Personal Finance on The Huffington Post

David Fiderer: Why Obama Won't Do What's Needed to Deal With the Mortgage Crisis

2009-12-01T15:58:03Z

Beware of national averages like “One
in Four Borrowers Is Underwater.” The
problem is heavily concentrated in places like Phoenix, where 54% of
homeowners with mortgages have negative equity. That’s about half a million
underwater mortgages, more than the combined totals in Texas and New York state,
where 10 times as many people live.

University of Arizona law professor Brent T. White
says anyone with negative home equity should simply walk away. Arizona, like
California, is a non-recourse state, where a home lender cannot legally pursue
repayment beyond the value of the underlying collateral.

The situation looks much worse in America’s
Dubai, Las Vegas. Almost three-quarters Las Vegas homeowners with mortgages
have negative equity or near negative equity. A lot of them are really
underwater. Almost half of Nevada homeowners with mortgages have negative
equity in excess of 25%. The total residential mortgage debt in Nevada is 1.14
times the value of the underlying real estate.

The majority of America’s underwater mortgages,
about 5.5 million, are located in the four sand states: California, Florida,
Arizona and Nevada, according to a new study by First American CoreLogic. That’s
where homeowners face each month with a renewed sense of anxiety. Many
wonder if the next mortgage payment means throwing away good money after
bad. And almost all wonder how the next foreclosure will affect neighborhood
property values, and the fabric of their community.

Don’t feel smug if you live elsewhere, say Deutsche
Bank analysts Karen Weaver and Ying Shen. By 2011, they predict, one half of all American homeowners will
have negative equity, plus another 20% who will have borderline negative
equity. They expect the New York market, which so far has held up fairly well,
to collapse. By 2011, they estimate, three-quarters of homeowners in the New
York-White Plains-Wayne, NY-NJ market will be underwater.

Whichever numbers you accept, it’s clear that the
size of this mortgage crisis dwarfs everything else, including healthcare
reform, the war in Iraq and social security. America's $11 trillion in home mortgage debt is 45%
larger than public
debt owed by the federal government. And half of that $11 trillion was lent
or guaranteed by Government Sponsored Enterprises like Fannie Mae or Freddie
Mac. It's not just the solvency of the GSEs that’s at stake; it's the health of
the overall economy. Federal revenues were down by $400
billion this year because people have less taxable income.

President Obama will issue admonishments to
the banks. Robert Reich says we should change the
bankruptcy laws to allow for cramdowns. All well and good, but it's unrealistic
to hope that banks will fill the vacuum of leadership at the top. We’re talking
about sorting out the problems of 10 to 15 million individual mortgage
loans. The financial incentives
are too fragmented and too misaligned and too nontransparent for any private
party to sort out the mess. Given the numbers involved, these mortgage problems
are too big, and too interconnected, to be resolved on a scattershot basis in a
dysfunctional marketplace.

If the government wants the job done right, it
must do the heavy lifting itself. Here
are the three proposals to untangle the mortgage mess:

1. Perform due diligence on all borrowers at
risk.

Step one is to find out what’s going on with each
distressed borrower. It’s a very time consuming and labor intensive job, which
is why no one wants to do it. It requires a face-to-face meeting with the
borrower, plus independent verification of a borrower’s employment and income,
his financial assets and obligations. It requires figuring out if the
borrower would be motivated to continue servicing the loan if it were reduced
to an amount below the property’s current market value.

Each delinquent mortgage loan is a multi-layered
story. Some borrowers took out mortgages as part of a flipping scheme.
Some, who took out a loan they could not afford, were deceived by dishonest
mortgage brokers. Others took out a fully-documented 80% loan on a house that
lost 50% in market value. All the evidence shows that mortgage fraud went
viral during the real estate boom.

The root cause of the mortgage meltdown, and most
other financial scandals, was that everyone piggybacked off of somebody else’s
due diligence, which was never performed properly in the first place. As a
substitute, investors relied on credit ratings and financial models that were
fatally flawed. Now that millions of borrowers are in trouble, everyone
acts as if the situation can sort itself out on its own. If we really want to
take charge of the problem, the federal government should temporarily hire
50,000 people to perform actual due diligence on these borrowers and
loans. The private parties who contributed to the situation don’t have
the same incentive to do things right. They’re conflicted.

2. Nationalize loan servicing for private label
mortgage securitizations.

When mortgage loans are sold to securitizations,
the loan servicing process is outsourced to a company that has no financial
stake in the loans and has all sorts of incentives to play all sorts of tricks
on the borrowers. The loan servicer is ostensibly acting on behalf of the
security holders, who, because if different levels of subordination, have
varied and conflicting claims. The problem is compounded by the fact that
none of the private label mortgage securities have standardized loan
documentation or workout policies. The incentives are very different when a
bank keeps a loan on its own books, or when Fannie Mae guarantees mortgage-backed
securities. In those instances, one creditor has a singular financial interest
in working out the best possible solution for a problem loan.

By nationalizing this function, the federal
government would be able to assure that the workout function would be done with
honesty and integrity.

3. Create a transparent national
registry for every ownership claim, including every derivative claim, on a
mortgage securitization.

Here’s a very common scenario in loan workout
negotiations. Several creditors agree to some kind of temporary forbearance to
keep the borrower out of bankruptcy. But one holdout creditor shows no
flexibility. He prefers to push the borrower into bankruptcy, even if it means
that the eventual recovery will be far less. The holdout owns a credit default
swap, kept secret from everyone else, that will reimburse him immediately. With
complex securitizations and credit default swaps, the opportunities for bad
faith dealings in debt restructuring grow exponentially.

The only way to achieve an orderly and fair
workout process is to clarify who comes to the table with clean hands.

Once the government assembles the data of what’s
actually happening, it can assert pressure to enforce an orderly and reasonable
restructuring of America’s financial albatross.

Of course, this approach holds political peril. It’s easier to harangue against the
banks than it is to take responsibility for the mess created by someone else. Any
kind of government
intervention is red meat for the tea bagging crowd. Remember how it all
started in February 2009?

Do we really
want to subsidize the losers’ mortgages? This is America! How many of you
people want to pay for your neighbor’s mortgage? President
Obama, are you listening?… We're thinking of having a Chicago Tea Party in July. All
you capitalists that want to show up to Lake Michigan, I'm gonna start
organizing.

CNBC’s Rick Santelli, who disclaimed any political affiliation
after his famous rant, provided inspiration for Larry
Kudlow and countless others. You would think that people would have wised
up by now. But consider this, the sand states’ economies are all
blighted by record multi-year droughts.
Yet large blocks of voters are still brainwashed by a cable network that
says global warming is not real.

Finally, here are the numbers, simplified:

Source:First American CoreLogic

Sources: Federal Reserve, Congressional Budget Office

Professor Advises Underwater Homeowners To Walk Away From Mortgages

2009-11-29T10:22:45Z

Go ahead. Break the chains. Stop paying on your mortgage if you owe more than the house is worth. And most important: Don't feel guilty about it. Don't think you're doing something morally wrong.

That's the incendiary core message of a new academic paper by Brent T. White, a University of Arizona law school professor, titled "Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis."

One In Eight Americans On Food Stamps

2009-11-29T08:38:26Z

With food stamp use at record highs and climbing every month, a program once scorned as a failed welfare scheme now helps feed one in eight Americans and one in four children.

Federal Bankruptcy Filings Are Up By 34.5%

2009-11-26T01:00:37Z

WASHINGTON (AP/HuffPost)-- Bankruptcy filings in federal courts jumped by more than one-third this year, as businesses and individuals struggled to regain their footing in a weakened economy.

New numbers from the Administrative Office of the U.S. Courts show about 1.4 million bankruptcy cases were filed this fiscal year. That's up 34.5 percent compared with the more than 1 million cases filed last fiscal year. The bankruptcy figures cover a period from Oct. 1, 2008, to Sept. 30.

Filings under Chapters 7, 11, 12 and 13 all rose -- particularly filings for Chapter 11 protection, which increased 68 percent. Overall, business filings were up 52 percent, while nonbusiness filings rose by 34 percent.

States with the highest bankruptcies per 1,000 population are:

1. Nevada
2. Tennessee
3. Alabama
4. Indiana
5. Michigan
6. Ohio
7. Kentucky
8. Arkansas
9. Illinois
10. Colorado

Go to the economics and finance blog Calculated Risk to see these rates graphed.

Don McNay: Washington: Totally Disconnected From Main Street

2009-11-23T19:30:25Z

Can you hear me calling you?

-Mike and The
Mechanics

Mark Twain said that when he died he wanted to be in Kentucky because everything happens 20 years later in Kentucky than in the
rest of the world.

I live in Kentucky but I
want to die in Washington. It might be the ticket to immorality. The people running Washington seem to exist in an alternate
universe.

Sunday’s Huffington Post headline read “Sherrod Brown: Obama
Focused on Main Street
but not all his advisers are.”

How long did it take you to figure that one out, Sherrod?

What was the first clue? Double-digit unemployment? Huge
Wall Street bonuses? The fact that no one on Obama’s economic team
has ever worked on Main Street
in his or her entire life?

Operating a business on Main Street is a lot different than lecturing
at the Harvard Economic Club. The team
President Obama surrounded himself with has spent way more time in a faculty
lounge than in the corner barber shop.

In the alternative universe of Washington,
the idea that Senator Brown, a progressive Democrat from Ohio, would criticize Obama’s advisers, is
considered earth-shattering.

Partisanship rules in Washington.
And Democrats and Republicans never
deviate from their talking points.

No one is supposed to think for himself. Even just a little bit, like Brown did.

In the alternative universe of Washington, they don’t really understand that
people on Main Street
are hurting. Not only are they hurting,
they are angry.

Charlie Rose recently hosted Warren Buffett on his show. Buffett is one of the richest guys in the
world, but he thinks he, and other rich people like him, should pay a higher
percentage in taxes.

Buffett noted that “K Street lobbyists” had developed too
much influence in Washington
and the average American was not being heard.

Buffett was a big Obama supporter. But he is also a realistic businessman. He understands that our economic future
depends far more on Main Street
than on Wall Street.

Part of the reason Washington
can be an alternative universe is that it’s a city that tends to be immune to
recessions and depressions.

I was in Washington
recently and a friend told me of his dilemma of trying to buy an affordable home. Washington
has one of the most expensive housing markets in the country. The federal government has not had any
significant layoffs or cutbacks in many years.
They keep on printing money.
There are many others who work for agencies or firms that deal directly
with the government. They are not
feeling the recession, either. It seems
the business of government is always booming.

People in Washington
are not feeling our pain. Or the extreme
pain that their counterparts in state and local governments are about to
feel.

My business is somewhat recession-proof, but I operate just
off Main Street
in Richmond, Kentucky.
Economic despair is all around me.
I have friends, and friends of friends, come to me daily looking for a
job. Not a high-paying career with
possibilities for advancement, benefits and a pension. Just a job.
A paycheck.

I don’t know what to do for them. I don’t have jobs to give them.

We advertised for an entry level position earlier
this year. We were flooded with
applications, including people with advanced degrees and boatloads of experience.

As Sherrod Brown so astutely noted, some of President
Obama’s advisers don’t “get it.”

Those of us on Main
Street knew from Day One they wouldn’t “get it.” Nothing in their background, education or
life experiences prepared them to understand the economic crisis from a Main Street
perspective.

I don’t blame the people Obama appointed. I blame the guy who appointed them.

We don’t get to vote for Secretary of the Treasury or
Chairman of the Federal Reserve Board.

We do get to elect a president. A president I voted for. One who campaigned on “change we can believe
in.

We have not had change on the economic front because Obama
chose his advisers from the same bunch of Wall Street and Washington insiders
that George W. Bush chose from.

Tell me how Timothy Geithner,
Dr. Lawrence Summers and Ben Bernanke are different from Henry Paulson, Alan
Greenspan and the people Bush had around him?

Imagine how different economic policy would be if someone
who understood Main Street
was calling the shots.

We would have the kind of change we really could believe in.
And was promised.

Don McNay,
CLU, ChFC, MSFS, CSSC is one of the world's leading authorities in helping
people deal with “Big Money” issues.McNay is an award
winning, syndicated financial columnist
and Huffington Post Contributor. You can read more
about Don at www.donmcnay.com
McNay founded McNay Settlement
Group, a structured settlement and financial consulting firm, in 1983 and Kentucky Guardianship
Administrators LLC in 2000. You can read more about both at www.mcnay.com
McNay has Master's
Degrees from Vanderbilt and the American
College and is in the
Eastern Kentucky University Hall of Distinguished Alumni.

McNay has written two
books. Most recent is Son of a Son of a Gambler: Winners, Losers
and What to Do When You Win The LotteryMcNay is a lifetime
member of the Million Dollar Round Table and has four professional designations
in the financial services field.

Jeanne Kelly: Now Is Not the Time To Stop Using Your Credit

2009-11-18T13:24:46Z

Last week, pressed up against the door on the subway, I overheard the woman to my left say to her friend, who also just happened to be the woman to my right, how she only uses cash these days. "It's cut and dry that way," she said, "I also don't have to worry about messing up my credit." Not long after, waiting for an appointment in the Four Season's hotel lobby, I heard what seemed to be a young couple arguing about their credit rates. This could be juicy, I thought. So, I leaned in. "If you hadn't paid the bill late, again," I heard the woman say to the man, "then our interest rate wouldn't have gone up and we wouldn't have this problem. We need to pay this off and be done with it!" And later, making my way through a large cocktail reception, it seemed everyone was talking about credit. But this time I didn't have to eavesdrop. One man told me how for over thirty years he had great credit, but that his very recent financial trouble had essentially erased all his past years of good credit scores. If that's the case, he said, "Why bother using credit, if when you need it the most, they won't give it to you?"

While I understood their frustrations, I knew that most of their issues would disappear if they knew how to make better use of their credit. In order to have good credit for those occasions that you need it (like a home or car loan), credit needs to be maintained. It's sort of like a healthy body. There may have been a time when you ate well, exercised and got plenty of rest. You felt strong and lean. But your recent behavior has changed. Gone is the morning run followed by a stop at the juice bar, and your clothes feel tighter and your energy low. Credit works the same way. You've got to use it to have it, and you've got to use it well and on an on-going basis to have it be stellar.

So, while it's been wonderful to hear more and more people taking stock of their credit use and control of their financial lives, ceasing to use your credit is just as harmful as making late payments.

Here are some tips to keep in mind to help you from walking away from credit and to keep you building better credit.

Look at your credit report and make sure all your credit card companies are reporting a high limit. I see many creditors only report the balance due.

Maintain recent activity on accounts. Take out the store card you have not used in years and use it! If you are going to shop in that store, you might as well use the card they gave you and pay the bill when you get home.

Pay down your credit card balances to 20% or less of the high limit.

Monitor your credit to be aware of who is reporting what on you.

Pay at least the minimum payment due on time.

Embrace and enjoy the credit you have established over the years. Don't throw it away.

Manisha Thakor : Celebrity Money Meltdowns

2009-11-05T15:44:47Z

Tough economic times have tested the vast majority of Americans - and that includes celebrities. Lately there have been several high profile individuals from the worlds of sports, entertainment, and the arts who have seen their financial woes hit the front pages. A money meltdown is right up there with death and divorce as one of life's most stressful experiences. So let me say straight up that my intent in highlighting these experiences is not to poke fun or make light of their situations. Rather it is to help others by highlighting common financial pitfall that all of us (myself included) can learn from.

NBA Star Antoine Walker - Broke & In Big Trouble: During a successful career spanning 12 years, Antoine earned over110 million. Now it's gone. At age 33, Antoine has creditors chasing after him and is facing felony check fraud charges. Much has been made of his bling (the cars, watches, entourage). However, he was also by many accounts extremely generous with friends, family and those in need. Antoine's problem was that he spent as if his peak earnings years would repeat every year. He's not alone. Many people with variable incomes (commission-based sales people, entrepreneurs, etc.) fall into this trap. What we all can learn is if you have a volatile income stream, you should spend based on your average, or even trough, earnings to avoid a cash crunch when leaner times appear.

Bestselling Mystery Novelist Patricia Cornwell - Looking for40 Million: This prolific, smart, and highly popular writer has suffered losses estimated in the range of40 million. She's suing the money management firm that handled her money, arguing they didn't heed her instructions to "invest conservatively" and even cut checks for gifts given to people she didn't know. Patricia's problem was that she handed over complete control of her finances to her advisers. As it frequently takes single-minded devotion to one's craft to excel, the need for some delegation is understandable. What we all can learn is when it comes to your money, your motto (to quote President Regan) should be "Trust, but verify." Remember, no one will ever care about your money as much as you do. So you must stay involved, even if you have an adviser.

Uber-talented photographer Annie Leibovitz - Fighting to Keep Her Home: This American icon has taken some of the most famous photos... ever. From John Lennon & Yoko Ono (hours before he was shot) to a very pregnant (and very bare) Demi Moore, that was Annie's work. In the go-go years Annie's day rate was rumored to be $250,000. Today she is $24 million in debt and is a single mom of three young children fighting to keep her home. Annie's problem was spending liberally and borrowing aggressively against the equity in her home to make up the difference. When the credit markets seized up, she found herself in a cash flow crunch, and resorted to putting up her homes and copyrights to her lifetime work up as collateral for a loan. Now, that collateral may be called in. What we all can learn is that debt really is a four-letter word. Borrow at your own risk and understand that there will be consequences if you can't pay it back.

Famed Actor Nicholas Cage - Owes Over $6 Million in Back Taxes: This super talented actor owes the IRS. Big time. Uncle Sam wants over $6 million in back taxes from Nicholas Cage. The vast majority stems from the 12 million-ish in income he earned in 2007 that apparently he did not pay taxes on. Nicholas's problem is that he appears to be cash-strapped when it comes to paying those takes. What we all can learn is that if you are self-employed, as so many more of us are these days, it's vital to set aside money for taxes at the time you earn that income.

Don McNay: 2010: The Year Main Street Sticks It to Wall Street and Washington

2009-10-27T13:00:03Z

Look what's happening out in the streets
Got a revolution, got to revolution

-Jefferson Airplane

There is one thing I would not want to be right now: an incumbent politician.

From the president to the dog catcher, many in elective office are suffering from rapidly declining popularity. People are angry and broke. Governments are being forced to make massive cuts in programs and services. They will be forced into more layoffs, which will make even more people angry and broke.

It's not a fun time to be in government.

Next year will be a year of reckoning. We are going to see massive numbers of politicians get voted out of office. It could be that many unemployed people make a new career move -- such as running for office. If anyone has ever dreamed of being an office holder, 2010 is the year to do it. There are going to be several situations where voters elect a complete unknown, just to express their anger about the incumbent.

People want change, any kind of change, especially on the economic front. To those of us on Main Street, it looks like Washington and Wall Street are ignoring the economic pain and trying to pretend as if the crisis didn't happen or is all over with now.

Wall Street is gearing up to pay itself record bonuses. The president went to Wall Street, shaking down fat cats for campaign contributions. Instead of cracking down on Wall Street abuses, Obama wants to convene a conference and "talk about it." Yeah, that will do a lot of good. It pushes any real action down the road a few years. Maybe you could have a fundraising event while the conference is going on.

The same old story, same old song and dance. Next year could be the time when we change the tune.

President Obama was elected on change. But his economic team is just another variation of the Washington-Wall Street version of "good old boys." Dr. Lawrence Summers, Timothy Geitiner and Ben Bernanke are the same people who got us into the economic mess. They screwed up badly, but Obama put them back in charge to try again.

I've been reading Andrew Ross Sorkin's riveting new book, Too Big To Fail. It's a fascinating view of the personalities involved in the current financial crisis. One of the things that immediately strike you is how all the characters seem to be buddies from way back. They've worked together, played tennis together and spend all their time talking to each other, which is why they are clueless about what is happening on Main Street.

As someone who has opposed government bailouts since the beginning, I would like to say, "I told you so." But that doesn't get us out of the mess we are in. I suspected that the Wall Street-Washington alliance would think about each other first and the taxpayers later. That wasn't hard to see. All you have to do is look at recent history. For years, Wall Street has been paying for high priced lobbyists and funneling millions in campaign contributions to Washington. The overwhelming majority in Washington gets re-elected because they are able to outspend their opponents. It perpetuates a cycle where Wall Street and Washington only talk to and socialize with each other and think they can ignore everyone else.

Next year is when the voters are finally going to make them listen.

When you see companies who accepted bailout money wanting to dole out billions in bonuses, you see how tone deaf the people in Washington and Wall Street are. They don't get that there is real anger in the country. And it's not just because we have high unemployment and real economic pain. It's because the people are tired of being played for saps. That is why 2010 will be the year of the great upheaval.

Americans are tired of self dealing. From the largest cities to the smallest towns, any sign of an office holder feathering his own nest will be met with public retribution. Any challenger looking for an issue will find one. As Robert Penn Warren wrote in All The Kings Men, "There is always something." Anyone who voted for the Wall Street bailouts will automatically have a hard time. Wall Street and Washington think that the public has forgotten, but they have not.

They've been waiting for, but not seeing, some return on their investment.

I don't think President Obama is going to "get it" before 2010. He's big on the concept of un-elected "czars" -- a concept that scares me even more than the bailouts ever did. "Czars' aren't accountable to anyone and will be hard to get rid of. Voters want more ability to influence government, not less. They don't want some "czar" speaking for them. They want their own voices to be heard.

I voted for President Obama, just like I normally vote for the Democratic nominee. Obama is getting called out by conservatives, as one would expect. But some liberals, such as Arianna Huffington, are also taking him to task. He thinks that if he dominates the "news cycle" and bashes on Fox News, the rest of the country will let him do what he wants.

What we have here is a failure to communicate.

I'm not ready to sign up with Glenn Beck and the tea baggers of the world. But I do understand that people are tired of being ignored. Unless vast numbers of people on Wall Street and in Washington start to "get it," and get it quickly, you are going to start seeing a whole lot of new faces in Congress, state legislatures and city councils all across the country.

It may not change the unemployment rate. But it will at least change who is unemployed.

Don McNay, CLU, ChFC, MSFS, CSSC is one of the world's leading authorities in helping people deal with "Big Money" issues. McNay is an award-winning syndicated financial columnist and Huffington Post Contributor. You can read more about Don at www.donmcnay.com McNay founded McNay Settlement Group, a structured settlement and financial consulting firm, in 1983, and Kentucky Guardianship Administrators LLC in 2000. You can read more about both at www.mcnay.comMcNay has Master's Degrees from Vanderbilt and the American College and is in the Hall of Distinguished Alumni of Eastern Kentucky University. McNay has written two books. Most recent is Son of a Son of a Gambler: Winners, Losers and What to Do When You Win The Lottery. McNay is a lifetime member of the Million Dollar Round Table and has four professional designations in the financial services field.

While Law School Tuition Skyrockets, Government Student Loan Limits Remain Stagnant

2009-10-26T15:12:59Z

While law school tuition has skyrocketed over the past 15 years, federal loan limits have remained stagnant, putting more pressure on students to take out higher-cost private loans.

In 1994, students were limited to $18,500 in low-interest loans from the federal government. Fifteen years later, that limit has only increased to $20,500 though the $18,500 available to students in 1994 is worth $26,959.69 today in inflation-adjusted dollars.

Meanwhile, tuition and fees have tripled for in-state students at public law schools, and more than doubled for out-of-state students at public schools and those at private schools.

In the 1994-95 school year, low-interest federal Stafford loans covered full tuition for in-state students at every public university law school in the country. In the '07-08 school year, Stafford loans covered full tuition at 80 percent of public schools, according to a report released Monday by the Government Accountability Office.

Stafford loans used to cover full tuition for out-of-state students at 97 percent of public university law schools and 80 percent of private law schools. In the 2007-08 school year, those loans covered only 22 and 11 percent, respectively.

The effect has been calamitous for students. The average law school graduate in 2008 left school with more than $71,000 in debt, the GAO reports.

"The rising debt burden of law graduates and other graduates has a negative impact on the ability of highly qualified individuals to pursue careers in public service," the American Bar Association reports. The ABA has been calling for Congress to raise the borrowing limit under the Stafford loan program.

The U.S. House of Representatives recently passed a bill calling for reform in the loan program. It's now in the Senate.

Ryan Mack: Real Investing Vs. The "Pinky Ring"

2009-10-22T17:51:09Z

If I gave you $100,000 today how would you spend it? Before you continue to read, I want you to take a moment and think hard about this question. How would you put that money to work? After you have thought about it, which of the following two scenarios describes the best use of the funds?

Scenario A: Spend $50,000 on a "caddy", $25,000 for your pinky, and the balance on a "pound of blow". In twenty years you will have an old pinky ring and a lot less brain cells.

Scenario B: Spend $20,000 on a Honda Accord, $5,000 on a nice vacation, and invest $75,000 in your own portfolio. In twenty years you could have as much as $350,000 (with a very modest 8% return).

For those who chose Scenario A, you have agreed with famous rap star Lil' Wayne as this scenario was taken from his lyrics in his song "Stuntin' Like My Daddy". I listen to rap music, but we must understand that many of the lyrics in this music were written because of their ability to make money ... NOT because of their contribution to our intellectual capital.

I personally agree with Scenario B and so do the majority of millionaires in this country. Half of the millionaires in America have never spent over $30,000 for a car in their ENTIRE life (The Millionaire Next Door, Thomas J. Stanley and William D. Danko).

One reason is they are so busy making money that they do not have much time to worry about self image. If you were TRULY wealthy, and like 5% of America who controls 95% of the wealth in America, would you care about what others thought about you? Another more important reason is they understand that as long as they are spending money on items that lose value instead of things that gain value they are less able to maintain and increase their economic status. This is why you will hear stories about Jim Walton, heir to the fortune created by his father Sam Walton (founder of Wal-Mart). He still drives a 15-year-old Dodge Dakota pickup despite being number 23 on the 2007 billionaire's list. You may have also heard about Ingvar Kamprad, founder of multi-billion dollar enterprise and also a billionaire. He still drives a Volvo which is also 15 years old. Before he attained his fortune, his father gave him a very modest reward for doing well in school and what did he spend his money on ... a "modest" furniture company named Ikea which reported revenues of $17.7 billion dollars in 2005.

The question that you should be asking if you do not know and have not asked already is, "What are they spending their money on if it is not consumption?" The opposite of consumption (putting your money into assets that lose value) is production (putting your money into assets that go up in value). Four of the most common vehicles that you can invest your money into are the following:

1. Stocks
2. Bonds
3. Real Estate
4. Entrepreneurship

1. Stocks

a. The outstanding capital of a company or corporation.
b. The shares of a particular company or corporation.
c. The certificate of ownership of such stock: stock certificate.

Simply put, stock is ownership of a company. You can go to Starbucks and purchase coffee to be a customer. However, you can purchase stock in Starbucks and become part owner of the company. As an owner, you have a stake in every coffee that is purchased. The more shares you purchase, the larger your stake becomes.

2. Bonds

a. A certificate of ownership of a specified portion of debt due to be paid by a government of corporation to an individual holder and usually bearing a fixed rate of interest.

Both governments and corporations need to raise capital to operate. Salaries, suppliers, facilities are all examples of expenses that an employer incurs on a consistent basis. Welfare, social security, Medicaid, public schools and the Iraq war are all examples of programs and events that require a significant amount of funding from the government. One of the ways to pay for expenses and programming is to borrow from individuals by issuing bonds. If you purchase a bond you are essentially lending that entity money with their promise to return the funds borrowed PLUS interest.

3. Real Estate

a. Land plus anything permanently fixed to it, including buildings, sheds, and other items attached to the structure.

Whether it is your first home or purchasing a piece of investment property on the side, home ownership has always been an American dream and one of premier ways of accumulating wealth.

4. Entrepreneurship

a. The organization, management, and assumption of risks of a business or enterprise, usually implying an element of change and a new opportunity.

Owning and operating your own business has proven to provide the highest return of all of the stated investment vehicles. However, this investment also has the highest risk. It is a risk that is worth it because you are investing in your own ideas. There are those who want to invest in other peoples' ideas ... these investors are called venture capitalists.

Before you begin investing in these vehicles, there are a few things that you must do to prepare yourself to invest, such as the following:

How to Prepare a Budget: It is a must that we begin to pay closer attention to our spending habits. There is an old saying that you can tell a lot about the values of a person by looking at their checkbook journal entries. I cannot tell you how many friends who I have put on a budget and they have said things like the following:

• "I would have never thought that I spent that much money at the bar in a month."
• "I need to stop eating out so much!"
• "My girl is just going to have to learn to be happy with pizza!"
• "I didn't know that my closet full of sneakers was costing that much over the past six months!"

The budget is the most important piece of the financial plan. It is time consuming when you first start to organize your finances in this fashion. However, as with any other financial principle and habit, we must make a diligent effort to incorporate the language and actions of economic empowerment into our daily lives. Sixty percent of America is spending more money than they earn every month because they have not learned the habit of budgeting.

Eliminate Credit Card Debt: Many people feel that it is not important to eliminate credit card debt before investing in the market. Credit card debt has variable interest rates that can go as high as 30%. The national average annual percentage yield being paid by the average person in the US at the time this is being written is approximately 15%. Average credit card balance in each household in the US is around $7,000 and steadily increasing. If you have $5,000 in cash, have a credit card balance of $7,000, it does not make sense to put that $5,000 at risk to HOPEFULLY get a 15% return in the stock market when you are CERTAIN that you have to pay 15% on your credit cards. Whatever extra cash you possess, use that money to pay down your credit card debt.

Prepare an Emergency Fund: It is important to have 6-9 months of living expenses saved before you invest in the market. In October of 2006 when the Detroit teachers were on strike for 8 days, there were many teachers at the Credit Union applying for loans because they didn't have enough savings to last for much more than a week. Additionally, these savings should be placed in a high yield savings account. "High yield" refers to the interest rate on the account. In a regular checking account known to have as low as a .35% interest rate or 0%, you are losing money when you factor in inflation.

Inflation is the rise of the general level of prices in the nation related to the increase in amount of money in circulation. The result of inflation is the loss of value of currency. Inflation is why you could buy a candy bar in the 70s for nickel but have to pay as much as a dollar at many stores today. Inflation is the reason that gas prices continue to increase making it more expensive to drive. If you are keeping your money under the mattress, in a safe in the basement, or anywhere that is not earning interest then your money is loosing value as you read this. Putting your money into a high yield savings account will ensure that your money will earn interest that will outpace inflation thereby retain its value and even grow in real value. Good examples of high yield savings accounts are ING Direct, Emigrant Direct, and One United Bank.

I was watching CNN and saw an older gentleman being interviewed who was worth over two million dollars. That might not sound amazing to you but it is very amazing when I learned that he had never in his life earned over $11/hour. He made a practice of investing his money and living beneath his means. He made sure to include another monthly bill to pay himself within a savings/investment account on a monthly basis. Investing is not just for the rich, but for all income and age levels. The less you earn, the more important it is to be mindful of your expenditures. Less income means less financial protection to provide a cushion during financial setbacks (job loss, salary reduction, rising gas prices, or medical emergencies). Regardless of your income of financial position, it is up to you to make the decision to begin saving towards financial independence today!

Don McNay: Just Say "No" to Adult Children Wanting Money

2009-10-20T19:12:24Z

My old man is another child that's grown old

-John Prine

It seems like every family has one -- the Child Who Never Grew Up.

They mooch off their parents well into their "adulthood." They frequently need to "borrow" money, with no intention of paying it back. They always have car problems, relationship problems, "bad luck" or other sob stories.

All their problems have the same proposed solution: Money from mom and dad.

Often they are living with mommy and daddy, long past the time when their contemporaries are starting careers and families.

Concepts like budgeting, responsibility and ambition don't make it into their vocabularies.

According to multiple media accounts, former Michigan basketball star Rumeal Robinson took mooching to a new art.

He tricked his mother into letting him mortgage her home. A headline in the Miami News Times sums it up: "Hoops hero Rumeal Robinson blew a fortune on strippers, got indicted and left his mom homeless."

Sounds like a great guy.

Mooching children usually don't hurt parents as dramatically as Rumeal Robinson did, but the results are still bad. Adult children with a "failure to launch" are dragging down parents who can't afford to subsidize them.

The headline from a recent Newsweek online article read "Retired and Broke."

According to the AARP, people over 55 is the age group most likely to declare bankruptcy. The article cites the usual bankruptcy causes, like medical expenses and credit card debts, but hammers on the idea of parents not giving money to their children.

The article ends by noting that "parents may want to help the next generation extricate itself from debt. Leading by example might be a more valuable gift."

Wise advice.

It's not an easy decision to implement. There are situations, like medical emergencies or short term downturns, where families don't have another alternative. I'm also not talking about children with severe illnesses or who are unable to work. I wouldn't throw my sick child out on the street and neither would you. I'm talking about the child who has a car, an iPhone and running-around money but doesn't chip in for rent or groceries.

You are not doing your children any favors by not allowing them to grow up.

Roger Ailes did an interview for CSPAN a few years ago. He said when he turned 18, his father asked him where he planned to live.

Ailes was puzzled, but his dad said, "I can get you a job at the factory, (where his dad worked) but you can't live here." Ailes decided to go to college at Ohio University and got into broadcasting. He went on to create Fox News, CNBC and play major roles in some presidential campaigns.

Love him or hate him, Ailes is one of the most influential people in American media. His father forced him to grow up and make his mark.

I had a similar moment on my 18th birthday. My father took me outside and said, "You are going to get what I got on my 18th birthday -- the whole wide world to make your living in." (Dad had to quit school and go to work at age 15.)

Dad pointed to his car. He said, "You see that Cadillac? That is MY Cadillac, not OUR Cadillac. Make some money and buy your own." 20 years later, I did.

It wasn't "tough love." It was making me realize that I was an adult and had adult responsibilities.

I'm OK with parents helping children through college (in four years, not forty), but after that they are on their own.

People in my father's generation were drafted and sent off to war. There are 18 year-olds today who are fighting in Afghanistan and Iraq.

I saw a Frontline story about Afghanistan where the soldiers are sleeping on the ground without mattresses. I suspect those soldiers don't have much sympathy for a 30 year-old who is still living with mommy and daddy.

I work with people who receive "big money" from lotteries, inheritances and injury settlements. All of them have the same problem that retirees have. Once they lose all their money, they have very little ability to make it back. Like retirees, their financial downfall often comes from family and friends who want to "borrow" money from them.

Which gets us back to the adult in your house who still acts like a child. I can go on for hours about how making life too soft for him or her is bad. I can go on about how eating away your savings will leave you in a situation where death is your only way out of the mess. I can go on for hours about how giving adult children money is not actually love. It is enabling bad behavior, like giving heroin to an addict.

Instead, I give you three words to remember: Rumeal Robinson's mother.

Don't end up like her.

Helen Ford adopted Robinson at age 10 after his biological mother abandoned him. She and her husband raised him, helped Rumeal become part of a national championship basketball team at the University of Michigan and a player in the National Basketball Association, making millions of dollars.

Rumeal blew through his money, spending it on strippers, nightlife and high living. He never gave anything to the people who raised him. After his career ended, he got his mother to agree to let him take a mortgage on her house. Later, it was foreclosed on.

She used the house as a center for foster children. Now she lives in a two room apartment.

Rumeal's mother had good intentions. She wanted to help her son.

Parents are often the last to see that their child is a piece of human garbage. They are the easiest of prey.

I'm seeing a lot of elderly people lose their houses, savings and often their lives (financial pressure is a key trigger for suicide) because children "borrowed" money and never paid it back.

It's time to cut them off.

The kids will pout and cry. They will try to make you feel guilty. Immature people do that. Show them that you are a real, loving parent and not a patsy. Just say "No." Your own survival is at stake.

If you want some reassurance, I would ask you to call Rumeal Robinson's mother, but I assume her phone has been cut off.

Read more at: http://editorial.huffingtonpost.com/tmp/individual-entry-archive13.html

Don McNay, CLU, ChFC, MSFS, CSSC is one of the world's leading authorities in helping people deal with "Big Money" issues.

McNay is an award-winning syndicated financial columnist and Huffington Post Contributor.

You can read more about Don at www.donmcnay.com

McNay founded McNay Settlement Group, a structured settlement and financial consulting firm, in 1983, and Kentucky Guardianship Administrators LLC in 2000. You can read more about both at www.mcnay.com

McNay has Master's Degrees from Vanderbilt and the American College and is in the Hall of Distinguished Alumni of Eastern Kentucky University.

McNay has written two books. Most recent is Son of a Son of a Gambler: Winners, Losers and What to Do When You Win The Lottery.

McNay is a lifetime member of the Million Dollar Round Table and has four professional designations in the financial services field.

Read more at: http://editorial.huffingtonpost.com/tmp/individual-entry-archive24.html

Rohit Chopra: Should Every Baby Have a Bank Account?

2009-10-20T16:18:31Z

Nearly 28 million Americans live without a bank account. As a kid, I used to think people without bank accounts were like Scrooge McDuck from Duck Tales, who literally would go swimming in his money bin. But this is far from the truth.

Almost all of the unbanked will struggle to pass the credit check in order to rent an apartment, subscribe to a cell phone plan, or get a car loan. If having a bank account is critical in today's world, why doesn't everyone have one?

So who exactly are the people who stand in long lines at Western Unions on Fridays for the privilege of paying huge fees to cash their paychecks? Many assume that they're conspiracy theorists who hide cash under their mattress or criminals avoiding a paper trail.

That would be way more interesting than the reality. Most of those millions are the working poor, who are disproportionately young or new to the country. The costs of not having a bank account are stark: $40 per paycheck in fees alone and $360,000 of wealth destroyed over a lifetime. This doesn't even begin to count the lost benefits of tax-advantaged retirement, health, and college savings accounts. Nor does it count the money wiped away by astronomical interests rates, often about 1,000% APR charged by payday lenders.

What's troubling is that the problem is not due to traditional banks ignoring poor communities. Nearly 90% of these check-cashing services and payday lenders are located within one mile of a regular bank.

Some blame the banks. They believe that consumers have bad experiences with big fees from overdrafts or minimum balance requirements, so they would rather pay a fee upfront than deal with a surprise later.

Others point to culture. According to the Appleseed Foundation, 63% of immigrants from Latin America do not have a bank account and 60% of that same group sends money to relatives abroad. Many of these immigrants never used banking products and are not aware that there are even options apart from the neighborhood check casher. Unfortunately, many of their children will also be unbanked well into adulthood, continuing a vicious cycle.

There have been mild improvements -- many employers now pay their minimum wage employees with prepaid debit cards. But those two are full of fees for using the card, and it doesn't help build a credit history. Walmart is entering this $8 billion business by offering low-cost check-cashing and money orders, potentially saving low-income families thousands of dollars per year, but this still won't solve the problem.

So what can we do to stop the endless cycle of a predatory industry holding back the working poor from getting ahead? And how can we get children to learn some of the basics of personal finance when their parents can't teach them?

Require employers to offer a direct deposit option. The National Federation of Independent Business estimates that it's cheaper for employers to pay their employees through direct deposit than through paper checks. With more direct deposit, workers can easily open checking accounts, since many banks waive minimum balance requirements with direct deposit.

Offer newborn babies bank accounts. The federal government should work with banks to offer a no-fee product to all children. The accounts should allow tax-advantaged contributions for college savings and allow families to monitor their accounts online so kids can be better prepared as an adult to understand financial matters. They'll be prepared to accept checks or direct deposit at their first jobs without foregoing part of their pay to fees.

Regulate payday lenders and check-cashing establishments. The proposed Consumer Financial Protection Agency could help bring better fee disclosure practices and fairness to the largely unregulated industry of nontraditional financial services. 1,000% APR is not financial innovation -- it's exploitation.

Until we get more of the unbanked into the financial system, we risk keeping millions of Americans living paycheck to paycheck unable to get ahead and build a better life. As easy as it is to hate banks, the truth is that we need them and we must do more to restore trust in the industry.

Manisha Thakor : The Credit Card Act of 2009: Five Ways It Will Affect You

2009-10-18T20:33:43Z

In these recessionary times, millions of Americans have found themselves drowning in one of the most expensive types of debt out there -- credit card debt. Thanks to the Credit Card Act of 2009, however, relief is on its way. Come February 22, 2010 (and potentially as soon as December 1, 2009) there will be new consumer protections put in place. This legislation has something for everyone.

1. ARE YOU UNDER 21? This regulation will help you save yourself from yourself, by restricting your access to credit cards. Gone are the days of free tee-shirts and pizzas in exchange for signing up for a credit card on America's college campuses. Credit card companies will no longer be able to issue credit cards to individuals under the age of 21 unless they either can provide proof that they can repay the money they are borrowing on that card or have a parent (or someone else over age 21) co-sign and agree to be responsible for that debt. Right now the average college student is graduating with over $3,000 of credit card debt so having this temptation removed is huge.

2. ARE YOU TRYING TO ESTABLISH YOUR CREDIT HISTORY? This regulation restricts all interest rate hikes during the first year a card has been issued. Unless you have a card with a variable interest rate, card issuers can no longer raise your interest rate in the first year after a new account is opened. The only exceptions are if the card was opened with a clearly stated promotional rate for at least 6 months or if you go more than 60 days without making your minimum monthly payment.

3. ARE YOU JUGGLING EXISTING CARDS? This regulation puts in all kinds of speed bumps you'll like. The interest rate on your existing debt can't be raised unless, once again it's a variable interest rate, the end of a promo period, or you are over 60 days late on your minimum payment (for any of these reasons you do not have to be notified). On top of this, for future debt that you may accrue on fixed rate cards, issuers have to give you 45 days notice on any rate changes. Issuers can no longer charge over-the-limit fees unless you've specifically asked to have your account set up to allow transactions over your credit limit. Two-cycle billing is now banned. And if you boo-boo and are 60 days late on a payment, after 6 months of on time payments the card issuer has to restore your prior interest rate.

4. ARE YOU DIGGING YOURSELF OUT OF DEBT? This regulation requires the fair application of payments. In the old days, paying off your credit card debt was akin to eating a layer cake with your fingers while blindfolded. By that I mean you'd send in a payment - but it wasn't always clear to you which layer of debt was being nibbled away at. More often than not, it was the lowest interest debt that got paid off first when you sent in that payment. Under the new rules it will be your highest interest debt that gets paid off first.

5. ARE YOU A GIFT CARD PACK RAT? This regulation will enable you to shop till you drop. It applies to both prepaid cards as well as retailer cards. The two biggest changes are that (1) You get a full five years from time of purchase (or whenever money was last put on the gift card) to use it - so no more surprise expirations and (2) As long as you've used the card once in the past 12 months, no "inactive" fees can be charged. (After 12 months of no activity you can be hit with 1 fee a month).

Bankrupt Retirees: Older Americans Are Most Likely To Declare Bankruptcy

2009-10-14T14:07:42Z

Older Americans are heading into and through retirement with a boatload of debt. They're carrying everything from mortgages and home-equity loans to big credit-card balances, and many are finding the burdens harder and harder to bear. In the last eight years, the over-55 crowd has become the age group most likely to declare bankruptcy, according to the AARP.

Gangaji: Prizing Peace

2009-10-14T09:22:33Z

In my view, the emanation of peace by any one person is a boon to us all. When that person is the leader of the most powerful and sometimes the most dangerous nation in the world, that boon is magnified exponentially.

I happen to like President Obama and I support most of his policies, even if I veer toward a more progressive agenda than he seems beholden to. But liking the man, or even agreeing with his policies, isn't the issue here. There are a number of politicians I agree with, but at this moment I can't think of another one that emanates peace.

That the emanation of peace is recognized and saluted by one of the most prestigious organizations in the world is a cause for celebration. That it occurs before specific and quantifiable actions occur, is specific and hearty encouragement for such actions to occur.

That peace is even prized is an invitation to us all to investigate what we prize in our leaders and ourselves. We know as humans, and as humans subject to our government as well as to the actions of all other governments in our small world, that we want to prize peace. But do we value peace?

What do we value? We value the power to rule ourselves as we see fit. As a result we prize democracy, and we are extremely privileged to live in one. We value the need and the willingness to defend our democracy. We value the freedom to speak and think and worship as we please. We value being able to love freely. We value the sacrifices earlier generations made that have brought us to this point of even being able to consider this question.

This point is the point. With all the prior and present sacrifices and privileges, here we are. Now what do we value? Peace? That is the possibility.

Were the just and not-so-just-wars from our past fought just so we could demonize one another? Were the battles of the Revolutionary and Civil wars fought so that we could just keep on flexing our muscles and jaws, or so that we could live in peace together?

We know what sacrifices and scars war demands, but what does peace demand? Since President Barack Obama is the prizewinner, we can look to him to receive what he emanates. If you are willing to look at him, rather than at any particular policy he stands for, you will see that in fact he does emanate peace.

His strength isn't required for this emanation. His winning an argument or debate isn't required for this emanation. Even his happiness isn't required for this emanation.

What is required is his deep commitment to the value of peace. He is willing to be an emissary of peace even when vile hatred is being hurled at him. Most importantly, he is required to keep his mind and his heart open to emanate peace.

He has been awarded so that we can all benefit. So that we ourselves as well as our children can see what we still value even when we profoundly disagree. So that we can recognize the capacity within ourselves as individuals and as a planetary citizens to keep our minds and hearts open.

We can receive this award in our willingness to find the source of peace inside ourselves. We can extend this award by offering it all.

My beloved teacher Papaji always ended his meetings with the Sanskrit phrase, Om Shanti: peace for all.

All comments are read and appreciated.

Gangaji is offering a Couples Retreat with her husband Eli at Esalen Institue Oct 18-23. She will have a public meeting Nov 5 and weekend retreat Nov 7-8 in the SF Bay Area. She will be in Sydney, Melbourne, and Byron Bay, Australia during November and December. Additionally she is having upcoming Gangaji Foundation teleconferencing events. Read more about Gangaji's events and catalog of books and videos online.

Don McNay: It's Time to Teach Children About Money

2009-10-12T17:37:51Z

"You've got to stand for something, or you will fall for anything."

- John Mellencamp

Many of my columns are about people who make bad financial decisions. People who take out payday loans and run up debts on high-interest credit cards. People who play the lottery and gamble too much at casinos.

People who just don't know how to handle their money.

I'm convinced that most of the mistakes result from lack of information and bad habits formed in childhood.

Dr. Keen Babbage of Lexington, Ky. has some answers in the second edition of his book, Extreme Economics (Rowman & Littlefield Education, Lanham, Md.).

I loved the first edition that came out in 2007. My glowing comments appear on the back cover of the newer version.

Dr. Babbage says that personal finance should be a part of the school curriculum.

I've known Dr. Babbage for 30 years, and he knows something about finance. He is frugal and has a good eye for investments.

Keen mentions that he learned from his grandfather, Keen Johnson, a former Kentucky governor.

Governor Johnson was a "saving, thrifty, frugal" governor who, instead of buying new office stationary, used the stationary of the previous governor, Happy Chandler.

Johnson simply drew a line through Governor Chandler's name and wrote in his own.

I wish Governor Johnson had been in charge of our economy instead of Hank Paulson, Timothy Geithner and Ben Bernanke. I can't see Governor Johnson giving away billions in bailout money to Wall Street.

Governor Johnson was governor at the end of the Great Depression. He knew the value of a dollar.

If you look at the saving rate of Americans, its obvious that the frugal ethic of Governor Johnson's era has not been handed down to the current generation.

We have a society where the haves are getting more and the have-nots are getting less.

There are whole segments of the business world set up for the more intelligent and cunning to prey on the less savvy. If you go back to Darwin, there is an argument that the world has always been that way.

Education is the way for have-nots to protect themselves.

Education is the equalizer in any society. It allows the poor to be on equal footing with the rich. If people are able to make informed decisions, they are less likely to make mistakes.

That is where the concept of "Extreme Economics" kicks in.

Babbage's book is aimed at teachers and educators, but any parent or student would benefit from reading it. In 2007, Babbage wrote that America was headed toward a "financial meltdown."

He called it correctly on that one.

Smart money management sounds simple: spend less than you make, and save the rest. I don't think Americans, especially young Americans, get it. Babbage has some ways to help them understand.

Until recently, today's young people haven't had to learn hard lessons from a depression, and neither have their parents. Both have societal pressure to spend on consumer goods.

It wasn't life and death for our grandparents to have the coolest cell phone or iPod. My grandmother didn't have either and seemed to do fine.

When sound fundamentals are taught at a young age, they become habits. I've read many studies that show that people's financial profiles are decided by the time they are 27. If they run through money at age 27, they will do the same at age 50.

If you don't know the basics, you will blow your money. It doesn't make any difference how much money you have. Just ask lottery winners like Jack Whitaker. Like roughly 90% of lottery winners, he went through all of his money in less than five years.

The spend-for-today mentality has to stop. Schools and society have to address the problem, and Dr. Babbage has concrete ideas, exercises and plans that will help.

All of America needs to stand up and take notice. Too many Americans are falling for anything.

Don McNay, CLU, ChFC, MSFS, CSSC is one of the world's leading authorities in helping people deal with "Big Money" issues. He is an award-winning syndicated financial columnist and Huffington Post Contributor.

You can read more about Don at www.donmcnay.com.

Steep Losses Pose Crisis For Pensions

2009-10-11T14:24:35Z

The financial crisis has blown a hole in the rosy forecasts of pension funds that cover teachers, police officers and other government employees, casting into doubt as never before whether these public systems will be able to keep their promises to future generations of retirees.

Don McNay: Small Town Values in a Big Time Lawyer

2009-10-10T00:24:51Z

Yeah, I can be myself here in this small town
And people let me be just what I want to be

- John Mellencamp

For all my adult life, I've assisted trial attorneys with structured settlements. I've worked with big names in big cities but the best seem to come from small towns.

Like James (J.T.) Gilbert, in my hometown of Richmond Kentucky. J.T. is the kind of lawyer every small town should have. He spent 18 years as Chair of the Board of Regents at Eastern Kentucky University and longer as city attorney for the neighboring city of Berea. Along the way, he became one of the nation's top trial lawyers. He is President-elect of the Kentucky Justice Association.

Next week, in Boston, he will be inducted into the American College of Trial Lawyers. The American College of Trial Lawyers is a big time deal. Its membership can never be more than 1% of the attorneys in any state or province. Its membership includes big stars and big hitters. And a small town lawyer from Kentucky.

Kentucky has its share of big time rural lawyers. Sam Davies in Barbourville and Richard Hay in Somerset are two of the best injury attorneys the nation has ever produced.

The big cities, and their big populations, are well represented but it's easy to see why small town lawyers make it to the top.

It's like Mr. Mellencamp said, "People in small towns can be who they want to be."

The dynamics of a small town are perfecting for developing skills that make someone a a top notch trial lawyer. Small town juries won't allow you to pull the stunts that you see on Boston Legal or in the O.J. Simpson trial. They won't tolerate a lot of flash and showboating. That sort of behavior will hurt, not help, a client.

Depending on your perspective, there is good and bad to small towns. Everyone knows everything about everybody. It's like a scaled down version of Facebook except you don't get to choose the news that is posted.

Outside of President Obama and Theodore Roosevelt, almost all United States presidents grew up in small towns. I don't think that is an accident. Small communities develop a sense of service and a work ethic that people distant from their neighbors don't have.

Small town values can exist in any geographic area. People from places like Brooklyn and the south side of Chicago often have the sense of community that small town Kentuckians have.

It could be that President Obama is a small town guy after all. He grew up in Hawaii and other places but his early adulthood on the south side of Chicago is where he found a "small town" environment that embraced him.

I might be making too much of the big town-small town thing. I've spent most of my life dealing with Wall Street types and I'm often the only small town person in the room. I've gotten remarks about my accent and whether I grew up with running water. (I grew up in a Cincinnati suburb with an in-ground swimming pool in the backyard.) There are three ways to react to snobbery. One is to feel inferior. The second is to rise above it and outperform the people putting you down. The third is to just ignore it and live your life the way you want to live it.

I think J.T. Gilbert took the third route. He goes at life with the determination to make a difference. He's also just a genuinely nice guy. You want him to be your neighbor and I was in a sense. For seven years, I rented the office building next to his law firm.

I could talk to him on a regular basis and appreciated his reasoning and insights. I trusted him to be the executor for my will. My family knows if I drop tomorrow, to get ahold of J.T. and start making arrangements.

Like John Mellencamp, I'll probably die in a small town and probably where they will bury me.

People like J.T. Gilbert are the reason I stay here.

Don McNay, CLU, ChFC, MSFS, CSSC is one of the world's leading authorities in helping people deal with "Big Money" issues.

McNay is an award winning, syndicated financial columnist and Huffington Post Contributor.

You can read more about Don at www.donmcnay.com

McNay founded McNay Settlement Group, a structured settlement and financial consulting firm, in 1983 and Kentucky Guardianship Administrators LLC in 2000. You can read more about both at www.mcnay.com

McNay has Master's Degrees from Vanderbilt and the American College and is in the Eastern Kentucky University Hall of Distinguished Alumni.

McNay has written two books. Most recent is Son of a Son of a Gambler: Winners, Losers and What to Do When You Win The Lottery

McNay is a lifetime member of the Million Dollar Round Table and has four professional designations in the financial services field.

Mike Robbins: Let's Get Real About Money: Tips for Financial Sobriety

2009-10-09T12:44:44Z

How much money do you make? How much debt do you have? How much money do you spend each month? How much money do you have saved? How do you feel about money in general and yourself in terms of your financial situation?

These questions, and others like them, are about as personal and intimate as almost any questions we can ask ourselves and each other. Money is one of the most emotionally charged issues in our lives, especially these days. Because of our feelings of shame, guilt, confusion, judgment, fear, and more about money - we often don't ask or answer these questions in an honest way. Our inability or lack of comfort with this type of authentic discussion about money is one of the biggest reasons money continues to be such an area of stress, struggle, and confusion for so many of us.

I’ve struggled with money for much of my life – both not having money (growing up poor) and also not really understanding how it works, how to plan/spend/save in a conscious way, or how to attract it into my life. Over the past few years as I’ve begun to learn a little bit about money and also manifest a bit more of it in my life, my feelings have not really changed all that much. For example, instead of feeling ashamed of not having much money, I’ve simply shifted to feeling ashamed of not saving better or spending more wisely (and then assuming something was really wrong with me because even with more money coming in, we didn’t seem to be making that much financial progress).

As our financial circumstances change, how we relate to money often doesn’t change on its own, unless we intervene in a conscious way. And, as many of us have been impacted by the current recession, it may be shining a light on some of the unhealthy, unconscious, and negative patterns we have about money – both specific and emotional. My wife Michelle and I have been humbled this year by our decrease in revenue and the impact it has had on us, both financially and emotionally (as have so many people I’ve talked to about it). Yet, at the same time – we’re finding ourselves eternally grateful for the wake-up call and the increased awareness this has brought about for us – both in terms of money and with life in general.

This “financial sobriety” that many of us are going through, whether we wanted to or not, can be such a blessing in our lives if we’re willing to really embrace it, tell the truth about it, and use it as an opportunity to grow, learn, and transform. However, in order to do this we’re going to have to GET REAL about it. Getting real about how we feel about money and, more specifically, about our specific financial situation is challenging for many of us. We often spend and waste so much time and energy in judgment (of ourselves and others) about money; the thought of being vulnerable and transparent about it is something most of us choose not to do.

What if we did actually tell the truth about money – in detail, with specifics, and in an honest way? While doing this may seem scary on the surface, think of how liberating it would be, how much stress it could reduce, and how much genuine support we could receive ourselves or provide for others if we did.

Here are a few things you can do to challenge yourself to get more real about money, and in the process liberate yourself with more freedom, less stress, and increased peace about your finances and your life.

1) Tell the truth about how you feel about money. How obsessed are you with money? How much of your self-worth comes from your net worth (or lack thereof)? Do you avoid your finances, judge yourself and others about money, or pretend money isn’t really all that important (when in truth it is for you)? See if you can be honest about your own personal relationship to money. You may feel great and very peaceful about money (although I don’t know too many people who do). You may have a lot of fear, stress, shame, guilt, confusion, or anger about money. As with everything else in life, “the truth will set you free.” The more honest you are about your own relationship to money, the more freedom you’ll have.

2) Share the specifics of your financial situation with others. This one is BIG and for many of us, and quite scary. First, you have to confront that fact that you may not actually know the specifics of your finances (how much you make, how much you spend, how much debt or savings you have, etc.) When it comes to our money, “knowledge is power.” If we’re not clear about the details of our finances, it makes it difficult, if not impossible, to change them. Once we do know, being able to share our financial details with others, even if we feel a sense of fear, shame, guilt, or anything else about them, can be incredibly liberating and empowering. It takes a lot of energy to lie and pretend we have things all together when we don’t. When we share our finances with other people, we have the ability to be free about it, as well as get some valuable feedback and support.

3) Ask for support and give it to others. Being able to ask basic (or advanced) questions, reach out for help, and lean on others is so important in all aspects of life, especially with our finances. However, because of our emotional charge with money specifically, this is one of those areas we tend not to reach out to others about. It’s counter-productive for us to try to figure it out all by ourselves, especially if money is something we struggle with personally. And, regardless of how financially “successful” or knowledgeable we consider ourselves, we can always support and encourage those around us...even if it’s simply listening to them or being someone who they feel safe enough to share with about this vulnerable subject. We don’t have to do this all alone!

Have as much empathy and compassion for yourself and other people as possible when it comes to money. This one is such a big deal for so many of us, especially in today’s environment and climate. Being honest and vulnerable about money one of the best things we can do, not only right now during this recession, but as we move forward – to deepen our capacities for authenticity, abundance, and fulfillment in life!

Mike Robbins is a sought-after motivational keynote speaker, coach, and the bestselling author of Focus on the Good Stuff (Wiley) and Be Yourself, Everyone Else is Already Taken (Wiley). More info - www.Mike-Robbins.com

Martha McCully: My Reinvention Tour: The Venice Yard Sale

2009-10-06T14:12:40Z

My neighbors are hosting a yard sale. In their bikinis. It's a sales tactic I guess, but they are also occasionally lying down on the clothing items for sale to get some serious sun. They stuff the cash they make under the strings of their bikinis. The yard sale in Venice seems to be a weekend activity for the whole street. I went to one earlier in the season; I made friends with the neighbors after I bought their used jeans. I've hosted a few yard sales myself on the east coast, and contributed attic junk to a couple of others, but I wore long pants and long sleeves to protect against the sun, and a True-Value apron complete with pockets for cash, price stickers and a pen. I ran ads and put up signs. Somehow the Venice yard sale feels a little different.

First of all, there's only clothing for sale. It's as if the girls next door just brought the last season out to the front lawn instead of "changing closets" as we do on the east coast. And I like to support my neighbors, so I've bought their old, used stuff: a dress and a belt with a big ink stain. (What's grosser is the $10 pair of wedges I bought back east at a yard sale and literally wore every day this summer.) I spent two dollars. That fits into my clothing budget right now.

Secondly, they don't seem to care about the money part. I ask my neighbor Leah how much money she made. "Like, nothing," she says. (I just can't understand why the Viagra tie didn't sell.) Actually she made $20, but half of it was from a guy on Facebook who saw her posting for the sale. He hung out for most of the day on the lawn with Leah and her friend Amber and gave them a donation. He told them, "It was worth it just to meet you guys." Leah said, "We felt like hookers after."

The pace of making money in this new world is so different than what I'm used to. When I first left the steady paycheck eighteen months ago, each day that would go by where I didn't make a penny caused a panic. I didn't know the Chunk system then. Now I realize that every so often I get a "chunk" of money and I have to spread it out over the next while until I make another chunk. This terrifies me. Sometimes in the middle of spin class I find myself adding up my recent chunks to see how long I can keep this going; and always I lie awake at five in the morning adding up how many chunks I will need for next year. I've learned that a lot of people live this way, especially now, and you may be laughing at how obvious this is, but to someone who depended on direct deposit for over two decades, it's like learning 粵海粵語.

I never took Entrepreneurs 101, or a class in working for myself from home. I am still trying to master my procrastination tendencies and stay out of the kitchen. I've over-furnished my bungalow and potted an entire succulent garden. I try to structure my day, but the Farmer's Market and the Chai tea at Intelligentsia are too tempting. (Though a writer friend tells me that this all counts as "writing".)

I haven't hosted a yard sale yet but I'm considering selling some clothes at a local consignment shop. I just hope I never see the guy in the purple hat from Leah's yard sale wearing any of my old Theory tops.

Manisha Thakor : What's Your Money Personality?

2009-10-02T20:09:29Z

If there's one thing we've all learned the hard way over the past two years, it's the degree to which money affects every one of us on a daily basis. I recently had the chance to speak with Dr. Kathleen Gurney, Ph.D., the CEO of Financial Psychology Corporation, author of the book Your Money Personality and creator of the Moneymax Profile. Dr. Gurney has been researching the way Americans think and feel about their money for over 25 years. Through her research, she has identified nine broad "money personalities," amongst which people tend to be evenly distributed. Many high net worth investment advisers have found Dr. Gurney's money profile tool to be so powerful that they use it as the cornerstone of their financial planning practices.

One of the underlying tenants of Dr. Gurney's work is that when you understand your money personality you are better positioned to make financial decisions that you can stick with through thick and thin -- as opposed to having the kind of "manic response" that kicked in for so many during the bear market. By understanding your money personality, you can actually take the emotion out of dealing with your money. Here are excerpts from our fascinating chat:

How did you personally come to be interested in the subject "attitudes/feelings and the way in which people earn, spend, save and invest money?"

I worked for the Department of Defense as a Psychology Professor with the University of Southern California teaching at military bases throughout Europe. I saw first hand the way young people misuse their money as a result of earning a paycheck for the first time, being confronted with "deals" in the PX, and the financial and physical stress they endured as a result of lack of judicious decision-making. I was eager to explore the impact that our personalities make on how we use our money and to see if I could find any significant relationships and ways to then educate people to use that personal knowledge to make better use of money. The rest is history and has been the focus of my life's work.

What percent of Americans do you think understand their money personalities?

Probably around a third.

How can a person access your research to find out what their money personality is?

Take the Moneymax Profile questionnaire online (click here). It's a non-threatening questionnaire of 28 questions and you'll receive a full report immediately including your scores on the personality traits, your money management style and a money action plan of tips to make the best use of your money personality. There's a fee of $19.95 for this service and tool. You can also read my book, "Your Money Personality: What It Is and How You Can Profit from It." Many people find that they use both: first they discover their profile and then they read the book to learn more about people like them to receive more insight and feedback.
Ellen is a good example of the dramatic change that can occur.

How do Americans compare to other cultures with regards to their "financial psychological health?"

I have personal experience in having lived in several countries in Europe and particularly in France where I have lived part-time for fifteen years. Money is certainly not the scorecard they use to measure their satisfaction in life, nor their well-being. It is certainly respected in being able to provide for security and other personal needs but it is not used as a measure for judging personal value in friendships, partnerships, or life's meaning. Conspicuous consumption is not the norm as ads are delegated to the end of programming on television rather than every few minutes. Value is placed on a different currency than money as people and living life to the fullest are the keys to a rich life. Money is respected and not ignored but it is not the end goal nor given power over one's sense of importance.

Why do you think Americans were such poor savers over the past 20 years? What do you think needs to be done to encourage Americans to be better savers going forward?

Americans have been conditioned to believe that spending, consuming and having it all would be the key to happiness. We were experiencing such optimistic and bountiful times that we became over-zealous in our desire to have it all and pay the price to have it when we wanted it. This, of course, was a significant departure from the American norm of previous generations of savers and patient plodders. Unfortunately, Americans have now discovered that they've paid a very expensive price and have adopted new values of responsible saving. I just finished a tour with Capital One educating consumers about how they could develop healthy savings habits and take advantage of an exciting new offering by Capital One which eliminates will power decisions and automatically transfers $.50 for every debit purchase or online bill pay to a linked savings account and then matches it for the first three months and 5% thereafter for every eligible transfer up to $300 a year. I am excited about this tool and believe that American consumers can kick start their savings habit and make it subconscious as it will be automatic and rewarding at the same time.

If you could give just three pieces of financial advice from your standpoint as an expert in financial psychology, what would they be?

1. Control your money instead of allowing it to control you. People who are more involved with their money are also more confident and less emotional; therefore they make more suitable financial decisions.

2. Become aware of your attitudes and feelings about money and how they make an impact on the money you earn, spend, save and invest.

3. Take back your power to make the best use of your money so you use it for your well-being and values vs. trying to live another's dreams and definition of success.

You can stay current with Dr. Gurney's most recent work at both her website and blog.

Manisha Thakor is a personal finance expert on women & money. To learn more, visit www.ManishaThakor.com

Don McNay: Is Credit Evil?

2009-09-29T14:09:04Z

And
if I change my mind

A million times

-Shania Twain

I hate certain types of credit. I don't own a credit card and I don't want one.
Payday lending, tax refund anticipation loans and other forms of legalized loan
sharking should be outlawed.

I've watched many people get in trouble with upside down car loans,
second mortgages or from using high interest rate financing.

Credit keeps many people from living within
their means.

Then a friend told me he was buying a large house.

My buddy is a financial genius. He is
someone you never heard of - and he wants it that way. He drives a modest car and lived in a modest home, both of which he paid for in
cash. Like Warren Buffett, he is more interested in
his portfolio than pretense. He is a self-made success.

He said
that with the housing market depressed and interest rates
below 5%, it made good financial sense to buy a nice
house and finance it for 15 years.

I'm not sure he really wanted a nicer house.
He just saw it a financial opportunity.

He is rarely wrong and never makes irrational moves. He
got me to thinking again about the evils of credit.

There are times when credit is good, when it is used
responsibly by the people who can
handle it.

For example, take someone in a high tax bracket who is financing a house. If he borrows the money at 5%, the actual cost in most cases will be roughly 3%, after taxes.

If he used the house money for an immediate annuity, he would have the cash
flow to pay the mortgage, get the mortgage
interest deduction and participate in any increase in
value of the
house. (I am assuming that
sometime in the next 15 years, houses will appreciate in value again.) In the meantime, the
mortgage and annuity rates would stay the same.

That is a fairly low-risk way to use credit.

He could also
put his money
in the stock market and make big gains. Or lose his
shirt.

There has been a lot of shirt-losing in the past couple
of years.

Investing in the stock
market can be like going to the race track. There
are going to be winners and there
are going to be losers. People should understand that any investment
involves risk.

In the subprime, “too
big to fail,” anything goes market that brought on the financial crisis, some
people forgot about risk.

Those are the people
that I don’t want to have credit. None
at all.

Many are losing
their shirts by paying outrageous fees and interest on credit cards.

Credit cards can take 20% to 30% a year in interest plus really outrageous
fees. Guaranteed. And you don't get a tax
deduction.

I can't think of a worse investment than that.

I watched so many people fall off the wagon on credit cards, that I bought into the
"Just
say No"
philosophy on any credit.

A pioneer in the "never borrow money" philosophy was
the Christian author and lecturer, Larry Burkett. In the mid
1970's, he founded a non-profit organization called Christian Financial Concepts, that
used biblical principles in guiding people with their finances. One
of those principles was no debt whatsoever.

Burkett was extremely popular in Christian circles until his death in 2003 but he never reached a
mainstream audience. Dave Ramsey has.

Ramsey has a syndicated radio show and a nightly program on the Fox Business News Network.
Ramsey acknowledges
Burkett's influence in his book,
Financial Peace.

Although, like Burkett, Ramsey focuses his attention on churches and Christian communities, he
reaches every
demographic. His message of savings
and sacrifice and never borrowing money is one that many people need to
hear.

Then I think about my friend. I am sure his new home is a smart financial
move.

Credit in moderation
can be good. But like any addiction,
credit can be the worst nightmare of your life.

I understand there are
some circumstances where a home mortgage is a great idea, but don’t be looking
for me in any Capital One commercials in the near future.

Don McNay, CLU, ChFC, MSFS, CSSC is
one of the world's leading authorities in helping people deal with “Big
Money” issues.

McNay
is an award winning, syndicated financial columnist.

You can read more about Don at www.donmcnay.com

McNay
founded McNay Settlement Group, a structured settlement and financial
consulting firm, in 1983 and Kentucky Guardianship Administrators LLC
in 2000. You can read more about both at www.mcnay.com

McNay
has Master's Degrees from Vanderbilt and the American College and is in the
Eastern Kentucky University Hall of Distinguished Alumni.

McNay
has written two books. Most recent is Son of a Son of a Gambler: Winners, Losers
and What to Do When You Win The Lottery

McNay
is a lifetime member of the Million Dollar Round Table and has four
professional designations in the financial services field.

Job losses, early retirements hurt Social Security

2009-09-27T09:00:37Z

WASHINGTON — Big job losses and a spike in early retirement claims from laid-off seniors will force Social Security to pay out more in benefits than it collects in taxes the next two years, the first time that's happened since the 1980s.

The deficits – $10 billion in 2010 and $9 billion in 2011 – won't affect payments to retirees because Social Security has accumulated surpluses from previous years totaling $2.5 trillion. But they will add to the overall federal deficit.

Rohit Chopra: Should the Poor Be Denied the Right to Bear Children?

2009-09-24T15:32:23Z

The poor and indebted have it tough. They may have the right to buy a gun, but they can't get much else. They can't afford down payments, so they're not able to buy homes anymore. And since they can't afford to live in a good neighborhood, their kids aren't allowed to go to the best schools. And we've all heard how they can't afford adequate health insurance.

It raises the question: if they can't afford it, should the poor be allowed to have children?

So what does it really cost to raise a child? The USDA Center for Nutrition Promotion & Policy publishes an annual report that tries to answer just that. I analyzed this data to determine whether a lower-income family could afford to have a baby.

After a parent has taken care of their own personal expenses, housing, and savings, he or she would need an additional $1,000 per month (before taxes) to raise the average child from a lower income family. This assumes that extra money beyond monthly expenses are invested at a rate 2-3% higher than inflation. Regardless, it's an enormous bite out of the average low income earner's paycheck.

The good news is that if the family puts away about $60 extra per month, it amounts to a large amount of money over 18 years and can pay the majority of tuition at a public four-year university.

But $1,000 is the minimum. They'd need more if they lived in the Northeast or West Coast, more if they lived in a city, and more if they want to raise their child like their middle income counterparts. And way more if their employer doesn't provide family health insurance.

In other words, unless you can pony up at least an additional $1,000 a month for the next 20 years, you'll end up falling into a debt trap or depriving your child of the minimum needs to compete in the real world.

So should there be a childbearing policy? In India, they want to reduce the birthrate by promoting television. A British study recently showed how contraception is the cheapest way to cut carbon emissions. Last year, a Louisiana legislator actually proposed sterilizing poor women.

Here in America, could we better protect the environment, reduce crime, and increase school performance if the poor had fewer children? Maybe.

But, regulating childbearing for the poor seems wrong (and probably a little racist), even if economists can prove it's "efficient." Before we start telling people they can't have kids, let's consider other strategies to make everyone better equipped to tackle the financial challenges of raising a family. Here are a few:

Automatic Savings Account Enrollment. The last thing on the minds of new moms and dads is dealing with excessive paperwork related to pre-tax savings accounts. We should automatically enroll children in college and health savings accounts with contributions deducted from their parents' paychecks. Often parents discover these benefits far later than they should.

Credit Card Debt Warnings. Parents should receive warnings about excessive credit card debt and its potential to jeopardize their child's future opportunities. Financing a family with credit cards is rarely a good idea.

Better Baby Showers. Instead of registering for a $1,000 baby stroller, the laws should allow a reasonable amount of gift-giving to a child's educational savings account. Friends and family spend a lot on toys and clothes -- let's give them new options to invest in something more meaningful.

Prenatal Financial Counseling. Nonprofits and health care providers should partner to provide counseling for expectant parents so that they can understand how the finances will change, including the potential need for disability and life insurance. Unfortunately, lower income people often don't take advantage of dependent care and other tax-advantaged plans. Better information can help fix this.

The bottom line is that having a child is expensive. Instead of denying people the chance to be a parent, let's do everything we can to help people better plan their new family's financial future.

Don McNay: Like Lottery Winners, Pro Athletes Also Blow Big Money

2009-09-22T01:48:07Z

"It’s the same old story,
same old song and dance my friend'

-Aerosmith

Tom Leach, the voice of the University of
Kentucky Wildcats, gave me a fascinating Sports Illustrated article entitled, "How (and Why) Athletes Go Broke."

To quote baseball legend Yogi Berra, it is “Déjà vu all over again."

As a structured settlement consultant, I have worked with injury victims, lottery winners
and others who receive very large
sums of money. It’s been said that 90% of them will run through
their money in five years or less. I've seen people blow money in more ways than you can think.

Even knowing
that, I was still stunned to learn that within two years of retirement, 78% of
NFL football players are bankrupt or under financial stress.

60% of NBA basketball players are broke within five years of retirement.

I was under the impression that professional athletes had wonderful
support systems of agents, advisers and strong unions. I guess not.
They are running through their money faster than a crazed lottery winner.

Powerball winner Jack Whitaker was robbed of $600,000 in a strip club. Cash. It seems like a lot of pro sports stars are following his spending
philosophies.

Why are people so compelled to blow big
money?

I sometimes feel like a substance abuse or weight loss counselor. I
know many people I try to help will fail, but I keep focused on the success stories.

Like in the movie Carlito's Way, friends and family often are the reason many
people go down.

My father often said (and I often repeat) that
"If you
tell me who your friends are, I will tell you who you are."

The Sports Illustrated article said that the downfall of many pro athletes are
the people who are advising them and hanging out with them.

You can't choose your "friends" by their ability to serve
as your Yes-men. In fact, a true
friend will tell you when you are screwing up. You need friends who like
you for who you are, not for your wallet.

Professional sports figures attract flunkies for many reasons.
Society has a big attraction to celebrities. Someone needs to
tell sports figures that if a person REALLY wants to be your friend, he doesn't need to be on your
payroll.

I have many friends. But none of them get paid for that “privilege.”

Sports stars also get caught in the same trap
that others with big money fall into. They think the money is going to
last forever. Someone who gets a lottery jackpot or injury settlement is
only going to get it once. As I told one injury victim, "You are only going to get
hit by a truck once in your lifetime. You need to make sure that this
money is there for all your lifetime."

Sports stars often think they will play forever, but the average career of
an NFL player is only four years. The careers end, the money runs out and they are not prepared for the sudden fall.

Sports stars often have an attraction for risk. A young, professional
athlete is the epitome of self-confidence. Those who make it to the professional ranks were probably stars in grade school, high school and college. They have never had
anything go wrong in their entire lives.

Until they start investing big money.

Overconfidence is an affliction that plagues many on Wall Street. It
is the primary reason we are in an economic crisis. The problem is
even worse for sports stars since they generally don't have the education and experience that the Wall Street crowd has.

When overconfidence is combined with lack of knowledge, disaster strikes.

I would tell a professional athlete the same thing that I would tell anyone
with big money.

Plan on the money you have lasting for the rest of your lifetime. Assume you'll
never get another nickel. Dump all the
"friends" and hangers-on. Don't be spending to keep up with the Joneses. (I like the Dave Ramsey line: "Don't spend money you
don't have to impress people you don't know.")

I try to have lottery winners and injured people keep quiet about their
finances. Since that’s
impossible for sports stars, they need to take special care in choosing who will financially advise them.

Stars need advisers who have worked with others in their situation and income
class. They need advisers who don't "learn why
they earn" at the star's expense.

If they develop and stick to a sound
financial game plan, they can avoid being another
"same old story."

---------------------------------------------------------------
Don McNay, CLU, ChFC, MSFS, CSSC is
one of the world's leading authorities in helping injured people and lottery
winners deal with complex financial issues.

is also an award winning, syndicated financial columnist.

McNay
founded McNay Settlement Group, a structured settlement and financial
consulting firm, in 1983. The company's primary office is in Richmond, Kentucky.

McNay
has Master's Degrees from Vanderbilt and the American College and is in the
Eastern Kentucky University Hall of Distinguished Alumni.

McNay
has written two books. Most recent is Son of a Son of a Gambler: Winners, Losers
and What to Do When You Win The Lottery

You can write to Don at don@donmcnay.com or
read his column at www.donmcnay.com.

You can
reach him on Facebook at www.facebook.com/donmcnay and on Twitter at
twitter.com/Donmcnay

McNay
is a lifetime member of the Million Dollar Round Table and has four
professional designations in the financial services field.