The High Price of Cheating (Financially) on Your Spouse

MICHELLE PERRY HIGGINS: It’s almost Valentine’s Day. What could possibly ruin a perfect holiday, you ask? If you are one of the 7.2 million Americans with a hidden bank or credit-card account and your spouse finds out, this could definitely kick cupid to the curb.

Money arguments are the root of many separations and/or divorces. I am not surprised by the staggering number of divorces that are linked to money issues because we all have strong opinions and emotions surrounding this issue.  Unfortunately, a recent report from CreditCards.com says that one in five Americans have spent $500 or more on a purchase without their partners knowledge.  Financial infidelity is very serious and can have lasting effects on any marriage.  Even if the offending spouse is not discovered, the act of concealing something from the other spouse is bound to have a corrosive effect on the marriage bond.  And if the concealment is discovered, the other spouse will feel betrayed and it may take years to rebuild lost trust.
If you fall into the group of 7.2 million spouses with a hidden bank or credit-card account, think long and hard about whether the consequences are worth the risk. How will this play out if your partner finds out?  Is it worth the potential damage to your relationship?  Are you hurting your joint finances by having this account? How would you feel if you found out your partner was doing the same thing without your knowledge?

So how do we avoid this marriage minefield? One thing you can do is to sit down with your partner and create a new line item in your budget for each one of you.  Within the limits of your budget you need to decide on an amount that is mutually agreeable, whether it be $50, $500, or more. You can call this new addition to the budget whatever you want, say “fun money.” There should be no restrictions on the use of these funds and you should not have to report back to one another on how the money was spent.  These funds can be paid out in cash or you can each open an account.  Allowing each other this kind of financial freedom should help reduce the possibility of financial infidelity.

Michelle Perry Higgins (@RetirementMPH) is a financial planner and principal at California Financial Advisors.

Read the latest Investing in Funds amp; ETFs Report.

The Secret Beneath Incredible Wealth

Have you ever seen a rich guy in the news and caught yourself wondering how he got there?

Some of Australias richest people were simply born well. They were lucky enough to inherit their parents millions. But the idle rich rarely make headlineshellip;let alone profits.

We wont bring you any investing lessons from those types in Money Morning. Theyre wealth consumers, not creators.

We want you to pay more attention to the lsquo;other kind of wealth. The kind that buys you influence as well as the trappings of financial success. The kind of currency that regenerates itself time after time.

Australias richest investors dont want you to know this. But their prosperity is all thanks to membership of one secret society.

Dont bother asking your stockbroker about this society. He probably doesnt even know it exists.

But today, wed like to throw open its front door and hand you the skeleton key to untold richeshellip;

What were about to reveal is one of our most powerful wealth building secrets.

Normally, its almost exclusively off-limits to private investors. Thats because you typically need an eight-figure bank balance to even get a seat at the table.

Its a world where dealmakers dont need to report every last bit of information to the stock market, or disclose how much they earn, or how they plan to spend investor cash.

In the mindset of the super-rich, thats their business and no one elses.

In a way, its an invisible markethellip;an unseen market. Thats why we call it the lsquo;investment underworld.

Hiding in plain sight

The worlds best investors dont make their dough by staying meek and mild. They certainly dont earn their millions by buying and selling the large-cap stocks on the Samp;P/ASX 200 [ASX:XJO] index.

They get it by rattling a few cages. They find companies where, because of an immature business model, the winds of economic change, or subpar management, the potential for growth far outweighs the price at which they can take controlling stakes.

Finding these stocks is only half the battle. The intrepid investor needs to have the cojones to make plucky, calculated bets. Players in the investment underworld dont buy stakes in companies for potential profits of a couple of thousand dollars. They do these deals with an eye to making many millions down the trackhellip;sometimes hundreds of millions.

Dont think you dont know who these players are. They hide in plain sighthellip;and youve seen them in the headlines.

Were talking about billionaires like Jamie Packer, Lachlan Murdoch and Kerry Stokes. These guys are card-carrying members of the investment underworld. They slither through it like men possessed, hunting bigger and better prey.

Youd be amazed by the size of some of the deals that these guys have pulled off and how much profit they and their co-investors have reapedhellip;

The smartest deals

Cunning players make huge returns in the investment underworld time after time.

You already know their names. But you might not have heard about:

  • James Packer using an underworld stock to bank more than $50 million from a privately held cosmetics business

  • The Myer family using this technique to turn $450 million into $2 billion in just three years, through the 2006 purchase and 2009 relisting of Myer Holdings Ltd [ASX:MYR]

  • Kerry Stokes using it to pocket $3.3 billion from his Seven Media Group stake in 2006, right before the GFC hit

So you see, the investment underworld can throw up outrageous riches.

But the boundaries of the investment underworld dont stop at Australias shores. Its web of contacts criss-crosses the world. And the potential gains on offer overseas make some of these Aussie lsquo;underworld deals look like small fry.

lsquo;So what?, you might think, lsquo;I dont move in those circleshellip;so how can I reap those kind of gains?

Were glad you askedhellip;

Your special report

Today, were blowing the lid off this secret billionaires club.

Weve written a special report on the investment underworld embargoed from release until this afternoon. In it, weve revealed how you can infiltrate this underworld.

Youll discover how to shadow the deals that are going down every week in this hidden market.

You dont need blue-blood contacts, and you dont need a Swiss bank account. All you need is an open mind and a little speculating cash.

If our research is on the moneyhellip;following our advice could net you an average gain of at least 265% over the next few years. And if our analysis proves too conservativehellip;it could lead you to the best stocks youve ever bought in your life.

Youre getting a rare chance to step inside the investment underworld, and potentially make some serious cash by following in the footsteps of some of Australias wealthiest investors.

Sound interesting? Keep an eye on your email inbox later this afternoonhellip;and all will be revealed.

(If youre not already a subscriber to Money Morning you can subscribe for free here.)

Cheers,

Tim Dohrmann,
Editor, Money Morning

Join Money Morning on Google+

We must boost homeownership

When I became a Realtor more than 40 years ago, I had a single goal: to help families realize the American dream. Today my goal is still the same because I’ve discovered a simple truth – homeownership is good. It’s good for families, communities and the economy.

This simple truth used to be known and understood by those in Washington, DC They supported homeownership through tax incentives, such as the mortgage interest deduction and programs that ensured affordable mortgages.

Somewhere, somehow over the last six years, too many decision-makers have come to believe homeownership isn’t important. Their inability to create a clear path forward in the mortgage finance arena has led to uncertainty and restricted credit for qualified homebuyers. This has hurt not only families, but the nation as a whole.

Homeownership helps families build wealth and move up the socioeconomic ladder. This is perhaps more important now than at any time that I’ve been in the real estate business. The economic divide between wealthy households and low- and moderate-income households who can’t afford a home is wider than ever before.

In California, where home prices are high, this has resulted in a historic decline in first-time homebuyers from a high of 51 percent in 1993 to 31 percent this year, even while interest rates are at historic lows. Even worse, homeownership rates for Hispanic and African American families have seen an alarming decline in the last several years, from 47 percent in 2005 to 42 percent in 2013 for Hispanics and 40 percent to 33 percent for African Americans.

How did this seismic shift in attitude toward homeownership happen? When the housing crisis began, many “experts” almost immediately began deflecting blame from under-regulated lending, which resulted in nongovernment predatory loans, and decided it was homeownership and the policies promoting it that were bad. Lawmakers accepted that somehow owning a home and all the measurable benefits that society had reaped over the previous 70 years following the Great Depression didn’t exist. A large chorus inside the Beltway began saying government shouldn’t support and promote homeownership.

I am writing to say: “Enough!”

Washington needs to support and put forward more leaders such as US Housing and Urban Development Secretary Julián Castro and Federal Housing Finance Agency Director Mel Watt, who believe homeownership is important and are willing to take meaningful action to promote it. They, along with the president, have recently taken significant steps in support of affordable homeownership, such as lowering FHA mortgage insurance premiums, creating a 3 percent down payment loan program, maintaining Fannie Mae and Freddie Mac loan limits, and refocusing Fannie Mae and Freddie Mac on their missions of promoting homeownership.

No one is calling for loans to be made to unqualified homebuyers, and, sadly, not everyone should or will own a home. But the actions that Castro and Watt have taken to promote homeownership, and perhaps even bring finality to the conservatorship of Fannie Mae and Freddie Mac, are exactly what the market needs.

There is no “silver bullet” to make housing affordable, fix the slow housing recovery and promote wealth building. This will require the government and the real estate industry to do their part, but the place to start is to go back to the primary focus of implementing laws and regulations that support and promote putting qualified homebuyers into housing.

Consumer Reports: Tips for buying or selling a house

CONSUMERREPORTS– Some 5 million homes are expected to change hands this year, according to the National Association of Realtors. Thats up about 30 percent since the depths of the recession. If youre thinking of buying or selling a home, Consumer Reports survey of real estate agents gives you insider tips on how to negotiate the best deal.

The survey of more than 300 agents reveals that 86 percent say theyve seen other agents engage in poor business practices. At the top of the list: steering buyers toward a home that would result in higher commissions. And 27 percent say theyve seen other agents convince a client to sell a home for less than its worth.

Consumer Reports says dont hire the first agent you meet. Interview at least three, and check references. Also find out whether they are members of the National Association of Realtors. Its members have to adhere to a strict code of ethics.

And if youre selling a house, dont overpay the agents commission. The survey finds that more than 60 percent are willing to negotiate at least half the time. A lot of people think 6 percent is the standard commission, but more than half of the real estate agents surveyed said they usually charge around 4 percent.

For homebuyers, a caution: A third of the agents surveyed said that buyers get into trouble by underestimating what it costs to buy and own a home. Its not just about your monthly mortgage payment. When youre buying a home, you have to think about paying an attorney, your closing costs, and the title search. And then there are the ongoing costs of home ownership, such as taxes and utilities.

Another mistake that buyers make is waiting too long to review their credit reports. To get the most favorable rate on a loan, you need a strong credit score of at least 740, according to the chief financial analyst for Bankrate.com. If you need to improve your profile, Consumer Reports says dont wait until the last minute.

And a final word to the wise: Dont skip the home inspection. More than a quarter of agents say that not getting an inspection can be one of the more costly mistakes.

More advice on maximizing your deal whether you are buying or selling a house is available at ConsumerReports.org.

Interview with organizers of the Krewe for $15 and a Union Mardi Gras Parade!

Collette Tippy [Stand With Dignity], Naima Savage [Show Me 15] and Nolan Watson joined News and Views to talk about the March for $15 and a Union Rally Saturday February 7 at Congo Square.
Listeners learned about the fight for $15 Dollar/hr wages and the growing movement for living wages in New Orleans and the other cities across the United States. Organizers break down myths about increased wages being unaffordable for corporations and how increase wages actually create jobs through community wealth building. Our guests also discussed the difference between a minimum wage and a living wage.
For more information, contact 15andaunion [at] gmail.com or stand [at] nowcrj.org
To find out what a living wage is in New Orleans – or any city in the United States – check out the MIT Living Wage Calculator here: http://livingwage.mit.edu/

Banks using RRSP season to start savings conversations with Canadians

But bankers say they continue to be busy at this time of the year, and insist Canadians are focusing on saving money across a variety of available investment products despite dire prognostications about a lack of retirement preparedness.

“It’s a big period of business,” says Linda MacKay, senior vice-president of retail savings and investing at Toronto-Dominion Bank. The traditional sales season in the first couple of months of the year is “material for us, February in particular,” she said.

Recent statistics on saving suggest the banks are facing an uphill battle with many Canadians.

Almost half of working-age people say debt repayments are keeping them from saving enough for a comfortable retirement, while their income is not keeping pace with the cost of living, according to a report this month from HSBC.

The report, based on a cross-Canada survey, revealed 37% of people, including almost two in five who are 45 and older, aren’t and don’t intend to start saving for retirement. Perhaps even more disconcerting is HSBC’s revelation that many working-aged people have stopped or reduced saving for retirement because of the impact on their savings of the global economic downturn.

Given these trends, along with newer wealth-building options like tax-free savings accounts available year-round, banks are de-emphasizing the need to make a lump sum investment to an RRSP in the first two months of the year.

Instead, they are using the traditional RRSP season, and the months surrounding it, to encourage customers to come in and speak about all aspects of financial planning and management, including reducing the cost of debt to gain more money for savings and investments down the road.

At Royal Bank of Canada, for example, RRSP season is now referred to as “the winter investment season,” and extends all the way from November through February.

O’Connor: Buying home not ‘best investment’

Jeremy Biberdorf recommends investing in a home. I recommend not listening to Jeremy Biberdorf.

One of the most persistent personal finance myths around is that buying a home is your best investment. Youd think this notion would have been wiped out during our recent financial unpleasantness — along with hundreds of thousands of luckless home investors — but the idea persists.

Just to be clear: Owning a home can be a good move for the right people in the right circumstances. But the same can be said for owning a chainsaw or a pet turtle. That doesnt make either of them an investment.

Investment is a complex subject that most people feel totally insufficient to understand, Biberdorf writes. Then he proceeds to very effectively demonstrate the utter truth of that statement.

25% gain? Thats 100% wrong

Biberdorf is a website marketer who runs the personal finance blog Modest Money. He recently wrote an unfortunate and blaringly wrong-headed post for Quizzle.com, a personal finance and credit scoring site run by the Quicken Loans folks. Before this bad info gets too far around the Intertoobz, lets correct Biberdorfs biggest mistakes.

After asserting that the purchase of your own home is still one of the best ways to invest your money, Biberdorf goes on to give an example of someone who puts $40,000 down on a $200,000 house. Because houses appreciate at about 4 percent to 5 percent annually, the first-year bump in the homes value gives you a $10,000 gain for, a shocking 25 percent increase on your initial investment of $40,000.

Shocking, well, yes; that sentence is so shockingly wrong that it makes my brain hurt, so give me a moment here.

OK, Im back, and lets take first things first.

No, houses dont appreciate at 4 percent to 5 percent a year. They appreciate at that rate in some years and neither you nor I nor Jeremy Biberdorf knows what those years are going to be. They also lose value in some years, and they dont give you advance warning about that turn of events, either. Also, absent our own personal crystal balls, most of us are not ready to pick up and move out so we can lock in our awesome one-year gains when our homes do show gains.

On average, most folks move every 10 years. In the best 10-year period, according to the Case-Shiller Home Price Indices, the value of a home increased by a whopping 74 percent. But that stretch ran from 1996 to 2005, which includes the insanity of the pre-collapse housing bubble — you know, the one that so wildly inflated home values that it triggered the worldwide recession still being felt today, so maybe you dont want to bet on it happening again too soon. To show how extreme that was, from 1950 to 2005, home values increased 91 percent. But extend the range from 1950 to today, and values increased 46 percent. (These are all adjusted for inflation.)

During the worst years of the mortgage mania, home prices grew at an annually compounded rate of 5.68 percent, so getting an average of 4 percent or 5 percent in most years is a ridiculous assumption. In the 56 years from 1950 to the height of home values in 2005, the compounded annual growth rate of home values was 1.17 percent. And from 1950 until today, its 0.58 percent. So, if youre going by a long-run historical average, your rockin-sockin home investment is going to do about as well as a savings bond.

A further reality check: In all the 10-year periods beginning in 1950, home values gained 33 times but lost value 23 times, including 11 percent drops in the 1990s and, worst of all, a 24 percent loss for the last 10 years.

Of course, you could conceivably sit on your investment and wait for it to hatch into a golden opportunity as soon as a price hike comes along. Which means that if you got a great job offer or had a baby or wanted to retire to a sunny condo in 1995, you only had to wait to move for several more years — and hope that life didnt get in the way while also praying for one of the worst asset bubbles in history to inflate. Then you could cash in your big winnings. But stay too long, and youd be back in the red.

Show your work, Jeremy

Our man Jeremy also skips doing the math when it comes to a few other aspects of your home investment that will dim the luster of his projected sky-high returns. He writes that your property tax and interest are both tax deductible, making these costs essentially government subsidized, locking in your 25 percent equity return.

Wrong again, Biberdorf.

On the $160,000 mortgage youd need in his example, first-year interest amounts to $6,300. Yes, its tax deductible, and Uncle Sam lets most of us write off about one-quarter of that. Who pays the other 75 percent? You do, and it knocks your $10,000 gain down by nearly half.

Then theres property tax of, lets say, $1,500. Theres also the approximately $2,500 in closing costs and fees that you paid, which Biberdorf forgets, along with moving costs and homeowners insurance, which means that celebrating your savvy investment strategy is going to be limited to bringing your own bottle of domestic champagne to the local Chuck E. Cheeses.

But wait: Even if your home value did increase 5 percent, you dont actually have any more money than you started with unless you sell the house (and youd better sell now, bucko, since that 5 percent boost indicates your home value is headed for a fall in the next few years).

To lock in your genius gains, youll pay a 6 percent Realtors commission on your $210,000 sale of $12,600, plus other closing costs such as title insurance, advertising and document fees. Remember to add moving costs to what will have to be a cheaper house, because your $10,000 gain is as flushed as the Tide-e-bowl tablets you left behind.

All told, you put $40,000 down, sold the house for $210,000 and netted about $188,000. But you still have a mortgage balance of $157,000, which leaves you with $31,000. What happened to your shocking 25-percent gain? Arent you supposed to have $50,000 now?

Some evil mysterious source has erased your $10,000 paper profit and produced a $9,000 real-world loss — and thats before you subtract what you paid for property insurance and two sets of moving costs. The name of that evil, mysterious source?

Math.

So, be just like Jeremy and invest in a home to grab that 25 percent annual gain on your down payment. And believe me, when you see the return on your investment, youll definitely be shocked.

Brian OConnor is author of the award-winning book, The $1,000 Challenge: How One Family Slashed Its Budget Without Moving Under a Bridge or Living on Government Cheese.

boconnor@detroitnews.com

(313) 222-2145

Twitter: @BrianOCTweet

Most Portuguese-speaking countries rise in the 2015 Index of Economic Freedom

Six of the eight Portuguese-speaking countries recorded increases in the 2015 Index of Economic Freedom, drawn up by the US Heritage Foundation, the exceptions being Brazil and Mozambique, according to the document that was published recently.

The Index of Economic Freedom takes into account legal issues (property rights and freedom from corruption), limitations imposed by governments (fiscal freedom and government spending), regulatory efficiency (business freedom, labour freedom and monetary freedom) and open markets (freedom of trade, investment freedom and financial freedom).

The first five places on the index are occupied by Hong Kong, Singapore, New Zealand, Australia and Switzerland, and the first Portuguese-speaking country to appear is Cabo Verde (Cape Verde), which received 66.4 out of 100 possible points with an improvement of 0.3 points on the previous year.

In addition to Cabo Verde, the only other Portuguese-speaking country that is classified as moderately free is Portugal, which appears in 64th place with 65.3 points and an improvement of 1.8 points over 2014.

The other Portuguese-speaking countries came far behind these first two, with Brazil in 118th place (56.6 points and 0.3 points down on last year), Mozambique in 125th place (54.8 points and 0.2 points down) Sao Tome and Principe in 136th place (53.3 points and 4.5 points up) and Guinea-Bissau in 145th place (52.0 points and 0.7 points up), all in the mostly unfree category.

In the repressed category is Angola in 158th place with 47.9 points and 0.2 points more, and finally, Timor Leste (East Timor) in 167th place with 45.5 points and an improvement of 2.3 points.

Although Sao Tome and Principe registered the biggest increase in the group of eight Portuguese-speaking countries, the result was still below the world average and was ranked 29th among 46 countries in sub-Saharan Africa in the Heritage Foundation study in partnership with the Wall Street Journal, which analysed 186 countries, and ranked 178 of them. (macauhub/AO/BR/CV/GW/MZ/PT/ST/TL)

PM Modi promises more funds, financial freedom to states at first meeting of …

Prime Minister (PM) Narendra Modi promised more funds and financial freedom to states at the first meeting of the Governing Council of NITI Aayog in the national capital on Sunday and exhorted the chief ministers (CMs) to bury differences to help the country achieve high growth.

He addressed the CMs and representatives of 31 states and Union Territories as Team India and asked the CMs to personally monitor factors impacting project execution.

Unusual depth of experience fuels young entrepreneurs’ ambitious startups

Do young entrepreneurs today have an advantage over older business owners?

There’s no question they do. But it’s not an unfair advantage. They’ve earned it.

The most successful entrepreneurs are usually those who took on entrepreneurial activities at a young age. In my day, newspaper routes, babysitting or working in retail were the most common teenage paths to financial freedom. One friend of mine raised rabbits. But for the most part, these attempts to get a head start in business were by their nature very limited. You could generally babysit for only one family a night.

Moreover, these jobs taught very little. A paper route might teach you the discipline of early mornings, or how to find shortcuts through the neighbourhood. Entry-level retail might help you learn to take orders or avoid eye contact. But for the most part, the education was as limited as the potential for promotion.

Today’s young people, thankfully, have much broader options. Such opportunities formed a big part of the storyline at the Canadian finals of the Global Student Entrepreneurship Awards (GSEA), held last week in Toronto by the Entrepreneurs’ Organization.

The GSEA finals brought together six winning student entrepreneurs to pitch their businesses to a gold-plated jury that included former Dragon Bruce Croxon, EO Canada co-founders Peter Thomas and Bill Trimble, and Julie Mitchell of Toronto-based Parcel Design. The grand-prize winners would receive $10,000 cash, various free public relations and consulting services, and the right to pitch their business again at the global level in April in Washington.

While their businesses represented sectors as different as landscaping, bicycle rentals, apps and self-disinfecting chemicals, the six pitchers had one thing in common: all started earning money at an early age in fields that would have been unthinkable to previous generations. As part of their pitches, these young twenty-somethings told stories of importing automobiles, hawking collectibles on eBay, day-trading stocks, and reselling makeup and other consumer products sourced directly from China.