Elusive Wealth

Elusive Wealth is growing fast, in fact we are doubling our team of authors!  Yes this just means we are going from one to two, but it is worth bragging about. Joining me in providing commentary, insight, news and occasional bad humor is Jon.

Having Jon as part of the team will help provide some alternative views from my own. I will leave you to guess whether he is more or less liberal than I am    Anyway Elusive Wealth welcomes him to the team, and we look forward to some good discussions.

Keep an eye out on his first post, and please provide your input!  Thanks for visiting Elusive Wealth.

Dave Ramsey’s Town Hall for Hope broadcast is available on Hulu right now.  I did not get to see the broadcast the first time around, but now that it is available on Hulu I watched it.  If you are interested you can check out the broadcast here:

http://www.hulu.com/watch/74840/the-dave-ramsey-show-frid-may-2-2009

Now that I have been able to watch it, I have some thoughts that I want to share on the event.  First and foremost I do recommend that everyone watch the Town Hall for Hope. The message is excellent despite any shortcomings I mention in the rest of this post.  It is important that we continue to work our way out of difficult economic times with as much optimism and hope as possible. Key components of Dave’s message in this event include:

• The fear and hysteria can get to anyone, the media has done an excellent job publicizing it.
• Although 45+% of people believe there job may be at jeopardy, the reality is that unemployment has increased only around 3% (this has gone up slightly since the broadcast; also, 3% is based on the official unemployment number — some believe it is optimistic because it does not include underemployed).
• For those who have lost their jobs, attitude is a critical component to moving on and landing the next job.
• Although it is always difficult starting a new business during an economic downturn, there are advantages and opportunities that exist when compared to times of strong economy.

Dave’s message is extremely consistent with his show, and as he puts it, this is common sense — this is advice your grandmother might give.  That is true to an extent, though not everyone believes that avoiding debt completely is necessary. In fact many believe debt can be a key to financial well being (for example, buy real estate at no money down). If you have listened to Dave’s radio show, watched his television program, or read his book The Total Money Makeover, you will see that much of the content of the Town Hall for Hope has been delivered before. That is acceptable here, because in this event it is delivered to a potentially wider audience.

Dave believes that you cannot separate the spiritual from finances. Maybe more accurately he believes you cannot separate the spiritual from anything in one’s life, financies being a component of life. Although occasionally he will encourage his listeners to seek advice from their pastor or their church, usually he keeps religion out of the discussion unless he knows one’s faith. A big part of his delivery of Financial Peace is through the church community, so clearly his message has tie-ins with religion. Like his traditional shows, this event was mostly finance and economy with a little bit of spiritual mixed in.  This may turn off viewers who do not hold views of any religion, or believe in religions other than Christianity.

Near the end of the event the question / answer session between David Asman and Dave Ramsey added less value to the overall conversation than the initial discussion and the question / answer session with viewers. With the crowd gone and the seats empty, it made me feel as if it were time for me to leave as well.

Dave adds many of his usual quips and expressions to much of the conversation, and if you listen to or watch his show you may be quite familiar with them – to the point where they are overused. But there is something rewarding in Dave’s delivery in general, whether part of this event or his show. To me that reward is a very motivating financial adviser that constantly reminding me of my own financial goals. There are certainly other ways to attain the same motivation, however for those that are looking for the motivation, Dave Ramsey provides it.

In the end, for anyone with uncertainty and concern about our economic climate, the Town Hall for Hope is a must watch. For those who want motivation and want to help spread the message of hope, there is value in the event as well. The only group I might recommend not watch the program are doomsayers, there may be too much hope for even the pessimistic to withstand.

In a previous post, Voting with Dollars: Credit Bureaus, I mentioned freezing credit at each of the bureaus. In

Frozen Credit (Actually Just Water)

that post I also said that freezing your credit was free at TransUnion.  In fact, it was… but today I received a message from the credit bureau that it will no longer be free.  Maybe signs of inflation?

At any rate, here is an excerpt from the e-mail:

“ We have offered the Security Freeze services free of charge through our online self-service channel since its launch in 2008. As mentioned in our online Terms & Conditions, this service was being offered free of charge, but subject to change at any time. Beginning July 14, 2009, TransUnion will assess fees for Security Freeze services through the online channel as permitted by state law…”

TransUnion has provided a fee table that details the fees for each state. The good news is that the fee is no higher than $10 for all states, and still free in many. Well, except Delaware — sorry Delaware!  Appartently in Delaware freezing credit takes lower temperatures, so it is $20.

So despite this fee change, I am a big advocate of freezing your credit. If you do not have any upcoming purchases within the next few years that will require credit, I recommend freezing credit scores on each bureau. This is the best way to protect yourself from credit identity theft. So if you are planning on freezing your credit, be sure to make it to TransUnion before July 14th before the price is increased.

Other Blogosphere Posts on Freezing Credit:

Fine Tuned Finances (How to Freeze Your Credit and Stop Identity Thieves in Their Tracks)

I thought it would be interesting to look at some of the 2010 Budget cuts proposed by the Barack Obama’s Executive Administration.  Maybe I am alone on this    But I wanted to highlight some of the terminated programs to see what kind of waste we are dealing with (or hopefully no longer dealing with).  So this is by no means an exhaustive list. You can see the proposed cuts on the White House website (http://www.whitehouse.gov/omb/budget/fy2010/assets/trs.pdf).  This is meant to be a little fun, so please laugh occasionally as you read this.

Advanced Earned Income Tax Credit

The Advanced Earned Income Tax Credit is an extension of the Earned Income Tax Credit that apparently allows people with children eligible for the EITC to receive a portion of the credit through their paychecks (reduced witholding) instead of at filing time. The AEITC is used by a relatively small percentage of people (3% of those eligible for EITC) and is error prone. Cutting this program is estimated to save $125 million.

What I learned from this, is that if 514,000 people used this program, then that means there are about 17 million people claiming the Earned Income Credit.

C-17 Strategic Airlift Aircraft

Well this saves about $91 million.  Supposedly we are dropping this because we have enough of these already.  But I don’t have one, do you?

Christopher Columbus Fellowship Foundation

Yes I think the word is out, the Earth is round and the East Indies turned out to be farther than he thought. Here we save $1 million, but it makes me wonder what Chris C. would think about cutting the program.

Combat Search and Rescue Helicopter (CSAR-X)

Here we save $144 million dollars by eliminating this single purpose helicopter. From the budget: “The Department of Defense is questioning the need for a single-purpose helicopter. Unlike the other services, which carry out this mission with multiple-purpose helicopters, the Air Force has traditionally carried out this mission with single-purpose aircraft.”

Well they call it single purpose, but it searches and it rescues.  Seems like a winner to me!

Cotton Storage Payments

Cotton storage payments appear to amount to planned price fixing by the U.S. Government. They would never do that, would they?  This item allowed credits for storing cotton until prices increased.  The program is being eliminated since storage costs for other commodities are not funded by the Government.  I could see going either way on this, either have the U.S Government pay to store nothing… or, why not have them store everything?

Storing cotton costs around $570 million, so maybe that is why we don’t extend this program to polyester storage, etc.

Inner City Bus Security Program

Costing us $12 million, this program is being eliminated because it does not appropriately factor in risk when determining where the funding goes. If we wanted to factor in risk, I would start by looking for buses that Keanu Reeves is on.

Joint Strike Fighter Alternative Engine

I love this one!  At the tune of $465 million, we had two separate contractors building two different designs of an engine for the same airplane! Perhaps instead of cancelling the program, we could use the losing engine in one of our new GM cars.

Loran-C

This is being replaced because it is a legacy technology that GPS handles better. Loran-C acted somewhat as a backup for GPS, at least according to the budget document (you never know if the scope of the cut is as accurate as the Government believes). But what struck me in the document was the following statement, “Accounting for inflation, this will achieve a savings of $36 million in 2010 and $190 million over five years.”  I just find this funny, that the savings included account for inflation, considering the source of the inflation is primarily the government anyway. Maybe we should just increase inflation to meet our budget targets.

Oil and Gas Company Subsidies

This is one we all heard about during the campaign (if we were listening anyway).  This won’t save us anything in 2010, but the proposal states that we still save $26 billion between 2011 and 2019. Despite the belief of the budget document, it is difficult for me to imagine that this would not impact the price of gasoline. But I will take their word on it, they wouldn’t lie.

Oil and Gas Research and Development Program

Presidential Helicopter

This program subsidizes R&D efforts for improving extraction and delivery of oil and gas products. The budget states that oil and gas companies have the means to fund this work on their own.  I agree with this, they should compete on a level playing field with alternative energy source companies.  So far, from a product cost perspective, they have been winning hands down. This saves the taxpayers $250 million.

Presidential Helicopter

Last, but not least, the Presidential Helicopter! The cost of this beast has grown to $13 billion. This is an entire helicopter program for a single person.  The program is 5 years over schedule. The good news is that the budget has been cut to just enough funds to end the program and evaluate options for the current fleet and an alternative program. The bad news?  The alternative program likely starts the whole process over again.  Maybe we should have another bake off — hire two contractors to deliver two Presidential Helicopters and see which one flies better.

Conclusion

Well this was a short look at some of the terminated programs from the 2010 proposed budget. Hopefully your favorite program did not get cut. If it did, I apologize if I made fun of it in any away.

Wall Street Journal recently had an article on how life insurance policies were being placed on employees by a number of companies in order to help fund executive pensions. I also mentioned this briefly in a post describing why we are moving away from Chase as our primary bank (Voting with Dollars: Banking).

The article specifically discusses a number of banks (all the “biggies”) that are using this tactic. Three of the banks have policy valuations totalling 12 billion or more.  The kicker is that while the policy is on the employees, the beneficiary is the company itself. This money is then used to fund pensions for executives.

The practice helps the companies avoid taxes because the “proceeds” from the policies when the employee passes are tax free. This results in situations where the family of the employee (or former employee) may get little to nothing in insurance payout, but the company profits. For example, a current lawsuit has been filed over just such a situation. An employee who had survived two brain tumors signed an agreement for $150,000 in supplemental insurance which also acted as his consent for his employer to take out their own policy.  His company later fired him, and he passed away not long after. His family received no life insurance money because he was fired. But a check was mistakenly mailed to his widow for $1.6 million, but made out to his former employer.

New rules in 2006 require companies wishing to implement this to get consent from the employees that they take policies out on. And the rules limit the employees that they can take policies out on to the higher earners.

Having an employer win when you work for them, or win when you die, is a terrible conflict of interest. Certainly companies wouldn’t resort to murder to fund pensions, would they?  Probably not…but the situation described above demonstrates how murky this practice gets. The employer is no longer employed the individual, so his policy was canceled — but theirs remained in effect.  Having survived two brain tumors, the company may have fired him as a result of failing health.  Perhaps they were justified in doing so, assuming that his work was suffering. But benefiting from his death crosses a line.