Basic Yet Best Investment Advice

When I mention to people what I do for living, I’d frequently get questions on best places to invest nowadays. To that, I’d usually say:

TIME OUT!

Agtourism Anyone?

Obtained from http://news.ucanr.org/newsstorymain.cfm?story=1228 on 08/04/2009. New Mexico farmers, include the small farm owners, should be able to achieve the same.

Survey shows California farmers profit from agritourism … highlights

• 2.4 million agricultural tourists
• Activities include fruit picking, farm management, and visiting a petting zoo
• Small farms made up more than two-thirds of the farms that reported offering agritourism

Young and Zestless

Young adults are finding it hard to survive in this touch economic times. Recent graduates have to compete with recently layoff workers who have tons of experience. In times when the newly grads are supposed to be out of the house, living independently and working, these unfortunate young adults are at home, depending on their parents for residence and financial support. Due to their age and employment type, if any, they have to take the risk of being health-wise uninsured. For college graduates, they are very likely to carry college debts, which will increase via interest accumulation if not managed well.

At a very ripe age of 20s, these you people may have to resort to bankruptcy. Just when these newly graduates were expecting to open a new bright chapter of their lives, the were stuck at Chapter 7.

Options to consider:

• Dependent on your state of residence, parents may put their adult children temporarily under their health insurance plan.
• Consider going back to school to further studies with scholarship and human capital investment.
• …. there are others but they may be in the same category as “I might have to marry somebody for their health insurance“[1].

[1] in sickness and in health, till death do us part!!!

Give Credits to Those who Deserve Them

The hot news nowadays is how a bailed out company, AIG, passed out a $165M bonuses to its executives from more than $170M bail out money to the company. Even in these bail out and economic hardship, the richer group is taking advantage of this economic debacle, getting richer out of this situation.

Let’s do our part by passing on the credits to those who deserve them. Tax season is coming to an end. The U.S. government has provided many tax credits as a way to transfer money to those who deserve them such as the low income, hard working groups. Imagine handing $4,000 cash to those in dire need of these money to survive (e.g. buying basic food, paying rent/mortgages). We can do this by spreading out the words on different types of tax credits.

In the past, NM was estimated to lose between $74 million and $136 million in Earned Income Tax Credit. And this is only one of the many tax credit programs such as the Child Tax Credit, Federal Housing Tax Credit (for first time home buyers), Credit for the Elderly or the Disabled, Economic Stimulus Payment (ESP), and Recovery Rebate Credit (for those who missed out on previous year’s ESP).

As one of the poorest states in the nation, NM certainly needs an economic boost via these tax credit programs. Together, we can inform others about this and encourage others to share this information to those who qualify for claim their money.

Note

• Free tax help are available. Call 1-800-829-1040 for listings at your locality (call them to get these addresses). Three main types: IRS office, Volunteer Income Tax Assistance (VITA) Program, and AARP.
• Some centers provide Spanish translation.
• Online tax filing and/or software use saves times. Free for lower income households. State filing may have a small fee.
• NM has state (above refers mainly to federal type) Earned Income Tax Credit.

Meet the Needs

Introduction
- Mainly $$$
- Other resources

Problems

• Credit crunch & depreciation of home values
• Inflation
• Shrinking nest eggs

“But as the financial markets have ravaged retirees’ savings and investments, Laursen has put his retirement on hold. On top of a big hit to his retirement savings, his former employer just eliminated health care coverage for Laursen and his wife.”

“Despite big penalties, many are cashing in or borrowing against retirement”. A Hewitt Associates’ survey found that 6.2 percent of retirement account participants at large corporations had taken an early withdrawal as of Sept. 30, compared with 5.1 percent who reported taking early withdrawals in 2006. .. A separate October survey by the American Association of Retired Persons found that 13 percent of Americans 45 and older had tapped into their retirement investments early.
- 10%penalty if withdraw funds from your retirement account before reaching age 59½, even if you decide to retire early!
- Are there any exceptions? Yes. For example, with an IRA, you may be able to avoid the fine if you are using the money to buy a home, you are unemployed and need to pay health care premiums or you are using the money for higher education. If you have a 401(k), you may avoid the fee if you lost your job and are over age 55.
- Risks: Double whammy of losing that investment in your retirement and losing out on the chance for that investment to grow. That could mean that you have to work longer or live with less in retirement.
- What about borrowing against my retirement account? The IRS allows people to borrow against their 401(k) plans but not their IRAs. Borrowing money against your retirement funds, rather than withdrawing the funds outright, can be a better option for getting cash now and still saving for retirement. You will still likely pay interest on the loan, however. If you default on the loan, the IRS will consider that as an early withdrawal, which means you may be subject to penalties.

… comments:
- The good news is that Obama is trying to set up a universal health coverage that is supposed to cover 95% Americans. However, with the inherited national debt of $10.5 Trillion (and growing by about $3.8 billion every day) and other problems, we are uncertain on whether this program will take precedence over other programs. Consumer’s view: The government isn’t alone in borrowing too much money. American consumers have borrowed $11.5 trillion in mortgages and another $2.5 trillion in credit card, car loans and other debts. Banks and Wall Street investment firms borrowed tens of trillions of dollars more to create complex investments that now are worth a lot less than everyone thought.
- For the youth nowadays, they have to inherit this national debt. Later, when this generation grows up, they have to support the baby boomers’ Social Security & Medicare benefits, a new scenario in public financial transfer … GAO’s estimate: another $40 trillion. With the current health trends and longevity, it doesn’t look good – living longer while sicker. … So far, it hasn’t come up with a solution.
- Free Lunch!!!

• Increased unemployment rate

• NM-specific: State budget shortfall due to declining in the energy prices and weakened economy.

- National
- NM-specific

Solutions

1. Education
a. Motivation: Make them see the problem – the two situations.
b. The extend to which we educate depend of the costs and benefits (could be perceived)
i. For some, it may be beneficial
ii. For others, they may be better off following an expert opinion almost blatantly.
1. Consistent with human capital theory!!!
c. Family finance management, retirement planning, time management, technological use, family-own business.
i. Bureau of Business and Economic Research
ii. http://www.unm.edu/~bber/
iii. Consistent with Vision 2040 – downtown revitalization project

2. Marketing techniques.
a. Current extension programs have produced so many useful literatures related to family resource management.
b. The concern is that whether the targeted population got the intended messages, utilize them, and continue to take advantage of these programs and information.
i. An ideal extension route is to have these people to be our extension agents by promoting our programs, sharing the information … .
c. Youth are special groups. They are not like us when we were younger. In general, they are more tech-savvy and quick to make decisions (short attention span).
i. Use facebook, utilizes i-phone, you-tubing, like to feel in-control, and like interactive sessions.
ii. Idea: Utilize the youths interest in Fantasy Football or Poker for fantasy investment … updated in facebook or myspace.
iii. Unique ads: Table outside movie shows, viral marketing, product placement (ask athletes to wear clothes with our website),
d. Take advantage of latest findings in the field of marketing – to youth, elderly – to our advantage.
e. Map studies with GIS – People with same socioeconomic background tend to live together
3. Corporation with other departments or programs. Many programs are related to financial management. For instance, the decision to get involved in health prevention and treatments programs may be affected by the main family resources: education, time, and financial resources, as reflected in Gary Becker’s Household Time Allocation Model, an extension of Human Capital Model.

We may also take advantage of other programs that might be able to obtain more findings. Obesity prevention programs, for instance, may be easily funded.

4. Ask them what they really want. Ask them directly (interview, focus group) or social immersion. For instance, money may not be the primary resource concern for Navajo people. Perhaps, they are more concerned of regaining their land.

5. Outcome studies to help understand the impact of our programs on the betterment of society. Input-output or Cost-benefit analysis.
a. Experiments, variables, data-based, survey.
b. For our benefits and publications.
c. Look into marketing research and child development where the money tends to be.
6. Others:
a. Translations – blunders
b. Make the extension futuristic: Greener, internet, YouTube, Facebook, blogs, less cheesy, social gathering, public libraries
i. Get the younger people involved, .e.g. Big Brothers Big Sisters
ii. Especially those who are interested in extension work even from different departments.
c. Consumer protection: Advertisement directed towards kids, Free Lunch.
d. Anticipation: Look into other nations to see possible FRM-related problems.
i. Be the first to come out with solutions.
ii. E.g.: Cell-phone boom

Conclusion

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Focus:
- Research-based findings
- High percentage of workforce in the federal jobs. Better benefits.
- Spanish-speaking population: 44%
- High percentage of Native Americans: One cannot assume that they are highly concerned about financial issues.
- Youth
- Marketing

Native Indians have many issues with finances since much of their income comes from gov’t subsidies and also from Indian/reservation casinos. You might like to check out USA.gov’s tribal pages to see if there’s information there specifically about NM tribes. I know they’re listed alphabetically but I don’t know if there’s a way to find tribes in a specific state. There’s somewhat of a push to get Native Americans to start their own businesses so there might be some implications there for money management and ways to go about helping them get startup capital, how to manage the money once they start making it. It seems to me that there’s a link between this and how farm families manage their resources – balancing between the farm and the family. Regarding the federal employees – they are probably most like the “every day person” who needs to worry about budgeting, saving for retirement, getting the most out of their health care benefits, long term planning. Also, since the federal workforce is aging so dramatically they probably have a need for information about spending down their retirement savings, reverse mortgages, estate planning, and other aging issues. Military folks are pretty different from the typical federal worker since there are a lot of special programs that target them. Check out USA.gov’s page for Active Military Personnel to get an idea of them. NM might also have a lot of soldiers returning from war so they might need information about finding a job and getting by without any income, if you’re disabled, etc.

Reference

Resource Management for Daily Life, U of MN
http://www.extension.umn.edu/ResourceManagement/

Benefits of Federal jobs
Government Employee Benefits – Federal workers enjoy top-flight benefits
http://usgovinfo.about.com/blbenefits.htm

Working for the Federal Government – Benefits
http://media.newjobs.com/opm/www/usajobs/pdf/ei-61.pdf

For Federal Employees
http://www.usa.gov/Federal_Employees/Federal_Employees_Gateway.shtml

Resources in NM
http://ehe.nmsu.edu/financial-management.html
Family Resource Management
Management is using what you have (resources) to achieve what you want (goals and objectives). Family resources are all the resources the individual or family has available to help them reach their goals. These include human resources such as knowledge, skills, health, time and energy; material resources such as housing, money and investments; and community resources such as the library, Cooperative Extension Service and various agencies. Through educational programming, we can help individuals and families recognize resources they may be unaware of, and increase their skills in managing all resources available.
Objectives
• Provide basic financial education for limited resource audiences and general audiences including credit management and debt reduction
• Encourage financial planning for retirement and increased savings and investments
• Promote the use of all family resources including time, energy, skills and money to improve the quality of life management including organization
• Support money management skills for youth audience

Martin 2007 Justin Smith Morrill Lecturer
Michael V. Martin, president of New Mexico State University (NMSU) delivered the Morrill Lecture, “Induced Innovation: The Story of Land-Grant Universities,” on November 11 in New York City at the annual meeting of the National Association of State Universities and Land-Grant Colleges.
The Morrill lecture honors Justin Smith Morrill, the father of the 1862 Morrill Act. Signed by Abraham Lincoln, the act established federal funding for higher education in every state of the country; it is also known as the Land-Grant Colleges Act.
Martin is a recognized leader in New Mexico, being named a powerbroker by the New Mexico Business Weekly in 2006. He has written numerous book chapters and articles for academic journals, trade publications, and the popular press. Named the Outstanding Alumnus of Minnesota State University Mankato in 2006, Martin also received the NMSU Social Justice Award in 2005. Martin completed a bachelor’s degree in business and economics and a master’s degree in economics at Mankato State College (Minnesota State University). He received his Ph.D. in applied economics from the University of Minnesota in 1977.
Complete lecture text is available on the CSREES Web site.
From Sommer

LOGIC MODEL
http://www.uwex.edu/ces/pdande/evaluation/evallogicmodel.html

The Logic Model
http://www.uiweb.uidaho.edu/extension/LogicModel.pdf

Financial Security – CREES
http://www.csrees.usda.gov/financialsecurity.cfm

Poverty

New Mexico is ranked at the bottom of the states for the percentage of working families who are low-income, according to an analytical study conducted by The Working Poor Families Project.
Using data from the U.S. Census Bureau, the project identified an increase in income inequality by almost 10 percent from 2002 to 2006; the number of low-income working families has increased by almost 350,000 in the same time period.
“The economic turmoil of 2008 is creating even greater challenges for these families and making economic advancement more difficult,” according to the documents.

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Myths and facts about low-income working families:
• Myth: Low-income families do not work.
Fact: 72% of low-income families work.
• Myth: Low-income families do not work hard.
Fact: The average annual work effort for low-income working families is 2,552 hours, roughly one and one-quarter full-time jobs.
• Myth: Low-income working families are headed by single parents.
Fact: 52% of low-income working families are headed by married couples.
• Myth: Low-income working families are headed by immigrants.
Fact: 69% of low-income working families have only American-born parents.
• Myth: Low-income working families have very young parents.
Fact: 89% of low-income working families have a parent between the ages of 25 and 54.
• Myth: Low-income working families are overwhelmingly minority.
Fact: 43% of low-income working families have white, non-Hispanic parents.
• Myth: Low-income working families are dependent on public assistance.
Fact: 25% of low-income working families receive food stamp assistance.
Source: The Working Poor Families Project

Working Poor Families Project State Data Snapshot – New Mexico