Class Assignment, and Discussion: What We Do for a Living

Posted on April 4, 2012 by ajkeown

In Chapter 1 of Personal Finance Turning Money Into Wealth we take a look at “Thinking About a Career” and discuss the steps involved in career planning.   The first, and maybe most important step in career planning, is doing a serious self-assessment which could lead to developing an understanding of what you want to do in your “work life.”   You begin this by considering your interests, skills, values, personal traits, and desired lifestyle.  You’ll also take a look at your educational record – which courses did you like the most and which ones did you do well in?

But, what do most Americans do for a living?  A recent Planet Money article, “What America Does for a Living,” takes a look at the occupational changes that have taken place over the past 40 years.  To say the least there have been a lot of  changes.  Perhaps the biggest change is in the size of employment in the manufacturing sector which was the largest sector  back in 1972 employing almost a quarter of the U. S.  population.  At the start of 2012 the manufacturing sector has dropped considerably.  There are a couple other noteworthy changes.  First, more people are in the workforce – 64 percent versus 60 percent in 1972, and the number of jobs available has increased.  Today, 133 million people are working compared to just 73 million in 1972.

Class Discussion and Assignment:

1.  Read the Planet Money article, “What America Does for a Living.”  What have the major changes been in what Americans do for a living over the past 40 years?  Write a one page paper on the changes and why you think they have happened.  Be prepared to discuss this in class.

2.  What two careers have the most appeal to you?  Compare the salaries of both using the “Salary Comparison Calculator” website by recruiter.com.  Write a one page paper on your findings and be prepared to discuss your findings in class.

Posted in Ch. 1, Financial Planning Process, Ch.18, Financial Life Events | Tagged , , , , , | Leave a comment

Class Discussion: Birth Order and Your Financial Personality

Posted on March 28, 2012 by ajkeown

Bankrate.com recently looked at the impact of birth order on personal finance in the article “How birth order can affect your finances.”  It takes an interesting look at how being the oldest, youngest, or somewhere in between can impact your personality, and in particular your financial personality.  Of course, there are exceptions to these observations, but they certainly make you think.   They  give you a chance to take a look at your financial personality – and understanding your financial biases will take you a long way toward controlling your personal finances.

In Chapter 1 of Turning Money Into Wealth we introduce the 10 Principles of Personal Finance, and Principle 9 on that list is Mind Games, Your Financial Personality and Your Money.  This principle focuses on the fact that because of the way we are wired, we all have built-in biases that we don’t know about that have an impact on how we make our financial decisions. If you understand these biases, you can control them, and if you recognize what your financial personality is, you can take it out of the process and avoid some of the pitfalls you’d otherwise be subject to.

Class discussion and assignment:

1.  Read the articles, “How birth order can affect your finances” from bankrate.com and “Does birth order affect your finances?” from the Boston Globe website boston.com.   What are the financial traits of oldest, youngest, middle children?  What are you, and do you fit in with these descriptions?  Be prepared to discuss this in class.

2. What does the marketwatch.com article, “How birth order can affect your job, salary” say about your future?  Why does this make, or not make, sense to you? Be prepared to discuss this in class.

3.  After reading the introduction of Principal 9 Mind Games, Your Financial Personality and Your Money in Chapter 1 of Turning Money Into Wealth, can you think of some things from your childhood that might have had an effect on how you handle your money?

Posted in 10 Principles of Personal Finance, Ch. 1, Financial Planning Process | Tagged , , , , , , | Leave a comment

Class Assignment and Discussion: Warren Buffet’s Thoughts on Gold

Posted on March 22, 2012 by ajkeown

If you stay up very late and end up watching TV in the wee hours of the morning, you’ve probably heard one of those “turn your paper IRA into a gold IRA” commercials, touting the superiority of gold over other investments.  But, exactly how well gold has done depends upon the time period you look at.  In 1980, when the DJIA was below 1,000, gold peaked at around $850 an ounce. Since then gold has bounced a bit and recently has done very well, rising to around $1,900 an ounce in September 2011. While gold did very well in 2010 and early 2011, the average annual return on gold since 1980 is just under 3 percent per year. Over that same period a typical New York Stock Exchange stock increased at an average annual rate of 10.6 percent. Still, on late-night (or early morning) infomercials you continue to hear gold proclaimed as “the place for your savings.”

In Warren Buffett’s recent letter to the Berkshire Hathaway shareholders and in a recent Fortune magazine article written by Warren Buffett, “Why Stocks Beat Gold and Bonds,” he takes aim at gold as an investment. His thoughts echo those in Chapter 14 of Personal Finance, Turning Money into Wealth.  In fact, we even quote him in Chapter 14: “[Gold] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”—Warren Buffet, Harvard, 1998.

Discussion Assignments and Questions:

  1. Read the MarketPlace.org article, “How risky is the modern gold rush?”  Explain why Warren Buffett is not a fan of gold.  Be prepared to discuss your answer in class.
  2. Read the Fortune article written by Warren Buffett “Why Stocks Beat Gold and Bonds.”  What are his investing principles and why doesn’t he favor gold?  Be prepared to discuss your answer in class.
Posted in Ch.14, Investing in Bonds | Tagged , , , , , | Leave a comment

Video and Class Discussion: The Fed and the Economy – from Ben Bernanke

Posted on March 20, 2012 by ajkeown

Teaching Tip:  These are one-hour lectures and could be shown in class with class discussion following them.

When it comes to lectures, this one might not sound that exciting – “Reflections on the Federal Reserve and Its Place in Today’s Economy” – at least not until you learn that the person giving the lecture is Ben Bernanke, the chairman of the Federal Reserve.

Starting on Tuesday, March 20th, Bernanke will deliver a four-part lecture series about the Federal Reserve and the financial crisis that emerged in 2007. The series begins with a lecture on the origins and missions of central banks, followed by a lecture that will discuss the role and actions of the Federal Reserve in the period after World War II. In the final two lectures, the Chairman will review some of the causes of, and policy responses to, the recent financial crisis, focusing specifically on the actions of the Federal Reserve.

Lecture 1: Origins and Mission of the Federal Reserve

Recorded on March 20, 2012 12:45 p.m. ET.

Lecture 2: The Federal Reserve after World War II

Watch live on March 22, 2012 12:45 p.m. ET

Lecture 3: The Financial Crisis and the Great Recession

Watch live on March 27, 2012 12:45 p.m. ET

Lecture 4: The Aftermath of the Crisis

Watch live on March 29, 2012 12:45 p.m. ET

Live video of each lecture will be available to the public at Chairman Bernanke’s College Lecture Series. Transcripts and video recordings will be made available following each lecture.

Discussion Questions and Assignemnts:

1. Watch the lectures and write a one to two page paper on what you learned.  Be prepared to discuss them in class.

Posted in Ch.11, Investment Basics, Ch.12, Securities Markets, Personal Finance In The News | Tagged , , , , | Leave a comment

Class Assignment and Discussion: Retirement Confidence – A Thing of the Past

Posted on March 17, 2012 by ajkeown

According to a 2011 Retirement Confidence Survey by the Employee Benefit Research Institute, worker’s confidence that they will have enough money to “live comfortably throughout their retirement years” continues to decline – in fact, only 13% of those polled were “very confident” that they would have enough money.

What does all this mean?  It means that Principles 1 and 2, The Best Protection is Knowledge and Nothing Happens Without a Plan are the keys to living the good life in retirement.  It also means that if you want to avoid this problem during retirement, you’ve got to start planning now.  As we saw in Chapter 16 of Personal Finance Turning Money Into Wealth, It means that retirement planning isn’t just about saving and investing for retirement, it’s also about managing your savings in such a way that you will have enough income to last through retirement, regardless of how long you live.  In fact, according to a recent Bankrate.com poll, anxiety runs high among retirees that they will run out of money in their retirement years.  In fact, about four out of ten (37 percent) of retirees worry about outliving their money, with women fretting more – 44 percent were worried as opposed to 28 percent of men.  Let’s face it, there was a time when Americans didn’t need to worry about retirement planning – retirement meant taking a pension from your employer and letting Social Security pick up any slack.  But pensions are largely a thing of the past, and early retirement and longer lives have placed an enormous burden on Social Security.

Class Assignment and Discussion Questions:

  1. Read though the Bankrate.com article “Americans Plan to Work Through Retirement” and the “Fact Sheet on Retirement Confidence” by the Employee Benefit Research Institute.  Look at the results presented in the graphs in the Bankrate.com article titled “Do you worry about money and wish you saved more, or did you save enough?” and “How worried are you that you might outlive your money?” Are you surprised by the results?  Do you think more or fewer American’s should be concerned?  Be prepared to discuss this in class.
  2. Read though the Bankrate.com article “Americans Plan to Work Through Retirement” and the “Fact Sheet on Retirement Confidence” by the Employee Benefit Research Institute.  Look at the results presented in the graph in the Bankrate.com article titled “How has the financial crisis affected your retirement plans? Do you expect to retire?” Are you surprised by the results? Be prepared to discuss this in class.
  3. Looking at the “Fact Sheet on Retirement Confidence” by the Employee Benefit Research Institute, what do you see in the way of trends dealing with the financial aspects of retirement?
Posted in Ch.16, Retirement Planning | Tagged , , , , , , | Leave a comment

Class Discussion and Assignment: Warren Buffett’s Insights and Words of Wisdom

Posted on March 12, 2012 by ajkeown

Much of personal finance deals with understanding basic investment principles.  That’s why Part 4 of Personal Finance, Turning Money into Wealth is titled “Managing Your Investments” – and in Chapter 11 we take a look at investment basics, then in Chapter 13 we examine investing in stocks, followed by a look at bonds and other investment alternatives in Chapter 14.

The most famous investor in the world, and as a result, the third richest man is Warren Buffett, also known as the “Oracle” or “Wizard of Omaha.”  Not only is  he a rich and famous investor, but to many he is a folk hero – a totally self-made man – always working from the time he was a child, rising from nothing to the top, all on his own.

Much of Warren Buffett’s wealth stems from his ownership of Berkshire Hathaway, the very large and well diversified company with major interest in GEICO, life insurance, annuity sales and jewelry sales.  Every year Warren writes a “letter to the Berkshire Hathaway shareholders” where he gives them an update on who the firm has “done over” the past year along with some personal words of wisdom.

Class Discussion and Assignment:

  1. Read through “Investing insights from the Wizard of Omaha.” What did you think of his insights on housing and investing?  Be prepared to discuss your views with your class.
  2. Over the years, Warren Buffett has produced quite a few quotable words of wisdom.  Read through “Warren Buffett’s words of wisdom.”   Which two quotes did you like the best, why?  Write a short one-page paper on the two you like best and explain why.

 

Posted in Ch.13, Investing In Stocks, Ch.14, Investing in Bonds | Tagged , , , , , , | Leave a comment

Class Assignment and Discussion: Retirement Confidence – A Thing of the Past

Posted on March 9, 2012 by ajkeown

According to a 2011 Retirement Confidence Survey by the Employee Benefit Research Institute, worker’s confidence that they will have enough money to “live comfortably throughout their retirement years” continues to decline – in fact, only 13% of those polled were “very confident” that they would have enough money.

What does all this mean?  It means that Principles 1 and 2, The Best Protection is Knowledge and Nothing Happens Without a Plan are the keys to living the good life in retirement.  It also means that if you want to avoid this problem during retirement, you’ve got to start planning now.  As we saw in Chapter 16 of Personal Finance Turning Money Into Wealth, It means that retirement planning isn’t just about saving and investing for retirement, it’s also about managing your savings in such a way that you will have enough income to last through retirement, regardless of how long you live.  In fact, according to a recent Bankrate.com poll, anxiety runs high among retirees that they will run out of money in their retirement years.  In fact, about four out of ten (37 percent) of retirees worry about outliving their money, with women fretting more – 44 percent were worried as opposed to 28 percent of men.  Let’s face it, there was a time when Americans didn’t need to worry about retirement planning – retirement meant taking a pension from your employer and letting Social Security pick up any slack.  But pensions are largely a thing of the past, and early retirement and longer lives have placed an enormous burden on Social Security.

Discussion Questions:

  1. Read though the Bankrate.com article “Americans Plan to Work Through Retirement” and the “Fact Sheet on Retirement Confidence” by the Employee Benefit Research Institute.  Look at the results presented in the graphs in the Bankrate.com article titled “Do you worry about money and wish you saved more, or did you save enough?” and “How worried are you that you might outlive your money?” Are you surprised by the results?  Do you think more or fewer American’s should be concerned?  Be prepared to discuss this in class.
  2. Read though the Bankrate.com article “Americans Plan to Work Through Retirement” and the “Fact Sheet on Retirement Confidence” by the Employee Benefit Research Institute.  Look at the results presented in the graph in the Bankrate.com article titled “How has the financial crisis affected your retirement plans? Do you expect to retire?” Are you surprised by the results? Be prepared to discuss this in class.
  3. Looking at the “Fact Sheet on Retirement Confidence” by the Employee Benefit Research Institute, what do you see in the way of trends dealing with the financial aspects of retirement?

 

 

Posted in Ch.16, Retirement Planning | Tagged , , , , , , , , , | Leave a comment

Class Discussion and Assignment: A Backwards Look at Retirement

Posted on March 7, 2012 by ajkeown

Generally when we look at retirement we focus on whether an individual has enough saved to make it through retirement.  Another way of looking at retirement is to see what Americans have at the end of retirement – do they still have anything left when they die?  This was the approach used in recent research by authors from MIT, Harvard, and Dartmouth, and their results are disturbing – finding that almost half die with virtually no financial assets—in fact, 46.1 percent died with less than $10,000.  In addition, many of these households own nothing in the way of housing and rely almost entirely on Social Security benefits for support.  Not only do they have virtually no financial assets, they are also disproportionally in bad health.  They also found that it was worse for those living alone:

Elderly living alone:

  • 57.0 percent had less than $10,000 in financial assets;
  • 57.1 percent had no home equity.

Two-person households:


  • 31.7 percent had less than $10,000 in financial assets;
  • 20.4 percent had no home equity.

Chris Farrell, the economics editor of Marketplace Money, a personal finance show produced by American Public Media, recently examined this study in the article “More Bad News on Retirement” concluding that the health of Social Security is of utmost importance to many Americans and that relying on 401(k) retirement plans has not worked that well for many Americans.

You will often hear people ask the question “why should I save for my retirement when I might not even live that long?”  The educated, thoughtful answer might be another question… “but what happens if you do?”  Chapter 16 of Personal Finance Turning Money Into Wealth is filled with information on how to approach and execute a plan for retirement saving.  Review some of the eye opening charts and graphs such as “Saving in a Tax-Deferred Retirement Account Versus Saving on a Non-Tax Deferred Basis” and “Skipping Just One Year Can Cost You Almost $235,000”.  You may feel like retirement is a long ways off but if you seriously take a “Backwards Look at Retirement”, saving now for that possibiity may start to make more sense.

Discussion Questions:

  1. What can you do to make sure you don’t fall in with the 46.1 percent with less than $10,000 in financial assets during your final years? Write a 1 page paper with a response to this question.
  2. What are Chris Farrell’s concusions or takeaways?  Do you agree with him? Be prepared to discuss this in class.
Posted in Ch.16, Retirement Planning | Tagged , , , , | Leave a comment

Class Assignment and Discussion: The Living Too Long Problem – Longevity Insurance

Posted on March 5, 2012 by ajkeown

Teaching Tip:  SmartMoney.com has a great video titled “Living to 100? That will be $3.5 million.”  (Note, the video appears part way down the page, just click on it and it will show up.)

“Live long and prosper” – it’s the Vulcan greeting, often spoken by Mr. Spock on the original Star Trek television series back in the 1960s, and in reruns ever since.  It’s a wonderful greeting, but for many of us, it’s a tough thing to do.  You’d never think that dying early has an upside, but when it comes to retirement planning, living long and prospering are not that easy to do.

Recently, in the article “Living to 100? That Will Be $3.5M” Smart Money magazine took a look at the challenges of living to be 100, something that many of us are going to do, whether we like it (or are financially ready for it) or not.  According to the Bureau of Statistics, the average American will spend about $3.5 million if they live to 100.  About $1.5 million of that will be spent by the time you turn 50, and another $1.4 million will be spent by age 81.  Then to get to 100 you’ll need another $630,000.  Sound like a lot?  Well, it is, and not everyone is going to be able to live as they would like to in retirement.  The key, of course, is planning ahead of time.  Principles 1 and 2 are good companions in this case “The Best Protection is Knowledge” and “Nothing Happens Without a Plan”.

Making all this even more of a challenge is the fact that by the time you will be tapping into Social Security, it may not be as generous for you as it is for seniors today, and the likelihood that you have a pension from your employer is also on the way out.  In Chapter 16 of Personal Finance Turning Money Into Wealth there is a very revealing – and perhaps somewhat scary – figure depicting the importance of starting to save for retirement as soon as possible.  When you see that delaying just one year can cost you almost $235,000 really makes you sit up and take notice.  Perhaps that Vulcan greeting should be tweeked a little to read “Start saving now to live long and prosper”.

Discussion Questions:

  1. What do you think the chance is that you will live to 100?  Now read the article “Live to 100?” from the Guardian and check out the “Probability that You’ll Live to 100” – this is data for England, but it’s essentially the same here.  Are you surprised?  How does that impact your savings plans for retirement?  Be prepared to discuss this in class.
  2. Chapter 1 of Personal Finance,Turning Money Into Wealth talks about the challenges women face in retirement, and why personal savings and Social Security retirement benefits are more important for women than thay are for men.  Why is this?  While women face serious challenges in retirement, why is it important for men to understand the challenges women face?  Be prepared to discuss this in class.
  3. Ask a relative or friend who appears to be enjoying retirement about his or her retirement planning. Consider both financial and personal implications.
  4. Talk with someone who is currently retired about his or her sources of retirement income.  Be prepared to share what you find with your class.
Posted in Ch. 9, Life and Health Insurance, Ch.16, Retirement Planning, Uncategorized | Tagged , , , , , | Leave a comment

Video and Discussion: How Severe Are Problems with Social Security?

Posted on March 1, 2012 by ajkeown

Teaching Tip:  PBS NewsHour put out a great 11 minute 20 second video on Social Security, focusing on future problems facing Social Security.  This can either be shown in class or assigned.  In either case, it should foster a good debate on its soundness and future viability.

In Chapter 16 we look at Social Security. For many individuals, Social Security is the primary source of retirement income. About 95 percent of all Americans are covered by Social Security.  As you learned in Chapter 16, the size of your Social Security benefits is determined by (1) the number of years of earnings, (2) the average level of earning, and (3) an adjustment for inflation.

As Social Security made its way into the recent political debate, PBS NewsHour presented an in debth look at Social Security and its problems. When Social Security began over 75 years ago, the average life expectancy was 64 years old. Today the average American lives to be 78, with about 20 of those years spent in retirement. With 52 million Americans relying on Social Security, it is a program is important to us all – one that we all know someone relying on it for their financial well-being.

Discussion Questions:

1      Read through the first sections of Chapter 16 of Personal Finance, Turning Money into Wealth.  What are you purchasing with your payroll tax paid to Social Security? How will your benefits be paid for in 40 years?

2      How do you think Social Security will change by the time you retire?  Be prepared to discuss this in class.

3      What changes do you think should be made in Social Security to make sure it is in good shape by the time you retire.  Be prepared to discuss this in class.

Posted in Ch.16, Retirement Planning | Tagged , , , , | Leave a comment