Should Facebook IPO Be Part Of Your Financial Plan?

A client wrote the following e-mail to me yesterday:

“If Facebook goes public, do you think it is worth getting into into it for a while? Ride the wave for a few weeks and see what happens.  Let me know.  I know you believe in the long term, but who knows, it might be worthwhile.”

To which I responded:

Do I “…think that it is worth getting into it for a while? Ride the wave for a few weeks and see what happens.” Of course I don’t know the answer for two reasons: 1. because we choose not to do individual stock analysis; and 2. I can’t see the future. But smarter people than me will also be pondering that question, and when I find information concerning the Facebook IPO I will send it to you for your consideration (see Forbes article here: http://www.forbes.com/sites/petercohan/2012/01/30/four-reasons-why-facebooks-ipo-is-irrelevant/print/). All that being said, however, my educated guess is that it is not worth the risk and I would advise against it. Don’t get me wrong, I like Facebook, and am an active user. It might also be a good or even great company. What I’m saying is that its STOCK might not be a good purchase in your investment portfolio.

If you are interested, I will endeavor to support that argument below. You did ask me for “my thoughts”! If you are not interested, then simply page down and go to the end of the e-mail.

First of all, as mentioned in my opening sentence, we don’t do individual stock analysis and choose to only use exchange traded funds (ETFs), open & closed-ended mutual funds, and Real Estate Investment Trusts (REITs) for investing in client portfolios. Over 95% of the trading volume on the New York Stock exchange today is done for and by institutional investors, many of them using high-speed computers and rapid program trading (up from 10% in the 1960s, and 70% in the 1990s). Along with the huge resources they bring to bear, we think this gives a huge advantage to institutional investors over retail investors. For this reason we support following the old adage…”if you can’t beat ‘em, join ‘em”. Therefore, we will only purchase the institutionally managed accounts in client portfolios that are listed at the beginning of this paragraph, and strongly urge clients not to venture into the realm of individual issues of stocks. At best we think a portfolio of individual issues, put together by retail investors, will not out-perform over the long-term institutionally managed accounts, and at worse you may end up becoming “trader chum”!

Secondly, based on taking a position in a stock for a few days or weeks, let’s be sure we all agree what we are talking about here – you are asking me, pure and simple, about a gamble, a bet, a speculation. This is, of course, more akin to asking me about black versus red in Atlantic City, NJ, or which pony to put some money down on at Monmouth Park Race Track. This is really about asking me, “how can I make some big money, quickly, with almost no effort?” Everyone’s been chasing this “golden ring” for 100s of years, and they will continue to do so for a millennium – I think we’re hard wired to do this (good for the continuation of the human species…survival of the fittest and all…bad behavior for long-term investing success). We don’t recommend our clients engage in this activity, or consider it “investing” for any financial goal or objective. We do recommend making money in investing the old fashion way – long-term, based on an asset allocation strategy, with quarterly rebalancing, in institutionally managed accounts, based on a measurable financial goal – in other words…the “boring” way!

Thirdly, if we agree that this is not about investing, or planning, then I can only give you my personal feeling about speculation and gambling…in the end, the house always wins. I don’t believe the possibility of the big kill, the thrill of the race, the ability to boast about “picking the winner”, or the adrenaline rush leading up to the finish (or after the finish if you were the winner) is worth the potential “cost”. However, many people do. If that is you then I would suggest a casino, a dog track, or a trip up to A.C., but please keep it out of the investment portfolio.

Finally, I believe one of my jobs (and one of the values/benefits you expected by hiring me) is to keep you on plan and not let the two biggest motivating human emotions (fear and greed) get you off track. I tried, but failed, last October 4^th from keeping fear from taking you “off the track” when you took 50% of your stock holdings out of the equity markets on the lowest point of the whole year. Luckily, we were able to get you back fully invested pretty quickly, but still creating huge capital gains (unnecessary taxes) and missing out on some of the best performing days of 2012. Now, with the famous Facebook possibly coming public sometime in April or May, you’re asking me to “battle” that second motivating human emotion…greed. I hope I am more successful in the future than I have been in the past.

However, if the four points above do not support my position enough to convince you, I think there are some important questions that one must answer before investing in a Facebook IPO:

1. Regardless of the “perceived” value of Facebook, will the proposed price of the IPO be too high to allow for much upside movement?
2. How did other tech. company’s IPOs do in 2011 (i.e. IPO of LinkedIn that jumped to $94.25 on the first day of trading, and has gone nowhere since)?
3. Buying is the easy part…what is the sell discipline? In other words, what will be the trigger for the sale of the stock – 10% drop in value, 20% drop in value, 50% increase in price, 100% increase in price?
4. If you want to make a real impact on your plan and your investment portfolio, you’ve got to put some “real” money into this thing (but no more than 5% of the value of your overall portfolio). $10,000 doubled or even quadrupled won’t make a hill of difference in your overall plan (a 4% withdrawal on an extra $30,000 in your portfolio will garner you an extra $100 per month in retirement, versus the possibility of not even getting your original $10,000 investment back).
5. Is Facebook an integral and necessary part of people’s lives, and getting more and more important each day…or are they taking it public now, at its peak, in order to capitalize its value for Mark Zuckerberg (at the expense of future shareholders)? Remember, Facebook is at its core an elaborate advertising delivery vehicle – there are no user fees. Stock prices go up based on expanding profits and expanding P/Es (price to earnings ratios). What is the potential for both of these in Facebook’s case (especially in light of the fact that Facebook will probably go public at an already excessive P/E of 80 as compared to the overall market at a P/E of about 12)?
6. How can you get the stock in the initial public offering (limited supply, difficult to get your hands on), and avoid buying the stock that is being “pumped and dumped” after the market opens on the first day of trading?

Here’s another article from Forbes that tried to answer the above referenced six questions: http://www.forbes.com/sites/investor/2012/01/30/facebook-hype-or-substance/

I hope you read through this whole thing, and got here to the end. I’m sorry about its length, but I spent a great deal of time thinking about your question, and my reasoning for my answer.

Here’s to continued “Planning Today For Tomorrow’s Success!”™

Timothy A. Knotts, CFP®, Certified Financial Planner™

The Hogan-Knotts Financial Group, Inc.

www.hkfg.biz

Teaching Financial Skills To Kids

I met a prospective client last week who said, “We don’t do budgets“.

How did budgets get such a four letter word connection? One of the problems that led to the 2008 financial crisis, and almost-meltdown-of-our-economy, was too many people and our government living way beyond their means! Of course, the solution is good budgeting skills….something they don’t teach, or teach well, to kids in our education system. So whose responsible? US!

To help us here is the low-down on four websites and tools that can help us all instill some inspiration, and add some wonderful “life-skills” toi a young person’s “quiver”.

www.kidworth.com — Version 1.0 of Kidworth was launched a few weeks ago and is ready for folks start sharing.

The free application helps teach kids the concepts of setting financial goals.

At a birthday party for a 5-year-old a few years ago, Mr. DeFelice, a father of three, noted the excitement with which presents were opened and then tossed into a pile, probably destined for oblivion in short order.

It inspired him to create an application that, in his words, could serve not only as “an online ledger of gifts or wishes” but also as a communication and notification tool. That idea became Kidworth.

The site lets users post desired gifts or how gifted money would be spent for a particular item or purpose, and serves up invitations to birthday parties as well as suggestions about meaningful uses such as charitable giving.

The site is integrated with the major social-media sites, and additional modules are in development, including one for allowances.

www.highscorehouse.com - another free site with lots of potential.

In beta, this site turns household routines into a game in which parents and kids deal with money matters that come up at home. Parents enter a PIN to manage and edit chores, goals and a rewards system, and kids win points toward things they want.

The site also offers a neat blog and forum for parents about dealing with child-related chore issues. You can set up tasks like “feed the dog,” “feed the turtles,” “brush teeth,” “put away clothes,” “read a book” and “clean room” that your kids  can redeem toward points for things like “30 minutes of TV time,” “a day with no chores,” “a trip to the movies.”

The site keeps track of everything that is scheduled, and kids can check off chores or tasks as they do them — to which the site replies, “checking with your parents.”

www.piggybank.disney.go.com - an entry into the financial planning game market by the “big one” – Disney!  The Great Piggy Bank Adventure® online is a virtual board game that educates kids and adults on the importance of wise financial planning. Kids will learn about important financial concepts and use these lessons to complete the game and achieve their dream goals. While The Great Piggy Bank Adventure® is designed for kids from ages 8 to 14, fun-loving adults are encouraged to play with their kids and get involved in their financial education.

www.allowancemanager.com - It is a free online tool to help kids and parents begin the lifetime wrestling match with managing finances. It was developed by former software engineers and managers from Adobe Systems Inc. and Apple Inc.

The two main parts for now are an allowance tracker, which is kind of an online spreadsheet, and printable chore charts.

www.hellowallet.com – An inexpensive online tool that provides individualized financial guidance to consumers, HelloWallet has been up and running since May. It applies proprietary analytics and behavioral research to help users boost savings and build wealth.

There is also now a HelloWallet application for iPhones, to which the younger crowd will probably be more likely to use.

This isn’t a bad place to start teenagers down the road toward knowing what they are doing when it comes to finances, budgeting and investments.

Contact me if you need help. I love speaking to young people, and/or their parents, about these invaluable life skills that will be needed by EVERYONE in the future (heck….they’re needed now!).

As always, “Planning Today For Tomorrow’s Success” at The Hogan-Knotts Financial Group (www.hkfg.biz). I’ll see you down the planning trail!

Timothy A. Knotts, CFP®, Certified Financial Planner™

What is a “fiduciary” standard of care, and why should it matter?

A “suitability” vs. “fiduciary”  standard of care – which do you enjoy with your financial advisor/planner? Ask them and see what they say. Many “financial planners” have a “suitability” and transactional relationship with their clients. Almost all Certified Financial Planners™ have a “fiduciary” (client’s interests always first) and fee-based relationship with their clients. Know the difference and make sure you’re getting the relationship you deserve!

A “planner” exercising a suitability standard of care will usually sell you something and tell you to “read the prospectus before investing”.

A CFP® exersising a fiduciary standard of care will usually give you investment advice and guidance on a fee-basis, not make an investment recommendation until they’ve done some preliminary fact finding and planning, and tell you “I’ve read the prospectus for you, done all the research, and understanding your intimate financial goals and objectives this is the best way for you to invest”.

Remember, data isn’t information, information isn’t knowledge, and knowledge sure as hell ain’t wisdom. Here’s to being a wise investor and planner!

See you down the trail!

Survival Guide to Turbulent Investment Markets

Here we go again. To paraphrase Yogi Berra: “It looks like last summer…all over again!” After another year of rising stock prices, doom and gloom has set in with most of the financial press and the talking heads on the 24/7 cable financial news programs. Our words of wisdom: Don’t panic – rebalance! Usually these periods of extreme pessimism are a good contrarian indicator for better results ahead.

Let there be no mistake, there are some real systemic problems with the US and world economies: unemployment is still at 9%; US long-term debt has been downgraded; the housing market is still in the doldrums; and European governments can’t stop spending money they don’t have. However, these issues are being worked on, and being worked out, over the long-run. In SPITE of these stumbling blocks, the US economy has been recovering for the last 2 ½ years, and continues to expand and grow. The economy would simply be growing faster, and with more enthusiasm, without them.

As you know, we coach you and all of our clients to NOT respond to short-term movement in the investment markets. It’s a loser’s game. Since the beginning of time, equity markets fluctuate like the weather. Over days, weeks, and months the movement of wall street indexes is totally random. The only predictable thing about them is that over the long-term they reflect the overall quality of life – they improve. Think we have it rough now? Go read some history about life in the 1930’s and 40’s. Heck, try to recall life in the 1970’s: High unemployment, high inflation, and disco (guilty as charged!).

But seriously, here’s what we know:
1. The news is never as bad (or good) as markets perceive it to be. We saw huge returns the past two years with virtually no good news. Why? Simple – the market perception in 2008 about how dismal the future was going to be was over stated. The world didn’t end. Banks did not fail at record rates. Life went on, and markets recovered. In other words – no Armageddon.

2. We are experiencing soaring corporate profits and healthy corporate capital spending. Through 6/30/11 top line revenue for the S&P 500 companies as a whole increased 13.2% year over year!

3. Corporate earnings in relations to stock prices are relatively low…or cheap. In other words, corporate earnings are good. Even dividend yields around 2.2% are somewhat favorable when compared to 10 year treasuries.

4. It’s a global market. For many US companies, success will be defined more by what happens in the emerging markets than the more established ones. The economies of Brazil, India, and China continue to grow, and US multi-nationals share in that growth. A weaker US dollar results in booming exports of US goods and services (which makes up 13% of our economy).

5. Auto sales are up, retail sales are strong, housing starts are up, and we have record low mortgage rates as well as record high housing affordability. The index of leading economic indicators continues to go higher, and we’ve just experiences a massive correction in oil prices of over 30% since its April high (which bodes well for the US consumer).

So, here are five steps to survive this or any future crisis:
1. You should be allocated amongst many investment classes: short-term government and corporate bonds of investment grade, large and small US & international growth companies, large & small US and international value (high book to market) companies. Your actual asset allocation should be based on your long-term goals and objectives, your tolerance for risk & necessary return – we do that for you.

2. Own the entire asset class. Do not try to selectively stock pick.

3. Rebalance quarterly. This last step is without question the one most easily ignored. And yet it is so essential. Rebalancing forces us to sell high and buy low. This is investment 101 – we do this for you as well!

4. Manage your emotions. Few things in life are ever as bad as we perceive they will be. If you are having troubles with this one give us a call. If we can’t resolve it over the phone, come into the office – we have a couch!

5. Think long-term. Retirement is only the beginning. Most 65 year olds today will live 30 more years. That’s 30 years of good times, 30 years of inflation, and 30 years of the ups and downs of both economic and market cycles. You must be financially and mentally prepared for it.

So, while there is always a possibility, we think there is virtually no probability of a new impending recession based on all the economic analysis we follow. The economy, like last summer, has hit a soft patch, but continues to grow and expand through this recovery and will soon be in expansion territory. The events of the last week were an overreaction to an unfortunate coincidence of debt downgrade, slow economic data, & the worrisome but manageable US fiscal position.

Short term gyrations in the market will always get in the way of long-term strategies. Our job is to keep them out of our minds so we don’t let these short-term events derail our long-term plans. Ignore the headline news; it’s just there to sell advertising space anyway! Stay focused on market valuations, corporate liquidity and earnings – these are the things that drive stock prices over the long run. Most importantly, watch investor sentiment. As Warren Buffet (one of the richest men in the world, and smartest investors) said, “Be greedy when others are fearful, and fearful when others are greedy”. And to quote my fellow financial planner Mark Matson: “I don’t know where the next 20% move is going, but I do know where the next 100% move will be. It’s always up.”

See you down the trail!

Timothy A. Knotts, CFP®, Certified Financial Planner™

Tax Planning: Tax Issues To Watch Out For

Just a quick mid-year review of Federal income and estate tax planning issues, traps and changes that everyone should be mindful of as financial plans are discussed. Some I’ve blogged about before, and others are worth mentioning.

COST BASIS REPORTING Starting this year the custodian of your investments must report the cost basis (what you paid for an investment, adjusted for commissions, splits fees and reinvested dividends) of stocks you purchased in those accounts. No more “fudging” and fuzzy math by individual investors – this information will be reported to the IRS as well and you’d better match! However, you can still lower your tax bill by indicating to your custodian what “lot” you are selling when individual stocks are sold. Higher cost basis lots will result in a lower tax bill, so choose wisely! We use a portfolio management program here in my office, and have been tracking cost basis, stock lots, and dates of purchase for all clients since 1994. Note: beginning in 2012 the custodians will begin reporting cost basis for you on your mutual funds and ETFs as well. Caveat: New Jersey and other states do not recognize capital gains as anything other than ordinary income…it is a Gross Income Tax state.

CAPITAL GAINS RATES For 2011 and 2012 the long-term capital gains rate for investments remains at 0% or 15%, depending on your marginal income tax rate (most people will pay capital gains tax at the 15% rate). However, you MUST hold the investment for at least a year and a day. If you sell before that you will have created a short-term capital gain and possibly subjected the difference between your cost basis and the net sales proceeds to a 35% tax! One day can make all the difference so be careful (except in NJ – see caveat above). The 0%/15% capital gains tax rate is scheduled to go to 10%/20% in 2013.

STANDARD vs. ITEMIZED DEDUCTIONS There is no standard deduction for property taxes this year, so you’ll need to itemize deductions in order to get this tax break in 2011. If you don’t have enough deductible expenses to itemize then you’ll be out of luck, so keep track of all your tax expenditures, medical expenditures, charitable gifts, and expenses associated with managing your assets or paying your taxes. All of these add up and could lower your tax bill. Review IRS Schedule A NOW to see what you should be tracking!

TAX CREDITS FOR “GREEN” HOME IMPROVEMENTS Last year’s tax deal did extend some tax credits (tax credits are better than deductions as a credit is applied after your tax is calculated, and lowers your taxes dollar for dollar!) for “green” home improvements such as insulation, new windows, efficient heaters and air conditioners. However, the lifetime credit is now lowered to $500 from last year’s $1,500, and there are limits are some specific projects. So, check the tax law first before going out and spending a bundle on home improvements and expecting a big tax credit next year…you may be surprised. On the other hand, your projects should result in a savings in your utility bill, and mother nature will thank you!

CHARITABLE CONTRIBUTION OF IRA ASSETS It’s Back! If you are older than 70 1/2 you can take up to $100,000 of your IRA and give it to a qualified charity and pay no income taxes on the distribution (but you get no deduction either…it’s a wash). If you are under 70 1/2, you would first have to make a taxable distribution from the IRA, which increases your Adjusted Gross Income on the front page of your tax return (and may limit your ability to claim the full itemized deduction, personal exemption, as well as other items concerning your tax bill), and then deduct the charitable contribution as an itemized deduction on Schedule A. This will work well for those over 70 1/2 who need to make an otherwise taxable Required Minimum Distribution (RMD), and who also want to make a charitable contribution. The RMD can go directly from the IRA to the qualified charity. Caveat: check with your tax advisor about the impact this technique might have on your state income tax bill; there may not be any special treatment of an IRA distribution for those over 70 1/2.

ESTATE TAX RATES Estates where assets are not left to a surviving spouse (left to children, trusts or other heirs) can generally avoid estate taxation on up to $5.0 million (and $10.0 million for the surviving spouse at their death if none of the $5.0 million was used at the first spouse’s death). Anything over that amount is taxed at 35%. However, that “deal” is only good till the end of 2012. As it stands right now, we go back to the estate tax law that was in effect in 2002 at that point, where the estate tax exemption plummets to $1.0 million, the tax rates shoots back up to 50%, and there is no “portability” of the unused exemption of the first spouse to die carried over to the second to die (it becomes “use it or lose it” again). Caveat: for my fellow citizens of New Jersey, regardless of what the Federal estate tax law is or will be, our exemption is stuck in 2001 at $675,000 which can cause some interesting, and terrifying, tax problems even at the first death of two spouses (New Jersey called this “decoupling” from the Federal Estate Tax law!). EVERYONE in New Jersey needs to have their wills and estates modeled to make sure under the current law they have not floundered into a horrible NJ estate tax trap!

PREPARE FOR COMING CHANGES Yes, they’re coming to a theater near you soon! The AMT “fix”, which saved about 21 million filers from paying this “extra” tax, is only good till the end of 2011. It’s back in 2012 unless Congress changes the law before the end of this year – not likely for a cash-starved budget! Also, a new 3.8% Medicare tax will be imposed on unearned income starting in 2013 if you are single and have a Modified Adjusted Gross Income over $200K (over $250K if filing a joint return). This tax alone is another reasons to think twice about large distributions from your IRA for a gift to charity. As mentioned above, the long-term capital gains tax goes to 10%20% in 2013, but more importantly the 15% tax on qualified dividends from certain stocks and mutual funds, as well as short-term capital gains, goes to whatever your marginal tax rate is (which could be as high as 39.6% in 2013!).

For specific tax advice for your circumstances please consult a qualified tax advisor.

See you down the trail…Timothy A. Knotts, CFP®, Certified Financial Planner™

Maybe It’s Time To Buy A Home!

On an inflation adjusted basis home prices are down almost 40% from their 2006 peaks.  Could they fall further? Yes, but most experts believe potentially only 5% to 10% more. Why not wait? Because we are back at a place in home prices where personal real estate tends to track inflation up. In addition, any “gain” by waiting will be offset by a ”loss” from inflation-caused higher home mortgage rates. In other words if you wait, but pay 1% in higher interest rate costs on a 15-year mortgage, you will pay about 9% MORE in interest costs ($75,000 in interest over the life of the loan versus $57,000 on a $200K mortgage) than if you bought now, more than offsetting any further decline in price up to 9%!

The math may be a little complicated, and you need access to an amortization software program to see the additional costs of waiting, but waiting for a further price decline may end up costing you more in the long run! So if you don’t live in Florida, Nevada, Arizona or Southern California, and you’re thinking of purchasing a home, there may not be a more opportune time than right now while mortgage rates are at a historical low…in spite of the “potential” for further prices declines. The latest S&P/Case-Shiller survey shows prices in 10 of 20 major markets have already started to rise, in some cases significantly, including in Washington, D.C., Minneapolis, San Francisco and Atlanta.

Linda A. Duessel, CFP, CPA, CFP, an Equity Market Strategist with Federated Investment Management, has some additional thoughts on purchasing personal residential real estate now here: Be Money Savvy:
Home ownership is an important part of the American dream

See you down the trail…Timothy A. Knotts, CFP®, Certified Financial Planner™

Retirement Planning: Baby Boomers Sacrificing their Retirements For Their Kids!?

The leading edge of the Baby Boom Generation (1946-1964) turned 65 this year. They will do so at the rate of 10,000 per day for the next 18 years (that’s 3.65 million a year!).

For many of these Boomers retirement IS NOT right around the corner. According to a survey released in June fifty-five percent of Boomers will retire LATER than they originally expected. Obviously, the economy and the investment markets has played a huge role in that trend. However, the real shocker from the survey is that 17 percent of those anticipating a delayed retirement indicated that it was because they have found themselves financially supporting their adult children or other relatives! More than half of the Boomers surveyed (54%) had said that they have actually had their adult children live with them for 3 months or more, and supported them in some fashion.

“Many of the young adults returning home are part of Generation Y, a group now often recognized as the ‘Boomerang Generation’.” A large portion of the Gen Y (1977-1989) group surveyed (23%) had indicated that they had moved back in with parents for 3 months or more, and 41% said that they had received post-college financial assistance from their parents (money for food, rent and discretionary bills like cell phones).

As a member of the Baby Boomer generation I speak from experience (I have four children). We have had the best intentions, but we are now setting the wrong precedent by financially supporting our adult children (specifically when it comes to discretionary items) to the degree that we are. Of course. we don’t want to see our children struggle financially, but almost all of my Boomer friends agree that we have coddled and protected our children for their whole lives – they’ve never suffered or wanted for anything. So what do we do now?

Financial assistance from Boomer parents should come, but be within reason — loans instead of gifts; supplemental distributions for food & housing instead of paying the entire freight; below market “rent” for living at home; and never an “allowance” for entertainment and vacations or trips. Financial assistance should never be open-ended, and there should always be an expectation of when it will end. Boomer parents should not let their children’s discretionary spending “requirements” come between them and their retirement. A budget or spending plan should be required as a condition of continual support, as well as regular discussions about what is being done to reach financial independence. Terms and repayment (if required) should always be documented and signed by all parties. It shouldn’t be easy, or even fair. While parents wouldn’t have their kids want for the basic necessities of life (food, clothing & shelter), these children should at the same time be highly incentivized to move out and move on.

For those that have already fallen in a “bad” habit or pattern with their “boomerang” children in providing Economic Outpatient Care (a term coined by Dr. Thomas Stanley in his 1996 book, The Millionaire Next Door) it is not too late to set yourself back on the path to success. A family meeting where a discussion of what everyone wants, and what everyone’s expectations are, can be a good place to start. If children are working, but still living at home, then a discussion of market rate living expenses should be part of the conversation and some  below-market, reasonable amount of “contribution” needs  to be collected (with the expectation that this will be raised to “market rates” over some pre-agreed-to time frame). Finally, parents need to re-examine their own retirement savings requirements, and make sure they themselves get back on track toward financial success. We can not, and should not, be enablers of creating EOC!

To turn it all around, here are four ideas to begin with today:

1. Reassess your goals. Estimate retirement readiness, make projections about the future, and develop a new plan to get back on track. We use MoneyGuidePro here in our office to make realistic projections about the future for our clients. Don’t let the needs (or for heaven’s sake wants) of your children derail your own retirement plans and security. How can you know how much you can help if you don’t know what you need to help yourself first? There is a concept in emergency care that says “never make a second victim”…the same applies here!

2. Work as a team. Have an honest discussion with your family about your own personal financial goals and expectations. Determine your spending habits and come up with a spending plan/budget for your children. Set up a timeline (no one wants to be cut off cold turkey – it creates feelings of animosity) to help both you and your children to regain their financial independence. Rome wasn’t built in a day….this could take 3 to 5 years to correct. Make a plan, then work it!

3. Consult the experts.Talk to a CFP® (Certified Financial Planner™) to look at all your options. They also may be able to facilitate a family meeting. Everyone also has psychological relationships with wealth and money. Experts in that area may need to be brought in as well.

4. Ask for help. You can’t do this on your own. These conversations with children and family members are hard, and may be emotionally painful.

To review the survey and find more information on this topic go here: http://files.shareholder.com/downloads/AMTD/1319884953x0x475088/bc913af7-5da2-4240-ab90-e285a86a3fab/Q2_II_Findings_Final060711.pdf

See you down the trail. Timothy A. Knotts, CFP®, Certified Financial Planner™