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The Independent Investor: Financial Challenges Facing Single Parents
By Bill Schmick On: 08:01PM / Thursday March 19, 2015

Over 13 million Americans struggle each day to be the best single parent they can. It can be a thankless job and one that requires an entire set of financial tools that couples rarely face. This column is dedicated to helping the single parent cope.

Twenty-five percent of children under the age of 18 in the U.S. are being raised without a Dad. That's not to say that there aren't plenty of single fathers bringing up children, but the facts are that the majority (80 percent) of single parents in this country are women. Nearly half of them live below the poverty line. Here's how you can avoid that fate.

The first change you must make is in developing a new attitude toward life and your finances. If your spouse had been handling the finances before you broke up, that responsibility is now squarely on your shoulders. Step one is to know how much you are spending. Create a budget. Record everything you spend each day for the next three months and then divide the total by three. That will give you an understanding of how much you are spending on average each month. With knowledge comes power.

Continue to do this for that first year and make sure to monitor your spending on everything. The next thing to do is establish an emergency fund that can be accessed easily. This pool of money is earmarked for unexpected expenses like home repairs, new tires, etc. You should keep a reserve of 3-6 months of expenses on hand for emergencies, or in case you lose your job.

If you are now or have been a stay-at-home spouse, you will probably need to consider a new career. That may require taking classes to earn a degree or attend a vocational school. Sometimes divorce courts allow for "rehabilitation maintenance," which can be negotiated in a marital settlement agreement requiring one spouse to pay for the other's training. This is especially so when one spouse initially worked and paid for the other spouse's law, medical, MBA or other degree. Now it's your turn.

For those of you who already have a good-paying job, retirement savings will now become critical to your future and that of your family. You need to save at least 15 percent of your salary each year and if you can afford it, much more.

You must also reevaluate all of your financial documents. Term life insurance is important in the event that something happens to you. It is the obvious way that your children can be cared for financially if you or your ex dies suddenly. Life insurance, for those who are in the throes of divorce right now, can be mandated in a divorce decree. I suggest you insist on it and make sure your ex does not allow it to lapse by law. The policy should be large enough to insure there are ample funds to provide a home, basis living needs, medical expenses and college tuition for all your children.

Make sure that all of your retirement accounts and other pools of money have the proper beneficiaries recorded. This includes any money your parents may intend to leave to your kids. Normally, your children should now be the legal beneficiaries of any inheritance. The last thing you want is to see your ex-spouse receive your assets or become the custodian of assets while your children come of age. And while you are at it, you might give some thought to who you would like to have as guardians of your children in case of your death if not your ex-spouse.

Single parenting is a hard job and the relationship you have with your ex can make it that much more difficult if it is mired in recrimination and hostility. What is done is done. Your future success demands that you acquire a new self-image, devoid of the past, that will allow you to treat your ex as a business partner for the sake of your children and your future self. The sooner you accept these facts, the sooner you and your children can start enjoying life again.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.



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@theMarket: Pay Attention to Diverging Markets
By Bill Schmick On: 03:50PM / Saturday March 14, 2015

It was a turbulent week for U.S. stocks as the strong dollar and worries over possible rising interest rates spooked investors. But not all markets followed our lead. This divergence could be the beginning of a trend that could benefit your portfolio.

Normally, the American stock market is the big dog that wags the tail in international markets. When U.S. averages decline, foreign markets fall with them and vice versa. "De-coupling" occurs when the opposite happens like it did this week.

While U.S. stocks declined, both the Chinese and Japanese stock markets gained. Other Asian markets also did well, especially South Korea, which cut a key interest rate this week. So far in 2015, Japan is a clear winner, gaining 8.4 percent year-to-date, while China has trailed with only a 3.5 percent gain. However, those gains look good compared to the S&P 500 Index, which is flat for the year.

Europe, thanks to the launch of their own quantitative stimulus program, is up 15 percent so far this year but in all these cases appearances can be deceiving. If an American investor had purchased either European or Japanese shares without hedging the currency, those gains would have been much less. In the case of Europe, where the Euro has declined by 13 percent, the U.S. investors' gain is about 2 percent, still better than the U.S., but not by much.

Recently, many equity strategists are coming around to my point of view. As most readers know, I've been bullish on Japan since June, 2011, when the Nikkei was trading around 8,900, compared to over 19,000 today. Readers also know that I have reiterated my positive stand on China, Japan and Europe several times over the last year and with good reason.

The worldwide trend by central banks to lower interest rates and stimulate their slow-growing economies is having a predictable positive effect on many foreign stock markets (as it did in the U.S. over the last five years). In contrast, our own Federal Reserve Bank has wound down our stimulus program and is preparing to raise interest rates now that the country is growing again. That has triggered a rise in the dollar and demand for U.S. Treasury bonds.

All of this sounds good and it is over the long-term, but short-term it causes problems here at home. Most large U.S. companies depend on foreign markets for a healthy share of their profits. The 23 percent rise in the dollar against a basket of currencies since last June has hurt profits considerably. So much so that analysts are predicting that 2015 could be the worst year for corporate profits since 2009 (when earnings fell 5.5 percent).

I am not expecting that sort of shortfall, but first quarter 2015 profits could decline by over 2 percent and the second quarter should be down as well. And adding to the export woes, the decline in oil prices is also having a negative impact on corporations in the energy sector.

Given this wall of worry, is it any wonder that our stock market should be trapped in a trading range? So far this year we have vacillated in a range of -3 percent to 3 percent and I expect that to continue until we have more clarity on all of the above concerns. Does this mean I've turned cautious on the U.S. market?

Not at all; American corporations have coped and even prospered in a strengthening dollar environment in the past. The stock market has also done quite well when interest rates have risen throughout our history, as long as rates do not rise too much. Lower energy prices have also turned out to be a great boon for economies worldwide. All that is required is a little patience while we wait for our economy to adjust to these conditions. And as we wait, a little money in certain foreign markets is not such a bad idea.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.



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The Independent Investor: Kids & Money
By Bill Schmick On: 08:39PM / Thursday March 12, 2015

Given that most Americans grow up with little or no idea of how to save, budget, or spend money, it might be a good idea to ask why.  It begins with the family but discussing money in this country is as uncomfortable as talking about sex.  That needs to change and it starts with our children.

"My kids were taught about personal finances as part of their school curriculum, but it went in one ear and out the other," said one hard-working client, who called asking for advice on how to teach his teenagers the value of money.

Although the majority of states now mandate some kind of classroom training in finance, most students fail to "get it." Children learn best when they apply what they've learned to their daily life, especially when it concerns their own money. If money is a taboo subject at home (and in most homes it is not), than managing one's money, no matter how little, simply becomes a hopeless task.

Yet kids are naturally curious about money. Last year, T Rowe Price, a global financial company, polled parents on the subject and learned that 37 percent of children asked their parents "how much things cost." Another 29 percent asked about an allowance, while 19 percent wanted to know where money comes from.

The majority of parents (77 percent) used their children's allowances as the main tool in family finance education. But there is a lot of controversy over whether kids should work for their allowances, just receive it as part of family environment, or get nothing at all.

Suze Orman, television's finance guru, believes that the word should not be part of the household vocabulary. Instead, children should be paid for chores. The more chores one does, the more one is paid, depending on the task and the child's age. This teaches a work ethic, she believes, while negating the allowance as their "due" simply because their best friend receives one.

On the other hand, an allowance for accomplishments above and beyond the expected daily chores (room cleaning, bed-making and other household chores) does help prepare the child for a future in the work place. Simply doling out an allowance to your kid, as many parents do, is no answer, since money never earned is money never valued.

The only way kids learn about savings, budgeting and spending money, in my opinion, is by practicing with money they have earned. But here is where the allowance concept falls down. Of roughly half the children who receive an allowance, in the survey, fully one-third spend it all and come back to their parents for more money. Eighty percent of the families polled in the study gave in to their children's demands. Is it any wonder that most Americans grow up to constantly live above their means? Even worse, only 1 percent of children save any money from their allowance, according to the American Institute of CPAs.

Most American families have never addressed sensitive issues like family debt or how much income their parents generated. When asked why that new bike won't be forthcoming, Mom and Dad simply say "no," or "we can't afford it." That is usually the end of the conversation. In my next column, I will discuss some methods you can use to further your children's (or grandchildren's) concept of money, while also teaching them how to budget and save and spend wisely; so stay tuned.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.



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@theMarket: Home on the Range
By Bill Schmick On: 04:01PM / Saturday March 07, 2015

New highs followed by some selling, then a little back and fill, before climbing to yet another new high. That's the environment we are in and it happens to be a great recipe for making money in the stock market.

The last few days are a great example of what I'm talking about. Last Friday, the Nasdaq finally breached the 5,000 level. Now there was nothing magical about that number. It's round and the media decided to use it as some sort of goal post for the technology index. As I predicted in recent columns, the Nasdaq scored that touchdown and then this week, promptly fell back 40-plus points. The other averages sold off in sympathy and here we sit in yet another trading range.

The media needs to manufacture a reason why markets move and sometimes those reasons can be full of contradictions. Friday's non-farm payroll data is a case in point. The employment gains surprised investors. The cold snap in the Northeast had many economists looking for weaker job growth. U.S. payrolls actually came in much higher at 295,000, versus a mean estimate of 235,000 jobs. One data point does not a trend make, but if you look at the three-month average of 288,000 job gains/month, the employment data is clearly rising.

That puts the unemployment rate at 5.5 percent, down from 5.7 percent, even though the month to month rise in wages is still fairly anemic. Nonetheless, those are good numbers and combined with the continued low price of energy, should convince most investors that this economy is doing just fine. Why, therefore, did the stock market sell off?

We are in one of those periods where traders have decided that good news is actually bad news. Stronger job growth, to them, means the Fed is going to raise rates sooner than later. Duh, hasn't the Fed already notified us that they plan to raise short-term rates sometime in mid-year? Whether that happens in June or September is immaterial, but traders insist on trading every data point as if it is meaningful. Don't you fall for it.

The point to focus on is that all of this trading to and fro is simply noise. Understand that we are now in a new trading range on the S&P 500 Index, somewhere between 2,085 and 2,115. And like previous trading ranges, this one represents a higher low and a higher high from the previous range. If you look back through the last 12 months, time and again, you could identify the same type of trading behavior. The moral of this story is that as long as the markets continue to exhibit this kind of behavior we are all in Fat City.

How long before the next move higher? I wish I knew. Sometimes trading ranges are short-lived, a week or two. At other times, they can last for months. After all, stocks go sideways better than 60 percent of the time, so patience is a real virtue when it comes to investing. Historically, March and April are up months in the stock market. Odds are this year will be no different. What you need to understand is that in this kind of stair-step market, you simply hunker down and wait for your rewards.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

 



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The Independent Investor: Rise of the Smoothie
By Bill Schmick On: 03:20PM / Thursday March 05, 2015

The global market for smoothies is projected to hit $9 billion this year. Driven by a new health-consciousness among consumers, today's on-the-go convenience of gulping down your vitamins and minerals is appealing to more and more of us. Expect that trend to continue.

From a niche market in America in the '90s, the industry here at home has grown to over a $4 billion market today, which makes the United States the dominat domicile of all-things smoothie. The sector is forecasted to grow 10 percent a year for the next five years, according to Research and Markets Group, an analytical business group. Food chains, service restaurants, beverage companies and consumers, not to mention the dozens of smoothie franchises, have made the fruit and/or vegetable drink as ubiquitous in America as McDonalds or Starbucks.

For many consumers worried about obesity, eating right and living longer, the convenience of gulping down your daily FDA minimum requirements of fruits and vegetables can be a strong selling point. It sure beats the pants off swigging down gallons of unhealthy soda.

Most of us consider smoothies a healthy but a sweet snack consisting of fruit and possibly yogurt or other ingredients like peanut butter or soy milk. The most convenient (and cheapest) way to make the drink is by using frozen fruit. Frozen fruit sales in the U.S. now top $1 billion a year, which is up 67 percent from five years ago, according to Nielsen. Sixty percent of that fruit went into making smoothies, which is up from just 21 percent back in 2006.

The making of smoothies goes back to the 1930s, '40s and '50s with the invention and use of both blenders and refrigerators. Smoothies became associated with the health food industry in the '60s through people like Jack Lalanne, the renowned health and fitness guru, who was one of the earliest advocates of juicing and nutrition. Today, with the trend toward organic and natural foods, smoothies have come into their own.

My own experience with smoothies is now two years old. I started with my old blender making a combination of fruit and vegetables drinks, but soon found that my tried and true blender wasn't cutting it. In search of the same consistency and flavor as a store-bought smoothie, I moved on to a popular smoothie-maker, which cost me a bundle. Still not satisfied, I stepped up once again and bought an even more expensive brand with a powerful motor. If I am an example of a typical smoothie consumer, no wonder that blender sales in America have grown 103 percent since 2009.

Today my wife and I consume at least one a day, combining both fresh vegetables and fruit. I will admit that making them can be time consuming and depending upon the ingredients, expensive. As such, you can usually find me in the bruised fruit and vegetable corner of my local supermarket. I usually make enough to last us at least two days. It gets better.

My company, thanks to my constant urging, decided to buy an almost-industrial smoothie maker. I have become the official "Smoothie King" in the office. It helps that just about all of us here are health nuts, extremely busy and concerned with our weight. As such, we are typical Americans.

As more and more commercial players move into the business, competition is emulating the differentiation that has been so successful in the coffee market. Now, we are being tempted by "Super Smoothies," made with antioxidant-rich super fruits like goji berries or super foods such as chia and flax seeds. Tropical fruit and tea-flavored concoctions are now common at most juice bars and cafes. Pre-made and bottled smoothies are also popping up at many local supermarkets.

If you haven't dipped your taste buds into the smoothie world as of yet, I suggest you do. The health and weight benefits are substantial and they taste great to boot.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.
 



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Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com Visit www.afewdollarsmore.com for more of Bill’s insights.

 

 

 



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