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SUNDAY, NOVEMBER 6, 2016
· THE SUMTER ITEM
USA TODAY PERSONAL FINANCE PETE THE PLANNER
Peter Dunn Special for USA TODAY
As I sat down for my annual “what will 2017 look like” session, I was already cringing, which is really bad because it takes quite a bit to make me cringe. My mailbox had not been kind over the last couple of days. Among the catalogs, political mailers and veterinarian appointment reminder postcards, the two parties responsible for my two largest monthly bills had each spent 47 cents to ruin my day. First my mortgage lender had adjusted my escrow requirements based on property tax increases and a homeowners insurance rate upsurge. At this point in my life, I’m no longer shocked by mortgage payment increases. Though to keep my sanity, I’ve turned it into a game of how high can it go. Not surprisingly, the game gets less fun each year. Next, my health insurance provider mailed me their good news/bad news letter. The good news? We didn’t get dropped, despite receiving a letter two weeks prior stating we got dropped. I hadn’t received that level of mixed messages since a prom invite some 22 years ago. Great, we get coverage once again. The bad news at this point is pretty obvious: We were staring at a significant premium hike. Not the 117% premium blast some Americans are reportedly facing, but 25.4% isn’t exactly a complimentary massage.
Why living too close to the edge is a danger Bills always go up. Count on it, or when they do, look out below!
statistics proving the average American doesn’t have the positive cash flow to handle major bill increases. I’ll withhold the stats showing you how millions of Americans don’t have enough money saved in their savings accounts to fund a flat-tire repair. When major bills get more major, financial stability erodes. It’s elementary, but the only conceivable way to keep your financial life solvent in the midst of expense increases is to reduce spending in some other area of your life. This is not fun, this is not easy and this is not really optional if you want to keep your head above water. It is optional, but choosing to have 110% of your income spoken for each month isn’t exactly advisable. You could, like so many people do, choose the adolescent rebellion approach to budgeting. This is where you are upset at financial reality so you act out by spending more money than you have. That way you can really stick it to … wait. Who are these people sticking it to? That’s right. They’re sticking it to themselves. But who am I to throw stones? I’ve lamented the disappearance of my last visible ab while consuming a cheeseburger. Refusing to adjust your spending in the face of a price increase is silly, if not sad. DEAL WITH IT
I’m not happy about my health insurance premium increase. I oscillate between being grateful I have coverage and wondering what life without the Affordable Care Act would be like. And while both of these thought paths help me cope with reality, neither solves my problem. Like you, I’m playing with the cards I’m dealt. As you would hope, I don’t spend every dime I earn. I have a healthy monthly surplus, which is primarily used to fund my kids’ college fund. When my expenses increase, my surplus shrinks. When my surplus shrinks, I’m not able to
UNHAPPY NEW YEAR
Two expenses in, and 2017 is looking ugly. I’m not one to wallow in my own personal financial adversity. My brain is now in problem-solving mode. I need to answer one essential question: How will we adjust our budget to account for these rather salty price increases? Welcome to the beginning of the end for millions of Americans. I’ll spare you the heinous
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VETERANS DAY Q&A
fund my college savings goal as aggressively. I don’t expect the sympathy cards to roll into the office this week, but in the spirit of math, when expenses increase, there are consequences. When you have no surplus, the consequences are much different. The average American doesn’t have a surplus. In order to make ends meet, meals out must be cut, smartphone plans must be adjusted, and/or additional income must be tracked down.
Knowing that prices tend to increase should lead you to one conclusion: You need to budget for them. Refusing to sacrifice other purchases you want or need will result in further instability, whether you are willing to admit to it or not. Knowing that prices tend to increase should lead you to one conclusion: You need to leave room in your budget for price increases. In other words, that online mortgage calculator that states you can afford X amount of house only means you can afford X amount of house right now, not next year. When you go to the car lot and try and buy as much car as the finance manager will let you buy, you’re ignoring the cost of living increases that will rock your world next year. Financial decisions cannot be made with snapshots alone. The payment you can handle this month isn’t necessarily easily affordable next year or even next month. My original mortgage payment I agreed to in the fall of 2007 isn’t even close to what I pay now. I’ve accounted for this reality, and you must too if you want to survive your “what will 2017 look like” session. Peter Dunn is an author, speaker and radio host, and he has a free podcast: Million Dollar Plan. Have a question about money for Pete the Planner? Email him at AskPete@petetheplanner.com
THE WEEK AHEAD
Some of our veterans’ sacrifices are financial Lisa Kiplinger l USA TODAY
Having grown up in an Air Force family — proud daughter of Col. Keith Kiplinger (thank you for your service, Dad) — I’m somewhat familiar with the ins and outs of veteran family finances ... but not quite as familiar as Douglas McCormick, author of Family Inc. With Veterans Day on Friday, the Army veteran took some time to share his thoughts on how military service affects families. You donated a portion of your royalties to veterans causes. Why?
Q
A: Family Inc. is intended to empower every American with the tools required to achieve financial independence. However, as a veteran Army officer, I am also using the book to empower the veteran community with financial education. Most Americans appreciate the sacrifices our service members have made for our country, but few understand the unique financial challenges our veterans face while serving, upon career transition to the civilian workforce and upon retirement.
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Why did you write your book?
QA: Because I would have benefited from a comprehensive resource to serve as a roadmap for making important financial decisions such as career choice, investing, insurance and retirement when I transitioned from service. How smoothly did your transition from the military into the private sector go?
Q
A: Like many veterans, I chose to go back to school after service and got a master’s degree in business from Harvard. This served as an effective complement to my Army experiences. However, I had limited savings and lots of obligations, such as a mortgage on a home I couldn’t sell, credit card debt and a young family. So the transition was difficult. What are the special financial challenges that military families face?
Q
A: While most veterans have
CADE MARTIN
After serving in the Army, Douglas McCormick got a master’s degree in business from Harvard.
highly developed labor skills, such as leadership and teamwork, that make them attractive employees, they face unique challenges to achieving financial security, including: uEighty-three percent of service members will navigate a mid-career transition. uBecause service members are often deployed abroad and move frequently, they are likely to transition without a well-developed professional network. uService members are more likely to have family and dependents at a young age. uUnemployment and underemployment rates among military spouses are higher than the national average. Collectively, these circumstances leave many military families with modest financial resources and limited flexibility to endure the unexpected costs or periods of unemployment that can occur when they transition from the military to a civilian life and career. You are the first financial pro I’ve run into who tells clients not to bother with budgets. How does that work?
Q
A: I find people get distracted with detailed budgets, spend too much time tracking meaningless information and fail to focus on the issues and decisions that really matter. For this reason, I prefer a monthly high-level review of an income statement, broken into fixed costs and variable costs, as well as a balance sheet, which shows the family’s assets, liabilities and net worth. Readers can create their own income statement and balance sheet on my website, www.familyinc.com.
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A contested election could be a worst-case scenario Paul Davidson @Pdavidsonusat USA TODAY
While the course of the economy each week typically hangs on such scintillating data as durable goods, this week’s events feature a more prominent development: the presidential election. The vote, which could shape the contours of the economy for years to come, is at the center of a light week of economic news. After hunkering down since the recession, consumers have felt more comfortable borrowing money in recent months, especially since they’ve whittled down debt levels. Total consumer credit increased at an annual rate of 8.5%, or $26 billion, in August, the fastest pace in a year. Revolving credit, such as credit cards, rose 7%. Non-revolving credit, such as auto and student loans, increased 9%. Economists expect the Federal Reserve on Monday to report a moderation in September, with total credit expanding by a still-solid $18 billion. The election has created a cloud of uncertainty over taxes and other policies that, according to some businesses, has curtailed hiring and investment. A clear victory on Tuesday by Hillary Clinton, who represents the status quo, likely would set off at least a short-term relief rally in
The results of the presidential election, featuring Hillary Clinton and Donald Trump, could affect the economy for years to come.
A close election that’s contested likely would prolong stocks’ unease and weigh on markets for weeks.
markets, says economist Paul Ashworth of Capital Economics. A win by Donald Trump likely would intensify worries over potential trade skirmishes with countries such as China and Mexico and a crackdown on immigration that could restrict the labor supply. But a close election that’s contested likely would prolong the uncertainty and weigh on markets for weeks, Ashworth says. Even a decisive Clinton victory would still leave glaring questions. For example, how much of her plan to raise taxes on the wealthy and increase spending on infrastructure, education and aid to low- and middle-income households will be passed by a likely divided Congress? Generally, economists believe Clinton’s blueprint would moderately boost economic growth, while Trump’s across-the-board tax cuts would swell the debt and raise the risk of recession. The Labor Department’s Job Openings and Labor Turnover Survey will be less momentous but still offers a window into the labor market. Job openings were at a near record 5.8 million in July, signaling employer demand remained healthy. But openings fell to 5.4 million in August. Another drop in the September total “could be an early warning sign that labor market conditions are softening,” says Nomura economist Lewis Alexander.