It is one of the most wonderful times of your life, expecting a new addition to your family. But along with the joy comes the responsibility of providing for all of his or her needs. As the saying goes, "Parents are people who carry pictures in their wallets -- where their money used to be." The cost of welcoming a new arrival can be about $32,000 for the first two years alone. Knowing in advance what expenses a new child adds can make your family's finances easier to manage.
A new baby makes creating a budget (or adjusting your existing one) a top priority, as conservative estimates have the cost of raising a child at $9,500 to $10,700 per year to age 17. Many families will spend more than $230,000 over 18 years. As you consider your growing family's fiscal needs, take a look at key areas to address before and after your new child comes home.
If you and your spouse plan to keep working after your child arrives (and you both have company-provided benefit plans), one of your first steps is to choose the benefits you need from each plan, at the lowest out-of-pocket cost possible. For instance, if you plan to switch health plans for better and/or less-costly maternity benefits, consider whether the plan you favor offers the pediatric coverage and providers you prefer for infant care. A managed-care plan, such as a health maintenance organization, can reduce out-of-pocket expenses over a traditional plan, which often requires you to pay at least 20% of care costs. The savings can be substantial for pediatric care, as managed care offers cost incentives for the preventive care children often need, such as well-baby check-ups, inoculations, and treatment of flu and ear infections. For medical expenses not covered by your health insurance, find out if your firm offers a medical reimbursement account. Your pretax contributions can pay for items such as orthodontic care, insurance deductibles, and eyeglasses. With this type of plan, you'll have to determine at the beginning of the year how much to contribute and you will lose any money you don't spend.
Your money-saving skills take center stage when you or your spouse (or both of you) take time off to care for your new child. Some companies provide little or no paid maternity leave -- but you still need to pay bills. And if and when you go back to work daycare can be costly...averaging over $9000 a year. Plan ahead by putting as much as possible per paycheck into a conservative account that is easily accessed (important if baby arrives early). Even if you can only save $100 monthly beginning in the second month of pregnancy, finding a savings vehicle with a 4% monthly rate of return would give you over $800 seven months later. That could pay for a year's worth of diapers or baby food/formula!
Your child's arrival should also prompt you to protect against potential loss of income by obtaining or increasing insurance coverage. Your greatest chance of losing family income is if you or your spouse is disabled -- making disability insurance a must. With this coverage, try to replace about 60% of your income. The most inexpensive way is to purchase coverage through your company's group policy, if possible. If this isn't an option, consider purchasing an individual disability insurance policy. Life insurance should be your next consideration. You should have coverage equal to 5 to 10 times your family's annual income. If life insurance isn't available through your or your spouse's benefit plan, an affordable alternative is term insurance. These policies are generally written for a specific time and pay benefits if the policyholder dies. (For example, a term policy with $100,000 coverage may cost about $200 in yearly premiums.)
Another important thing to consider is drawing up a will designating a guardian for your child should you and your spouse die together. If you or your spouse dies without a will (intestate), a judge decides who will be appointed your child's guardian. As a result, it could be someone you hadn't wanted as a guardian. Finally, your will should provide for guardianship that applies to both your current and future child or children. Your will can also be a vehicle for creating a trust to hold your child's inheritance. The trust allows you to specify what you want the money to be used for (such as college education costs) and at what age you want the principal distributed to your child. That way, you can delay distributing money to your child until he or she is old enough to handle it responsibly.
Best of luck to all of you new parents and parents-to-be. Hope this is helpful.
Tuesday, June 12, 2007
Monday, June 11, 2007
Make Your Child a Millionaire
Just wanted to pass along some valuable information in which I thought you may be interested. If your child is employed, they can contribute up to $4000 a year to a Roth IRA. The contributions are not tax deductible, but at their tax bracket it won't really matter. Just to put it in perspective, consider the following...
If they would put in $4000 a year between the ages of 16 and 21 and not another dime after that, and the Roth IRA earns 10% per year, the child would have well over $2 million dollars at age 65. $4000 may be alot to contribute at that early age, but even half of that and they would have over a million dollars. The Roth may earn less than 10% some years, but may earn even more in other years. The point is to try and have them save as much as possible to maximize their savings at retirement. And the best part about saving this money in a Roth, is that the money will be 100% tax free at retirement!
A great place to go for some financial calculators is
http://www.firstcommand.com/whereGo/calculatorlist.htm. Just search calculators on the home page.
Happy Investing.
If they would put in $4000 a year between the ages of 16 and 21 and not another dime after that, and the Roth IRA earns 10% per year, the child would have well over $2 million dollars at age 65. $4000 may be alot to contribute at that early age, but even half of that and they would have over a million dollars. The Roth may earn less than 10% some years, but may earn even more in other years. The point is to try and have them save as much as possible to maximize their savings at retirement. And the best part about saving this money in a Roth, is that the money will be 100% tax free at retirement!
A great place to go for some financial calculators is
http://www.firstcommand.com/whereGo/calculatorlist.htm. Just search calculators on the home page.
Happy Investing.
Monday, April 9, 2007
Home Buying and Mortgage Questions
I have had several inquiries regarding my article "Buying Your First Home" (3/30/07). There is so much information about home purchasing that it can be overwhelming. I just wanted to pass along a few websites that have some great information regarding home buying and mortgages, www.homeloans.va.gov, www.ginniemae.gov and www.fanniemae.com
If you have any specific questions, just let me know and I'll try to help.
If you have any specific questions, just let me know and I'll try to help.
Monday, April 2, 2007
Why Gold Should Surge
I have been a fan of gold and gold stocks for at least 6 years now. There have been many ups and downs and a lot of scary volatility. Trading for the short term is not an easy thing with gold, but looking at the larger long term picture I see nothing but upside. Of course there will be corrections in between, but if you can ride them out... this gold bull may just be in it's infancy. I ran across this article this weekend on the Dow Jones Newswire and thought it may be of some interest. Enjoy.
Seven Reasons Why Gold Should Surge 4-1-07 9:04 PM EDT
JUPITER, Fla. (M&M) -- I believe gold about to surge to $700 ... then $800 and potentially higher. Here are seven reasons why ...
1. China can't get enough gold
According to the China Gold Association, China's gold production hit 19.9 metric tonnes in January, up 25.7% from a year earlier. At this rate, China should produce 260 tonnes this year. And it's STILL not enough to meet Chinese demand - it falls about 100 tonnes short. And the gap may be even BIGGER! This is "The Year of the Golden Pig," in the Asian calendar, and many Chinese buy gold to celebrate. China's 2006 gold consumption grew by an amazing 17%, and the Shanghai Gold Exchange reports that gold trading volume 72.83% in January.
2. Two India gold ETFs are launching
The first gold ETF in India is Benchmark Mutual Fund's Gold BeES. It launched on February 15. The second gold ETF in India is rolling out now, launched by UTI Mutual Fund. The new ETF is called, naturally enough, UTI Gold Exchange Traded Fund. According to Rajesh Bhojani, President of Marketing for UTI Mutual Fund, about 30% of the gold market in India is investors. I wonder what the new gold ETF will do to that percentage?
3. Existing gold ETFs are pumping up demand
We already know what gold ETFs have done here in the U.S. When the StreetTRACKS Gold Shares gold ETF (GLD) started in November of 2004, it held about 100 tonnes of gold and gold traded at around $450 per ounce. Now, there are 476 tonnes and gold is trading around $650 per ounce. That's not a coincidence. The Gold Shares gold ETF and other gold ETFs around the world make it easier than ever for people to invest in gold. Why? Because there are several advantages of investing in GOLD ETFs:
* No hassles of safety
* No resale concerns
* Quality Assurance
* No making charges
* More tax efficient in absence of wealth tax and long-term capital gains tax
Despite the recent sell-off in markets of all types, the amount of gold held by the GLD barely budged (down 2.2% from its peak). I expect U.S. investors to start adding again, and that will drive prices even higher.
4. Investment demand is booming
Reuters reports that worldwide investment demand for gold should remain at historically high levels this year, with investors continuing to buy large volumes of gold in bullion, coin and jewelry. CPM's 2007 Gold Yearbook report predicted investors would likely add another 39.7 million ounces to their gold holdings in 2007, after investing 43.5 million ounces in 2006. I believe this estimate of demand is too conservative. See reasons 1 through 3 for why.
5. Central bank gold stockpiles have swooned to a 60-year low
The International Monetary Fund (IMF) reports that the amount of gold held by central banks and other government organizations declined for the eighth straight year in 2006. Bullion holdings were 867.6 million ounces last year, down 1.2% from 2005, the lowest since 1948, according to the World Gold Council.
The Russian Central Bank was the only one to make purchases last year, up 3.8% to 12.91 million ounces, according to the IMF. Speaking of China, it is still holding 19.29 million ounces in December -- unchanged since 2001. But here's some interesting news: China is setting up a managed fund to handle its more-than $1 trillion in currency reserves. This will be Asia's biggest government controlled fund. China has to do something -- 70% of its currency reserves are in the U.S. dollar and the greenback could get creamed as China's currency, the renminbi (or yuan) appreciates. China is already losing money on the deal, writing off $3.4 billion in exchange-rate losses in 2006.
In short, China needs to invest in something other than dollars. A smart move would be to buy more gold for its central bank reserves. Even a small move in this direction would send gold soaring.
What's more, central bank gold sales fell to 11.4 million ounces in 2006, down from 20.6 million ounces in 2005. If this trend continues, that will also boost the price.
6. Miners can't find new deposits fast enough
Analysis by Metals Economics Group shows exploration budgets increased to almost $7.13 billion in 2006 -- the fourth consecutive annual increase since the bottom of the exploration cycle in 2002 and the highest total since MEG began these reports in 1989. MEG analyzed budgets for 1,624 companies (using a $100, 000 cutoff), which MEG estimates covers about 95% of worldwide commercially oriented nonferrous expenditures. Adding in the other 5% of companies gives total expenditures for commercial nonferrous metals exploration of $7.5 billion. That blows past the previous high of $5.2 billion in 1997 to set a new pinnacle of global nonferrous exploration. So where is all this gold? Well, it takes time to bring new gold mines online ... and the big 'n' cheap-to-mine deposits have already been found. Meanwhile, production at existing but long-worked mines is grinding down. As a matter of fact ...
* South Africa's gold output fell nearly 8% in 2006 from 2005. It is now at its lowest level since 1922!
* U.S. gold output for last year declined slightly from 262 tonnes to 260 tonnes.
* Australian production fell 4.5% to 251 tonnes.
* Peruvian gold production fell to 203 tonnes from 207 tonnes.
* Russian gold output dropped to 152 tonnes from 156 tonnes
* Canada's gold production fell a whopping 11% to 104 tonnes.
Bottom line: Big gold producers are finding it tough to replace their reserves. That's why we saw huge mergers last year. Yamana merged with RNC Gold ... Glamis Gold bought Western Silver ... Goldcorp merged with Glamis ... Barrick bought Placer Dome. Heck, just look at mine supply. Despite the price of gold rising for years, supply from mines is actually going DOWN. Since mine supply doesn't cover demand, where does the rest come from? From scrap, central bank gold sales and stockpiles, all of which are being depleted. And that is a recipe for much higher prices.
7. Gold charts show opportunity
Take a look at a weekly chart of gold. You can see that gold is channeling higher. The rate of ascent is INCREASING. It is at the BOTTOM of the channel now. It appears that gold is presenting the best buying opportunity since January. The next big move will likely be over $700 per ounce. And if we have a breakout, all bets are off. Those are seven good reasons why I think gold will head higher. I could give you a lot more.
How to play the surge:
I prefer junior gold miners, but they can have wild ups and downs. There other ways to play this surge that are less cardiac-inducing. You can always buy the Street Tracks Gold (GLD) , which simply tracks the price of gold. For more leverage, consider a fund like U.S. Global Investors World Precious Minerals Fund (UNWPX) . Its holdings include Goldcorp (GG) , Northern Orion Resources( NTO) , Bolivar Gold and more. It has a total expense ratio of just 1.43%, which is lower than the industry average. And it returned 28% over the past year, beating the pants off its competition.
Dow Jones Newswires
04-01-072104ET
Copyright (c) 2007 Dow Jones & Company, Inc
Seven Reasons Why Gold Should Surge 4-1-07 9:04 PM EDT
JUPITER, Fla. (M&M) -- I believe gold about to surge to $700 ... then $800 and potentially higher. Here are seven reasons why ...
1. China can't get enough gold
According to the China Gold Association, China's gold production hit 19.9 metric tonnes in January, up 25.7% from a year earlier. At this rate, China should produce 260 tonnes this year. And it's STILL not enough to meet Chinese demand - it falls about 100 tonnes short. And the gap may be even BIGGER! This is "The Year of the Golden Pig," in the Asian calendar, and many Chinese buy gold to celebrate. China's 2006 gold consumption grew by an amazing 17%, and the Shanghai Gold Exchange reports that gold trading volume 72.83% in January.
2. Two India gold ETFs are launching
The first gold ETF in India is Benchmark Mutual Fund's Gold BeES. It launched on February 15. The second gold ETF in India is rolling out now, launched by UTI Mutual Fund. The new ETF is called, naturally enough, UTI Gold Exchange Traded Fund. According to Rajesh Bhojani, President of Marketing for UTI Mutual Fund, about 30% of the gold market in India is investors. I wonder what the new gold ETF will do to that percentage?
3. Existing gold ETFs are pumping up demand
We already know what gold ETFs have done here in the U.S. When the StreetTRACKS Gold Shares gold ETF (GLD) started in November of 2004, it held about 100 tonnes of gold and gold traded at around $450 per ounce. Now, there are 476 tonnes and gold is trading around $650 per ounce. That's not a coincidence. The Gold Shares gold ETF and other gold ETFs around the world make it easier than ever for people to invest in gold. Why? Because there are several advantages of investing in GOLD ETFs:
* No hassles of safety
* No resale concerns
* Quality Assurance
* No making charges
* More tax efficient in absence of wealth tax and long-term capital gains tax
Despite the recent sell-off in markets of all types, the amount of gold held by the GLD barely budged (down 2.2% from its peak). I expect U.S. investors to start adding again, and that will drive prices even higher.
4. Investment demand is booming
Reuters reports that worldwide investment demand for gold should remain at historically high levels this year, with investors continuing to buy large volumes of gold in bullion, coin and jewelry. CPM's 2007 Gold Yearbook report predicted investors would likely add another 39.7 million ounces to their gold holdings in 2007, after investing 43.5 million ounces in 2006. I believe this estimate of demand is too conservative. See reasons 1 through 3 for why.
5. Central bank gold stockpiles have swooned to a 60-year low
The International Monetary Fund (IMF) reports that the amount of gold held by central banks and other government organizations declined for the eighth straight year in 2006. Bullion holdings were 867.6 million ounces last year, down 1.2% from 2005, the lowest since 1948, according to the World Gold Council.
The Russian Central Bank was the only one to make purchases last year, up 3.8% to 12.91 million ounces, according to the IMF. Speaking of China, it is still holding 19.29 million ounces in December -- unchanged since 2001. But here's some interesting news: China is setting up a managed fund to handle its more-than $1 trillion in currency reserves. This will be Asia's biggest government controlled fund. China has to do something -- 70% of its currency reserves are in the U.S. dollar and the greenback could get creamed as China's currency, the renminbi (or yuan) appreciates. China is already losing money on the deal, writing off $3.4 billion in exchange-rate losses in 2006.
In short, China needs to invest in something other than dollars. A smart move would be to buy more gold for its central bank reserves. Even a small move in this direction would send gold soaring.
What's more, central bank gold sales fell to 11.4 million ounces in 2006, down from 20.6 million ounces in 2005. If this trend continues, that will also boost the price.
6. Miners can't find new deposits fast enough
Analysis by Metals Economics Group shows exploration budgets increased to almost $7.13 billion in 2006 -- the fourth consecutive annual increase since the bottom of the exploration cycle in 2002 and the highest total since MEG began these reports in 1989. MEG analyzed budgets for 1,624 companies (using a $100, 000 cutoff), which MEG estimates covers about 95% of worldwide commercially oriented nonferrous expenditures. Adding in the other 5% of companies gives total expenditures for commercial nonferrous metals exploration of $7.5 billion. That blows past the previous high of $5.2 billion in 1997 to set a new pinnacle of global nonferrous exploration. So where is all this gold? Well, it takes time to bring new gold mines online ... and the big 'n' cheap-to-mine deposits have already been found. Meanwhile, production at existing but long-worked mines is grinding down. As a matter of fact ...
* South Africa's gold output fell nearly 8% in 2006 from 2005. It is now at its lowest level since 1922!
* U.S. gold output for last year declined slightly from 262 tonnes to 260 tonnes.
* Australian production fell 4.5% to 251 tonnes.
* Peruvian gold production fell to 203 tonnes from 207 tonnes.
* Russian gold output dropped to 152 tonnes from 156 tonnes
* Canada's gold production fell a whopping 11% to 104 tonnes.
Bottom line: Big gold producers are finding it tough to replace their reserves. That's why we saw huge mergers last year. Yamana merged with RNC Gold ... Glamis Gold bought Western Silver ... Goldcorp merged with Glamis ... Barrick bought Placer Dome. Heck, just look at mine supply. Despite the price of gold rising for years, supply from mines is actually going DOWN. Since mine supply doesn't cover demand, where does the rest come from? From scrap, central bank gold sales and stockpiles, all of which are being depleted. And that is a recipe for much higher prices.
7. Gold charts show opportunity
Take a look at a weekly chart of gold. You can see that gold is channeling higher. The rate of ascent is INCREASING. It is at the BOTTOM of the channel now. It appears that gold is presenting the best buying opportunity since January. The next big move will likely be over $700 per ounce. And if we have a breakout, all bets are off. Those are seven good reasons why I think gold will head higher. I could give you a lot more.
How to play the surge:
I prefer junior gold miners, but they can have wild ups and downs. There other ways to play this surge that are less cardiac-inducing. You can always buy the Street Tracks Gold (GLD) , which simply tracks the price of gold. For more leverage, consider a fund like U.S. Global Investors World Precious Minerals Fund (UNWPX) . Its holdings include Goldcorp (GG) , Northern Orion Resources( NTO) , Bolivar Gold and more. It has a total expense ratio of just 1.43%, which is lower than the industry average. And it returned 28% over the past year, beating the pants off its competition.
Dow Jones Newswires
04-01-072104ET
Copyright (c) 2007 Dow Jones & Company, Inc
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