The Colbert Nation tuned in big time to say goodbye to "The Colbert Report."
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It’s only early September but the somewhat below normal temperatures makes it feel like autumn even though the official start is still a few weeks away. That cool crispness of the early morning brings back memories of heading off to school for another year. As I sit here thinking about the young men and women returning to a Ball State that is much different since my last class there I recall other changes.
In the mid-1980s well before most of today’s college students were born, I was a young stock broker working in a world most of them would find horrifying- no iPods, no cell phones, no texting(!), and almost no personal computers. We did have a computer or two around the office mostly for the accounting department. They weren’t an essential tool for me as they are today.
Somewhere back in that time a certain trend in the investment markets began. As the 80’s boom got rolling and the economy grew, interest rates started falling. While there have been ups and downs along the way the overall trend has been down for decades.
I laugh a little now recalling a conversation with the head of the firm I worked for back then and agreeing with him that an 8% long-term municipal bond rate was what seemed to be acceptable to most of our clients who wanted tax-free income. Anyone looking for even half that rate of interest today is going to be very disappointed.
Declining interest rates are a problem for people who depend on their savings to generate income for them as many of our clients do. The situation has never been worse than the last few years as our government has tried to revive the economy with policies that push rates down even more. The benchmark 10-year Treasury note recently hit an all-time low under 1.5% and that’s reflected in all interest bearing investments.
People who invested in 5-year bank certificates of deposit as recently as 2007 received 5% interest but now face a 70% reduction in income as those CDs mature. The rates being offered do not even make up for the reduction in the buying power of the dollar caused by inflation.
Another trend that represents a possible solution to this problem is the tendency of stock dividends to rise over time. The dividends paid by the stocks in the S&P 500 stock market index have more than tripled since 1988 and have increased or stayed the same in all but 19 out of the 98 quarters since then.
But isn’t there more risk to principal in stocks? Yes there is or at least there has been greater volatility. The S&P 500 has grown in value more than fivefold in the last 25 years but there have been and will be periods of decline. The last significant one was in 2008 and the index has recovered about 80% of that decline so far. Dividend income also fell in 2008 but surpassed its old high two years ago.
Of course not every stock in the S&P 500 is a dividend payer and not every one is an attractive investment. MutualWealth Management Group can select stocks appropriate for your needs and design a well-diversified, managed portfolio that may minimize volatility risk and maximize your income and growth potential. A total portfolio may also include some bonds which may further dampen volatility.
As the summer draws closer to an end, we start gearing up for all things Fall. This includes working with companies who offer Health Savings Accounts (HSAs) to their employees, reviewing retirement plans and investments and helping individuals prepare for the upcoming holiday season. One staple event for MutualBank this time of year is the beginning of our United Way campaign.
MutualBank is a pacesetter company, meaning we run our company campaign prior to the start of the formal United Way campaign. This year, we wanted to do something a little different with our campaign kickoff meeting.
In order to make it fun and raise extra money for United Way, we thought of a contest. We selected several fun costumes and thought about who our employees might be willing to pay money to see wearing them. A couple of executives came to mind and we put the plan into action. Employees voted on the costume by paying $1.00 per vote. At the meeting, we provided a photo opportunity where employees could pay $1.00 to have their photo taken with our executives.
Fortunately, Pat Botts, President, and Lynda Stoner, Vice President and Regional Manager, were great sports! They are willing to do whatever it takes to raise money for United Way. Clearly, you can see that based on their costume. The winning costumes were "Thing 1" and "Thing 2" from The Cat in the Hat.
And who says bankers can't be fun?
Above: (L to R) Lynda Stoner, Pat Botts
Below: (L to R) Lynda Stoner, Sue Godfrey-United Way,
Michael Brown-United Way, Pat Botts
I dread the beginning of school, because I know that means I start hearing the statement, “I need money for…………….” On a weekly basis there is something that my children need (or think they need) money to buy or do something at school. Usually I grumble a little bit and then one of them will say, “Just get the money at the bank.” Convenient that I work at a bank and they have all the money I need, or so my children think.
When do we decide to teach our children about money, hopefully before it is too late. When I started working at 16, I lived at home and had very few expenses. So every week I cashed my check and had my weekly spending money. Like most youngsters, cash in the pocket meant I must spend it as soon as possible. I know that if I would have saved ˝ of my paycheck from ages 16 to 22, I would have had a pretty decent savings to either buy a car, down payment on a house, pay down school debt, etc.
There will always be a debate on whether to give children an allowance or pay for chores and while we do not currently do either at home, maybe we should. How will our children learn how to save, to be charitable, or make financial decisions if we do not train or equip them? One of the reasons we are in the economic crisis today is that we all were spending more than we made. Spending more than we have is definitely one trait that we must not pass down to our children.
The reality is, waiting until our children get a job at 16, 18, 22 or at whatever age, may not be the right answer. By then, it might just be too late. We all must learn that we must budget and make decisions on each of our priorities. While we expect our children to learn a lot at school, we must also make the decision to teach our children along side with the schools to make our communities better.