Where is My Money?

It seems there are always stories in the news about the latest scheme that has defrauded many people. Seeking a big return, people give their hard-earned dollars to criminals. The big return is never realized. All the money is lost.

With all the bad guys in our industry, I can understand how someone would look at Parsec with a skeptical eye. I am not going to discuss our performance returns or market strategies in this post. I want to discuss something a little more basic that everyone should consider when interviewing a potential investment advisor: “Where is my money?”

In some cases, the victim gives the criminal money to buy investments. In turn, the fraudsters provide the victim with a statement showing assets purchased with that money. It may contain the names of easily recognizable companies. Without an actual stock certificate behind that piece of paper, the statement is worthless.

At Parsec, we do not take custody of your assets. The assets are held at an independent broker, in your name. We recommend Charles Schwab, Fidelity, and T.D. Ameritrade, all brokers whose names you probably recognize. You will receive a quarterly statement from us that contains performance statistics and other information. You also receive a monthly statement from the independent broker so you know exactly what you own in each investment account.

Furthermore, we do not have the authority to move those assets to an unlike-registered account without your consent. You must sign a letter or form to authorize the movement of securities to unlike-registered accounts, which adds another layer of security.

When assets are held at a broker and registered to you, an independent source tells you what you own. There are no “phantom” assets. Also, giving someone the ability to move assets to accounts not registered in your name can be dangerous if in the wrong hands.

When you select an investment advisor, I hope you will ask this very basic question. You worked hard to accumulate what you have. Don’t let an unscrupulous person take it away from you.

Cristy Freeman, AAMS
Senior Operations Associate

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The Bucket List

Several years ago, I read a self-help book that promised to help me manage money better.  I do not remember much about the book, not even the title.  I do remember one exercise that was very useful.

I was supposed to create what is now commonly known as a “bucket list.”  I should list all of the things I wanted to do during my lifetime.  It did not matter how long the list was.  When finished with the list, I should then review it and think about how a change in money management practices could help me achieve those goals.  That would help me to set a budget, make more responsible spending decisions, et cetera.  After all, you need money to pay for most of the things you want to do in life.

I found the exercise to be very enlightening.  To my surprise, I saw that most of the items related to travel.  I realized that I needed to do a better job at maintaining an emergency fund and set a formal budget for travel.  I had been tapping the emergency fund whenever I wanted to visit some place new, which is a bad idea.  I setup a direct debit from my checking to my savings account so that savings could be automatic.  This act created a formal budget for both emergency savings and travel.

Today’s list is very different.  My revised list includes completing several projects around the house, paying off my mortgage a few years early, donating more money to my favorite charity, buying a nice road bike, and squirreling away more money for unexpected expenses and retirement.  Sure, there are a few personal goals that are not tied to money; I am not completely shallow.  In balance, the list is much more practical than years ago, when I wanted to see the world.

I still do not want to wake up one day at age 80 and realize all I ever did was work, work, work.  The list can help me stay focused on important things and achieve some of my goals.  Hopefully, I can strike the right balance between the practical (saving for retirement) and the fun (buying that road bike).  I encourage you to take some time to create your own list.

Then, please share your list with your financial advisor.  Goals change over time, so he or she should be aware of what you want from life.  Together, you can develop a financial plan to direct your savings in a manner that will bring you closer to achieving your goals.

Cristy Freeman, AAMS
Senior Operations Associate

 

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An Unexpected Windfall

At the start of every new year people make resolutions to lose weight, alter bad habits, or save more money.  While I cannot help you with some of those issues, I can offer a little advice on saving money.

For 2011, the IRS has reduced the employee-paid portion of the Social Security tax from 6.2 to 4.2 percent.  While that may not seem like a large amount of money on a per-paycheck basis, it can add up to a nice sum for the year.  If you earn the maximum Social Security wage limit of $106,800, 2 percent represents $2,136.

Before you grow accustomed to having a few extra dollars in your paycheck, I recommend you implement a plan now.  Here are a few suggestions:

  • Deposit the funds into your emergency savings account.  Everyone needs an emergency savings account.  Opinions vary about the amount.  Some suggest 3 months’ worth of routine expenses.  Other say 6 to 9 months are needed.  
  • If your emergency savings account is well funded, apply the dollars to debt.  You could apply the extra money toward the smallest debt, if you want to experience the rush of the early payoff.  However, you will be financially better off if you to apply it to the account with the highest interest rate.  Reducing debt levels is always a great idea.
  • Fund a Roth IRA if you qualify.  If not, apply the savings to another retirement vehicle, such as your company’s 401(k) or a traditional IRA account.

I recommend that you use automatic bank drafts for any of the above options.  It is a simple way to transfer the funds from your account before you can spend them.  Parsec can assist you with setting up an automatic transfer into your brokerage accounts.

I hope you have a safe, healthy new year and wish you the best of luck in accomplishing your goals!

Cristy Freeman, AAMS
Senior Operations Associate

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How to Save Millions in Two Seconds!

I love headlines like that. Tightening our belts is the topic du jour during this economic disaster. While the leading indicators show an improvement, I am sure you know people who are still unemployed, have lost their homes, or are in serious financial straits. We are hardly out of the woods yet. So, I have compiled a list of my favorite tips for saving money:

Protect your credit score. Why?

o You qualify for better interest rates when your credit score is good, which saves you money in the long run.
o Your credit score impacts your property insurance rates.
o A prospective employer may want to check your credit. A bad score could hurt your chances, depending upon the employer.

Everyone knows you should get the free, annual credit report offered through AnnualCreditReport.com. Identity theft is not the only danger, though. Excessive debt and late payments or defaults can damage your score. All your sacrifices and stringent budgeting can be undone by a lousy credit score.

Be thoughtful about all purchases, not just the big ones. I am not talking about your daily Starbucks habit, although that can add up too. A lot of purchases are driven by a perceived need, rather than an actual need.

Don’t fall victim to the “it’s on sale” syndrome. You are not saving money if you really had no intention of buying the item in the first place.

The Internet is a fabulous tool. You can comparison shop without having to leave the comfort of your home.

Tip if you are considering an appliance purchase: Go to energystar.gov. Look for the Energy Star Appliance Rebate Program button. The “cash for clunkers” program is being offered for certain appliances this year. Each state has a different budget and rollout date. Our dishwasher died here at Parsec about three weeks ago. We waited for this program to start in North Carolina and saved over $100.

Ask about discounts. Some people will give you a discount, but you have to ask. My vet will match heartworm medicine prices offered by a national catalog retailer. I saved about $50.

Yes, it takes extra work to stretch your dollar these days. Hopefully, these tips can assist you in that task.

Cristy Freeman, AAMS
Senior Operations Associate

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