Financial Blog

Smart moves for college graduates- part II

Last week, I outlined six smart moves including the concept of avoiding bad debt. If you missed it, visit Stewarts Commentary under the Resource Center at Here are the remaining six smart moves:

  1. Avoid bad debt around owning a car. I once had someone tell me, I thought you always had a car payment! He was dead serious, and he was also broke! A car, by definition, is a depreciating asset. In fact, when you drive a new car off the lot it depreciates in value about 10% that very day! Most people arrive at the dealership, find their dream car and ask the salesperson, How much are my payments? Youre asking the wrong question of the wrong person! Dealers have been asked this question so many times that they figured out the perfect system to sell more cars and more expensive cars. To get payments as low as possible, theyll now finance a vehicle over as long as eighty-four months! This is a terrible financial strategy for you. Heres a better approach: If you dont have cash to pay for a car, decide on how much car you can afford based on payments over twenty-four months. In all likelihood, this will be a used car. Once you pay your car off, continue to make payments but now do it in an investment account dedicated as a new car fund. Continue to drive your existing car and fund your next car account until you can pay cash for your next car and then keep this cycle going forever. That way you have your money working for you rather than for someone else.
  2. Embrace the concept of Good Debt. Good debt is the use of financing to buy things that you expect to appreciate in value. The best example is buying a home. Other examples include borrowing for investing such as buying rental properties or to start a business. Even borrowing to advance your education can be a good use of debt.
  3. Protect yourself from adversity. Great health may be your greatest asset. Theres an ancient proverb that goes something like this, A man with good health is a man of a thousand dreams. A man with poor health is a man but with one dream. Like consistent investing produces wealth, a consistent program of exercise and good nutrition yields good health. This should be one of your top priorities. Believe me; its easy to allow other things to seem more important. In addition, build cash reserves in a money market account equal to at least three to six months of your paycheck as a buffer against the unexpected expenses. Also, make sure that you cover the insurance basics including owning disability income insurance, health insurance, auto insurance and life insurance if you have family dependents.
  4. Prepare every day for retirement. Ninety-seven percent of Americans arrive at retirement pretty close to dead broke. The reason? They felt they could worry about that next year...only next year never came. Most companies offer some type of retirement plan that you can participate in and some also offer matching contributions. But whether your company does or doesnt have a plan you should set one up. Your best first choice may be a Roth IRA. To learn more, visit and type Roth IRA into their search engine.
  5. Cut the parental cord. I just read an article that stated that 30% of millennials live with their parents! Reflecting on my thirty-plus years as a financial advisor, Ive noticed that the most successful children have been those who had to make it on their own. More so than at any other time, I see so many helicopter parents who insist on helping run their childrens lives well into young adulthood. Yes, its time to leave the safety of the nest, spread your wings and fly! You can do this and youll be proud of yourself when you succeed. So will your parents!
  6. Always be learning. Just when you thought you were finished with education, Im telling you that you are just getting started. There is no greater investment you can make than in yourself. A primary life goal should be to be an insatiable learner. Identify successful people in your chosen field and model what they do. In fact see if they will act as a mentor to you. If you ask, youll find most successful people are very willing to offer periodic guidance.

Realize a college graduate, the only limitations you have are the ones that you place on yourself. Create a vision of what you would like to accomplish; develop a written plan; be prepared to correct and continue along the way; and focus on continuous improvement. There is nothing you cannot achieve!

Crop Insurance Basics: Moral Hazard

Editors Note:

The article below comes from the National Crop Insurance Services newsletter, Whats Cropping Up?

The commentary offers an interesting perspective on what crop insurance does for Americas farms. It also explains that farmers contribute a substantial amount of their own money to protect their crops.

Over the past few years, crop insurance coverage has become an even more important part of a farmers risk management strategy. Without adequate coverage in the drought years of 2011 and 2012 and into the following years with drought, flooding, hail and cold damage, many Southwest producers would not have survived. Now, with a farm program that depends mostly on crop insurance for producers safety net, adequate coverage is essential. RS

Moral hazard is a phrase commonly used in the business community that simply means people act or perform differently when they are fully insulated from risk. An entry on the topic in explained it like this:

We encounter moral hazard every day tenured professors becoming indifferent lecturers, people with theft insurance being less vigilant about where they park, salaried salespeople taking long breaks, and so on...

The idea of a corporation being too big or too important to fail also represents a moral hazard. If the public or management of a corporation believes that the company will receive a financial bailout to keep it going, then the management may take more risks in pursuit of profit.

The term frequently surfaced during the Great Recession, with the Federal Reserve Chairman even noting, As we try to make the financial system safer, we must inevitably confront the problem of moral hazard.

How Travel Insurance Saved My Life

I was picking up a fever--no doubt about it. I woke drenched in sweat, nauseous and confused. Everyone else in Saigon was celebrating Halloween as I lay marooned on my bed with a climbing temperature and an itch so bad I wanted to tear the skin from my body. I was too faint to stand. A trip to the hospital proved useless. I was injected with a yellow-y liquid to stop the itching, which made me tired and dizzy. It helped temporarily, but when I got home, the itching started up again. Scratching, showering, skin salve--everything and anything I tried just aggravated it. I returned to the hospital the next day and was injected with the same liquid. The doctor casually told me I was allergic to something, hazelnuts or tomatoes, he suggested--hardly staples in Vietnam. I was frustrated and desperate.

I'd been living in Saigon for a few months, and had travel insurance to cover medical emergencies. But, too drained to figure out exactly what my policy covered, much less in a foreign language, I paid cash. After yet another trip to the hospital, it was clear that I wasn't getting better, though, and I became unsure how many more hospital visits I could afford at $100 a pop. I did what any twentysomething would do: I called my dad. Previously unaware of my severe condition, he immediately got on the phone with the travel insurance company. A few hours later, I got a call from a nice woman at Marsh, based in South Africa (where I am originally from). The good news after loads of bad news: I was fully covered by my plan. She was genuinely concerned and got straight into the specifics: What were my symptoms? How long had I been experiencing them? What were they testing me for? Many of her questions, the hospital staff hadn#39;t thought to ask. Finally, in a time and a place where I couldn't help myself, someone could help me.

When I returned to the hospital the next day, I was given a new doctor. Clearly, the travel insurance woman had made a call. The new doctor immediately tested me for dengue fever, a mosquito-transmitted disease that, left untreated, has a mortality rate of up to 50 percent. The results came back positive. There I was, showing all the symptoms for one of the most prevalent and deadly mosquito-borne viruses in the country--for almost a week, no less--and no one had even thought to test me for it.

She informed me that the dengue fever was on the on the verge of hemorrhagic dengue--the most severe form. I knew it could be fatal.

The dengue fever, which has no cure, continued to worsen. The medication I was finally given helped some of the side effects, but I was so fatigued that even climbing a few stairs was challenging and the itching would come in gigantic waves. In an effort to stop myself from scratching, I'd jolt and jig my body in weird lurches, a movement my housemates coined the 'dengue dance.'  Then, more bad news: The insurance representative, who had been following my case, called to say that my platelet count had dropped dangerously low. In all honesty, I didn't know what a platelet count was. But when she informed me that the dengue fever was on the verge of hemorrhagic dengue--the most severe form of the virus--I knew it could be fatal.

The next step was to fly me out of the country for a blood transfusion, but there are serious risks involved when flying with dengue fever, so she decided to wait a few days and see if my condition worsened. It was a tense period of waiting and testing. But eventually, my platelet count plateaued, and then began to to climb. It was only the beginning of a very long road to recovery, but I was finally out of the stagnant water. Marsh reimbursed me for the hospital visits I had initially paid for in cash and I never saw the final hospital bill. Irrelevant of how much my treatment cost, monitoring dengue fever in the beginning is absolutely critical and, had the insurance rep not taken control of the situation, I don't know which way this story would have gone. 

Getting dengue fever a second time would be even more dangerous, and should I contract it again, travel insurance could save my life. It can be difficult to understand the travel and health insurance landscape. A survey done by the travel insurance website InsureMyTrip found that "one in four Americans are unsure whether their domestic health insurance plan would cover any doctor or hospital visits while traveling outside the country. At a time when the Zika virus is an ever-growing threat, and malaria, dengue fever, and other diseases are still present, travel insurance is crucial. Here, two travel insurance experts give advice on how to navigate travel insurance basics. 

Domestic health insurance doesn#39;t ensure coverage worldwide

There can be huge gaps with domestic health insurance plans when traveling abroad. "Regardless of health insurance coverage, many doctors and hospitals outside of the US will require full payment in advance of treatment," says Daniel Durazo, director of communications at Allianz Global Assistance USA. Travel insurers have access to services you won't gain with domestic insurance. "Travel insurers pre-screen doctors and hospitals around the world, have translators on staff to speak with foreign medical providers on your behalf, provide prescription medication assistance, and have 24-hour nurse-staffed help lines. It is a level of care completely different from what you'd get with your domestic health insurance provider," says Jim Grace, CEO of InsureMyTrip.

Start with a Reputable Provider

You don#39;t want to find yourself arguing with your travel insurer from some far-flung part of the world, so make sure you select a company you can trust. "The US Travel Insurance Association maintains a list of members in good standing on its website," says Durazo. It's also important to find an insurer with a global presence. "Oftentimes, a traveler will purchase a well-advertised, low-priced travel insurance plan offered by a cruise line or tour company, but it could be missing some key benefits. For example, it may not include medical coverage or it may only provide travel vouchers and not cash reimbursement, says Grace.

Consider Getting Insurance Even If You#39;re Not Going Somewhere Exotic

Just because you're heading to London and aren#39;t at risk of contracting a rare Amazonian disease doesn't mean you should skip the travel insurance. "Regardless of where you may be headed, illnesses and accidents can happen anywhere. [The right travel insurance plan] will cover the cost of canceling your trip for a reason covered by the policy and also provide coverage for for travel delays, baggage loss, and more," says Durazo. "Each country has its own specific risks," says Grace. Recently, InsureMyTrip reported a surge in calls following the terrorist attacks in Brussels, "mostly from travelers who were traveling to Europe and seeking coverage," Grace explains. 

Read the Fine Print

When choosing a plan, it#39;s important to know exactly what#39;s covered. "Most policies also come with a #39;free look#39; period (typically 10 days) during which you can review your policy. If you decide it doesn't meet your needs, you can cancel it for a full refund," says Durazo. If you're not sure which policy to take out, a comprehensive travel insurance policy is a good option. Grace notes that in 2015, "over 75 percent of InsureMyTrip customers purchased a comprehensive travel insurance policy, which offers the most protection for travelers. It provides a variety of benefits, including trip cancellation and emergency medical coverage." It's also important to hold onto any documents or receipts if you run into an emergency while traveling. "The top reason a claim is denied is due to lack of proper paperwork. Saving receipts and getting copies of medical/police records is important," says Grace.

Insurance Basics for Your Business

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