REGINALD ODUNZE.COM: 2016-06-05

Thursday 9 June 2016

Study reveals how America’s wealthiest — and poorest — spend their money By Rayhanul Ibrahim

Microsoft co-founder Bill Gates, who certainly falls into the top 20% has spoken out about income inequality.

The notion of growing income inequality in the US has dominated the Democratic primary, and a new study provides insight into spending patterns of Americans who fall into the extreme ends of the wealth spectrum.

That study from the JPMorgan Chase & Co. Institute found the bottom 20% of America’s earners end up allocating a bigger portion of their spending on one key necessity: fuel.

While the top 20% of earners had total expenditures of just 3.5% on fuel, the poorest fifth of Americans end up spending 7.2% on fuel. That difference likely stems from the fact that everyone who drives “must use a fixed quantity of gas to travel to work,” as the JPMorgan study noted. In other words, poor people can’t easily cut back on gasoline.

As you can see from this chart, though, the wealthy spend a bigger share of their total outlay on so-called durable goods — such as cars and appliances. That’s because they have more discretionary income remaining after covering necessary expenses such as gas and food, which allows them to spend more on their wants, such as buying luxury cars instead of a Ford.

To draw these conclusions about how the wealthy spend their money, JPMorgan analyzed 15 billion different anonymized credit/debit card transactions performed by 50 million different people. Then, JPMorgan’s researchers mapped each transaction to the appropriate income quintile and spending category.

As you can see from the image below, on an absolute basis, America’s wealthiest 20% spend roughly 28% more on durable goods than the bottom quintile. But the consumption gap narrows in other categories, including nondurable goods. Those goods largely consist of basic necessities, like groceries and clothing, that the poor can’t simply forgo.

The rich do buy more expensive groceries — shopping at places like Whole Foods instead of Walmart — but there’s a limit to how much more expensive these necessities can get. Interestingly, the amount the top and bottom quintiles spend on fuel is nearly identical, which harkens back to the idea that everyone driving has to buy a fixed quantity of gas to commute, rich or poor.

This study suggests that it could be important to track so-called spending inequality along with income inequality. If the bottom 20% starts to earn more money, that could mean little to them if prices of things like groceries and gasoline spike, as the proportion of spending on necessities, such as fuel and non durable goods may remain the same, or increase. As the study noted, “Inequality is most concerning when it limits the consumption of basic needs.”

Culled from Yahoo

Wednesday 8 June 2016

New startup makes stocks as easy to buy as gift cards-By Mandi Woodruff

From medical billing and investing to consumer banking and retirement saving, scrappy startups have managed flip just about every traditional financial service on its head. The latest innovation out of Silicon Valley is a company called SparkGift, which aims to make it as easy to gift someone shares of Apple or Tesla as it is to pick up a gift card.

The company, founded by Peggy Mangot, began beta testing in March. Mangot, a former Visa product manager, spent four years at Google working primarily on Google Wallet, the company’s mobile payments app.
Developing an easy-to-use platform for stock gifting was born out of a personal frustration, Mangot says: “We have all these occasions where we have this opportunity to give gifts to family and friends, and the only real options are things or gift cards. I’d rather give an investment, but it’s almost impossible to do easily.”

Source: SparkGift

SparkGift allows gift givers to buy fractional shares for as little as $20 (the typical gift amount so far has been between $75 and $90, Mangot says). Fractional shares are pretty much what they sound like — less than one full share of a company. Rather than purchasing one whole share of Apple for $110, for example, you could spend $20 and buy roughly one-fifth of a share, something not all brokerages allow investors to do. The company gives gift-givers access to over 6,000 stocks and index funds. They hope to start offering access to 529 savings plans in the future. Over time, family and friends can easily contribute funds to a kid’s SparkGift account through a registry parents set up on the site, which lets other potential gift-givers know which stocks or funds their child prefers.
In its current form, the site works best for those who know which stock or fund they want to gift. You can select from the top six most popular stocks and index funds (Tesla (TSLA) tops the list of stocks; index fund investors favor Vanguard’s Total Market Index Fund (VTSMX), and search by name. But you’ll have to do any stock performance comparison using other tools. Mangot says they plan to roll out more investor education tools in the future but the mission now is to keep things as stripped down and simplified as possible.
“This could be a cool tool to make investing less scary,” she says. “The only way to really learn is to actually participate. We provide a way to do that with a small amount of money initially.”
More than half of stocks purchased through the site have been given to minors, 30% of whom are newborns (0-3 months). Depending on the state, minors can assume control over their accounts at age 18 or 21. “Over time, we want to build a relationship with this customer… and potentially we will either be their investment advisor or we will help them find other financial services,” Mangot says.
How it works:
Gift-givers pick the investment they want to buy and how much they want to purchase. The cash is delivered via a festive e-card to the recipient, who is then prompted to open an account with SparkGift (you select either an individual account or a custodial account, which is owned by a minor but managed by a parent). The cash is essentially a gift certificate at this point. In order to purchase the stock with the funds, the recipient has to open an account through SparkGift with online brokerage firm Folio Institutional, which powers SparkGift’s trades. All of this happens through SparkGift’s friendly interface, which reduces the intimidation factor.
What it costs:
There are fees involved, a flat rate of $2.95 per transaction, plus 3% of each amount gifted (these apply to the gift-giver only, not the recipient). However, the company is offering to waive the 3% fee through the end of 2015. By contrast, many discount brokerages require a minimum balance of $500 and charge between $4.95 to $9.99 per trade.
Teaching kids about investing
Of course, you don't have to purchase stocks for a kid to teach them about investing. Sophia Bera, certified financial planner and founder of Gen Y Planning, says parents shouldn’t focus on teaching their kids how to pick individual stocks. “I think it's more important to help your kids decide what type of account to put their money rather than which investments to put it in,” such as a Roth IRA or a 529 college savings plan, she says. “However, if as the parent you have investments, then you might want to share that with them. Talk about how the stock market goes up and down. Show them your investment portfolio.”
That’s how David Bianchi, author of “Blue Chip Kids: What Every Child and Parent Should Know About Money, Investing, and the Stock Market,” started easing his son into the market. His son was 12 when Bianchi set up an eTrade account, deposited $10,000 and let him choose a few stocks to invest in (McDonalds, Coca-Cola and Disney were his picks). In Bianchi’s case, his son was a little too enthusiastic about his new hobby. He began sneaking peeks at his account so often during class that Bianchi was called in for a meeting with school administrators. Bianchi eventually set up an investing club at his son’s school where members learn basic investing strategies but don’t trade with real money.
You certainly don’t want to teach your child how to day trade. “But the biggest mistake parents make is they don't think kids will be interested because they’re young or they’re not smart enough to understand it. Kids will be interested if you present it in a way that’s fun,” Bianchi says.
SparkGift’s biggest challenge so far has been to make sure parents take the initiative to accept the stock gift on their child’s behalf and set up an account. If the gift isn’t accepted, the money doesn’t get invested. “It’s very easy to do, but sometimes people say ‘oh, that’s so great,’ and then they get busy and forget,” Mangot says.

Bera recommends a classic Roth IRA or 529 plan to parents looking to get their children into the market. There are pros and cons to each. You can open a custodial Roth IRA, which a parent controls, but the child has to be earning an income of some kind and minimum deposits start around $500. A 529 plan allows teens to withdraw funds tax-free for college expenses. Friends and family can make direct contributions to these accounts by coordinating with the child’s parents, or through tools like GradSave or Upromise.

“Some parents even offer to match the amount of money that their teens put away for the future,” Bera says. “I think this is a great incentive to encourage kids and teens to set aside money for the future."

Culled from yahoo

Tuesday 7 June 2016

Two killed as car bomb hits police bus in Istanbul: TV

A destroyed van is pictured near a Turkish police bus which was targeted in a bomb attack in a central …

ISTANBUL (Reuters) - A car bomb exploded in central Istanbul during the morning rush hour on Tuesday, killing two people, wounding others and wrecking a passing police bus near the main tourism district, news channel Haberturk reported.
A parked car packed with explosives was detonated by remote control as the police bus drove by, CNN Turk said.
It broadcast cell-phone footage of a blackened and mangled vehicle on the street as vendors peered out from a souvenir shop in a district near Istanbul university.
There was no immediate claim of responsibility. But Kurdish militants, Islamic State and radical leftists have all staged attacks in Turkey recently.
A Reuters witness saw what appeared to be two police vehicles hit, one of them on its side next to the road. Gunshots were heard in the area after the blast, state-run Anadolu Agency reported.
Broadcasters showed armed police in the street near to the site where the blast struck. Haberturk said eight people were wounded.
A spokesman at police headquarters in Istanbul was unable to provide information on the incident when reached by phone.
Turkey has suffered a spate of bombings this year, including two suicide attacks in tourist areas of Istanbul blamed on Islamic State and two car bombings in the capital, Ankara, which were claimed by a Kurdish militant group.
(Additional reporting by Osman Orsal; Writing by Daren Butler; Editing by Ayla Jean Yackley, David Dolan and Andrew Heavens)

Culled from Reuters

Monday 6 June 2016

How One NASCAR Driver Plans to Avoid Going Broke in Retirement - Sheiresa Ngo

Aric Almirola with his son, Alex | Matt Sullivan/Getty Images

Stories hit the news every day about celebrities who made a fortune and then squandered it all. One sports star who has made a decision not to let this become his story is NASCAR driver Aric Almirola. The Cheat Sheet chatted with Almirola to learn more about his quest for financial security.
The Cheat Sheet: What prompted you to start learning about personal finance?
Aric Almirola: I started learning about personal finance at a really young age. My grandfather took us racing, and we left our race shop with a budgeted amount of cash. That was the cash we had to put gas in the truck that pulled the trailer, buy our pit passes, get food from the concession stands, and all of the things we needed when we were out racing. So I learned about budgeting and personal finance really early on in life. And, with my own personal finance, I got a crash course in finance as soon as I left college. Once I told my parents I was leaving college to follow my dream of becoming a professional race car driver, they said that if I wanted to move away from home and quit school then I was on my own. I had to figure out how to start paying for my own truck payment, insurance bills, cell phone bills, rent for an apartment, and everything that you need to survive on your own. So that forced me into learning how to manage my personal finances.
CS: What are some things you are doing to prepare your finances for retirement and life after NASCAR?
AA: The number one thing I’m doing to prepare for retirement is saving. I’m very blessed and fortunate to have a great career and make good money. To be able to do what I love is obviously a blessing, but at the same time, I have to live well within my means and save for the future. I think that’s important regardless if you’re a NASCAR driver or if you’re an everyday business man. You can’t spend more than you make because it just doesn’t work. I have the luxury of being in a position that allows me to save money, and because I do that, it’s helping me prepare for retirement.
Another important thing I’ve done to prepare for retirement is have a fiduciary adviser help me with my investments. There’s a lot of opportunity out there to invest your money, but there’s also a lot of vehicles you can use to invest your money that will also cost you money. If you’re an average investor like me and you’re not aware of what is out there and all of the hidden fees, then it can cost you a lot of money in the long run. I think it’s very important to hire a fiduciary adviser you can trust. The purpose of a fiduciary adviser is to have someone in your corner that will help you get the right unsolicited investments that they will not be getting kickbacks from or reaping the benefits of a fee structure. That’s what I’ve done and it’s been an important step in the process for me.
You also need to take an interest in your finances. I’ve taken a very aggressive interest in my personal finances and my retirement planning because nobody will have my best interest at heart more than I will for myself. It can be very confusing and challenging to understand at times, but I’m continuously digging deeper into the financial world to educate myself.
CS: What is your opinion of athletes who have gone broke after retirement? Are you ever afraid that could happen to you?
AA: I think that’s a shame. I feel like any professional athlete is very similar to a lottery winner. There are so many people out there that are good at baseball but will never get to play in Major League Baseball. There are a lot people that are great at football but will never be professional because they weren’t on the right team in high school or college and didn’t get noticed. And it’s the same for a race car driver. I raced against thousands of kids growing up that I know had every bit as much talent as I did, and some had even more. But they just didn’t get the same lucky breaks that I did to make it to where I am today. So I really view making it to the professional level of any sport like being a lottery winner.
The pay comes along with both. It’s such a shame to see people get that money and blow it all. They don’t have any sort of reality or sense that the money will stop one day. The flow of income won’t always be there. There’s a small window of opportunity for professional athletes to make as much money as they can for as long as they can. The best professional athletes will play for 10 or 15 years. Then at the end of that they are a middle-aged person that has to figure out how to live until they’re 90 years old. If you’ve blown it buying expensive houses, cars, jewelry and all of the same stuff for your friends, then it’s really hard to plan for life after sports.
CS: What lessons are you teaching your children about money?
AA: Something that I’ve really been on our kids about is to not be entitled. That’s the biggest thing for me. Money is out there. Money is out there to be had and to be made, but you have to work for it. People aren’t just sitting around waiting to throw money at you. My son Alex is three years old and my daughter Abby is two years old, so they’re really in the infancy of learning about money. But, one thing that my wife, Janice, and I have made them do is pick up their toys in the playroom and put them all away. We ask them to help us when we have to take the garbage out. We ask them to walk out to the street with us to help us get the mail.
We do all this to help them understand the value of work because at the end of the day we give them a coin or two to put into a jar that we keep in our kitchen. They get to watch that jar fill up. It’s their piggy bank, so to speak. They don’t care much about the denomination right now. Two pennies are currently better than one quarter. They are so young that they don’t understand the denomination part, but they do understand that if they help clean up and do work that they’ll get money for that. So right now we’re mainly focusing on helping them learn that if they work, help and pitch in, they’ll earn their money.

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