Alpha Advisors

How to Make $787 in 15 Minutes…Legally

Wed, 10 Aug 2011 12:29:00 -0400

The other day I stumbled upon something that saved me a lot of money, and while I hope you never need to use this tip, I am sharing it with you in case it can help you or someone you know.

Some of you know I had a pretty serious “medical incident” occur in June (I am fine now, thanks!). I was recently working through the medical bills from my little one-week vacation at the local hospital. The largest bill was from the hospital. I remembered from previous experience that they had offered a 10% “prompt pay discount” if you pay within 30 days of the bill. I called to see if this was still available, and they confirmed, so I paid. $400 saved.

Then I called the next largest bill and stated “I am working through my medical bills, trying to decide which ones to pay this month. The hospital just gave me a 10% discount for paying quickly – can you offer that too?” The lady with whom I was speaking put me on hold and asked her boss, then came back and offered me a 25% discount. Yes, more than I asked for. Tough negotiator, you’ve got yourself a deal. $212 saved.

The group with the next largest bill, without hesitating, offered me a 25% discount right away. Boom! $175 saved. There you go - three calls, 15 minutes, $787 saved.

A few providers I called did not offer a discount – generally these were the occasions where I was talking to an outsourced billing processor rather than the accounting department of the actual provider.

This is an “unadvertised sale” that is widely available, but I’d bet most people don’t know to ask for it. These opportunities were not offered on the invoices – I had to call and ask for it. So, spread the word – if you are going to pay your medical bills on time anyway, make sure you ask for a discount.

Dealing with a Devalued Dollar

Thu, 11 Nov 2010 14:25:00 -0500

We were recently asked by a client about the potential for significant devaluation of the U.S. dollar in the near future, and how we are approaching this issue. This topic has been in the headlines a lot recently, so I thought the response was worth sharing with others who might have similar questions.

As the U.S. economy has become increasingly intertwined with the rest of the world, currency exchange rates impact us as producers, consumers and investors. A weaker dollar can be “inflationary” by making the items that we import more costly and by making it more expensive to travel abroad. On the other hand, it can also improve the competitiveness of our economy by making our exports less expensive for other countries.

Investors in foreign stocks and bonds benefit from a weakening dollar as it allows returns denominated in foreign currencies to be exchanged back into more dollars. Likewise, the large American corporations in which we invest can benefit from a falling dollar when converting foreign income back to dollars. The net impact to any specific company or individual is not as simple as declaring that a weaker dollar is bad or good. And despite headlines that would lead one to believe that a decline in the dollar is inevitable and is bad, the future remains difficult to predict.

So how do we position our clients’ portfolios in light of this ambiguity? First of all, we do not attempt to make short-term predictions about any market, including currencies. Our investment approach is driven by a longer-term perspective. If the U.S. continues to follow policies that are detrimental to the long-term health of the economy, we would expect to see a gradual and continual decline of the dollar versus the currencies of nations whose governments were making better decisions.

Given the long-term expectation of a weaker dollar, one must decide (1) which alternative currencies to hold, and (2) how to gain exposure to those currencies.

Currencies, historically, have been one of the most volatile and unpredictable instruments. Consider that as recently as early this year many experts were predicting that the dollar was headed toward parity with the Euro. In a dynamic world, policy shifts are made all the time - particularly in democratic countries - which makes it difficult to select one or two currencies to substitute for the dollar. Therefore, we diversify into a basket of currencies, including some from developed countries, developing countries and emerging countries.

We believe that the U.S. economy is mature and will be outperformed by the latter two types of countries on an ongoing basis. There will be fluctuations, but they will occur within a definite trend. Rather than try to identify those short-term intervals that produce sharp re-valuations, we prefer to establish a more permanent position to diversify our exposure to the dollar.

Maintaining a long term “short” position in the dollar (a bet against the dollar) can be quite expensive, so we have chosen to accomplish essentially the same thing through the use of non-dollar-denominated investments. There are three ways that we have built up that position over the last ten years. First, we have indirect exposure to foreign currencies that occur naturally through the ownership of large, global companies with a large portion of their earnings generated outside the U.S. Second, we have allocated 15% to 20% of clients’ portfolios to strictly foreign companies. Finally, and more recently, as our concern for the long term health of the dollar increased, we moved a significant portion of our clients’ fixed income portfolios into non-U.S. holdings, including some emerging market exposure.

In summary, rather than engaging in short-term speculative bets for or against the dollar, our clients’ portfolios are permanently and naturally hedged to an appropriate degree through the diversification of their investments across domestic and foreign stocks and bonds. We believe this is the most prudent and balanced approach in the face of uncertainty.

How to Increase the Impact of Your Giving

Wed, 10 Nov 2010 00:00:00 -0500

Most people want to help make the world a better place, in some way, and are willing to share what they have with others to accomplish that. Here are some thoughts about how to maximize your contribution:

Give within the context of a plan. All too often in life we tend to take the path of least resistance or are driven by “the tyranny of the urgent”. Charitable giving often suffers the same fate: we don’t carefully consider in advance how much we want to give, or to whom, and our giving becomes more a reflection of the requests that happen to come our way than of what we truly value.

At Alpha Advisors, we would suggest that to truly optimize your giving, you actually need two plans: a holistic lifetime financial plan, and an annual giving plan. The overall plan allows you to make informed giving decisions in the context of the rest of your goals. There is a lot of wealth tied up in the hands of people who have no idea how much they need for themselves, and as a result don’t realize how much they can afford to share with others. The annual giving plan provides discipline and ensures that your giving lines up with your own agenda, not someone else’s.

The point is, charitable giving is really an investment and deserves the same thoughtfulness that you’d give when deciding how to handle your portfolio. Be more intentional about your giving and you will have a greater impact.

Maximize the tax benefits. You have limited resources and there is an endless need out there. By giving in the most tax-efficient way possible, you maximize the amount of money that you are able to share with others. It is costly – and needlessly so - for example, to make charitable gifts with cash and then fund those gifts by selling appreciated assets such as marketable securities, real estate or a privately-held business and paying capital gains taxes. But people do this all the time. By giving appreciated assets instead, you get the same tax deduction now, but also avoid capital gains tax.

If you find yourself in a higher tax bracket from one year to the next, you should consider matching your charitable deductions with your higher-income year(s) to maximize the tax benefits. Uncle Sam is your partner in charitable giving, as he effectively subsidizes your giving by up to 40%. A donor-advised fund is a great way to accomplish this. Take advantage of every opportunity to reduce taxes and thus increase the money available for you to share with others.

Invest yourself. No organization could survive without consistent financial support. However, money is not the only resource of which your favorite causes are in short supply. You can increase your impact by sharing some of your time and talents as well. What issue or organization matters most to you? If you are not sure what you have to offer, go and ask, and I am sure they will find a place for you.

We all face increased “busy-ness” in our lives, so it is easier to give a check than give ourselves. As a result we can find ourselves not really connected with the organizations we support. Beyond the benefit to the organization, you will gain something as well - the satisfaction that comes from a more direct impact on the lives of others or helping an organization operate more effectively.

The Financial Wisdom of Ebenezer Scrooge

Fri, 05 Nov 2010 00:00:00 -0400

by Sarah Byrd

Do you just have to have that new iPhone? Do happily you buy the newest computer game for your nephew but wear socks with holes in them? Do you feel driven to work just one more hour when you’d rather be playing with your children? Why do we behave as we do?

I recently read an interesting book titled The Financial Wisdom of Ebenezer Scrooge by Ted Klontz, Rick Kahler and Brad Klontz. The title seemed like an oxymoron to me. The authors use the characters and the story as a backdrop to discuss our relationship with money. The stated goal of the book is “to help you identify those hidden beliefs that are sabotaging your fulfillment in life, bring them into full awareness and deal with them so that they lose their power.”

The starting point is our beliefs. Whether we recognize them or not, we all have hidden beliefs about money that drive our behavior. The authors call these “money scripts.” They suggest that most of them are learned in childhood and internalized. “Since children can’t fully grasp adult reality, they translate what they see and hear into unconscious rules about life.”

The problem is that “these perspectives don’t necessarily reflect reality from an adult perspective. Instead, they may represent only a distorted truth as seen through the eyes of a child.” As we mature we often behave as if the partial truth is an absolute truth. It is now a money script. It can be difficult to recognize the script, because it’s how we’ve always thought about that aspect of money; it just makes sense to us.

Seeing both Scrooge’s and Cratchit’s money scripts might help us recognize our own.

A few of Scrooge’s money scripts are:

Don’t spend money on yourself or others.
The more money you have, the happier you will be.
Giving to the poor encourages laziness.
Money will give you meaning in life.

When you remember his meager existence in a cold, dark house, his refusal to give to the poor, suggesting workhouses were the answer, and his miserliness with Bob Cratchit, you can see some of the negative effects of his scripts.

But he’s not the only character with detrimental scripts. Consider some of Bob Cratchit’s:

There will never be enough money.
You can never be happy if you are rich.
If you are good, the universe will supply your needs.

His scripts keep him stuck in the role of victim, working for a tyrant. He accepts his miserable existence as his destiny.

Once you accept that you have money scripts, you need to be willing to challenge them. Simply stated, we need to be willing to look at ourselves objectively. This usually involves help from others. Scrooge had the ghosts. Seeing his past and present helped him see how he’d been affected by events and how they were continuing to impact his life. If you’re brave enough, sit down with a spouse, friend or sibling and ask some hard questions. Among others, the authors suggest some of the following:

As best you can, recall the memorable experiences you have had with money, both good and painful. Go as far back in your memory as you can.
Go back and put a feeling word next to each of the items. Can be as simple as angry, sad, afraid.
Now look over everything you have written and ask yourself: “Looking at everything that has happened, if I had to write one or two sentences to summarize my experiences with money, what would they be?” Another to think of it is, “The moral of my story is…”

For some of you we’ve just reached the point of discomfort.

But consider this: Scrooge’s final epiphany came when he was visited by the Ghost of Christmas Future. It was seeing how these lifelong scripts would play out to the end that finally shook him up enough to make him want to change. We don’t have to look death in the face to know there are things we can hope to see changed. It starts with understanding, which will only come by looking.

Doing it through the means of such an accessible story works well and the authors never have to stretch to make their points. Scrooge was exposed early on to possess little wisdom, and even less aptitude, for relationships. I, however, had always overlooked what financial wisdom he may have had. He amassed a fortune but couldn’t enjoy it. Until he changed.

Rarely do we think change is easy, but we all know when it’s the right change it’s worth the effort. So if you’re willing, ask yourself, “What are my money scripts? Could they be sabotaging me? What would my life be like if I changed them?” We would be happy to enter into this discussion with you.

Well, What's Stopping You?

Mon, 07 Jun 2010 00:00:00 -0400

The economic upheaval we’ve experienced over the past year or two has caused a lot of people, myself included, to think more deeply about our lives and what is really important to us. Last year I ran across a series of questions that I believe can be a powerful tool to help people gain clarity about what they truly value in life. From a “wealth management” standpoint, this exercise can be valuable by providing a context for making decisions and for the deployment of resources (financial and non-financial) in the pursuit of the things that matter most to you.

My wife, Jessica, and I took some time to answer these questions individually and then got together to share our responses. It was a wonderful and eye-opening experience. Here are some of my observations:

Most of the things that were clearly important to me were non-financial; that is, they had very little to do with money and in many cases, limited funds was not necessarily an obstacle to achieving those desires.
It was great to write it all down – that made it more real. I still have the pages and intend to review them on a regular basis.
It was even more powerful to read my answers out loud to someone else. It was a far more emotional experience than I expected, even more so than writing my thoughts down in the first place. Perhaps saying it out loud served as a confession of past failures and also as a commitment to doing better. If you do not have a significant other to do this exercise with, consider sharing your responses with a close friend.
If nothing else had come of it, this exercise was a great way to get to know my wife better. Life is so busy that it is easy to let time slip by without a lot of deep, meaningful conversations.

So, here are the three questions, followed by one last question of my own:

Imagine you are financially secure; that you have enough money to take care of your needs, now and in the future. How would you live your life? Would you change anything? Let yourself go. Don’t hold back on your dreams. Describe a life that is complete and richly yours.
Now imagine that you visit your doctor, who tells you that you have only 5-10 years to live. You won’t ever feel sick, but you will have no notice of the moment of your death. What will you do in the time you have remaining? Will you change your life and how will you do it? (Note that this question does not assume unlimited funds.)
Finally, imagine that your doctor shocks you with the news that you only have 24 hours to live. Notice what feelings arise as you confront your very real mortality. Ask yourself: What did you miss? Who did you not get to be? What did you not get to do? (Careful: this question is not asking what you’d do with your last 24 hours, but rather asks you to look back over your life.)

Once you have thoughtfully completed this exercise, I challenge you to answer one more question: “Well, what’s stopping you?” If you are like most people, you have just laid out a list of desires and dreams to pursue, and probably many things you’d like to avoid regretting in the future. A lot of those things do not require money; they simply require a change of priority in how you use your time and perhaps an increased willingness to take risks.

This exercise may be way outside a lot of people’s comfort zones. But as the ancient philosopher Socrates said, “An unexamined life is not worth living.” My twist on that would be to say that an examined life is more worth living. We are here to help you with this kind of thinking and then help apply the answers in the context of a financial plan.

Ladies, it’s 10 p.m. - Do you know where your money is?

Wed, 05 May 2010 16:43:00 -0400

By Sarah Byrd

In every marriage each spouse takes on different responsibilities. Cooking, yard work, shopping, paying bills - one person doesn’t do it all, and efficient living often necessitates division of labor. You don’t each need to know what brand of fertilizer is making your yard green, or where you buy your tomatoes. However when it comes to planning and understanding your family finances its better if you’re both involved. It can be a great way to keep communication lines open, increase confidence and prevent needless anxiety in the future.

In a majority of American households, finances are managed by the husband. Quite often, wives may be engaged in the monthly budget, but have very little involvement in the bigger picture; when it comes to areas like their investments and taxes, they are in the dark.

Unfortunately, between high divorce rates and the fact that women generally live longer than men, the odds are high that at some point in their lives, most women are going to face the need to handle their entire financial world on their own. For many, they will face this for the first time during a period of transition or grief. A great gift that a husband can give his wife (and a wife can give to herself) is to ensure that both spouses are equipped with at least a fundamental understanding of their finances. (Men, if your wife is the primary manager of your finances, then this applies to you as well.)

Ideally, both spouses have met with their financial advisor to discuss their mutual goals and agree on a financial plan. At the beginning of the process there may have been a surge of interest in your family finances as you discussed certain aspects of your financial future together, possibly for the first time. Unfortunately, over time, many of the women who were originally involved slowly disengage, until at some point they might not even participate in the meetings to review and update the financial plan.

How knowledgeable are you about your family finances? Here is a short checklist that you can use to assess where you are:

Do I know our financial advisor, attorney, and CPA? Am I comfortable talking with them directly if I needed to?
Am I engaged in the ongoing maintenance of our financial plan? What are our major goals?
What is our household income? What are the major expenses?
Do I know where our money is invested?
Do I understand our insurance coverage?
Do I understand the provisions of our wills and estate plan?

In addition, in case of emergency:

Do I know the location of key documents, such as insurance policies, medical powers of attorney, and estate documents?
Do I know the location of our safe deposit box , the key, and a list of the contents?
Do I know how to access all of our accounts via the internet?
When do monthly bills come due? Are any paid automatically?

If you read through these checklists and feel comfortable with your level of knowledge, you are in great shape. If not, you can identify some areas for improvement.

The complexity of any family’s financial world can be intimidating; just knowing the key pieces of information goes a long way toward peace of mind. If you’re not there and you’d like to be, let us help!

Hymns for Haiti - A Benefit Concert

Tue, 09 Mar 2010 14:47:53 -0500

Alpha Advisors is proud be a sponsor of Hymns for Haiti - a benefit concert to raise funds for the relief effort in Haiti. Please come out for a great event and support an important cause!

Date: Saturday, March 20, 2010
Time: Doors open @ 6 PM, show starts @ 7 PM
Featuring: Alex Mejias & High Street Hymns with Special Guests
Location: West End Presbyterian Church 9008 Quioccasin Road, Richmond, VA 23229

Tickets: All ages are welcome. $10 in advance, $15 at the door. Kids 12 and under are FREE! Tickets will be sold online at www.ticketstobuy.com, at WEPC before and after Sunday church services until the show and at C28 in Short Pump Town Center and Lifeway Christian Store on Broad Street in the West End.

100% of proceeds will go to Compassion International and Partners in Health.

Is a Roth IRA Conversion Right for You?

Tue, 09 Mar 2010 14:10:00 -0500

The “Roth Conversion” opportunity has generated a lot of media coverage and advertising dollars from financial institutions. You might be concerned about being left out of this seemingly once in a lifetime opportunity. But the decision to convert is far from a “no-brainer”. This is because the amount that you convert will be subject to income taxes. Though the taxes can be spread over two years, and there is no early withdrawal penalty, this cost must be weighed against the potential benefits.

A “Roth conversion” is simply transferring money from a tax-deferred account, such as an IRA, to a Roth IRA account. The amount converted is treated as a withdrawal and is taxed as income in the current year. Before 2010, only investors with adjusted gross incomes below $100,000 were eligible for Roth conversion. This year, the income limit is suspended, and any investor with tax-deferred retirement accounts such as traditional IRAs, 401(k)s, 403(b)s, SEP-IRAs, and SIMPLE-IRAs can convert some or all of the balances to a Roth IRA.

Most traditional retirement accounts allow investors to make tax-deductible contributions that may grow tax-free, but future withdrawals are taxed at ordinary income tax rates. Roth IRAs are unique because they are funded with after-tax dollars, and the growth and future withdrawals are not subject to income taxes.

The Roth conversion might especially appeal to investors who don’t expect to need all of their retirement account assets and intend to leave some portion to their heirs. Beneficiaries of Roth IRAs will likely benefit from the continued tax-free compounding and tax-free withdrawals over their lifetimes so paying the taxes to convert some portion of a regular IRA may help to maximize the total future benefit to them.

If your estate plan includes the likelihood that your retirement account will be left to charitable causes then it would not make sense to convert these balances. Since these organizations aren’t subject to income taxes, paying taxes on the conversion today wouldn’t save any taxes in the future.

If you do expect to need most or all of your retirement account balances to fund your own retirement, then the question comes down to whether shifting the tax liability forward at today’s rates is favorable to continuing to defer taxes until withdrawals are made and paying taxes as you go, at future rates.

There are many variables, including the timing of withdrawals, future tax rates, projected income, expected returns, etc. that don’t allow a one-size-fits-all decision. For example, if you expect to have significantly below-normal taxable income in 2010, or you expect that your income tax rate will be significantly higher in retirement than they are today, it might make sense to do a full or partial conversion. For many investors, the potential benefit is too small and too uncertain to offset the certain pain of voluntarily paying additional income taxes!

We’d be happy to perform an analysis based on your specific circumstances and goals.

Interview with a Nigerian email scammer

Fri, 12 Feb 2010 15:07:25 -0500

If you have ever wondered about those email scams that always seem to originate in Nigeria, here is an interview with someone who claims to be a former scammer. The author was not able to corroborate the story due to the subject’s desire to remain anonymous, but the story sure is intriguing!

Toyota: Another Lesson in Concentration Risk

Thu, 04 Feb 2010 11:08:00 -0500

Toyota Motor Corporation has been one of the most respected automakers in the world. It is widely admired for making high-quality cars, and for being a profitable operation, while its American counterparts for the most part have run themselves into the ground. If you were going to own stock in an automaker, this likely would have been high on the list of candidates.

But the recent recall of millions of its cars due to serious safety concerns has rather suddenly hung a dark cloud over the company. As James Stewart points out in his Wall Street Journal article, it’s not just current profits that are at risk - the company’s reputation is on the line as well. Sales have already been adversely impacted and there is speculation that the company’s woes have not been completely revealed at this point. As of this writing, Toyota stock has lost nearly 25% of its value in not much more than a week. Toyota is not going out of business, but its shareholders certainly have cause to be nervous.

This episode is a great reminder of the importance of diversification and avoiding the needless risk of being concentrated in a single stock. No matter how “safe” an individual stock seems - because of the nature of its industry, its management, or how well the investor thinks he knows the company - there is always the risk of a negative event that can severely or mortally wound a company. And they often appear to be doing just fine right before it happens.

Tips for Preventing Identity Theft

Fri, 29 Jan 2010 12:56:00 -0500

I have recently been helping a client go through the process of recovering from identity theft and subsequent fraud. Our clients have been fortunate for the most part to avoid becoming victims, but I can now say from firsthand experience with the hassles of the aftermath that a few ounces of prevention are worth a ton of cure.

Here is my “Top 10 List” of some relatively simple tips for protecting your identity and your financial world from fraud:

Protect your Social Security number. Don’t carry the card in your wallet and don’t print the number on your checks. Don’t use it or any part of it for user names or passwords. Not too long ago, it was common practice to have your Social Security number as the ID number on driver’s licenses and health insurance cards. In Virginia, that is no longer the case. If you have the option to use an alternative identification number, do it.
Limit the information that is printed on your checks – do not include your driver’s license number or Social Security number.
Consider a credit bureau lock-down. You can contact the three major credit bureaus - Equifax, Experian and TransUnion – and have them put fraud alerts on your credit records. For a fee, firms like Lifelock and Identity Guard will do that for you, along with some other add-on services intended to protect your credit and identity from fraud.
Review your credit report at least annually. Request free copies from the big three credit reporting agencies at www.annualcreditreport.com and review the credit reports for inaccuracies.
Thwart dumpster divers with a shredder. Your trash can be a goldmine of information for an identity thief. Any documents that contain sensitive personal information such as your Social Security number, account numbers, driver’s license number, or signature should be shredded before you throw them out. Use one that does cross-cut/confetti style as opposed to strips. Modern shredders can handle credit cards and CDs as well.
Review your monthly bank and credit card statements, looking for unauthorized transactions. If you see anything suspicious, contact the financial institution.
No phishing. “Phishing” involves pretending to be a financial institution or other company you do business with and sending an email or creating pop-up messages to get you to reveal your personal information. This has gone on for years but until recently the fake messages were easy to spot by their broken English. These days they are much more difficult to detect as fakes.

If you are contacted by phone or email, always verify a source before sharing your information. Don’t open the links in the messages. Instead, type the web address into the browser yourself to ensure you are indeed going to the site you intended.
Use multiple passwords, use strong passwords, and change them regularly. Instead of using your initials and date of birth for every account and web site, consider using multiple passwords comprised of upper and lower case letters, and numbers. And then change them every couple of months.
On your personal computer, keep your antivirus and anti-malware software up to date. Most software has the option to automatically download the most current virus files on a weekly basis, and this is necessary given the proliferation of software viruses out there.
Shop online carefully. Use trusted vendors and look for the padlock icon in your browser; this designates a secure site that will encrypt your information that you transmit across the internet.

Money Saving Tip: Energy Efficiency Tax Credit

Fri, 22 Jan 2010 13:56:00 -0500

As a provision of the American Recovery and reinvestment Act, the federal government is providing an economic incentive for you to make improvements to your home’s energy efficiency.

The incentive comes in the form of a tax credit of up to 30% of the purchase price of certain items, such as water heaters, furnaces, insulation, etc. The credit is limited to $1,500 and is for improvements made in 2010.

The highlights of the program are available at the IRS web site. A list of eligible items is located on the EnergyStar website and a list of answers to frequently-asked questions is located here.

If you have an eligible purchase that you have been putting off, this tax credit might make it worth it to go ahead and do it this year, and let the government help pay for it.

Career Next Step

Tue, 01 Dec 2009 22:10:00 -0500

There are a lot of people out there who are either unemployed, “under-employed”, or employed but wishing they could do something different to earn a living. It can be easy to short-circuit the job search due to a sense of desperation to find a new job, or fear of trying something new. How many people who have lost a job they never really liked are now out there looking for a job exactly like their previous one?

A job transition is a great opportunity to take some time to reflect on your skills, interests, and passions, and identify the places where those things intersect with the needs of the marketplace.

There are many tools out there to help you discover more about yourself. A web site called Career Next Step provides access to over a dozen such tools, a framework for compiling the various results to identify themes and insights, and matching those themes to career options.

The process is based on a “career management” course taught at Virginia’s Darden School of Business and is run by the professor that developed the course. I took the actual course years ago and it was extremely valuable in my own life. I have not tried the web-based version, but for less than $200 I think it would provide valuable insights to someone seeking a change of vocation.

Retirement Bubble?

Sat, 28 Nov 2009 00:00:00 -0500

Several months ago I read a very thought-provoking article titled “Next, The Retirement Bubble”. The author shared an interesting point of view that reinforced the value of finding something to do for a living that you love, and that you would like to do for the rest of your life. Not only is this a healthy view of work, but from a financial standpoint, it is a wise strategy for mitigating the risk of outliving your money.