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Friday Financial Five – August 31st, 2012

Friday, August 31, 2012


Ben Bernanke will begin bloviating before breakfast. . .

GDP is revised up

We received another smidgeon of good news as the 2nd quarter GDP was revised up to 1.7% from 1.5%. It’s not a huge increase and it was expected, but we’ll continue to take anything remotely positive, even if it comes in dribs and drabs. This accompanies some heartening home sales data to provide a small light at the end of a very long tunnel, despite deteriorating consumer confidence numbers for August.

The rush to give everything away

More and more of us have a story about a friend or family member subjected to a lengthy, expensive nursing home experience. A strategy that appears to be gaining traction with younger retirees is to start giving away assets in order to “protect” them from the five year look back period. The problem is, once you have irrevocably given something away, it’s very tough to get it back. You might not have any control over your estate and gifted money could get spent or lost in the recipient’s divorce. Be sure to travel down this path with extreme care.

Graduating from college does have its privileges

The escalating cost of college is rightfully causing people to reevaluate their return on educational investment. A recent Georgetown University Center on Education study reveals this: the 2012 unemployment rate for graduates with a bachelors or better is seven percent versus 24 percent for new high school graduates. The study found some other interesting trends as it relates to the recession that began in December, 2007. Since then, the healthcare industry added one million jobs for those with degrees. Also, having a degree dramatically reduced your chance of losing a job in manufacturing or construction.

Investment spotlight: Floating rate funds

With the current low interest rate environment, it makes sense to have a flexible fixed income strategy. Floating rate funds take advantage of short duration banks notes with adjustable interest rates. The rationale is to avoid being stuck with long term bonds when the rates start to edge higher. However, what you avoid in interest rate risk subjects you to credit risk. Therefore, if you’re going to use this asset class, you may want to utilize bank loans issued from large, liquid issuers.

Financial aid on your student ID

You have to give it to the banking industry – they certainly are innovative when it comes to reaching young spenders. There are currently 900 schools partnering with banks to link financial aid and grants to student IDs, according to a study by the U.S. Public Interest Research Group. It sounds like a great mix of readily available cash (you don’t have to wait for a check) and convenience, but look out for reloading and ATM fees.

Dan Forbes is a regular contributor on business financial issues. He is a CFP Board Ambassador. He leads the firm Forbes Financial Planning in Providence, RI and can be reached at [email protected]


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