Graduating from college can be an exciting and stressful time. Suddenly you need to find a job, replay loans and make solid financial decisions. Fortunately, you don’t need to be unprepared. Below are some budgeting basics to keep your spending under control, some suggestions on how to set financial goals and a list of the top 10 American cities for starting out.

Muhammad Saleem contributed the graphics below from www.onlinecollege.org as presented by Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!). Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.  

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Financial Repression is a form of wealth confiscation and redistribution that is in some ways as effective as taxation – but the government never directly calls it that. It never appears in the budget (directly), and while it is dependent on a comprehensive network of laws and regulations – none of those go through the legislature with a stated intention of creating Financial Repression. So while the economic net effects are similar to a huge and comprehensive set of investor taxes being used to pay down the national debt, the “taxes” are never a campaign issue because voters and investors don’t understand what is happening – they only feel the results. [In this article I lay out for you what is slowly developing and expected to escalate dramatically in the next few years.]

So says Daniel Amerman (www.danielamerman.com) in edited excerpts from his original article*.

Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!) has edited ([ ]), abridged (…) and reformatted (some sub-titles and bold/italics emphases) the article below for the sake of clarity and brevity to ensure a fast and easy read. The report’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Amerman goes on to say, in part:

“Financial Repression” is the academic term for how governments can pay down enormous debts by forcing interest rates below the rate of inflation, and then systematically confiscate the purchasing power of their citizens’ savings over time, while keeping people from being able to escape or defend themselves. It is a hidden form of investor wealth confiscation and redistribution – as effective in its own way as taxation – with a very long track record of “success”. [For another article on the subject read “Financial Repression” May Soon Become Our Worst Nightmare! Here’s Why]

 The form of wealth confiscation is inflation rather than cash payments, and while the enormous benefits which flow to the government are entirely real, the overwhelming majority of those whose wealth is being confiscated will never fully understand what is happening, as there are no checks being written, and it never appears on a tax return. This makes Financial Repression a hugely successful strategy from a governmental perspective. 

The policies of Financial Repression were used by advanced economies between 1945 and 1980 to successfully slash over 70% of the amount of government debt relative to economic output. This strategy is posted on the IMF website and is drawing international attention among government policymakers and economists for very good reason – it’s what actually worked for the governments the last time around, and how they dodged default or hyperinflation.

However, while parallels exist, the current crisis is very different from the post-World War II government debt crisis. By the end of 1945, the war was over, and the challenge was how to pay down past debts that had been racked up but were no longer being incurred. Conversely, the main problem this time around still lies in the future, with the United States, Europe and others having made long-term entitlement promises that dwarf the current deficits.

For Financial Repression to have a chance in the current environment, the governments of the world must employ not just the strategies of the past, but even more powerful strategies to deal with a fast oncoming future crisis that is far larger than the post World War II crisis.

From the perspective of a government that is in financial crisis mode, with no end in sight, there is a powerful mathematical advantage to deploying a double-edged strategy which devastates the financial security of millions of retirement investors by slashing both the value of their savings (the first edge) and the value of their pensions and/or Social Security payments (the second edge).

The effects of the implementation of this strategy can already be seen all around us,[as follows]:

The solution to investing in the face of financial repression..is quite distinct from the all-or-none currency meltdown strategies that implode absent a meltdown, and the more conventional investment strategies. Ideally, an investor should deploy a strategy that can handle any or all…scenarios: one that survives and even thrives during and after a currency meltdown, and one which also not only survives but even prospers in Financial Repression (or combinations of meltdown and repression) while still doing fine if those scenarios end up not being as severe as many now anticipate.

Historic Financial Repression & Its Powerful Return

The most important thing that we need to understand about Financial Repression is that it works. The graph below shows that historically, as a result of war debts, the developed nations of the West owed about as much in total public debt outstanding compared to their economies in 1945 as they do right now. By 1980, more than 70% of that debt was gone, as a percentage of the size of the national economies.

The graph was derived from the data in an influential paper by Carmen Reinhart and M. Belen Sbrancia, which has been circulated by the International Monetary Fund to decision-makers on a global basis. What the paper shows is how it’s done: how the developed nations of the world took seemingly impossible debt burdens and brought them down to a manageable level. Here is a link to my analysis of this traditional first edge of Financial Repression, Financial Repression: A Sheep Shearing Manual, in which I discuss the way traditional investment strategies are devastated by the governments’ deliberate tilting of the investment playing field. Should you wish to also read the much longer original paper by Reinhart and Sbrancia, this is the Original Paper on the IMF website.

What was done – even if it was never described that way in the newspaper headlines or in the investor education books and columns – was as follows: 

• the governments used paper currencies that were prone to inflation, instead of the precious metals-backed currencies that were the norm before the 1930s.
• they also deployed a network of rules and regulations to create a playing field in which savers and financial institutions were pretty much forced to invest their money at interest rates that were below the rate of inflation.
• Each year as inflation destroyed part of the value of money, the real (inflation-adjusted) value of the governmental debt burden fell along with the value of money.
• Each year, inflation also destroyed part of the value of the nation’s savings with much of those savings being either directly invested in government debt, or indirectly, through accounts at financial institutions that were forced to heavily invest in government debt.
• Savers were effectively given no choice but to watch the purchasing power of their savings fall each year as government debts were paid down by inflation…

Even though the academic term Financial Repression fell into obscurity for about three decades, it is not just an artifact of the historic past. Indeed it has returned stronger than ever. To see the evidence: consider what you pay for food, energy, healthcare, education and many of the other essentials of life. As we all know, the cost for these resources has been rising at an annual rate that is much higher than the puny-to-nonexistent interest rates that we have been earning in our collective money market funds and savings accounts.

Now in a theoretical free-market, investors would force interest rates up to adjust for current inflation as well as for future inflationary expectations. This competing academic theory that governments can’t use inflation to pay down debts has wide acceptance among many commentators. However, it flies in the face of what actually happens in the real world, as shown not just with the experience of the last ten years, but also from 1945 to 1980. The point of Financial Repression from a governmental perspective is that there is no free market with regard to interest rates; instead the government uses its vast powers to effectively force a negative return on savers. Much more information on the recent and current experience can be found in my article “Cheating Investors As Official Government Policy“.

The Oncoming Global Crisis & Governments’ Need For Wider & More Aggressive Repression Policies

As mentioned in the overview, while the ratios of overall government debt levels to the size of the economies are roughly comparable between the years 1946 and 2011, there is a major difference which makes things far worse this time around. In 1946, the war was over, the massive deficits had stopped, and it was a matter of paying down debts already in place.

This time, the worst of the crisis still lies ahead of us instead of being behind us. What grips the developed world in the early 2010s is a sovereign debt crisis, the essence of which comes down to the governments having promised to pay far more to certain sectors of their societies than they have the tax revenues or even the economic resources to actually pay for and, as shown by numerous studies which go back for decades, the worst is still ahead of us.

The amount by which future government expenditures are likely to exceed future government tax revenues in the United States (under the current structure) is estimated to be somewhere in the range between $62 trillion and $200 trillion (with some estimates being in present value form and others not). Now officially, the US government merely has the staggering sum of $14 trillion in debt outstanding. But, that is using a government definition of debt, which is Treasury obligations only, rather than all of what the government has promised to pay in the future. If a corporation were to use that kind of selective accounting people would go to jail for fraud.

If we take the approach that the newspaper USA Today did, which was to treat the government like a corporation and report on the total by which its total future obligations rose in a year, then during 2010 (as illustrated in the graph below), the share of the one-year increase in total unfunded national obligations per solvent and able to pay (above poverty-line) US household came to $54,600.

The source of the above graph is my article, “Per Household Annual Deficit Exceeds US Income Per Household“. Also covered in that article is that according to the US Census Bureau, the median household income is only about $50,200 per year so the situation is far worse than “merely” having a national debt burden that is greater than the size of the national economy. We are in the incredible place where the annual growth in total unfunded government obligations per above-poverty-line household exceeds the current annual income of the median household.

This sounds fantastical and difficult to believe, but the math is basic: take the results of a study of US government obligations by a major mainstream newspaper, divide the annual increase in obligations by the number of above-poverty line US households, compare to the median annual US household income, and you have the preceding graph.

Obviously, the Financial Repression techniques of the past aren’t by themselves going to be enough to deal with the problem this time around. The future deficits are increasing at too great of a rate so if Financial Repression is to be successful again it is going to need to be modified in such a way that the size of those future payments is as much a target as earnings by savers. As we will cover below, that is the second edge of modern Financial Repression: it is devastating for retirees, it will be getting worse year by year for current and future retirees, and it has been underway for some time now.

The Solution For Governments: Inflation Index Manipulation & Theft By Statistics

Simply put, the solution for governments is to not pay what has been promised to entitlement beneficiaries (especially retirees) and public sector workers who rely on inflation-indexed payments. Instead, governments use their direct control of how inflation rates are calculated and reported to deliberately understate the rate of inflation, which then steadily reduces retiree and inflation-indexed workers standards of living on an annual basis over the coming years and decades. From the perspective of governments – which is a very different perspective from fairness and justice for individual citizens – this leads to a highly desirable outcome.

What is causing the “sovereign debt crisis” which is threatening the economic viability of the US and the EU simultaneously is that impossible promises have been made from the perspective of overall society. There has been a fundamental demographic shift, with a post-war boom in population followed by smaller families. For decades, politicians have made generous promises to a rapidly aging population without considering the cost of meeting those promises in the future, or how a relatively smaller group of adult children in their prime working years could support a very large group of elderly parents in the style which the politicians promised. It’s not even so much a matter of money and tax rates as that the promises made exceed the likely economic resources available to pay for them under any reasonable growth scenario. [As such the promises made in the past will not be fulfilled in the future... and, therefore,] these impossible promises will be broken in one form or another.

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We know there will be higher and higher Social Security costs in the US (and its equivalent in other nations), higher and higher public and private pension costs, and most dangerous of all, higher and higher health care costs for an aging population – even as relatively fewer workers are available per retiree to pay for the burden so we know there will be a steady mathematical decline in the ability to pay that will get a little bit worse every year. When $62 trillion or $200 trillion in future total deficits in the US are discussed – it is the demographics of an aging population that is the source.

One way of dealing with [the promises that were made] is to explicitly and openly change the rules and reduce the entitlements, and the first stages of this approach are already in process. However, for politicians, this is a very dangerous path indeed when taken too far. People have been falsely told for decades when they paid payroll taxes that these taxes were a public savings plan for retirement. Of course, this has been a lie the entire time, the money was never saved but was always spent the same year it was taken in, and the Social Security “trust fund” has always only been IOUs which the government has written to itself but many people don’t understand that. [As such, they naturally they get inflamed when what was promised to them, and what they thought they had paid for, is taken away from them. They feel cheated and they look for people – namely politicians – to blame. When this problem is compounded by particularly unscrupulous politicians seeking short-term advantage by denying that the problem exists at all - then open entitlement cuts are difficult, and no one is proposing a plan powerful enough to actually solve the problem.

The other path available is to use steady annual math to fight steady annual math. As covered in my article "Inflation Index Manipulation & Theft By Statistics", which was originally published in 2007, the mathematics involved are to publicly claim an inflation rate that is lower than the actual inflation rate. Then each consecutive year continue to deliberately understate the rate of inflation. This methodology is employed because most benefits are promised in inflation-adjusted terms, which is both the problem and the loophole. The problem is that as long as the government honestly makes fully inflation-adjusted payments to beneficiaries, then the burden of future government promises is impossible. The loophole is that the government controls what the inflation rate is defined as being.

When we look all around us [we see that] the costs of maintaining our standards of living are rising at a rate that is substantially higher than the earnings we receive on our savings; and there is also a higher rate of true inflation than the annual increases we get in Social Security payments or in cost-of-living adjustments to salaries. What we are seeing is a steady mathematical process of growing theft.

The illustration in the chart and graph above, from the article “Inflation Index Manipulation & Theft By Statistics”, uses assumptions of 10% for the real inflation rate, and 3% for the official rate of inflation. This means that the government cheats retirees out of 7% of their incomes each year. There is a 7% reduction in year one, and another 7% in year two, and another 7% in year three, until by the 20th year, the government is able to wipe out 73% of its future debt burden without ever explicitly taking a benefit away or breaking a promise. Crucially, this mean the otherwise impossible promises are now well within the capacity of future tax rates and the future economy to pay albeit at a terrible cost in falling standards of living for retirees and those whose salaries are tied to inflation indexes.

For the economically impossible to become possible, without explicitly reneging on retirement promises on a massive scale, the inflation rate must be deliberately understated. More specifically, the steady mathematical progression of breaking promises via reducing inflation-indexed payments is used to cancel out the steady mathematical progression of increasingly impossible promises as

• the ratio of current workers to retirees falls with each year,
• the makeup of the population of retirees is transformed by age, with an ever increasing percentage of Boomer retirees reaching 80 and beyond, along with
• the associated explosive surge in average annual medical expenses.

This is the necessary mathematics…and it is the reason why it’s likely to get only worse – indeed much worse – in the years to come. More on the math and the thoroughly interrelated political considerations can be found in this article.

The Double-Edged Risk For Retirees

Both of the two closely interrelated aspects of modern Financial Repression are likely to have a devastating impact on the future standard of living for tens of millions of retirees. These current and future retirees are investing to supplement Social Security and/or a pension, and this means the two edges of Financial Repression will be slashing them both coming and going. Unfortunately, the overwhelming majority of the population doesn’t see the blade or the deliberate nature of the attack, making it very difficult to build effective defenses.

For future retirees, in each year up to retirement and each year afterwards, there will be a steady squeeze which reduces the standard of living that can be paid for by Social Security and pensions. Their expenses are likely to be increasing at rates that are well above the increases in benefit payments which are tied to inflation-indexing as determined by the government…

Let’s return to our illustration of a 10% real rate of inflation, versus a 3% official rate of inflation that is used to calculate annual increases in Social Security payments. We’ll assume that we are talking about a 60 year old named Brian who had for many years been hoping to retire at age 65, but because his financial planning investment strategy didn’t work out as hoped, Brian is now shooting for 70 – if he is lucky. The current purchasing power of Social Security, in combination with Brian drawing down from what he hopes will be his retirement savings in 10 years, would be tight but doable, in terms of his future retirement standard of living. However, when he goes to the chart, and sees that, with the illustration assumptions, in 10 years the purchasing power of Social Security may only be 48% of what it is now, Brian realizes that it simply won’t work, and that he and his wife wouldn’t be able to retire at all with an above-poverty-line standard of living.

(The above chart was created in 2007, thus ten years out is 2017. While the chart could have been easily updated to the current year, it was left in its 2007 form to reinforce a very important point: this isn’t a new, surprising, or short-term development, but instead, governments resorting to inflation-index manipulation has been predictable for a long time, for the same fundamental reasons that such manipulations are likely to persist far into the future.)

Brian realizes that with his current plan, he can’t retire at 70. He also doesn’t know what his health will be in his 70s, and he isn’t entirely confident that he will still have a job in 5 years, let alone in 10 or 15 years. For these reasons, Brian and his wife decide to tighten their belts right now, and drop their standard of living, to try to save as much as they possibly can before their incomes fall in retirement. Perhaps between additional savings and earnings on those savings, they will be able to retire in ten years, or at least have the option if life makes the decision for them.

Which brings us back to the first edge of Financial Repression, the time-honored method governments can use to reduce the real value of massive debts. Having been badly burned with their more aggressive stock investments, Brian wants to stick to “safe” and liquid investments this time around, particularly since they don’t know for sure when they will need to start cashing them out. [As such,] they choose short-term, high quality investments where interest rates are being manipulated by the Federal Reserve to stay at levels well below the rate of inflation, as part of a deliberate government policy of Financial Repression.

For simplicity’s sake, we will assume that the relationship between short-term high quality investments and real inflation is the same as that between the official rate of inflation and real inflation which would mean that over ten years, with a 3% annual return, and the value of money declining at 10% per year,

• the purchasing power of a dollar that Brian saves today will be worth 48 cents in ten years (pre-tax)…[and, as such,] he and his wife try to prepare by saving as much as they can, in an uphill struggle against the future – but it gets worse.
• 15 years from now, when Brian turns 75, Social Security payments only have 37% of the purchasing power that they do today – and the dollars saved to make up the difference in purchasing power also only have 37% of the purchasing power.
• 20 years from now, when Brian reaches age 80, Social Security payments only have 27% of the purchasing power that they do today – and the dollars saved to make up the difference in purchasing power also only have 27% of the purchasing power.
• Brian’s wife has a bigger problem than Brian does because, on average, women are younger than their husbands, and will live for longer, meaning Angela could easily have ten or more years of inflation and financial repression exposure after Brian has passed and 30 years from now, Angela’s solo Social Security payments may only buy 14% of what those payments would buy today – while the dollars saved 30 years before might have only 14% of the purchasing power they have today – pre-tax, even after having been invested at market rates for 30 years.

What makes this bleak scenario all too likely is the other side, and the financial interests of the sword-wielder. Because of 30 years of systematic inflation-index manipulation, the government is saving 86 cents on the dollar when it comes to retirement beneficiary payments. That fantastic, incredible, unpayable $14 trillion in national debt from 2011 is worth only about $2 trillion in inflation-adjusted terms by 2041. Thus, the impossible numbers of unfunded obligations, the $62 trillion and more – turn out to be possible after all.

From a very cold, impersonal, mathematical perspective – the steady power of exponential mathematics was simultaneously applied from two different directions to quite effectively deal with the seemingly impossible 1-2 combination of current debts and promised future payments that are rapidly increasing. From the self-serving perspective of politicians seeking to stay in power there is a compelling political logic to choosing a slow and highly technical deceit that most voters will never fully understand, as opposed to repeatedly voting to reduce retirement payments in the open (these political considerations are covered in more detail in the “Inflation Index Manipulation” article linked above). From the perspective of the tens of millions of current and future retirees, [however,]… there is all too likely to be an intensely personal tragedy, repeated in city after city across the U.S., as well as in other nations. Honest hard-working people who played by the rules their entire lives, who made a lifetime of contributions, who did everything they were supposed to do in order to enjoy a pleasant and prosperous retirement – find themselves facing impoverishment in their later years, caught in a multi-sided financial trap with seemingly few ways out.

This is unfair, it is an outrage, and it is just plain wrong. One solution may be to scream and shout and spread the word, and if enough people do it [perhaps] that could help. The situation – and the math – being what they are, however, the most practical and effective solution may be to leave the conventional retirement investing box altogether, move to a different level of understanding, and learn to flip the government’s mathematics of retirement destruction into a personal arbitrage opportunity for building safety and wealth.

The Triple Risk For The Military, Teachers & Other Public Sector Employees

The greatest danger of all is reserved for those who currently still serve the public in their careers: military personnel, police, firefighters, teachers and the many other public sector workers. (While they fall in a different category, the millions of private sector employees whose incomes are also explicitly tied to official inflation indexes are also at risk.)

As the public workers face the severe challenges in making retirement investments in an intertwined world of financial crisis and Financial Repression, what may appear to be their greatest benefit relative to many in the private sector, may instead turn out to be the lead weight that drags them down. The advantage – and also the problem – is that they have a job and source of income that is (generally speaking) more secure than the uncertain prospects faced by many in the private sector. However, in these days of financial strain, unless they get a promotion, their pay is going to be limited to increasing with the rate of inflation. Much like Social Security beneficiaries, the only raises they will receive are those associated with the official index for inflation. Indeed, because they are paid by the government, public sector worker salaries come out of the same pool of money as entitlement beneficiaries, and will effectively sink or swim along with the entitlement beneficiaries.

Let’s consider the total challenge that is faced by a soldier, firefighter or teacher who is trying to prepare for retirement in 10 or 15 years…In an environment of Financial Repression, they face

• steady impoverishment from the first edge, that comes in the form of a declining purchasing power for future retirement benefits. Like Brian and his wife in the previous illustration, they face the danger that their public pension may have only 48% of its current purchasing power in 10 years, or only 27% in 20 years,
• steady reduction in the purchasing power of their savings from the second edge. They face the danger that a dollar they invest today to offset their benefits falling by half in 10 years, will itself only have half the purchasing power that it does on the day they first invested.
• steady financial squeeze on their savings because their income is explicitly tied to inflation indexes so, as public employees attempt to save ever more money, their household expenses (all else being equal) are likely to be rising as a percentage of their income each year, which translates to less money being available to save each year. This then places them in the situation where 1) their ability to save diminishes every year along with the purchasing power of their salaries; 2) the purchasing power of their savings declines each year; and 3) the purchasing power of their public pensions declines each year.

The above may sound like a horrible example of Murphy’s Law in action, but there is no coincidence here…The governments of the Western developed world are broke, and have no way out, unless they make some radical changes…Governments have massive current debts, along with impossible spending burdens ahead. The largest components of those spending burdens are salaries for public sector workers and transfer payments for entitlements – each of which are inflation-indexed. The “magic bullet” of manipulating the inflation indexes to steal from savers, public workers and retirees is what makes the math work.

Because they have three separate exposures – salaries, savings returns and retirement benefits – public workers face the likelihood of having three distinct “shots” taken at their current and future standards of living – this year, next year and every year thereafter.

The Choice Between Impoverishment & Finding New Solutions

While there is a significant chance of a financial and economic meltdown when it comes to the governments of the West, particularly if the euro and European economy were to collapse – there is no certainty of a meltdown. This meltdown may look inevitable to some people when we consider current laws and the way the banks and economies are currently structured, however, for personal financial survival, it is also essential to keep in mind that the rules are what the government says they are. Think of governments as being enormous, dangerous beasts who have been backed into a corner and are fighting for their lives. Bloodied, wounded beasts with full control over not only what the language of the law reads – but perhaps even more important – which laws are enforced and how they are enforced with how inflation-indexing works being only one example.

As we are already seeing in Europe [and] the U.S., the general governmental reaction to the increasing failure of government policies is not to say “we screwed things up, we’re all resigning in shame and here is your power back and a return to sound money”. Rather the government’s reaction to its own failure is to try to ratchet up its own power in the name of emergency, and to increase its control over its own citizens in the process.

The use of Financial Repression to emerge from enormous debt levels is not theory – it is proven history. It is what worked the last time the governments had this level of debt outstanding. The situation is worse this time around, but the double-edged sword of Financial Repression is already being aggressively wielded today by the US government against its own citizens. This can be plainly seen when we compare the real cost of living and how that changes on an annual basis in comparison to either returns on savings or the official indexes that are used to pay salaries and entitlement benefits. In my opinion, there is no question that the net result is that we are not being adequately compensated for saving our money, and that standards of living are falling for people who are completely dependent on payments that move exactly with official government inflation indexes…

There is an alternative, however, and that is to seek out strategies that are thoroughly nonconventional from a meltdown perspective, as well as in comparison to normal financial planning. Perhaps the best approach is to say: “I don’t know what the future will be, so I want a strategy that protects what I have if it’s meltdown, with a strong upside potential and I want a strategy that protects what I have if it is financial repression, with a strong upside there too. What I want is a strategy that works for me both ways.”

A continuation of Financial Repression into the future will likely severely damage many conventional long term investment strategies. There are the direct effects of the first edge, which means fixed income investors steadily lose the value of their portfolios to inflation.

It is the second edge of Financial Repression, however, that is the deadliest for traditional investment strategies…Baby boomers have been buying stocks which are absolutely dependent on growth in consumer spending in order to fund their retirements, with an intention to sell at the very time the Baby Boom is reducing spending in retirement, not taking into account that age-driven reduction in Boomer spending will slash much of the value of stocks that depend on growth in consumer spending. This then creates a loop as reduced investment values lead to reduced retirement spending ability, which further reduces investment values, and so forth. If retirees and public sector workers – along with inflation-indexed private sector workers – have falling real incomes because of inflation-index manipulation, then this has a devastating effect on consumer spending growth, which…then means that a stock market priced for never ending growth is radically overvalued, and subject to a punishing and long-term decline.

The repression may or may not be successful at preventing a total financial meltdown. Crucially, however, meltdown investors must understand that if currency collapse is dodged, even if there is a sustained but high real rate of inflation that is deliberately deployed as part of a strategy of Financial Repression, part of the very design of the playing field and tax structure will likely be to squeeze out and crush the assets of those pursuing simplistic and traditional meltdown strategies. The government actively makes the rules, and history shows that in times of emergency, motivated governments change rules very quickly on a wholesale basis. Unfortunately, however, too many people mistakenly believe that a desperate government that is scrambling to prevent financial collapse will merely passively maintain the current rules.

As close to financial security as can be found in these perilous and volatile times can best be achieved through pursuing unconventional strategies designed to handle both repression and meltdown.

* http://danielamerman.com/articles/2011/DoubleRb.html

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A new financial policy initiative known by the label “Financial Repression” may soon become our worst nightmare. ‘Repression’ rhymes with ‘depression’ which could be what we have to look forward to as rampant price inflation and permanently lower living standards take hold. Get ready to be conscripted into a citizen army assembled for the greater cause of saving the nation from being swamped by a tsunami of debt. Let me explain. Words: 1585

2. Attention America! Your Surging Debt Will Eventually Suffocate You

Our empirical research ( Growth in a Time of Debt) on the history of financial crises and the relationship between growth and public liabilities shows that burdens above 90% are associated with 1% lower median growth – and the United States’ debt level is currently hovering around 90% on a gross basis and 60% netting out assets. Politicians like to argue that their country will expand its way out of debt but our historical research suggests that growth alone is rarely enough to achieve that…[given] the debt levels we are experiencing today…[As such,] we need to be cautious about surrendering to the “this-time-is-different” syndrome and decreeing that surging government debt isn’t as significant a problem in the present as it was in the past. [Let us explain why.] Words: 1175

Americans spend more time planning their vacations than their retirement and this is the reason why 1 out 7 baby boomers are going bankrupt. With people living longer and spending as much as 30 years in retirement, if you want to maintain a moderate standard of living, it is essential to plan your retirement well in advance to secure your golden years.This article outlines 6 ways to do just that. Words: 665

So says Arthur Adams (http://www.ampminsure.org/) in edited excerpts from his original article.

Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!) has further edited ([ ]), abridged (…) and reformatted (some sub-titles and bold/italics emphases) the article below for the sake of clarity and brevity to ensure a fast and easy read. The authors’ views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

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Adams goes on to say:

Unfortunately, very few are concerned about their retirement years and are unaware of the ways they can be harassed if they have debts during this time. Pre-retirement planning, including having all the necessary insurance policies in place, is a necessity if you want to stay on top of your finances. Here are some retirement planning tips:

1. Start saving early: Whatever step you take to repay your debt obligations while you’re young, you should make sure that you start saving early for your retirement. You should save at least 10% of what you make in a month so that you can build the emergency fund that you can fall back on during tough economic times. The rise in the number of bankrupt seniors in the US is solely due to the number of people who are not saving when they should.
2. Know your retirement needs: Your needs keep on changing with time and when you retire it will change a lot as you’ll not tend to go out as often as you used to earlier. You should determine what you may need in order to formulate a plan that can help you meet all your retirement needs. Take charge of your financial future so that you don’t take wrong steps in the long run.
3. Contribute money to your workplace 401(k): If your employer offers you a 401(k) account… [then take full advantage of the opportunity and]contribute [to the maximum allowed] and irrespective of the matched contributions by your employer. Also, don’t withdraw money from this account as and when you need as this may become chargeable before your retirement age.
4. Get adequately insured: As you’re ageing it is more likely that you wll be prone to disease and accidents. The only way you can stop burning the hole in your wallet is by getting yourself basic insurance policies [such as] health insurance and auto insurance. Get enough coverage so that in the event of a mishap you don’t shell out… [more money than you can comfortably pay].
5. Allocate money to an IRA: An IRA or an Individual Retirement Account is yet another retirement plan that can help you lead a debt free retired life. It is best if you can put up to $5500 a year into the IRA account and if you’re 50 and older you can contribute even more. IRAs offer you tax benefits but make sure you don’t withdraw money from this account whenever you want as this will nullify all benefits and you may even be subject to taxes.
6. Determine basic investment principles: How you save your dollars is equally important as how much you can save them. As you’ll be living on a fixed income, you should always consider the basic investment principles following which you can make money by earning profits. Choose the best asset that can ensure maximum returns and minimum loss. You [should use] an investment advisor…[to] get expert advice and [make full] use it while taking the plunge into the investment market.

Conclusion

If you don’t want debts to mar your golden years, you should follow the steps mentioned above. While you’re working, get help from a debt professional so that you can reduce/eliminate all your financial worries while you’re earning your bucks. Don’t delay this entire debt payoff method till you reach your retirement age and also check the insurance coverage to make sure that you’re adequately covered.

Editor’s Note 

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2. Is $1,000,000 Enough to Provide for a Successful 30-year Retirement?

5. AARP Survey: Golden Years Appear Grim to Aspiring Retirees

 

An AARP survey of over 5,000 American workers aged 50 or older has confirmed…that the Great Recession has radically changed the financial situation for many aspiring retirees and that the outlook for their golden years now looks grim. It seems that counting on their home equity to finance a life of leisure didn’t exactly work out as planned. [Let's review the survey's findings.] Words: 400

 

6. 5 Places to Retire and Rent for Less Than $500 Per Month

 

 

 

Housing is likely to be one of your biggest retirement expenses. One way to approach your search for the ideal overseas retirement haven is to focus on retire-overseas choices where housing is cheap. [Below I present five such places for your consideration.] Words: 1040

 

7. Life Insurance: a Pot of Gold or Ready Cash?

 

A life insurance policy is intended to provide your family with a sizable amount of money should you meet an untimely death and, as such, can be said to be a something of a an ultimate bonanza – a pot of gold, if you will. Most people, however, think the only way to get money from a life insurance policy is to die but there is another way should your circumstances change and that is called a life settlement. In this article I provide you with some insider insights on how to go about negotiating the maximize payout on such a settlement. Words: 851

8. 75% of Americans are in Deep _ _ _t!

Rising education and medical costs, on-going credit card interest payments, well used personal lines of credit and large mortgage debt and home equity loans – most a penchant for living beyond their means – is keeping 75% of American households in some degree of debt. Take a look and then pass it on to your friends, neighbors and co-workers.

9. 2 Ways to Reduce Your Debts Using the “Snowball” Method

 

 

What is the best way to reduce debt? The most-efficient means is probably the snowball method. There are two main variations of the snowball method, but you must consider your personality to determine which of the two is right for you. [Let me explain.] Words: 1251

 

10. 10 Money Ideas That WILL Change Your Life

 

 

 

Frugality often gets a bad rap. Many people misunderstand frugality and assume that it’s nothing more than being “cheap” when, in reality, frugality is making sure that you get the most from the money and resources you have, even if they are limited. [Here are 10 ways to do just that.] Words: 1132

A life insurance policy is intended to provide your family with a sizable amount of money should you meet an untimely death and, as such, can be said to be a something of a an ultimate bonanza – a pot of gold, if you will. Most people, however, think the only way to get money from a life insurance policy is to die but there is another way should your circumstances change and that is called a life settlement. In this article I provide you with some insider insights on how to go about negotiating the maximum payout on such a settlement.

 Arthur Adams (http://www.ampminsure.org/life.html)

Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!) has edited the article below for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

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Adams goes on to say, in part:

Many changes in your life may compel you to choose a life settlement and you can do one of three things:

1. keep your life insurance policy as a form of investment and reduce the amount of coverage,
2. let your policy lapse or
3. surrender it in order to get the cash surrender value – called life settlement.

Many companies purchase life insurance polices as an investment paying you the upfront fees and then undertake to make payment of the premium amount. The money that they will pay depends on various factors but it usually is about 15% of the face value of your policy although this can be negotiated higher if you take the right approach as discussed below.

Why spend time surfing the internet looking for informative and well-written articles on the health of the economies of the U.S., Canada and Europe; the development and implications of the world’s financial crisis and the various investment opportunities that present themselves related to commodities (gold and silver in particular) and the stock market when we do it for you. We assess hundreds of articles every day, identify the best and then post edited excerpts of them to provide you with a fast and easy read.

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You need to know that you cannot sell each and every life insurance policy:

• the age of the policy holder has to be 55 years or more
• the life expectancy of the policy holder has to be between 2 and 12 years
• the insurance policy must be transferable and
• the policy should be either a variable life insurance policy, universal life insurance policy, term life or second-to-die policy.

By selling off your policy, you will get less money than if you had continued the policy until your death and, therefore, you should be VERY cautious when arranging a life settlement. It is EXTREMELY important that you make yourself aware that the commission on a life settlement can be as high up to 33% but that the insurance agent and the insurance company who is buying your policy negotiate the actual commission payout  to the client between themselves and that this is hidden from the client.

In life settlement discussions with an insurance agent keep in mind that he/she will always recommend that you accept a settlement payout from a life insurance company from which he/she will get the greater share of the available commission – and that company will most often be the issuing company – but that there will be other interested buyers of your policy. Therefore, so as not to be taken advantage of in such a brazen manner I recommend that you approach such a settlement payout process as though you were buying or selling a car!

In the all important negotiation process, may I suggest the following approach:

1. Tell your advisor that:

• you know what the payout commission is on your particular policy and, as such, are looking to get the maximum payout settlement and that
• you will be getting competitive quotes from other life insurance agents as well as him/her.

2. Get settlement payout offers from three or more other life insurance agents.

3. Negotiate with all the agents previously contacted to see if they can exceed the best offer.

4. Settle on the agent who will offer you the highest settlement.

Keep in mind that life settlement is not meant for everyone. Be sure that your life insurance needs have been properly fulfilled and you have carefully taken into consideration the advantages and disadvantages before making any decision. That being said, should you decide on pursuing a life settlement make sure you realize a maximum return. In conclusion, as I said in the opening paragraph, a life insurance policy can either be your family’s pot of gold or give you a potentially lucrative cash settlement.

Editor’s Note:

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 Related Articles:

Imagine that you could pay for a service online without accruing a mountain of fees. Imagine being a retailer and having the ability to take your customer’s money – and keep all of it. Sounds impossible, doesn’t it? Well, now it’s not. Introducing Dwolla [- a better alternative to credit cards and Pay Pal for everyone involved, except the banks. Let me explain.] Words: 615

So says Melanie Epp (http://blog.yourmoney.ca)  in edited excerpts from her original article*.

 Constructing a portfolio for the retirement years requires one to focus on portfolio risk or uncertainty while not neglecting return. If the portfolio asset allocation plan is too conservative, the return will not meet lifestyle expectations. Inflation is again on the rise and this needs to be taken into consideration when putting together a retirement oriented portfolio. Below is a combination of index ETFs that project respectable returns while holding down portfolio volatility. Words: 455

So says Elizabeth MacBride (www.wealthfront.com) in edited excerpts from two articles* which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has further edited ([ ]), abridged (…) and reformatted below for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

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McBride goes on to list the 10 signs below:

1.  The investment advisor doesn’t focus specifically on investment advice

Some advisors practice much like the country doctor of old, promising to do everything under one roof, from investment advice to financial planning to tax advice to insurance products. Rare is the firm that can do all those things well; rarer still the single person. In fact, a good advisor will ask you a series of tough questions, ascertaining your goals to make sure she is the right person for the job.

A good investment advisor probably will ask whether you have a solid financial plan, will talk to you about taxes, and may even prompt you to seek outside help but her main focus will be helping you earn returns on your money, and she’ll have the specialized skills required to develop a customized plan of asset allocation and a strategy for finding the best investment products in those asset classes.

2.  The advisor does not speak openly about returns

If your advisor doesn’t speak openly and proudly of the risk-adjusted returns he or she has earned for investors, time to run for the door…Some advisors will say that because they customize portfolios, they cannot provide a composite return. If you hear that, ask for returns on similar portfolios…

What you should be bringing to the table is a reasonable expectation of what good returns look like, especially when a portfolio has been designed to minimize risk. We would all like a compounded, risk-free 8-10% return [but that is] not going to happen. Many investors suffer from the classic investing mistake of focusing exclusively on recent returns or ‘performance chasing’ [but they] must try to understand HOW that return was achieved and be very aware of the risk taken (with volatility only one measure of risk).

3. The advisor touts service instead of returns

Advisors may try to cover up a history of poor returns – or the lack of well-thought-out investment strategies — with a focus on handholding and service. Bedside manner may well be important to you but are you willing to pay the fairly high fees – 1-3% of assets – that many advisors charge for a nice bedside manner? What you really should want to pay for are skills that will help you earn a good return on your money.

4.  The advisor promises to customize a stock portfolio for you

An advisor who tells you that she customizes a stock portfolio for her clients is selling you a bill of goods. Rather, advisors should customize an asset allocation for you, and then be focused on buying the best managers for each asset class.

Consider what a customized portfolio might mean: An advisor who favors one client over another with “better” stocks would be acting extraordinarily unethically toward less-favored clients. The stock-customization sales pitch is especially a red flag if the advisor is selling herself as both a financial planner and an investment advisor [because] it takes so much time to be both a stock picker (i.e. analyze corporation’s financial statements, etc., if done correctly) and be a financial planner to retail clients.

5.  The advisor pushes products in which he or she has a vested interest

In the Byzantine world of financial service fees, it’s sometimes hard to tell how and how much an advisor is getting paid. Advisors who receive their compensation from mutual fund companies may be biased to sell more funds to you, just as advisors employed by a financial institution like a bank might be more likely to sell that company’s products, even if they cost you more. A fee-only advisor’s incentive might be to take too much risk, so that your assets grow faster and he earns more in the short term. You’ll need to equip yourself to recognize this sign of a bad advisor.

6.  The advisor is overly reliant on mutual funds

Many mutual funds are expensive… Moreover, mutual funds don’t offer the transparency that investors (and good advisors) need in order to determine which money managers are skilled, not just lucky.

A growing chorus of experts is recognizing that many mutual funds are a bad deal for investors; an advisor who hasn’t kept up with the shift toward low-fee investments, such as ETFs and index funds, isn’t doing his job…

7.  The advisor cannot back up his investment strategies with academic research

…Investors should look for an Investment Policy Statement that outlines how investment decisions will be made, a written plan that explains the investment strategy and a plan for rebalancing the portfolio in case of a major market event… Consider how much better you…[feel] watching the headlines if you had a copy of such a plan.

The investment strategy should be backed up with the growing body of academic research on investing. You don’t have to understand all of those theories, but you need an assurance that your advisor does.

8.  The advisor custodies assets in-house

If you’re working with an investment advisor who directly manages your money, but the money isn’t at a financial institution that sends you statements directly, you may have a problem. Outside custody, as it’s called, provides a level of protection for your money. How can you tell if your assets are custodied outside? Your statements should be coming from a financial institution that you can find and contact…

9.  The advisor is not a fiduciary

Fiduciaries are legally obligated to act in their clients’ best interests. However, many people who call themselves “financial advisors” work for brokerages and operate under the lower suitability standard, which requires them merely to ensure that investments are suitable for the client at the time of the purchase. Many of the financial advisors working for big Wall Street firms are not fiduciaries. Employees of discount brokerages also are not fiduciaries.

10.  The advisor is AWOL and/or condescending

…Does your advisor reach out to you regularly to explain how your investments were holding up and what…[is happening] in the equities market means for your portfolio?…Part of an advisor’s job is convincing you not to bail out of the investment plan when your emotions are pushing you to make a decision that’s likely harmful in the long run.

Communication is a two-way street. All of the experts I interviewed agreed on this: An advisor who doesn’t take the time to listen to you is not doing his job. If your advisor takes the approach that you should just leave everything to him and not worry about it, look out… After a relationship develops, clients sometimes do turn more responsibility over to an advisor or ask fewer questions but that should be your decision, not the advisor’s.

[In addition,] arrogance in an advisor is a bad sign…The relationship [should] be based on humility…It’s OK to say, ‘I’m an investment professional, but I don’t know where the market is going.’”

In conclusion

Now is the perfect time to:

1. determine if the advisor is selling you services that amount to not much more than a smile or is he/she is offering real substance that will help you meet your financial goals. It is important to hold him/her to the highest standards.

2. take steps to understand how your advisor gets paid…[because] you will [then] be aware if the advisor is subtly, or even not so subtly, pushing you to buy investments that will cost you more – and pay them more.

3. ask the advisors to inform you of all of the fees and costs of your investments – in writing – including an estimate of the transaction costs such as brokerage commissions and bid-ask spreads within mutual funds or other pooled investment vehicles.

*https://www.wealthfront.com/blog/10-signs-bad-investment-advisor/

*https://www.wealthfront.com/blog/10-signs-bad-investment-advisor-part-ii/

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2. 15 Criteria for Choosing an Investment Advisor

An investment advisor friend of mine recently asked me to summarize for him the criteria I would use if I were looking to identify an investment advisor to work with and I came up with 15 characteristics I would look for in what for me would be an ‘ideal investment advisor’ which I would like to share with you. Words: 679

3. Is It Time To Fire Your Financial Advisor?

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4. How Not to Outlive Your Nest Egg 

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Objective and independent thinking is increasingly important to investing and trading success, particularly in the current and prospective economic and financial market times. How do you score yourself against the 15 ‘successful people traits’ outlined below?

So asks Aimee Groth (www.businessinsider.com) in an article* regarding how successful people think as put forth in John C. Maxwell’s New York Times bestselling book, How Successful People Think  which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has further edited ([  ]), abridged (…) and reformatted below  for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included so as to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

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Groth goes on to say, in part:

1. Thinking is a discipline – work at it. Consider developing a thinking schedule…[setting] aside a half day every two weeks, a whole day every month, and two or three full days every year.
2. Figure out where you need to focus your energy, and then use the 80/20 rule. Devote 80% of your energy to the most important 20% of your activities. Remember that you can’t be everywhere, know everyone, and do everything… Avoid multitasking: it can cost you 40% efficiency.
3. Expose yourself to different ideas and types of people. [Be] selective about spending most of your time with people who challenge you.
4. If you have an idea then follow through. “Ideas have a short shelf life. You must act on them before the expiration date.”
5. Thoughts need time to develop. Don’t just settle on the first thing that comes to mind. Remember the last time you had a brilliant idea at 2 a.m., but it sounded sort of ridiculous when you woke up the next morning? Thoughts need to be “shaped until they have substance” and need to stand the test of “clarity and questioning”.
6. Collaborate with other smart people. Thinking with others yields higher returns. It’s like giving yourself a shortcut. That’s why brainstorming sessions are so effective.
7. Reject popular thinking (which often means not thinking at all). Too many people act, hoping that others have thought things through first. To reject popular thinking you must be OK with feeling uncomfortable. Also remember that right now, there are a bunch of other people out there deciding to think for themselves — and they are the ones who are successful.
8. Planahead, while leaving room for some spontaneity. When you’re strategic, you reduce your margin of error. Simply having vague ideas of where you are and what you want to accomplish will get you no where. The keys to being strategic are: 1. break the issue down, 2. ask why the problem needs to be solved, 3. identify the key issues, 4. review your resources, 5. put the right people in place. [As] Henry Ford once said, “Nothing is particularly hard if you divide it into smaller parts.
9. To think differently, do different things. Try new routes to work, meet new people, read books you might even consider boring. The key is exposure to new ideas and ways of life.
10. To appreciate others’ ideas, you need to value other ideas.You can’t think you’re always right. Give other concepts a chance. Have an agenda — for the day, and when you meet with people.
11. Take time to plan out your weeks, months, and long-term goals — and then they follow through…Don’t walk into meetings, parties and coffee dates blind…Decide what you want to learn from people before walking through the door.
12. [Undertake] reflective thinking to give you perspective and confidence in your decision-making skills. If you’re not reflecting, it’s holding you back more than you think. As Socrates said, “An unexamined life is not worth living.”
13. Get over negative self talk. Winners think in terms of “I will” and “I can.” Smart people don’t see limitations, they see possibilities. Former baseball star Sam Ewing once said that “nothing is so embarrassing as watching someone do something that you said could not be done.”
14. Creative people are dedicated to ideas. They embrace ambiguity, don’t fear failure, and hang out with other creative people.
15. Naturally optimistic people find it hard to be realistic thinkers. A realistic perspective allows you to get close enough to a problem in order to tackle it. Facing potential consequences also helps you be more efficient, and it gives you credibility. To become a more realistic thinker, you must: 1. appreciate the truth, 2. do your homework and get the facts, 3. think through the pros and cons, 4. consider the worst-case scenario, and 5. align your thinking with your resources.

At the end of the day, it’s important to remember we can all change the way we think. “Learning how to master the process of thinking well leads you to productive thinking. If you can develop the discipline of good thinking and turn it into a lifetime habit, then you will be successful and productive all of your life.”

*http://www.businessinsider.com/how-successful-people-think-john-maxwell-2011-9#

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