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Jobs, jobs, jobs…while the economy seems to be improving, those who have stumbled upon the ranks of the unemployed find little comfort in recent statistics (i.e. three months of US housing price increases). Even though many economists project slightly positive Gross Domestic Product growth in the US  during the third and fourth quarters of 2009,   it will still continue to feel like a recession to millions across this country because the labor market is usually one of the last economic indicators to show improvement in an improving economic environment.  With this country on a course to see a double digit unemployment rate according to many economist estimates, is there any reason to have hope?  The answer is absolutely! 
 
Whenever I discuss financial tips/strategies for the unemployed, many in the audience respond with bewildered looks coupled with a “huh?!”  Or I get the classic oversimplified response which states, “FIND A JOB!”  This is great advice, but there are other financial strategies for those who find themselves unwillingly placed into the ranks of the unemployed. 
 
1.      Get Rid of Foolish Pride – Many people feel that their job is an integral part of their identity.  They take pride in their career and being laid off or fired can be a huge blow to the ego.  I have spoken with many who experience a sense of shame upon finding themselves unemployed.  This shame can lead to medical ailments such as depression or stress.  Going into a shell or becoming the life of the party to mask the reality of your situation from your friends are both very normal occurrences.  Picking up the dinner tab with friends, shopping sprees, and trying to put on the facade that things are still normal is a very destructive and expensive habit. Not only are you using money which should be kept in your savings, but you are depriving yourself of a very important resource…your network. 

Your network of family, friends and acquaintances who can help you find employment is often more expansive than you realize.  Very often your friends and family are more likely to work harder for you to find employment than random strangers who read your resume on websites and with employment agencies.  The more people who know about your situation, the more support you will have from those willing to go the extra mile to provide assistance.  Warm referrals, placing resumes directly into the hands of people who can make hiring decisions, and constantly monitoring the employment scene are more likely to occur by people who care about your future.  In addition, using social networking sites like Linkedin, Facebook, and Myspace can magnify your outreach to others who can assist you in your search. 
   
2.      File for Benefits – There are some unemployed who feel so disillusioned and embarrassed by their situation that they are reluctant to file for unemployment benefits.  However, there are measures in the recent stimulus bill that are designed to help those who have lost their jobs which include:
•         lengthening the period which people can be eligible for unemployment benefits.
•         suspending the taxation of benefits up to $2,400
•         providing a 65% subsidy to cover COBRA health insurance premiums for up to nine months
•         increasing the maximum monthly food-stamp benefit by 13%
 

3.      Join the Ranks of the “Under Employed” – Having “a” job is better than having “no” job.  The mortgage company or your landlord will not stop collecting rent just because you lost your job.  If you find it hard to find a job in your first field of choice, you must begin to look for the next best thing.  There are thousands in my hometown of Detroit who are in this very predicament…they were laid off from the automobile industry and have no other training but that which applies to a suffering industry.  If you can, find a job that will at least help pay bills you can remain above water. While you are working as an “under-employed” individual, consider other options that you might pursue while you are working – options that will expand your scope of career choices and therefore make you more marketable.  For example, community colleges offer inexpensive classes and training, non-profits offer free and inexpensive certification courses (consult your local politicians office for a list of community resources), and the internet has made the new education and training search much easier. Never look at a temporary job as a negative or a step backwards; think of it as a positive event that buys you the time to look for the job of your first choice while allowing you to pay your bills. 

4.      Get CHEAP! – Your pot of funds now has a finite ending and every penny spent gets you one penny closer to that scary ZERO figure! Now is the time to design a budget for your household, tighten your belt, use coupons, buy food in bulk, use only your ATM machine to avoid charges, and eliminate all impulse spending.

Lowering your interest rates can assist in lowering your monthly bills so inquire about lowering your interest rates on your credit cards or your eligibility to refinance your home.  Fannie Mae has reported that up to 50% of individuals who own a loan from Freddie Mac or Fannie Mae and who are eligible for a loan refinance have not taken advantage of the opportunity to get a lower interest rate. 

Here are a few other quick tips that will allow you to cut costs:

• Cut all unnecessary luxury spending that create monthly bills such as cell phone bills (use a house phone and carry two quarters), gym memberships (work out at home), garage parking in the city (park on side streets), and magazine subscriptions (read articles on the internet for free at the library).
• Only take on additional debt in the case of an emergency. 
• Talk to your accountant about researching all legal tax strategies that you can utilize.
• No more loans or money gifts to family members and/or loved ones. 

5.      Make Job Searching a Job – If you are unemployed, your new job is to find a job.  Create an organized database listing all places that have received your resumes, the primary contact person and and an expected date to hear from them.  Rank them in your database according to the likelihood of receiving a yes.  Start your search early in the morning and set as many appointments as possible.  Schedule meetings and appointments on a daily basis since the more time that you spend away from home the more productive you will be and less time will be spent watching daily talk shows. 
6.      Stay Healthy – Even with the 65% COBRA subsidy from the government, maintaining health insurance can be costly.  Whether you elect to maintain health insurance or not (I always advise against going without health insurance) make sure you are taking every precaution to remain healthy. Eat more healthy foods and less junk food.  As we all know, junk food is not only high in calories but it is usually filled with sugar which leads to more costly trips to the dentist.  Work out at least three times per week for a minimum of 30 minutes per day, wash your hands regularly, get plenty of sleep, and take up yoga at home.  Staying healthy is not only good for the body, but it helps to maintain a positive/confident outlook that will make for a more impressive job interview. 

7.      Don’t Touch Your 401K (if you can help it) – Try your best not to have a knee jerk reaction to raid your 401K or company retirement plan.  Keep in mind, just because your statement reads “$50,000” does not mean you have that much to withdraw.  If you consider the federal, state, and perhaps city taxes on the funds that you have invested along with the 10% early withdrawal penalty and the possibility of deducting any matching funds contributed by your company (if you are not fully vested), that $50,000 could easily turn into  $25,000.  Raiding the company retirement plan should be the absolute last option. 

8.      Investing is Not a Priority – If you have other investments, don’t use this as a time to check your portfolio every minute hoping that the $10 stock turns into the next Google.  This is unnecessary stress in your life.  If you were putting funds into an account monthly, those funds should now be diverted into your checking or savings account with the most access.  Liquidity is your best friend in these times of hardship and stocks are not liquid.  Even if you have your funds i n a standard, non-qualified brokerage account you may not have to pay a penalty for the sale of a stock but you have tax liabilities if you have gains.  As with the 401K, stop your investing in these funds, but don’t rush to liquidate these funds at first.  However, if you are forced with the choice between paying rent and keeping a position in a stock, and you have exalted ALL other options, feel free to sell the stock. 

9.      Decide Which Bills to Pay First – After you have exhausted all options, if you are unemployed there may be a time to make hard decisions about which bills take priority.  This should not be determined by which collection agencies are the most annoying or seem to yell the loudest.  If you cannot pay your light bill you may lose your lights.  If you cannot pay your phone bill you may lose your phone.  However, if you cannot pay your rent or mortgage you will lose your home.  Losing your phone or lights might be a tremendous loss, but not as big of a loss as having to sleep on the street.  I am not suggesting that it is okay to skip any bill payment that you owe as this is irresponsible and negatively impacts your credit; however, when hard times are upon us we must keep things in proper perspective. 

Here are a few things to consider BEFORE you decide to skip a bill payment:

• Have you called the companies before to negotiate a payment plan?
• Have you checked your budget and cut all luxury expenditures to see if you can squeeze out a few extra dollars?
• Do you have any items around the home of value that you would consider selling? Is it time to host that yard sale that you have been considering?
 
10.  Don’t Get Suckered – When desperation sits in, financial offers that you would not have considered before now begin to look more attractive. The financial predators are constantly swimming in the waters trying to attract those who are worried, anxious, and concerned that using “traditional” strategies of working hard will not be effective.  These are the commercials that only play during the middle of the day or late at night when the typical employed person will never see them. They offer you overnight fame by purchasing the most effective real estate system ever created or magical options trading software that can never be incorrect.  For a small  fee you will be able to purchase your financial freedom…what a deal!  Your money is too valuable to waste on false notions of fast prosperity.  

11.  Have Faith! – What other choice do you have? Faith is not waiting on a unicorn to prance into your life or a rainbow to form which signifies the end of your misery.  Faith is half believing and half acting on that belief.  People behave according to what they believe will happen.  So if you believe that things will continue to be bleak, your job search will weaken and this will lessen the chances of finding a job.  However, if you believe that your future will be bright, and you hold onto this positive outlook, you will be more likely to do the work that is necessary to find employment.  I promise this to you, if you hold on to the belief that you will find a job, and aggressively pursue that belief, you will survive these hard times!

Given today’s economic challenges, this is not the time to start panicking. Instead we must carefully plan our next financial steps to ride out this storm intact. The steps outlined below are tangible solutions to guide you and your loved ones in making sound financial decisions during this uncertain time. Let one of Optimum’s qualified advisors work with you to start your tomorrow today!

At one time or another we’ve all heard the ominous, monotone and quite frankly annoying tone that typically interrupts our favorite television or radio program to let us know these famous words—”This is a coordinated monthly test of the Emergency Alert System (EAS). If this had been an actual emergency, official messages would have followed the alert tone. This concludes this test of the Emergency Alert System.” We are then returned to our regularly scheduled program already in progress. Like EAS, today’s economic crisis may initially frustrate and confuse us, but we should not panic thinking the world is on the verge of total collapse. Therefore we must heed sound instruction and most importantly use this as a signal to adequately prepare and protect our financial futures.

Rising foreclosures, decreasing values of retirement plans, tight credit lending, plummeting stock markets and bank recovery plans have experts saying we are experiencing our biggest financial emergency test since the Great Depression. But the good news is that all is not lost and we WILL recover if we are patient and diligent enough to ride out the ups and downs of this economic storm.

So How Do I Prepare?

We’ve all heard the advice, “Save for a rainy day” but lately today’s economy makes me wonder if we should be saving for a monsoon! With that being said, preparation is the key to riding out any storm, including economic storms. Most Floridians put together hurricane kits ready at a moment notice with basic survival items just as Californians will have a similar earthquake kit and New Yorkers may have one for adverse winter weather. As a person who rode out several hurricanes and tornadoes, I can attest that being prepared helps calm some of the fear and anxiety that often comes with uncertainty. It gives a sense of peace that at the very least, I know my basic needs will be provided. The same is true for our finances. We can be calm about our financial situation during times like these when we’ve taken the time to plan. Our Economic Survival Kits should include the following:

• Develop a written budget that is enforced and realistic, avoiding large purchases unless absolutely necessary and affordable within the budget.
• Ensure everyone is held accountable for following the household plan.
• Contribute to an Emergency Savings account to cover at least 3-6 months (or more depending on your occupation) of your living expenses in a high-yield savings account.
• Create diversified investment portfolios (i.e. retirement acct) with the proper asset allocation according to your individual risk tolerance and market conditions.
• Consider alternative methods for earning extra income to further increase your savings potential (e.g. selling unwanted items on eBay, consignment stores, yard sales, seasonal employment, etc.).
• Consider barter agreements with neighbors, family and friends for babysitting and other services.
• Maintain adequate life, health, disability and property insurance – now is not the time to drop coverage in order to minimize your expenses.
• Prioritize debt repayment with the goal of being completely debt free.
• Establish estate planning documents such as wills, trusts, living wills, durable power of attorney, etc.
• Don’t forget to continue in your efforts of responsibly “giving” to others who are in need, as we remember the proverb, “Give and it shall be given unto you”.

If you’ve already put together your Economic Survival Kit, Congratulations! You’re well on your way to minimizing your economic collateral damage and today’s economy will test your preparation efforts to sustain your family during financial downturns. But I suspect that most of you are reading this thinking, “I don’t have any of these items prepared for my economic future and I’m doomed for failure.” Not so, as there is still time to start putting these things in place. Even if you are only able to place one item in your Economic Survival Kit, it will go a long way in creating stability during these times. The most critical thing to start doing today is changing your bad financial habits (i.e. using credit card for consumption purposes, not saving) and replacing them with sound financial disciplines that will render the greatest results.
One of Optimum’s qualified representatives will gladly assist you with any questions you may have about how the economy directly affects you. Remember, we are in this economic test together so don’t stress knowing that at some point we will return to regular programming.

Many state that the equity market is poised for a strong rally in the long run. They contend that even though we have seen strong performance in the equity markets since March 3rd, 2003, there are still many potential gains that we have yet to see.

Others state that the bond market is very attractive.  They contend that for the next 5 years or so, rates and inflation will remain benign.  Yet others believe that even though rates are at historically low levels, they will continue to decline over the next few years.

What about the real estate market?  It has been on a tear for many years now, and many still believe that “you can’t loose” if you purchase real estate.

I have heard all the arguments and clearly the equity markets are showing the most promise…..with the exception of one other investment category.

There is another area of investment which is not talked about as frequently. This area of investment has TREMENDOUS potential and almost unlimited upside.  Doubling, and tripling your investment in this area would be an enormous understatement.  “What is it?” you ask.

I will give you a clue…you wake up everyday and go to sleep in it.  You eat in it, you take your children to school in it, you attend block parties in it, and many of your family and friends may also live in it.  If you haven’t guessed by now, I am referring to the community.  That’s right…an investment in your community is the greatest investment you can make. By investing in the community, what are the returns for me, you ask? How does one invest in a community? There are many ways you can invest in your community. Let me explain.

Community Businesses

In your community, there are many businesses.  These businesses, if upheld, will bring respectable traffic to your community.  Restaurants, bakeries, schools, libraries, and more are all a reflection of the upkeep and character of the community.  Outsiders often get a sense of the community by the quality of service, experience and ambiance within the local community restaurants and other institutions.  The upkeep of the schools and libraries are all factors looked upon by drive-through visitors. Frequent investment is crucial to property value, and quality of living. Time and money that flows through these community institutions will always be reflected in the property values and ultimately the quality of life for the community’s residents.  So take time to eat in your community restaurants, donate books to your local libraries and schools, and frequent the stores and shops in your community.

Entrepreneurship

How large of a return did Bill Gates, Russell Simmons, or Oprah Winfrey get on their original dollars of investment?  The number is far too large for any ordinary calculator to hold.  Successful entrepreneurship has always been guaranteed to be one of the largest returns on your investment.  So I challenge you to open your own business in your own community.  Seek support from the community and they will often respond positively to your business endeavor.

Education is a key component of entrepreneurship.  Oftentimes an individual has not discovered his or her passion; they have not received the education that provides them with the knowledge and exposure to identify areas that will be most beneficial for them.  Investing in education is a key component to entrepreneurship in your community.  Flourish your mind, and your business will also flourish.

Youth

Investing in the youth of our communities will not only yield enormous returns but returns that are often the most immediate and most fulfilling.  The youth of our communities are crying out for our assistance and support.  The parents and the teachers need our assistance.  Seeing the smile on a youngster’s face – a smile that you helped to create – is one of the most personally rewarding experiences one can have. I personally spend a great deal of time with the youth in my community, and will always continue to do so because I continue to see so many positive results.  How many young Bob Johnsons, Warren Buffets, or Bill Clintons will never reach their potential because we didn’t take the time to invest in him or her?  I urge all to take some time to volunteer at the local school in your community and talk to the children.  Career days, tutor programs, after school programs, and more are all opportunities to stop by and spend some time with the children of your neighborhoods.  They are our future, and investment in their lives is also an investment in yours.

The bible says, “Neither shall the inheritance remove from one tribe to another tribe; but every one of the tribes of the children of Israel shall keep himself to his own inheritance.” (Numbers 36:9) What this means to me is that money made in the community should primarily be spent for the benefit of the community.  So I urge you to think about how you are contributing to your own communities.  If you are not active, then how can you get active?  Many people look to the politicians to create change, and often fail to realize that they can create positive change and movement right in their own communities.  How much time are you putting into the care and upkeep of your community?  Do you throw cigarette butts, chicken bones, and other trash on the streets, yards, or subway tracks?  Participate in your community, donate to your community (time and money), and most of all RESPECT your community.  It will go a long way for you, me, and the American society as a whole.

Written By: Ryan Mack, President of Optimum Capital Management, LLC
Email Questions and Comments to ryan@optimum-capital.com.
(www.optimum-capital.com)

This behavior is not just in this city, however.  You can find exuberant spending habits all over the nation.  In the US, by their 65th birthday, 93% people are either passed or require financial support of family, friends, and/or social security.  This means that only 7% of individuals are able to support themselves comfortably upon retirement.  It seems a shame to think that most in this nation will work for 40 – 50 years only to be dependent.

Our resource allocation really needs a lot of assistance.  A recent survey by AC Nielsen revealed that 28% of Americans have no spending cash after covering expenses.  Out of the 38 countries surveyed, we ranked among the highest in income, but we also ranked among the highest in consumer spending and debt acquisition.  In terms of saving of our assets, we ranked 33rd among the nations surveyed.  Bottom line is…we have to do better!

Each of us has an obligation to our future families and ourselves to be a responsible steward of our finances.  We can’t live like 50 Cent, if we only have 50 cents in our pocket.  We must determine what is important to us, and determine from our values and beliefs what will truly make us happy.  The majority of millionaires are unaffected by pressures of society, and from media hype that attempts to portray what is “cool”.  You will hear about Mike Tyson tipping a waitress $10,000, but you won’t hear about Warren Buffett still living in the same house he purchased with his wife before he made his fortune.  Or the multi-millionaire CFO of a major Fortune 500 company spotted in the Men’s Warehouse purchasing a $200 suit off the rack, then putting his new suit into the trunk of his brand new Honda Civic.

How much do you have left over after you have covered your expenses?  How many miscellaneous expenses are you incurring each month that aren’t necessary?  Do you really need to eat out every day?  When drinking alcohol, while you call yourself a social drinker, are you really drinking because you like to drink?  Or do you accept the 300%-400% markup on a beverage because of pressures of society (heaven forbid that you are the only one at the event without a drink in your hand)?

We each need to budget, plan, and save if we are to be able to achieve true wealth.  We must prepare for the days of necessity.  I will leave you with this Aesop’s fable…

The Ant and the Grasshopper

In a field one summer’s day a Grasshopper was hopping about, chirping and singing to its heart’s content.  An Ant passed by, bearing along with great toil an ear of corn he was taking to the nest.

“Why not come and chat with me,” said the Grasshopper, “instead of toiling and moiling in that way?”

“I am helping to lay up food for the winter,” said the Ant, “and recommend you to do the same.”

“Why bother about winter?” said the Grasshopper; we have got plenty of food at present.” But the Ant went on its way and continued its toil.  When the winter came the Grasshopper had no food and found itself dying of hunger, while it saw the ants distributing every day corn and grain from the stores they had collected in the summer. Then the Grasshopper knew:

Author:  Ryan C. Mack, President of Optimum Capital Management, LLC
Contact: 877-75-TEACH (83224) or info@optimum-capital.com

Step one: Research, Research, and Research

NEVER purchase a stock when you have not done your homework.  Speculative investing is the fastest way to loose your money.

There is another serious problem I have seen everywhere—savings are put into risky investments that turn sour, and soon there is nothing left to pass on to one’s son.  The man who speculates is soon back to where he began—with nothing.  This, as I said, is a very serious problem, for all his hard work has been for nothing; he has been working for the wind.  It is all swept away.  All the rest of his life he is under a cloud—gloomy, discouraged, frustrated, and angry.  (Ecclesiastes 5:13-17)

I can’t tell you how many tips I have heard from self claimed “savvy” investors, “This stock is going to go sky high!  I made $3,000 from ABC yesterday!”  This could be true, and the stock could very well appreciate.  However, I will assure you that you will rarely hear stories of losses.  Only stories of profits made of smart decisions.  It is hard to believe that NO ONE is loosing money.   The bottom line is, don’t listen to or “believe the hype”.  Perform your own due diligences to a company before you purchase its stock.  “Steady plodding brings prosperity; hasty speculation brings poverty.” (Proverbs 21:5)  What does the company do? How well has it been performing? Does it make money? How fast is it using the money that it is making? Does it have interesting products in the product line? How much debt does it have? Is competition already too thick for this start-up to survive (if it is a start-up)?  Do your fundamental analysis of the stock.

Fundamental Analysis–Analysis of security values grounded in basic factors such as earnings, balance sheet variables, and management quality. Fundamental analysis attempts to determine the true value of a security, and, if the market price of the stock deviates from this value, to take advantage of the difference by acquiring or selling the stock. Fundamental analysis may involve investigating a firm’s financial statements, visiting its managers, or examining how a particular industry is affected by changes in the economy. (Dictionary.com)

You don’t need to sign up for a class at your local college, but you should be aware of the basic tools of fundamental analysis if you decide to invest in the market.  A simple 30 minute tour of yahoo.finance.com will do.

Step Two: When Should I Buy?

When I was trading this was a question that we asked every day.  Is this a good entry point, should I wait until it hits this level, or are there a lot of sellers around here?  These questions and many more were a critical part of the job.  We did our share of fundamental analysis, but we also relied tremendously on technical analysis.

Technical Analysis–The study of relationships among security market variables, such as price levels, trading volume, and price movements, so as to gain insights into the supply and demand for securities. Rather than concentrating on earnings, the economic outlook, and other business-related factors that influence a security’s value, technical analysis attempts to determine the market forces at work on a certain security or on the securities market as a whole. (Dictionary.com)

If we looked at a chart, and we liked what we saw, we would invest.  However, remember, we were active traders with great advantages over the typical at-home investor.  My best advice to those of you who want to invest is that if you do your homework, and if you like what you see, then buy the stock!  One of the best methods to purchase any stock is dollar-cost averaging.

Dollar-Cost Averaging– Investment of a fixed amount of money at regular intervals, usually each month. This process results in the purchase of extra shares during market downturns and fewer shares during market upturns. Dollar-cost averaging is based on the belief that the market or a particular stock will rise in price over the long term and that it is not worthwhile (or even possible) to identify intermediate highs and lows. (Dictionary.com)

If you have $5,000 that you want to invest in a stock, an example of dollar-cost averaging would be to invest $1,000 per month for 5 months.  The object here is to be able to buy more shares of a stock should it depreciate, and fewer shares if it appreciates.  Nobody has ever been able to consistently time the market; trying to time the dips perfectly can be a very discouraging task.  Dollar-cost averaging takes the human emotion out of the equation.  Trust me, if you have done sufficient research, and believe in the company’s long run potential, you will increase your odds of being a winner in the end (although nothing is guaranteed in this market).

Step Three: Don’t put all your eggs in one basket.

Once you have researched a stock, and decided that you want to begin your dollar-cost averaging, continue to research other securities that you can purchase.  No one person should ever have too much of any one investment in his/her portfolio.  Too much weight in options, real estate, stocks, bonds, can be very dangerous.  In relation to stocks, many portfolio managers use the 5% limit rule.  This means that no one stock is going to make up any more then a maximum of 5% of any one portfolio.  This is called diversification.

Diversification–The acquisition of a group of assets in which returns on the assets are not directly related over time. An investor seeking diversification for a securities portfolio would purchase securities of firms that are not similarly affected by the same variables. For example, an investor would not want to combine large investment positions in airlines, trucking, and automobile manufacturing because each industry is significantly affected by oil prices and interest rates. Proper investment diversification, requiring a sufficient number of different assets, is intended to reduce the risk inherent in particular securities. Diversification is just as important to companies as it is to investors.

If a stock’s value increases causing it to break significantly above 5% of the portfolio value, shares are sold to decrease the value until it is once again 5%. Conversely, if the stock depreciates significantly, and the manager still believes in the stock, he/she will purchase more shares to increase the amount of stock in the portfolio.  This allows him/her to keep a balance in the portfolio, while not allowing any one stock to gain too much exposure at one time.  I am sure that the employees of Enron, who had most of their investment in company stock, wished they listened to this advice.

Step Four: Stick to the plan!

Before you purchase a stock, you should already have a plan in place.  What is your timeline for this investment?  If the stock depreciates in value, at what price are you willing to say, “Enough is enough”?  How much of a gain are you willing to except before you take some off the table?  Whether you are an active trader, or a long term trader, you need a plan.  There have been many times when I have purchased stock at $10, and I say to myself, “I will sell it if it breaks 9.50 to the downside.”  I don’t just arbitrarily pick this point.  This point is chosen after doing my technical analysis, and being able to discern that this point signifies that the stock is “broken”.  (Broken=A term used by traders referring to the expected sharp decrease in value after a stock has breached a specific technical level.)  There have been times when I have “sold the bottom”. (Sold the bottom=A term used by traders to indicate that they have sold at the lowest possible point of the day, only to unhappily see the stock appreciate.)  However, more often than not if I stick to my strategy, I have made money.  Investing is not a game where you attempt to be right 100% of the time. You simply have to be right more often than you are wrong, and you will make money.  Discipline is a needed trait no matter what form of investing you do.  “He openeth also their ear to discipline, and commandeth that they return from iniquity.” (Job 36:10)

Whether it is dollar-cost averaging or active trading, stick to the plan.  If you are dollar-cost averaging and the stock depreciates a great deal, don’t panic and sell every share.  At this point, you should have done your research and know that you have invested in a quality, sound company.  This could be an excellent point to purchase shares at an economical price, reducing the average cost of your ownership.  Don’t loose sight of common sense, however.  As with Enron, if you hear news that drastically alters your perception of your investment as being investment-worthy, by all means sell the stock.  Take your lumps and get your tax write off against the loss.  As I stated, the investment game does have risks.  I wish it were so, but you can’t win them all.

Step Five: Don’t forget you have invested!

Many times, people invest in stocks and they forget about them once they have purchased them.  This is your portfolio, and it is your job to monitor them.  I know it is easy to allow your Financial Planner to run the show, but this is not a wise move.  Take ownership and responsibility for what is yours.  Read the news on your stocks and watch how they react to the different news and new elements presented within the marketplace. Learn about their competitors. Monitor fiscal policy and how it affects your stock, and keep an eye on anything that makes your stock move—whether it is micro or macro.  I don’t advise personal investors to participate in active trading, but I do advocate that they should actively monitor their portfolio.  Be careful and have enough discipline to be able to watch the value of your portfolio decrease before your eyes if the market turns south.  As you watch this, be confident enough that you have developed a well thought out plan that will protect you, lessen your risk, and increase your odds of benefit over the long run.  A good financial planner should be able to assist you with this.

If you have any financial questions, call me at 718-623-3423 or email me at ryanmack@optimum-capital.com.

• The older population (65+) increased 9.3% since 2004.
• The number of Americans aged 45-64 – who will reach 65 over the next two decades – increased by 39%.
• About 12.4% of the population is an older American.
• The population 65 and over will increase from 35 million in 2000 to 40 million in 2010 (a 15% increase) and then to 55 million in 2020 (a 44% increase for that decade).

(Principal sources of data are the U.S. Bureau of the Census, the National Care Center on Health Statistics, and the Bureau of Labor Statistics.)

America as a whole is definitely getting older, but are we preparing ourselves for life as a senior? One way we can prepare for a life during our “Golden Years” is by exploring the benefits of Long Term Care insurance.

Long Term Care insurance is a great way to protect the assets you have worked so hard to accumulate. According to AARP (www.research.aarp.org), there’s a 68% probability that people age 65 and over will become disabled in some of the activities of daily living or that they will become cognitively impaired. According to Americans for Long-Term Care Security (www.ltcweb.org), more than half of the US population will require long-term care at some point in their lives. Furthermore, one out of five Americans over the age of 50 is at risk of needing long term care in the next 12 months.

With costs for long-term care on the rise ($75,190 annually for a private room, $13,000 annually for adult day care, and $25,000 annually for assisted living), long-term care insurance is become more and more necessary. However, we must be careful to buy the appropriate amount of insurance.

Here are some tips on how to purchase long term care insurance:

#1 Shop Around – Make sure that you shop around and get comparison quotes. You should have a long-term care specialist explain the differences in benefits and premiums. Try not to purchase benefits that you don’t need.

Optimum Capital Management has affiliations with many insurance companies as well as our own network of long-term care specialists. We can assist you in your comparison search for the best policy to match your needs.

#2 Cheap Is Not Always the Best – Be sure to do your research on the company’s experience in the market. Many companies have a history of rate increases which can be detrimental during a life of fixed income within your Golden Years. Many companies offer rate guarantees, which can be a plus. Just because a policy is cheap, doesn’t mean it is the best for you…check the company’s rating.

Optimum only affiliates itself with companies of the highest rating. Quality is of the utmost importance for all of our clients.

#3 Know What You Are Purchasing – Some policies don’t offer coverage for home health care, but do offer coverage for care in a long term facility. Also, there are many various definitions for the word “facility”. What is the policy’s definition, and how comprehensive is the policy? Make sure that you are aware of exactly what you are purchasing with your hard earned dollars.

Optimum Capital Management will educate you about the various definitions within each policy that we select for you. We believe in being that helping hand of support to eliminate the possibility of making important decisions alone.

No matter how old or young we are, it’s never too late to start planning for your tomorrow today. Call Optimum Capital Management at 877-75-TEACH (83224) to start this process.

If you are a current business owner, or perhaps have the vision that you would like to become a business owner, then you must recognize that having sufficient capital is a prerequisite to accomplishing your business goals. Debt (borrowed money) is one form of capital, and many business owners obtain debt by applying for a loan at a local bank or lending institution.

Obtaining a line of credit for your business may initially appear to be a daunting task. What do banks look for when extending a line of credit to a prospective business owner? How should you present your request to the bank? How do you negotiate the best terms for your loan? How much should you ask for and how do you plan to repay the debt?

Banks or any lending institution will consider many factors before extending a line of credit to a company. One of the primary considerations is collateral. Collateral is security (assets) pledged for the payment of a loan. In the event that a company defaults (cannot repay) on the line of credit, the bank must be assured that there are sufficient assets to cover the debt. The quality of your assets will be instrumental in the loan approval process and will also have a significant impact on the terms (interest rate, fees, covenants) of the loan.

Below is a brief list of common assets that may be used as collateral, as well as questions that might be answered before applying for a business loan.
• Inventory: How quickly are you selling through your inventory? Does your inventory have obsolesce (becoming outdated or outmoded)?
• Account Receivables: What percentage of total sales does/(will) each of your customers represent? How many days does it take to collect on your receivables? What is your dilution rate (Returns, allowances, credit losses, discounts and other offsets against accounts receivable)? Description of major customers?
• Property, Plant & Equipment: What is the market price of your fixed assets? What depreciation method are you using to assess your fixed assets?
• Investments: What is the value of your portfolio? What types of investments are included in your portfolio?
• Life Insurance (i.e. key person-Business owners insurance): What is the amount of the cash value portion of your life insurance?
• Trademark: What is the appraised value of the trademark?

If you are in the market for a loan for your business, we at Optimum can provide you with the valuable advice needed in order to get the loan with the most competitive terms. We’ll start by reviewing all the factors which will be reviewed by the bank and help you decide on the total amount of the requested loan. We can also assist you in developing the most appropriate format to present to the lending institution and coach you on how to negotiate for the best terms. Let Optimum direct you to a representative at one of the banks in our support network of partners who have been carefully screened for their willingness to work with small business owners.

Written By: Lloyd Cambridge, CFO of Optimum Capital Management
For questions call 718-623-3423 or email Lloyd@optimumcapitalmanagement.com

The number one question that most entrepreneurs ask when embarking on a new business venture or expanding their existing business is “How do I raise money for my business?”

Locating money for your startup business can be challenging, especially when you have limited resources in your personal bank account and are terrified of even thinking about walking into a bank to ask for a loan. Don’t fret or be discouraged because where there is a will there is a way. Within this article we hope to add a glimmer of hope in your search for obtaining capital for your startup business by outlining the eight and great sources of startup capital.

1. Bootstrapping
Bootstrapping is typically a business owner’s first source of capital because it is normally the least expensive and the easiest source of capital to obtain.

Bootstrapping means using the resources you currently have in the most efficient way to finance your business.

When bootstrapping, Business owners:

1. Take an inventory of their personal assets that can be used to finance their business operations such as saving accounts, credit cards, and seeking the help of family and friends.

2. Explore creative methods to finance their business such as bartering services with other businesses and borrowing money from their 401K’s.

3. Look for ways to become more efficient at managing their current resources and finances such as stretching their payment deadlines with suppliers and collecting payments owed by customers more quickly.

2. Banks and Credit Unions
Banks and credit unions are in the business of providing loans to small business owners so don’t be afraid of them because that is their job. They provide loans for a variety of reasons including working capital (finance day-to-day operations), mergers and acquisitions, real estate development, leasehold improvements and many others.

The challenge that most small business owners run into when looking to banks and credit unions for financing is that most banks and credit unions only consider financing businesses that have a minimum of two years under their belt and that have some form of collateral or guarantee to support a loan.

Small business owners also have the option of applying for an SBA loan guarantee at banks and credit unions. The SBA loan guarantee reduces the banks and credit unions risk from taking on small business loans and makes it easier for the small business owner to get approval for funding.

3. SBA Guarantee Programs
The Small Business Association (SBA) is a government sponsored agency that provides loan programs that assist small business owners who typically are unable to secure financing from traditional lenders.

The SBA does not directly lend money to small businesses, but they do provide a guarantee for loans that are made to small businesses by lenders (Banks, Credit Unions).

The guarantee that the SBA provides reduces the lenders risk, which gives them more comfort when reviewing and approving loan requests from small business owners.

4. Factoring
Factors are financial institutions that purchase account receivables (Invoices) from companies. In exchange, the factor pays the company a percentage (up to 85%) of the receivable (Invoice) upfront. When the company’s customer pays the receivable (invoice) to the factor, the factor then gives the remaining balance owed to the company, less a fee for themselves. Fees normally range from 1-5%.

Factoring is beneficial for small business owners because it provides quick liquidity to small businesses for growth and their on-going operations. By small businesses selling their receivables to factors they are able to speed up their cash flow cycle by not having to wait 30-120 days or longer to collect cash from their customers.

Factoring is also beneficial for small businesses because factors act as a bill collector for the small business, allowing the business owner to focus on more critical business tasks.

5. Micro Lenders
Micro lenders extend small loans to small business owners who typically do not qualify for traditional loans due to their less then adequate collateral coverage and /or credit history. Micro loans typically range from $500-$35K in size and typically have more flexible terms then loans from traditional financial institutions.

6. Angle Investors
Angle investors are individuals who invest their own money in early stage companies in exchange for equity. Most angle investors have prior experience in starting and managing companies and bring to the table critical resources and contacts that help small businesses move to the next level.

Angle investors typically provide second round financing after entrepreneurs have exhausted their own personal resources and have sought and utilized the resources of family and friends. Angle investors typically invest a few hundred thousand dollars in a company with an average investment size of $450K. They seek high returns and look to cash out of their investment within 3-7 years when the company’s exit strategy (i.e. Initial Public Offering, acquisition) is executed.

7. Venture Capitalists
Venture capitalists are investment funds or partnerships that invest cash into promising start-up and emerging companies in exchange for equity. Venture capitalists also take on a great deal of responsibility in managing the company by bringing to the table a host of its own resources, contacts and experience.

Venture capital is typically the second or third stage of financing, which starts with the entrepreneur using their own available resources to finance the company, and then looking to angle investors to provide further financing. Venture capital investments typically range in size between $500K-$5MM.

Most venture capitalist firms seek high returns and look to cash out of their investment within 3-7 years through an IPO or the sell of the company.

8. Grants
Grant programs provide money for small businesses that typically fall within a specific category of business or people, such as businesses within the field of medicine, technology, and education or businesses that are owned by veterans, women and minorities.

Grant programs are provided by both private organizations and the government, and are typically competitive in nature. All grants require the submission of an application in order to be considered. The grant writing process is an art form within itself and it is normally recommended for small business owners interested in obtaining grant money to hire an experienced grant writer to assist in locating and completing grant applications.

Written By: Lloyd Cambridge, CFO & Partner of Optimum Capital Management
For questions call 917-562-5494 or email Lloyd@optimumcapitalmanagement.com

How many times have you heard financial advisors, bankers and other “financial gurus” say that “You should have a diversified portfolio”? Well, they are correct. Diversification is the key in any portfolio and should reflect multiple investments. By choosing multiple asset types you protect yourself from the risk of declining value in one particular asset type thereby having a negative impact on your cash flow and net worth.

Typically the word “diversification” makes you think about having the right mix of stocks, bonds, and mutual funds in your 401k or 403b. These assets are extremely important when creating a diversified portfolio; however, they do not tell the whole story of diversification. There are actually four major asset classes that everyone should invest in to truly have a diversified portfolio:

1. YOU
2. Paper Assets
3. Real Estate
4. Business Development / Entrepreneurship

From a financial context when you increase the presence of these four asset classes in your portfolio, you also increase the ability of those assets to generate income and create wealth for you.

Of the four asset classes, YOU are the greatest and most important asset in your portfolio. When you begin to invest in yourself, you not only increase your value but you are positioned to increase your income as well. You can increase your value by:

• Returning to school for another degree
• Reading a book a month
• Meeting someone new every month
• Learning another language
• Learning to play an instrument
• Joining the gym
• Learning a new trade

When an employer takes note that you are well educated, speak three languages, have a Rolodex filled with valuable contacts and have great ideas, you become an invaluable asset to that employer giving you more bargaining power and leverage when it comes time to negotiate your salary and bonus.

The second asset class is paper assets. We are most familiar with these assets, such as stocks, bonds and mutual funds. Most invest in these assets through publicly traded companies with the purpose of increasing their value and producing income through dividends. Ultimately your net worth is increased as the company increases in value. Your paper asset portfolio can be increased by investing in quality assets, such as certain ETF’s and mutual funds representing the entire stock market.

Real estate investments is the third asset class and can increase your income through rental income and your net worth through the appreciation of the property. You can further increase the value of your real estate portfolio by making improvements and/or renovations to your property to enhance its value.

The fourth asset class is business development. Owning and investing in your business is a major endeavor with the potential to yield great income levels and increase your net worth over time. Studying the wealthiest people in the world, 99% of them own businesses and/or invest in other people who have their own businesses. You may not have an interest in starting your own company; however, you can still have an equity stake in someone else who has a privately held business.

True diversification is all about investing in all the major asset classes in order to protect your income and net worth from being negatively affected. If we have learned anything from the global financial crisis over the last year, we have learned that we cannot rely upon any one asset class, but we must invest in all of them to protect us against unforeseen events that may happen.

1. Breathe

The natural response to tough economic times is to panic. The fear of unemployment mixed with thoughts of a delayed retirement or not having enough money to send your kids to college usually results in making emotional decisions about your investments. Because the decisions you make now will affect you once the economy recovers it is imperative that you stop, relax and take a breath before making changes in your investment accounts.

2. Review Your Asset Allocation

Proper asset allocation is one of the most important areas to focus on during turbulent times. Not having the correct balance of stocks, bonds and cash that reflect your risk tolerance and target retirement date can have an irreversible effect on your account. The percentage of stock in your portfolio should decrease as you move closer to retirement. Stocks are risky and taking high risk with no guarantee you’ll receive with high returns is a bad idea when close to retirement. It’s also important to keep in mind the number of years you’ll have to regain loses from an improperly allocated portfolio decreases the closer you get to retirement. A simple way to estimate what percentage of your portfolio should be invested in the stock market is to subtract your age by 105, the number you get is the percentage of your money that should be invested in stocks.

3. Ensure Your Diversified

Evaluate your investments to ensure not all your eggs are in one basket. Think Enron. Employees invested all their money into one company and when their company went under so did their entire retirement account. In some cases, people lost their entire live savings. To prevent this from happening you should be exposed to a variety of investments vehicles including stocks, bonds, mutual funds and cash. The risk levels, type of companies, and their geographic location should also vary. By diversifying your investments, you automatically offset large losses in one area by gains in another.
4. Stay Informed

Now is not the time to ignore announcements from human resources or trash investment statements before opening them. Amongst other changes, many companies have decided to temporary suspend matching retirement contributions and some are even changing the investment options available in their plans. Changes in the investments available may disturb both the asset allocation and the diversification of your account. Staying informed will enable you to be proactive in making adjustments that may be necessary because of the changes your employer has made to your plan.

5. Ask For Help
If investment talk makes you, crazy and you don’t feel completely comfortable developing your own investment strategy you may need to call on a professional for help. Your first stop should be your employer. Some employers offer access to financial professionals that will give you guidance on your accounts free. Non-profit organizations and government agencies are another resource you can turn to for help. The New York City Department of Consumer Affairs’s Office of Financial Empowerment launched the Financial Education Network (FEN). FEN is a directory of financial counselors, workshops and classes that can help you with your investment questions.