December 15, 2016

Fed Interest Rate Increases: The Tempest in the Teapot

Anybody who was surprised that the Federal Reserve Board decided to raise its benchmark interest rate in December 2016 probably wasn’t paying attention. The U.S. economy is humming along, the stock market doing well, the unemployment rate has fallen to a low level -- now considered to be 'full employment.' We are more recently seeing evidence of increasing wages as well.

The rate rise is extremely conservative: up 0.25%, to a targeted range from 0.50% to 0.75%—which, as you can see from the accompanying chart, is just a blip compared to where the Fed had its rates ten years ago when it was north of 5%. Keep in mind the prime rate -- more commonly used in consumer finance -- is the federal funds rate plus 3%. So prime was north of 8% in 2007.

The bigger news was the announced intention to raise rates three times next year, moving to a more “normal” 3% by the end of 2019. This is faster than prior market expectations, heading into the meeting, although still somewhat conservative. Whether any of that will happen is unknown. After all, in December 2015, the Fed was indicating two and possibly three rate adjustments in 2016 before backing off until now.

The rise in rates is good news for those who believe that the Fed has intruded on normal market forces, suppressed interest rates much longer than could be considered prudent, and even better news for people who are bullish about the U.S. economy. The Fed's announcement acknowledged the sustainable growth in economic activity and low unemployment as positive signs for the future. However, bond investors might be less pleased, as higher bond rates mean that existing bonds lose value. The recent and quick rise in bond rates at least hints that the long bull market in fixed-rate securities—that is, declining yields on bonds—may be over.

For stocks, the impact is more nuanced. Historically stocks tend to do well and not be impaired by modest interest rate and inflation increases where fast increases tend to hurt. Plus bonds and other interest-bearing securities compete with stocks for your capital investment. As interest rates rise, the see-saw between whether you prefer stability of bonds or higher expected growth of stocks tips a bit, and some stock investors move some of their investments into bonds, reducing demand for stocks and potentially lowering future returns. None of that can be predicted in advance, and the fact that the Fed has finally admitted that the economy is capable of surviving higher rates should be good news for people who are investing in the companies that make up the economy.  

The bottom line here is that, for all the headlines you might read, there is no reason to change your investment plan as a result of a 0.25% change in a rate that the Fed charges banks when they borrow funds overnight. There is always too much uncertainty about the future to make accurate predictions, and today, with the incoming administration, the tax proposals, the fiscal stimulation, and the real and proposed shifts in interest rates, the uncertainty level may be higher than usual.

For those that have trouble sleeping, you may also read the growing body of academic literature that provides compelling evidence that the Fed has little to no effect on real interest rates in the economy. Rather, markets supersede the Fed and determine these. No doubt we saw the same recently.

To Your Prosperity,

Kevin Kroskey, CFP®, MBA

This article adapted with permission from


December 05, 2016

Balancing Traits

Are you ready to achieve work-life balance? The American Sociological Review has published a study showing that most of us struggle—which is a fancy word for “fail”—in this important endeavor. But there’s hope. The study also found that the minority of people who HAVE managed to achieve some form of the work/life holy grail are doing certain things well.

Like what? First, they take the time to make deliberate choices about what they want in their lives. Rather than collapse after work in front of the TV or stay at their desk through their vacation time, they create a road map of the kind of life they want to live, and how they will spend their time, and commit to this path. 

Second: they regularly communicate with important people in their lives about what’s working for them, and what isn’t. This prevents them from drifting off the work-life rails as a result of outside influences and pressures.

Third: they make sure they set aside time for family, friends and their important interests. Instead of waiting to see if there’s any free time is left over after work, they make a point of booking time off to spend outside of work, and they are willing to guard this time and resist intrusions on it.

Fourth: they develop a strong sense of who they are, and their values, and what’s important to them. This helps them determine what success means to them, what makes them happy and what they want to get more of in their lives.

Fifth, they are able to tune out distractions, which may mean their electronic devices or just the TV. This allows them to participate in meditation, enjoy music, engage in physical activity or other things that rejuvenate and regenerate them.

Sixth: They are willing to make sacrifices to get what they want. They may work extra hard during the week so they can be sure to get the weekend off—or earn an extra day off to add to the planned weekend activity.

Finally: they develop a strong support network that they can depend on to get them through difficult times. They have a variety of interests, which brings them in contact with like-minded people who will enrich their lives and be there when they’re needed.

To Your Prosperity,

Kevin Kroskey, CFP®, MBA

This article adapted with permission from

November 02, 2016

Don't be like Gerald

A Texas County Commissioner Gerald Daugherty is a "proven fighter for better roads, lower taxes, and responsible county spending." His wife also doesn't want him driving her crazy in retirement and is using this message to help him get re-elected. As a sign I once saw in a restaurant said, "Retirement: Half the Money and Twice The Husband."

Have a plan for retirement -- for financial and non-financial aspects -- to ensure you are fulfilled with yourself as well as your relationships. And, have a laugh at Gerald's video.

September 06, 2016

Communicable Stress (Even From The Evening News)

By all accounts, stress—and its accompanying emotional mix of frustration, anxiety and fear—are bad for your health. When you experience stress in your body, you release increased amounts of glucose from our liver into your blood, and your body produces cortisone, which is actually toxic to your system. Your heart rate goes up, sending more enriched blood to your muscles. Your immune system kicks into high gear, and you stay in this high-alert state, which is only designed to help you, combat real threats, depleting you physically.

Now, researchers have discovered that stress is contagious—that is, you can catch it from those around you, and even from the evening news.  

Researchers at the Max Planck Institute for Cognitive and Brain Sciences conducted an experiment where they gave individuals a series of very challenging arithmetic questions and interviewed them—in both cases, in order to induce direct stress. They had another group of subjects watch the test and interviews through a one-way mirror. They found that 95% of those subjected to direct stress experienced the physical symptoms, but so, too, did 26% of the observers. Later, they discovered that 24% of their subjects experienced stress simply watching television programs depicting the suffering of other people. (Think: Evening news.) 

How do you combat this contagious health risk? Heidi Hanna, a psychologist and author of Stressaholic: 5 Steps to Transform Your Relationship With Stress, recommends, well, ten actual steps.

First, create a place where you can think without being disturbed. This is difficult in open-plan offices, of course, and it explains why so many great ideas are hatched in the relative isolation of the shower.

Second, when you interact with people, give them your full attention. If you set aside your smartphone and focus on that co-worker or spouse, it short-circuits the stress-producing message that the other person is not important. Moreover, it may reduce the stress of trying to do too many things at once.

Third, get to know when you are feeling stressed, and ask yourself if you are picking it up from someone else. If so, you can either help that person or limit your time together.

Fourth: Practice meditation, and give your brain a few minutes to get out of work mode.

Fifth: Make sure you get up from your desk to walk around and stretch every hour or two, and twice a day climb some stairs or otherwise get your heart rate up. If you sit too long, less oxygen gets to your brain, which can trigger a stress response all by itself.
Sixth: Do not go too long without eating. If your blood sugar goes down, it sends a message to the brain that there is a shortage of food, which can trigger an automatic stress response.

Seventh: Do not schedule every minute of your time. Allow time between meetings to prepare for your next encounter and to check and resolve email messages.

Eighth: Practice gratitude. That means avoiding the tendency to focus on the negative by redirecting your focus to things that are going right in your life.

Ninth: Redefine stressors as challenges. If you see that looming deadline as a challenge, but you know you have the resources to meet it, it generates adrenaline. If you worry about the deadline, you produce cortisone, the inflammatory stress hormone.

Tenth: Set a good example for others by practicing good stress “hygiene” and refusing to infect others. The better you take care of yourself, the more others will be able to avoid stress.

To Your Prosperity,

Kevin Kroskey, CFP®, MBA

August 01, 2016

Paying for College and Getting Your Money's Worth

According to the Student Loan Marketing Association (more commonly known as Sallie Mae Bank), the average tuition, room and board at a private college comes to $43,921. Public tuition for in-state students at state colleges amounted to $19,548 (about half of which is room and board), with out-of-state students paying an average of $34,031.

How are parents and students finding the cash to afford this expense?
  • Sallie Mae breaks it down as follows: 34% from scholarships and grants that don’t have to be paid back, coming from the college itself or the state or federal government, often based on need and academic performance.
  • Parents typically pay 29% of the total bill (an average of $7,000) out of savings or income, and other family members (think: grandparents) are paying another 5%.
  • The students themselves are paying for 12% of the cost, on average.
  • The rest, roughly 20% of the total, is made up of loans. 
The federal government’s loan program offers up to $5,500 a year for freshmen, $6,500 during the sophomore year, and $7,500 for the junior and senior years. If that doesn’t cover the remaining cost, then students and parents will borrow from private lenders. The average breakdown is students borrowing 13% of their total tuition costs and parents borrowing the other 7%.

Does it matter whether the university is considered an elite? Research has shown showing that the majority of American-born CEO’s of the top 100 of the Fortune 500 companies did not attend elite universities. There also was no pattern in where they went to school. The Platinum Study by Michael Lindsay studied 550 American leaders including 250 top CEO’s, and he found that over two-thirds graduated from non-elite schools. This finding is generally consistent regardless of profession. Many studies have documented that where you go to college has little predictive value for future earnings or levels of well-being.

Is the cost of college worth it? The Federal Reserve Bank of New York recently published a report on the labor market for college graduates. The conclusion, in graphical format, is that younger workers have experienced much higher unemployment rates than their college graduate peers—the figures currently are 9.5% unemployment for all young workers, vs. just 4.2% for recent college graduates. Overall, the unemployment rate for people who have graduated with a 4-year degree is 2.6%, and even during the height of the Great Recession, it never went over 5%.

And income is higher as well. The average worker with a bachelor’s degree earns $43,000, vs. $25,000 for people with a high school diploma only. The highest average incomes are reported for people with pharmacy degrees ($110,000 mid-career average), computer engineering ($100,000), electrical engineering ($95,000), chemical engineering ($94,000), mechanical engineering ($91,000) and aerospace engineering ($90,000).  

Lowest average mid-career incomes: social services ($40,000), early childhood education ($40,000), elementary education ($42,000), special education ($43,000) and general education ($44,000).

Among the lowest unemployment rates: miscellaneous education (1.0%), agriculture (1.8%), construction services (1.8%) and nursing (2.0%).

Yes, there are some themes here, and of course people in every career can fall above or below these averages. Nor does everybody who graduates with a particular degree end up in a career that tracks that degree.  The point is that despite the cost, a college degree does seem to provide significantly better odds of getting a job, and getting paid more for the job you do get.
To Your Prosperity,

Kevin Kroskey, CFP®, MBA

This article adapted with permission from


July 05, 2016

Ways Money Can Most Effectively Buy Happiness

We all know that money cannot buy you happiness, right? As it turns out, this is not exactly true.

A recent study by University of Michigan economists Betsey Stevenson and Justin Wolfers, examining data from more than 150 countries using World Bank data, has shed new light on the interaction between happiness and the size of your bank account. Their first conclusion: the more money you have, the happier you tend to be, regardless of where you are on the income spectrum. They also concluded that multi-millionaires do not think of themselves as “rich.”

However, there do seem to be income levels where a person’s happiness can be increased faster than others are. Princeton University economist Angus Deaton has found that peoples’ day-to-day happiness level rises until they reach about $75,000 in income—a point where a person can comfortably afford the basic necessities of life without worrying where his or her next meal is going to come from. After that, this type of happiness levels off.

In fact, a report in Psychological Science magazine found that the wealthier people were, the less likely they were to savor positive experiences in their lives. Another study found that lottery winners tended to be less impressed by life’s simple pleasures than people who experienced no windfall. Once you have had a chance to drink the finest French wines, fly in a private jet and watch the Super Bowl from a box seat, then a sunny day after a week of rain does not produce quite the same jolt of happiness it used to.

It is another kind of happiness, which focuses on something the researchers call “life assessment,” that continues to rise at all levels of wealth. The more money people have, the more they feel like they have a better life, possibly (Deaton hypothesizes) because they feel like they are outcompeting their peers.  

Is there any way to more efficiently buy happiness with money? A study by the Chicago Booth School of Business found that people experienced more happiness if they spent money on others compared to when the money was spent on themselves. Treating someone else—or, more broadly, charitable activities—are among the most powerful financial enhancements to personal happiness.

Other research has shown that you get more happiness for your buck if you buy experiences rather than things. An epic trip to Paris, or a weekend at a bed and breakfast near the coast, can be more enduringly pleasure inducing than buying a new watch or necklace. The watch or necklace quickly becomes a routine part of your environment, contributing nothing to happiness. However, your travel experience can be shared with others and reminisced about.

Finally, you can buy time with money—decreasing your daily commute by moving closer to work, hiring somebody to help around the house, someone to mow the lawn or mulch the beds, hiring an assistant to clear your desk—all giving you more leisure time to pursue your interests. With the free time, take music lessons or learn to dance—and you will be happier than somebody with millions more than you have.

To Your Prosperity,

Kevin Kroskey, CFP®, MBA

This article adapted with permission from

June 02, 2016

Having TSA PreCheck & Global Entry Means Shoes and Coats Stay On

With all the news about long lines at the airport, now more than ever is the time to consider getting yourself "PreChecked". The one most commonly used by travelers is TSA PreCheck. It costs $85 for 5 years. This option is perfect for travelers who are flying within the United States. You'll skip the long lines, keep your shoes on and not even half to pull out your laptop.

The other, broader option is called Global Entry. It costs $100 and it's a great option if you plan to travel internationally. Global Entry allows users to expedite the customs procedures in addition to speeding up the typical airport screening process.

I personally recommend Global Entry. I originally signed up for TSA PreCheck but ran into an issue. Some of the discount airline carriers I use do not use TSA PreCheck. There is no Known Traveler ID printed on the boarding pass. Thus I was not able to skip the security lines at the airport when flying with these carriers.

Global Entry, however, gives you a separate ID card and is not airline-dependent. Thus even if flying discount carriers, you can skip lines going through security. Plus, for anyone who has traveled internationally knows lines in customs can be quite long, making Global Entry even more valuable.

Do you need it? Well, that's up to you. But wouldn't it be great to make the hassle of airport security a little easier, for as little as $17 a year.