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.

May 02, 2016

Predicting The Future of Future Expectations

“I'm fascinated with the problem of why really smart people have such a hard time predicting the future. It is mostly because the future is more random than we think. But it's also because future performance (like earnings and economic growth) doesn't tell you half of what you need to know to predict future outcomes.”

The above was taken from a recent and insightful article entitled Performance Vs Outcomes (Morgan Housel, The Motley Fool). The author described and provides examples in the world of investing that successfully picking what will do well requires not only predicting what may happen in the future, but also out predicting what everyone else’s expectation of what the future will be as well.

In other words, to be successful with investing, it’s not only necessary to predict what may happen in the future, but also to evaluate whether the rest of the market is already pricing in that same expectation, or not. For instance, we’ve long known that soda consumption is on the decline (for 12 years now), but Coca-Cola stock is at an all-time high, even as optimism about the growth potential of Walmart has proven true with net income tripling since 2000… but its stock is down 1.5% since then. Similarly, Apple fans for years have been “right” about the company as its earned almost a quarter of a trillion dollars in profit since 2012… but its stock has barely budged, even as Amazon’s profits have rounded down to zero since 2012 but its stock has tripled as the markets just see more and more opportunity for the company going forward (even if it’s not profiting yet).

What this reveals is that the further complication for investment outcomes is that in the future, stocks are then priced based on what future expectations are at that time – the future-future expectations! – which means it’s not only necessary to evaluate the future (which may be feasible for some who analyze the trends), and expectations about the future, but what expectations about the future-future will be in the future. This has proven to be almost impossible (as noted in the examples above of Apple vs Amazon and Coca-Cola vs Walmart), and similarly who could possibly know what the mood of 7 billion investors will be in April of 2021, even though that may overwhelmingly determine where market levels will be by then.

Ultimately, then, the reality is that when we try to go from just predicting trends of the future, to making investment decisions on that basis, we increasingly must recognize that we’re not just trying to predict the future, but are trying to predict future-future emotions and expectations, which is the real determinant of the outcome.

On the other hand, perhaps this helps us realize that trying to predict the future or future of future expectations is largely a waste of time.

To Your Prosperity,

Kevin Kroskey


April 06, 2016

Mutual Funds and Say on Pay for CEOs

Shareholders of publicly traded companies have an important job of providing a system of checks and balances on the company's corporate governance, including executive pay plans. Agents of the company (executives) have an inherent conflict of interest in maximizing their own wealth versus maximizing the wealth of the principals (shareholders). You can look back to 2008 and come up with a slew of examples illustrating this principal-agent problem, which in part provided the impetus for the 2010 "Say on Pay" rules in the Dodd Frank Act.

Bloomberg recently had an intriguing article showing how the largest shareholders of publicly traded companies -- mutual funds -- generally fall in line with corporate boards for executive pay decisions but some notable outliers exist, having a more discriminating view of these pay plans and advocating for shareholder interests.

The "most agreeable" of the mutual fund giants voted with directors on executive pay plans 97 percent of the time last year, according to a report by shareholder advocacy group As You Sow. These fund giants included Vanguard Group, BlackRock Inc., and TIAA CREF.

Dimensional Fund Advisors backed only 54 percent of pay proposals and the California Public Employees’ Retirement System opposed 47 percent of pay plans, As You Sow said.

"We take corporate governance very seriously," said Joseph Chi, co-head of portfolio management at Dimensional, which had $388 billion in assets as of Dec 31. "We continue to press on this issue because it is important to shareholders."

Dimensional’s corporate governance committee comprises the firm’s most senior officers and directors, including co-founder David Booth and director Eugene Fama, Chi said. It never approves of plans that allow single-trigger payouts to executives -- golden parachutes without termination -- in the event of a merger or acquisition.
I commend Dimensional Fund Advisors for advocating for shareholder interests and hope more fund companies do the same to maintain a better system of checks and balances.
Kevin Kroskey, CFP®, MBA

March 01, 2016

The Good Side of Bad Markets

After the recent downturn in the U.S. and global stock markets, you can be pardoned if you wished that the markets were a bit tamer. Wouldn’t it be nice to get, say, a steady 4% return every year rather than all these ups and downs?

Be careful what you wish for. There are at least three reasons why you should hope the markets continue scaring investors half out of their wits.

1) The very fact that stock downturns scare people is one reason why stocks deliver a higher return than bonds. Economists call it the “risk premium;” which can be roughly translated as: people are not willing to pay as much for an investment that will periodically frighten them to death as they would pay for an investment that delivers a less exciting investment ride. Over their history, stocks have been a fairly consistent bargain relative to less volatile alternatives, which is another way of saying that they’ve delivered higher long-term returns than bonds and cash. 

2) If you’re accumulating for retirement by putting money in the market every month or quarter, every downturn means that you can buy shares at a bargain price while many other investors are selling out at or near the bottom. Over time, as the market recovers, this can give a little extra kick to your overall return.

3) Market downturns give an advantage to those who are willing to practice disciplined rebalancing among different asset classes. Basically, that means that when stocks go down, any new cash goes disproportionately into stocks to bring them back up to their former share of the overall portfolio. This, too, allows you to buy extra shares when the prices are low, and can also boost long-term returns.

There’s no question, the downward plunge on the stock market roller coaster is scary. It’s hard to maintain your discipline when the voice in the back of your brain is telling you to bail out on the bouncy trip before somebody gets hurt.  

But unless this is the first time in history that the market goes down and stays down forever, we will ultimately look back on the decline and see a buying opportunity, rather than a great time to sell and jump to the sidelines. The patient, disciplined, long-term investor should see market volatility as one of your best friends and allies in your journey toward retirement prosperity.

Best Regards,

Kevin Kroskey, CFP, MBA

This article adapted with permission from Bob Veres.

February 02, 2016

Putting Market Corrections Into Perspective

After a turbulent 2015, stocks tumbled in the first few weeks of 2016, causing concerns that the bull market U.S. equities have enjoyed since 2009 may be over.

Plagued by worries about global economic growth, the S&P 500 dropped 7.75% in the first two weeks of 2016.1 While the pullback surprised many investors, corrections in the 5-10% range are not unusual.

Since 1928, the S&P 500 has experienced corrections of more than 5% about three or four times each year.2 We see declines of 10% or more every 1-1/2 years, and bear market corrections of 20% or more about every three or four years.3 Obviously, these are all averages and the performance of any single year can deviate significantly from historical norms. 

Though market corrections are rarely welcome, they are a natural part of the overall business cycle, and it is important to take them in stride. The most important thing is not to give in to emotion. While it can be tempting to eject when downside volatility is being experienced, impulsive decisions can be a killer to your portfolio. The only way to ensure you can reliability expect to earn a market rate of return over time is to stay invested in the market throughout time.

Having a sound financial plan in place couple with a diversified portfolio to support the plan is step one. Step two is having the discipline to execute the plan and stay invested over time.
Kevin Kroskey, CFP®, MBA

All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Diversification does not guarantee profit nor is it guaranteed to protect assets.