Saturday, 14 July 2012

Throw the Toll Gates Open!

I spent all of June traveling the toll roads of Pennsylvania, New York, and New Jersey. The amount of construction was considerable ... and rather disconcerting as many of the projects seem to have hardly advanced since my last major time spent in the area, in 2008-9. Yet, like millions of others, I had to stop and hand somebody money or throw quarters into a bucket (or have my newly re-acquired EZ Pass debited). Why should commuters pay full toll when the roads are slow due to seemingly never ending construction projects?



The founders, who formed numerous toll roads to tie their young nation together politically and economically, had a solution to bad roads and construction delays: throwing the toll gates open. Why not institute the practice adopted by New York in 1804,* which stipulated that turnpike commissioners could force turnpike companies to stop charging tolls if they determined that their roads' condition impeded the regular flow of traffic? Today, instead of having the brunt of the cost fall on stockholders (of which there aren't really any as most of today's toll roads are so called public corporations owned by governments), deduct any shortfalls in toll revenue from the pool in which turnpike executives draw their salaries and benefits. Under the new incentives, construction projects will be completed much more quickly and with much less waste of commuters' time and patience, guaranteed.



*For details, see Daniel Klein and John Majewski, “Economy, Community, and
Law: The Turnpike Movement in New York, 1797-1845,” Law and Society Review 26, 3 (1992): 492-93.

Friday, 13 July 2012

LIBOR scandal Fubarnomics and the pressing need for real reform

Several years ago I published a book called Fubarnomics that argued that most of the FUBAR ("fouled" up beyond all recognition) aspects of our economy -- including construction, healthcare, higher ed, and the financial crisis -- were rooted in hybrid failures, in both market and government failures in other words.



The recent scandal over LIBOR is no different. The market failure here is palpable: asymmetric information allowed the bankers to lie about how much it cost their banks to borrow. The government failure is more subtle but is perhaps best exposed by the question: wtf? More specifically, how was it that these crucial transactions were not monitored? that even after it became clear there were problems with self-reporting nothing substantive was done? The answer, of course, is regulatory capture. The Fed, the Treasury, and the FDIC are Wall Street's hand maidens, not its policemen.



The LIBOR scandal is just another indication that the financial system is badly broken. I think we need to return to basics: non-profit, plain vanilla depository institutions (credit unions) for the bulk of us; mutual insurers; mutual asset managers paid by performance (mutual funds); partnership-only investment banks/LCFIs/hedge funds; deposits guaranteed up to $25,000 and life insurance to $250,000, and everyone else on the hook for losses. If any company, financial or otherwise, becomes Too Big To Fail (TBTF) it needs to be broken up before it crashes the economy and causes taxpayers billions. Anyone in a fiduciary position caught stealing or lying needs to expect serious jail time and a lifetime of poverty.



But ahhhh there is that regulatory capture again. Sensible reforms are impossible until Americans make them happen. Traditionally, they are supposed to do so at the polls but what to do when both political parties have also been co-opted and only offer a choice between Frick and Frack? Revolution? Not yet. First Americans need to flex their economic muscles and stop doing business with big banks, political parties, and anyone else standing in the way of serious reform.

Tuesday, 10 July 2012

Financial Management and You

Financial management revolves around making fiscal and monetization decisions in a business enterprise. It dictates the financial direction of a corporation and introduces you the concepts needed to the thinking steps and tools. The goal is generating more revenue and increasing the value created for the share holders. Financial management is different from corporate finance in that the latter deals with the fiscal decisions that a corporation has to make against a body.
Also the principles and concepts used by corporate finance can be applied to the world of financial management. We can break down financial management into techniques and rationale about long-term and short-term decision making. Most capital investment decisions are made thinking in the long term because they deal with investments. Financial management also deals with the methods to finance a corporation such as equity or debt, and the decision of whether the firm should pay dividends or not. It also deals with some short term decisions about updated liability and incumbent balance of equities. Dealing with inventory and liquidity management are other things management of finance has to perform. It also has to do with giving credit to customers and short-term loans.
It deals with investment banking using the help of corporate finance. Investments bankers assess the financial needs of a corporation and deliver the capital where it is needed. Many times it is called corporate finance because it involves getting capital to finance the acquisition, expansion or purchase of a business. Capital budgeting is a methodology used to find the right sources of capital and allocate investments the right way. It has to analyze future cash flow, long term investments, its size and whether it is a right time to do it. The investment that will be chosen have to undergo a DCF valuation and if it offers peak performance it win the selection process.
Sometimes it is difficult because it is also referred to as consumerism. It is possible to overspend in many subjects. This situation will lead to huge credit card bills. A fiscal crisis will come when someone spends his/her money before earning it. A financial management book is what is needed in this situation. Most of us dream of becoming millionaires in a short amount of time. However, monetary management is needed if we want to demonstrate our capacity to create wealth. The task of a management book is showing you where to go if you need advice or tools to manage your money effectively.
To prevent loses and effectively manage your income, you need the help of a financial management book. Economic independence is within reach if you read a financial management book and apply its principles. First off, you need to change your mindset. It is important to change our perception about money and its purpose if we want to become wealthy. Learning the nuances of finance will help you deal with your financial concerns, your strengths and weaknesses. You will use a financial management book because it is very hand, and the financial subject tricky.

Financial Management Programs

Financial management is one of the most important things you should learn if you wish to venture into any kind of business. It involves financial decisions, techniques on how to ensure high profit, as well as the tools and the methods of analyses in order to come up with sound decisions.
Starting a business and making it grow, as we all know, is not an easy task--even if you have all the financial resources you need for your business to thrive. Remember that your money is just a tool for a successful business. What really determines your success are your skills in handling your money and all other your skills in making decisions.
If you are new to business, don't worry because there are literally hundreds of financial management software programs available today. The right one can help you make accurate and objective decisions regarding your finances. Financial management programs can help you take care of cash management, accounting, payroll reporting, check preparation, financial risk management, and others with ease and convenience.
There are several kinds of financial management programs, and each kind has its own features, advantages, and disadvantages. It is important to choose one that truly fits your needs. It is not enough to get one that can make work easier for you - you need one that can help you optimize your profit.
You can check reviews on each product before you narrow down your choice to one. Compare their features as well as their prices before you choose a particular program.
Financial management programs do calculations automatically for you, so you don't have to worry about having to deal with too much numbers. It is advisable to choose programs with basic features first if you are starting a small business. If you find it hard to budget your finances and plan your business, you can choose programs with budgeting features.
Advanced financial management programs aid in billing as well as preparation of payrolls and invoices. Look for these added features if you think you need them. Furthermore, if you are more oriented toward visuals, choose programs that make use of graphs and charts, as these probably will be easier for you to use.
Like any other decision you are going to make in business, deciding which programs to use can trigger a chain reaction, so be very careful and do not decide too quickly. It may sound as simple as deciding what to wear for a formal gathering, but financial management programs are not like a tuxedo - they can give your business long-term solvency, not just a good first impression.

Easy Steps To Financial Management

We go to work, come home, pay our bills, and still keep asking ourselves the same question - "Why is there always so much MONTH left at the end of the MONEY?" So many well-paid people are living paycheck to paycheck and have nothing to show for their long hours of hard labor. If you think you can't afford that summer vacation or get that car repaired when it needs to be, think again. Here are some very basic money saving techniques that ANYBODY can do, no matter what your income level is.
1. PAY YOURSELF FIRST. These are words that you will hear almost every financial consultant say. The general rule of thumb is to set aside a certain percentage of every paycheck, or ANY source of income, and place it into a savings account. This must be done before paying any of your bills. Determine the average total of all your outgoing money (mortgage, rent, electric, phone, cable, etc.), and compare that with your total monthly income. Then pick a percentage of your income that you would feel comfortable about stashing away for a rainy day. A good rate to think about is 10%, however, if you can only do 5%, that's great too. The most important thing is to be very consistent, and make it a monthly habit.
2. KEEP TRACK OF EVERY PENNY - THEN REVIEW. A great way to cut down on unnecessary spending is to keep a written record of absolutely EVERY penny that you spend on a daily basis. No matter if it's a soda or candy bar from a convenience store, or a bag of chips out of the vending machine. Write down the item and the price in a small note pad. At the end of each week, go back and add up the total amount of money you have spent, and you will be astonished at the results. Review the items you have purchased, and make a decision about whether or not you could have done without it.
3. WANTS AND NEEDS...AND THE 48 HOUR RULE. Of course, we all know what our NEEDS are. Food, clothing, cleaning supplies, toiletries, gas for the car and lawnmower, etc. However, it's the WANTS that cause a lot of financial friction. Everybody wants something, but with a little self-control and discipline, you can be well on your way to building that little nest egg. See yourself walking down the street, and you suddenly pass a home decor store when a coffee table centerpiece catches your eye. You feel like you just have to have it. This is when the 48 hour rule comes into play. Instead of making the purchase on impulse, take a couple of days to really think about how much you really want that item. Surprisingly, most of the time you will decline on the purchase.

Tuesday, 3 July 2012

4th of July Financial Freedom

Today is the 4th of July and time that we celebrate our freedom as Americans and those who have given so much to keep us free. Thank you to all who have served.

The celebration gives us pause to consider our financial freedom. What is your definition of financial freedom? One definition of financial freedom (financial independence) is when your passive income exceeds your expenses. You no longer have to work another day in your life for money as all of your financial needs are met from the income of your investments.

For many of us, we work the greater share of our life to save for retirement – hopefully the point of our financial freedom. Our retirement savings, along with social security hopefully provides enough income that we don’t need to supplement our income with another job.

When you think about retirement and financial freedom, how much money do you need to live the life you want? Are there avenues to reach your financial freedom sooner? Increase your level of investment? Do you have options to reduce spending? (i.e., reduce living expenses and improve your overall health by eating fresh produce from a home garden, using public transportation or riding your bike to work or school). Maybe your financial 4th is sooner than you think. How much do you really need to be happy?

Financial freedom and independence can be reached sooner by saving more, spending less or a combination of two. Can you reduce your spending and increase your savings to reach your financial 4th of July sooner?

Let us know your secrets to reaching financial freedom and happy 4th of July.