Financial Literacy

Financial Literacy

Given the amount of information available from numerous sources you might believe financial literacy is through the moon. Unfortunately
it is not the norm. For example, a large number of people did not know what bankruptcy was.

Recent surveys conducted by two of today’s largest financial product based organizations paint a bleak picture. Financial literacy is regressing
rather than progressing.

Financial Literacy

The surveyors were shocked to learn the groups needing the information the most are the groups who don’t search for it. It seems those who are financially ignorant like it that way. And they did not say that by the way.

Surveyors learned the folks who are already financially literate belong to the group that keeps searching to learn more. It would be ironic if it wasn’t so sad.

The Financial Literacy surveys were conducted around eight main areas:

  1. Earning
  2. Consuming
  3. Saving
  4. Investing
  5. Debt
  6. Risk
  7. Insurance
  8. Information Sources

It would be hard to disagree that these aren’t important areas. After all, they stare us in the face every day of our existence.

Earning

I cannot imagine someone not knowing how to read their paycheck. Some folks had no idea what determines their take home pay. Incomprehensible to say the least.

If this important financial document isn’t important to a person I can’t believe any other financial document would be important.

Consuming

All of us consume everyday or we wouldn’t be alive. But, not being able to articulate where you spend your money, and on what, seems out of place. Especially in today’s society. But the surveys say otherwise.

Saving

An easy concept to be sure. Yet some respondents had no idea how to get the biggest bang for their buck. In other words, they couldn’t tell how they
would maximize their savings dollars.

Investing

This is an area requiring more study than a subject like saving. So, may be it is understandable that respondents did not know how to evaluate particular investments. Or, understand the risk associated with each type of investment. However, those are not poor excuses for foregoing a cursory attempt at financial literacy.

Debt

An extremely easy concept to understand. Or so you would think. Above all respondents couldn’t express the relationship between loan features and repayments.

Duh!

By the way budgeting was out of the question when it came to debt for these respondents.

Risk

I realize risk begins most people’s days. It is called waking up to an uncertain world no matter how many times we wake up.

When it comes to financial literacy people couldn’t explain the degree of risk associated with an action. Or the degree of risk they were willing to accept with regard to a particular investment.

Insurance

Types of coverage is all a person really needs to know about insurance. Subsequently, no one has to dive into the inner bowels of how the insurance industry works.

However, it would be extremely beneficial to understand how your policy works regarding your particular coverage. So, what you are paying for and why
would be a good start.

Financial Literacy Information Sources

We live in the age of information. For example even the homeless have access to information. They simply use the library and government agencies.

Finding appropriate sources and asking for advice isn’t a giant pain in the posterior any more. To clarify it is open source to borrow Internet language.

And, in most cases, it is absolutely and completely without cost. Therefore, a person does not have to take one dime out of their pocket.

Financial literacy, like understanding financial definitions, equates to financial well being. So if you have it, your life is better all around. Subsequently, if you don’t have it, seek it out. You’ll make a better life for yourself.



Senior Outreach Ministries achieves it’s objectives with the capital we’ve either earned or received from donors. The Proud 2 B A Senior Ribbon for example. Donate $5, get a ribbon and help us help a hungry Senior Citizen in need. All proceeds remain in the Ministries to be used per our mission statement. We are a volunteer church. No one receives a salary or wage. Please help us help less fortunate hungry Seniors. We never have and never will ask the government for grants, funds or hand outs. Thank You in advance.

A Dominated Fund and Pre-senes

A Dominated Fund and Pre-Senes

A Dominated Fund is something you might not be very familiar with. Chances are neither is the term “Pre-Sene”. The aim of this article is to take care of both of those.

You may know from reading our definition for Pre-Sene you can tell people in this age group are most likely still working. Very few are a member of the FIRE – financial independence retire early – brigade. Therefore the Pre-Sene probably has a 401(k), IRA or some other retirement program.

Since very few defined benefit programs remain in the work place that means the Pre-sene is contributing to a defined contribution program like the aforementioned. Besides knowing how a dominated fund is defined it is also imperative to know the percent of your retirement account in dominated funds. The easiest way to learn is to look at your retirement plan’s schedule.

The second easiest way is to get your plan’s investment schedule from your HR department. Before you launch into research here is the definition of a dominated fund: A dominated fund is a fund that no reasonable investor would invest in given that plan’s other investment offerings. This is according to one financial author.

Another financial author and professor defines a dominated fund as: An asset A is dominated if there is another asset B such that under “any” realization of the financial future asset B will provide a “larger total return” than asset A.

Let’s Try a Different Dominated Fund Explanation

In other words if the fund containing the bulk of your dollar bills is dominated by another fund (having a higher return and lower fees) in the same family your contributed dollars should be in that fund. Now you can start doing your research.

It is no secret fund managers put those dollars in dominated funds because these funds have higher fees. Subsequently, higher fees means higher commission dollars for the fund manager. And, to add insult to injury, the dominated fund may not receive any, or very little, personal attention. Personal attention is called management in the investing world.

And Now For a Example

An excellent example, as reported on some of the largest financial websites, is indexed mutual funds that have expense ratios (or other charges) that are not at the market minimum. As one of the reporting authors said —

“You might not think that there would be many such funds, but they are common as weeds.”

A quick summary. You absolutely must know how your dollars are being invested.

Because the how is the key to how much in fees and expenses you are paying. One source made the bold statement that an investor’s fee structure in one of these funds could cost the investor a minimum of $200,000.

That 200K is your money being dribbled out of your pocket and into the pocket of the fund manager. I don’t know if you want to pay that much and lose that amount’s ability to pay you in your retirement. If you do, keep doing what you are doing. After all, it is your money.



Senior Outreach Ministries achieves it’s objectives with the capital we’ve either earned or received from donors. The Proud 2 B A Senior Ribbon for example. Donate $5, get a ribbon and help us help a hungry Senior Citizen in need. All proceeds remain in the Ministries to be used per our mission statement. We are a volunteer church. No one receives a salary or wage. Please help us help less fortunate hungry Seniors. We never have and never will ask the government for grants, funds or hand outs. Thank You in advance.

Consumer Price Index and Inflation

Consumer Price Index and Inflation

The Consumer Price Index (CPI) and inflation are directly related. Although, the formula for calculating the inflation rate is relatively simple the truth is nobody gives a good gosh darn.

And maybe we shouldn’t given it is a government calculated number and the government actually tells us what it is for the year every year. In fact, watch any business show on television and you will hear the talking heads spew forth about inflation and the CPI.

Consumer Price Index and Inflation

It is helpful to know the agency responsible for computing the CPI and informing the general population of that number is the Bureau of Labor Statistics or BLS for short. They actually survey thousands of prices all over the country and formulaically compute the Consumer Price Index and the inflation rate.

For any index to be worth its salt it has to have a base rate to be used for comparison purposes. This means somebody or some agency sets that base. With the CPI it is the BLS and currently the base year for comparison purposes is 1984.

The truth is it wasn’t exactly 1984. What the government math wizards did was use the numbers from 1982 -1984 took an average and called 1984 the year the CPI was 100. Just like magic they had a year and a number.

What Does This Mean to Me?

What does all this have to do with me you might be asking. Well, maybe a lot and maybe nothing. I will say if you are a senior about to retire or are already retired this number is important.

You see, inflation eats away at your buying power. If something cost one dollar in the base year, 1984, but costs 1.98 today, inflation has eaten ninety eight cents more out of your nest egg.

It could get more complicated but why complicate a simple formula I’ll show you in a minute so you can break even with inflation. As seniors we face medical bills, taxeshospital bills. All the same bills pre-senes and younger people face too.

But what we don’t face is longevity to combat this bully called inflation. It simply eats away our money and we seemingly can’t shoo away the monster.
Year after year it nips at our heels.

Breaking Even With Inflation

Fortunately there is an easy to use formula to help us calculate the investment rate of return we need to “break even” with inflation. Expressed as a fraction it looks like:

Inflation Rate / 1 – Tax Rate

Obviously we need to know the inflation rate and our tax rate. I will assume the inflation rate is 5% and the tax rate (bracket) is 30%. Our equation looks like:

.05 / 1 – .3

Or

.05 / .70

Dividing we get this number: 7.14

7.14 expressed as a percent is 7.14 percent or .0714. This is the return we would need to receive to stay even with a 5% inflation rate in a 30% tax bracket.

We could have more fun with the Consumer Price Index and inflation but this appears to be enough fun for this article. Keep this formula in mind as you plan your retirement.



Senior Outreach Ministries achieves it’s objectives with the capital we’ve either earned or received from donors. The Proud 2 B A Senior Ribbon for example. Donate $5, get a ribbon and help us help a hungry Senior Citizen in need. All proceeds remain in the Ministries to be used per our mission statement. We are a volunteer church. No one receives a salary or wage. Please help us help less fortunate hungry Seniors. We never have and never will ask the government for grants, funds or hand outs. Thank You in advance.

703 Retirement Plan

703 Retirement Plan

You may have received emails or seen ads talking about the 703 retirement plan. If you are like me, when you saw that weird looking retirement plan you wondered what the heck is it all about.

703 Retirement Plan, Saving for Retirement, Retirement Topics

As it turns out the author of the email or ad is using a clever twist of words to entice you to subscribe to a particular email newsletter. They can’t just say, hey, subscribe to my newsletter for $XXX a year because nobody would sign up. So, they use a bit of intrigue/curiosity.

The 703 plan is what the real investment world calls a Dividend Re-Investment Plan or DRIP. It has several moving parts.

The first is you must own a stock that allows you to reinvest the dividend into buying more shares instead of taking the dividend in cash. For example fictitious company JXN allows you to DRIP.

They pay a quarterly dividend of $1 per share. And you own 200 shares. Rather than taking the $200 in cash you use those dollars to buy more shares of JXN. As you might guess more shares means you have increased your holding. Plus your dividend will be larger next quarter because you have more shares.

And now for the second moving part. Most brokerage companies charge a fee to reinvest your dividend. Oops, you’ve just decreased the number of shares your $200 will buy. No worries. The 703 plan shows you how to bypass your broker and save the fee and/or commission charge.

Semi-Related Investment Info

All you have to do is subscribe to the newsletter being offered and you’ll learn the secret bypass method. Well, I say, simply click on this link or the title and download the information without subscribing to anything. I titled it, “The D.R.I.P.”.

And to bolster your investment library click this link, or the title, to get a second primer, “And Capital Appreciation Too”. Both are 100% free!

You are welcome to subscribe to our newsletter by >>CLICKING HERE<< but you don’t have to. Simply click the links in the above paragraphs and you’ll get the reports. It’s that easy. We think you should put that information to use whether you’re a member we email our newsletter twice a month or not.



Senior Outreach Ministries achieves it’s objectives with the capital we’ve either earned or received from donors. The Proud 2 B A Senior Ribbon for example. Donate $5, get a ribbon and help us help a hungry Senior Citizen in need. All proceeds remain in the Ministries to be used per our mission statement. We are a volunteer church. No one receives a salary or wage. Please help us help less fortunate hungry Seniors. We never have and never will ask the government for grants, funds or hand outs. Thank You in advance.