Gap between rich & poor growing! Say goodbye to middle-class.

What would you do if you lost your job tomorrow?  How are you preparing yourself for the “new economy”?  Are you doing the same things you’ve always done and expecting a different result (isn’t that the definition of insanity)?  Or are you taking steps to make sure you don’t land in America’s new underclass?  

Damien Hoffman of Wall Street Cheat Sheet says the growing underclass now accounts for about 10% of the U.S. population.  Here is the evidence:

1. A record 40 million Americans are on food stamps – 1 in 8 Americans may not be able to eat without government assistance.
2. 32 million Americans don’t have health insurance – these people pray everyday that they don’t lose their health because the costs can drive the average person into bankruptcy.
3. 24.5 million Americans are unemployed – it’s more like 17% if you include those that have given up the search or are working part-time and still looking for full-time work.
4. 2.8 million homes were foreclosed in 2009 – that number is expected to jump to between 3 & 3.5 million in 2010.
5. Dollar Tree Stores stock is at all-time highs – revenues are up 12.5% which means that 12.5% more dollars are chasing ultra-cheap products.

Many jobs lost in recession gone for good?

Unlike previous recessions where jobs returned quickly and people simply picked up where they left off, many experts suggest that this time is much different as many of the 8.4 million jobs lost are gone for good.  And many of those that are getting jobs are having to settle for half of what they were making previously.  So what do you do if you’ve lost your job?  Many are returning to school for a college or technical degree, but this is no longer a guarantee that you will find a job as employers now have a huge pool of talent to choose from. 

On the other hand, a US News article titled 7 New Rules For Getting Ahead suggests that economic dowturns tend to produce a surge in entrepreneurship.  This is especially true in the home-based business arena as these businesses cost very little to start, are very low risk and high reward.   The author goes on to say that entrepreneurs have an advantage, as they overcome obstacles for a living and tend to be a lot more resilient.  Even if you work for someone else, an entrepreneurial attitude can set you apart from your co-workers.

Thinking About Buying a Franchise?

In this economy, many people are looking to go into business for themselves as they have lost their jobs and are simply tired of having someone else tell them what to do.  Are you one of these people who is tired of the rat race and looking to take control of your professional future?  If so, where should you turn?  Do you open a franchise?  Start your own small business, like retail or a restaurant?  Or should you consider home-based business of some kind?  Let’s take a look at each.

First, many people are attracted to franchises because most of the work is already done for them and they think that the investment guarantees success.  Well think again.  The attached article from CNN Money highlights the Top 10 most popular franchises, their failure rates and the average loan amount which ranges anywhere from $90,000 to over $1 million.  Here is the list:

1. Subway
2. Quiznos
3. The UPS Store
4. Cold Stone Creamery
5. Dairy Queen
6. Dunkin Donuts
7. Super 8 Motel
8. Days Inn
9. Curves for Women
10. Matco Tools

Student loan debt…good or bad?

Some view student loan debt as “good debt” because you are investing in yourself, as an education can lead to a higher salary.  But in practice, many would say that student loan debt is one of the most toxic types of debt, requiring extreme caution and responsibility.  Take the story of Dr. Michelle Bisutti, for example.  When she finished medical school in 2003, her student loan debt was approximately $250,000.  Since then, it has grown to more than $555,000!

This enormous burden is the result of deferring loan payments while she completed her residency, default charges and non-stop compounding of interest.  Certainly Dr. Bisutti’s case is extreme, but it is just one example of a growing US problem.  According to a Wall Street Journal article dated February 16, 2010, “There is an estimated $730 billion in outstanding federal and private student-loan debt, says Mark Kantrowitz of FinAid.org, a Web site that tracks financial-aid issues — and only 40% of that debt is actively being repaid. The rest is in default, or in deferment, which means that payments and interest are halted, or in ‘forbearance,’ which means payments are halted while interest accrues.”

The article goes on to say that ”Dr. Bisutti recently entered a rehabilitation agreement on her defaulted federal loans, which now carry an additional $31,942 collection cost. She makes monthly payments on those loans — now $209,399 — for $990 a month, with only $100 of it going toward her original balance. The entire balance of her federal loans will be paid off in 351 months. Dr. Bisutti will be 70 years old.

The debt load keeps her up at night. Her damaged credit has prevented her from buying a home or a new car. She says she and her boyfriend of three years have put off marriage and having children because of the debt.” 

Some quality of life, right?

40% of unemployed are now permanently unemployable?

So is the economy recovering yet?  I guess it depends on who you talk to.  And will all of those people who lost their jobs in the current recession eventually go back to work?  Well…the Economic Cycle Research Institute (ECRI) isn’t so sure.  Here is what Lakshman Achuthan of the ECRI had to say during a recent interview when asked about high unemployment:

“That, unfortunately, won’t change even as the rate of job losses continues to improve.”  Achuthan figures 40% of the unemployed, particularly in manufacturing, are permanently unemployable. “So, those people are displaced. The recovery is happening. It’s very real, but the economy doesn’t want their skills for one reason or another.” He says, “it’s very real but economy doesn’t want their skills.”

Experts suggest $1 million isn’t enough to retire on

Yahoo is just full of great articles today.  Here is an excerpt from another one:

“Conventional wisdom says that you need to save $1 million for retirement.

That target may be easy to remember, but it falls short of the true cost of what’s required for post-career comfort. Longer life spans, the threat of inflation and the uncertain future of Social Security benefits make this long-touted savings advice inadequate for most, advisers say.”

If you do the math, $1 million invested at 4-5% equates to a $40-50k per year residual income.  How long does it take to save $1 million, if you could do it at all?  Pretty scary to think about, isn’t it? 

More proof that our system is broken

Here is an excerpt from an article I found this morning on Yahoo, and this is exactly the message that we’re trying to convey.  It’s titled “7 Stressors Sapping the Middle-Class.”

False expectations. For the past 40 or 50 years, Americans have lived by a series of unofficial tenets: A good education guarantees a good job, hard work will bring prosperity, and 40 years of 40-hour-a-week work earns a comfortable retirement. Then, maybe; now, not so much. Workers who believe that somebody owes them a comfortable life just because they try hard are risking bitter disappointment in a Darwinian economy, where there are likely to be more losers and fewer winners than we’re used to. The winners will be those who learn how to adapt, expect nobody to give them anything, and are prepared to work harder in the future than they did in the past. That’s how it was in America before anybody ever heard of the middle class, and it may be that way for a while again. The real middle class–the true bedrock of the nation–will be able to handle it.

The good news is that there are options, you simply need to have an open mind and a desire to make a change.  Visionaries Worldwide is helping people to address these issues by providing education on personal development, financial literacy, leadership and entrepreneurship.

The home-based business phenomenon!

Home-based businesses are the trend of the future. An increasing number of people are now choosing to work from the comfort of their own homes, especially in the current recession where millions of jobs have been lost.  Many are tired of office politics and being forced to give up their weekend for the good of the company, and for some, it’s their only option!  A home-based business is a great chance for many people, especially parents of growing kids, to strike a balance between career and family.

Working from home is now viewed by many as their ticket to realizing their dreams. The amount of money you could earn is proportional to your own performance, without waiting for the boss to give you a raise or promotion. Whether your home-based business provides you with the sole means of support or just generates an extra stream of income, its earning potential relies on your self-motivation and dedication.  Most people start out working their business in their spare time but when the income from their home-based business surpasses that of their regular job, many opt to quit their 9 to 5.  Isn’t that the unltimate dream for most?

Social Security…the biggest Ponzi scheme in history?

Most of us are now familiar with the infamous Bernie Madoff, who bilked investors out of billions through one of the largest Ponzi schemes in history. But was it the biggest?

First, what is the official meaning of a Ponzi (pyramid) scheme? The US Securities and Exchange Commission website says this:   

“A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors and to use for personal expenses, instead of engaging in any legitimate investment activity.

With little or no legitimate earnings, the schemes require a consistent flow of money from new investors to continue. Ponzi schemes tend to collapse when it becomes difficult to recruit new investors or when a large number of investors ask to cash out.”

SEC Website

Will you be prepared for retirement? Scary statistics!

Throughout my 15 years in the financial services industry I have seen a lot. The most significant trend? In general, people are unprepared for retirement. The following are some statistics compiled from studies conducted by the FDIC as well as various investment firms:

- The average American is 90 days away from bankruptcy.

- The average bankruptcy could have been avoided with an extra $350 per month.

- 97% of Americans will be dependent to some degree on family, friends or the government in retirement.

- A 65 year-old couple retiring today has a 63% chance that one of them will live to 90 years old and a 1 in 7 chance one of them will live to 100. As life expectancy increases, today’s retiree will spend about as much time in retirement as they did in their careers!

- A 65 year-old couple retiring today will need approximately $240,000 to cover medical expenses in retirement even with Medicare coverage.

- Rule of 219 = 2 people x 3 meals per day x $5 per meal x 365 days per year x 20 years = $219,000 just to eat in retirement.

- $240,000 + $219,000 = $459,000 just for healthcare & meals (see previous 2 stats)

- The typical pre-retiree household (age 55 and up) has a retirement savings of $60,000.

- Another survey estimates that 1 in 5 pre-retirees age 50-64 has less than $5000 in retirement savings.

- As of July 2005, more than 30 million retired workers were receiving Social Security income, with benefits averaging $960 per month, or less than $12,000 per year. Although Social Security is designed only as a supplement to other sources of income, during 2003 the majority of senior Americans relied on Social Security as the source for at least 80% of their income.

The good news? There are options and Visionaries Worldwide can help!

Sources: FDIC Outlook, Social Security Administration, US Department of Labor, US Department of Health & Human Services