The most common question people ask (whether they realize it or not) when making an investment decision is, “What is my expected return?”  The well-known acronym is ROI, which stands for return on investment.  The idea is intuitive and simple; before making any investment decision you want to know what results can be expected so that you can compare alternatives and choose what you feel is the best investment for your desired result.

Today, one of the biggest investments for a parent is college education.  When we do financial planning, education savings is almost always stated as a primary goal by parents.  Interestingly, the focus is generally on saving for 4 years of college.  What is rarely, if ever, brought up is the idea of ROE – return on education. The default assumption is that the key to educational success, or at least the foundation of it, is a 4 year degree.  While that assumption may have been valid in the past, times have changed, and with the cost of education skyrocketing, many parents find themselves trapped by this traditional path.  To help provide some freedom from this trap, instead of simply focusing on 4 costly years away at some school (which may still be the outcome), starting with the end in mind, or the projected ROE, can produce a better result.

Decisions on education are complicated to say the least, but thinking ahead can better help our kids find, develop, and pursue their calling without breaking the bank. Just throwing money at an education decision does not provide a guarantee; in fact,  it can be  like buying a lottery ticket simply hoping for the best.  Investing education money for a specific purpose will likely have a much greater ROE.

… is a rule of thumb applicable to most financial transactions, and now it is a principle to apply to the financial press as well.  In reporting events of the recent financial crisis, it is clear that the media has played no small role in stoking investor fears.  This is not to say that there is not plenty of bad news to report, but the media could do a much better job of reporting the news in context instead of writing attention grabbing headlines.  Take this article for example – “Foreclosures in Maryland surge 32%” - which could easily lead us to conclude that the rate of foreclosures is reaching an unimagined level.  Yet, a close read of the article paints a different picture: this was simply the one month increase of October over September.  In reality, October foreclosures decreased 16% from the same period last year.  One home in Maryland was in foreclosure for every 774 homes.  This works out to be 0.0013%.

Not everything is rosy and the bad news needs to be reported.  Just remember to read the fine print.

For many people, the idea of giving away their hard-earned money is a radical concept that seems to be irrational at best.  For others, giving has become a routine more than a passion and a duty more than a calling.  Wherever you find yourself on this spectrum consider listening to these messages entitled The Genius of Generosity by Chip Ingram and made available through the ministry of Living on the Edge.  Accompanying each message is a PDF outline which is a guide for the message followed by key points of application. 

Our CEO, Russ Crosson, recently penned this letter to our clients.  In the midst of the economic uncertainy he wanted to share his thoughts and encouragment to them regarding our company and also the larger perspective.

It would be an understatement to say that this has been an historical Presidential election, and you can’t find a blog worth its salt that doesn’t have some commentary on how to vote.  Of course, our business is financial planning, and we have to tread lightly when it comes to politics because well-meaning individuals can come to differing conclusions as to what election outcome is best.  That being said, we all want a guide that will help us gain perspective.  

We look for insight and wisdom that penetrates the rhetoric of promises, positions, and policies.  

We fight the tension between principle and reality. 

We struggle with our personal needs, and the impact on generations of citizens that follow. 

For some of us, political issues even carry the weight of life and death. 

These tensions create passion and in some cases an emotional burden.  In this post from his blog, John Piper highlights how we can vote in such a way so as to remind ourselves of what ultimately matters.

Unfortunately, the depression of the 1930’s is being used by the media as an analogy for where we find our selves today.  While we don’t dispute serious economic concerns exist and the current economic picture is certainly not rosy,  the fact is that today’s data points  do not remotely resemble that time period.  As Irwin Kellner’s article highlights, there are more differences than similarities to the Great Depression. 

It is undeniable that we have experienced some type of financial crisis.  To some people it is simply a market cycle, for others we are heading to a depression.  In light of this, many of us are naturally asking ourselves and others what financial decisions do we need to make?  Should we sell all, buy more, stay put, etc… These are certainly prudent and reasonable questions, however we often miss the bigger context in which to view all that is happening around us.

Chuck Colson shares some thoughts regarding our role as Christians in this commentary.  If the idea of having an eternal perspective or that God owns it all is a little unclear, then consider watching this six minute video from John Piper.

The positive story of Clayton Homes stands out in the current subprime mess. A builder and financer of modular homes dealing primarily with the lower income market segment, Clayton Homes has bucked the trend of rising mortgage default rates. Their secret – practice conservative, old fashioned lending.

Their story highlights two big issues in the recent liquidity crisis:  First, institutions originating and selling off bad loans did not have to live with the consequences of their actions. Second, Clayton was careful in who they lent to.

A great take-away for all of us is not to forget that our decision-making (in business, as families, etc.) will be better when we  spend more time considering the cost of financial decisions knowing that we will be personally affected by any negative long- term consequences. 

Scott Houser, the Chief Compliance Officer of Ronald Blue & Co., recently penned an article that was highlighted in the Sound Mind Investing newsletter.  He and his wife, Candy, have had the privilege of raising and launching 5 children into college and beyond.  In this article, Scott shares the wisdom they gathered in the college search process.

You don’t have look far to get a negative view of all that is going on right now within our economy and the investment markets.  Certainly, there are reasons for concern, but there are also some alternative views which are going largely unreported or discussed.  Below are three recent articles highlighting a different perspective. 

Quit Doling Out That Bad-Economy Line

Why blue chips will bounce back

Recession … or not?