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Archives for March 2017

What is a Social Entrepreneur?

Social entrepreneurs use new approaches within the business world to help solve social problems. The term was first coined in 1980, but has entered the mainstream recently as the millennial generation permeates the business world. A recent survey found that around half of today’s Wharton Business School graduates who go on to start their own business will incorporate some form of social benefit as part of their model.

The importance millennials place on environmental, social and governance (ESG) factors is often reflected in company mission statements, as well as the allocation of their assets. ESG investments have increased by 33 percent since 2014. The United States is the country most accommodating to social entrepreneurs, followed by Canada and the United Kingdom.

In the past, social entrepreneurs were labeled as nonprofit “do-gooders,” but the for-profit model of business is becoming more prevalent. Some may start out using charitable contributions; however, some philanthropists — much like business investors — have become more vigilant about ensuring their donations yield measureable results.

Strong social entrepreneurial businesses often possess characteristics similar to other successful startups. They generally have a clear understanding of the market they want to serve and how to serve them. Social entrepreneurs not only exhibit passion, they tend to use their natural talents, expertise, skills and training to grow their business. One of these core competencies is to develop access to needed resources, with funding options ranging from traditional small business loans to crowdfunding.

What differentiates a social start-up from a normal business? One component is its measure for success. For example, say a company develops a new water pump used to help undeveloped countries better access water sources. The average company might measure its achievements in terms of revenues. A social business, however, might focus not just on revenues, but how well the pump is made, how it gets to the communities that need them and how community members are trained to install, use and benefit from the new product.

Today’s market for social businesses isn’t just for entrepreneurs; it’s also for socially conscious consumers. Socially and environmentally impactful products and services are becoming more common because they tap into a socially responsible feeling many consumers seek. Today, there are simply more opportunities to indulge and support that feeling.

The Science Behind Decision Making

In the 1940s, 90 percent of the stock market was owned by individual household investors. Today, with the widespread use of investment banking and mutual fund investing, individuals are responsible for trading only 20 percent of U.S. corporate equity.

Do we no longer trust ourselves with investment decisions? You might think that, with so much information now accessible via the internet, more people would invest on their own. However, the fact remains that there’s really too much information now available, much of it from unreliable sources, and very little can be tailored specifically to individual financial situations.

That’s where we come in. Our job is to help you determine a mix of investment and insurance options for your financial goals, timeline for retirement and tolerance for market risk. Together, we can take this world of information and create a financial strategy designed to help you work toward your financial goals.

Interestingly, one of the hottest areas of research in recent years is behavioral finance. This is basically the study of why we make the investment decisions we do. But regardless of the reasons, this knowledge doesn’t necessarily change our decision-making style. Our decisions are reflections of who each of us is; perhaps they reflect our values, but just as often they may reflect our dispositions (which may not always be a good thing). This is another reason having an experienced financial advisor to run ideas by can help ground decision-making and keep us focused on long-term goals.

While biases may be inherent to our nature, it’s still a fascinating field to help us understand everyday behaviors of which we may not be aware. For example, one consultant got a firsthand look at natural human behavior when she underwent two hip surgeries. Over time, she relied on two crutches, one crutch and then a cane. During this time, people were far more willing to help by holding doors and carrying things for her when she was using a crutch as opposed to a cane. It’s worth considering how this bias reflects our feelings toward people with disabilities that appear temporary versus permanent.

By the same token, we tend to make poor decisions when we’re under stress. One researcher explored this concept within the context of poverty: People living in impoverished conditions with constant financial stress tend to lack the capability, or “mental bandwidth,” to make better choices.

Perhaps understanding our bias tendencies can help us recognize why other people make what we may judge to be consistently poor decisions.

What the Rest of the World Worries About

There’s been a substantial degree of unrest as the new presidential administration continues to roll out policy changes. However, the U.S. isn’t alone in that regard. In a recent survey, 63 percent of respondents worldwide said they believe their country is headed in the wrong direction.

China, Saudi Arabia, India and Russia are the most optimistic about their situation, while Mexico, France, South Korea and South Africa are the most negative. Here’s some of what the rest of the world is worried about:

  • Unemployment continues to be the greatest worldwide concern. This concern is most prevalent in Spain and Italy, where unemployment levels remain high.
  • The second biggest concern is poverty and social equality, felt most egregiously by citizens of Hungary, Russia, Germany, Belgium and Japan.
  • The third most common worry is financial and political corruption.
  • Crime/violence and health care round out the top five things people worry about the most all over the world.

Some issues are more worrisome in certain areas of the globe. For example, Latin America is particularly concerned about the state of education, while immigration is more troublesome in Great Britain, Germany, Italy, France, Belgium and Canada.

Countries like the U.S. and Great Britain have vowed to look inward, placing their country’s best interests at the forefront. For some, this more national-centered approach could cause headaches. Germany, for example, relies on global demand for its exports, which represents nearly half of the country’s gross domestic product. The U.S., with exports accounting for only 13 percent of GDP, is in a less precarious position.

A New Generation of Workaholics

As baby boomers wind down their careers, many would like to “phase out” of their jobs, working fewer hours each week; perhaps fewer still each year. But is this a practical solution for private employers? Maybe. When you consider a recent study on millennial worker habits, it may be surprising to find they could pick up the slack in shared workweeks.

When they were in junior high and high school, millennials gained the reputation of being entitled and enabled. But vast numbers went to college and came out burdened with student loan debt and poor job prospects. Graduating college around the time of the recession has helped many millennials become more appreciative when job opportunities become available. They’re willing to learn and to work hard if they see commensurate rewards at the end of the tunnel. In short, millennials could offer an ideal complement for baby boomers phasing into retirement.

A 2016 U.S. workplace study found that many millennials are workaholics. They’re more likely to remain available during non-work hours via email and cellphone, and they’re more likely to work while on vacation.

For some, these may come as surprising insights about our younger generation. The fact is, many entered the workforce when jobs were scarce, so they fell a bit behind the earning curve relative to previous generations. Perhaps that makes them more focused, more determined and more willing to work long and hard to cover lost ground. So, for an older baby boomer looking to phase out of the workforce gradually, he or she could do worse than to pair job sharing responsibilities with a millennial co-worker.

How Millennials can Still Build Equity Through Home Ownership

Financial experts have long touted that buying a home is a foundation for building long-term wealth. In fact, the younger a homeowner enters the housing market, the more potential he has for greater wealth over his lifetime.

However, fewer young adults today are buying houses than in the past. This puts a damper on the economy in a couple of ways. First of all, fewer home sales tend to lower new housing starts and accompanying construction jobs. Second, for young adults, this reduces their chances to build long-term home equity. In fact, many of today’s millennials missed out on the tremendous price increases (and equity explosion) from the low point of the housing market in 2007-08 to today’s market.

There are several reasons millennials aren’t buying homes. Low inventory in some areas has driven housing prices out of the range of some first-time homebuyers. Also, today’s young people are more content to continue renting, as it gives them better options for mobility and job switching. Unfortunately, rental fees have grown steadily over the last six years, averaging 20 percent higher than in 2010, which further hampers millennials’ ability to save for a down payment to buy a home.

Parents who would like to help their adult children get into the housing market may benefit in a couple of ways. One way is to loan children the money to buy a home, payable with interest. After all, with today’s mortgage rates above 3 percent and CD rates below 2 percent, parents and children could negotiate an interest rate that is beneficial to both parties. Note that gifts of more than $14,000 a year ($28,000 if gifted by a married couple) may incur a gift tax to be paid by the benefactor.

Another possible option is to buy the home of the child’s choice with cash and then turn around and sell it to him using “seller financing.” This may be something to consider if the young adult does not meet the eligibility requirements for a mortgage or lacks a down payment. With seller financing, the parent basically acts as the bank to which the child makes monthly mortgage payments, with interest, toward paying down the loan. The amount of credit is the agreed upon purchase price of the home minus any down payment. The mortgage/deed of trust is registered with the local public records authority. The parents can continue to hold the loan and receive ongoing payments to supplement their income, and/or eventually the child can apply to refinance the balance of the loan with a bank mortgage.

With seller financing, parents can help children begin building home equity at an early age, as long as the parent trusts the child will be able to continue making payments. However, even if the child was to default on payments, at least the home would not be foreclosed on by a bank. The parent can reclaim the property as an asset and decide whether to allow the child to live there until he can resume payments or simply resell the property, which may have built up substantial equity.


The content provided here is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal or tax advice. Contact us at info@securedretirements.com or call us at (952) 460­-3260 to schedule a time to discuss your financial situation and the potential role of investments in your financial strategy.

Facts About IRAs

While an IRA may have a lower annual contribution limit (2017: $5,500; $6,500 age 50 or older) than a workplace-sponsored retirement plan, opening an IRA can provide an opportunity to help diversify your retirement assets. An IRA offers certain benefits that are generally not available in a 401(k), such as:

  • Lower cost
  • Larger spectrum of investment options
  • Flexible options for penalty-free distributions prior to age 59½
  • Roth IRA does not require distributions after age 70½
  • Roth IRA offers “tax diversification” to help eliminate tax liability for a portion of retirement income


The content provided here is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal or tax advice.  Contact us at info@securedretirements.com or call us at (952) 460­-3260 to schedule a time to discuss your financial situation and the potential role of investments in your financial strategy.