- WEALTHY: Why should people buy your widget? (Yanik Silver)
- HEALTHY: A new exercise trend that’s even worse than aerobics (Dr. Al Sears)
- WISE: Roy Romer on the cost of a college education
ALSO IN THIS ISSUE:
- Should you have a 529 savings plan? (Michael Masterson)
- Feedback Friday: Smoking out a bad habit
- Ad "en passant" to your vocabulary
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How to Give Yourself a Big Advantage Over Your Competition
By Yanik Silver
Want to know a simple secret to increasing almost any product’s sales and crushing the competition?
Listen closely. The secret is to EDUCATE your customers.
What consumers care about are the benefits they’ll get by dealing with you. So you can convince them to buy from you instead of your competition by educating them about the way you do something … even if that "something" is standard in your industry.
Here’s an example …
Murray Raphel, a retail direct-marketing consultant, tells the story of how he was visiting one of his clients, an Ethan Allen furniture store, when he noticed carpenters in the back room working on furniture. He asked, "Do you make furniture here?"
The reply from the manager of the store was, "No, those carpenters are doing repairs."
He went on to explain how every customer is given a lifetime guarantee on all their wood pieces. And he quickly added, "But most good furniture stores do this."
Of course, no other furniture store in the area was advertising that fact. So Raphel turned it into what marketing people call a "unique selling proposition" (USP) for Ethan Allen.
He ran an ad stating "Every Piece of Ethan Allen Wooden Furniture Is Guaranteed for Your Lifetime!" And the ad brought a huge response. Since no one else was making that promise, people assumed they could get that very appealing guarantee only from Ethan Allen.
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"The need for a college education is even more important now than it was before, but I think that the increased costs are a very severe obstacle to access. It is an American dream, and I think that one of our challenges is to find a way to make that available."
Roy Romer
Notes From Michael Masterson’s Blog: Get Your Toddlers Set Up for College
State-sponsored 529 college savings programs (also known as qualified tuition plans) made the news last fall because Congress has made their tax-free earnings status a permanent thing.
If the newspaper articles raise awareness about these programs, so much the better. They are very helpful for middle-income families who want to pay for college expenses without going into debt.
In ETR #1943, I suggested that it’s the responsibility of the parents – not the government – to make sure their children have a good elementary and high school education. That means investing both time and money. But when it comes to a college education, the responsibility has always been borne by individuals – the parents and/or the students. In fact, next to a house, college tuition is the biggest financial burden that most families face.
Why not lighten the load by (1) paying for tuition and school expenses in advance or (2) beginning to invest for that education today on a tax-exempt basis?
These are the primary benefits of the 529 programs: Earnings grow tax-free at the federal level and, in some states, at the state level. In a few states, even contributions to the plan can be tax-deductible. (But there is NO deduction for contributions on the federal level. This does not function like a traditional IRA.)
Tax-free growth is why these plans are so popular with forward-thinking parents. (Since 2001, 529 assets have risen steadily from $13.6 billion to $97.3 billion this year, and they are expected to continue to climb in the future.)
529 programs do have limits and trade-offs, however. So I asked Justin Ford, creator of the Seeds of Wealth program, about 529s. This is what he told me:
"There are two primary types of 529 plans – 529 Savings and 529 Prepaid.
"Prepaid plans are offered by most state universities and a growing number of private schools. They can be offered by an individual institution or a group of institutions for education expenses for that university or state university system. Prepaid plans lock in your cost today for much of your future educational expenses. They are often guaranteed by the state. Your choice of university, however, is limited by the plan you choose. Yet, if your child decides to go to another school, you can sometimes roll your account over.
"College savings plans are more flexible but they do involve more risk. They are basically state-sponsored programs that allow you to open a tax-exempt investment account on behalf of the child or children whose education you are saving for."
The key benefit of the college savings plans is that you have more choice over:
- Who manages your money.
- What investments you can make.
- Which schools you can choose.
For example, Schwab’s 529 savings plan offers a choice of 10 investment portfolios. The proceeds can be applied to any qualified school in the U.S., with full federal tax savings.
Some 529 college savings plans offer guaranteed minimum returns. Others don’t.
What’s important to know about college savings plans, Justin pointed out, is that they are NOT guaranteed by the state, the FDIC, or anyone else. So with some 529 savings plans you could end up with less than you put in.
Setting up a 529 savings plan will have an effect on your child’s ability to get financial aid, but the decrease is very small – just pennies on the dollar, according to Schwab. And if it’s held in an uncle’s or grandparent’s name (as opposed to the parents’ names), it doesn’t reduce the child’s eligibility for financial aid at all.
"Even if there is a slight reduction in eligibility for financial aid, so what?" Justin said. "It’s better to make a lot of money even if it puts you in a higher tax bracket. Likewise, it’s better to invest for your kids’ education now than pin your hopes on future aid programs."
There are other saving options for your children’s college, but most, like the Coverdell Education accounts, have caps. (In the case of the Coverdell Education accounts, the cap is $2,000 a year.)
Justin said that he has seen no contribution or income limits for 529 plans stipulated on the IRS website, other than the stipulation that contributions "cannot be more than the amount necessary to provide for the qualified education expenses of the beneficiary."
Another option is to put money into a family limited partnership that you control (and in which your children are minor investors). The income they get would be taxable, but the basis can be adjusted downward since the children are limited partners and don’t have control over the important decisions that affect the money’s value.
Yet another option is a regular taxed account for minors in UGMA or UTMA accounts (under the Uniform Gift to Minors Act and the Uniform Trust for Minors Act). These would have no contribution limits and offer complete flexibility.
"You may realize some tax savings from these accounts," Justin said, "especially in the beginning, simply from the fact that minors have lower overall earnings and therefore lower tax liability than you would likely incur from your account.
"Of course, you’d get no minimum guarantee or locked-in tuition with this account," he added.
Which brings us back to the 529 programs – my personal recommendation. I like them because they are simple and because they are flexible. If you are in a position to help your children or grandchildren, now is a great time to choose one.
But before you make your final decision, check out some of the government websites on the topic for more info, including the College Savings, Securities and Exchange Commission, and IRS websites. Then contact the sponsors of the specific plans you may be interested in and quiz them on fees, investments, and flexibility of the use of funds.
[Ed. Note: Check out more unedited, uncensored (and sometimes unexpected) ruminations on Michael Masterson's Blog]
- Michael Masterson
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Going From the Frying Pan Into the Fire
By Al Sears, MD
On a Friday morning not long ago, a patient told me excitedly, "Dr. Sears! I took your advice and gave up aerobics. Now I run marathons!" My heart sank. She had completely missed the point. Replacing aerobics with an even longer duration exercise is not what I had in mind.
Unfortunately, as aerobics has (thankfully) lost favor with the general public, an increasing number of people have turned to running marathons. In fact, a major sporting goods manufacturer recently reported that sales of women’s running shoes jumped by an astounding 40 percent in the last year.
Studies by Dr. Arthur Siegel and Boston area hospitals on runners in the Boston Marathon show the surprising effects. After drawing blood samples both before and after the race, they discovered symptoms of early-stage heart disease, as well as a higher risk of sudden cardiac death, stress fractures, and permanent skeletal damage.
But by exercising, instead, in short bursts, you can wipe out the risk of heart disease, burn fat, and develop a robust set of lungs.
So if you like to run outdoors, try this: Run 50 yards, then stop to catch your breath. If you’re panting at that point, you’ve done enough to start getting the health benefits.
You don’t have to run fast or hard. And you don’t have to do this more than once a day. But you will build your heart and lungs faster if you rest for two minutes and then do at least one more set – up to eight sets total. Then, after a week or two, gradually begin to increase your speed.
[Ed. Note: Focusing on short periods of exertion and recovery is the basis of Dr. Sears' PACE® program. Learn the details HERE.]
Feedback Friday: "Cigars … You Don’t Need Them"
In ETR #1928, Mary Gribble admonished Michael Masterson for admitting that he smokes an occasional cigar. Michael’s response? "I’ll be cutting back on my cigar smoking as part of my Health goal for 2007." But that wasn’t good enough for many ETR readers. Here’s what a few of them had to say …
"Thank you so much for your daily insights. ETR is the first newsletter I read each morning, and take much of it to heart.
"What incredible timing for the note from Mary Gribble. My mom recently died of lung cancer, COPD, and heart disease.
"I have started a "blog" where I have posted Mom’s story along with some of the research I’ve done. It not only provides a medium for providing information but it also provides a means for interaction with interested parties, and a place where their stories and research can also be posted. Please check it out at: emilyshealthalternatives.blogspot.com
"Michael, if you read only one posting, please read my mom’s history posted on Dec. 29th, and PLEASE do more than just ‘cut back.’ We would all like to see you around for a very long time."
- Emily Grider
Colorado Springs, CO
"God bless her, Mary sounds real cute and all, but I ought to at least point out that George Burns smoked several cigars a day, every day of his life – and he lived to 100. Makes 77-year-old Mary look like a mere sprout. Keep puffing away, Michael!"
- Jim Edholm
Andover, MA
"Cutting back? One a day is one too many. You’re a smart man, an athletic man. Don’t your fitness trainers counsel you to increase your breathing capacity (let alone your life expectancy) by quitting? If not, they’re copping out. Perhaps one of your 2007 goals should be to research what even one cigar a day does to your lungs and to your gums and teeth. On a recent visit to my dentist, I heard the hygienist in the cubicle next to mine counsel her patient to quit smoking to heal the damage to her gums precipitated by smoking. Gum disease is common to smokers; the arteries narrow and the blood supply to the gums is greatly reduced. I encourage you to do your homework, Michael.
"I am ebullient on this topic because doctors removed my father’s voice box and cut a hole in his upper chest so he could breathe (not a pretty sight), but the cancer had spread and he died six months later. I started smoking when I was 16 and wisely quit when I was 26, so it’s not like I don’t understand a smoker’s need. We get an exorbitant amount of advice from you, Michael. Turnabout is fair play."
"To your good health in 2007."
- Marie Cook Waehler
Millville, DE
"Cut them out completely, cutting back will not work. Throw them in the trash can and don’t look back. A year from now, you will be glad you did."
- Ron Hanley
Hobart, NY
Every Now And Then A Mysterious Package Would Arrive…
My husband Dave, (bless him) was desperate to get us back on our feet, so he started trying out all the ‘business opportunities’ you get through the mail.
I grabbed one at random. I watched the DVD. I took notes and followed the instructions just like it said and waited for the results. It seemed simple enough and it took me less than an hour!
Then one day, I got an email saying there was some money I was owed. It was $3,012 and change! The money was real… and ALL MINE!
Now I look forward to sharing my good fortune with you…
- Patrick Coffey
Word to the Wise: En Passant
"En passant" (on-pah-SAHNT) is French for "in passing" – meaning on the way to doing something else.
Example (as used by Virginia Postrel in The Atlantic): "A friend advised Jackie Kennedy on White House dinner parties: ‘Have pretty women, attractive men, guests who are en passant, the flavor of another language. This is the jet age, so have something new and changing.’"
[Ed. Note: Become a more persuasive writer and speaker ... build your self-confidence and intellect ... increase your attractiveness to others ... just by spending 10 VERY enjoyable minutes a day with ETR's new Words to the Wise CD Library.]
Michael Masterson
Copyright ETR, LLC, 2007
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