Today’s show was spurred by two things: 1) it’s tax time and, therefore, thinking about taxes and tax planning is fresh on most people’s minds, and 2) a letter we received from one of our Premium Subscribers. In the letter, he stated he would like to hear a show on the tax efficiency of mutual funds and how you select a fund that is tax efficient. So, we set out to answer his questions…

You can’t really discuss the tax efficiency of mutual funds without touching on on the tax efficiency of individual stocks and bonds as well as the tax efficiency of Exchange Traded Funds. In the show, we try to explain that all three have different levels of tax efficiency and that each may be more or less tax efficient than the others depending on the current market environment.

As you listen, keep an ear out for the following topics:

• How do mutual funds, ETFs, and Separately Managed Accounts operate differently?
  
• What are embedded losses and embedded gains in mutual funds?
  
• How are dividends and capital gains created inside of a mutual fund?
  
• What is the Turnover Ratio and how does it affect my investments?

There are two important thoughts that Bo and I share that I want to make sure you don’t miss. First, when trying to design a portfolio that is tax efficient, it is much more important to focus your efforts on the vehicle in which you will hold the investment (i.e. 401K, IRA, Roth, etc.), than the efficiency of the actual investment. The second issue we try to stress is:

“Don’t let the tax tail wag the investment dog…”

This simply means, don’t sacrifice diversification and/or performance to save a little on taxes. Tax planning and tax efficiency  should be a tool to optimize your portfolio, not your overall purpose for investing.

As we wrap up the show, Bo and I share some current events that have happened over the last week. Our purpose in sharing these is simply to get your opinion. We have no doubt that you, our Money-Guy listeners, are the “cream of the crop”, and we truly value your thoughts and ideas surrounding these topics!

Today’s show is on an issue that we all face, yet not many people know how to handle. It’s happened to every one of us. You start a folder to house all of your “important documents”, then maybe your folder turns into a binder, the binder turns into a drawer, the drawer becomes a filing cabinet, and next thing you know, you’re up to your ears in “important documents”. Which ones should you keep? How long should you keep them? What can you finally throw away?

There was a great article in Consumer Reports’ Money Adviser magazine titled “Conquer the paper piles”. This article did a great job of explaining what documents we should keep, what we can throw away, and how long we need to wait before we throw them away. I go through each of these in the show, but here is a quick recap and breakdown:

Keep for a Year or Less

• Bank records
• Credit-card bills
• Current-year tax records
• Insurance policies
• Investment statements
• Pay stubs
• Receipts

Keep for a Limited Time

• Household furnishings paperwork
• Investment purchase confirmations
• Loan documents
• Savings bonds
• Vehicle records

Hold These for Seven Years

• Personal federal and state tax returns and their supporting records

Do Not Toss

• Defined-benefit plan documents
• Estate-planning documents
• Life-insurance policies
• Safe-deposit box inventory

While some of these may seem fairly obvious, I go through the ‘ins and outs’ of each in the show and explain the reasoning of why some documents are more important or need to be kept around longer than others.

I also start the show off by giving you a few tips on how to save some money on your utilities and make your life a little easier. A website that I frequently use is ConnectUtilities. This website is great for comparing service providers and finding the best deals available in your area. A service that I think is amazing for simplifing your life is PayTrust. While usually I make every effort to save you guys money, I think that this service is well worth the cost!

Today’s show isn’t exactly one of those that gives you a warm and fuzzy feeling inside. The topic is, however, one of those that is a necessary evil and is a very real issue that needs to be addressed. The unemployment rate is, and has been, one of those statistics that the mainstream media has inundated us with. Considering the gravity of what it measures, it is understandable why so much attention has been given to this piece of data.

In today’s show I want to walk you through a wonderful article titled Unemployment in Uncharted Territory. This article explains the current state of unemployment in the United States and the current efforts being made to combat this overwhelming burden. Particularly, I like how this article explains how unemployment is measured and the variying ranges depending on definition (U-1 to U-6). If you’ve never heard these terms, I walk you through what each of them are and how they are calculated. Even more than this, however, I appreciate how the author goes on to explain the implications of the current and projected unemployment and how this situation is affecting and will affect the country in the short to intermediate term.

This article coupled with a listener email I share are what spurred me to cover this topic. In the email, this listener asks:

“…How exactly is that debt [the federal deficit] going to affect future generations? What will they face besides super-high tax rates? What could I do today to provide my grandchildren with some future relief?…”

I feel that all three of these are very reasonable and understandable concerns. By analyzing the unemployment article and throwing in some personal insight, I hope I can shed some light on how to deal with these issues.

You’ll hear Bo and I reference some research we did prior to publishing this show. Below are some numbers for you to use as reference:

Year          US Population                  Federal Deficit                  Amount of Debt per Person

2005           2.96 million                             $4.7 trillion                                    $15,900

2006           2.98 million                             $4.9 trillion                                    $16,400

2007           3.01 million                             $5.1 trillion                                    $17,000

2008           3.04 million                             $6.4 trillion                                    $21,000

2009           3.07 million                             $7.8 trillion                                    $25,400

As you listen to the show, I will attempt to explain exactly what these numbers mean and why they should be important to you.

It isn’t all “doom and gloom”, though. To close out the show, I try to end it on a high note and explain some of the exciting things that could happen going forward and why now might be the best time ever for you to really change your life for the better! If you have any thoughts, please feel free to share them below.