Clarkhoward.com - Clark's 529 Plan Guide

Once a year, Clark takes his team on a trip to reward them for all their hard work. This year the crew went to Hawaii. Here's how the staff trips work: They pick dates and then Clark waits until a sale comes along and grabs tickets to wherever he can get a deal! So they've been to Tokyo for $410 roundtrip; Prague for $290 roundtrip; and Argentina in the $400s with junk fees included. This particular Hawaii trip was $322 roundtrip. Some of the antics the crew got up to during the weeklong respite were priceless. Associate producer Joel got 2 traffic tickets, and his friend had a wreck on a scooter while not wearing a helmet. Joel also managed to damage his rental car, plus he got a ticket for forgetting his high beams were on. Producer Kim loved the Waipio Valley. Her other favorite memories of the trip included driving through a lava field to get to an isolated geo-thermal pond where she swam with sea turtles. A few members of the staff -- including executive producer Christa and engineer Deborah -- went to Pearl Harbor and found the experience very solemn, moving and educational. Clark, meanwhile, spent a lot of time hanging out at the resort because he was sick. His cell phone got ruined and he had a real customer-no-service experience trying to get some assistance. Fortunately, the accommodations everyone had were superb. Christa and her husband loved their ocean-view condo, where they watched whales doing flips. It was like SeaWorld on steroids, according to Clark. Special thanks to Ilyce Glink for pitching in while Team Clark played in Hawaii!

With the economy in a slump, some very visible symbols of the slowdown are starting to show. The fast food index, which measures how often people eat the greasy stuff, is actually a good indicator of what's going on economically. The same can be said of cable subscriptions. Clark recently read that techies are canceling cable TV because they watch so much Internet programming for free.

Now comes word that Starbucks is going through a midlife crisis and have brought back their founder as CEO. A handful of stores are even selling coffee for $1 and other locations are offering free refills. Starbucks created the premium market for coffee and now they're suffering from it. People can no longer justify spending $5 on a cup o' joe. Plus, practically every financial guru boasts about how much you can save in the long run by eliminating a latte a day from your budget. So will Starbucks take a cue from the fast-food giants and debut a StarBUCKS menu with several $1 selections? There's no telling. Right now these sales ploys are only being tested at select locations. If they do build traffic, you'll soon see them everywhere.

It used to be taken as an article of faith that the wealthy would continue spending even during lean times. But the mass affluent market is suffering too. So if you do go out to treat yourself to a meal or a shopping spree, there will be more opportunities (what's called "the value proposition" in industry lingo) for you.

So much has happened on the economic front while Clark was away in Hawaii. In the latest installment of Clarkonomics, Clark discussed the Federal Reserve's big cut in interest rates and the news about the economic stimulus package/rebates that will be coming this summer.

Did the Fed make the rate cut just to protect big-money interests in banking or did they have the long-term strength of the country in mind? The answer won't be clear for a few years. But you can feel the impact of the move right now: This is a great time to refinance your mortgage. Consider this option if you have good credit, some equity in your home and a current interest rate in the high 5 percent range. The greatest benefit will be for those who want 15-year loans, which may start at 4 percent. 30-year mortgages will probably see the low 5 percent range. If you have a home equity line of credit, these rates should be back in the 5 percent range after peaking in the 8s. Come March or April, you may want to look at converting from a floating rate to a fixed rate home equity line of credit. One of the ironies of the Fed's move is that being a borrower looks more favorable than being a saver right now. Most banks and credit unions are slashing their rates. So you may want to use this opportunity to put more of your dollar toward your floating rate debt and knock it out faster.

The economic stimulus package, meanwhile, makes use of the idea of negative income tax. That means people who are lower on the economic ladder are given more incentive to work by getting rebates and not having to pay income tax. But let's not lose sight of one thing: The purpose of this rebate money -- $100 billion approximately -- is so that politicians can get re-elected. It's not about stimulating the economy. Sure, people will be excited about the rebate, but the reality is it won't address the real problem. In the long run, we're better off with lower tax rates and a simpler system than having the government send out candy to people. One promising part of the stimulus package is that there will be specific tax breaks for entrepreneurs. Now that's a great way to create long-term rewards for the economy!

Many people are uncertain what to do when it comes to the question of stocks. In a continuing segment of Clarkonomics, Clark examined the investing angle of the economic slump. The real question is should any of it matter to how you create long-term security? Clark recently saw a couple of alarming headlines in The Wall Street Journal: "When is it time to buy stocks again?" and "Are stocks cheap?" There are two things Clark doesn't believe in: Buying individual stocks and timing when to get in and when to get out of the market. Clark believes in buying stocks through mutual funds or ETFs (exchange-rated funds). Basically, he buys a basket of investments with little slices and dices of a lot of different companies. He also buys on a consistent basis -- via his 401(k) every pay period and via an investment plan every month. But let's cut to the chase: Should you be worried by the market volatility? If you're near retirement age and aren't diversified in your assets, yes, you probably should be. But if you're young, it's good to have a decline in share prices now. The decline means that you can buy more shares for the same dollar.