business journal march 2012 b section

8/2/2019 Business Journal March 2012 B Section

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BINSID

ETHE

BusinessJournalOF WEST CENTRAL OHIO

March 2012

Money & Investments

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How much in savings and investmentsshould you have by age 35 or 45? Or, forthat matter, at 65, when youre likely to benear retirement?

If you dont know, you have plenty ofcompany. So many figures are bouncedabout that its often difficult for people toknow whats right. Many workers just savewhat they can and hope for the best.

Thats why some financial advisers nowuse a simple yardstick to help clients quick-ly see how they measure up. It suggests theamount of savings and investments youshould have in relation to income at differ-ent ages.

For example, at 35 your assets shouldat least equal your annual income. The for-mula is by no means gospel, but its a use-ful tool to check whether youre largely ontarget, need to save more or should reviseyour retirement plans.

The idea comes from Charlie Farrell, aDenver investment adviser and author ofYour Money Ratios: 8 Simple Tools for Fi-nancial Security.

Farrell says financial ratios are used tosimplify complicated data for investmentprofessionals analyzing companies. He fig-

ured workers could use a similar shortcutfor personal finance.

Mari Adam, a financial planner in BocaRaton, Fla., says she uses ratios based onFarrells book with clients.

I like it because it is very simple, shesaid. When you do retirement planning,its so complicated, people just dont getit.

The math is easy. Add up all your bankaccounts, 401(k)s, individual retirementaccounts and other investments. Dont in-clude the equity in your house. Thats be-cause, Adam said, Most people still needsome place to live and dont take steps todownsize and sell the house.

Younger workers in their mid-20sarent likely to have a lot of assets builtup. Whats key for this age group is to getstarted with saving and investing. Contrib-ute at least enough in a 401(k) to get theemployer match if you cant afford to domore now, Adam said. But and this iscrucial dont forget to increase the con-tributions 1 to 2 percentage points annually

to catch up.For all other age groups, Adam usesthe ratios listed below. Other advisers, she

notes, use even more- stringent savings tar-gets. Still, if youre not a good saver now,these benchmarks will appear steep:

Assets at age 35 should equal one totwo times yearly gross income.

Assets at 45 should total three to fourtimes income.

Assets at 55 should be six to eighttimes income.

And at 65, assets should equal 10 to 12times income.

These are aspiration levels, Adamsaid. If you cant meet them, she said, itdoesnt mean you cant retire.

You might be able to get by with fewerassets if other financial factors are in yourfavor. For example, Adam said, you couldmake it on less if your mortgage is paid offor if you will get a fat pension or ampleSocial Security check in retirement or ifyou are truly frugal.

But if youre short on savings, you stillhave time to make changes.

You can squirrel away more, work lon-ger or take a part-time job in retirement.

You can delay Social Security benefits un-til as late as age 70, so youll get a biggercheck. And you can always free up home

equity by selling a pricey house and mov-ing to a more modest place.

The benchmarks Adam uses arent thatfar from what T. Rowe Price recommends,said Stuart Ritter, a financial planner withthe Baltimore-based investment company.

T. Rowe Price, though, offers anotherway for workers to look at retirement sav-ings. It calculates how much you should besaving at different ages based on how muchyou have already put away.

For example, if youre 35 and have as-sets worth twice the amount of your annualincome, then you need to save 12 percent ayear to stay on target, T. Rowe Price calcu-lates. But if youre 55 and have saved onlythree times your income, you will need tosquirrel away 32 percent of pay annually.

Ideally, all of us would begin our ca-reers saving 15 percent of gross pay annu-ally, Ritter said. If your employer providesa 401(k) match say, 3 percent of pay then you can save 12 percent, for a total of15 percent.

At this savings rate and with the money

invested in a diversified, age-appropriateportfolio, you should be able to maintainyour lifestyle in retirement, Ritter said

Are you sure youre saving enough?


2/16

2B TheBusinessJournal March 2012

The Business Journal

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This is my 13th year of writing top 10investing tips to get you thinking aboutchanges you can make to your finances forthe coming year. As always, I wish you ahealthy and prosperous new year.

Tip 1: Work on your life goals

Financial planners have embraced theidea of helping people identify their lifegoals and help their clients achieve them.

Money can be the means to an end or away to keep score, but it makes for a lousyproxy for measuring what youre getting outof life. When you know what youre work-ing toward, youll be more committed to in-vesting for those goals.

Identifying your life goals is so muchmore than just a bucket list, but that listcould be part of the package, too.

What do you want to accomplish while

on this earth? What do you need to get itdone? Revise, re-evaluate and resubmit yourplan as necessary, but dont let the pursuit ofwealth be the goal.

Tip 2: Know where the money goesYou can do one of two things with your

income -- spend it now or save it for later.Economists call it the consumption/invest-ment decision. If you consistently spendmore than you make, you arent puttinganything toward your goals. Put together aspending plan for your income, and stick tothat plan.

I like to call it a spending plan rather thana budget because budgeting, like dieting, is achore, while a spending plan has you choos-ing how to allocate your income.

Keep track of your spending. Whetherits with an app on your smartphone or on a

scrap of paper you keep in your wallet, trackyour spending to see if your spending planmatches your spending reality.

Tip 3: Spend less than you makeThis is easy to say, and its not so easy

to do. A commitment to living within yourmeans is a first step toward working towardthe future. When you finance current con-sumption with credit, youre reducing futurespending by that expense plus interest.

If you have a big credit hangover, youllhave to take your medicine and get out fromunder your past spending, too. Deleverag-

ing is all the rage for banks, countries andconsumers. It just means theres less debtin the mix. Debt restructuring can free upsome money in the monthly spending plan,but it doesnt pay off debt. It just changesthe terms. Dont make that decision lightly,especially if youre considering a cash-outrefinancing of your mortgage to pay off yourcredit cards. And dont run up the card bal-ances all over again.

Tip 4: Maximize your employersmatching contributions

For employers who make matching con-

tributions to their employees retirementplans, its common for them to match 50cents per dollar that you contribute up to acap. The cap is typically 3 percent for theemployers contribution if the employeecontributes 6 percent of his salary.

Whats not to like about making 50 per-cent on your money before you even decidehow to invest it?

Many of us arent saving enough for re-tirement. Turning down a helping hand fromour employer doesnt make sense. Startbuilding a retirement war chest. Youre go-ing to need it.

Tip 5: Build an emergency fundKeeping some money in reserve for fi-

nancial emergencies is a sound practice. Formost people, its where they should startinvesting. An emergency fund is a pool of

money typically invested in liquid invest-ments, meaning the investments can be con-verted to cash without penalty or reducingprincipal.

A common rule of thumb is to have threeto six months worth of living expensesavailable in your fund.

Tip 6: Expand your approved listThe current trend in retail investing is for

investors to have an investment-policy state-ment developed with their investment ad-viser. More comprehensive than a brokerage

12 essential investing tips for 2012

See TIPS, page 15


3/16

March 2012 TheBusinessJournal 3B

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Occupational Health

Selection and employee training and

assessment are your end to the pro-cess, not the beginning.

Often we focus on the physical items ofvision protection. However, it is not justabout personal protective equipment. Lay-ing the groundwork for your companys vi-

sion protection program can ensure success

and make the program run smoother in thelong run. Each employees vision is criticalto your safety programs success, and thisgoes for all groups within the company.

Establish the need and basis and networkof support from all angles as you methodi-cally build the program elements, includingpurchasing, the employee base, and upper

management. Too often, a vision protection

program begins with issuing PPE quicklyplucked from a catalog or big box store -and not with employee training and needassessment. Do your homework as a safetyleader and plan the program elements andmanagement input ahead of time.

Selection and employee training and as-sessment are your end to the process, notthe beginning.

Things to consider:Your facilitys policy. Is there a history

of vision protection at your facility? Are

you starting from scratch or dusting off along-forgotten, orphan program?

Your facility itself. What are the process-es that could cause an eye/face injury? Goback to the basics of safety: review chemi-cal lists for hazards, process equipment thatflings particles, filings, radiation, glare,unique hazards, etc. If you have not done soyet, document each department and make anote of each type of vision protection haz-ards that exist. This is your basis for justify-ing the program to upper management, so

carefully review your entire facility hazardassessment and employee task analysis andmake a plan of action to meet the hazardschallenge.

Your companys vision injury history.Dont focus on a single year; review therecords for many years. Include notes forprocess changes, assimilations of othercompany properties or mergers, contractemployees, and even temporary/seasonaltype operations. Consider your maintenanceoperations and other especially unique situ-

ations. Discuss the injuries in detail withnot only your workers comp specialist, butalso departmental managers and line staff-ers. Dont forget your maintenance staffers,who can provide a great deal of valuableinformation, and the housekeeping/sanita-tion staffers. (They see everything!)

Your employees. Consider their train-ing, educational levels, limitations (such aslanguage barriers), use of temps and con-tractors on site, skill and expertise at highlydifficult tasks, and also their acceptance ofchange. Do crews work remotely, or are all

plant employees under one roof? Consideremployee turnover, too. New goals canmean change in how they do certain tasksand in using PPE that had been selected andtrained upon. Make sure the selection pro-cess helps employee acceptance and thatyour awareness ensures each PPE item isused, not seen as a burden on getting the

job done.

Your company resources. Confront thebrutal facts: Money matters right now, andavailable manpower for training is shrink-ing. Is there a reasonable budget? Do youhave training assistance? How about afunctional safety committee that will sup-port your efforts? Are you alone in tryingto manage multiple programs? How muchtime and effort can you devote to this pro-gram?

Outside help. Consider consultants,trainers, grad students, interns, and the

tools to help, such as video-based training,posters, and online tools. What can you uti-lize within your budget?

Attitude and LeadershipAs the safety chief, you know well the

upper managements attitude toward safety.Are you struggling to make changes in spiteof management? Do you hide until draggedout in a crisis? Perhaps your corporateleaders champions of safety stewardship,instead. How your managers view safety

directly relates to new program initiativesand how much support you can expect inthe long run.

Now, we turn to your own leadership.Is vision protection an add-on? A bold newinitiative for safety? Drudgery? Cast a criti-cal eye on your attitude toward the programand how much effort you plan to devote toit. Nothing spells failure faster than apathyfrom the safety leadership.

What you want to accomplish with avision protection program sounds simple,

doesnt it? However, very careful consid-eration must be given to this item. It is easyto overstate your goals for the program andhave the efforts falter within a few months.Even-handed application of resources andtime will keep your efforts in front of em-ployees and management, which will keepthe program progressing.

Set your goals and make them reason-able and obtainable. Planning your pro-grams success gives you a better chance ofaccomplishing it. This item can be tricky;your schedule depends on other program

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Trends in Construction

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and virtually endless design possibilities. Give us a call today, and put us to workon your project.

Contact us at 1-855-BUID-85 or visit us on the web www.AlexanderBebout.com.

2012 is well underway, and were look-ing forward to another year filled with in-

novation. Below are some trends that arebeginning to emerge within the constructionindustry:

Green Building & Construction Wevealready had our fair share of green proj-ects this year, but with the White House ad-ministration continuing to push for BetterBuilding Initiative Investments, this type ofconstruction is here to stay.

Stimulus Projects/Government FundedInfrastructure this piggy backs off of the

Better Building Initiative Investments men-tioned above. The government has allotted

billion dollar budgets to projects such asgovernment buildings, highways, educa-tional facilities, hospitals and transporta-tion.

Multi-Family Rental Housing Construc-tion Boom There has been a recent addi-tion to the amount of renters in the market,due to the large number of foreclosures thathave occurred in the past few years. Youngadults, who might not see the value in pur-chasing a home, as a result of the decreasein housing prices, may also be a part of the

increasing volume of renters. According tothe 2012 Dodge Construction Outlook, mul-

tifamily housing will rise 18% in dollars and17% in units.

Residential/Non-residential Construc-tion Reed Construction Datas chief econ-omist, Jim Haughey, predicts a 24% jump inresidential construction and a 14% increasein non-residential construction.

Manufacturing Industry Accordingto the 2012 Dodge Construction Outlook,

manufacturing construction will increase by4%, following the 35% gain in 2011.

While there are other sectors in the con-struction industry that are still experiencinga decline, we continue to stay hopeful forwhat lies ahead in 2012.

2012 construction trends at a glance

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Its that time of year when our teampredicts the 2012 commercial constructiontrends from whats on tap for Chicagoretail construction to national restaurantconstruction and hospitality construc-tion. Weve compiled the list below basedon conversations with clients and fellowcommercial construction experts, upcom-ing bid work, economic projections andobservations in the field.

1. We Are the 99 Percent - Following

along with Occupy Wall Street, value-based new retail and restaurant construc-tion projects that target 99 percent of thepopulation will continue to be hot in 2012.Watch brands like Ross Dress for Less andSavers continue to gain momentum. Cur-rently Savers has three Chicago-area loca-tions, but we wouldnt be surprised to seethat number increase in 2012.

Growing retail brands likes AdvanceAuto and Auto Zone that help consumerssave money by keeping their cars longer

should also continue to do well in 2012.From what we hear on the commercialconstruction news front, if there will beany new shopping mall construction proj-ects next year, they are likely to be outletmalls a category that is seeing an uptickafter a few quiet years.

New hospitality construction projectsin 2012 will also focus on the 99 percent.Most hotel brands are building residenceinns and business inns vs. their high-endflagship brands. Expect to see hotel con-struction in the extended stay market grownext year with an emphasis on highly ame-nitized rooms.

2. The 1 Percent Still Matters, Too -When it comes to luxury retail construc-tion, look for high-end brands to focus onretail renovations of existing locations.These established high-end retailers aretaking advantage of market conditions tobuild bigger and better stores. There isalways at least one big Michigan Avenueretail construction project a year and rightnow Burberry is expanding its Michigan

Avenue space from two stories to five sto-ries, plus one basement level.

3. Creative Deal-Making - As obtain-ing financing for commercial constructionprojects continues to be a challenge forsome developers, look for creativity be-

hind the scenes. We have been approacheda couple of times to become an equitypartner in a project in order to win thatconstruction job. We are not developers, sothat doesnt work with our business model.But, that doesnt mean you wont see othercommercial general contractors cough upcash to win a job. However, we feel thebest Chicago contractors, or any commer-cial contractor, should focus on what theydo best, which for us is construction.

We also see no slowing down in pro-viding developers conceptual commer-cial construction budgets. Deals today aretougher to make and developers want tomake sure there arent any hidden num-bers.

4. Entrepreneurs Are Hungry - Ne-cessity entrepreneurship often emergesduring a recession. For those who cashout their 401Ks, many go into business forthemselves in the restaurant franchise mar-ket. We mentioned this rise in fast-casual

franchise restaurants in our 2011 commer-cial construction trends blog post and wethink it will only continue in 2012, par-ticularly in the restaurant construction ofsandwich/hamburger shops. The Subways,Quiznos, Five Guys and Smashburgers ofthe world will continue to dominate thevalue-add franchise sector. And keep youreye on Capriottis Sandwich Shop, whichhas plans to add 300 new restaurants in thenext five years.

Also look for fast-casual restaurantconstruction jobs to go smaller in termsof square footage. Reports from some res-taurateurs say the majority of their salesare from take-out, so they are moving tobuilding smaller spaces.

5. Anything Goes The old rule ofsuccessful shopping center developmentwas not to mix retail tenants with medi-cal tenants. Having a restaurant next to adentist office was suicide for the center.But now, shopping mall landlords need tofill the space so anything goes, even if thestores may not be the best fit for mall. A

lot of these random tenants are indepen-dent retailers, which unfortunately do notplace the highest standards on shoppingcenter construction, but they pay their rentand fill vacancies, so thats what matters atthe moment.

Five predictions for

commercial construction

trends in 2012

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Construction backlog

falls 3.2 percent in the

fourth quarter of 2011BUT, BACKLOG IS UP 10.9 PERCENT

FROM ONE YEAR AGOWASHINGTON, D.C. - Associated Build-ers and Contractors (ABC) today releasedits Construction Backlog Indicator (CBI) forthe fourth quarter of 2011. CBI declined 3.2percent from the previous quarter from 8.1months to 7.8 months, but is still up 10.9 per-cent compared to the fourth quarter of 2010.CBI is a forward-looking economic indicatorthat measures the amount of nonresidentialconstruction work under contract to be com-pleted in the future.

Overall, the latest CBI numbers indicate adegree of stalling in the recovery of the nationsnonresidential construction industry, likely dueto a combination of the soft patch that devel-oped in the broader economy early last year,a number of seasonal factors and the windingdown of federal stimulus projects, said ABCChief Economist Anirban Basu. But the goodnews is that given the recent acceleration ineconomic and employment growth, CBI is po-sitioned to rebound more forcefully during thequarters ahead.

In addition, the most recent data reflectthe ongoing expansion in privately fundedconstruction activity as opposed to the con-

traction of publicly funded construction,Basu said. The nations smaller constructionfirms are gaining an advantage from this shift,in contrast to the decreased construction activ-ity among the larger firms that had benefittedfrom earlier federal stimulus projects and mili-tary base realignment-related construction.

Regional Highlights Construction backlog expanded in the

Northeast from the third quarter to the fourthquarter, but declined in the South and West,and was essentially unchanged in the MiddleStates.

Construction backlog is higher in everyregion of the nation compared to one year ago.

Companies in the South, some of whichare located in high-growth states such asLouisiana, Oklahoma and Texas, reported thelengthiest backlog at 8.9 months, up 14.7 per-cent from the fourth quarter of 2010.

AnalysisThe disparity between regional construc-

tion activity is on the rise, said Basu. Oneyear ago, the difference in backlog betweenthe South region, with the lengthiest backlog,and the West region, with the shortest backlog,

was 1.98 months. During the fourth quarter of2011, this gap rose to 2.81 months, with theSouth reporting a backlog of 8.92 months andthe West at 6.11 months.

The South appears to be the region mostpositively impacted by rebounding nonresi-dential construction, largely due to its centralimportance to the nations energy industry,Basu said. The West continues to deal withmany issues, including the impact of weak res-idential real estate markets and stressed state

fiscal conditions, both of which impact the vi-

tality of broader regional economies.Industry Highlights All industry segments monitored by ABCs

CBI declined in average construction backlogfrom the third quarter to the fourth quarter, butbacklog is up on a year-over-year basis in boththe commercial/institutional and infrastructurecategories.

Construction backlog in the commercial/institutional segment fell from 8.4 months inthe third quarter of 2011 to 7.8 months in thefourth quarter, but remains 11.4 percent abovethe level reported one year ago.

Heavy industrial is the only segment inwhich construction backlog declined fromthe same time one year ago. Backlog for thissegment fell from 6.6 months in the fourthquarter of 2010 to 5.7 months in the fourthquarter of 2011.

AnalysisThe biggest surprise in the data is the lack

of momentum in construction backlog associ-ated with the heavy industrial category, saidBasu. Manufacturing capacity utilization,or to what extent a nation uses its productivecapacity, stood at just 71.4 percent during thethird quarter of 2011, down from a typical his-

toric level of more than 80 percent. This im-plies capacity utilization must rise a bit morebefore the industry experiences a significantincrease in construction backlog.

Highlights by Company Revenue During the fourth quarter, construction

backlog for firms with annual revenue exceed-ing $100 million declined 3 percent. However,firms in this category continue to report thelargest construction backlog among all rev-enue categories.

Construction backlog for firms with lessthan $30 million in annual revenue remained

at roughly the same level between the third andfourth quarter, but is up 14.1 percent year overyear.

Construction backlog for firms with an-nual revenue ranging from $30 million to$50 million increased from 7.3 months to 7.4months during the fourth quarter.

In the $50 million to $100 million revenuecategory, construction backlog declined from9.7 months to 8.9 months during the fourthquarter, but is still 4.2 percent higher than thefourth quarter of 2010.

Analysis

The most important finding in this quar-ters report is the growing construction activ-ity taking place among smaller firms, Basusaid. Early in the recovery, the lions shareof construction work seemed to favor firmswith annual revenues in excess of $50 million.This had much to do with federal infrastruc-ture spending. As the economic recovery hasbroadened to encompass more constructionsegments, work has steadily spread to smallerfirms - a trend that is likely to continue.


8/16


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The slowdown in investment in struc-tures is associated with the soft patch ofeconomic growth that characterized muchof last year. --ABC Chief Economist An-irban Basu.

Nonresidential fixed investment in-creased 1.7 percent in the fourth quarterof 2011 following a revised 15.7 percentincrease in the previous quarter accord-ing to the Jan. 27 Gross Domestic Product(GDP) report by the Department of Com-merce.

Nonresidential fixed investment in

structures fell 7.2 percent for the quarterafter increasing 14.4 percent in the thirdquarter, and 22.6 percent in the secondquarter of last year. Nonresidential fixedinvestment in equipment and softwarewas up 5.2 percent in the fourth quarterfollowing a 16.2 percent increase in thethird quarter.

Residential fixed investment jumped10.9 percent in the fourth quarter of 2011after a 1.3 percent increase in the thirdquarter.

Federal government spending fell 7.3percent in the fourth quarter as nationaldefense spending decreased 12.5 percentand federal nondefense spending increased4.2 percent. State and local governmentspending was down for the sixth straightquarter as spending slipped 2.6 percent inthe fourth quarter.

Gross domestic purchases - purchasesby U.S. residents of goods and serviceswherever produced - increased 2.8 percentin the fourth quarter following an increaseof 1.3 percent in the third quarter.

Overall, real GDP increased 2.8 percentin the fourth quarter following a revised1.8 percent increase in the third quarter oflast year.

AnalysisThe fourth quarter of 2011 was a disap-

pointing one for nonresidential construc-tion structures, said Associated Buildersand Contractors Chief Economist AnirbanBasu. Investment in structures had blos-somed during the two previous quarters,

4th Quarter 2011 GDP:Nonresidential FixedInvestment Up 1.7 Percent

(Continued from page 9B)


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According to research,those businesses seek-ing the advantagesof being perceived ashaving greater resourc-es, being a leader andbeing more experi-

enced should utilizethe strategy of larger,more colorful, morefrequent advertising.

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expanding 22.6 percent in the secondquarter and 14.4 percent in the third quar-ter. The fourth quarter represented a rever-sal with investment dipping 7.2 percent.

While this may be attributable to sea-sonal factors and not particularly worri-some, another theory is that the slowdown

in investment in structures is associatedwith the soft patch of economic growth

that characterized much of last year,Basu said. Investment in structures tendsto be a lagging economic indicator, whichmeans that the slowdown in economicgrowth during the first half of last yearwould be reflected in subsequent datacharacterizing nonresidential investment.

Overall, most people will focus on theGDPs disappointing headline number,

said Basu. The consensus forecast wasfor 3 percent growth on an annualized ba-sis during last years fourth quarter. While2.8 percent growth is in the immediate vi-cinity, the marketplace was certainly hop-ing for better because the fourth quarterof 2011 was the years best, as well as the

best performing quarter since the secondquarter of 2010.

It is likely that the consensus forecastwould have not been so optimistic hadforecasters understood how substantiallygovernment outlays have been falling,Basu said. State government spendingdeclined for a sixth consecutive quarter,and federal government outlays fell 3

percent for the quarter, adding to the eco-nomic malaise that is facing the country.

Nonresidential (Continued from page 8B)

Ottoville, Ohio

General Contractors

17359 State Route 66 Ottoville, Ohio 45876

Phone: 419-453-3825 Fax: 419-453-3025

Industrial & Commercial Roofingwww.CottermanRoofng.com

Minster & Dayton

419-628-3713


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business journal march 2012 b section

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