News Summary

SPRINGFIELD — Larry Baker works hard to get his hands on other people's money, but his goal is to return more than he receives.

Owner of Baker Krizner Financial Planning, 2330 N. Limestone St., the farm boy from Quincy and Wittenberg grad, along with partner Scott Krizner, advises about 2,900 clients in Ohio, Florida, New Jersey and California.

With 35 years of financial planning experience from which to draw, Baker sees himself as a local observer of the present national economic situation who is charged with doing his best to ensure his clients are prepared for whatever life throws at them.

He recently offered his opinions of and strategies for dealing with individual financial futures in today's unpredictable economy.

Q How do you guide your clients during difficult and unpredictable financial periods like we're facing now?

A "We prepare our clients for inevitable life and market changes, but we can't necessarily know what those changes will be or when they will happen.

So, we start with the fact that most everyone goes through six major life events: opportunity, emergency, college, retirement, disability and death. We try to help people build capital or have programs in place so that when any of these life events happen, they're either ready for it or they're in better stead. Opportunities and emergencies come up, but if people are prepared and have capital, many of those emergencies can turn into a nuisance instead of a crisis."

Q What is going on nationally?

A "Today, we have something going on which is, in my humble opinion, a result of too much leverage in the mortgage industry and too many derivatives built on that leverage. The mortgage industry got ahead of itself and many people have become accustomed to using debt to finance their lives."

Q Can you be more specific about what the mortgage crisis has done to the national economy?

A "There is no question this mortgage problem is more pervasive and wider than anyone ever imagined. ...Fewer than 7 percent of mortgages are in trouble, but the leverage in the industry and freezing of the market that comes from them are the problem. The securitization of the debt itself has caused a situation where people do not know how to value the debt, so now banks are not able to value their assets and the derivatives. Those assets can be technically written off and that's causing the problem."

Q What is a frozen market?

A "In a seized or frozen market, even though products have value, if no one is interested in buying, then what value do they actually have? Right now, nobody will buy out of fear and uncertainty."

Q What will the proposed government bailout do?

A "The federal government is trying to return the market to regular activity so the markets can start to move again. The government may take this opportunity to re-regulate and tighten the delivery of (certain financial) products.

Q What else impacts the stock market?

A "Many things that can be both be positive and negative — a war, an energy crisis or innovations that enhance people's productivity. Right now for example, countries like China and India are trying to build a middle class. As those countries continue to grow, it provides new markets for our products and services. Those emerging markets then transition to developing markets and will continue to grow."

Q What do you see as a potential solution?

A "There will have to be a tightening of the belt on all levels of society — federal, state and local governments and on an individual level, too. The problem with debt is someone has to pay it back. From the top to the bottom, the country is borrowing too much money to finance its activities. People are going to have to come back to having the equity, having money to do things and that's not a bad thing. That's the way it should have been all along."

Q On a personal level, what's one big financial mistake people often make with regard to debt?

A "Overextension on a home or a mortgage you can't handle. A home should be 22 percent or less of total income so there is still some money for other things including savings. If you focus on practicality and functionality in a home, it will serve you well."

Q Bottom line, what should investors do right now?

A "Historically, the markets shudder once in a while and there are no guarantees in the stock market. Things that hold true in the long run don't necessarily hold true in the short run, so the key is to stick in there, stick with your financial plan."

Contact this reporter at (937) 328-0371 or elroberts@coxohio.com.