Savings: Does Your Desire to Save Match Your Reality?

Savings: Does Your Desire to Save Match Your Reality?

Mike Desepoli, Heritage Financial Advisory Group

“The only money that’s really yours is the money you spend.

Everything else goes to somebody else.”

-Teddy Chafolious

That piggy bank we remember from childhood wasn’t just a place to store our birthday money and spare change: it was a lesson, a way our parents encouraged us to get into the habit of saving. Many parents even go so far as to deposit half of any monetary gifts their children receive directly into a savings account, just to drive the point home. Adults who took that lesson to heart might set up automatic deposits into long-term savings or retirement accounts from their paychecks every month – a modern mechanism for implementing this age-old lesson.

But the quote from Teddy Chafolious raises an important point: What are we saving FOR? Many new investors come to their financial advisors with a number in mind: “I want to save $1 million before I retire.” There’s even something of a fad among millennials who work as hard as they can, save as much as they can, and try to retire before age 50.

But why? After all, “you can’t take it with you.”

It’s important to have financial goals, and committing to a regular savings plan is good first step towards achieving them. But if you treat your long-term financial planning as just a series of targets to hit, or numbers you have to drive up as much as possible, your return on investment is going to be a lot higher than your Return on Life – the feelings of happiness and fulfillment that your financial planning should provide you.

How much are Americans saving?

According to the US Bureau of Economic Analysis, Americans today are saving a lot less than they have in years past. Personal savings in the United States averaged 8.29 percent from 1959 until 2017. The rate for 2017 is hovering around 3 percent. Experts tie this historically low savings rate to increased household spending, which continues to outpace wage increases, and high levels of revolving debt, like credit cards.

Figures like these drive many people to the opposite end of the spectrum: they save as much as they possibly can, especially if they’re nearing retirement.

Finding balance.

We tend to think that the person saving more is doing a better job of managing his or her money than the person saving too little. But neither extreme is going to maximize your Return on Life. Spend too much enjoying the now, and you might end up having to work much longer than you want to – maybe even all the way through retirement. Save too much too early, and you and your family might miss out on the experiences that you deserve to enjoy with your hard-earned money: big family vacations, a new home, creature comforts, entertainment and culture that will enrich all of your lives.

Worse, new retirees who have spent their lives stuck in “savings mode” often have trouble transitioning to the reward mentality that should provide for a meaningful retirement. These retirees worry so much about running out of money that they often neglect their own wants and needs, to their emotional and physical detriment.

Reality check.

So how do you find that balance between enjoying today and preparing for tomorrow?

First, ask yourself if your rate of savings is in line with your reality. Are you saving so much that you’re not enjoying life as much as you could be? Or are you hovering around that 3 percent savings figure, telling yourself that you’re putting enough money away when you know, deep down, that you’re not?

Next, make an appointment with your Advisor to talk about your financial goals, and your vision for a dream retirement. Work together to find that saving/spending balance that’s going to align your savings with your reality, and hopefully, your goals and dreams. Find that sweet spot, and your money won’t just be numbers on a balance sheet. It will be yours. Don’t have an advisor? Here is a helpful article to show you what to look for.

Overlooked Keys to Being a Successful Investor

Three Overlooked Keys to Being a Successful Investor

Mike Desepoli, Heritage

Does investing strike “fear” in you? We once heard somebody say the word “fear” stands for “False Evidence Appearing Real.” That seems to apply to investing. Here’s why.

The stock market makes some people nervous. This can be especially true for young people who grew up during the Great Recession. Not only did these folks see market volatility at its worst, but they also came away with negative impressions about the financial markets in general.

The truth is that the market is neither a one-way ticket to instant riches nor a dangerous game for insiders only. There is risk involved in any kind of investment, but if you understand how the market operates in the long run, then the rewards can be significant.

By understanding the following three important facts about the market, you might be able to turn “fear” into “False Evidence Appearing Real” and not get scared out of letting your money work hard for you in the market.

  1. The market tends to move in long cycles.

The amount of info we have at our fingertips makes it tempting to check in on our investments weekly, daily, or even hourly. As a financial professional, though, we take a much wider view of the markets. And while past performance is no guarantee of future returns, the history of the market continues to trend upwards.

Consider the S&P 500 Index. If we go back and look at all the bull (upwards) and bear (downwards) markets from 1926 to 2017, the average bear lasted 1.4 years and resulted in a 41% loss on average. However, the average bull lasted 9 years, and gave investors a 480% gain on average, according to First Trust.

When volatility strikes, patience is usually a good course of action. Your financial plan is designed to provide for the rest of your life, not for one bull or bear cycle. Instead of panicking when the market dips, try to think of volatility as a tax that investors pay on the wealth that the market can create.

And if you do find yourself checking in on your investments as regularly as you check your email, maybe think about uninstalling that app—or calling us.

  1. Make consistent contributions to your portfolio.

Besides struggling to accept volatility, many people are skittish about the markets because they feel powerless. Money goes in, and decades later, who knows what’s going to come out. They feel that politicians, corporations, and geopolitical tumult will have the final say in how big their retirement nest egg grows.

However, often times the biggest factor that determines the success of your investments is simply contributing new money on a consistent basis. As discussed above, the market will most likely trend upwards in the long run. The more of your money that’s along for the ride, the bigger those eventual gains will be.

For example, suppose that you decide to invest $10,000 every year for 10 years into your portfolio. In a flat market returning 0%, that $10,000 would account for 100% of your portfolio’s gains. In a modest market returning 6% per annum, that $10,000 would account for 73% of your portfolio’s gains. And even in a bull market, charging ahead at a rate of 12%, your $10,000 would STILL account for more than half of your portfolio’s gains, according to Invesco.

  1. Focus on what you can control.

To be sure, part of investing involves accepting things you can’t control. A hurricane on the other side of the world might rattle the markets for a couple days. A large company might become embroiled in an accounting scandal. The Federal Reserve might make an unexpected interest rate move. Market corrections might follow.

But if you understand volatility and continue to focus on the big picture, you’ll start paying more attention to the things you can control, like a monthly budget that allows for automatic contributions to your investment and retirement accounts.

Better yet, think about setting a goal to ramp up the size of those contributions. Many people try to save or invest 10% of their income. Can you shoot for 15%? 20%? The bigger the contributions, the bigger the payoff when you retire. And if retirement isn’t on your radar, that big investment cushion will go a long way toward giving you a feeling of freedom.

If you’re still unsure about investing in the markets, make an appointment to talk to us. We can help clear away any misconceptions you might have about investing and craft a plan that makes you comfortable about how your money is working for you.

 

 

Facebook Data Scandal: What you need to know

Facebook data scandal: Here’s everything you need to know

Mike Desepoli, Heritage

Cambridge Analytica is in the midst of a media firestorm. This came after an undercover sting operation caught senior executives boasting about psychological manipulation, entrapment techniques and fake news campaigns. Alongside social media giant Facebook, the London-based elections consultancy is at the center of an ongoing dispute over the alleged harvesting and use of personal data.

What happened

It started with an explosive expose broadcast by Britain’s Channel 4 News on Monday. In it, senior executives at Cambridge Analytica, were caught on camera suggesting the firm could use sex workers, bribes and misinformation in order to try and help political candidates win votes around the world.

How did this initially come to light?

The Channel 4 News investigation followed articles published over the weekend by the New York Times and U.K. newspaper The Observer. The reports sought to outline how the data of millions of Facebook profiles ended up being given to Cambridge Analytica.

In this way, 50 million Facebook profiles were mined for data. Kogan then shared this with Cambridge Analytica, which allowed the firm to build a software solution. The software was used to help influence choices in elections, therefore spurring the narrative of collusion. This was according to a whistleblower, who revealed the alleged practices to both newspapers.

How has Facebook Stock responded?

As you might expect it’s been under quite a bit of pressure the last few days. It is currently off about 10% from recent all time highs made in February. With growing calls for executives to appear before congress, it will likely continue to be under pressure. In the news today, there is a group of investors who have filed a class action lawsuit against Facebook with the intention to recoup stock losses.

What happens next?

U.S. senators have urged Facebook boss Mark Zuckerberg to testify before Congress. They will likely ask about how the social media giant will protect its users. Meanwhile, in the U.K., Zuckerberg has been summoned by the chairman of a parliamentary committee in order to explain the “catastrophic failure” to lawmakers.

The head of the European Parliament has also said it will carry out an investigation to see whether data was misused.

 

 

Tariffs & Trade Wars

Tariffs & Trade Wars

By Emmet Sullivan , Guest Blogger

 

Many consumers, investors, and ordinary citizens often worry when the word “tariff” is thrown around. Instantly signaling an increase in price in imported goods, the word is almost synonymous with a negative economic impact.  Thinking in terms of the big picture, we need not jump to such hasty, and often misguided conclusions.

What is a Tariff?

First, it is important to understand what tariffs are, and what they hope to accomplish. A tariff is an additional tax imposed on imported goods.  By imposing these taxes on imports, national governments hope to discourage large-scale outsourcing. As a result they hope to spur domestic production by driving import prices up. When the prices of imports go up, the hope is that consumers will look to domestic suppliers for goods they would normally obtain from international sellers.

The current tariff talks in the U.S. are based around metals. Specifically, President Trump wants to impose a 25% tariff on imported aluminum and steel.  The levy is intended to increase demand of domestically manufactured metals by increasing the price of their international substitutes.  This in turn might create a number of job opportunities in U.S. metal production related to the surge in demand.

Trade War?

Many worry that this tariff may result in an international trade war between the U.S. and countries like China and South Korea. There is speculation that trading partners might retaliate with similar tariffs. Therefore, this would make it harder for U.S. producers to export their goods.  However, Canada (the U.S.’s largest supplier of both aluminum and steel) and Mexico (the U.S.’s third largest trading partner) are both exempt from the tariff as part of the ongoing re-negotiation of the NAFTA agreement.

In summation, the tariff should not be an immediate cause for worry. As stated, some of the U.S.’s largest trading partners are exempt from its effects, and some speculate that it has been implemented as a negotiation tool for international agreements like NAFTA. The tariff’s long term effects remain to be seen, but we caution against fear of an economically-harmful trade war at present.

5 Steps to Raise Your Credit Score

5 steps to raise your credit score

by Mike Desepoli

If you need to boost your credit score, it won’t happen overnight.

Credit scores take into account years of past behavior you can findon  your credit report, and not just your present actions.

But there are some steps you can take now to start on the path to better credit.

1. Watch those credit card balances

One major factor in your credit score is how much revolving credit you have versus how much you’re actually using. The smaller that percentage is, the better it is for your credit rating.

The optimum: 30 percent or lower.

To boost your score, “pay down your balances, and keep those balances low,” says Pamela Banks, senior policy counsel for Consumers Union.

If you have multiple credit card balances, consolidating them with a personal loan could help your score.

What you might not know: Even if you pay balances in full every month, you still could have a higher utilization ratio than you’d expect. That’s because some issuers use the balance on your statement as the one reported to the bureau. Even if you’re paying balances in full every month, your credit score will still weigh your monthly balances.

One strategy: See if the credit card issuer will accept multiple payments throughout the month.

2. Eliminate credit card balances

“A good way to improve your credit score is to eliminate nuisance balances,” says John Ulzheimer, a nationally recognized credit expert formerly of FICO and Equifax. Those are the small balances you have on a number of credit cards.

The reason this strategy can boost your score: One of the items your score considers is just how many of your cards have balances, Ulzheimer says. That’s why charging $50 on one card and $30 on another instead of using the same card (preferably one with a good interest rate) can hurt your credit score.

The solution to improve your credit score is to gather up all those credit cards with small balances and pay them off, Ulzheimer says. Then select one or two go-to cards that you can use for everything.

“That way, you’re not polluting your credit report with a lot of balances,” he says.

3. Leave old debt on your report

Some people erroneously believe that old debt on their credit report is bad.

The minute they get their home or car paid off, they’re on the phone trying to get it removed from their credit report.

Negative items are bad for your credit score, and most of them will disappear from your report after seven years. However, “arguing to get old accounts off your credit report just because they’re paid is a bad idea,” Ulzheimer says.

Good debt — debt that you’ve handled well and paid as agreed — is good for your credit. The longer your history of good debt is, the better it is for your score.

One of the ways to improve your credit score: Leave old debt and good accounts on as long as possible. This is also a good reason not to close old accounts where you’ve had a solid repayment record.

Trying to get rid of old good debt “is like making straight A’s in high school and trying to expunge the record 20 years later,” Ulzheimer says. “You never want that stuff to come off your history.”

4. Pay bills on time

If you’re planning a major purchase (like a home or a car), you might be scrambling to assemble one big chunk of cash.

While you’re juggling bills, you don’t want to start paying bills late. Even if you’re sitting on a pile of savings, a drop in your score could scuttle that dream deal.

One of the biggest ingredients in a good credit score is simply month after month of plain-vanilla, on-time payments.

“Credit scores are determined by what’s in your credit report,” says Linda Sherry, director of national priorities for Consumer Action. If you’re bad about paying your bills — or paying them on time — it damages your credit and hurts your credit score, she says.

That can even extend to items that aren’t normally associated with credit reporting, such as library books, she says. That’s because even if the original “creditor,” such as the library, doesn’t report to the bureaus, they may eventually call in a collections agency for an unpaid bill. That agency could very well list the item on your credit report.

5. Don’t hint at risk

Sometimes, one of the best ways to improve your credit score is to not do something that could sink it.

Two of the biggies are missing payments and suddenly paying less (or charging more) than you normally do, says Dave Jones, retired president of the Association of Independent Consumer Credit Counseling Agencies.

Other changes that could scare your card issuer (but not necessarily hurt your credit score): taking cash advances or even using your cards at businesses that could indicate current or future money stress, such as a pawnshop or a divorce attorney, he says.

For more on this topic check out: #AskTheAdvisor 61: 5 Ways to Build Your Credit

The BIGGEST Blunder Investors Are Making

The Biggest Blunder Investors are Making Right Now

Mike Desepoli, Heritage

 

It’s not all their fault, though, as information is often dumbed down in the interest of simplicity. As Einstein said: “Everything should be made as simple as possible but not simpler.”

Unfortunately, often the information provided to average investors has been simplified below the bare minimum. To avoid the blunder, average investors need a bit of sophistication.

To fully understand how to avoid the blunder, let us first illustrate the point. Read on for the blunder and how to avoid it.

The dirty little secret

Many average investors believe the myth that bonds are safe. There is some truth to the understanding that bonds are safer than stocks, but average investors miss an important nuance. If you buy an individual Treasury bond or a bond of a company with a solid balance sheet and hold it to maturity, you will get your principal back. However, this is not the case when you buy mutual funds or ETFs.

Asset Allocation? What asset allocation

Many average do it yourselfers are advised to start with 60% in stocks and 40% in bonds. Of course, adjustments are made based on age and objectives. Investors are told that stocks are for growth and bonds are for safety and income. Many average investors do not understand that they can lose a lot of money in bonds.

All good things come to an end

Bonds have been in a 30-year bull market. For this reason, the bad advice given to investors has not hurt them so far. However, average investors need to know that the bull market has ended.

The big blunder

As stock market volatility has risen, many average investors who want safety are moving out of stocks into bonds. They are doing so because they do not understand the following:

  • They can lose money in bonds.
  • Interest rates are rising.
  • Bonds move inverse to interest rates. In plain English, when interest rates go higher, bonds go lower.
  • Stocks are experiencing volatility because of rising interest rates.

What to do now

First and foremost, do not buy bond funds or ETFs.

Second, it helps to understand that most funds and popular ETFs are concentrated in a handful of stocks that have run up and now pose a high risk.

Third, if you don’t know what you’re doing always consult with a professional.

Fourth, check out Episode 60 of The #AskTheAdvisor Show by clicking here.

 

 

7 Simple Tips to Curb Your Spending

7 Simple Tips to Curb Your Spending

 By Mike Desepoli, Heritage

 

  1. Create a 30-day list

Make a new rule: you can’t buy anything (except necessities) until a 30-day waiting period has passed. Put a 30-day list on your refrigerator, and when you have the urge to buy something, put it on the list with today’s date. After a month has passed, you can buy the item. Many times the urge will have passed and you can just cross the item off the list. This works if you stick to your rule. The only exceptions would be groceries and other similar necessities.

  1. Don’t go to the mall

You only get the urge to buy on impulse if you’re in a shopping area (or if you’re watching TV). So, prevent the urge from happening in the first place by not going shopping. Don’t go to the mall or Walmart or other shopping areas. Only go to a store if you have a specific necessity to purchase, and go with a list. Don’t buy anything not on that list. Now get out as soon as possible. Don’t just walk around window shopping for entertainment, or you will be sorely tempted. Find other ways to have fun.

  1. Don’t go to online retail sites

Just as the mall will create the urge to buy, so will online sites such as Amazon. They make it too easy to buy something. Instead, stay away from these sites.

  1. Monitor your urges

Make it a point to monitor your urges, if it’s a big problem. Keep a little piece of paper, and put a tally mark on it every time you get the urge. This helps you to become more conscious of the urge, which is usually something we don’t even notice. Different symptoms can appear, such as faster breathing or a faster heart rate, when we have the urge. By becoming more aware of the changes in our body, we can begin to get the urges under control.

  1. Plan your purchases

Making a list before you go shopping is important. If you can make it a habit to stick to that list, you’ll eliminate a lot of little impulse buys. For other purchases, make it a habit to plan them, save for them, shop around, and even see if you can get it for free. Going through this process ensures that your purchases are more deliberate, and less on impulse. Plan ahead for birthday and Christmas gifts, and other large purchases that you know are coming up in the month ahead.

  1. Ask questions

Before you buy anything, ask yourself a series of questions. Is the purchase going to improve your life in some important way? Is the purchase supposed to make you feel better? Does it help you meet one of your life goals? Will it simplify your life? These are useful questions to help you evaluate the value of a purchase, and why you’re making it. Be honest with yourself — don’t try to sell yourself!

  1. Keep the end in mind

It’s useful to have clear goals in mind at all times. What do you want to do with your life? Do you have financial goals that you’re trying to accomplish, in the long-term and medium-term? Keep your savings goals in mind, and know when you’re about to make a purchase how the purchase will affect your goals.

Fore more information on this topic, check out our weekly Video Show by visiting the link below:

#AskTheAdvisor 59: 1 Simple Tip to Curb Your Spending Habits

What is a stock market correction? And a few other facts.

What is a stock market correction? And a few other facts you need to know

It’s been a crazy few days on Wall Street.

 

On Tuesday, the Dow plunged 567 points at the opening bell and briefly sank into correction territory before roaring back. On Monday, the Dow took its biggest single day point plunge in history.

Here’s what you need to know about what’s going on in the stock market.

What is a stock market correction?

A correction is a 10% decline in stocks from a recent high. In this case, that was less than two weeks ago, when the Dow closed at a record high of 26,616. A correction is less severe than a bear market, when stocks decline 20% from their recent highs. The stock market’s last correction began in the summer of 2015 and ended in February 2016.

Why is this happening?

The most immediate reason is a fear of inflation.

 

Last Friday’s jobs report was strong. Wages are rising, and unemployment is historically low. That’s great news for Main Street. But on Wall Street, it raises fears that inflation will finally pick up, and that the Federal Reserve will have to raise interest rates faster to fight it.

How are global markets reacting?

Overnight, world markets followed the United States’ lead and dropped. The Nikkei in Japan closed down 4.7%, China’s main stock index closed down 3.3%, and Australia’s closed down 3.2%. European markets were lower, but not as much as Asia. Stocks were down about 2% in Britain, Germany and France.

What does this mean for the rally?

From Election Day to the record high on January 26, the Dow climbed more than 8,000 points — a remarkable 45%. Many factors were behind the rapid rise: The ever-improving economy and job market, business optimism, record corporate profits, and the big business tax cut, which Republicans made law. The losses in the market since the beginning of last week wiped out about a quarter of that gain. The Dow began Tuesday up about 6,000 points since the election.

Is this the worst decline ever?

No.

Monday’s decline of 1,175 points on the Dow was, by far, the biggest point decline in history. The Dow had never lost more than 777 points in a single day. But in percentage terms, the declines of Friday and Monday are nowhere near the worst. On Black Monday in 1987, the Dow dropped an incredible 22%. That’s the equivalent of a 5,300-point decline today. And on several days during the financial crisis in 2008, the Dow dropped 6% or 7%. Monday’s decline was 4.6%. That was the worst for the Dow since August 2011.

 

Does all of this mean we’re entering a recession?

Stock market declines don’t cause recessions, and they do a pretty poor job of predicting whether one is coming. So while the market plunge might rattle investors and ding consumer confidence, it is not a sign that the economy is in trouble. Unemployment is at a 17-year low. Average hourly wages went up last month the most in eight years. Consumer and business confidence are near record levels. Economists say it would take a much bigger stock market move than Monday’s plunge to change that.

For more information visit us at Heritage Financial Advisory Group and check out the latest episode of The #AskTheAdvisor Show.

Stock Market Sell-Off: Heartburn, Not A Heart Attack

 

Managing Investment Risk

Managing Investment Risk

By Mike Desepoli, Heritage

If we know one thing about stock market investors it’s that the better the market performs, the less and less they think about risk. The first thing every investor should know and accept is that there is no such thing as a surefire investment. Risk is a part of the process. No matter what you invest in, there is always a possibility that you won’t turn a profit – or worse: you can lose some or even all of what you put in to it. You can manage risk, though, with a few proven techniques.

Asset Allocation

The first step in managing risk is to practice asset allocation. This means having your money in a variety of asset classes, which include cash, stocks, and bonds. Doing so is a protective measure – typically when stocks are doing well, bonds aren’t, and vice versa. Having some money in cash (or cash equivalents, which are extremely low-risk investments such as Treasury Bills and money market funds) makes sense, because outside of inflation risk – the slow but steady increase in the cost of living – your money is pretty safe.

Generally speaking, cash is the least risky of the asset classes, then bonds, and then stocks. Where you put your money depends largely on what type of investor you are, so be sure to allocate your funds according to your comfort level and needs:

• Aggressive Investor. 75% of holdings in stocks, 15% in bonds, and 10% in cash
• Balanced Investor. 50% of holdings in stocks, 25% in bonds, and 25% in cash
• Conservative Investor. 25% of holdings in stocks, 25% in bonds, and 50% in cash

Diversification

After you spread risk by investing in different asset classes, you can manage it even further through diversification. There are many different types and classes of stocks and bonds – some are much more risky (but with the potential for greater reward) than others. Therefore it is a good idea to divide your funds among a variety of investment vehicles with different risk and reward potentials.

For example, consider purchasing shares of stock in an assortment of different sectors. A sector is a subset of a market, and stocks are often grouped by the company’s type of business. Sectors include utilities, transportation, technology, health care, energy, and communications services. When you diversify your holdings among sectors, you spread risk – if one sector is doing poorly, another is probably doing well.
An easy way to diversify your holdings is with mutual funds, since they are comprised of many different investment types and classes.

Dollar Cost Averaging

Dollar cost averaging is another way of managing investment risk, and nothing can be simpler to do. You can practice dollar cost averaging by purchasing securities with a fixed amount of money at regular intervals. This way you buy more shares when the price is low and fewer shares when the price is high, thus reducing the over-all cost of the shares purchased.
If you have a retirement account through your employer, you already practice dollar cost averaging. You are having a set amount of money deducted from each paycheck deposited into your retirement account. And whether the mutual fund is doing well or poorly, the same amount of money is being invested. Done over many years, you ride out the highs and lows of the market.

Review and adjust your portfolio (your collection of investments) regularly. Even if you are comfortable with a great deal of risk, the closer you get to retirement, the more conservative your investment portfolio should become. The last thing you want is to have the bulk of your money – cash you are expecting to have when you stop working – in investments that have a high likelihood for loss.

The 2018 Personal Finance Roadmap

The 2018 Personal Finance Roadmap

By Mike Desepoli, Heritage

Ah Spring time. Warm weather and longer days.

People also tend to be more motivated in the Spring to organize, clean, and go through their stuff.

While it’s always good to get rid of old stuff and clean your house or apartment, I think it’s also a perfect time to leverage your motivation to give your personal finances a good deep cleaning as well.

Regularly checking up on your finances is important. There are many things you can do to improve your personal finances. However, a majority of them are really easy to put on the back-burner. Trust me – “buy life insurance” was on my to do list for two years before I finally got around to it.

Carve out some time this Spring to go through this spring cleaning personal finance checklist. It will help you start doing some things you’ve been meaning to do, as well as give you a check-up on certain things you are already doing to ensure you are still in a good spot.

Check your Net Worth

Checking your net worth can be a painful experience, especially for those who are in student loan or other debt. Even if you fall in this group, though, it’s still better to know where you stand than to be ignorant of your situation.

I have said in the past that for a large majority of people, especially millennials, it’s more important to focus on income than net worth. That’s exactly why it took me so long to get around to utilizing online platforms to track my finances. But once I did it felt good to know exactly where I stand at any point in time.

Review your Budget or Start Budgeting

One of the things I stress in personal finance lunch and learns or coaching sessions is to not only budget, but to regularly review your budget.
If you haven’t started a budget yet, that’s the first thing you should do. Budgeting can be as hands-on or hands-off as you want. Some people hold themselves to a specific spending threshold while others (myself included) just track the monthly trend and make sure they aren’t spending too much on things they don’t care about.

If you already budget, take some time to review your monthly spending. Ask yourself these questions:

• Is my spending in alignment with my values?
• Are there areas I can cut back spending on (i.e. restaurants, cable, cell phone, entertainment)?
• Is my current spending habits allowing me to pay down debt or prohibiting me from paying down or incurring more debt?
• What changes can I make to create more cash flow?

Review your Debt

While Personal Capital does a good job of pulling in your debt, I think it can be valuable to lay out all your debt in a spreadsheet as well.
When I’m looking at my debt I focus on a couple things: what type of debt it is and what the interest rate is?

There are different strategies you can use depending on the type of debt, but the first goal should always be to get a lower interest rate. If you have high interest credit card debt it can make a lot of sense to refinance it through a personal loan. It it’s student loan debt there is also opportunities to refinance at a lower rate.

Debt can be overwhelming, and I always encourage people to be action-oriented with their debt. Sometimes no action is needed, for example if you have it on auto-payment and it will be done at a specific date in the future (assuming you are happy with the interest rate). Others may want to be more proactive, such as refinancing, increasing their income through their 9-5 or a side hustle, or cutting expenses to pay it off faster.
Analyze your Income

It’s easy to get comfortable in a job and lose a pulse on whether or not you are getting paid fairly. Take some time to review your 9-5 income and give your resume a refresh. Some specific things you can do include:

• Review and compare salary data on sites like glassdoor
• Review job listings on an app like indeed to see what sort of skills employers are looking for
• Update your LinkedIn Profile
• Update Your Resume

Perhaps you are happy with where you are at with your 9-5 and the prospect of switching employers – even if it meant a higher pay – isn’t attractive. Or perhaps you are already maxed out at your 9-5 but still want to increase your income.

Check your Emergency Fund

Now you probably don’t need to check your emergency fund. If you have one, you likely know how much it is. If you don’t have one, you also know how much you have.

But when I say check your emergency fund I want you to actually think about whether or not your emergency fund is sufficient. How many months could you live off of it? If your answer was less than three months, it’s time to make building your emergency fund a priority. If you really want to challenge yourself make a plan of hitting somewhere in the six to twelve month range.

Now, if you don’t have an emergency fund then it’s time to get one. I will be the first to admit that building an emergency fund is not easy, especially when you have debt and other things that you want to put your income towards. But I can also tell you that it’s one of the best things you can do for your peace of mind.

Start by setting a realistic goal like saving $100. Then challenge yourself to increase that to $500, and so on. Eventually you will want to have the equivalent of three or more months of monthly expenses set aside. The important thing is to get started.

Review your Retirement & Health Savings Account

Another thing you should review is your retirement and Health Savings Account. A few things to check are:

• Are you contributing up to your company match for your 401k?
• Whether you have a company match or not, how much money are you actually putting into your 401k and/or IRA?
Are you able to contribute more?
• What investments do you haven in your 401k and/or IRA? Do you need to re-balance it?

I’m all about the “set it and forget it” approach to investing, especially when it comes to retirement accounts, but it is important to check up on them every once in a while, even if it’s just once a year.

Review your Insurance

The last thing on the Spring Cleaning Personal Finance Checklist is review your insurance. Insurance isn’t the most exciting thing in the world, but it serves an important function and can protect you from expensive, unexpected bills – or even bankruptcy.

Take an inventory of your current insurance coverage. How much do you pay in premiums? What are you actually getting in return? Is your coverage adequate?

Many times people don’t realize how much they are paying for insurance because it’s baked into their paycheck, mortgage payment, or is on auto-pay. Understanding the true cost of your insurance is important, if not just to have it as a reference point.

Insurance isn’t all about cost. You can oftentimes get cheaper insurance, but if the coverage is bare-bones you are going to regret it if something big happens. One of my former manager’s house burnt down right after he switched to a cheaper home insurance company. They ended up being very difficult to deal with and caused much more hassle than a different company likely would have. That’s not always the case, but I think it’s important to balance cost with quality of coverage.

Besides reviewing your current coverage it might make sense to add some additional coverage as well. Up until a little over a year ago I did not have any life insurance, but I decided to open a million dollar policy at age 27. There’s are many reasons to consider life insurance. In general, if others depend on your income and would be impacted if it were to go away, you should look into getting life insurance.

For more info on this topic checkout: (VIDEO) #AskTheAdvisor 55: The 2018 Personal Finance Roadmap

What To Do With Your 401k When Changing Jobs

What To Do With Your 401k When Changing Jobs

By Mike Desepoli, Heritage

Last year, millennials were nicknamed the ‘job-hopping generation’ after a Gallup report revealed that 6 in 10 millennials are open to new job opportunities.

According to this report, millennials have a reputation for job-hopping and are said to move freely from company to company, more so than any other generation.

That being said, I don’t think switching jobs is a trait unique to millennials only, even though they are said to job-hop three times more than other generations.

The job market is ever-changing and is not like it used to be. Fewer companies offer pensions and some entry-level jobs offer very little benefits or stagnant wages. Self-employment, temporary work, and side jobs have all become increasingly popular work options.

Also, there is less loyalty among employees who realize they can be laid off at any given time.

At the end of the day, if you come across a better job opportunity that you think you’ll be happier with and has better pay and benefits, you may feel tempted to switch jobs and there’s nothing wrong with that.

If you have a 401k however, you may be wondering what you can do with it when you do secure another job. You don’t want all the money you saved for retirement to go to waste, so here are a few options.

 

Keep the Money in Your Old 401k

Most companies will let you leave the money you saved for retirement in your 401k where it is. In other cases, there may be a balance requirement.

Employees who move on to another company may choose this option out of default especially if they have no idea what to do with their 401k. The major downside is that you won’t be able to contribute to your 401k anymore.  Also, you’ll have to keep track of more than one retirement account.

If you tend to switch jobs every couple of years, you could wind up with multiple 401k plans that you can’t contribute to which is why it’s best to consider some of these other options first.

 

Roll Over Your 401k to Your New Company’s 401k

If you had a good 401k plan with your old employer, you can easily roll it over to your new 401k. Check to see what the investment options are along with the fees with your new company. If you don’t like your current options as much as your old plan, consider rolling it over.

Most employers will accept a 401k rollover. As long as you have at least $5,000 in your account, it’s your legal right to do roll it over. If you have less than $5,000 in your account, your employer will have the option to cash you out of the plan.

If you’re going with this option, always ask for the rules to be clarified since you may have limitations since you’re no longer with the company. For example, you may be charged extra fees since you no longer work there.

Move Your 401k to an Individual Retirement Account (IRA)

This is another option you’ll have especially if you don’t like your new company’s 401k plan. IRAs and Roth IRAs are great options that typically have lower fees and allow you to have more control over your investment options. With an IRA, you will just have more control overall. You can choose low-fee investments and won’t be limited to name just your spouse as your beneficiary like with most 401k plans.

Keep in mind that there is a difference between a traditional IRA and a Roth IRA. With a traditional IRA, you contribute pre-tax dollars.  The money is not taxable until withdrawals begin. If you withdraw funds before then, you’ll most likely have to pay a penalty fee.

With a Roth IRA, your contributions are taxed when you make them so your earnings will be tax-free. Withdrawals are also tax free once you attain age 59 1/2.

There are also income limits to be eligible for an IRA. In 2017, you must earn less than $118,000 if you’re single and less than $186,000 if you’re married. The maximum contribution you’re allowed to make per year is $5,500 and $6,500 if you’re 50 or older.

Cash Out Your 401k

This isn’t the best option, but it is an option nonetheless. If you want or need the money in your 401k account to pay bills, meet other expenses you have, or even to reinvest another way, you can simply cash out what’s in your retirement account.

A major downside is that you will have to pay taxes on the money along with a penalty. If you cash out a smaller amount, what you receive will be even smaller. If you cash out a large amount, it won’t really be worth it due to your large tax bill.

You could also destroy your retirement nest egg in the process especially if you received a nice 401k company match.

Depending on how many times you switch jobs that provide you with a 401k account, you may need to make the decision of what to do with your old 401k more than once. To determine which option is best for you, determine your current and future needs. Always consider factors like fees along with your investment options.

I’m sure everyone wants to retire some day so it usually the better option to keep money from your 401k and roll it over or put it in an IRA.

4 Ways to ACTUALLY Keep Your Resolutions

4 Ways to ACTUALLY Keep Your Resolutions

By Mike Desepoli, Heritage

 

You might know that 41% of Americans make New Year’s resolutions annually. But did you know that out of those, more than 42% never actually succeed, yet continue to make new resolutions every year? As the saying goes, if change were easy, more people would do it.

Fortunately, there are some simple ways for you to set yourself up for success. Read on to explore some of the most common resolutions and how you can actually make them stick.

Resolution: Manage Time better

Most of us can think of some way we’d like to improve our time management. Whatever you want to make room for, there’s a key strategy that can help you actually make it stick.

Success Tip: Name Your Why

You have 24 hours in a day, but old habits can be hard to break. To make a lasting change in how you’re budgeting your time, first establish your “why”.

Let’s say you want to spend more time with family, or spend an hour a day reading. What’s the reason behind your goal? How will it enrich your life? If you review your “why” regularly, you’re less likely to quit when those old habits come calling.

Resolution: Learn a new skill.

Adding new skills can help you maintain a sharp mind and a sense of purpose in life. It can also be a lot of fun! If there’s something you’ve been wanting to learn, the new year is a great time.

Success Tip: Get Classy

You don’t have to go at it alone. Take a class and let an expert show you the way. There are top quality online classes available for everything from tennis to organic farming to screenwriting. Looking for more in-person experience? Check out the offerings at your local community college.

Resolution: Get Healthy

Whether you want to eat better, sleep more, or amp up your exercise regimen, “getting healthy” is one of the most popular wishes at the beginning of a new year.s

Success Tip: Partner Up

For better or worse, we often tend to show up for other people more easily than for ourselves.

Doing a cleanse? Checking out yoga? Find a buddy to do it with you. Chances are good that someone you know has a similar goal. With a partner who’s counting on you, you’re more likely to stay accountable and get in great shape.

Resolution: Get Organized

The new year’s invitation for a fresh start also extends to your personal space and working environment. But trading a habitual mess for lasting tidiness can feel like an impossible task.

Success Tip: Start Small

Whether you’re looking to empty an attic, declutter your desk, or finally put all those National Geographic in chronological order, keep it simple and flexible.

To get unstuck, ask yourself: “What is one small thing that I can do today?” Just keep taking one small step each day, and you’ll have the job done before you know it.

 

For more information on this topic, check out the #asktheadvisor show episode 53 by clicking HERE

Unusual Expenses that Add Up Quickly

Saving for a Rainy Day: Unusual Expenses that Add Up Quickly

By Jackie Waters, Guest Contributor from Hyper-Tidy.com

 

When you’re living independently as an adult, it’s easy to budget for everyday costs–grocery shopping, mortgage or rent, gas for your car, etc. However, most people end up spending a significant portion of their income on emergency situations that are not expected. The big fault here is not having a disaster, but not planning for one. In your monthly or yearly contribution to your extra savings account, it’s important to think about the price of even the most unusual expenses as a result of unexpected circumstances. Unfortunately, it’s not a matter of if these situations will happen–but when. During tough times, you want to be prepared, so here are some areas in your life for which you should be saving.

 

Home repairs

If you are living under a roof with your name on the property, you are responsible for fixing all the problems that arise. This ranges from a leaky faucet, to a damaged appliance, and to even more serious issues that attribute to the home’s structure. Some of the home repair afterthoughts include:

 

  • Bug infestation, such as fleas or bedbugs

 

  • Water damage

 

  • Foundation problems (such as a crack or shift)

 

  • Sewer line problems on the outskirts of your property

 

  • Mold

 

Often times, water damage and mold can be preventable simply by being aware and immediately fixing leaks throughout the house. Any type of bugs, especially fleas or bedbugs, can attach to you or your belongings as you travel. It’s important to check for bugs any new place you stay, even for a short duration of time. Foundation or sewer problems, on the other hand, are issues that happen over time and can only be fixed by calling professionals for repair.

 

Environmental disasters

Depending on where you live in North America, you can take a hit from the environment in a variety of ways. These disasters can be droughts, hurricanes, fires, earthquakes, tornadoes, floods, volcanoes, hail storms, and severe weather that encompasses rain, wind, thunder, and lightening. In 2016 alone, major climate disasters in the United States accumulated to a one-billion-dollar cost per disaster.

 

  • House fires can cost up to $45,000 for homes without fire sprinklers and $2,166 for homes with sprinklers, according to the U.S. Fire Administration.

 

  • Flooding for 2,000 square foot homes with 6 inches of water damage can cost up to $39,150 based on National Flood Insurance Program estimates. Find out the estimated cost for your home here.

 

  • Earthquakes cost the average homeowner $3,914 in property damage and repairs.

 

It’s important to note that while purchasing homeowner insurance can reduce most costs of natural disasters, the coverage varies state by state. Typically, water damage from floods are not covered by insurance companies.

 

Family Tragedy

Death of a loved one, or severe illness, can happen unexpectedly and change the lives of everyone else in an instant. Particularly, American funerals are becoming more and more expensive; the average can range from $8,000 to $10,000 per person.

 

Major sickness, such as cancer, can require intense pharmaceutical drugs and hospital visits that end up costing an individual thousands of dollars each year. Drugs and other medicinal therapies alone can range from $10,000-$30,000 per month for some people. Insurance companies usually cover 70-80% of medical bills, but that still leaves the average cancer patient with $24,000 to $36,000 in annual debt.

 

Sudden job loss or cut in pay

No one likes to plan for the day they lose their job, but unfortunately, it can still happen. For those who live on their own independently or whose income provides for an entire family unit, the loss of pay can be quite significant. In these circumstances, having an emergency fund with 3 to 6 months’ worth of expenses can help with daily living until you get back on your feet.

 

About Jackie Waters

Jackie Waters is a mother of four boys, and lives on a farm in Oregon. She is passionate about providing a healthy and happy home for her family, and aims to provide advice for others on how to do the same with her site Hyper-Tidy.com.

25 Ways to Save Hundreds on Your Holiday Shopping

Tips to Save Hundreds on Your Holiday Shopping

 

You’re not alone. A recent study found that 39% of Americans feel pressured to spend more than they can afford during the holiday season.

That’s no wonder, with the average U.S. adult planning to drop $830 on Christmas gifts this year, and 30% of people planning to spend upwards of $1,000, according to a November poll.

To help you make the most of every gift-giving dollar, we’ve asked shopping experts for their smartest strategies. We will explore how to score deals and outsmart retailers at their own tricks. Here are many ways to save during this years shopping season.

1. Track the items you want

One of the easiest ways to save is to avoid impulse buys. Start by making a gift list, then comparison-shop . You can also use price tracking tools to see the highest and lowest prices an item is currently selling for. That way you know whether to whip out the card now or wait till closer to Christmas.

 

2. Set up price alerts

Want something that’s still too pricey for your budget? Use the web to set up email alerts that will notify you when the price drops.

3. Ask for a price match

Once you know the lowest price an item is selling for, ask your local merchant to match it. Most stores will price-match with their direct competitors. You can even compare prices while you’re out shopping by using mobile apps like Price Grabber or Shop Savvy.

4. Shop from a cash-back site

Plenty of websites will give you cash back for shopping at certain retailers as long as you enter the shop’s site through them first. You’ll typically get between 1% and 5% of the purchase back, though sometimes retailers will run specials that bump that figure up to 20%.

You may have access to a similar deal through your credit cards. Discover’s Discover Deals program, for example, includes several retailers who offer between 5% and 15% cash back when you click through Discover’s site to the retailer. As with the sites above, these offers are on top of your usual credit card rewards.

5. Subscribe to store emails

It can be well worth the spam to sign up. Major retailers offer special loyalty coupons and early sale access to frequent customers. Just keep in mind that come-ons for 40% off clothing or housewares could cause you to ramp up spending even as you hunt for bargains. Avoid the temptation by keeping these emails in a separate folder that you check only when you actually need something.

 

Fragile Markets

Fragile Markets

Heritage Financial Weekly – December 12, 2016

 

Dad: “Fra-gee-lay” …it must be Italian!

Mom: I think that says “fragile,” honey.

Dad: Oh, yeah.

 

This holiday season, investors’ enthusiasm for U.S. stocks has rivaled old man Parker’s passion for his major-award leg lamp in ‘A Christmas Story.’ Last week, three major U.S. indices hit all-time highs.

Consumer Sentiment on the Rise good for stocks?

Barron’s reported consumer confidence is helping make this the most wonderful time of the year for U.S. stock markets. The University of Michigan’s Index of Consumer Sentiment rose to 98 in December, reflecting a surge in consumer confidence. It was the highest reading since January 2015 and is closing in on the highest level since 2004. Surveys of Consumers chief economist, Richard Curtin, wrote:

 

“The most important implication of the increase in optimism is that it has raised expectations for the performance of the economy. President-elect Trump must provide early evidence of positive economic growth as well as act to keep positive consumer expectations aligned with performance. Either too slow growth or too high expectations represent barriers to maintaining high levels of consumer confidence.”

 

In his December Investment Outlook, Bill Gross cautioned while many aspects of Trump’s agenda – tax cuts, deregulation, fiscal stimulus – are good for stocks over the near term, investors should keep an eye on the longer term, as protectionist policies could restrict trade and, together with a strong dollar, could lead to more fragile markets.

 

European stocks also moved higher last week as a result of the European Central Bank (ECB) announcing a taper. Quantitative easing will continue through 2017, but ECB purchases will fall each month beginning in April.

A Look At The Numbers

Data as of 12/9/16 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) 3.1% 4.6% 5.4% 7.7% 12.5% 4.8%
Dow Jones Global ex-U.S. 2.7 2.0 2.1 -2.8 2.7 -1.1
10-year Treasury Note (Yield Only) 2.5 NA 2.2 2.9 2.1 4.5
Gold (per ounce) -0.8 9.5 7.6 -2.0 -7.4 6.4
Bloomberg Commodity Index 1.3 12.2 11.2 -11.2 -9.2 -6.3
DJ Equity All REIT Total Return Index 3.8 7.7 10.8 12.1 12.6 4.8

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

 

Divorced? you may want to investigate spousal benefits.

If you weren’t the top wage earner in your marriage, or your job was raising the children, then Social Security’s spousal benefit could prove advantageous. As a result, it provides the lower earning spouse with 50 percent of the higher earning spouse’s benefit at full retirement age, even if you’re no longer married.

 

“Social Security operates with a philosophy that a divorced person may deserve a personal benefit, having been the long-term partner and helpmate of a member of the workforce. The benefit is similar, in fact, to the spousal benefit that is available to a person who is still married.”

 

What Does it all Mean?

To qualify, you do have to answer ‘yes’ to a significant list of requirements:

 

  • Married for at least 10 years
  • You are unmarried now
  • Age 62 or older
  • Your ex-spouse is entitled to Social Security benefits
  • The benefit you qualify to receive based on your work, is less than the benefit your ex-spouse qualifies to receive because of several factors. There are other factors that could affect your application for spousal benefits, including whether your ex-spouse has begun taking benefits. If you would like to learn more, contact your financial professional .
Weekly Focus – Think About It

“My mission in life is not merely to survive, but to thrive; and to do so with some passion, some compassion, some humor, and some style.”

–Maya Angelou, American poet