soon to be parent

5 Planning Tips for the soon-to-be parent

The best time to get money-wise about parenthood should be before a child is born. Most soon-to-be parents are probably thinking about all the glorious elements of being a parent; the snuggling, baby baths, feeding, or changing diapers. The last thing newly minted parents are thinking about is making sure their family is set up for financial success. If you are a parent-to-be, preparing ahead of time will enable you to think through all your options and create a solid financial plan.

1.      Create a (parent) budget

When a child arrives, your family budget will change dramatically. Make sure to factor in the cost of diapers, baby formula, child-care, clothes, toys, and the list goes on.

2.      Start an emergency fund

Start saving three to six months of household expenses in an account that you can readily access. For those who wish to be a bit more aggressive, aim for six to twelve months.

3.      Review your insurance coverage

The primary goal is to make sure your family can continue to keep the household going financially if something unexpected were to happen. This involves you conducting a thorough analysis of your life insurance, along with short- and long- term disability insurance.

4.      Think retirement before college

Students have options for funding their education – – grants, scholarships, loans, and any savings or investments you’ve put aside. You don’t have such a variety of options to fund your retirement, nor can you make up for that time lost. Understandably, you want to provide proper funding for your child’s education. Still, your financial independence should be the top priority.

5.      Make an estate plan

Make sure your family’s wishes are carried out in the event something happens to you. Your family’s details will end up in court with a judge deciding what he or she thinks is best if you don’t have documents such as a will, trust, or power of attorney.

Please make sure to speak with a financial professional as it relates to these tips. Doing so will ensure that you and your family will have peace of mind related to your financial decision making.

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5 Important Estate Planning Documents

One of the most valuable gifts you can leave your loved ones is a properly prepared estate plan. During your lifetime, you will have worked hard to acquire various assets (hopefully). When you leave this earth, the choice is yours about who/what gets those assets. However, this won’t happen without proper planning. Please don’t leave it to the state to decide what happens to your assets upon your death. The first thing you should do is touch base with an estate planning attorney. They are well versed in the legal requirements for the state in which you reside.

Here are 5 estate planning documents that you should familiarize yourself with:

1.      Last Will and Testament – a will is a legal document which allows you to:

  • Designate who will receive your assets after your death; this avoids having your assets divided according to the state’s formula
  • Nominate an executor; they will manage your estate, pay your expenses, debts, taxes, and distribute your estate according to the instructions in your will
  • Nominate a guardian for your minor children

2.      Durable Power of Attorney for Health Care

  • With this document, you name a person of your choice and agreed to make a medical decision for you. This person will act on your behalf in health care matters if you cannot make those decisions. This authority expires upon your death.

3.      Revocable Living Trust

  • In a revocable living trust, your assets are transferred into a trust, generally administered by you for your benefit during your lifetime and transferred to your beneficiaries upon your death, without the need for court involvement. Your Last Will and Testament, which is supplemental to your trust, cover any assets that have not been transferred into the living trust. A revocable trust allows you to retain control of your assets during your lifetime, quickly transfer them to your beneficiary upon your death and avoid the expense and delay of Probate Court. This trust also helps to reduce or eliminate any federal estate taxes.

4.      Durable Power of Attorney for Property Management

  • This document designates and authorizes a person of your choosing to make financial decisions and manage your assets on your behalf to the same extent and effect as if you were present in person. Durable means that they may also act for you in the event you become incompetent or incapacitated.

5.      Living Will

  • A living will allows you to state your desires regarding the use of life-support devices to prolong your life if you are stricken with a terminal illness or when there is no reasonable hope for recovery from an injury or illness.

 

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10 Money Tips For Women

There has been a ton of research around women and finances. One study, conducted by the National Center for Women and Retirement Research, showed a direct correlation between a woman’s personality characteristics and her financial habits. The study also revealed that some unique qualities tend to lead to smarter money choices: assertiveness, openness to change, and an optimistic outlook.

Money, in general, is an emotionally charged subject. Some experts say the beliefs that women have about money and their emotional attachments strongly influence how they spend and handle money. If you’re not where you want to be financially, do a quick assessment of what drives you emotionally when it comes to money. Try to figure out the roadblocks that keep you from becoming financially independent.

With that, here are 10 tips (not in order of importance) that can aid you on your journey to becoming a financial rock star:

  1. Be involved in the day-to-day of your family’s finances. Talk about money with your spouse or significant other.
  2. Don’t rely on someone else (spouse or significant other) for your future financial security.
  3. Set financial goals and track your progress along the way; They can break down as such: (a) Quick Win – a goal you can accomplish today, tomorrow, or within the next 1 or 2 weeks (b) Big Win – goals you can achieve within 1-month, 3-months, 6-months or 1 year.
  4. Don’t let the fear of (1) losing money, (2) of failure, or (3) of the unknown stop you from investing. The stock market (in the long run) is your friend.
  5. Consider taking on some DIY (do-it-yourself) projects around your home. Try fixing minor issues yourself. YouTube has a TON of DIY videos that can assist you and if you’re still not comfortable, ask a friend or family member to help out.
  6. Build a substantial emergency fund; 3-months is good, but 6-months is even better.
  7. Focus some attention on your retirement savings; a rule of thumb – put away 10% of your earnings each year.
  8. Pay yourself first! Since you pay your bills every month, you should be one of those “bills” that gets paid.
  9. Having a day job is great but think of other creative ways to earn additional income.
  10. Get your debt in check. Don’t spend money you don’t have (that one was for the credit card abusers). And, if you have student loans, know that you may have them for a while unless you’re working in a position that receives bonuses or commissions OR you receive a windfall of money.
  11. BONUS tip: Marry well! (Believe it or not, this is a strategy for some women)
you need a planner

You Need A Financial Planner

Financial planners were put on this earth for one reason, to help people get and keep their financial houses in order. But so many people avoid financial planners. Why, exactly is that? Are you one of those people who think you’re better off on your own? Perhaps. Are you the person who says you don’t make enough money; therefore, there’s no need for you to meet with one? Or maybe you’re the person who says, “I don’t want someone all up in my business.” Whatever your reason, you should seriously consider having a conversation with a financial planner because the data doesn’t lie! As a society, we are seriously failing at financial planning.

If you have some time, research this piece that the National Association of Personal Financial Advisors published in 2012. The findings are quite disturbing. In that piece, they reference an organization, the National Foundation for Credit Counseling, which conducts an annual consumer financial literacy survey. Take a look at their survey in 2013 and 2014. It should come as no surprise, but the numbers continue to be extremely disappointing year after year. And, if you’re wondering how things are going today, not much has changed. On the flip side, this should encourage any financial planner to continue to reach out to and follow up with their clients, ask those tough questions, and challenge their clients to be better financial stewards.

Financial planning shouldn’t be something that we fear, but something we should embrace. If you are someone who doesn’t have a plan, you need one. If you’re someone who already has a plan, maybe you’re overdue for a review. No matter your situation, having a financial game plan will most certainly guarantee you financial independence (however you define it) at some point in your life. And just like that adage says, if you fail to plan, you plan to fail.

understand bene's

Understanding Your Benefits is Important

When you get a job, your employer may have informed you that you will be receiving some additional benefits aside from a paycheck. Some of the most important benefits a company may offer come by way of insurance. For this article, I want to focus on life and disability insurance. Determining what insurance benefits you select will depend on your unique situation. Keep in mind; employers may give you numerous insurance options to choose from, while others may offer the bare minimum. Nevertheless, read through the entire benefits packet that they give you!

Most people are well aware of the importance of health insurance, but not so much when it comes to life and disability insurance. Here’s a recommendation; take some time to determine how much life and disability insurance you need. The life insurance offered through your employer is the cheapest that you will find, typically because your employer is fronting most, if not all, of the premium payments for you. You will generally find that they may offer flat rates of coverage at varying cost to you, or they may have it where you’re entitled to an amount equal to one or two times your salary. If what they are offering isn’t enough, consult an insurance agent to determine how much additional coverage you need to fill your gap. Having adequate life insurance is of the utmost importance. Suppose your household has two wage earners and one passes away, or the breadwinner of your family was no longer here. In that case, the remaining family members would most certainly appreciate having money for the final expenses and maintaining their current lifestyle. The grieving phase will be challenging enough, but adding financial troubles into the mix makes things that much tougher on your family.

When it comes to disability insurance, the same rules apply. Your employer is fronting most, if not all, of the premium payments for you. Many of us don’t see the value of having disability coverage, but here’s some food for thought. If you were seriously sick or injured and unable to work, how would you pay your bills? If you answered that question by saying you have an adequate amount of emergency funds (3-6 months worth of expenses) saved, then you may be okay. If you don’t have such an amount, then disability coverage becomes your savior. Essentially, it enables you to maintain your current lifestyle. What happens for most people is that they fail to have the all-important emergency fund, which results in them having to tap other resources like their investment or retirement accounts or credit cards. None of those sources should be utilized if at all possible. Your employer may only offer short-term disability or a combination of short and long-term disability coverage. 

Remember, read your benefits packet because this is something you need to know. Again, just like with life insurance, if what your company offers isn’t enough, consult an insurance agent to determine how much additional coverage you need to fill your gap. [Just so you know, you will never be able to get 100% disability coverage, primarily because if you could get 100% of your earnings without working, you would never go back to work.]

Having a firm grasp of your insurance offerings through work is critical. There may be gaps within your overall insurance plan, and you need to make sure they are filled. Insurance is THE foundation of a financial plan. If you are not adequately protected, you are putting your investment and retirement accounts in serious jeopardy. Think of it this way, if you were going to build a house, would you start on the second floor? Of course not!! You set the foundation, which allows you to build the remainder of the house. There have been numerous studies conducted about the staggering number of under-insured people in this country. Please don’t let this be you. If you don’t care about insurance studies, ask a family member or close friend if they or someone they know has been negatively impacted by having an inadequate amount of insurance, then you will understand.

best time to invest

When is the Best Time to Invest

Having served as a financial service professional my entire career and I am repeatedly asked two questions: “When is a good time to invest?” and “Where’s a good place to put my money?”

I struggled tremendously with my response when I was a novice, but now that I’m a seasoned pro, it’s straightforward. I would always get tripped up on trying to sound smart or talk long enough to assure the person I knew what I was talking about. As I’ve matured, responding is so much easier. My answer to the first question, NOW! Today is a great day to invest (in something), and tomorrow will be too! My response to the second question, please take a look at exhibit A.

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Now, both of your questions have been answered, so you can move forward and start investing. But wait, just giving you a simple answer isn’t enough. I know you will have some follow-up questions, and now comes the pivotal point in this exchange.

You’ve got two options:

1. Schedule a time with the professional and dig a little deeper about what you’re trying to accomplish with the money you want to invest. PLEASE keep this in mind…this meeting might cost you money. A financial service professional also has a family, bills, goals, etc. They are running a business. Just ask yourself, would you be okay working every month and not getting paid? If someone is offering free assistance, it will generally be limited in scope because whatever you are discussing could have been found/read on the internet. Thus, you need to decide if it’s worth you paying someone to help you get it done. If you are concerned after someone quotes you a price, make sure to shop around a bit (but not too long) to see what else the market is offering. Keep in mind, if you are paying someone, chances are you are serious and will follow through on things since you’ve put some “skin” in the game. Generally, people don’t truly value free advice; thus, they rarely take action after receiving it. You know yourself, so the decision is up to you.

2. Use one of the many do-it-yourself platforms that various financial institutions offer. With this option, you will be required to do your research and decide what you want to invest in. All of the platforms are extremely user-friendly, so you shouldn’t have any issues if you are tech-savvy.

You are now equipped with a few options to help you start (or reviewing) your investment plan. Once you have made a decision on which option, you have to act promptly. PLEASE do your best to avoid the awful disease called “paralysis by analysis.” The stock market doesn’t care how long it’s going to take for you to make a decision; you just need to do it. I would seriously hate for you to miss out on an opportunity because you’re still “thinking” about what to do.

taking inventory

Taking Inventory

Getting your financial house in order is a goal that most people set for themselves. Of course, not everyone will get things in order at the same stage in life. Like anything else, most people will do things when they are ready, not when some financial professional tells them to do so. Or they will decide to take action as a response to a life event. Here are a few examples.

Let’s say you have a friend (who has young children and a spouse) that passes away unexpectedly. After witnessing that, you decide to get serious about having adequate life insurance to protect your family. Or you have a co-worker who is getting well into their golden years but still HAS to work because they didn’t save/invest appropriately for retirement. Only then do you decide to start taking retirement planning seriously.

No matter your excuse or fear around financial planning, you must take it step by step. You have to crawl before you can walk, and you must walk before you can run.

Completing a personal balance sheet is the “crawl” step that everyone should take. This document, which you can find pretty much anywhere on the Internet, is easy to complete. It’s going to require you to list everything you own (assets) and everything you owe (liabilities). With some basic math (assets – liabilities), you will be able to determine your net worth.

Taking this “inventory” enables you to focus on where you need to start related to your financial plan. Plus, as you continue to move forward with your financial plan, this can serve as your barometer of financial fitness. The goal is to continue to grow your assets while decreasing your liabilities.

Some experts will recommend that you update your balance sheet once a year. However, if you are the type that needs more frequent feedback, perhaps you should consider updating your balance sheet quarterly or twice a year.

spare change

The Spare Change Experiment

I would like to share a story about why it doesn’t make much sense to keep all of your money in a bank account. Disclaimer: Having a bank account is essential. As a rule of thumb, having 3-6 months of savings (6-12 months is even better) in a bank or credit union is appropriate, but anything over that doesn’t make much sense.

During a previous job, I was an avid commuter. Every weekday I would take the train to and from work. On several occasions, I would notice that there was always spare change on the ground while passing through the turnstiles at the station. Pennies were the most plentiful, but I found $1 coins and even paper money even on a few occasions. If I had to pay for an additional fare or replace my train ticket, I would typically find spare change near the machine. What started as a simple observation turned into an obsession. Each day as I passed through the train stations, my eyes were transfixed on the ground, scanning for any signs of free money. My addiction took an even bigger turn because, after a week of doing this, I set up an excel spreadsheet to track my earnings. This adventure went on for nearly two whole years!

So what exactly is the point of my experiment? During the first year, I collected nearly $30 (this total excluded the paper money found) off the ground at the train stations. I’m sure you may have been thinking this while reading this article; yes, I carried hand sanitizer in my bag. That year, my bank only paid me $15 in interest from my savings account. The previous year my bank only paid $13 in interest from that same savings account.

Now the recommendation isn’t to become some spare change scavenger while you’re out in public. Still, from one (seemingly silly) experiment, I accumulated more money than what my financial institution was paying in interest for the past two years. This makes a very compelling argument for those people who are afraid of investing. Investing your money in the stock market or some other investment vehicle allows your money to work a little bit harder for you. Yes, the stock market can be a frightening place (when you don’t understand it), but if you look at any historical data about the stock market, you will see some magical things that have happened over the long haul. And yes, if you analyze the stock market in specific time frames, it would scare the boogie man. However, investing is an excellent thing that everyone should do, and the longer time horizon you have for investing, the better.

Lastly, I heard many people express that there isn’t any risk when your money is in the bank. However, keeping all of your money in the bank makes you highly susceptible to purchasing power (inflation) risk. Just so you don’t forget, when it comes to financial products, whether it’s banking or investing in the stock market, risk is ALWAYS involved.

rtmnt crisis

The Retirement Savings Crisis

The National Institute on Retirement Security produces research studies, and their primary focus is, you guessed it, retirement. They published a study in June 2013 entitled “The Retirement Savings Crisis: Is It Worse Than We Think?” It was startling to read through the key findings of the report. If you get a chance, take a look at the report, and even if you’re not in the financial services business, the data is alarming. They produced another study in December 2013 about Race and Retirement, and that study was even more frightening. Honestly, year after year, the updates on the data they produce doesn’t get much better.

The first key finding from that report stated that 38 million working households have NO retirement account assets at all. The sad thing, that number includes workers who are offered a retirement plan through their employer but who refuse to put any money into the plan. It’s understandable that some companies do not offer a retirement plan. Thus the individual is responsible for setting something up on their own. If your employer offers you a retirement plan and you’re not putting any money into it, you need to have a serious discussion with yourself or someone about why. If you don’t know how to get started or have the slightest idea about what you’re doing, your benefits department will be more than happy to assist you. They’re providing you the 401k or some other retirement plan, and they will gladly walk you each step of the way. If not them, then the plan sponsor (the company hired to offer the retirement plan) can provide you that assistance. Please make that phone call, send an email, find a co-worker who understands the retirement plan, do something.

For those people who are not offered a retirement plan through their employer, then you must seek out someone on your own to help get you squared away. There isn’t a shortage of financial services professionals in this country. And if you don’t want a professional’s help, there are a plethora of do-it-yourself options available. Either way, there is absolutely no good reason as to why you shouldn’t have some of your money in a retirement account. If you are still unsure why this is of the utmost importance, ask yourself one question. After all your working years, wouldn’t you like to have something to show for all those hours you worked??

Retirement planning applies to every working individual in this country. If you’re just starting in your career, then time is on your side. It doesn’t take a ton of time for you to do this, but it does involve committing. So many people say that they don’t have time to do this planning, which is bologna. There is more than enough time within a year (8766 hours) for you to work on your retirement plan. Not taking your retirement plan serious is just not cool. There are similar studies done and year after year, and the data never seems to improve. We can most certainly do better only by asking ourselves one simple question.

How much time did you spend this year or last year planning for your retirement?

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How to Settle A Negative Account

Many people struggle with debt. Sometimes, you may not be sure how to attack it, especially if you’re delinquent on multiple accounts. Typically, the creditor will make various attempts to recoup the money that is owed to them; however, at some point they may give up and charge-off what you owe them. A charge-off means that the creditor has given up on trying to get the money from you. After that, two things occur…1) they refer the account to a collection agency (either an in-house firm or third party) who then becomes responsible for recouping the money, and 2) it’s reported as a negative item on your credit report.

Trying to settle that account in some form or fashion with any long-overdue account may be your best bet. Sometimes, if an account has gone to collections, they may even send you a letter stating that if you pay 70%-80% of the outstanding balance, then you’re good to go. For example, if you owed $10,000 and you can settle by paying $7,000, then that’s a win!

But if that’s not the case, here are some things you NEED to know about settling an account:

  1. You have rights under the Fair Credit Debt Collection Practices Act (FDCPA). Sometimes creditors and collectors can appear to be a nuisance, but keep in mind they are just doing their job. However, they have guidelines that they must adhere to and being abusive and or harassing is a big no-no.
  2. Make them validate the debt. Collection agencies purchase debt from the original creditor or they are working on behalf of the original creditor. If the collection agency contacts you and asks for repayment, ask them to verify that you owe the money. Per the FDCPA, collection agencies assigned a debt are not the creditor; therefore, they cannot prove that you owe the money. Why? Simply because you never signed a contract with them. However, there is one exception; if the agreement you signed with the original creditor has the insertion “…debtor agrees to be responsible for payment of this debt to a creditor or its assigns”.
  3. Build rapport with your creditors/collectors. Dealing with creditors and collectors can be intimidating, but you created the debt and owed the money. Explain to them that you’re unemployed or that an unexpected death or illness has occurred. They need to know something and understand that life happens, but leaving them in the dark about your situation is NOT the thing to do.
  4. If negotiating payment arrangements, make sure you have the money! Having the money to negotiate with is essential. Knowing this dollar amount will allow you to discuss a realistic payment schedule that fits your spending plan. Also, the terms you discuss will, of course, need to be acceptable to your creditor.
  5. While negotiating, keep your emotions in check. Again, your creditor has a job to do, and you owe the money. But they will be more willing to listen to you if you stay cool, calm and collected during the entire process.
  6. DOCUMENT, DOCUMENT, DOCUMENT! You must get everything in writing once you have negotiated a settlement payment or plan. Once that’s complete, ask your creditor to fax, scan/email or mail the plan to you.