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 thinks 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, go research this piece that the National Association of Personal Financial Advisors published back in 2012. The findings are quite disturbing. In that piece they reference an organization, the National Foundation for Credit Counseling, who conducts an annual consumer financial literacy survey. Take a look at their survey from 2013 and 2014. It should come as no surprise but year after year, the numbers continue to be extremely disappointing. 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 a 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 old adage says, if you fail to plan, you plan to fail.

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The Ups And Downs of the Market

Are you afraid of the stock market? If so, hopefully there is a good reason as to why you are afraid. If your reason isn’t one from experience in dealing with the market directly, then that’s a major problem. Many people have professed that the stock market is a terrifying place simply because on any given day, the market could be up or down — which is defined as market volatility. Because of the constant change that plagues the market, many opt to keep their money in safe, typically, banking-related products or in a shoe box at the house. If you are you trying to make money work for you over the long-term, then the stock market is where a portion of your money needs to be.

The fear of the stock market, like anything else, stems from a lack of understanding. The first thing you need to understand is that there are two types of market cycles; bear markets and bull markets.

Bear markets: (pessimistic outlook) the stock market is declining, and we tend to see investments losing value. Investors who get into the market during this period tend to ride the investment down and then sell out after significant losses, which locks in their losses.

Bull market: (optimistic outlook) the stock market is trending upward, and we see investment gains. Investors see bigger returns, which prompts them to take a more aggressive approach than what they’re comfortable doing. Many times, people get into an investment after the biggest gains have been made and the actual return to the investor may be much smaller than the investment reports.

Typically, investors will shift between being bearish/bullish on the stock market based off factors such as: global economic concerns, national economic data and corporate financial performance.

Knowing the cycles of the market is helpful, but now you’re probably thinking about one or both questions; When is a good time to get in the market? When is a good time to get out? This would be classified as “market timing”; you’re trying to buy precisely when stocks are at their lowest and sell when they’re at their peak. Historically speaking, the stock market’s best performances (in any given year) come on a handful of days. No investment professional has a crystal ball allowing them to see into the future, so your best bet is to avoid market timing at all cost. Of course, you may run into investment people who claim they can time the market, but keep in mind, it’s not sustainable over the long-term.

Here are a few tricks to the investing game that will help you deal with the volatility of the stock market:

  1. Get invested and stay invested. Don’t let short-term market fluctuations drive your long-term strategy. As a reminder, you should be investing for the long-term and not trying to “time” the market
  2. Consider asset allocation; this is an investment strategy that involves spreading your money across the major investment types, like stocks (equities), bonds (fixed income), cash and equivalents
  3. Utilize dollar-cost averaging; this strategy involves investing the same amount of money into your investment, regardless if the market is up or down. This allows you to buy more shares when prices are lower and fewer when prices are high. Over time, this results in you lowering the average cost of your shares
  4. Re-evaluate your attitude toward risk; it’s important to do this as you go through the various stages in your life

Hopefully this will help rid you of some of that fear about the stock market. Also, there are PLENTY of financial services professionals who can assist you with determining the best investment approach for your situation. And if you opt not to work with a professional, there are countless resources for the do-it-yourself investor.

Wishing you all the best my fellow investor!

LI faq

Life Insurance FAQ

Life insurance is an extremely important product that should be a part of EVERYONE’S #buildwealth plan. Here are some common frequently asked questions as it relates to life insurance.

How much life insurance should I own?

There is no single right answer! Some experts will recommend that you have an amount that is equal to 6 – 10 times your annual gross salary. Others say you should opt to have 2 times your annual gross salary. Coverage amounts are individual and certainly not “one size fits all.” The really nail down how much, it’s best that you meet with a financial professional and complete a personal needs analysis.

When should I review my current coverage?

Your situation has probably changed since you first purchased your life insurance policy. If something were to happen to you today, would your family have enough coverage? Generally, it’s recommended that you meet with your financial professional once a year, however, if you have done any of the following since you purchased your policy, you should review your coverage as soon as possible:

·        Purchased a home

·        Had a child

·        Married, divorced or become widowed

·        Changed jobs

·        Taken out a large loan

·        Started a retirement or college fund

·        Started your own business

·        Began caring for an elderly relative

I already own life insurance, should I purchase life insurance on my spouse?

If your spouse contributes to the family’s annual income, then he or she should have adequate life insurance coverage to help replace his or her income in the event of their death. If you spouse does not earn an income, life insurance can still play an important role in helping to pay for valuable services he or she provides; for example, providing child care, elder care, maintaining the home and running the household. Make sure to meet with a financial professional, who can help you determine the proper amount via a personal needs analysis.

Should I purchase life insurance on my child?

Some people scoff at the idea of purchasing a policy on their child but there are a few reasons you may want to consider it:

1.      You can generally purchase life insurance at the lowest possible premium. If your child were to purchase the same amount of coverage when he or she becomes an adult, the annual cost would generally be much higher

2.      You can help ensure that he or she has life insurance protection for life. If the child develops health problems as an adult, he or she could become uninsurable and may not be able to obtain life insurance coverage. In some families, a grandparent purchases a life insurance policy for the child. Also, keep in mind that some states limit the amount of life insurance that can be purchased on minors.

3.      While it’s not a popular option that is widely discussed, some people decide to purchase life insurance on a child to save money for their college education or some other use. Permanent life insurance policies build cash value, and over time, this could grow into a substantial amount of money.

Do I need individual life insurance if I have group life insurance through my job?

YES! Participating in our group life insurance is a good idea because you may be able to receive life insurance at a lower, group rate. If your group coverage is convertible – meaning, when you leave the company you can convert it to an individual policy without evidence of insurability – the individual policy you convert will generally have high premium cost compared to other policies. If your group coverage ends, you can apply for a new policy, especially if your healthy. Otherwise, you may not qualify or may have to pay higher premiums depending on your age and health status. Group life insurance my not provide an adequate amount of death benefit to meet all of your needs.

Consider supplementing your group policy with an individual policy. An individual policy is one that you own, thus it isn’t tied to your employer and you won’t have to worry about your premiums rising every year. With a n individual policy, you won’t need to wonder whether you still qualify every year or if you will lose your life insurance if you change jobs or get laid off. It’s insurance coverage that stays with you.

money personality

Understanding Your Money Personality

People have different ways of dealing with money related issues. The characteristics that drive these differences are linked to your unique personality style. Understanding your money personality might be the first step into better managing your financial affairs.

Let’s take a quick dive into the 5 personalities:

1.     Deniers: a denier might say something along the lines of “retirement is just too far away” and they would be considered your procrastinators. A denier feels strongly that getting their financial house in order will take too much time and effort, thus they tend to be pessimistic in their thinking. A denier usually ends up worse off financially at retirement and as a group, tend to have less education and fewer financial resources than the general population. As a denier, you will require simple programs/initiatives (like having payroll deduction so you save money) that will help motivate you to act in your best interest. Keeping the process simple is what you desire.

2.     Strugglers: a struggler is someone who lives paycheck to paycheck and is prone to a setback if a crisis were to arise. They will deem themselves to be financially successful if they are able to save a little bit on a consistent basis. An investment program, like dollar-cost averaging, would be suitable for a struggler. With the proper education, planning and a bit of motivation (from an accountability partner) a struggler can avoid a future crisis.

3.     Impulsives: an impulsive will make a financial decision on a whim. They are well aware that they should have a financial plan and should be saving regularly, but they always have something else that they will spend their money on first. Since an impulsive can be hot and cold when it comes to their financial decision making, when working with a financial professional, an impulsive will need to focus on building a solid upfront relationship, which will enable their interactions to flow smoothly.

4.     Cautious Savers: although they are skilled at saving, cautious savers tend to be very cautious when it comes to investing. They find it easy to save a set amount of money each month but will typically consider investments that are conservative in nature. Cautious savers are extremely analytical and meticulous when it comes to all things financial planning related.

5.     Planners: planners are willing to take risks and have the ability to make financial decisions on a gut feeling. However, they have supreme confidence about their financial outlook because they have a well-defined saving/investing plan. Planners are extremely goal-oriented, which drives them to constantly monitor how much they are saving/investing on a regular basis.

No matter which category you fall into, everyone needs to have a financial plan. Many people look to friends, family and co-workers and want to mimic what they are doing, but that’s not always a great course of action. Understanding your money personality will enable you to customize your plan to fit your needs.

bw challenge write up

The #BuildWealth Challenge Results Are In

How did this #buildwealth challenge come about? Simple…I was trying to determine what financial areas were causing the most issues for people. Was it a lack of understanding of the complexities of the various insurance and investment related products? Or was it dealing with basic money management skills and credit. I set out to see if I could get 500 people (ended up with 510) to respond to my brief survey.

Please note that I am not an academic and this research project wasn’t as thorough as I would have liked. I didn’t capture any detailed demographic information (got plenty of feedback about that), however the respondents of this survey come from a variety of age ranges, ethnic backgrounds, educational backgrounds, professions, etc. Despite all of that, I think the results we very revealing about the relationship people have with money. I do have plans for future #buildwealth challenges and I will most certainly do a better job of capturing more detailed information.

Without further ado, let’s jump into the results!

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I know some may argue that they track their financial success some other way, but I felt strongly that someone’s net worth tells the “real” story. You can determine your personal net worth by using a simple formula, Assets – Liabilites = Net Worth. This formula can be found on an important financial document called a balance sheet. Please familiarize yourself with this document because it’s a great first step to getting your financial house in order. By its very nature, completing a balance sheet will require you to gather all of your financial information as it applies to what you own (assets) and what you owe (liabilities). Think of this (taking inventory) as the all important first step on the road to financial rockstar status.

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For starters, the fact that two people skipped this question is kind of crazy. I’m not really sure what to make of it. And, for the 9% who put “neither”, that intrigued me because it says a couple of things; 1) they don’t have the slightest clue about where their money goes on any given month or 2) they just don’t care about knowing where their money goes. The question is simple…who is control, you or your money? People feel like they are living check to check because they haven’t taken the time to do some form of a budget, which would provide some level of control. If the old school way of budgeting doesn’t work for you, try the 50/20/30 plan or some other budgeting method. The key is to figure out what method works for you and stick to it. Also, don’t be so hard on your self if you can’t master the budget right away. Keep in mind that you have to crawl before you can walk.

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Understanding the importance of credit is critical to living a decent life in this country and I was happy to see that over 60% of the respondents were in the good/great category. For the small percentage who stated they have “no idea” about their status, my hopes are that they at least excercise their rights by obtaining one free credit report (no score) from each of the three credit bureaus once a year. The interesting thing about credit is that you can screw it up, then clean it up, then screw it up again, then clean it up again. And you can repeat that for as long as you would like. But, once you clean up your credit, unless there are some unforeseen circumstances (i.e. job loss, divorce, becoming disabled) it should not be that hard to maintain a positive credit standing.

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This question wins the prize for “most skipped” and that wasn’t a big surprise. The way the question is phrased probably has something to do with it, as I didn’t specify what type of insurance. Plus, most people don’t truly understand why insurance is the cornerstone of their #buildwealth plan until something goes wrong. Let me ask a question. If you were going to build a house, where would you start? If your answer was anything other than the foundation, we need to talk! When it comes to building a home, a solid foundation sets the tone for the remainder of the house. In regards to your #buildwealth plan, not having a strong insurance foundation may jeopardize your saving, investment and retirement plans. If you were to get seriously sick or injured, your bills don’t stop just because you’re not working. Unless you have adequate savings, I seriously hope you have the proper amount of disability insurance. How about if your spouse/significant other (who happens to be the breadwinner) dies unexpectedly? Again, unless you have savings or some other assets that you can liquidate immediately, I seriously hope you have enough life insurance. I’ll stay away from medical insurance because I know everyone who has medical coverage is grateful. Clearly, the insurance conversation isn’t a fun one to have but hopefully I’ve shed some light on how insurance can affect your overall financial well being.

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There’s going to be a day when you don’t want to get up and go to work. When that day occurs, hopefully you have more than enough money to survive. Retirement, whether you’re just starting your career, a seasoned professional or your winding things down, should be on your radar. The younger you are, the more time you have, the older your are, the less. It’s scary to know that some people have worked 30 or 40 years and have nothing to show for it. Or they are in their early 70’s or even 80’s and they “have” to work because they can’t afford not too. Having your retirement plan in order is of the utmost importance. Back in the day, your employer typically took care of retirement planning for you, however, the responsibility now falls on your shoulders. Many companies have done away with pension plans (because they are expensive to manage) and the long-term viability of social security seems to be an issue, but I’m optimistic that our government will figure out how to make it last. There are some employers who don’t provide a retirement account, and that’s okay, because there are plenty of avenues for you to open one up on your own. There isn’t a good excuse as to why you shouldn’t have an account (be it with your employer or on your own) that’s dedicated to retirement. And if you are one of those people who is struggling with the question of “how much should I save for retirement”, the answer is simple…A LOT!

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Risk is another area that more of us need to discuss when thinking about our #buildwealth plans. Let’s get one thing clear, there is risk in every single type of account that exist. The big question when it comes to risk is how much can you tolerate? If you’ve ever worked with an investment professional or opened any type of investment account, you’ve taken a risk questionnaire. Some experts will say that if you’re young, you should be aggressive and if you’re older, you should be more conservative. And of course there is everyone else in between. The theory makes sense because if you’re young and you’re investing aggressively for the long-term, despite the ups and downs of the market, you will probably be satisfied with the growth in your account. Just search any historic data about the long-term performance of the stock market and you will understand. On the flip side, when you’re older, you may be relying on those funds to live, thus it’s all about preservation. You might not be able to live comfortable if a major dip in the market occurs and your account balance is cut in half. Managing risk will ALWAYS be a work in progress for everyone. Life will cause you to think differently about risk. When you’re young and single, you make different choices in relation to someone who is older and has a family. When you’re salary is $150,000/year, you’re investment decisions are different from someone who is earning $80,000/year. When you are an educated investor, you’ll tend to make more riskier investments as opposed to a novice investor. I could go on with examples, but you get the point. Be mindful of the risk that you’re taking and make sure you are the one that’s driving your decisions on risk and not your emotions or some outside influence.

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Wealth Building Strategies Your Advisor Didn’t Share With You

Many people don’t know (and probably don’t care) that September is Life Insurance Awareness Month. It’s the one month out of the year that life insurance gets it’s time in the sun. To pump up this incredible product, I want to share some alternate uses for life insurance that many advisors never share with their clients.

1. The Roth Alternative

The “Roth” IRA was created back in 1997 and it was setup to provide an individual with tax-free money during their retirement years. Other employer-sponsored retirement plans (401k, 403b, 457b, etc.) also adopted the Roth feature. Currently, if you have an IRA or employer-sponsored retirement plan that has “Roth” in front of it, you’re telling the IRS to tax the money that’s currently being contributed into that account. And, if you follow a few simple rules, you can receive your distributions tax-free during retirement.

There were only two problems with the Roth IRA specifically: 1) if you earn too much money, you are not allowed to open one and 2) the contribution amounts are limited (2020 limits – $6,000 if you’re under age 50, $7,000 if you’re 50 and over). Income limits don’t apply to the employer-sponsored plans and the contributions limits are higher than an IRA but they still have a cap.

With these problems known, people began to search for another way to invest their money for retirement with the hopes of receiving tax-free money during their retirement years. The solution – a properly structured permanent life insurance policy.

2. Create Your Own “Bank”

For starters, you will not have to concern yourself with setting up a physical (or online) financial institution. Also, for the sake of keeping things simple, this strategy involves you utilizing a properly structured permanent life insurance policy. Here are the primary reasons people consider creating their own “bank” or what some call the “family bank”:

  1. The cash value usually earns a much better growth rate than any solution you would find at your financial institution (High-yield savings/checking or CD’s).
  2. The growth, as well as distributions you take, are not taxed as long as a small amount of death benefit stays in force until you pass away
  3. When you borrow money, your full cash value continues to grow inside the policy despite any loans you have against the policy

For each of the alternate uses of life insurance I’ve shared with you, I highly recommend that you speak with a financial advisor or insurance agent. These strategies are not typically shared with the general public. So, once you do connect with a financial advisor or agent, you will now be equipped with some good material to discuss at your next appointment.