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financial planning

The Importance of IRA Custodial Documents

Most of us don’t pay attention to or even read the custodial documents that we receive when we open an IRA. It could cost you…

Wash Sale Rules

If you sell an investment at a loss, you need to be careful about how you re-invest the money so that you can avoid the wash sale rules.

Reasons #12 & #35 That You Might Need A Financial Advisor

What are the reasons that you might need a financial advisor? They vary by individual, but there are common needs that many folks have.

Transitioning to a Financial Planning Career

Every once I a while I will be asked to give my opinion on some logical steps to take when pursuing a financial planning career. This post may be beneficial for individuals who are entering the financial planning profession right out of college or are looking to change careers. Some are steps to take and others are questions to ask yourself and others along the way. What is it about financial planning do/would you enjoy? It could be client-facing meetings, technology, back-office work, or a combination. And you may not know until you try your hand at several things. Ask some current planners or even your own. The point is to find an area that you enjoy and work to get better at it. Find the right firm. Will you work for an RIA or broker-dealer? What type of firm do you want to align with? This could mean starting […]

Disclaiming an Inherited IRA

Disclaiming an inherited IRA must be done with caution. There may be many reasons to do this, and there are many ways to mess it up.

Life Moves Pretty Fast…

In the classic 80’s movie, Ferris Bueller’s Day Off, Ferris Bueller says, “Life moves pretty fast. If you don’t stop and look around once in a while, you could miss it.” In other words, life happens. That’s why it’s important to meet with your financial planner to see if anything has changed, and if there’s anything that needs to be done to assist with those changes. The reason it’s important to meet with your planner is that he or she can ask questions and propose situations that you might not even be aware of or think about. A recent example would be how the new tax law affects your situation. Another example would be a child that is going to college, a job change, death, divorce, or 2018 being the year you plan to retire. A financial planner will be able to provide another set of eyes to your situation […]

Income ≠ Wealth

There’s a big difference between income and wealth. Income can be considered the amount of money an individual earns on a consistent basis. For most individuals, this is a paycheck. Wealth can be considered an individual’s net worth, or, more specifically, how much income their wealth generates and how long they can sustain a given lifestyle without having to receive a conventional paycheck. Some individuals may confuse the two. Some may feel that a high income equates to wealth. They may also think that to be wealthy or to generate wealth, their income must be high. This isn’t the case. While a high income may help to build wealth faster, it is no guarantee that an individual is or will be wealthy. Let’s look at an example of two couples, about the same age, nearing retirement and wondering if they have enough wealth to do so. These are based on […]

Your 401k and IRA in 2018

Recently, the IRS just announced the contribution limits for 401k plans (including 403b and 457 plans) as well as IRAs. Additionally, the IRS also announced changes to the income phase-outs for traditional IRA deductibility and Roth IRA eligibility. Let’s start with the 401k plans. For 2018, the IRS increased the contribution limits to $18,500, up $500 from $18,000 last year. The catch-up contribution for those age 50 or over remains unchanged at $6,000. $500 may not seem like much, but think of it this way – you get to give yourself a $500 raise! For those interested in maxing out their 401k plans in 2018, here’s the breakdown depending on whether you’re paid monthly, 24 weeks per year or 26 weeks per year. If you’re paid monthly, the contribution is $1,541.66. This brings you just eight cents under the $18,500 max annually. If you’re paid 24 weeks per year, then […]

Can I Retire Early?

Many individuals at some point in their life and career wonder if they can retire early. First, retiring early is relative to the individual. That is, retiring early for one person may mean retiring at age 55. To another, it may mean retiring at age 30. When teaching, I’ll ask my students what the “retirement age” is. Answers range from 65 to 70. Inevitably, I will get asked the question, “How much money do you need to retire?” And the answer is the crux of this article. Whether an individual wants to retire can be based on several factors such as money saved, age, job satisfaction, and health. For example, an individual may never want to “retire” if they love their job, or if they find fulfilment and purpose while at work. For some individuals, the choice to retire isn’t a choice. They must continue to work to cover expenses, […]

Comprehensive Financial Planning – Explained

Do you know what is involved in comprehensive financial planning? This post gives an overview of the components and how they all fit together.

The Only Thing Permanent is Uncertainty

For the last few months we’ve experienced some uncertain and unnerving events across the US and the globe. Presidential elections, threats of war, terrorism, and political arguing can make weathering your portfolio and financial plan uneasy, if not difficult at times. Add that to the daily responsibilities of your occupation, family, and finances, and we can potentially lose sight of our long-term goals and be susceptible to short-term thinking that may derail our goals and take us off-track from our financial well-being. Financial planners, wealth managers, advisors, are not immune to this uncertainty and the impact it has on our thinking as well. If you find yourself worrying or thinking about the uncertainty, perhaps the next few thoughts can help in your thinking and provide some insight on whether changes are necessary. Have your goals changed? For example, if your retirement timeline is 20 years away, it’s highly unlikely that […]

Create Your Own Luck

“Luck is when preparation meets opportunity.” The other day I was eating lunch with my kids. After lunch was over I gave them a “treat” from the drawer that we normally house goodies of all sorts. I happened to grab a couple of gold-wrapped chocolate coins. These coins were renditions of the JFK half-dollars. My youngest grabbed her coin and said, “heads or tails?” I quickly said “heads” while she flipped the coin in the air. The coin landed on the floor. Tails. I said, “Well, we both lost.” My daughter quickly exclaimed, “I won daddy.” When I asked her how she won when the coin landed tails she replied to me, “I called both heads and tails.” Win-win. Essentially, my daughter had created her own luck. And I immediately thought, “This is excellent fodder for a blog post. So here we are. The reason why I mention this is […]

Frugality Versus “Buying on Sale”

I wanted to write a brief note on the difference between being frugal and frugal spending. I think it really boils down to the mindset of the individual. Frugality, in my opinion, is making smart purchases when necessary, and forgoing purchasing altogether if not. I also believe that frugality is making purchases that reduce the need to spend more in the future (i.e. buying a quality product for more money in order to reduce or eliminate repair expenses in the future). Frugal spending, on the other hand, is buying something simply because it’s on sale or cheap – regardless of need. For example, many times we see items in the store advertised as “buy one, get one half off” or “2 for $5.00”. It can be easy to fall into this trap of buying these items and leaving the store feeling good about having saved money. Sometimes we may even […]

How to De-clutter Physically and Financially

Throughout our lives we acquire things. This can start at an early age when we were given things as gifts and of course, the childhood tendency to collect and save many of the items that we came across. As we mature into adults, the desire or habit to continue to hold onto things may still linger. This leads to garages, basements, closets, bedrooms, and even storage facilities full of stuff. It can also creep into our financial lives – as we acquire different savings accounts, retirement accounts, or purchase things that continue to be automatically deducted from our bank account (a monthly subscription to a gym, perhaps). Decluttering can have a profound effect on our behavior. It can help lower the stress of trying to keep track of so many things. It can also free up time to enjoy the things in life that are important to us. Finally, it […]

Save Money with an Energy Audit

When we hear the word audit it’s often associated with a negative connotation. However, an audit does not necessarily have to be a bad thing – especially when it can save you some money. I’m talking about having an energy audit done at your home or business. What an energy audit can do is let you know how much energy and utilities your home is using as well as let you know how much energy and utilities your home may be wasting. Of course, wasted utilities means wasted money. Let me give you an example from my perspective. About 5 years ago my wife and I decided to have an energy audit done. We called our local utility provider and inquired about the specific programs that were available. Our utility company was more than willing to point us in the right direction and they recommended a third-party contractor that was […]

Axioms for Graduates

As the spring semester comes to end for high school and college graduates, I wanted to perhaps give some unsolicited advice as these newly christened adults start out on their own and begin making life choices and financial decisions that will impact their future. Resist the temptation to spend everything you make. Instead, do your best to save as much as you can. In fact, it’s possible for a recent college grad to go from making hardly anything during their college years to a decent starting salary. Pay yourself first. Establish an emergency fund of 3 to 6 months of living expenses and save to your 401k and IRA. It’s absolutely possible to save $23,500 annually ($18,000 to the 401k and $5,500 to the IRA). In ten years, without interest or compounding, you’ll have saved close to a quarter-million dollars. All by the time you’re between the ages of 28 […]

Book Review: Financial Advice for Blue Collar America

Kathryn B. Hauer has written a wonderful book on the unique financial advice needs of blue collar American workers – this is a review of that book.

Read the Fine Print

As I was reading the paper the other day I came across an ad for a pretty prominent mutual fund broker-dealer. The ad was touting the investment acumen and performance of its mutual funds and fund managers. It mentioned how many of its funds had outperformed category medians over a certain span of years. Then I read the fine print. The fine print stated the following: Rankings are based on total return and do not include the effects of sales charges The rankings were based on the funds’ Class Z shares. Past performance does not guarantee future results. In providing these materials the company is not acting as your fiduciary as defined by the Department of Labor. Let me summarize what these fine print statements mean. First, sales charges reduce returns. In other words, their rankings didn’t include the expenses associated with commissions earned by the salespeople that sell the […]

Anchoring

How we think and the way that we perceive information can have a powerful impact on our decisions. Often, the first piece of information we receive is what we will use for future reference when making decisions – and whether we feel those decisions are good or bad. This is referred to anchoring or anchoring bias and is very well described in Daniel Kahneman’s book, Thinking, Fast and Slow. Let’s look at an example. Recently, I had a student ask me regarding his benefit package and starting salary he was offered from a potential employer. This student will finish a master’s degree in May and this will be the first “real” job the student will have out of school. Initially, the employer was talking to the student about project management and leadership opportunities. When it got down to brass tacks, the company was talking about a potential starting salary of […]

Sorry to Rain on your Parade

I wanted to take a brief moment to remind our readers of a fundamental investing truth that tends to get overlooked, forgotten, or deliberately disregarded during times of market euphoria. Think about this. If you had a million dollars at the beginning of 2016 to invest and I said that over the year that there would be a Supreme Court vacancy, the Cubs would win the World Series, interest rates would rise, and Donald Trump would become president – would you invest that million dollars in the market? I would bet that many people would not. They would guess that 2016 would be a dismal year for market returns. Yet, in 2016 the Dow returns 13.4% and the S&P 500 returned 9.5%! With all of that uncertainty and the improbable happening, the market still had a great year of returns. Those who stayed invested were rewarded. Those who sold (say, […]

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