General Financial Planning

Plan to Save in 2013? Basics to Get Started

 It’s the start of a new year and we all have the best intentions. But it can be easy to let those intentions slip away by the end of January if you don’t have a plan.  

In my previous post, I addressed strategies for developing an action plan to keep your financial savings resolutions.  For even more ideas, Susan Tompor of the Detroit Free Press offers more than a dozen basic savings ideas in her recent article “13 Resolutions to Save in ’13.” All the ideas are helpful, but here is my Cliff Notes version of the top three simple strategies you can put to work:

  1. Use What You’ve Got – How many of us run out and buy something new rather than take the time to look for and use what we might already have?  We tend to stash items in the pantry or in the back of the closet and then forget about it.  So, before you run out to the store to get something like a new tube of toothpaste, why not make sure you’ve used up the small tubes you’ve collected from your dental visits over the past year first?
  2. Think “Just In Time” --  Our society is obsessed with stores like Costco and Sam’s Club that allow us to get tremendous “deals” by buying in bulk.  Unfortunately, this leads to overspending and overstocking our pantries with items that we then forget we have (see #1).
  3. Go to Your Kids and Ask Them How to Save Money – Get the entire family involved in saving.  It’s never too early to get children involved in being fiscally responsible, and you might be surprised at the creative ideas that they come up with.

Making progress towards your larger financial goals starts with just a few small steps.  Start your steppin’ today.

Sandra Adams, CFP® is a Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012 and 2013, Sandy was named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

Financial Resolutions

 It’s that time of year again and you’ve likely made one or more New Year’s Resolutions.  If you’re like a majority of Americans, you made a resolution to achieve at least one of the following goals in 2013:

  • Lose weight
  • Get in better physical condition (exercise more)
  • Get organized
  • Get in better financial shape

A recent survey by Fidelity Investments, found that of those who made financial resolutions, over 50% set a goal of saving more money. 

Whether saving is for a short-term goal (like buying a new car) or a long-term goal (like saving for retirement), how do you avoid being one of the over 35% of Americans who have broken their resolution by the end of January?*

Try these ideas:

  1. Write down the savings goals you’d like to accomplish by 12/31/2013.
  2. Break your bigger goals into actionable and specific quarterly goals; assess your progress every 90 days.
  3. Be accountable to a third party.  Your financial planner is the perfect person to work with to establish your annual goals and develop actionable steps to achieve those goals.  Schedule a quarterly check-in to report your progress.

Like any goal (or resolution) you make in life, putting it in writing and keeping yourself accountable is the best way to achieve success.  Make 2013 the year you keep your financial resolutions!  See my next blog for ideas on specific actionable goals for the year.

Sandra Adams, CFP® is a Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012 and 2013, Sandy was named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

*New York Times, January 2012

An Open Letter to The Big Lottery Winners

 Are you the winner (or do you just wish you were)? The recent Powerball jackpot was estimated to be about $550M.  That is $550 plus six zeros – that’s a big number!

Let’s take a look at the math and then a few suggestions on how your next steps:

If there had only been a single winning ticket, and assuming you receive your payout in 2012 and you elect the lump sum, you are looking at about $248M after federal income taxes.  Have you heard about the fiscal cliff?  Well, now that you won you might take notice.  Unless Congress elects to act and extends the Bush tax cuts, you are looking at potentially an extra $18M in federal income taxes next year – yikes!  Not that you can’t get by with only $230M – but you might race to pick up your check before 2013 hits just to be sure.  You see, the top tax rate is expected to increase to 39.6% and there is a new Medicare surtax which probably increases the tax bill by 5.5% or $18M in your case.

Some action steps you might consider:

  • Get a good team on your side.  Work with a good financial planner, tax accountant, and estate planning attorney BEFORE you collect (so that means right away because the clock is ticking down to the end of the year.
  • Tell your boss what you really think of him AFTER you have your money.
  • Then, and this is important, give yourself a 6 month "No Decision Zone"!  That's right, hold off on making long term decisions and get your ducks, or bucks in this case, in a row.  There will be plenty of time to spend.
  • Don't be a statistic!  The statistics are not on your side.  Unfortunately most lottery winners, regardless of the size of winnings, evaporate their winnings in just 2.5 years*  

 Congratulations on beating the odds.  It has been said that money is a means to an end.  With  smart decisions the means can be meaningful.  Good luck.

*Source:  Ipsos MORI Market Research

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily of RJFS or Raymond James.  You should discuss any tax or legal matters with the appropriate professional.

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What Better than the Gift of Financial Education and Support?

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 I don’t know about you, but I can hardly believe that it is already time for the holidays.  It seems like just yesterday that I was racking my brain to come up with creative gift giving ideas for all of those people on my list.  I find that it is just as hard to find gifts for adults as it is for children.  But there is one gift I’ve found that transcends generations – the gift of financial education. 

I know, financial education does not sound as attractive or exciting as say, an iPad or a Wine of the Month Club membership, but it is a gift that can keep on giving for a lifetime.  What am I talking about when I suggest a gift of financial education?  Here are just a few ideas:

For Younger  Kids (elementary – high school):

  • If you’re trying to stay away from more electronics, there are hundreds of books, workbooks and other resources available from Jump$tart Coalition (JumpStart.org)
  • Games like Monopoly, The Game of Life, and PayDay are great (Most are available as both traditional board games or for the computer, Wii, etc.)
  • Make a contribution to a 529 College Education fund to support the child’s future education.

For Older Kids (college - young adults):

  • If your gift recipient has had earned income during the year, consider contributing to a ROTH IRA in their name. 
  • Gift shares of a mutual fund or stock introduce them to investing and help them start an investment portfolio.
  • Make a payment towards their outstanding student loan debt.

For Young Adults and Beyond:

  • Fund a year of a credit monitoring service to protect their credit and financial identity from fraud.
  • Purchase financial software to help them with budgeting and financial tracking (i.e. Quicken)
  • Pay for a consultation with a Certified Financial Planner ™ (my personal favorite!).  This can help provide basic financial education and guidance for getting them set on the right financial path.

Giving a gift tied to financial education and support may not make you the hero of the holidays, but you can be certain that the gift will long be remembered as one that lasted long after the holiday decorations are put away for another year.

Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.  Investments mentioned may not be suitable for all investors.

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November is National Caregivers Month

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 November is a month of gratitude.  We celebrate Thanksgiving Day and express our appreciation for the good things in our life.  What better time to say an extra “thanks” to the caregivers in our lives?

According to the National Caregivers Association, over 65 million Americans – approximately 29% of the U.S. population – provide care for chronically ill, disabled or aged family members or friends during any given year.  Family caregivers provide an average of 20 hours of care per week.  Over 66% of these caregivers are women, and 37% also have children or grandchildren under the age of 18 living with them.  What, you might ask, does this have to do with financial planning?

The reality is that the value of the services provided by family caregivers in the U.S. is estimated to be upwards of $375 billion each year.  Most of these caregivers receive little to no compensation for the services they provide.  Providing caregiver services to friends and family can create a drain on family funds, as these caregivers must often leave their jobs or significantly reduce their hours.  This, in turn, drains savings and delays retirements.

Action steps can be taken to protect the financial well-being of these valuable caregivers:

  • Have a family plan in place for providing care.  My recent blog on holding a family meeting is a good guide for starting this conversation. 
  • Coordinate family resources.  This involves sharing responsibilities among family members (even those living at a distance) so that no one member is overburdened.
  • Put financial resources in place to cover potential long term care expenses.  This includes purchasing long-term care insurance or alternative self-funding strategies so that care can be paid for (this includes providing possible compensation for family caregivers).

One of the best ways to say “thank you” to current or future caregivers in your life is to plan.  Contact your financial planner to provide assistance with family meetings, coordination of resources, or long-term care funding.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily of RJFS or Raymond James.

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Year End Retirement Savings: From 401ks to IRAs

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 It should come as no surprise that saving for retirement is a financial priority that takes discipline, diligence and oversight. One important year-end financial move to help keep your retirement savings in check is to review your contributions to 401k plans and IRA’s for the year.

If you received a year-end bonus, you may want to go ahead put some of it into your retirement to max out your contributions for the year (see our post on year-end planning for your bonus).  Likewise, if you’ve received a raise, can you increase your regular contributions? 

Year-End Tips for 401k Participants:

    ✔ Max out 401k contributions if cash flow permits. For 2012 the limit is $17,000 and if you are over age 50 you can contribute an extra $5500 per year.  To calculate your maximum percentage divide $17,000 by your annual salary.

    ✔ Review your employer match policy to make sure you are not leaving money on the table.

    ✔ Plan for 2013.  The maximum contribution amount for 2013 is $17,500; an increase of $500 from 2012.

    ✔ If you have left an employer and have an old 401k sitting around, you may want to consider rolling over to an IRA.

Year-End Tips for IRA Owners:

    ✔ The 2012 maximum contribution amount for IRA’s is $5000. 

    ✔ Don’t forget about the “Catch-up” contribution if you are 50 or older.  That’s an extra $1000 you can contribute for a total of $6000. (Note:  Total combined contributions to Roth and/or traditional IRA’s cannot exceed these amounts)

    ✔ Do you have multiple IRA accounts?  Consider combining them to simplify record keeping and management. 

    ✔ SEP-IRA:  Maximum contribution limits for self-employed and small business owners is 25% of salary or $50,000; whichever is smaller.

    ✔ Plan for 2013.  The IRA contribution limit is $5500 and the SEP-IRA limit is 25% or $55,000; whichever is smaller

So, before you bid farewell to 2012, spend some time with these checklists. Your future is worth the time it takes to properly plan today. If you need help, we’re always ready with answers.

Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.  The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.

Year End Planning: Bonuses

 Less than half of all businesses provide a year-end bonus to employees*.  During the last decade, prior to the financial crisis, more than half of companies handed out bonuses.  My grandfather worked for Ford Motor Company and received many bonuses over his 30 years there.  But one word of wisdom that he shared with me that stuck:  You don’t live on your bonus, that’s for savings.

Here are 5 things to consider in allocating your year-end bonus:

  1. Review your financial plan. Are there any changes since you last updated your financial goals? 
  2. Have you accumulated any additional revolving debt that you don’t want to retain, if so consider paying off the highest costing debt first if you don’t have a cash flow issue?
  3. Are your emergency cash reserves at the appropriate level to provide for your comfort?  If not consider beefing them back up.
  4. Are your insurance coverages where they need to be to cover anything unexpected?  If not, consider re-evaluating these plans.
  5. Review your tax situation for the year.  Make an additional deposit to the IRS if you have income that has not yet been taxed so you don’t have to make that payment and potential penalties next April.   

If you can tick through the list and don’t need to put your bonus to any of those purposes, here are some other ideas: If you’re lucky enough to save your bonus, like my grandfather, consider maximizing your retirement plan at work, including the catch-up provision if you’re over 50.  Also consider maximizing a ROTH IRA, if eligible, or investing in a stock purchase program at work if one is offered.  Another idea is a 529 plan, which is a good vehicle for savings for educational goals.  If all of these are maximized, then consider saving in your after tax (non-retirement accounts) with diversified investments.

*Source: Huffington Post

Any information is not a complete summary of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Center for Financial Planning, Inc., and not necessarily of RJFS or Raymond James.  Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making an investment.  Investing involves risks and you may incur a profit or loss regardless of strategy selected.  Be sure to contact a qualified professional regarding your particular situation before making any investment or withdrawal decision.

Year End Planning: Holiday Spending

 Nothing louses up the family budget like the holidays.  There is something about those twinkle lights and pine smell that weakens all resolve to control spending.  It is estimated the average family spends $750* on gifts and for upper middle income families it is often four times that amount.  This figure does not include entertaining, travel, and decorations.  We all know what to do, but here are a few reminders as we approach the SEASON.

First of all remember what it is all about. Gifting is supposed to have special meaning from the giver to the receiver.  Gifting is a way of saying “thank you” or “I love and appreciate you”. If you have a large family, shorten your gift list by drawing names or giving family gifts.  This is one way to cut down on the number of gifts and make the one you give more meaningful.

It is important to set a budget for holiday spending. There is no better control mechanism.  If you cannot control your use of credit, go back to the old-fashioned method and pay cash.  Many stores have reinstituted lay-away plans which help as well. Along with the budget comes the shopping plan.  Both cut down on impulse buying.

If you are experiencing financial distress, set expectations among your family and friends. This is particularly important to do with children. Children are often unrealistic with their wish list.  Discussing what is possible will help create excitement instead of disappointment.  Get children involved in the spirit of the season. Gift certificates are another way to keep within your budget and are often most appreciated by the receiver.

Shop early and shop late. Many folks shop all year for the holidays so they can take advantage of sales.  Late shoppers can also get great bargains especially if they can be flexible in their gifting.   If you are shipping gifts, seek those stores that give free shipping to save a bundle.

Consider home-made gifts. Busy families and seniors so appreciate a basket of home-made goodies. When one of our daughters was going through a tight financial situation she made the most ingenious gifts—a colorful winter scarf, a charming basket we use for magazine storage, and a hand tiled serving tray.  It is interesting that I cherish and use those gifts but I could not tell you what I received last year.

Last but not least, keep your holidays simple and enjoyable. Remember it is not the amount you spend, but rather the quality of the time and thoughtfulness you spend on giving that counts. Happy Holidays.

*Source: National Retail Federation 10/17/2012

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.

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Year End Planning: Schedule a Family Meeting

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 It’s hard to believe that in just a few short weeks, the holiday season will be upon us.  Family gatherings during the holidays are rare occasions when parents and siblings are in the same place at the same time.  While these gatherings are wonderful opportunities for casual conversations and reminiscing, why not use this time to have a productive family meeting?

It is important for families, no matter the ages of the family members, to have serious conversations about the legal and financial planning in place; or the planning that is not in place that needs to be.  Important points for discussion may be:

  • Legal Documents – Do all family members over the age of 18 have their own Durable Powers of Attorney (POAs for Health Care and General Financial are needed)?  Do those assigned as POAs understand their potential responsibilities in their roles?  Are wills or trusts in place or needed?
  • Financial Savings – Particularly for elder family members, are there financial resources and structures in place to fund potential long-term care needs in the future?  For younger family members, is there an opportunity to use year-end gifting to help fund education or retirement savings (i.e. ROTH IRAs)?
  • Elder Care Planning – For family members who are aging, this meeting may be an opportunity to start conversations about future care.   Discussions regarding future housing and care needs, as well as a review of the older relative’s future challenges, alternatives and resources are important.  In particular, beginning to lay out future roles of family members is critical to the future success of this kind of planning.  For a list of questions that might be helpful in starting these conversations, click here.

As you look forward to the holiday season, plan for good food and family stories.  But also plan for important conversations that can affect your family’s legal and financial success.  By planning ahead for these conversations, family members can be prepared to contribute to the planning in a meaningful way.  For additional tips on holding these all-important family meetings, talk to your financial planner.

Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.

Timely Tips to Help Protect Against Identity Theft and Cyber Fraud

 Besides being the gateway to the Thanksgiving season, October is National Cyber Security Awareness Month.  At home and at work our growing dependence on technology requires greater awareness and action plans to protect against online risks.

I distinctly remember the sinking feeling in my stomach when I was recently discovered a thief had obtained personal information and made purchases on my credit card.  I was routinely reviewing the statement and I did not expect to see anything out of the ordinary and then boom – there it was.  Several unidentifiable transactions right in front of my eyes.  

Identity theft can occur anywhere and anytime.  

Here are some practical suggestions to help you keep cyber security top of mind:

  • Review your credit report periodically to be on the lookout for fraudulent activity.  Free credit reports from each of the three major bureaus (staggered quarterly for year-round monitoring) are available annually at www.annualcreditreport.com
  • Fee-based services are available for a cost to provide convenience for those who don’t want to personally monitor their information. 
  • Monitor bank and credit card accounts at least weekly.
  • Be vigilant about keeping sensitive information from prying eyes in public places.
  • If you file taxes electronically – review the security policy with your tax preparer.
  • Stop hackers by using strong passwords. 

Here are some additional resources to help protect you against identity theft:

Spending a little time to protect your information can help you avoid all of the hassle of being a victim. If you’d like more help, feel free to contact your Center Planner. 

Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.  Links are being provided for information purposes only.  Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors.  Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members.

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