Ask anyone who’s had a flat tire, a leaky roof, or an unexpected medical bill – having enough money tucked away in an emergency fund can prevent a lot of headaches.

It may seem obvious to create a cushion for unexpected expenses while you’re saving up for retirement, especially if you have kids that need to get to their soccer games on time, a new-to-you home that’s really a fixer-upper, or an injury that catches you off guard. But an emergency fund is still important to keep after you retire!

Does your current retirement plan include an emergency fund for unexpected expenses like car trouble, home or appliance repair, or illness? Almost 50% of Americans surveyed said they have less money saved this year than last year for emergencies. That means 50% of Americans may need to turn to other methods of coverage like taking loans from family or friends or accruing credit card debt.

After you retire and no longer have a steady stream of income, covering unexpected expenses in full (without interest or potentially burdening loved ones) can become more difficult. And when you’re older, it might be more challenging to deal with some of the minor problems yourself if you’re trying to save some money! You’re probably going to need to keep the phone number for a good handyman, handy.

Don’t let an unexpected expense after retirement cut into your savings. A solid financial strategy has the potential to make a huge difference for you – both now and during your retirement.

Contact me today, and together we can put together a strategy that’s tailored to you and your needs.

How do you handle job stress?

Sticking to a solid workflow? Meditation? A stress ball in each hand?

Whichever way you choose to lessen the stress (that 80% of American workers experience), there’s another stress-relieving tactic that could make a huge difference:

Relieving financial stress.

Studies have found that money woes can cost workers over 3 weeks in productivity a year! And this time can be lost even when you’re still showing up for work.

This phenomenon is called ‘presenteeism’: you’re physically present at a job, but you’re working while ill or mentally disengaged from tasks. Presenteeism can be caused by stress, worry, or other issues – which, as you can imagine, may deal a significant blow to work productivity.

So what’s the good news?

If you’re constantly worried and stressed about financing unexpected life events, saving for retirement, or funding a college education for yourself or a loved one, there’s a life insurance policy that can help you – wherever you are on your financial journey.

A life insurance policy that’s tailored for you can provide coverage for those unknowns that keep you stressed and unproductive. Most people don’t plan to fail. They simply fail to plan. Think of a well-thought out insurance strategy as a stress ball for your bank account!

Contact me today, and together we’ll work on an insurance strategy that fits you and your dreams – and can help you get back to work with significantly less financial stress.

When you finally make the commitment to organize that pile of financial documents, where are you supposed to start?

Maybe you’ve tried sorting your documents into this infamous trio: the Coffee Stains Assortment, the Crumpled-Up Masses, and the Definitely Missing a Page or Two Crew.

How has this system been working for you? Is that same stack of disorganized paper just getting shuffled from one corner of your desk to the top of your filing cabinet and back again? Why not give the following method a try instead? Based on the Financial Industry Regulatory Authority (FINRA)’s “Save or Shred” ideas, here’s a list of the shelf life of some key financial records to help you begin whittling that stack down to just what you need to keep. (And remember, when disposing of any financial records, shred them – don’t just toss them into the trash.)

1. Keep These Until They Die: Mortgages, Student Loans, Car Loans, Etc.

These records are the ones to hang on to until you’ve completely paid them off. However, keeping these records indefinitely (to be on the safe side) is a good idea. If any questions or disputes relating to the loan or payment of the loan come up, you’re covered. Label the records clearly, then feel free to put them at the back of your file cabinet. They can be out of sight, but make sure they’re still in your possession if that info needs to come to mind.

2. Seven Years in the Cabinet: Tax-Related Records.

These records include your tax returns and receipts/proof of anything you might claim as a deduction. You’ll need to keep your tax documents – including proof of deductions – for 7 years. Period. Why? In the US, if the IRS thinks you may have underreported your gross income by 25%, they have 6 whole years to challenge your return. Not to mention, they have 3 years to audit you if they think there might be any good faith errors on past returns. (Note: Check with your state tax office to learn how long you should keep your state tax records.) Also important to keep in mind: Some of the items included in your tax returns may also pull from other categories in this list, so be sure to examine your records carefully and hang on to anything you think you might need.

3. The Sixers: Property Records.

This one goes out to you homeowners. While you’re living in your home, keep any and all documents from the purchase of the home to remodeling or additions you make. After you sell the home, keep those documents for at least 6 more years.

4. The Annually Tossed: Brokerage Statements, Paycheck Stubs, Bank Records.

“Annually tossed” is used a bit lightly here, so please proceed with caution. What can be disposed of after an annual review are brokerage statements, paycheck stubs (if not enrolled in direct deposit), and bank records. Hoarding these types of documents may lead to a “keep it all” or “trash it all” attitude. Neither is beneficial. What should be kept is anything of long-term importance (see #2).

5. The Easy One: Rental Documents.

If you rent a property, keep all financial documents and rental agreements until you’ve moved out and gotten your security deposit back from the landlord. Use your deposit to buy a shredder and have at it – it’s easy and fun!

6. The Check-‘Em Againsts: Credit Card Receipts/Statements and Bills.

Check your credit card statement against your physical receipts and bank records from that month. Ideally, this should be done online daily, or at least weekly, to catch anything suspicious as quickly as possible. If everything checks out and there are no red flags, shred away! (Note: Planning to claim anything on your statement as a tax deduction? See #2.) As for bills, you’re in the clear to shred them as soon as your payment clears – with one caveat: Bills for any big-ticket items that you might need to make an insurance claim on later (think expensive sound system, diamond bracelet, all-leather sofa with built-in recliners) should be held on to indefinitely (or at least as long as you own the item).

So even if your kids released their inner Michelangelo on the shoebox of financial papers under your bed, some of them need to be kept – for more than just sentimental value. And it’s vital to keep the above information in mind when you’re considering what to keep and for how long.

Setting financial goals is like hanging a map on your wall to inspire and motivate you to accomplish your travel bucket list.

Your map might have your future adventures outlined with tacks and twine. It may be patched with pictures snipped from travel magazines. You would know every twist and turn by heart. But to get where you want to go, you still have to make a few real-life moves toward your destination.

Here are 5 tips for making money goals that may help you get closer to your financial goals:

1. Figure out what’s motivating your financial decisions.

Deciding on your “why” is a great way to start moving in the right direction. Goals like saving for an early retirement, paying off your house or car, or even taking a second honeymoon in Hawaii may leap to mind. Take some time to evaluate your priorities and how they relate to each other. This may help you focus on your financial destination.

2. Control Your Money.

This doesn’t mean you need to get an MBA in finance. Controlling your money may be as simple as dividing your money into designated accounts, and organizing the documents and details related to your money. Account statements, insurance policies, tax returns, wills – important papers like these need to be as well-managed as your incoming paycheck. A large part of working towards your financial destination is knowing where to find a document when you need it.

3. Track Your Money.

After your money comes in, where does it go out? Track your spending habits for a month and the answer may surprise you. There are a plethora of apps to link to your bank account to see where things are actually going. Some questions to ask yourself: Are you a stress buyer, usually good with your money until it’s the only thing within your control? Or do you spend, spend, spend as soon as your paycheck hits, then transform into the most frugal individual on the planet… until the next direct deposit? Monitor your spending for a few weeks, and you may find a pattern that will be good to keep in mind (or avoid) as you trek toward your financial destination.

4. Keep an Eye on Your Credit.

Building a strong credit report may assist in reaching some of your future financial goals. You can help build your good credit rating by making loan payments on time and reducing debt. If you neglect either of those, you could be denied for mortgages or loans, endure higher interest rates, and potentially difficulty getting approved for things like cell phone contracts or rental agreements which all hold you back from your financial destination. There are multiple programs that can let you know where you stand and help to keep track of your credit score.

5. Know Your Number.

This is the ultimate financial destination – the amount of money you are trying to save. Retiring at age 65 is a great goal. But without an actual number to work towards, you might hit 65 and find you need to stay in the workforce to cover bills, mortgage payments, or provide help supporting your family. Paying off your car or your student loans has to happen, but if you’d like to do it on time – or maybe even pay them off sooner – you need to know a specific amount to set aside each month. And that second honeymoon to Hawaii? Even this one needs a number attached to it!

What plans do you already have for your journey to your financial destination? Do you know how much you can set aside for retirement and still have something left over for that Hawaii trip? And do you have any ideas about how to raise that credit score? Looking at where you are and figuring out what you need to do to get where you want to go can be easier with help. Plus, what’s a road trip without a buddy? Call me anytime!

… All right, all right. You can pick the travel tunes first.

Your first lesson isn’t actually one of the six.

It can be found in the title of this article. The best time to start teaching your children about financial decisions is when they’re children! Adults don’t typically take advice well from other adults (especially when they’re your parents and you’re trying to prove to them how smart and independent you are).

Heed this advice: Involve your kids in your family’s financial decisions and challenge them with game-like scenarios from as early as their grade school years.

Starting your kids’ education young can help give them a respect for money, remove financial mysteries, and establish deep-rooted beliefs about saving money, being cautious regarding risk, and avoiding debt.

Here are 6 critical financially-related lessons EVERY parent should foster in the minds of their kids:

1. Co-signing a loan

The Mistake: ‘I’m in a good financial position now. I want to be helpful. They said they’ll get me off the loan in 6 months or so.’

The Realities: If the person you’re co-signing for defaults on their payments, you’re required to make their payments, which can turn a good financial situation bad, fast. Also, lenders are not incentivized to remove co-signers – they’re motivated to lower risk (hence having a co-signer in the first place). This can make it hard to get your name off a loan, regardless of promises or good intentions. Keep in mind that if a family member or friend has a rough credit history – or no credit history – that requires them to have a co-signer, what might that tell you about the wisdom of being their co-signer? And finally, a co-signing situation that goes bad may ruin your credit reputation, and more tragically, may ruin your relationship.

The Lesson: ‘Never, ever, EVER, co-sign a loan.’

2. Taking on a mortgage payment that pushes the budget

The Mistake: ‘It’s our dream house. If we really budget tight and cut back here and there, we can afford it. The bank said we’re pre-approved…We’ll be sooo happy!’

The Realities: A house is one of the biggest purchases couples will ever make. Though emotion and excitement are impossible to remove from the decision, they should not be the driving forces. Just because you can afford the mortgage at the moment, doesn’t mean you’ll be able to in 5 or 10 years. Situations can change. What would happen if either partner lost their job for any length of time? Would you have to tap into savings? Also, many buyers dramatically underestimate the ongoing expenses tied to maintenance and additional services needed when owning a home. It’s a general rule of thumb that home owners will have to spend about 1% of the total cost of the home every year in upkeep. That means a $250,000 home would require an annual maintenance investment of $2,500 in the property. Will you resent the budgetary restrictions of the monthly mortgage payments once the novelty of your new house wears off?

The Lesson: ‘Never take on a mortgage payment that’s more than 25% of your income. Some say 30%, but 25% or less may be a safer financial position.’

3. Financing for a new car loan

The Mistake: ‘Used cars are unreliable. A new car will work great for a long time. I need a car to get to work and the bank was willing to work with me to lower the payments. After test driving it, I just have to have it.’

The Realities: First of all, no one ‘has to have’ a new car they need to finance. You’ve probably heard the expression, ‘a new car starts losing its value the moment you drive it off the lot.’ Well, it’s true. According to CARFAX, a car loses 10% of its value the moment you drive away from the dealership and another 10% by the end of the first year. That’s 20% of value lost in 12 months. After 5 years, that new car will have lost 60% of its value. Poof! The value that remains constant is your monthly payment, which can feel like a ball and chain once that new car smell fades.

The Lesson: ‘Buy a used car you can easily afford and get excited about. Then one day when you have saved enough money, you might be able to buy your dream car with cash.’

4. Financial retail purchases

The Mistake: ‘Our refrigerator is old and gross – we need a new one with a touch screen – the guy at the store said it will save us hundreds every year. It’s zero down – ZERO DOWN!’

The Realities: Many of these ‘buy on credit, zero down’ offers from appliance stores and other retail outlets count on naive shoppers fueled by the need for instant gratification. ‘Zero down, no payments until after the first year’ sounds good, but accrued or waived interest may often bite back in the end. Credit agreements can include stipulations that if a single payment is missed, the card holder can be required to pay interest dating back to the original purchase date! Shoppers who fall for these deals don’t always read the fine print before signing. Retail store credit cards may be enticing to shoppers who are offered an immediate 10% off their first purchase when they sign up. They might think, ‘I’ll use it to establish credit.’ But that store card can have a high interest rate. Best to think of these cards as putting a tiny little ticking time bomb in your wallet or purse.

The Lesson: ‘Don’t buy on credit what you think you can afford. If you want a ‘smart fridge,’ consider saving up and paying for it in cash. Make your mortgage and car payments on time, every time, if you want to help build your credit.’

5. Going into business with a friend

The Mistake: ‘Why work for a paycheck with people I don’t know? Why not start a business with a friend so I can have fun every day with people I like building something meaningful?’

The Realities: “This trap actually can sound really good at first glance. The truth is, starting a business with a friend can work. Many great companies have been started by two or more chums with a shared vision and an effective combination of skills. If either of the partners isn’t prepared to handle the challenges of entrepreneurship, the outcome might be disastrous, both from a personal and professional standpoint. It can help if inexperienced entrepreneurs are prepared to:

• Lose whatever money is contributed as start-up capital
• Agree at the outset how conflicts will be resolved
• Avoid talking about business while in the company of family and friends
• Clearly define roles and responsibilities
• Develop a well-thought out operating agreement

The Lesson: ‘Understand that the money, pressures, successes, and failures of business have ruined many great friendships. Consider going into business individually and working together as partners, rather than co-owners.’

6. Signing up for a credit card

The Mistake: ‘I need to build credit and this particular card offers great points and a low annual fee! It will only be used in case of emergency.’

The Reality: There are other ways to establish credit, like paying your rent and car loan payments on time. The average American household carries a credit card balance averaging over $17,000. Credit cards can lead to debt that may take years (or decades) to pay off, especially for young people who are inexperienced with budgeting and managing money. The point programs of credit cards are enticing – kind of like when your grocer congratulates you for saving five bucks for using your VIP shopper card. So how exactly did you save money by spending money?

The Lesson: ‘Learn to discipline yourself to save for things you want to buy and then pay for them with cash. Focus on paying off debt – like student loans and car loans – not going further into the hole. And when you have to get a credit card, make sure to pay it off every month, and look for cards with rewards points. They are, in essence, paying you! But be sure to keep Lesson 5 in mind!’

If you’ve always used the services of a traditional bank, you might not know the ins and outs of credit unions and if using one might be better for your financial situation.

Credit unions are generally known for their customer-focused operations and friendliness. But the main difference between a bank and a credit union is that a credit union is a nonprofit organization that you have to be a member of to participate in its services. Credit unions may offer higher interest rates and lower fees than banks, but banks may provide more services and a greater range of products.¹

Read on for some basics about what you should know before you join one.

Protection and insurance

Just like banks, your accounts at a credit union should be insured. The National Credit Union Share Insurance Fund (NCUSIF) functions to protect consumer deposits if the credit union becomes insolvent. The fund protects up to $250,000 per customer in deposits.² Be sure the credit union you select is backed by the NCUSIF.

What credit union is best for you?

Today there are many credit unions available. Many now offer 100 percent online banking so you may never need to visit a branch at all.

The most important feature in selecting a credit union is to make sure they meet your personal banking needs and criteria. Here are a few things to consider:

• Does the credit union offer the products and services you want? Can you live without the ones they don’t?
• Do they have competitive interest rates when compared to banks?
• Are the digital and online banking features useful?
• What are the fee schedules?
• What are the credit union membership requirements? Do you qualify for membership?

Take your time and do some research. Credit unions vary in the services provided as well as the fees for such services.

What to expect when opening a credit union account

Each credit union may have slightly different requirements when opening an account, but in general, you will most likely need a few things:

Expect to complete an application and sign documents. When opening a credit union account, you will likely have to fill out some forms and sign other paperwork. If you don’t understand something you are asked to sign, make sure you get clarification.

Be prepared to show identification. You will likely be asked to show at least two forms of identification when opening an account. Your credit union will also probably ask for your social security number, date of birth, and physical address. Be prepared to show proof of your personal information.

Make the required opening deposit. On the day you open your credit union account, you’ll likely be asked to make an opening deposit. Each credit union may have a different minimum deposit required to open the account. It could be up to $100 (or more), but call the credit union to make sure.

Unique benefits

Credit union accounts offer some unique advantages for members. You may enjoy more comfortable access to personal loans or even auto financing and mortgages. Credit unions may offer other perks such as fee waivers, as well as discounts on other products and services that come from being a member.

If participating in a customer-owned bank sounds interesting to you, a credit union may be a good option. There are more credit unions available today than ever. Do your research. You may find an option that compares to your current bank, but offers some greater benefits that will make it worth the switch.

When you deposit money into certain bank accounts, they’ll pay you interest.

Have you ever wondered why they do this? Banks perform lots of services. They’re holding your money for you, making it accessible at tens of thousands of points across the globe, facilitating purchases from e-commerce sites, processing automatic payments, etc. Oftentimes this is done for free or for a small fee. So why would they pay interest on top of all this?

Let’s find out.

Banks play both sides

We need a place to store our money. Some people might not like the idea of handing over their hard-earned cash to a financial institution, but storing their savings under the mattress might make it difficult to perform many transactions, especially online. Banks perform the essential service of giving much of the population a place to store their money while simultaneously facilitating payments between different participants.

Modern economies function on debt (so not all debt is necessarily bad). Corporate debt owed to a bank might be used to grow a business quickly by taking advantage of a great business opportunity.

People don’t always have the entire amount of money all at once to buy something very costly like a house, so banks can help out by lending them the money. To collect the money to lend out, banks receive deposits from other customers.

Thus banks play a fundamental role in the economy, but why do they pay interest? They obviously receive interest on loans, but on the other side, they already offer several free services, like facilitating payments and helping to safeguard cash. Why would they pay people to give them money?

Banks need depositors

Similar to other industries, the banking industry needs customers. This is not only true on the lending side, though. Banks also need customers on the depositing side, because they need to get their money for lending from somewhere. The more customers they have, the more money they can lend out, in turn generating more income.

Since banks compete with each other just like members of any industry, they need a way to attract customers. Sometimes they may offer more features for an account or more free services, but the most enticing incentive is usually the interest rate. And that is the simple idea behind why banks pay interest: zero interest in theory would attract zero customers.

Why more interest for longer deposit periods?

It seems like savings accounts usually pay better interest rates than checking accounts. Why is that? A person probably opens a savings account with the intention of storing their money over a relatively long period of time. The expectation is that the money wouldn’t frequently be removed from that account.

So why do banks generally pay more interest if they believe you’ll leave money untouched for longer? Here’s why. The money you deposit with a bank doesn’t sit idle. It’s lent out to other individuals and businesses in the form of loans. But every bank must abide by minimum reserve requirements,¹ and if they fall below the threshold, they can face serious consequences. Thus they are motivated to have their customers park their money for longer periods of time, and savings accounts are intended for just that purpose. The longer a customer intends to leave their money untouched at a bank, the more the bank might be willing to pay in interest.

If you’ve ever been in a pinch and needed cash fast, you may have considered taking out a payday loan.

It may make sense on some level. Payday loans can be readily accessible, usually have minimal requirements, and put money in your hand fast.

But before you sign on the dotted line at your corner payday lender, read on for some of the downsides and dangers that may come along with a payday loan.

What is a payday loan?

Let’s start with a clear definition of what a payday loan actually is. A payday loan is an advance against your paycheck. Typically, you show the payday loan clerk your work pay stub, and they extend a loan based on your pay. The repayment terms are calculated based on when you receive your next paycheck. At the agreed repayment date, you pay back what you borrowed as well as any fees due.

Usually all you need is a job and a bank account to deposit the borrowed money. So it may seem like a payday loan is an easy way to get some quick cash.

Why a payday loan can be a problem

Payday loans can quickly become a problem. If on the date you’re scheduled to repay, and you’re coming up short, you can extend the payday loan – but will incur more fees. This cycle of extending the loan means you are now living on borrowed money from the payday lender. Meanwhile, the costs keep adding up.

Defaulting on the loan may land you in some trouble as well. A payday loan company may file charges and begin other collection proceedings if you don’t pay the loan back at the agreed upon time.

Easy money isn’t easy

While a payday loan can be a fast and convenient way to make ends meet when you’re short on a paycheck, the consequences can be dangerous. Remember, easy money isn’t always easy. Payday loan companies charge very high fees. You could end up with fees ranging from 15 percent or more than 30 percent on what you borrow. Those fees could be much higher than any interest rate you may see on a credit card.

Alternatives to payday loans

As stated, payday loans may seem like quick and easy money, but in the long run, they may do significant damage. If you end up short and need some quick cash, try these alternatives:

Ask a friend: Asking a friend or relative for a loan isn’t easy, but if they are willing to help you out it may save you from getting stuck in a payday loan cycle and paying exorbitant fees.

Use a credit card: Putting ordinary expenses on a credit card may not be something you want to get in the habit of doing, but if given a choice between using credit and securing a payday loan, a credit card may be a better option. Payday loan fees can translate into much higher interest rates than you might see on a credit card.

Talk to your employer: Talk to your employer about a pay advance. This may be uncomfortable, but many employers might be sympathetic. A pay advance form an employer may save you from payday loan fees and falling into a debt cycle.

If possible, a payday loan should probably be avoided. If you absolutely must secure a payday loan, be prepared to pay it back – along with the fees – at the agreed upon date. If not, you may end up stuck in a payday loan cycle where you are always living on borrowed money, and the fees are adding up.

A properly set up home insurance policy can be peace of mind.

Home insurance is designed to help you financially if something goes wrong with your home. It’s one of the most important insurance coverages you can have because it protects the very place that protects you.

Home insurance is a contract. Your policy lays out what it covers and what it doesn’t cover. It also includes your rights and responsibilities and those of your home insurance company. So how do you know if you have the right type of home insurance policy? How can you help ensure your home insurance will cover what you need it to cover? Read on to learn some basics.

What does a home insurance policy cover?

Basically, home insurance pays to repair or replace your home or property if it’s damaged in a covered loss, such as theft or fire. A proper home insurance policy also should offer liability protection if someone is injured on your property and then sues you.

Do you have to purchase homeowner’s insurance?

Homeowner’s insurance may be required if you have a mortgage. Your bank will want to make sure the asset is protected, so they’ll likely require you to purchase a homeowner’s policy. They’ll also want to see proof of coverage – sometimes called a binder or an Evidence of Insurance certificate. Such a document will list the insurance limit, deductible, and declare the bank as the mortgage holder.

How much insurance do you need on your home?

The limit for your home policy is based on the cost to replace your home – not the value of the home – and on several other factors. Considerations for replacement cost include:

Construction: The replacement cost of your home will depend greatly on the construction. Is it a wood frame? Masonry? Concrete block? What is the square footage? How about roof construction? All these construction features will help determine the replacement cost of your home.

Personal property: The policy limit for your personal property typically defaults to a percentage of the amount for which your home is covered. For example, if your home is insured for $100,000 and the percentage is 50%, the default personal property limit would be $50,000.

Bonus tip: Highly valuable personal property is excluded from typical homeowner policies. Special property such as antiques, fine art, or jewelry may be covered only up to a certain sublimit. If you have highly valuable property stored within your home, talk to your insurance professional about getting the proper coverage for these items.

Liability insurance: As stated, a basic home insurance policy should come with some liability coverage to protect you if you end up in a lawsuit. Such a suit may stem from someone getting injured on your property.

Bonus tip: Homeowners should have some extra liability protection. An “umbrella” liability policy can add more liability coverage in case you end up in a lawsuit.

What type of deductible should I select?

A typical homeowner policy deductible is between $500-$1,000 (this can vary by state).¹ But there are options for $5,000 all the way up to $100,000 deductibles. Some policies offer percentage deductibles where the deductible is counted as a percentage of the policy limit. For example, if your home is insured for $150,000 and you carry a 10% deductible, your out-of-pocket cost in the event of a claim would be $15,000.

Many homeowners opt for a high deductible to save on the cost of the policy. Bonus tip: Select the highest deductible you can afford. Just keep in mind that if you have a claim, you are responsible for paying the deductible. If the damage is less than the deductible, you will have to make the repairs without the help of insurance. Know your risks and select the right policy.

Home insurance policies don’t cover everything. They contain exclusions. For example, many homeowners policies don’t cover flood damage. Flood insurance must be purchased separately. If you live in a coastal area or near a large body of water, consider purchasing a flood insurance policy.

Bonus tip: Flood insurance has become more important for homeowners in recent years. Flooding can cause catastrophic damage and can also affect homeowners who are not in a so-called “flood zone”.

Knowledge is power. The more you know about homeowners insurance, the better prepared you’ll be if something goes wrong with your home. Get to know your policy’s limits, coverage, and deductibles, so you can help ensure you have the coverage you need, when you need it.

Starting your business requires making a myriad of decisions.

You’ll have to consider everything from a marketing budget to the theme of your website to how you’re going to arrange your office. But if you give careful consideration to the financial decisions concerning your business, you’ll start off on the right foot.

What is your business structure going to be?

Business structures have different tax and liability implications, so although there are only a few to choose from, make your selection carefully. You may consider:

Sole Proprietorship

A sole proprietorship is the simplest of business structures. It means there is no legal or tax difference between your personal finances and your business finances. This means you’re personally responsible for business debts and taxes.

Limited Liability Company

Under an LLC, profits and taxes are filed with the owners’ tax returns, but there is some liability protection in place.

Corporation

A corporation has its own tax entity separate from the owners. It requires special paperwork and filings to set up, and there are fees involved.

Do you need employees

This may be a difficult decision to make at first. It will most likely depend on the performance of your business. If you are selling goods or a service and have only a few orders a day, it might not make sense to spend resources on employees yet.

However, if you’re planning a major launch, you may be flooded with orders immediately. In this case, you must be prepared with the proper staff.

If you’re starting small, consider hiring a part-time employee. As you grow you may wish to access freelance help through referrals or even an online service.

What are your startup costs?

Even the smallest of businesses have startup costs. You may need computer equipment, special materials, or legal advice. You may have to pay a security deposit on a rental space, secure utilities, and purchase equipment. Where you access the funds to start your business is a major financial decision.

Personal funds

You may have your own personal savings to start your business. Maybe you continue to work at your “day job” while you get your business off the ground. (Just be mindful of potential conflicts of interest.)

Grants or government loans

There are small business grants and loans available. You can access federal programs through the Small Business Administration. You may even consider a business loan from a friend or family member. Just make sure to protect the personal relationship! People first, money second.

Bank loans

Securing a traditional bank loan is also an option to cover your startup costs. Expect to go through an application process. You’ll also likely need to have some collateral.

Crowdfunding

Crowdfunding is a relatively new option for gathering startup funds for your business. You may want to launch an online campaign that gathers donations.

What’s your backup plan

A good entrepreneur prepares for as many scenarios as possible – every business should have a backup plan. A backup plan may be something you go ahead and hammer out when you first create your business plan, or you might wait until you’ve gotten some momentum. Either way, it represents a financial decision, so it should be thought out carefully.

Develop a backup plan for every moving part of your business. What will you do if your sales projections aren’t near what you budgeted? What if you have a malfunction with your software? How will you continue operations if an employee quits without notice?

How much and what kind of insurance do you need?

Insurance may be one of the last things to come to mind when you’re launching your business, but going without it may be extremely risky.

Proper insurance can make the difference between staying in business when something goes wrong or shutting your doors if a problem arises.

At the very minimum, consider a Commercial General Liability Policy. It’s the most basic of commercial policies and can protect you from claims of property damage or injury.

Make your financial decisions carefully

Business owners have a lot to think about and many decisions to make – especially at the beginning. Make your financial decisions carefully, plan for the unexpected, insure yourself properly, and you’ll be off to a great start!

For most households, buying a home means getting a mortgage, which means lenders play a big role in declaring how much house you can “afford”.

Many people take that calculation as a guide in choosing which house they want to buy, but after you’ve signed the papers and moved in, the lender might not be much help in working out the details of your family budget or making ends meet.

Let’s take a look behind the curtain. What is it that lenders look at when determining how large of a mortgage payment you can feasibly make?

The 28-36 Rule

Lenders look closely at income and debt when qualifying you for a certain mortgage amount. One of the rules of thumb at play is that housing expenses shouldn’t run more than 28% of your total gross income.¹ You also may hear this referred to as the “housing ratio” or the “front-end ratio”. The 28% rule is a good guideline – even for renters – and has been a common way to budget for household expenses over many generations. Using this rule of thumb, if your monthly income is $4,000, the average person would probably be able to afford up to $1,120 for a mortgage payment.

Lenders also check your total debt, which they call debt-to-income (DTI). Ideally, this should be below 36% of your income. You can calculate this on your own by dividing your monthly debt payments by your monthly income. For example, if your car loans, credit cards, and other debt payments add up to $2,000 per month and your gross income is $4,000 per month, it’s unlikely that you’ll qualify for a loan. Most likely you would need to get your monthly debt payments down to $1,440 (36% of $4,000) or under, or find a way to make more money to try to qualify.

Buying less home than you can afford

While the 28% and 36% rules are there to help provide safeguards for lenders – and for you, by extension – buying a home at the top end of your budget can still be risky business. If you purchase a home with a payment equal to the maximum amount your lender has determined, you may not be leaving much room for error, such as an unexpected job loss or other financial emergency. If something expensive breaks – like your furnace or the central air unit – that one event could be enough to bring down the whole house of cards. Consider buying a home with a mortgage payment below your maximum budget and think about upsizing later or if your income grows.

A home as an investment?

A lot of people will always think of their home as an investment in an asset – and in many cases it is – but it’s also an investment in your family’s comfort, safety, and well-being. In reality, homes usually don’t appreciate much more than the rate of inflation and – as the past decade has shown – they can even go down in value. Your home, as a financial tool, isn’t likely to make you rich. In fact, it may do the opposite, if your mortgage payment takes up so great a percentage of your monthly budget that there’s nothing left over to invest, pay down debt, save for a rainy day, or enjoy.

Homes are one of those areas where many discover that less can be more. Whether it’s your first home or you’re trading in the old house for a new one, you might be better served by looking at how big of a mortgage payment you can afford within your current budget, rather than setting your sights on the house your lender says you can afford.

Savvy savers know that if they look after their pennies, the dollars will take care of themselves.

So, if you’re looking for places to gain a few extra pennies, why not start by maximizing your savings account?

Granted, a savings account might not be a flashy investment opportunity with a high return. But most of us use one as a place to park our emergency fund or the dream car fund. So, if you’re going to put your money somewhere other than under your mattress, why not put it in the place that gets the best return? Here are some tips for getting the most out of your savings account.

Try an Online-only Account

Your corner bank branch isn’t the only option for a savings account. Why not try an online account? As of May 2022, some banks are offering online checking accounts with rates of 1.25% (some even higher).¹

With the help of technology, you can link one of these high-interest savings accounts directly to your checking account, making moving money a breeze. Say goodbye to the brick and mortar bank, and hello to some extra cash in your pocket!

Check Out Your Local Credit Union

A credit union offers savers some unique benefits. They differ from a traditional bank as they are usually not for profit. They function more like a cooperative – even paying dividends back to members periodically.

A credit union can also be beneficial as they typically offer a higher interest rate than your everyday bank. Membership in a credit union may also have other perks, such as low-interest rates on personal loans as well as exceptional customer service.

Money Market Accounts

A money market account is like a savings account except it’s tied to bonds and other low-risk investments. A money market can deliver the goods by giving you more for your savings, but there are often account minimums and fees. Before putting your savings into a money market account, check the fees and account minimums to make sure they’ll coincide with your needs.

Don’t Use a Parking Place When You Need a Garage

A savings account is a like a good parking place for cash. Its usefulness is in its ease of access and flexibility.

This makes it a great place to keep savings that you may need to access in the short term – say, within the next 12 months.

For long-term saving (like for retirement), it’s generally not a good idea to rely on a savings account alone. Retirement savings doesn’t belong in a parking place. For that, you need a garage. Talk to your financial professional today about a savings strategy for retirement, and the options that are available for you.

Shopping for a Savings Account

Just because a savings account doesn’t offer high yields, doesn’t mean you shouldn’t consider it carefully. To get the most bang for your savings buck, search out the highest interest possible (which might be online), be aware of fees and penalties, and remember – any saving is better than not saving at all!

Are your finances feeling tight? It may be because your debt has outpaced your income.

Your debt-to-income ratio is a key factor in determining your financial health. This ratio is simply your monthly debt payments divided by your monthly income, multiplied by 100 to make it a percentage.

Banks and other lenders will look at your debt-to-income ratio when considering whether to give you a loan. They want to see that you have enough income to cover your monthly debt obligations. A high debt-to-income ratio can make it difficult to qualify for new loans or lines of credit since it can signal that you’re struggling to keep up with your debt payments.

Fortunately, your ratio is easy to calculate…

First, add up all of your monthly debt payments. This includes your mortgage or rent, car payment, student loans, credit card payments, and any other debts you may have.

Next, calculate your monthly income. This is typically your take-home pay after taxes and other deductions. If you’re self-employed, it may be your net income after business expenses.

Finally, divide your monthly debt payments by your monthly income. Multiply this number by 100 to get your debt-to-income ratio.

For example, let’s say you have a monthly mortgage payment of $1,000 and a monthly car payment of $300. You also have $200 in student loan payments and $150 in credit card payments. Your monthly income is $3,000.

Your debt-to-income ratio would be (1,000 + 300 + 200 + 150) / 3,000 = .55 or 55%.

A debt-to-income ratio of less than 36% is typically considered ideal by lenders—anything more can signal financial stress.¹

If your debt-to-income ratio is high, don’t despair. There are steps you can take to improve it.

First, try to increase your income. That can mean working extra hours, scoring a raise, finding a new job, or even starting a side business.

Second, you can lower your debt. You can do this by making extra payments on your debts each month or by consolidating your debts into a single loan with a lower interest rate.

Making these changes can be difficult, but they can make a big difference in your debt-to-income ratio—and your financial health.

If you’re not sure where to start, contact me! I can help you develop a plan to get your debt under control and to start building wealth.

Inflation isn’t just eating away at your purchasing power—it’s also ravaging your savings account.

If you’re like many people, the interest you’re earning on your money is being completely eroded by inflation. That’s because the annual rate of inflation has been outpacing the interest rates on savings accounts for years.

Let’s look at some numbers…

Let’s say you have $10,000 in a savings account that pays 1% interest. After one year, you would have earned $100 in interest, which sounds like a decent return.

But if inflation is running at 2%, then the purchasing power of your money has declined by 2% over the same period. In other words, the $10,100 you have in your account can buy less than what $10,000 could buy a year ago.

As a result, your real return on investment—or the return after inflation is taken into account—is actually negative 1%.

Now, let’s bring that to the real world—in 2022, the total inflation rate has been 8.5% thus far,¹ while the average interest rate for savings accounts is just .13%.²

That means for every $100 you have in a savings account, the purchasing power of that money declines by $8.50 while the value of your money only grows by $.13.

In other words, inflation is absolutely massacring your savings account.

So what can you do about it?

Simple—find assets that grow at a rate that outpaces inflation.

One option is to invest in assets with high compounding interest rates, such as certain types of bonds. Another strategy is to invest in options that have the potential to generate high returns, such as stocks or real estate.

You could also start a business that can scale quickly and generate a high return on investment.

Whatever strategy you choose, the key is to find an asset that will grow at a rate that can outpace inflation.

So don’t sit idly by and watch as inflation destroys your savings account—take action and find an investment that will help you keep up with the rising cost of living. Otherwise, you’ll end up losing ground financially.

It’s time to wake up and smell the coffee!

The reality is that your retirement savings might be losing value every day. It’s because of something called inflation, and it may result in your finding yourself retiring with less than you anticipated. In this blog post, we’ll discuss how inflation affects your savings and what you can do about it.

First, what is inflation?

Inflation is a measurement of how much prices are rising over time. And it’s not just that the price of gas is skyrocketing or some other commodity—inflation affects everything.

That may not necessarily be a problem for you, so long as your wages are increasing with the rate of inflation. Commodities might get more expensive, but your rising paycheck means you can still afford what you need. But if income isn’t keeping up with inflation, an upper-class income today may only afford you a middle-class income tomorrow!

But there’s another danger that inflation poses.

Let’s say you have $1 million dollars in the bank that you’ve put away for retirement. Good for you! You’ve probably already dreamed of how you’ll use that cash once you retire. A new home, a new car, worldwide travel, you name it!

But here’s the rub. Over time, the cost of those items (most likely) will steadily increase. So will the basic cost of living. By the time you retire, your $1 million has far less purchasing power than it did when you first started saving. You haven’t lost money, exactly. Your money has just lost value.

So how can you combat the slow decay caused by inflation?

Start by moving your money away from low, or no, growth places. Your Grandma may not like to hear this, but hiding money in your mattress is an easy way to torpedo its value over the long haul!

Find investments that actually grow over time and help beat inflation. Over the last 100 years or so, the average inflation rate has been 3.1%. That’s the bare minimum rate at which your investment should grow, if you’re using it for long-term wealth creation.

A licensed and qualified financial professional can help you with both of these steps. The sooner you start the process of protecting your wealth from inflation, the more you insulate yourself from the danger of waking up with less money than you’d thought!

It’s time to manage all those papers that are taking up space in your filing cabinets!

But how? Which documents should you preserve? Which ones should you shred? Here are 11 helpful tips on what to do with tax documents, legal documents, and property records.

Documents to keep.

At the top of this list? Estate planning documents. Your will, your living trust, and any final instructions should be carefully labeled, stored, and protected. Your life insurance policy should be safeguarded as well.

Records of your loans should be preserved. That includes for your mortgage, car and student loans. Technically, you can shred these once they’re paid off, but it’s wise to keep them around permanently. Someday you may have to prove you’ve actually paid off these debts.

Tax returns.

Here’s a trick—keep tax returns for at least 7 years. Why? Because there’s a 6 year window for the IRS to challenge your return if they suspect you’ve underreported your income.¹ Keep your records around to prove that you’ve been performing your civic duty by properly reporting your income.

(Check your state’s government website to determine exactly how long you’re supposed to keep state tax returns.)

Property records.

Keep all of your records pertaining to…

• Your ownership of your house
• The legal documents for buying your house
• Commissions to your real estate agent
• Major home improvements

Save these documents for a minimum of 6 years after you move out of your home. If you’re a renter, keep all of your records until you’ve moved out. Then, fire up your shredder and get to work!

Speaking of your shredder…

Annual documents to destroy.

Every year, you can shred paycheck stubs and bank records. Just be sure of two things…

First, make sure that you’re not shredding anything that might belong in your tax records.

Second, be sure that you’ve reviewed your finances with a professional who will know which documents may need preserving.

Once you’ve done that, it’s fine to feed your shredder at your discretion!

Credit card receipts, statements and bills.

Once you’ve checked your monthly statement against your bank records and receipts, you’re free to shred them. You may want to hold on to receipts for large purchases until the item breaks or you get rid of it.

When in doubt, do some research! It’s better than tossing out something important. And schedule an annual review with a licensed and qualified financial professional. They can help you discern which documents you need and which ones can be destroyed.

Your credit score can affect a lot more than just your interest rates or credit limits.

Your credit history can have an impact on your eligibility for rental leases, raise (or lower) your auto insurance rates, or even affect your eligibility for certain jobs (although in many cases the authorized credit reports available to third parties don’t contain your credit score if you aren’t requesting credit). Because credit history affects so many aspects of financial life, it’s important to begin building a solid credit history as early as possible.

So, where do you start?

1. Apply for a store credit card.
   Store credit cards are a common starting point for teens and young adults, as it often can be easier to get approved for a store card than for a major credit card. As a caveat though, store card interest rates are often higher than for a standard credit card. Credit limits are also typically low – but that might not be a bad thing when you’re just getting started building your credit. A lower limit helps ensure you’ll be able to keep up with payments. Because you’re trying to build a positive history and because interest rates are often higher with a store card, it’s important to pay on time – or ideally, to pay the entire balance when you receive the statement.

2. Become an authorized user on a parent’s credit card.
   Another common way to begin building credit is to become an authorized user on a parent’s credit card. Ultimately, the credit card account isn’t yours, so your parents would be responsible for paying the balance. (Because of this, your credit score won’t benefit as much as if you are approved for a credit card in your own name.) Another thing to keep in mind is that some credit card providers don’t report authorized users’ activity to credit bureaus.¹ Additionally, even if you’re only an authorized user, any missed or late payments on the card can affect your credit history negatively.

Are secured cards useful to build credit?
A secured credit card is another way to begin building credit. To secure the card, you make an initial deposit. The amount of that deposit is your credit line. If you miss a payment, the bank uses your collateral – the deposit – to pay the balance. Don’t let that make you too comfortable though. Your goal is to build a positive credit history, so if you miss payments – even though you have a prepaid deposit to fall back on – you’re still going to get a ding on your credit history. Instead, it’s best to use a small amount of your available credit each month and to pay in full when you get the statement. This will help you look like a credit superstar due to your consistently timely payments and low credit utilization.

As you build your credit history, you’ll be able to apply for credit in larger amounts, and you may even start receiving pre-approved offers. But beware. Having credit available is useful for certain emergencies and for demonstrating responsible use of credit – but you don’t need to apply for every offer you receive.

“Bankruptcy” and “retirement” are words that shouldn’t belong in the same sentence.

But it’s become an increasingly common phenomenon—12.2% of bankruptcies in 2018 were filed by people over 65, up from 2.1% in 1991.¹

What’s driving this unexpected trend? The collapse of pensions and the lack of savings by people nearing retirement age are the two primary culprits.

The pension problem is relatively straightforward. In the past, pensions were pretty much a given—a common benefit that companies provided to their employees as part of their compensation package. Employees would work a set number of years, and then receive a monthly check from their employers upon retirement.

But in recent years, pensions have all but disappeared. Today, only 15% of workers have access to a pension plan.²

That alone isn’t enough to fuel the increase in bankruptcies among retirees. After all, workers now have access to 401(k)s and 403(b)s, which can help replace pensions to some extent.

The problem is that most people nearing retirement age don’t have enough saved up in these accounts to support themselves. In fact, the median retirement account balance for baby boomers (age 57-75) is just $202,000.3 Using the 4% rule, that’s a retirement income of about $8,000 per year, well below the poverty line.

Is it any wonder then that retirees are going bankrupt? They go from having a stable income to having almost no income at all, and they don’t have enough saved up to cover the basics. What are they supposed to do when the medical bills start piling up or the car needs repairs?

If you’re approaching retirement age, don’t become a statistic. Meet with a licensed and qualified financial professional ASAP to discuss your retirement options and see what steps you might need to take now to support yourself.

Here’s a mystery—how in the world do insurance companies stay in business?

After all, their business model seems… odd. Their main product is cold, hard cash. In some cases, those payouts are substantial—for life insurance, it’s recommended that people buy 10X their annual income. That can mean payouts of well over $500,000. That’s a huge chunk of cash! The premiums you pay over your lifetime likely don’t even scratch the surface of that amount.

So what’s the secret? The answer is minimizing risk. Here’s how it works…

Let’s say you run a mom-and-pop life insurance company. You find 20 clients, and charge them each a $100 monthly premium for $500,000 of protection.

Your business earns $24,000 per year, and for the first five years it’s smooth sailing.

But what would happen if just one of your clients died? Suddenly, you would have to pay out $500,000. And unless you had some other income, that would mean the end of your business.

Here’s an even scarier proposition—what if you decided to exclusively market towards the elderly? And what if two of them died in quick succession? Suddenly, you’re on the hook for a million dollars, and your business is toast.

This is why insurance companies are so risk-averse. They have to be, or they’ll go bankrupt.

Their solution? They evaluate every person they insure. Actuaries plug the amount of coverage, age, history, health, and even the zip code of prospective customers into complex algorithms to determine their risk level. It’s why life insurance is often vastly more expensive for smokers than non-smokers—their risk of death is simply higher.

Then, the actuaries hand the results to underwriters who determine the premium amount.

Let’s consider your hypothetical business again—this time with proper risk protection.

You still have 20 customers, each with $500,000 of protection. But now, you’ve evaluated each customer for risk, and adjusted their premiums.

You charge 5 clients $100 per month, 5 clients $250 per month, and 10 clients $400 per month. Plus, you’ve had to decline serving the highest risk customers. Now, you’re earning $69,000 annually. And because of your new qualification process, you don’t have to make your first payout for 10 years. Now, you can easily cover the cost, with some to spare!

And as you expand your client base, you’ll have a larger and larger pool of low-risk customers to help offset the cost of payouts for the high-risk ones.

This is the secret to how insurance companies stay in business. By carefully evaluating and managing risk, they can keep their costs low, and ensure they have the cash on hand to make payouts when needed.

It’s not a question if buying is better than renting. It’s a question of when you’ll be ready to buy.

That’s because rent money is lost to your landlord forever.

A homeowner, though, has the chance for the value of their house to increase. It may not be an earth-shattering return, but there’s a far higher chance that you’ll at least break even from owning than renting.

Even with its advantages, owning a home isn’t for everyone… at least, not yet. Here are a few criteria to consider before becoming a homeowner.

You’re ready to put down roots. If you’re not yet prepared to live in one place for at least five years, home ownership may not be for you.

Why? Because buying and selling a home comes with costs. As a rule of thumb, waiting five years can allow your home to appreciate enough value to offset those expenses.

So before you buy a home, be sure that you’ve done your homework. Will your job require you to change locations in the next five years? Will local schools stay up to par as your family grows? If you’re confident that you’ll stay put for the next five years or more, go ahead and start planning.

You can cover the upfront costs of home ownership. The upfront costs of buying a home, as mentioned above, are no laughing matter. They may prove a barrier to entry if you haven’t been saving up.

The greatest upfront costs you’ll face are the down payment and closing costs. A down payment is usually a percentage of the total purchase price of your home—for instance, a home priced at $200,000 might require a 20% down payment, or $40,000.

Closing costs vary from state to state, with averages ranging from $1,909 in Indianna to $25,800 in the District of Columbia.¹ These include fees to the lender and property transfer taxes.

The takeaway? Start saving to cover the upfront costs of purchasing a home well in advance. Your bank account will thank you!

You can handle the maintenance costs of home ownership. Say what you will about landlords, but at least they don’t charge you for home repairs and maintenance!

That all changes when you become a homeowner. Every little ding, scratch, and flooded basement are your responsibility to cover. It all adds up to over $2,000 per year, though that figure will vary depending on the size and age of your home.² If you haven’t factored in those expenses, your cash flow—as well as your airflow—might be in for trouble!

Do you have residual debt to deal with? The great danger of debt is that it destabilizes your finances. It dries up precious cash flow needed to cover emergency expenses and build wealth.

That’s why throwing a mortgage on top of a high student loan or credit card debt burden can be a blunder. You might be able to cover costs on paper, but you risk stretching your cash flow to take care of any unplanned emergencies.

In conclusion, owning a home is an admirable goal. But it may not be for you and your family yet! Take a long look at your finances and life-stage before making a purchase that could become a source of stress instead of stability.