Severance Explained

July 6, 2022

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Bree Hudson

Bree Hudson

Independent Consultant

5830 Granite Parkway
Suite 100
Plano, Texas 75024

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June 29, 2022

Sinking Funds 101

Sinking Funds 101

You can put down the life jacket—a sinking fund is actually a good thing!

Why? Because a sinking fund can help you avoid high interest debt when making big purchases. Here’s how…

Put simply, a sinking fund is a savings account that’s dedicated to a specific purchase.

For instance, you could create a sinking fund for buying a new car. Every paycheck, you would automate a deposit into the fund until you had enough money to buy your new ride.

And that can make it a powerful tool. Instead of putting big ticket items on a credit card or using financing, you can instead use cash. It can work wonders for your cash flow and your ability to build wealth over the long haul.

Here are a few tips for making the most of your sinking fund…

Plan in advance

Sinking funds work best when they’ve had time to accumulate—you probably can’t save for two weeks and then expect to buy a car!

First, write a list of all major upcoming expenses on the horizon. List how much you expect them to cost, and when you plan to purchase them.

Then, divide the cost by the number of pay periods between now and then. That’s how much you need to save each paycheck to buy the item in cash. Even if you can’t spare the cash flow to save the full amount, you can at least save enough to lower the amount of debt you’ll be taking on.

Prioritize access

What good is saving for a purchase if you can’t access the money? Not much.

That’s why it’s best if your sinking fund is highly liquid. No penalties for withdrawal. No delay between selling assets and accessing cash. Otherwise, you may find yourself unnecessarily twiddling your thumbs instead of actually making the purchase!

Prioritize safety

Remember—this is for a specific purchase on a relatively short timetable, so you might not want to put these funds in a more aggressive account. The last thing anyone wants is for their car savings to get halved by a bear market. There are other accounts specifically designed for building wealth. This doesn’t need to be one.

So before you make your next big purchase, call up your licensed and qualified financial professional. Give them the details about what you plan to buy and when. Then, collaborate to see what saving for the purchase could look like. It could be the alternative to credit card spending and financing that your wallet needs!

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This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies for saving and/or investing that may be available to you. Any examples used in this article are hypothetical. Market performance is based on many factors and cannot be predicted. Before investing or enacting a savings or retirement strategy, seek the advice of a licensed and qualified financial professional, accountant, and/or tax expert to discuss your options.

June 8, 2022

Tax Now or Tax Later?

Tax Now or Tax Later?

If someone asked if you’d rather pay taxes now or later, what would you say?

Paying later is tempting. After all, who likes paying taxes at all? As with most inconveniences, it’s easy to delay, delay, delay.

But here’s an important question. When do you think taxes will be greater—today, or years from now?

It’s impossible to answer.

Looking to history doesn’t really help—income taxes are actually far lower now than they were in the 1930s, 40s, or 50s.¹ So if you pay now, you may miss out if taxes sink even further.

But no one can predict the future. If you opt to pay later, unforeseen circumstances may create a higher tax environment down the road.

So if you’re comparing tax now vs. tax later, it may feel like you might as well toss a coin to determine your strategy. Not a good place to be!

But fortunately, there’s an alternative. Tax never.

And no, that doesn’t mean buying shady nail salons, opening businesses in the Cayman Islands, or committing a felony. It simply means working with a licensed and qualified financial professional to identify time-proven—and 100% legal—financial vehicles.

These include…

Roth IRAs/Roth 401(k)s Health Savings Accounts Indexed Universal Life (IUL) Insurance 529 College Savings Plans Municipal Bonds

Each vehicle has specific rules, limitations, strengths, and weaknesses. It’s absolutely critical that you consult with a financial professional before you start leveraging these tools. Remember, you don’t need to flip a coin to make financial decisions!

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¹ “History of Federal Income Tax Rates: 1913 – 2021,” Bradford Tax Institute, https://bradfordtaxinstitute.com/Free_Resources/Federal-Income-Tax-Rates.aspx

June 6, 2022

Retiring in a Bear Market

Retiring in a Bear Market

Is a slowing market challenging your peace of mind about retirement?

It’s no wonder why—losing wealth on the cusp of retirement can suddenly lower the quality of your post-career lifestyle.

And worst of all, it can seem unavoidable. If you turn 67 during a bear market, what are your options for avoiding a retirement disaster?

The first, most obvious solution is to keep working. Take the loss on the chin, push through, let the recovery buoy your savings, and retire at the top.

The drawbacks? It could delay your retirement by 3 to 5 years.

Even worse, you’ll then likely face the temptation to retire at the TOP of the next bull market. And if you don’t plan accordingly, your retirement savings and income could get hammered during the almost inevitable bear market that would follow.

The second, far more powerful strategy? Taper your risk as you approach retirement.

Why? Because it can make you far less vulnerable to market fluctuations. Whether you retire at the top or bottom of the market becomes less important for your retirement outcome.

That’s why it’s absolutely essential to meet with a licensed and qualified financial professional ASAP. They can review your goals and situation to determine what level of risk works best for you. They can also help you taper your risk exposure as you get closer to retirement.

And if you’re ready to retire but skittish about the market, they can help you weigh the pros and cons of taking the plunge or waiting it out.

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May 23, 2022

What's a Recession?

What's a Recession?

Most of us would probably be apprehensive about another recession.

The Great Recession caused financial devastation for millions of people across the globe. But what exactly is a recession? How do we know if we’re in one? How could it affect you and your family? Here’s a quick rundown.

So what exactly is a recession? The quick answer is that a recession is a negative GDP growth rate for two back-to-back quarters or longer (1). But reality can be a bit more complicated than that. There’s actually an organization that decides when the country is in a recession. The National Bureau of Economic Research (NBER) is composed of commissioners who dig through monthly data and officially declare when a downturn begins.

There’s also a difference between a recession and a depression. A recession typically lasts between 6 to 16 months (the Great Recession was an exception and pushed 18 months). The Great Depression, by contrast, lasted a solid decade and witnessed unemployment rates above 25% (2). Fortunately, depressions are rare: there’s only been one since 1854, while there have been 33 recessions during the same time (3).

What happens during a recession <br> The NBER monitors five recession indicators. The first and most important is inflation-adjusted GDP. A consistent quarterly decline in GDP growth is a good sign that a recession has started or is on the horizon. Then this gets supplemented by other numbers. A falling monthly GDP, declining real income, increasing unemployment, weak manufacturing and retail sales all point to a recession.

How could a recession affect you? The bottom line is that a weak economy affects everyone. Business slows down and layoffs can occur. People who keep their jobs may get spooked by seeing coworkers and friends lose their jobs, and then they may start cutting back on spending. This can start a vicious cycle which can lead to lower profits for businesses and possibly more layoffs. The government may increase spending and lower interest rates in order to help stop the cycle and stabilize the economy.

In the short term, that means it might be harder to find a job if you’re unemployed or just out of school and that your cost of living skyrockets. But it can also affect your major investments; the value of your home or your retirement savings could all face major setbacks.

Recessions can be distressing. They’re hard to see coming and they can potentially impact your financial future. That’s why it’s so important to start preparing for any downturns today. Schedule a call with a financial professional to discuss strategies to help protect your future!

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¹ “What Is a Recession?” Kimberly Amadeo, The Balance, Apr 6, 2022, https://www.thebalance.com/what-is-a-recession-3306019

² “What Is a Recession?” Amadeo, The Balance, 2022

³ “Recession vs. Depression: How To Tell the Difference” Kimberly Amadeo, The Balance, May 4, 2022, https://www.thebalance.com/recession-vs-depression-definition-causes-and-stats-3306048

May 16, 2022

Why Retirees Are Going Bankrupt

Why Retirees Are Going Bankrupt

“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.

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¹ “Retirees and Bankruptcy,” Bill Fay, Debt.org, Sep 30, 2021, https://www.debt.org/retirement/bankruptcy/

² “The Demise of the Defined-Benefit Plan,” James McWhinney, Investopedia, Dec 18, 2021, investopedia.com/articles/retirement/06/demiseofdbplan.asp

³ “Average Retirement Savings for Baby Boomers,” Lee Huffman, Yahoo, Apr 10, 2022, https://finance.yahoo.com/news/average-retirement-savings-baby-boomers-125500443.html#:~:text=According%20to%20the%20Transamerica%20Center,income%20of%20%248%2C000%20per%20year

April 25, 2022

Lessons From the Super Frugal

Lessons From the Super Frugal

The world of the super frugal can be an overwhelming place.

In a sense, it’s inspiring. The creativity and grit of the super frugal are sure to put a grin on your face. You may even find a few fun money saving projects that are worth your time. Saving money with french toast? Sign me up!

However, there’s a fine line between inspiring and weird, and the super frugal sometimes cross that line. Could reusing a plastic lid as a paint palette save you money? Sure! The same is true for bartering with store clerks. Will you get funny looks? Almost certainly.

It’s not that funny looks are bad. There’s wisdom to defying the crowd and marching to the beat of your own drum. But sometimes there’s a good reason to raise an eyebrow at super frugality…

That’s because it can miss the point.

Your financial top priority must always be providing for those you love. In this day and age, that means building wealth.

Some people may need extreme measures to do that. Let’s say you have deep credit card debt or a spending problem. Coupon clipping, saving on utilities, and thrifting may help you knock that debt out faster and free up the cash flow you need to start building wealth.

But don’t mistake the means for the end. Obsessing over coupons, stressing over recycling, and cutting too many corners can reach unhealthy and even pathological extremes. That doesn’t create wealth and prosperity—it can just cause more suffering.

So take lessons from the super frugal. Find a few money savings projects that you enjoy. Maybe do a spending cleanse. But keep your eye on the ultimate prize—building wealth for you and your family.

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April 20, 2022

Are You Ready?

Are You Ready?

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.

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¹ “Average Closing Costs in 2020: What Will You Pay?” Amy Fontinelle, The Ascent, Sept 28, 2020, https://www.fool.com/the-ascent/research/average-closing-costs/

² “How Much Should You Budget for Home Maintenance?” American Family Insurance, https://www.amfam.com/resources/articles/at-home/average-home-maintenance-costs

April 11, 2022

Discover Your Retirement Number

Discover Your Retirement Number

How much money will you need to retire?

It’s a question that has no single answer. Everyone has different financial needs that arise from their specific situation.

But there are methods and tools you can use to discover your personal retirement number. In this article we show three ways to estimate how much you need to save for a comfortable retirement.

Use an online retirement calculator. The beauty of retirement calculators is that they’re simple. Input some data about your savings, and you’ll get an estimate of how much you’ll have in retirement. They’ll let you know if you’re on target for your retirement goals.

Always take retirement calculators with a grain of salt. They’re each built on different algorithms and assumptions, so expect a range of results.

They also don’t know you personally, or your situation. You may have specific needs and plans that they can’t take into account.

Here are a few retirement calculators you can try…

The 4% Rule. This is the tried and true strategy for discovering your retirement number. It takes a little math, so grab your calculator!

First, let’s assume your income is $60,000 per year.

Next, let’s say that your annual retirement income must be 80% of your current annual income. So that’s $48,000.

Now, divide that by 4%…

$48,000 ÷ 0.04 = $1,200,000

Using the 4% Rule, you would need to have saved $1,200,000 to retire on 80% of your current income ($1,200,000 ÷ $48,000 = 25 years).

The Income Scale. This strategy, recommended by Fidelity, is more of a rule of thumb.¹

It aims for you to save 10x your annual income by age 67. It provides benchmarks along the way…

-1x by 30 -3x by 40 -6x by 50 -8x by 60

The only issue with this strategy is that 10x your income may not be enough for a comfortable retirement. For instance, a family earning $60,000 per year would only have $600,000 saved!

Each of these tools will help you estimate your retirement number. But the best way to discover your true number is to meet with a licensed and qualified financial professional. They can help you consider all the variables that may impact your retirement, and how to prepare.

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March 16, 2022

What You May Not Know About Life Insurance

What You May Not Know About Life Insurance

Life insurance has one main job—helping to protect your family’s financial security in the event of your death.

And it does that by providing your loved ones with a one-time payout that replaces your income.

Your family depends on you to provide. It’s how they afford necessities like food and shelter. It’s also how you support them with their lifestyle.

But if you pass away, your income dries up. Your family would have to face their financial responsibilities with fewer resources.

That’s where life insurance helps. If you pass away, your family receives a benefit that can help ease the financial pressure.

Instead of a yearly salary, your loved ones now receive a once-in-a-lifetime salary.

That’s why it’s common to base the size of your life insurance policy on your income. Rule of thumb, you want a policy that’s 10X your annual income.

So if you currently earn $60,000, you probably would need a $600,000 policy.

There are factors besides income to consider. For instance, your family may need more protection if you’re paying off a mortgage.

In conclusion, if anyone you love depends on your income, you need life insurance. It’s a way to provide for your family, even if you’ve passed away.

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This article is for informational purposes only and is not intended to promote any certain products, plans, or policies that may be available to you. Any examples used in this article are hypothetical. Before enacting a savings or retirement strategy, or purchasing a life insurance policy, seek the advice of a licensed and qualified financial professional, accountant, and/or tax expert to discuss your options.

March 14, 2022

3 Saving Strategies For College

3 Saving Strategies For College

In this day and age, it seems like college tuition is skyrocketing.

Students and parents are increasingly reliant on loans to cover the cost of higher education, often with devastating long-term results.¹

In this article we’ll cover three saving strategies to help you cover the cost of college without resorting to burdensome debt.

Strategy #1: Use “High-Yield” savings accounts. This strategy is simple—stash a portion of your income each month into a savings account. Then, when the time comes, use what you’ve saved to cover the costs of tuition.

Unfortunately, this strategy is riddled with shortcomings. The interest rates on “high yield” savings accounts are astonishingly low—you’d be hard pressed to find one at 1%.²

Even if you did, it wouldn’t be nearly enough. For example, if you had $3,000 saved for college in a savings account earning 1% interest per year, it would only grow to about $3,100 after four years—not enough to cover a whole semester’s tuition!

Even worse, inflation might increase the cost of tuition at a pace your savings couldn’t keep up with. Your money would actually lose value instead of gain it!

Fortunately, high-yield interest accounts are far from your only option…

Strategy #2: Consider traditional wealth building vehicles. That means mutual funds, Roth IRAs, savings bonds, indexed universal life insurance, and more.

The growth rates on these products are typically significantly higher than what you’d find in a high-yield savings account. You might even find products which allow for tax-free growth (the Roth IRA and IUL, for example).

But, typically, these vehicles have two critical weaknesses…

  1. They’re often designed for retirement. That means you’ll face fees and taxes if you tap into them before a certain age.

  2. They’re often subject to losses. A market upheaval could seriously impact your college savings.

Note that none of these vehicles are identical. They all have strengths and weaknesses. Consult with a licensed and qualified financial professional before you begin saving for college with any of these tools.

Strategy #3: Use education-specific saving vehicles. The classic example of these is the 529 plan.

The 529 is specifically designed for the purpose of saving and paying for education. That’s why it offers…

  • Tax advantages
  • Potential for compounding growth
  • Unlimited contributions

It’s a powerful tool for growing the wealth needed to help cover the rising costs of college.

The caveat with the 529 is that it’s subject to losses. It’s also very narrow in its usefulness—if your child decides not to pursue higher education, you’ll face a penalty to use the funds for something non-education related.

So which strategy should you choose? That’s something you and your financial professional will need to discuss. They can help you evaluate your current situation, your goals, and which strategy will help you close the gap between the two!

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Market performance is based on many factors and cannot be predicted. This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies for saving and/or investing that may be available to you. Any examples used in this article are hypothetical. Before investing or enacting a savings or retirement strategy, seek the advice of a licensed and qualified financial professional, accountant, and/or tax expert to discuss your options.


¹ “Student Loan Debt: 2020 Statistics and Outlook,” Daniel Kurt, Investopedia, Jul 27, 2021, https://www.investopedia.com/student-loan-debt-2019-statistics-and-outlook-4772007

² “Best high-yield savings accounts in August 2021,” Matthew Goldberg, Bankrate, Aug 25, 2021, https://www.bankrate.com/banking/savings/best-high-yield-interests-savings-accounts/

March 14, 2022

Financial Essentials for Retiring Baby Boomers

Financial Essentials for Retiring Baby Boomers

Are Baby Boomers out of time for retirement planning?

At first glance, it might seem like they are. They’re currently aged 57-75, meaning a good portion have already retired!¹

And those who are still working have only a few precious years to create their retirement nest eggs and get their finances in order.

Perhaps you’re in that boat—or at least know someone who is. If so, this article is for you. It’s about some essential strategies retiring Baby Boomers can leverage to help create the futures they desire.

Eliminate your debt. The first step is getting rid of your debt. After all, it’s not optional in retirement—you’ll need every penny to fund the lifestyle you want.

That means two things…

  1. Don’t take on any new debt. No new houses, boats, cars, or credit card funded toys.
  2. Use a debt snowball (or avalanche) to eliminate existing debts.

That means focusing all of your financial resources on a single debt at a time, knocking out either the smallest balance or highest interest debt.

Eliminating, or at least reducing, your debt can help create financial headroom for you in retirement. It frees up more cash flow for you to spend on your lifestyle and on preparing for potential emergencies.

Maximize social security benefits. Delay Social Security as long as possible (or until age 70). Delaying Social Security increases your monthly payments, so it’s a simple way to maximize your benefit.

For example, if you started collecting Social Security at age 66, you would be entitled to 100% of your social security benefit. At 67, it increases to 108%, and by 70 it increases 132%. That can make a huge difference towards living your dream retirement lifestyle.

Check out the Social Security Administration’s website to learn more.

Protect your wealth and health with long-term care (LTC) coverage. The next step is to protect your assets from the burden of LTC. It’s a challenge 7 out of 10 retirees will have to overcome, and it can be costly—without insurance, it can cost anywhere between $20,000 and $100,000. That’s a significant chunk of your retirement wealth!²

The standard strategy for covering the cost of LTC is LTC insurance. It pays for expenses like nursing homes, caretakers, and adult daycares.

But it can be pricey, especially as you grow older—a couple, age 55, can expect to pay $2,080 annually combined, while a 65 year old couple will pay closer to $3,750.³

The takeaway? If you don’t have LTC coverage, get it ASAP. The longer you wait, the more cost—and risk—you potentially expose yourself to.

Pro-tip: If you have a permanent life insurance policy, you may be able to add a LTC rider to your coverage. Meet with a licensed and qualified financial professional to see if this option is available for you!

Review your income potential with a financial professional. The final step on your path to retirement is reviewing your income options. You want to strike a balance between maximizing your sources of cash flow and keeping control over your retirement plan.

Many retirees lean heavily on two primary income opportunities: Social security and withdrawals from their retirement savings accounts.

And that’s where a financial professional can help.

They can help you review your current retirement lifestyle goals, savings, and potential income. If there’s a gap, they can help come up with strategies to close it.

You’ve worked hard and made sacrifices—now it’s time to reap the rewards of all that elbow grease. Which of the essentials in this article do you need to tackle first?

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¹ “Boomers, Gen X, Gen Y, Gen Z, and Gen A Explained,” Kasasa, Jul 6, 2021, https://www.kasasa.com/articles/generations/gen-x-gen-y-gen-z

²”Long-term care insurance cost: Everything you need to know,” MarketWatch, Feb 19, 2021, https://www.marketwatch.com/story/long-term-care-insurance-cost-everything-you-need-to-know-01613767329

³ “Long-Term Care Insurance Facts - Data - Statistics - 2021 Reports,” American Association for Long-Term Care Insurance, https://www.aaltci.org/long-term-care-insurance/learning-center/ltcfacts-2021.php

March 2, 2022

Playing With F.I.R.E.

Playing With F.I.R.E.

Financial Independence. Retire Early. Sounds too good to be true, right?

But for many, it’s the dream. And for some, it’s even become a reality.

What is the Financial Independence Retire Early, or “F.I.R.E.” movement? It might be obvious, but it’s a movement of people who are striving to achieve financial independence so that they can retire early. How early? That’s up to each individual, but typically people in the F.I.R.E. movement are looking to retire between their 30s and 50s.

How are they doing it? By saving as much money as possible and living a frugal lifestyle. That might mean driving a used car, living in a modest house, and cooking at home instead of eating out. They scrimp and save wherever they can to save.

So why is the F.I.R.E. movement gaining in popularity? There are a few reasons…

Some people want freedom. They want the freedom to travel, to spend time with their family, and to do whatever they want without having to worry about money.

Others are tired of the rat race. They’re tired of working jobs they don’t love just so they can make money to pay for things they don’t really want. They’d rather be doing something they enjoy and have more control over their own lives.

And finally, people want security. They want the wealth they need to live comfortably and fear-free, and they want it now. They don’t want to wait until they’re 65 or 70 to start enjoying their retirement.

It’s a challenging path. Achieving financial independence and retiring early takes hard work, sacrifice, and planning. You’ll have to face financial challenges like covering health insurance, for one.

So if you’re thinking about joining the F.I.R.E. movement, what are some of the first steps?

1. Assess your finances. Figure out how much money you need to live on each month and how much you need to save to achieve financial independence.

2. Set financial goals. Determine where you want to be financially and create a plan to get there.

3. Make a budget and stick to it. Track your spending and make adjustments as needed so you can save more money.

4. Invest in yourself. Education is key, so invest in books, courses, and other resources that will help you build your wealth.

5. Stay motivated. Follow other F.I.R.E. enthusiasts online, read blogs and articles, and attend meetups to keep yourself inspired on your journey to financial independence.

So are you ready to play with F.I.R.E.?

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February 23, 2022

Is Saving Money on Utilities Worth the Effort?

Is Saving Money on Utilities Worth the Effort?

Penny pinchers and smart savers have developed dozens, perhaps hundreds, of ways to save money on their utility bills.

Have you heard of any of these…?

Putting rocks in the toilet tank to save money on water. Cranking down the thermostat in winter and cranking it up in the summer to save on power. Manically unplugging every appliance that’s not in use.

Maybe you knew a family growing up that used all these strategies to make ends meet. Or maybe it was your family!

But is it really a good idea to cut back on utilities?

If you’re backed into a financial corner or new to saving, it’s not a bad place to start. But if you’re working toward financial independence, you likely have greater obstacles to overcome.

Here’s a breakdown of the average American’s annual consumer spending…

Housing: $21,409

Transportation: $9,826

Food: $7,316

Personal insurance and pensions: $7,246

Healthcare: $5,177

Entertainment: $2,912

Cash Contributions: $2,283

Apparel and Services: $1,434

That’s a lot of money flying out the door each year!

Where do utilities fit into the picture? According to Nationwide, families spend an average of $2,060 on utilities each year.

That puts it towards the bottom of the average American’s budget.

Cutting your spending on housing, transportation, or food by one-third would free up more cash flow than reducing your utilities by half.

So before you invest in some space heaters or start lugging rocks into your bathroom, evaluate your overall spending. Are there problem areas where cutting back would create greater results?

If you answer yes, focus your time and attention first on those categories. Find a cheaper apartment or recruit roommates. Carpool with friends. Dine out less.

But if you’ve already budgeted and you still need more cash flow, turning off some lights and using an extra blanket or two at night won’t hurt.

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¹ “How much is the average household utility bill?” Nationwide, https://www.nationwide.com/lc/resources/personal-finance/articles/average-cost-of-utilities

² “Average annual expenditures of all consumer units in the United States in 2020, by type,” Statistia, Dec 9, 2021 https://www.statista.com/statistics/247407/average-annual-consumer-spending-in-the-us-by-type/#:~:text=This%20statistic%20shows%20the%20average,amounted%20to%2061%2C334%20U.S.%20dollars.

February 16, 2022

Manage Your Finances Like a Pro

Manage Your Finances Like a Pro

Do you ever feel like your money is going out the door as fast as it’s coming in?

Maybe you’ve tried budgeting, only to slip back into a pattern of unconscious spending.

Or maybe you’ve tried saving, but found that you simply don’t have enough cash at the end of each month.

If you’ve tried to get your finances in order but still struggle to stay afloat, this may be the article for you. Here are three dead simple things you can do right now to help you manage your money like a pro.

1. Download a budgeting app.

If you’re not a spreadsheet whiz, don’t worry. There are many free budgeting apps available that can help you keep your finances in order without breaking a sweat. Most of these apps make it easy to add transactions and set goals based on your income and expenses.

Best of all, some even sync with your bank account, so you don’t have to tally up your spending each month—the app does it for you!

Here are a few budgeting apps to consider…

Mint—Good overall budgeting app that syncs with your bank accounts

YNAB (You Need a Budget)—In-depth budgeting tool that’s more hands-on than other options

Mvelopes—Cash envelope budgeting system that syncs with your bank accounts

EveryDollar—Simple budget that requires manual input of expenses

Honeydue—Budgeting app designed specifically for couples

Each of these apps is free to use, but offer additional features for a monthly or annual fee.

2. Dial back subscriptions.

Do you have a gym membership, magazine subscriptions, or streaming services?

Better question—are you using your gym membership, magazine subscriptions, or streaming services?

If you’re like many, you’re shelling out money each month for subscriptions you don’t even use. You may have even forgotten that you’re still signed up for some of them!

But little by little, those subscriptions add up, depleting your cash flow each month.

So take some time to look at your transaction history to discover recurring charges. Then, cancel the ones you’re not using.

Pro-tip: You can also use apps like Truebill and Hiatus to help identify and cancel unwanted subscriptions.

3. Automate your savings.

Do you struggle to save money because of your spending habits? If so, it may be difficult to set aside cash while still having immediate access to it.

The good news is that you can set up an automatic transfer from your checking account to a savings account each month.

In fact, with this method, you don’t even have to think about it! It’s like paying a monthly subscription to a future of potential wealth and financial independence.

And it’s not difficult. Simply log in to your savings or retirement account and look for a transactions or transfers tab. Then, schedule a recurring deposit right after you get each paycheck. Just like that, you’ll automate a wealth building process that requires zero effort on your part.

If you want to manage your money like a pro, simply follow these three easy steps. With these simple moves in place, you’ll be watching your savings grow possibly faster than ever before!

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February 14, 2022

Tips for Saving Money on Homeowners Insurance

Tips for Saving Money on Homeowners Insurance

Trying to free up cash flow? Then look no further than your homeowners insurance.

That’s because there are several techniques you can use to help cut down your monthly premiums. Here are a few worth trying!

Go all out on security. One of the easiest ways to save money on homeowners insurance is to make your home more secure. Installing deadbolts, window locks, smoke detectors and fire alarms, motion detectors and video surveillance will not only help keep burglars out but may also reduce your premiums.

Just be sure to count the costs before you deck out your home. It may be more expensive to go all out on security than to pay your premiums as they are. Depending on how secure you already feel in your home, investing in extra measures may not be something you choose to do just yet.

Boost your credit score. Your credit score can have a big impact on your insurance premiums. The majority of insurers use it as a factor to determine what you will pay for homeowners insurance, so if your score is low, expect to pay more.

What can you do to improve your score? For starters, focus on paying all your bills on time. Next, reduce the balance on your credit cards. It’s a good idea to set up automatic monthly payments for your utility bills and other recurring expenses. It’s a simple, one-time action that can save your credit score from slip ups and oversights.

Eliminate attractive nuisances. If you have a swimming pool or trampoline on your property, expect to pay more for homeowners insurance. Insurers view them as attractive nuisances, and raise your premiums accordingly. That includes things like…

Swimming pools Trampolines Construction equipment Non-working cars Playground equipment Old appliances

It’ll be a weight off your shoulders—and your bank account.

Maximize discounts. You might be surprised by the wide range of discounts insurance companies offer homeowners. They include everything from not smoking to choosing paperless billing to membership in specific groups. It never hurts to ask your insurer what discounts are available.

Bundle your home insurance with auto insurance. Businesses love loyalty. And they’re not afraid to incentivize it. That’s why insurance companies will often reward you for bundling your home and auto insurance together. So if you already own a car, ask your insurer if you can purchase discounted home insurance. It may significantly lower your monthly rate.

Some methods are more obvious than others, but all of them can add up to big savings over time. Ask your financial professional for their insights, then reach out to your insurer. You may be surprised by how much you save!

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January 26, 2022

Lessons You'll Learn on the Journey to Financial Freedom

Lessons You'll Learn on the Journey to Financial Freedom

Financial freedom is a process. It doesn’t happen overnight.

Instead, think of it as a journey with things to experience and lessons to learn along the way.

If you’ve embarked on the adventure of building wealth, here are 8 lessons about yourself and the world you can learn.

1. Money isn’t everything, but it makes things easier.

The first lesson you’ll learn on your journey to financial freedom? There’s more to life than money. There are people you care about. Hobbies that inspire you. Conversations that restore and heal you. Causes that matter. Without those, life is empty.

But you’ll also learn that money can make life easier.

It allows you to enjoy those things, to take care of yourself and your family, and to do something that has a bigger impact than what you might otherwise be able to do.

2. No one ever regrets saving for retirement.

“I should have saved less for retirement and spent more on clothes.” —No one

3. You can’t spend your way to happiness.

You’ll learn that there’s no amount of spending that can solve your problems. Instead of shopping sprees and new toys, you’ll come to prize experiences and memories above all else.

4. If there’s anything you want in life, you’ll need to work for it.

If something sounds too good to be true, it probably is.

If you want to build wealth and live a life you can be proud of, it’s up to you. There is no magic secret, no get-rich-quick scheme. And with that comes self-satisfaction and humility. If you have something, you’ve earned it. If it was given to you, it came from someone else who earned it.

5. Debt free doesn’t mean rich—just debt free!

Debt freedom is a critical step. But it’s not the destination.

Once you’ve eliminated debt, celebrate it. But this is no time to pause. It’s time to devote your resources to building wealth.

6. A job or career should never define you.

You are not your job. At minimum, your job is a tool to support your family. At best, your career is an avenue to express your talents and passions. But either way, your job should be aligned to, and subordinate to, your ultimate values.

7. Excuses and denials will destroy your dreams and freedom.

You’re going to be tempted. Whether it’s an expensive new toy, a nicer car you can’t really afford, or just another latte at Starbucks, the siren song of “I deserve this” can be loud. So can the “safety” of not being yourself or doing things just to impress others.

But no matter what, when you hear these things in your head, it’s time to pause. Is this really what I want? What am I trying to accomplish? What are my values? Those are your guides to financial freedom and happiness.

8. You’re far more powerful than you think.

As you progress in your journey to financial freedom, the hope is that you’ll wake up one day and notice that things are better. You’re less stressed. Your house feels more in order. You’re actually getting somewhere. And you’ll realize that you did that. Your good decisions and discipline is what got you here.

You can do things you never thought possible. You’re far more powerful than you think.

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January 19, 2022

How To Maximize Savings With A Limited Income

How To Maximize Savings With A Limited Income

It can be tough to save money when your income is tight.

But it’s not impossible. In fact, there are a lot of things you can do to make the most of your money and stretch your dollars further. Here are some tips to help you get started:

1. Track your spending. The best way to save money is to know exactly how much you’re spending and where you’re spending it.

Create a budget and track all of your expenses for a month or two so that you can see what areas are costing you the most money. Then, work on those categories first.

If there are some areas that you’re having trouble cutting back, try using a website like Mint.com to see if there’s a way to reduce spending in those categories. Maybe it makes sense for you to switch your cell phone plan or cancel the cable package. The key is to be aware of where your money is going.

2. Make your own meals. Eating out every day is a quick way to blow through your paycheck. Creating your own meals is almost always cheaper than buying prepared food.

Plus, by making more of your own food, you’ll have more control over what ingredients are going into it—which means you can make healthier food choices.

3. Use coupons and rebates to save money. If you redeem the right coupons, you can get a lot of free or discounted products and services.

Keep an eye out for coupons in your mailbox, in newspapers and magazines, and through online coupon sites like Coupons.com. You can also take advantage of rebates, which give you a discount on your purchase price after the product has been purchased.

4. Ask for discounts. If you’re buying something from a business, be sure to ask if they offer any kind of discount. Many times retail stores and restaurants will offer discounted items or free upgrades to customers who ask.

5. Get creative with your transportation costs. No, that doesn’t mean getting rid of your car. But there are things you can do to make transportation cheaper. For example…

Take public transportation when possible (it’s usually less expensive than buying gas and parking).

Carpool with other people who live in your area or work in your area.

Maintain your car to help avoid expensive repairs down the road.

Getting from point A to point B will always cost time and resources. But with these tips, it doesn’t have to make or break your budget.

6. Buy used items. Not only is it possible to find good used items at discount prices, but buying “recycled” gives an item a second life and keeps it from being thrown into a landfill. You can buy used items locally or on sites like Craigslist and eBay, and you can also try searching a local thrift store. You might be surprised by what other people consider junk!

7. Find the best prices online. Retailers know that shoppers love searching for the lowest price. Many of them will actually reduce their prices if you show them that someone else is selling an identical item for less.

Use a price comparison website like PriceGrabber to look up the items you want to buy, and then compare the prices of those products across multiple retailers.

Saving money on a tight budget is possible if you’re willing to get creative and look for ways to reduce your spending. By taking advantage of discounts, coupons, and rebates, by making your own meals instead of eating out, and by looking for the best online prices, you can stretch your dollars further.

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January 17, 2022

How To Prepare For Emergencies

How To Prepare For Emergencies

Saving for a rainy day is something that everyone should do. But it’s not always easy.

It can be tough to put money away when you’re struggling to make ends meet. However, an emergency fund can mean the difference between weathering a financial storm or being exposed to financial harm.

Fortunately, creating an emergency fund is simple. In fact, if you play your cards right, it can be up and running in moments!

You can leverage several different types of accounts to save for those unexpected road bumps. A good option is opening a savings account or money market account with your bank.

Why? Because they are easy accounts to use when emergencies arise. They grant quick access to your money, usually without the threat of tax or bank penalties for withdrawals.*

Plus, they’re often a breeze to create. Just apply online with your current bank or speak with a representative. You might be surprised how quickly you can get an account up and running.

Next, set up a recurring deposit of whatever amount you can spare into your emergency fund. That way, it won’t be too hard to maintain throughout the year. Every time you get paid or get money from somewhere else, just throw some in there! It’s that simple.

Your goal? Save up to 3-6 months of living expenses. Why 3-6 months? Because that’s often enough cushion to cover many unexpected expenses that can so easily derail you.

At the very least, it gives you breathing room if your income were to dry up for 3-6 months.

At the most, it can cover an unexpected broken foot and subsequent surgery without incurring medical debt.

Regardless of how you use it, saving for a rainy day is just good financial sense. If you’re able, start your emergency fund now to safeguard yourself in the future!

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*Be aware of any fees your particular bank may incur for either of these types of accounts.

January 12, 2022

Financial Steps in the Right Direction

Financial Steps in the Right Direction

It’s not just about money. It’s about what you do with it… and how you feel about it.

It doesn’t matter if your balance is $0 or $1 million dollars, because that dollar figure is meaningless without context and perspective. What matters most is how you feel about your finances and the choices you make with them every day, week, month—all year long.

But there are some very practical things we can all do to keep our financial ship on course even in challenging times:

1. Pay off high-interest debt

2. Save 10% of your income

3. Buy life insurance now

4. Start a side gig

Pay off high-interest debt before saving for retirement. This is a very important step that should not be overlooked or minimized. Paying off credit card debt with high interest rates can save you huge amounts of money and make other savings goals easier to reach.

Save 10% of your income. It’s always wise to consistently save as much as you can. Yet, the rule of thumb that says we should save 10% of our income is still a solid one. Remember – saving is just for you – it’s not an investment per se, but rather a protection from any nasty surprises down the road and a way to ensure you have more money to save, invest and live on.

Buy life insurance now. Life insurance is often misunderstood and misused. As such, many people fail to see its value in terms of providing for their loved ones or even protecting their own future. However, life insurance provides a way to protect your family and business in the event of an unforeseen tragedy.

Start a side gig. It will not only provide you with a second stream of income, but will offer an additional sense of security and freedom.

For many people, their financial lives become clouded with stress and anxiety because they don’t have a way to earn extra money. The solution is often as simple as taking some of the time they’d normally spend watching TV and learning a new skill, or getting a part-time job on weekends.

However you choose to start making more money, focus on what is going to make you happier in life. Because if you’re financially free, secure and happy – that’s true wealth.

The most important thing to remember is that it’s not about how much money you make or have, but what you do with your money—how you feel about it. Make smart financial choices and things will happen for the better.

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December 28, 2021

The Right Way to Spend

The Right Way to Spend

There’s endless advice about how not to spend money. And it’s often delivered with an undertone of shame.

“You’re spending WHAT on your one bedroom apartment? Why don’t you find roommates?”

“I’ll bet those lattes add up! That money could be going towards your retirement.”

“You still buy food? Dumpster diving is so much more thrifty!”

You get the picture.

But make no mistake—pruning back your budget is great IF overspending is stopping you from reaching your goals.

But what if you’re financially on target? What if your debt is gone, your family’s protected, your retirement accounts are compounding, your emergency fund is stocked, and you still have money to spare?

Good news—you don’t have to live like a broke college student. That’s not you anymore. Instead, you can spend money on the things you really care about, like…

• People you love

• Causes that inspire you

• Local businesses

• House cleaning services

• Travelling

• Building your dream house

• New skills and hobbies

This isn’t a call to wildly spend on everything that catches your momentary fancy. That might be symptomatic of underlying wounds that you’re trying to heal with money. It won’t work.

Instead, it’s a call to identify a few things that you’re truly passionate about. Ramit Sethi of I Will Teach You to Be Rich fame calls these Money Dials.¹ They’re things like convenience, travel, and self-improvement that excite you.

Just imagine you have limitless money. What would be the first thing you spend it on? That’s your money dial.

And, so long as you’re financially stable, there’s no shame in spending money on those things. This is why you’ve worked so hard and saved so much—to provide yourself and your loved ones with a better quality of life. Give yourself permission to enjoy that!

So what are you waiting for? Start planning that backpacking adventure through Scandinavia, or drafting blueprints for your dream house, or decking out the spare room as a recording studio. You’ve earned it!

Not positioned to spend on your passions yet? That’s okay! For now, let your goals inspire you to take the first steps towards creating financial independence and the lifestyle that can follow.

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¹ “Money Dials: The Reason You Spend the Way You Do According to Ramit Sethi,” Ramit Sethi, I Will Teach You To Be Rich, Oct 22, 2021 https://www.iwillteachyoutoberich.com/blog/money-dials/

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