Getting a Degree of Financial Security

June 14, 2021

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Andre & Mara Simoneau

Andre & Mara Simoneau

Financial Consultants

Lynx Creek Cir

Frederick, CO 80516

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May 26, 2021

The Better Choice: Federal or Private Loans for College

The Better Choice: Federal or Private Loans for College

Education can be one of the best investments you can make in your future.

Those with a bachelor’s degree earn, on average, almost $1 million more over their lifetime than those with just a high school diploma. And a person who gets a master’s degree can earn more money than someone with a bachelor’s degree!¹

But how should you pay for higher education? You may not have enough cash on hand to afford school. That means you’ll need student loans. That begs another question—should you get a federal or a private loan? There are many factors that go into answering this question. Let’s break down some pros and cons for both federal and private loans so you can decide which route is right for you.

Federal loans come straight from Uncle Sam. It all begins with filling out a FAFSA form. This form determines your eligibility for loans, grants, and work-study programs.

Federal student loan rates are typically lower than for private lenders. Federal loans also offer more flexible repayment options—you can make payments as a percentage of income or defer them until after school ends. You may also qualify for relief if you default on your loans. In general, a federal loan can be a good choice for many students, whether they’re pursuing a bachelor’s or master’s degree.

But remember, there are potential limitations to how much the federal government will lend you. Private loans may be needed to fill in the gaps. They typically charge higher interest rates and have stricter payment options. But they can sometimes be refinanced for better terms.

So if you need loans to afford your education, opt for federal loans first. Then, use private loans to cover the rest, refinancing as needed.

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¹ “The College Payoff: Education, Occupations, Lifetime Earnings,” Georgetown University Center on Education and the Workforce, 2011 https://cew.georgetown.edu/cew-reports/the-college-payoff/

² “Federal Versus Private Loans,” Federal Student Aid, https://studentaid.gov/understand-aid/types/loans/federal-vs-private

May 12, 2021

A Beginners Guide to Saving and Shredding Documents

A Beginners Guide to Saving and Shredding Documents

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.

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¹ “Save or Shred: How Long You Should Keep Financial Documents,” FINRA, Jan 27, 2017, https://www.finra.org/investors/insights/save-or-shred-how-long-you-should-keep-financial-documents

April 14, 2021

The Time Value of Money and College

The Time Value of Money and College

College is one of the most expensive things that you can spend your money on, but it might not always be a good investment.

College graduates make much more than high school graduates over their lifetimes.¹ Some people think this means going to college is worth the cost because they’ll be able to pay off the loans with their higher salaries after graduation. But as you’ll see in this article, there’s another critical factor you should consider before going off to school.

Which career path will empower you to start saving sooner? The longer your money can accrue compound interest, the more it can grow. Working an extra four years instead of attending school could result in retiring with more. Let’s consider two hypotheticals that illustrate this point…

Let’s say you land a job straight out of high school at age 18 earning $35,000 total annual salary. You’re able to save 15% of your income in an account where the interest is compounded monthly at 9%. Assuming you work until 67, or 49 years, and consistently save the same amount each month over that time period at the same interest rate, you would retire with almost $4 million!

What if instead you attend college and graduate after 4 years? You land a job that pays $60,000 annually and are able to save 15% of your income. If you also retire at 67 after 45 years of work, saving 15% every month, you’ll retire with $4.7 million. That’s almost $700,000 more than the non-graduate!

But what if student loans prevent you from saving for 5 years after graduation? You’d retire with $3 million. In this hypothetical scenario, losing 9 years of saving results in a college graduate actually retiring with less than someone who diligently works and saves right out of high school.

The takeaway isn’t that you shouldn’t attend college. It’s that you should carefully weigh the costs of higher education. Is there a career path you could take right out of high school that would have you saving right away? Will your degree land you deep in debt and behind the 8-ball for building wealth? Or do the benefits of the degree substantially outweigh the costs? Don’t attend a college just because it’s what your peers are doing. Consider your passions, weigh the benefits, and calculate the costs before you make your decision!

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. Market performance is based on many factors and cannot be predicted. Any examples used in this article are hypothetical. Before investing, enacting a savings or retirement strategy, or taking on any loans or debt, seek the advice of a licensed and qualified financial professional, accountant, and/or tax expert to discuss your options.

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“The College Payoff,” Georgetown University, https://cew.georgetown.edu/cew-reports/the-college-payoff/

April 12, 2021

Home Buying for Couples: A Starter Guide

Home Buying for Couples: A Starter Guide

Buying your first home is an exciting, yet daunting process.

You and your significant other already have a lot on your plate in planning this huge purchase—from deciding how much house you need to fitting it all into a budget. Read on for some tips that will help ease the process of buying a house as well as help you save money in the long run!

Evaluate your financial situation before you start house hunting. It’s important to know what kind of mortgage payment is feasible for the income in a household. You’ll also have to contend with hidden housing costs like property taxes, renovations, and repairs. Calculate your total income, and then subtract your current expenses. That’s how much you have at your disposal to handle the costs of homeownership.

Improve your credit score. If you’re a first-time homebuyer, your credit score is important—it can profoundly affect your ability to get approved for loans and mortgages! The higher that number goes up, the easier it may become to get approval from lenders. You can help yourself out by paying off any outstanding debt balances such as student loan payments, medical bills, and credit card debt before going house hunting.

Start saving for a downpayment. As a rule of thumb, you’ll want to put down at least 20% of the home’s purchase price. This can take years, especially if your budget is tight! However, it’s well worth it—you may avoid the hassle of paying private mortgage insurance (PMI), which can substantially add to your monthly housing payments. A sizeable downpayment can also lower your interest rate and reduce the size of your loan.¹

Decide how much house you need. This is a tough question to answer, but it’s crucial that both partners are united on this front. Otherwise, one partner might feel like a house doesn’t meet their needs. Sit down with your partner and discuss what exactly you desire out of your home. How many bedrooms will you need? Do you want a big yard or a small one? How close to work do you want to live? Hammer out the important details of what you want in a home before the shopping begins!

Decide on your budget. Knowing how much you can afford before shopping for a home will help narrow down the options. Typically, housing costs should account for no more than 30% of your budget. That includes your mortgage payment, repairs, HOA fees, and renovations. Spending more than 30% can endanger your financial wellness if your income ever decreases.

Buying a home can be an exciting time for couples. But it’s important to take the necessary steps before you start house hunting. Remember, you want your new home to be a source of joy, not financial stress! Do your homework, talk with your partner, and start saving!

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“Do you need to put 20 percent down on a house?,” Michele Lerner, HSH, Sep 2, 2018, https://www.hsh.com/first-time-homebuyer/down-payment-size.html

March 15, 2021

What You Need To Know About Life Insurance

What You Need To Know About Life Insurance

Buying life insurance is something that many people put off.

But it’s important to take the time to learn about what type of policy you may need and how much coverage you should buy. If you have a family, buying enough life insurance might be the most important part of your financial strategy.

Here are 4 things you need to know before you buy life insurance.

What is life insurance? Simply put, life insurance is an agreement between an insurer and a policyholder. When the policyholder dies, the insurer is legally obligated to pay a set amount of money, called a death benefit, to whomever the policyholder had predetermined.

Do you need life insurance? If people you love are dependent on your income, you may need life insurance. The death benefit can serve as a replacement for income that would vanish in the case of your passing. A personal tragedy doesn’t have to become a financial crisis!

What if I don’t have any dependents? Then life insurance may not be for you! However, you should note that life insurance might be useful if you’re carrying high levels of debt like student loans or a mortgage.

How much coverage should I get and how long should my policy last? As a rule of thumb, your life insurance coverage should be worth 10X your annual income. That should provide your family with a financial cushion while they grieve and plan for the future.

If you buy a term policy, be sure that it lasts through periods of high financial responsibility like paying a mortgage or raising a family.

If you want to learn more about life insurance, let me know! I can help you evaluate your financial situation and what a policy would look like for you.

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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 1, 2021

How to Find Your Net Worth

How to Find Your Net Worth

Usually when we think of net worth we imagine all the holdings of a wealthy tycoon who owns several multi-million dollar businesses.

Net worth is just a balance sheet of a person’s assets and liabilities, not unlike the balance sheets used in business. You also have a net worth, and it’s important to know what it is.

Calculating your net worth is simple. First, you’ll want to tally up all your assets. These would include:

  • Personal property and cars
  • Real estate equity
  • Investments
  • Vested retirement plans
  • Cash or savings
  • Any amounts owed to you
  • Cash value of life insurance policies

Next, you’ll calculate your liabilities (what you owe someone else). These would include:

  • Loans
  • Mortgage balance
  • Credit card balances
  • Unpaid obligations

Your total liabilities subtracted from your total assets equals your net worth.

The number could be positive, or it could be negative. Students, for example, often have a negative net worth because they may have student loans but haven’t had a chance to build any personal assets.

It’s important to realize that net worth isn’t always equal to liquid assets. Your net worth includes non-liquid assets, like the equity in your home.

Measuring your net worth regularly can be a strong motivation when saving for the future—it can mark progress toward a well-reasoned financial goal.

When you’re ready to put together a personalized strategy based on your net worth and (more importantly) your future goals, reach out! We can use your current net worth as a starting point, while keeping focused on the real target: your long-term financial picture.

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February 24, 2021

2 Strategies to Build Credit When You’re Young

2 Strategies to Build Credit When You’re Young

The sooner you establish your credit score, the better positioned you’ll be for financial success.

Why? Because your credit score touches every aspect of your financial life—a high score can help you obtain a lower interest rate on mortgages and car loans, insurance payments, and even your rent!¹ That can help free up more cash for building wealth.

So, where do you start?

Apply for a credit card… and then use it responsibly! Credit cards are excellent tools for building your credit history. If you attend a university, you might be able to score a student credit card. However, just remember that credit cards are not free money. The less you use your credit card, the higher your credit score. Choose a few recurring expenses, and limit your credit card usage to those. Then make sure you pay off the balance every month, on time.

Use automatic payments on all your debts. Missing payments on your debt obligations can torpedo your credit score. It’s absolutely critical to pay on time for your credit card bill, student loan payments, and anything else you owe.

Consider automating all of your debt payments. It’s a simple, one-time move that can steadily reduce your balances and help boost your credit score.

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!

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October 19, 2020

When Education Isn't Worth It

When Education Isn't Worth It

After room and board, a degree from a private university costs $46,950 per year.¹

A public university charges less than half that, with an annual price tag of $20,770.² That’s over double what it was in 1980 after adjusting for inflation.³ Why the sharp increase? Part of the answer is that demand has skyrocketed over the past 40 years. An information age requires knowledgeable, highly-skilled workers, and getting a degree is the traditional way of meeting those criteria. Rising demand has occurred alongside a steady decline in state funding for public education. One report found that 79% of tuition increases stemmed from such cuts.⁴

But there’s always been an assumption, despite the ballooning costs of higher education, that attending university would be worth it. Afterall, graduates almost always earn more than their peers.⁵ It’s an investment in a future income, right?

The diminishing returns of a degree
But that old model is simplistic at best. College simply doesn’t pay off for some graduates. Data demonstrates that the lowest earning college grads actually earn less than their highschool educated counterparts. ⁶ They actually lost income by going to university! It makes sense when you do the math. Going into crippling debt to get a speech and drama degree only earns you about $28,300 after graduation. ⁷ And the huge supply of highly-educated workers has put pressure on once prosperous careers. For example, more people graduate from expensive law schools in the United States than there are job openings for attorneys. ⁸ Sure, there’s 6-figure potential there if you can land a job, but you’re competing with dozens of other qualified prospects. It’s easy to see why people have become so cynical about higher education.

Simple solutions?
Overall, there are certainly times when a college degree is not worth the time and treasure. Spending 12 years at a private institution to get a doctorate in an obscure field with low pay and a brutal job market? There are probably more profitable ways to spend your time. But overall, there are numerous degrees that may still pay off; the average Bachelor’s degree is worth around $2.8 million over a lifetime. ⁹ But you must plan strategically. It all comes down to how you reduce the cost of your education and maximize your upside potential post-graduation.

Narrow your search to only include public schools in your state. Do as much research on scholarships and apply for as many as possible. Live with your parents to cut down on room and board costs. Take a gap year of work between your bachelors and masters degree. And do some research on job opportunities in the field before you get a diploma. You might decide that going into debt to become a petroleum engineer is a better investment than signing your life away to the humanities!

If you’re a parent, start planning your child’s higher education today. That will involve choosing the right schools and encouraging them to work hard and love learning. But you must also provide them with a steady financial foundation to pursue their dreams. Helping them get a degree debt-free might empower them to study their passions instead of chasing paychecks to fight off loans. There are financial products on the market designed to help you save for your child’s future, no matter what level of education they decide to pursue. Let’s schedule a time to meet and we can discuss your options in detail!

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¹ Hillary Hoffower, “College is more expensive than it’s ever been, and the 5 reasons why suggest it’s only going to get worse,” Business Insider, JunE 26, 2019, https://www.businessinsider.com/why-is-college-so-expensive-2018-4

² Hoffower, “College is more expensive than it’s ever been,” Business Insider

³ Hoffower, “College is more expensive than it’s ever been,” Business Insider

⁴ Abigail Hess, “The cost of college increased by more than 25% in the last 10 years—here’s why,” CNBC, Dec 13 2019, https://www.cnbc.com/2019/12/13/cost-of-college-increased-by-more-than-25percent-in-the-last-10-years.html

⁵ Anthony P. Carnevale, Ban Cheah, Andrew R. Hanson, “The Economic Value Of College Majors: Executive Summary,” Georgetown University Center On Education And The Workforce, 2015, https://cew.georgetown.edu/wp-content/uploads/Exec-Summary-web-B.pdf

⁶ Emma Kerr, “Is College Worth the Cost?,” U.S. News & World Report, June 17, 2019, https://www.usnews.com/education/best-colleges/paying-for-college/articles/2019-06-17/is-college-worth-the-cost

⁷ Alison Doyle, “Average College Graduate Salaries: Expectations vs. Reality,” The Balance, June 6, 2020, https://www.thebalance.com/college-graduate-salaries-expectations-vs-reality-4142305

⁸ “Occupational Outlook Handbook, Lawyers” Bureau Of Labor Statistics, Sept 1, 2020 https://www.bls.gov/ooh/legal/lawyers.htm#tab-6

⁹ Anthony P. Carnevale, Stephen J. Rose and Ban Cheah, “The College Payoff: Education, Occupations, Lifetime Earnings” Georgetown University Center On Education And The Workforce, 2011, https://cew.georgetown.edu/cew-reports/the-college-payoff/

September 23, 2020

Who Needs Life Insurance?

Who Needs Life Insurance?

Life insurance is important… or so you’ve been told.

But do you really need it? And how can you know? Let’s take a look at who does and doesn’t need the family and legacy protecting power of life insurance and some specific examples of both.

Protecting your dependants
Is there anyone in your life who would suffer financially if your income were to vanish? If so, then you have dependents. And anyone with financial dependents should buy life insurance. Those are the people you’re aiming to protect with a life insurance policy.

On the other hand, if you live alone, aren’t helping anyone pay bills, and no one relies on you financially to pursue their dreams, then you still might need coverage. Let’s look at some specific examples below.

Young singles
Let’s say you’ve just graduated from college, you’ve started your first job, and you’re living in a new city. Your parents don’t need you to help support them, and you’re on your own financially. Should you get life insurance? If you have serious amounts of student or credit card debt that would get moved to your parents in the event of your passing, then it’s a consideration. You also might think about if you have saved enough in emergency funds to cover potential funeral expenses. Now would also potentially be a better time to buy a policy early while rates are low, especially if you’re considering starting a family in the near future.

Married without children
What if your family is just you and your spouse? Do either of you need life insurance? Remember, your goal is to protect the people who depend on your income. You and your spouse have built a life together that’s probably supported by both of your incomes. A life insurance policy could protect your loved one’s lifestyle if something were to happen to you. It would also help them meet lingering financial obligations like car payments, credit card debt, and a mortgage, even if they still have their income.

Single or married parents
Anyone with children must consider life insurance. No one relies on your income quite like your kids. It’s what clothes them and feeds them. Later on, it can empower them to pursue their educational dreams. Life insurance can help give you peace of mind that all of those needs will be protected. Even a stay-at-home parent should consider a policy. They often provide for needs like childcare and education that would be costly to replace. Life insurance is an essential line of defense for your family’s dreams and lifestyle.

Business owners
No one wants to think about what would happen to their business without them. But entrepreneurs and small business owners can use life insurance to protect their hard work. A policy can help protect your family if you took out loans to start your business and are still paying down debt. More importantly, it can help offset the losses if your family can’t operate the business without you and has to sell in poor market conditions.

Not everyone needs life insurance right now. But it’s a vital line of defense for the people you care about most and should be on everyone’s radar. The need might not be as urgent for a young, debt-free single person, but it’s still worth it to start making plans to protect your future family. Contact a financial professional today to begin the process of preparing!

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June 24, 2020

Read this before you walk down the aisle

Read this before you walk down the aisle

Don’t let financial trouble ruin your future wedded bliss.

Most newlyweds have a lot to get used to. You may be living together for the first time, spending a lot of time with your new in-laws, and dealing with dual finances. Financial troubles can plague even the most compatible pairs, so read on for some tips on how to get your newlywed finances off to the best possible start.

Talk it out If you haven’t done this already, the time is ripe for a heart to heart talk about what your financial picture is going to look like. This is the time to lay it all out. Not only should you and your fiancé discuss your upcoming combined financial situation, but it can be beneficial to take a deep dive into your past too. Our financial histories and backgrounds can influence current spending and saving habits. Take some time to get to know one another’s history and perspective when it comes to how they think about money, debt, budgeting, etc.

Newlyweds need a budget Everyone needs a budget, but a budget can be particularly helpful for newlyweds. A reasonable, working household budget can go a long way in helping ease financial stress and overcoming challenges. Money differences can be a big cause of marital strife, but a solid, mutually-agreed-upon budget can help avoid potential arguments. A budget will help you manage student loans or new household expenses that must be dealt with. Come up with a budget together and make sure it’s something you both can stick with.

Create financial goals Financial goal setting can actually be fun. True, some goals may not seem all that exciting – like paying off credit cards or student loans. But formulating financial goals is important.

Financial goal setting should start with a conversation with your new fiancé. This is the time to think about your future as a married couple and work out a financial strategy to help make your financial dreams a reality. For example, if you want to buy a house, you’ll need to prepare for that. A good start is to minimize debt and start saving for a down payment.

Maybe you two want to start a business. In that case, your financial goals may include raising capital, establishing business credit, or qualifying for a small business loan.

Face your debt head on It’s not unusual for individuals to start married life facing new debt that came along with their partner – possibly student loans or personal credit card debt. You may also have combined debt if you’re planning on financing your wedding. Maybe you’re going to take your dream honeymoon and put it on a credit card.

Create a strategy to pay off your debt and stick to it. There are two common ways to tackle it – begin with the highest interest rate debt, or begin with the smallest balance. There are many good strategies – the key is to develop one and put it into action.

Invest for the future Part of your financial strategy should include preparing for retirement, even though it might seem light years away now. Make sure you work a retirement strategy into your other financial goals. Take advantage of employer-sponsored retirement accounts and earmark savings for retirement.

Purchase life insurance Life insurance is essential to help ensure your new spouse will be taken care of should you die prematurely. Even though many married couples today are dual earners, there is still a need for life insurance. Ask yourself if your new spouse could afford to pay their living expenses if something happened to you. Consider purchasing a life insurance policy to help cover things like funeral costs, medical expenses, or replacement income for your spouse.

Newlywed finances can be fun Newlywed life is fun and exciting, and finances can be too. Talk deeply and often about finances with your fiancé. Share your dreams and goals so you can create financial habits together that will help you realize them. Here’s to you and many years of wedded bliss!

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June 3, 2020

Do you know your net worth?

Do you know your net worth?

Usually when we think of net worth we imagine all the holdings of a wealthy tycoon who owns several multi-million dollar businesses.

Or a young heiress on the New York social scene, or a successful blockbuster movie actor.

However, you have a net worth too. Essentially, your net worth is a personal balance sheet of your assets and liabilities, not unlike the balance sheets used in business.

Calculating your net worth
First, you’ll want to tally up all your assets. These would include:

  • Personal property and cars
  • Real estate equity
  • Investments
  • Vested retirement plans
  • Cash or savings
  • Amounts owed to you
  • Cash value of life insurance policies

Next, you’ll calculate your liabilities (amounts you owe someone). These would include:

  • Loans
  • Mortgage balance
  • Credit card balances
  • Unpaid obligations

Your total liabilities subtracted from your total assets establishes your net worth.

The number could be positive, or it could be negative. Students, for example, often have a negative net worth because they may have student loans but haven’t had much of a chance to build personal assets yet.

It’s also important to realize that net worth isn’t always equal to liquid assets. Your net worth includes non-liquid assets, like the equity in your home.

What should your net worth be?
The notion that you should be at a certain net worth by a certain age is mostly arbitrary; wealth is relative. Having a hundred thousand dollars stashed away might sound like a lot, but if you live in an affluent area or have a large family to provide for, it may not last long if your job disappears suddenly. In other situations, the same hundred thousand dollars might be a fabulous starting point to a growing net worth.

Net worth can be a way of “keeping score”, but it’s important to remember the game is one in which you are the only player and you’re playing to best yourself. What someone else has or doesn’t have isn’t relevant to your needs and your future goals for your family.

Looking ahead
Measuring your net worth can be a strong motivation when saving for the future. Do you want to be a certain net worth by a certain age? Not if the number is pulled out of thin air. If your net worth marks progress toward a well-reasoned goal, however, it’s extremely relevant.

When you’re ready to put together a personalized plan based on your net worth and (more importantly) your future goals, reach out anytime. We can use net worth as a starting point and a measurement tool, while keeping squarely focused on the real target: your long-term financial strategy.

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February 10, 2020

Is Your Employer-Provided Life Insurance Enough?

Is Your Employer-Provided Life Insurance Enough?

Just because your company provides you with free life insurance coverage doesn’t mean you’re fully protected.

While it certainly doesn’t hurt to have, it may not be enough to provide for your family in the event of a tragedy.

For the first time ever, more Americans have employer-provided life insurance (108 million) than have individual life insurance coverage (102 million), according to a new LIMRA study. This is important especially during Life Insurance Awareness month to make sure you’re aware that typically life insurance through your job is not portable. Which means you can’t take it with you. Everyone should make sure they have individually owned insurance to protect their family just in case they switch jobs or lose their job or potentially start your own company.

How employer-provided life insurance works.
A life insurance policy from your employer is typically a group plan that’s offered to you and your co-workers. Your policy is held by the company, and they’ll often pay most if not all the premium costs. The amount of insurance you’ll receive varies, but it’s normally one to two times your annual salary.

Problems with employer-provided life insurance.
A $50,000 payout, for example, may seem like a lot. But you may notice a problem when you stop thinking in terms of numbers on paper and look at how long the insurance money would last. You go from $50,000 per year to just $50,000, period! A life insurance benefit is essentially buying your family time to grieve and plan for their future in your absence. That might mean looking for new jobs, adjusting to a single-income lifestyle, taking out student loans, and so on.

If your employer-provided policy just matches your annual salary, your loved ones would only be covered for a single year as they go through the process of readjustment (assuming their spending habits don’t change and they don’t encounter any emergencies). In fact, 5 to 10 times your annual income is considered a reasonable amount of insurance for just this reason; it gives your loved ones plenty of time to figure things out.

Another problem with an employer-provided life insurance policy is that it depends on your employment status. If you leave that job (voluntarily or involuntarily), what might happen to your family if they are left unprotected? While employer-provided life insurance is definitely a perk, it often might not be enough.

Alternatives to employer-provided life insurance.
That’s why considering an individual plan is so important. It may not be provided by your employer, but you’ll get what you pay for – a safety net for the ones you love and the time they’ll need to recover… regardless of where you’re working.

Have questions? Feel free to contact me! I would love to help you prepare your insurance strategy and help protect your family’s future.

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February 5, 2020

Student Loans: avoid them or use them the smart way?

Student Loans: avoid them or use them the smart way?

Going to college can be a great way to invest in your future and get the training and education you need to thrive in the modern job market.

But we’ve all heard the horror stories of students saddled with thousands in loans that they struggle to pay back, sometimes for years. Student loan debt is often the most pressing financial issue for college students and recent grads.

So how do you take advantage of the benefits of a college education without burdening your future with years of debt? Here are some tips to help you avoid high student loan payments and pay your student debt off more quickly after graduation.

Work through school
The days of working a minimum wage job to put yourself through school seem to be over. However, working enough to cover at least some of your books and living expenses may make a huge dent in the amount of money you’ll have to borrow to graduate.

Work-study programs on campus are often good options, as they are willing to work around your class schedules. Off-campus part-time jobs can be a good option as well, and may offer better pay.

Live as cheaply as possible
Everyone knows the cliché of the broke college student existing on nothing but ramen noodles. While not many people would recommend trying to live on nutritionless soup every day, you should be able to find ways to cut your cost of living to reduce the amount of money you need to borrow to sustain your lifestyle.

Try living off campus with family or roommates and packing sandwiches instead of paying expensive meal tickets and dorm fees. Bike, walk, or take public transportation to avoid parking. Take advantage of free on-campus healthcare, counseling, free food events, free entertainment, and more so you can spend as little as possible on living campus life.

It’s okay to go out and have fun sometimes, but don’t borrow from your future in order to live beyond your means now.

Try to avoid unsubsidized loans
Subsidized loans are offered by the Department of Education at lower interest than many private bank loans, and they do not begin accruing interest until after you graduate. Take advantage of these loans first and try to avoid the unsubsidized private loans which begin accruing interest immediately and often have a higher rate. (1)

Be mindful of your future payments
It can be tempting to expect that you’ll have a great job earning plenty of money and time to pay back the student loans you’ve accumulated. But each time you take out a loan, you make your future payments higher and your payback time longer. Be sure to look at the numbers of how much your payment will be every time you up your loan amounts. Can you realistically envision yourself being able to pay that amount every month in just a few years? If not, it may be time to rethink the student loans you’re racking up, and possibly even reconsider your degree or career plan.

Go to trade school, earn an apprenticeship, or work in your chosen field before you commit to a college degree in that field
It’s not a popular topic with many high school guidance counselors, but learning a trade and finding a well-paying job without a degree is not only possible but a great option. Try finding an internship or trade school where you could get training for much less money than a university.

Consider community colleges and state schools
It’s a common misconception that private, ivy league, “big name” colleges are far superior to state schools and automatically the better option. However, state schools can often have great programs for far less money. Also, if you choose a local school, you can live close to your family support system while working through college. It’s possible to have a very successful career with a college degree from a state school, and be more financially stable in your future than someone struggling to pay off loans from an expensive private college.

Likewise, an associate’s degree from a community college can save money toward your bachelor’s degree, allowing you to pay far less than you would even to a state school. Just make sure your degree and credits will transfer to the university of your choice.

Find a graduate program that pays YOU
If you choose to pursue a Masters or Doctorate degree, try to find a program with a teaching assistant position, fellowship, or some other option for getting reduced tuition or getting paid to get the work experience you need.

Resist the urge to move up in lifestyle when you graduate
When you scrimp your way through school, it’s tempting when you get your first degree-related job to celebrate by loosening the reins on your frugal ways and start living it up as a young professional.

It’s great to reward yourself, and you need to adapt to your new financial situation (you may need a new wardrobe or a better car), but resist going too crazy with all the “extra” money a new job in your field can make you feel like you have. You should still live on a budget and manage your money carefully to pay off your student loans as soon as possible so you’re better prepared to move into the next phase of life unencumbered by a mountain of debt. Make paying back debt a priority, and pay extra when you’re able.

Education can be expensive and in some cases impossible to get without loans. But with frugality and an eye toward the future, you’ll be better prepared to get the education you need to succeed in life without being encumbered by debt for years. The high cost of education combined with the high cost of living can make a college education more of a financial burden for today’s students than ever before. By thinking outside the box and carefully prioritizing your educational goals—balanced with your finances—you can pursue your dream degree and have a better chance at a stable financial future.

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February 3, 2020

Begin Your Budget With 5 Easy Steps

Begin Your Budget With 5 Easy Steps

A budget is a powerful tool.

No matter how big or small, it gives you the insight to track your money and plan your future. So here’s a beginner’s guide to kick-start your budget and help take control of your paycheck!

Establish simple objectives
Come up with at least one simple goal for your budget. It could be anything from saving for retirement to buying a car to paying down student debt. Establishing an objective gives you a goal to shoot for, and helps motivate you to stick to the plan.

Figure out how much you make
Now it’s time to figure out how much money you actually make. This might be as easy as looking at your past few paychecks. However, don’t forget to include things like your side hustle, rent from properties, or cash from your online store. Try averaging your total income from the past six months and use that as your starting point for your budget.

Figure out how much you spend
Start by splitting your spending into essential (non-discretionary) and unessential (discretionary) spending categories. The first category should cover things like rent, groceries, utilities, and debt payments. Unessential spending would be eating at restaurants, seeing a movie, hobbies, and sporting events.

How much is leftover?
Now subtract your total spending from your income. A positive number means you’re making more than you’re spending, giving you a foundation for saving and eventually building wealth. You still might need to cut back in a few areas to meet your goals, but it’s at least a good start.

If you come up negative, you’ll need to slash your spending. Start with your unessential spending and see where you can dial back. If things aren’t looking good, you may need to consider looking for a lower rent apartment, renegotiating loans, or picking up a side hustle.

Be consistent!
The worst thing you can do is start a budget and then abandon it. Make no mistake, seeing some out-of-whack numbers on a spreadsheet can be discouraging. But sticking to a budget is key to achieving your goals. Make a habit of reviewing your budget regularly and checking your progress. That alone might be enough motivation to keep it up!

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November 20, 2019

Which Debt Should You Pay Off First?

Which Debt Should You Pay Off First?

American combined consumer debt now exceeds $13 trillion. That’s a stack of dollar bills nearly 900,000 miles high.

Here’s the breakdown:

  • Credit cards: $931 billion
  • Auto loans: $1.22 trillion
  • Student loans: $1.38 trillion
  • Mortgages: $8.88 trillion
  • Any type of debt: $13.15 trillion

Nearly every type of debt can interfere with your financial goals, making you feel like a hamster on a wheel – constantly running but never actually getting anywhere. If you’ve been trying to dig yourself out of a debt hole, it’s time to take a break and look at the bigger picture.

Did you know there are often advantages to paying off certain types of debt before other types? What the simple list above doesn’t include is the average interest rates or any tax benefits to a given type of debt, which can change your priorities. Let’s check them out!

Credit Cards
Credit card interest rates now average over 15%, and interest rates are on the rise. For most households, credit card debt is the place to start – stop spending on credit and start making extra payments whenever possible. Think of it as an investment in your future, one that pays a 15% guaranteed return – the equivalent of a 20% return in the stock market or other taxable investment.

Auto Loans
Interest rates for auto loans are usually much lower than credit card debt, often under 5% on newer loans. Interest rates aren’t the only consideration for auto loans though. New cars depreciate nearly 20% in the first year. In years 2 and 3, you can expect the value to drop another 15% each year. The moral of the story is that cars are a terrible investment but offer great utility. There’s also no tax benefit for auto loan interest. Eliminating debt as fast as possible on a rapidly depreciating asset is a sound decision.

Student Loans
Like auto loans, student loans are usually in the range of 5% to 10% interest. While interest rates are similar to car loans, student loan interest is often tax deductible, which can lower your effective rate. Auto loans can usually be paid off faster than student loan debt, allowing more cash flow to apply to student debt, emergency funds, or other needs.

Mortgage Debt
In most cases, mortgage debt is the last type of debt to pay down. Mortgage rates are usually lower than the interest rates for credit card debt, auto loans, or student loans, and the interest is usually tax deductible. If mortgage debt keeps you awake at night, paying off other types of debt first will give you greater cash flow each month so you can begin paying down your mortgage.

When you’ve paid off your other debt and are ready to start tackling your mortgage, try paying bi-monthly (every two weeks). This simple strategy has the effect of adding one extra mortgage payment each year, reducing a 30-year loan term by several years. Because the payments are spread out instead of making one (large) 13th payment, it’s likely you won’t even notice the extra expense.

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June 24, 2019

The Shelf Life of Financial Records

The Shelf Life of Financial Records

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.

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June 19, 2019

Making Money Goals That Get You There

Making Money Goals That Get You There

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.

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June 12, 2019

Headed in the Right Direction: Managing Debt for Millennials

Headed in the Right Direction: Managing Debt for Millennials

Three simple words can strike fear into the heart of any millennial:

Student.

Loan.

Debt.

The anxiety is not surprising: Members of the Class of 2017 had an average of $39,400 in student loan debt.

Nearly $40 grand? For that you could travel the world. Put a down payment on a house. Buy a car. Even start a new business! But instead of having the freedom to pursue their dreams, there’s a hefty financial ball and chain around millennials’ feet.

That many young people owing that much money before they even enter the workforce? It’s unbelievable!

Now just imagine adding car payments, house payments, insurance premiums, and more on top of that student debt. No wonder millennials are feeling so terrible: studies show that graduates with debt experience feelings of shame, panic, and anxiety. Now is the time to get ahead of your debt. Not later. Not when it’s more convenient or feels less shameful. You have the potential right now to manage that debt and get out from under it.

So how do you get out from under your debt? Sometimes improving your current situation involves more than making smarter choices with the money you earn now. Getting out of that debt ditch means finding a way to make more.

There are 2 things you can monetize right now:

  • Your education
  • Your experience

Both have their own challenges. You may not have spent much time in a particular field yet, so not a lot of experience. And what if you’re working a job that has nothing to do with your major? There goes education.

Two speed bumps. One right after the other. But you can still gain momentum in the direction you want your life to go!

How? A solid financial strategy. A goal you can see. A destination for financial independence.

Debts can become overwhelming – remember that stat up there? But with a strategy in mind for the quick and consistent repaying of your loans, so much of that stress and burden could be lifted.

Contact me today. A quick phone call is all we need to help get you rolling in the direction YOU want to go.

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May 13, 2019

6 Financial Commitments EVERY Parent Should Educate Their Kids About

6 Financial Commitments EVERY Parent Should Educate Their Kids About

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 $16,000. 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!’

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March 4, 2019

Tackling long term financial goals

Tackling long term financial goals

Many of us have probably had some trouble meeting a long-term goal from time to time.

Health, career, and personal enrichment goals are often abandoned or relegated to some other time after the initial excitement wears away. So how can you keep yourself committed to important long term goals – especially financial ones? Let’s look at a few strategies to help you stay committed and hang in there for the long haul.

Start small when building the big financial picture
Most financial goals require sustained commitment over time. Whether you’re working on paying off credit card debt, knocking out your student loans, or saving for retirement, financial heavyweight goals can make even the most determined among us feel like Sisyphus – doomed for eternity to push a rock up a mountain only to have it roll back down.

The good news is that there is a strategy to put down the rock and reach those big financial goals. To achieve a big financial goal, it must be broken down into small pieces. For example, let’s say you want to get your student loan debt paid off once and for all, but when you look at the balance you think, “This is never going to happen. Where do I even start?” Cue despair.

But let’s say you took a different approach and focused on what you can do – something small. You’ve scoured your budget and decided you can cut back on some incidentals. This gives you an extra $75 a month to add to your regular student loan payment. So now each month you can make a principal-only payment of $75. This feels great. You’re starting to get somewhere. You took the huge financial objective – paying off your student loan – and broke it down into a manageable, sustainable goal – making an extra payment every month. That’s what it takes.

Use the power of automation
It seems there has been a lot of talk lately in pop psychology circles about the force of habit. The theory is if you create a practice of something, you are more likely to do it consistently.

The power of habit can work wonders for financial health, and with most financial goals, we can use automation tools to help build our habits. For example, let’s say you want to save for retirement – a great financial goal – but it may seem abstract, far away, and overwhelming.

Instead of quitting before you even begin, or succumbing to confusion about how to start, harness the power of automation. Start with your 401(k) plan – an automated savings tool by nature. Money comes out of your paycheck directly into the account. But did you know you can set your plan to increase every year by a certain percentage? So if this year you’re putting in three percent, next year you might try five percent, and so on. In this way, you’re steadily increasing your retirement savings every year – automatically without even having to think about it.

Find support when working on financial goals
Long term goals are more comfortable to meet with the proper support – it’s also a lot more fun. Help yourself get to your goals by making sure you have friends and allies to help you along the way. Don’t be afraid to talk about your financial goals and challenges.

Finding support for financial goals has never been easier – there are social media groups as well as many other blogs and websites devoted to personal financial health. Join in and begin sharing. Another benefit of having a support network is that it seems like when we announce our goals to the world (or even just our corner of it), we’re more likely to stick to them.

Reaching large financial goals
Big, dreamy financial goals are great – we should have those – but to help make them attainable, we must recast them into smaller manageable actions. Focus on small goals, find support, and harness the power of habit and automation.

Remember, it’s a marathon – you finish the race by running one mile at a time.

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