Your Life Insurance Rate & You: The Risk Takers

September 11, 2019

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Luis Puente

Luis Puente

Financial Education

2711 LBJ Freeway Suite 300

Farmers Branch, TX 75234

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September 3, 2019

Big Financial Rocks First

Big Financial Rocks First

A teacher walked into her classroom with a clear jar, a bag of rocks, a bucket of sand, and a glass of water. She placed all the large rocks carefully into the jar.

“Who thinks this jar is full?” she asked. Almost half of her students raised their hands. Next, she began to pour sand from the bucket into the jar full of large rocks emptying the entire bucket into the jar.

“Who thinks this jar is full now?” she asked again. Almost all of her students now had their hands up. To her student’s surprise, she emptied the glass of water into the seemingly full jar of rocks and sand.

“What do you think I’m trying to show you?” She inquired.

One eager student answered: “That things may appear full, but there is always room left to put more stuff in.”

The teacher smiled and shook her head.

“Good try, but the point of this illustration is that if I didn’t put in the large rocks first, I would not be able to fit them in afterwards.”

This concept can be applied to the idea of a constant struggle between priorities that are urgent versus those that are important. When you have limited resources, priorities must be in place since there isn’t enough to go around. Take your money, for example. Unless you have an unlimited amount of funds (we’re still trying to find that source), you can’t have an unlimited amount of important financial goals.

Back to the teacher’s illustration. Let’s say the big rocks are your important goals. Things like buying a home, helping your children pay for college, retirement at 60, etc. They’re all important –but not urgent. These things may happen 10, 20, or 30 years from now.

Urgent things are the sand and water. A monthly payment like your mortgage payment or your monthly utility and internet bills. The urgent things must be paid and paid on time. If you don’t pay your mortgage on time… Well, you might end up retiring homeless.

Even though these monthly obligations might be in mind more often than your retirement or your toddler’s freshman year in college, if all you focus on are urgent things, then the important goals fall by the wayside. And in some cases, they stay there long after they can realistically be rescued. Saving up for a down payment for a home, funding a college education, or having enough to retire on is nearly impossible to come up with overnight (still looking for that source of unlimited funds!). In most cases, it takes time and discipline to save up and plan well to achieve these important goals.

What are the big rocks in your life? If you’ve never considered them, spend some time thinking about it. When you have a few in mind, place them in the priority queue of your life. Otherwise, if those important goals are ignored for too long, they might become one of the urgent goals - and perhaps ultimately unrealized if they weren’t put in your plan early on.

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August 26, 2019

What Does “Pay Yourself First” Mean?

What Does “Pay Yourself First” Mean?

Do you dread grabbing the mail every day?

Bills, bills, mortgage payment, another bill, maybe some coupons for things you never buy, and of course, more bills. There seems to be an endless stream of envelopes from companies all demanding payment for their products and services. It feels like you have a choice of what you want to do with your money ONLY after all the bills have been paid – if there’s anything left over, that is.

More times than not it might seem like there’s more ‘month’ than ‘dollar.’ Not to rub salt in the wound, but may I ask how much you’re saving each month? $100? $50? Nothing? You may have made a plan and come up with a rock-solid budget in the past, but let’s get real. One month’s expenditures can be very different than another’s. Birthdays, holidays, last-minute things the kids need for school, a spontaneous weekend getaway, replacing that 12-year-old dishwasher that doesn’t sound exactly right, etc., can make saving a fixed amount each month a challenge. Some months you may actually be able to save something, and some months you can’t. The result is that setting funds aside each month becomes an uncertainty.

Although this situation might appear at first benign (i.e., it’s just the way things are), the impact of this uncertainty can have far-reaching negative consequences.

Here’s why: If you don’t know how much you can save each month, then you don’t know how much you can save each year. If you don’t know how much you can save each year, then you don’t know how much you’ll have put away 2, 5, 10, or 20 years from now. Will you have enough saved for retirement?

If you have a goal in mind like buying a home in 10 years or retiring at 65, then you also need a realistic plan that will help you get there. Truth is, most of us don’t have a wealthy relative who might unexpectedly leave us an inheritance we never knew existed!

The good news is that the average American could potentially save over $500 per month! That’s great, and you might want to do that… but how do you do that?

The secret is to “pay yourself first.” The first “bill” you pay each month is to yourself. Shifting your focus each month to a “pay yourself first” mentality is subtle, but it can potentially be life changing. Let’s say for example you make $3,000 per month after taxes. You would put aside $300 (10%) right off the bat, leaving you $2,700 for the rest of your bills. This tactic makes saving $300 per month a certainty. The answer to how much you would be saving each month would always be: “At least $300.” If you stash this in an interest-bearing account, imagine how high this can grow over time if you continue to contribute that $300.

That’s exciting! But at this point you might be thinking, “I can’t afford to save 10% of my income every month because the leftovers aren’t enough for me to live my lifestyle”. If that’s the case, rather than reducing the amount you save, it might be worthwhile to consider if it’s the lifestyle you can’t afford.

Ultimately, paying yourself first means you’re making your future financial goals a priority, and that’s a bill worth paying.

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August 14, 2019

The Black Hole of Checking (Part 3)

The Black Hole of Checking (Part 3)

Are you feeling the gravity of this checking account situation yet?

All of the money lessons from Parts 1 and 2 dealt heavily with the importance of helping you make sure that all of your money isn’t just sitting in your checking account where it’s neither growing nor working for your future. However, there are a couple of important money-saving details to consider before emptying your checking account.

To avoid becoming too starry-eyed and moving all of your money without considering potentially pricey consequences, ask yourself these 2 questions:

1. Does your personal bank have any kind of fee attached to the minimum amount of money in your checking account? Staying on course to your financial goals can be tough enough, but when you’re hit with a surprise fee from your bank, can that feel like losing vital g-force in the right direction? Americans paid an average of $53 per person below with your bank’s unique rules to avoid those course-altering fees via your checking account:

  • Have the minimum balance requirement
  • Enroll in direct deposit
  • Open multiple accounts at the same banks
  • Find free checking elsewhere

2. Do you have enough in your checking account to avoid overdraft fees? $15 Billion. That’s how much Americans paid in overdraft fees last year alone. You could probably build your own space station for that kind of money! (A really small one, at least.) Remember the advice in Part 2 to have accounts for differing money occasions like an Emergency Fund or Fun Fund? These separate, deliberate accounts have the potential to help shield against many unexpected and/or large withdrawals from your checking account. Additional ways to protect yourself from overdraft fees are Overdraft Protection through your bank (but watch out for a fee for the service) or having a small cushion in your checking account, just in case.

Moving your money away from the Black Hole of Checking is important. But ignoring the asteroids of unexpected banking fees headed your way could strip away any potential forward momentum you have to make with saving and getting your money to work for you.

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August 12, 2019

The Black Hole of Checking (Part 2)

The Black Hole of Checking (Part 2)

Previously on “The Black Hole of Checking”…

In Part 1, we learned that any object pulled into a black hole will be stretched into the shape of spaghetti through a process called – wait for it – spaghettification. If you threw your shoe into it, the black hole’s gravity would stretch and compress your footwear into an unimaginably thin leather noodle as it was pulled deeper and deeper into the hole. Your shoe would be unrecognizable by the time gravity had its way.

The same thing can happen to the money in your checking account. Having a child, replacing an old automobile with something newer and more reliable, or taking a last-minute trip to see the grandparents in Florida over the holidays, can put a strain on your finances and stretch your reserves farther than you might have anticipated. As new bills create a bigger and bigger hole in your budget, your financial strategy may become something you don’t recognize.

Here in Part 2, let’s talk about how assigning an identity to your money can keep your financial goals on track, and help reduce the stretching of finite resources.

For example, say you keep all of your money in your checking account. Simple is better, right? If you want to go on a family vacation, you’ll just withdraw the funds from your account. Paying in cash to secure a “great” package deal up front? You’re all over that. But what happens if you pick up some souvenirs for Uncle Bob and Aunt Alice? Hmmm…if you get something for them you’ll have to get something for Greg and Susan too. (You’ll never make that mistake again.) And you just have to try that chic little cafe that you read about – you may never pass this way again. (But how can they get away with charging that much for a mimosa?!) Buy One, Get One all day pass at “The Biggest Miniature Museum in the World”? Let’s do it!

When you’re on vacation – having fun and enjoying yourself – it might be hard to resist taking advantage of unique experiences or grabbing those unusual gifts you didn’t account for. On the other hand, you may have no problem being thrifty when travelling, but what if someone gets sick or injured and needs hospital care on the road, or the car breaks down, or there is unexpected bad weather and you have to stay an extra day or two at the hotel?

After it’s all said and done, when you return home from your fun-filled trip, you may find a gaping hole where you had a pile of cash at the beginning of the month. If you had given your money a specific role before you planned your vacation, you may not have had such a shock when you got home – and you can enjoy your memories knowing you stayed on track with your financial goals.

Give your money identity, purpose, and the potential to grow by separating it into designated accounts. Try these 3 for starters:

1. Emergency Fund. Leaky roof? Flat tire? Trip to the emergency room? Maybe you’re great at resisting impulse buys (like those fabulous shoes you spied the other day), but sometimes things happen that are out of your control. Your emergency fund is for situations like these. Unexpected, unplanned-for expenses can derail a financial strategy very quickly if you’re not prepared.

The most important thing to keep in mind about this account? Do. Not. Touch. It. Unless there’s an emergency, of course. Then replace the money in the account as quickly as possible until it’s fully funded again.

How much should you keep in your emergency fund? A good rule of thumb is to shoot for at least $1,000, then build it to 3-6 months of your annual income. However much you decide suits your financial goals, just make sure you aren’t dipping into it when you don’t have an emergency. (Note: Grabbing a great pair of heels on sale is not an emergency.)

2. Retirement Fund. If you want to retire at some point (and most of us do), this one is a no-brainer. Odds are you’ve already begun to set aside a little something for the day you can trade in your suit and tie for a Hawaiian shirt and a pair of flip-flops, but is your retirement fund in the right place now? Unlike a day-to-day checking account with a very low or non-existent interest rate, your retirement fund should be in a separate account that has some power behind it. You’re taking the initiative to put away money for your future – get it working for you! Your goal should be to grow your retirement fund in an account with as high of an interest rate as you can find.

3. Fun Fund. This category may seem frivolous if you’re trying to stick to a well-structured financial plan, but it’s actually an important piece that can help make your budget “work”! Depending on your priorities, you might contribute a little or a lot to this account, but making some room for fun might make it more palatable to save long-term.

You might try setting aside 10% of your paycheck for fun and entertainment and see how that works – is that too much or not enough? Bonus: this is easy to calculate each month. If you’re bringing in $2,000 per month, put no more than $200 in your Fun Fund.

What you do with your Fun Fund is your choice. Will it be more of a vacation fund or a concert fund? A wardrobe fund or a theme park fund? It’s all up to you. And when the rest of your money has a purpose and is growing for your future, you might feel less guilty about snagging those hot shoes you’ve had your eye on when they finally do get marked down.

Don’t let your goals and your money get lost in a black hole of coulda, woulda, shoulda. What kind of purpose do you want to give your money? I can help!

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July 29, 2019

Helping Kids Get Physically Fit

Helping Kids Get Physically Fit

We know that for adults, the benefits of being physically active are myriad.

Reducing the risks of heart disease, cancer, type 2 diabetes, high blood pressure, osteoporosis, and obesity are worthy goals we should strive for. But how often do we think of these health concerns when it comes to our kids? They’re just kids, right?

When was the last time your kids exercised for an hour every day during the week? According to the US Physical Activity Guidelines for Americans, this is the recommended amount of physical activity for children and youth.

However, statistics show that a large majority (more than two-thirds) of children and adolescents don’t meet this standard. Although it’s typical that physical activity tends to decrease with age, developing an active lifestyle while young will likely influence activity levels into adulthood. For instance, if you used to run half-marathons as a teen, the idea of running a half-marathon now – as an adult – wouldn’t be as jarring as if you had never done that at all.

Studies show that there are several factors that can help increase physical activity in children. The first factor is the parents’ activity level. Simply put, active parent = active child. This is relevant for adults who don’t have their own kids, but have nephews, nieces, or kids they mentor. An adult’s level of activity can help foster the activity levels of the children they influence.

Another factor is getting children involved in a rec league or team sport. By adding these into a child’s weekly schedule, each extra hour per week of practice, games, meets, etc., adds nearly 10 minutes to the average daily physical activity for the child. They’ll never have time for exercise if it’s never scheduled to begin with. (This tactic works for adults, too, by the way.)

This much is true: being physically active while younger will affect the health of a child as they grow into an adult. So whether you have children of your own or children you are connected to, your level of activity can help contribute to building a habit of physical activity which will carry on into adulthood. Here’s to building our health, and our children’s, for the future!

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July 17, 2019

Your Life Insurance Rate & You: How Gender Factors In

Your Life Insurance Rate & You: How Gender Factors In

Men and women pay different rates for life insurance from the get-go. And it’s purely the result of statistics.

Life insurance rates are determined largely by life expectancy, so the longer you’re projected to live, the lower your rates might be. Statistically, women live longer: an American woman is expected to live about 81 years to a man’s expected 76 years. Therefore, if qualifying for life insurance was based on life expectancy alone, a man would pay more every time. (However, it’s important to note that gender is only one consideration while you’re applying for life insurance. Other factors include your age and your overall health.)

Now throw this stat into the mix: 46% of Americans don’t have any type of life insurance coverage at all. That means far too many people do not have the coverage in place to provide for their loved ones in the event of a sudden tragedy. Nothing to cover final expenses or replace lost income and no inheritance left behind… Finding yourself in financial trouble knows no gender.

When you’re ready to work together to build the tailored policy that takes you, your loved ones, and your goals into account, contact me. Stats are stats, but your unique needs have the potential to shape your coverage and your rate into something unexpected!

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July 15, 2019

Building a Bridge Over the Retirement Gap

Building a Bridge Over the Retirement Gap

If you’re already eyeing the perfect recliner for your retirement, hold that thought. And you might want to sit down. And start rifling through the ol’ couch cushions for a little extra change…

Because here’s a doozy: US women are 80% more likely than US men to experience poverty during their retirement.

Part of this startling retirement savings gap could be due to the unique set of circumstances that women face while preparing for retirement.

One of the most obvious of these unique circumstances? Women live longer. In the US, a woman is expected to live about 81 years vs. a man’s expected 76 years. Women have years longer to live than men, but the troubling percentages above suggest that most women are not even financially prepared to live as long as men are expected to!

This retirement savings gap may look and feel massive, but it can be bridged. And it all starts with a solid life insurance strategy. A tailored strategy has the potential to be beneficial for women and men: Women can help themselves be more financially stable and prepared as they look toward retirement, and men have the potential to provide for the women their lives – even after they’re gone.

Your unique situation and goals all factor in to how you want to kick back when you retire. I’m here to help. When you have a moment, give me a call or shoot me an email.

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July 1, 2019

Retirement Mathematics 101: How Much Will You Need?

Retirement Mathematics 101: How Much Will You Need?

Have you ever wondered how someone could actually retire?

The main difference between a strictly unemployed person and a retiree: A retiree has replaced their income somehow. This can be done in a variety of ways including (but not limited to):

  • Saving up a lump sum of money and withdrawing from it regularly
  • Receiving a pension from the company you worked for or from the government
  • Or an annuity you purchased that pays out an amount regularly

For the example below, let’s assume you don’t have a pension from your company nor benefits from the government. In this scenario, your retirement would be 100% dependent on your savings.

The amount you require to successfully retire is dependent on two main factors:

  • The annual income you desire during retirement
  • The length of retirement

To keep things simple, say you want to retire at 65 years old with the same retirement income per year as your pre-retirement income per year – $50,000. According to the World Bank, the average life expectancy in the US is 79 (as of 2015). Let’s split the difference and call it 80 for our example which means we should plan for income for a minimum of 15 years. (For our purposes here we’re going to disregard the impact of inflation and taxes to keep our math simple.) With that in mind, this would be the minimum amount we would need saved up by age 60:

  • $50,000 x 15 years = $750,000

There it is: to retire with a $50,000 annual income for 15 years, you’d need to save $750,000. The next challenge is to figure out how to get to that number (if you’re not already there) the most efficient way you can. The more time you have, the easier it can be to get to that number since you have more time for contributions and account growth.

If this number seems daunting to you, you’re not alone. The mean savings amount for American families with members between 56-61 is $163,577 - nearly half a million dollars off our theoretical retirement number. Using these actual savings numbers, even if you decided to live a thriftier lifestyle of $20,000 or $30,000 per year, that would mean you could retire for 8-9 years max!

All of this info may be hard to hear the first time, but it’s the first real step to preparing for your retirement. Knowing your number gives you an idea about where you want to go. After that, it’s figuring out a path to that destination. If retirement is one of the goals you’d like to pursue, let’s get together and figure out a course to get you there – no math degree required!

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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 17, 2019

How Much Life Insurance Do You Really Need?

How Much Life Insurance Do You Really Need?

Whenever you’re asked about choosing a new life insurance policy or adding additional coverage, do you have any of the following reactions?

1. “No way. We took care of this years ago. Having some kind of life insurance policy is what you’re supposed to do.”

2. “Well, it is only a few more dollars each month… But what if we never end up using the benefits of that rider? What if I could spend that extra money on something more important now, like getting that new riding lawn mower I wanted?”

3. “ANOTHER RIDER FOR MY POLICY?! Sign me up!”

Even though there might be some similar responses when faced with a decision to upgrade what you already have, with the right guidance, you can finance a policy that has the potential to protect what is most important to you and your family, fit your needs, and get you closer to financial independence.

The most honest answer I can give you about how much life insurance you really need? It’s going to depend on you and your goals.

General rules of thumb on this topic are all around. For instance, one “rule” states that the death benefit payout of your life insurance policy should be equal to 7-10 times the amount of your annual income. But this amount alone may not account for other needs your family might face if you suddenly weren’t around anymore…

  • Paying off any debt you had accrued
  • Settling final expenses
  • Continuing mortgage payments (or surprise upkeep costs)
  • Financing a college education for your kids
  • Helping a spouse continue on their road to retirement

And these are just a few of the pain points that your family might face without you.

So beyond a baseline of funds necessary for your family to continue with a bit of financial security, how much life insurance you require will be up to you and what your current circumstances allow.

If you’ve had enough of a guesswork, reactionary approach to how you’ll provide for your loved ones in case of an unexpected tragedy, give me a call. We’ll work together to tailor your policy to your needs!

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May 8, 2019

What is your #1 financial asset?

What is your #1 financial asset?

What is your #1 financial asset? It’s not your house, your retirement fund, or your rare baseball card collection gathering dust.

Your most valuable financial asset is YOU!
Today – Labor Day, the unofficial last day of summer – let’s look at ways you can develop your skills and outlook in the workforce as we move from summertime vacation mode into finishing 2018 strong.

You might be savvy at home improvement, you might be a whiz with your finances, or you might have the eye to spot a hidden treasure at a yard sale, but how do you increase your value as a laborer in the workforce? One of the top traits of successful people is that they come up with a plan and they execute. Waiting for things to happen or taking the crumbs life tosses their way isn’t on their to-do list. Whether you’re dreaming of a secure future for yourself and your family, or if you want to build a career that enables you to help others down the road (or both!), the path to your goal and how fast you get there is up to you.

Increase your value as an employee
Working for someone else doesn’t have to feel like a prison sentence. In a recent study, nearly 60% of entrepreneurs worked full time as an employee for someone else while planning and building their own business on the side. Being employed is a chance to learn alongside experienced mentors, and prime time to experiment with how you can best add value. In many cases, successful entrepreneurs spent their time in the workforce amassing a wealth of information on how businesses are run, making mental notes on what doesn’t work, and practicing what can be done better.

View your time as an employee as an opportunity to hone your problem solving skills. It’s a mindset – one that can make you a more valuable employee and prepare you for great things later. Being seen as a problem solver can grant you more opportunity for promotions, pay increases, greater responsibility, and perhaps most importantly, open up more chances for life-enriching experiences.

Build your financial strategy
While you’re working to increase your value as a laborer, you’ll benefit from steady footing before taking your next big step. This is where building a solid financial strategy comes into play. Nearly everyone has the potential to be financially secure. Where most find trouble is often due to not having a plan or not sticking to the plan. A few simple principles can guide your finances, setting you up for a future where you have freedom to choose the life you envision.

  • Pay yourself first. Starting early and continuing as your earnings grow, begin the habit of paying yourself first. Simply, this means putting away some money every month or every paycheck that can help you reach your financial goals over time. Ideally, this money will be invested where it can grow. The goal is to get the money out of harm’s way, where you would have to think twice before dipping into your savings before you spend.
  • Develop a budget and consider expenses carefully. Think about expenditures before opening your wallet and swiping that credit card. Avoid debt wherever possible. Most people are able to have more money left over at the end of the month than they might realize. Don’t be afraid to tell yourself “no” so you can reach a bigger goal.
  • Plan for loved ones with life insurance. Here is where the value you provide your family through your hard work comes into sharp focus. Life insurance is essentially income replacement, should the worst happen. Meet with your financial professional and put a tailored-to-you life insurance policy in place that assures your family or dependents are taken care of.

Put your skills to work as a leader
Once you’ve established a level of financial security, now is the time to think about giving back by providing opportunities and helping others to realize their goals. There’s an old saying: “You’ll never get rich working for someone else.” While that’s not always true, trying to realize your long-term financial goals in an entry-level position might be an uphill climb. Moving up into a leadership position can teach you new skills and can increase your earning power. The average salary for managers approaches six figures!

You might even be ready to branch out on your own, investing the knowledge and leadership skills you’ve gained over the years in your own venture. Consider becoming an entrepreneur with your own financial services business – this can allow you to help others while building on your continuing success as a financial professional.

Whether you choose to strike out on your own, start a new part-time business, or grow within the organization or industry you’re in now, there are key traits that will help you succeed. Having a future-driven, forward-thinking mindset will guide your decisions. Your sense of commitment and the leadership skills you’ve honed on your journey will define your career – and perhaps even your legacy – as others learn from your example and use the same principles to guide their own success.

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April 24, 2019

Some Numbers Are Hard to Believe – Like These!

Some Numbers Are Hard to Believe – Like These!

1.32 billion people log in to Facebook every day.

Apple has now sold over 1 billion iPhones. Google processes 1.2 trillion searches every year. And – perhaps the most difficult to believe of them all – the world hotdog eating record stands at 70 dogs in 10 minutes. I apologize ahead, but just visualize that. Seven hotdogs down the hatch every minute.

Here’s another number that’s almost beyond comprehension: 56% of Americans have less than $10,000 in retirement savings. You may be thinking – how can that be? Sadly, it’s true. Here’s another number that’s hard to… swallow (again, I apologize). One out of 4 Americans 65 and over rely on Social Security as their only source of retirement income. Yes, you read that right – 25%! It’s no wonder that 60% of Baby Boomers are more afraid of outliving their money than dying.

Why share these hard to believe numbers? To motivate you – at whatever age you are today – that you can start saving more right now. If you want to have a million dollars at the age of 65, how much do you need to start saving every month? That depends on your current age. If you’re 25, you’ll need to save a minimum of $158.12 per month. At 35, the amount jumps to $442.00 per month. At 45, it’s $1,317 monthly. At 55, you’ll have to save $4,882.00 per month. And at 60, you’d have to save $12,913.00 every month.

How much do you need to save to hit your goals? What’s the right financial vehicle to help you do it? Those are important questions. Best not to wait to find the answers. Contact me, and let’s get to work on a strong insurance strategy.

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April 15, 2019

Is a home really an investment?

Is a home really an investment?

The housing market has experienced major peaks and valleys over the past 15 years.

If you’re in the market for a new home, you might be wondering if buying a house is a good investment, or if it even should be considered an investment at all…

“Owning a home is the best investment you can make.”
We’ve all heard this common financial refrain: “Owning a home is the best investment you can make.” The problem with that piece of conventional wisdom is that technically a home isn’t an investment at all. An investment is something that (you hope) will earn you money. A house costs money. We may expect to save money over the long term by buying a home rather than renting, but we shouldn’t (typically) expect to earn money from buying a home.

So, a home normally shouldn’t be considered an investment, but it may offer some financial benefits. In other words, buying a home may be a good financial decision, but not a good investment. A home may cost much more than it gives back – especially at the beginning of ownership.

The costs of homeownership
One reason that buying a home may not be a good investment is that the cost of homeownership may be much higher than renting – especially at first. Many first time homebuyers are unprepared for the added expense of owning a home, plus the amount of time maintaining a home may often require. First-time homebuyers must be prepared to potentially deal with:

  • Higher utility costs
  • Lawn care
  • Regular maintenance such as painting or cleaning gutters
  • Emergency home repairs
  • Higher insurance costs
  • Private Mortgage Insurance (PMI) if you don’t provide a full 20 percent down payment

A long term commitment
Another problem with considering a house as an investment is that it may take many years to build equity. Mortgages are typically interest heavy in the beginning. You can expect to be well into the life of your mortgage before you may see any real equity in your home.

Having the choice to move without worrying about selling your home is a benefit of renting that homeowners don’t enjoy. The freedom to move for a career goal, romantic interest, or even just a lifestyle choice is mostly available to a renter but may be out of reach for a homeowner. So, be sure to consider your long term goals and aspirations before you start planning to buy a house.

When is buying a home the right move?
Buying a home in many cases can be an excellent financial decision. If you are committed to living in a specific area but the rent is very high, homeownership may have some benefits. Some of those may be:

  • Not having a landlord make decisions about your property
  • Tax savings
  • Building equity
  • A stable place to raise a family

Buying a home: Not always a good investment, but may be a good financial decision
Although buying a home may not pay you in high returns, it can be an excellent financial decision. If owning a home is one of your dreams, go for it. Just be aware of the costs as well as the benefits. If you’ve always wanted to own your own home, then the rewards can be myriad – dollars can’t measure joy and the priceless memories you’ll create with your family.

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

March 27, 2019

Emergency Fund Basics

Emergency Fund Basics

Unexpected expenses are a part of life.

They can crop up at any time and often occur when you least expect them. An emergency expense is usually not a welcome one – it can include anything from car repairs to veterinary care to that field trip fee your 12 year old informed you about the day of. So, what’s the best way to deal with those financial curve balls that life inevitably throws at you? Enter one of the most important personal financial tools you can have – an emergency fund.

What is an emergency fund?
An emergency fund is essential, but it’s also simple. It’s merely a stash of cash reserved solely for a financial emergency. It’s best to keep it in a place where you can access it easily, such as a savings account or a money market fund. (It also might not hurt to keep some actual cash on hand in a safe place in your house.) When disaster strikes – e.g., your water heater dies right before your in-laws arrive for a long weekend – you can pull funds from your emergency stash to make the repairs and then feel free to enjoy a pleasant time with your family.

Some experts recommend building an emergency fund equal to about 6-12 months of your monthly expenses. Don’t let that scare you. This may seem like an enormous amount if you’ve never committed to establishing an emergency fund before. But having any amount of money in an emergency fund is a valuable financial resource which may make the difference between getting past an unexpected bump in the road, and having long term financial hindrances hanging over you, such as credit card debt.

Start where you are
It’s okay to start small when building your emergency fund. Set manageable savings goals. Aim to save $100 by the end of the month, for example. Or shoot for $1,000 if that’s doable for you. Once you get that first big chunk put away, you might be amazed at how good it feels and how much momentum you have to keep going.

Take advantage of automatic savings tools
When starting your emergency fund, it’s a good idea to set up a regular savings strategy. Take a cold, hard look at your budget. Be as objective as possible. This is a new day! Now isn’t the time to beat yourself up over bad money habits you might have had in the past, or how you rationalized about purchases you thought you needed. After going through your budget, decide how much you can realistically put away each month and take that money directly off the top of your income. This is called “paying yourself first”, and it’s a solid habit to form that can serve you the rest of your life.

Once you know the amount you can save each month, see if you can set up an automatic direct deposit for it. (Oftentimes your paycheck can be set to go into two different accounts.) This way the money can be directly deposited into a savings account each time you get paid, and you might not even miss it. But you’ll probably be glad it’s there when you need it!

Don’t touch your emergency fund for anything other than emergencies
This is rule #1. The commitment to use your emergency fund for emergencies only is key to making this powerful financial tool work. If you’re dipping into this fund every time you come across a great seasonal sale or a popular new mail-order subscription box, the funds for emergencies might be gone when a true emergency comes up.

So keep in mind: A girls’ three day weekend, buying new designer boots – no matter how big the mark-down is – and enjoying the occasional spa day are probably NOT really emergencies (although these things may be important). Set up a separate “treat yourself fund” for them. Reserve your emergency fund for those persnickety car breakdowns, unexpected medical bills, or urgent home repairs.

The underpinning of financial security
An emergency fund is about staying prepared financially and having the resources to handle life if (and when) things go sideways. If you don’t have an emergency fund, begin building one today. Start small, save consistently, and you’ll be better prepared to catch those life-sized curve balls.

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March 11, 2019

Does healthy living have to cost more?

Does healthy living have to cost more?

Many of us may be chair-bound during the workday and may come home lethargic and sluggish – seeming results of a sedentary lifestyle and some potentially unhealthy habits of office life.

You might be itching to break this cycle and establish some healthier habits for yourself, but you don’t want to break your budget either.

If you’re interested in improving your healthy habits – but aren’t interested in spending a lot of money to do it – read on!

Getting more exercise
Many people equate maintaining a regular exercise regimen with an expensive gym membership, but you don’t have to have one to exercise. One can perform body-weight exercises just about anywhere, so getting in some sit ups, push ups, squats, and a brisk jog can be free of charge. Other body-weight exercises, like pull-ups, may require finding a place to do them, but all one needs is a horizontal bar. This can range from a sturdy tree limb to the monkey bars at the playground.

Not sure where to begin? There are a myriad of free videos and programs online for all ages, goals, and body types. (As always, get your doctor’s approval before starting any exercise program.) If an exercise program is all new to you, you might want to start with only 10-15 minutes, then work up from there.

It does require forming a habit to establish a regular exercise routine. For that reason, it’s a good idea to build exercise into a part of your day. That way, a sense of something missing may arise when the exercise is not completed, which can be a motivation to get the workout in.

Eating healthy
This one may be a little harder to solve than the exercise issue, because saving money on your food bill may require a bigger time commitment than you’re used to, with additional shopping and food preparation. The good thing about fruits and vegetables is that many of them can be eaten raw with minimal prep time.

Internet shopping provides a myriad of resources for finding good deals for nutritious foodstuffs. If you’re feeling more adventurous and don’t mind getting your hands dirty, there may also be a local communal garden[i] in your area. Some apartment complexes offer their roofs to be used as gardens, and for those with no other options, growing right in your high-rise apartment is feasible[ii]. One of the best parts about gardening? It may give you some exercise in the process.

Unfortunately, most people can’t raise their own livestock, so for meat (and alternative protein sources) online delivery is an option, as well as shopping sales and using coupons at your local grocery store.

If all of this seems like too great of a commitment (admittedly it may take some extra work), there are other ways to start the journey without running headlong into an agricultural venture. Simply avoiding processed and fast foods is a start, as these options can be more expensive and may offer less in the way of solid nutrition. And if you find the “healthy” option too bland, make a pledge to yourself to stick with it until your taste buds become accustomed to the new foods, or experiment with spices and herbs to increase the flavor intensity.

Eating healthy and beginning an exercise program certainly demand a degree of attention and commitment, but they do not always require a lot of money. Regardless of what advertisers want you to believe, it is possible to stay in shape without a gym membership or expensive home gym equipment, and you can eat healthy without spending a week’s paycheck in the grocery store’s organic aisle.

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[i] https://www.organics.org/get-your-neighborhood-growing-how-to-start-a-communal-community-garden/
[ii] https://dengarden.com/gardening/edible-plants-you-can-grow-in-your-apartment

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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February 20, 2019

Your health and your finances

Your health and your finances

Staying healthy has obvious physical benefits, like the chance for a longer and higher quality of life.

There is also the increased opportunity to partake in physical activities like team sports, or hiking and skydiving.

But there are also potential financial benefits to staying healthy. These may manifest in lower insurance premiums, lower medical care costs, and other less obvious ways.

The Immediate Benefits
Some benefits may be immediately observable, like a potential drop in insurance premiums for those who quit smoking or who allow an insurance company to track their daily exercise goals and accomplishments.[i] Of course, a healthier body may translate to fewer doctor visits and medication expenses, which may mean lower costs for anyone with high deductibles and copays.

For family members, a longer, healthier, higher quality life may also mean fewer expenses in your twilight years, when senior citizens may continue to live in their own homes without assistance. Of course, genetics play a role in the development and progress of health, but many leading causes of death may be entirely or partially preventable.[ii] Actively pursuing a healthy lifestyle may lead to lower risk of disease and debilitation.

Health and life insurance companies want to attract these kinds of clients (who are long-lived, make fewer claims, and pay premiums for a greater amount of time), so these companies may offer benefits in return. Family members and friends may potentially have less to pay for end-of-life care and even benefit from being able to spend more time with loved ones. This may produce positive financial results, like fewer sick days from stress-related illness and better mental health.

The Less Obvious Benefits
Lower insurance premiums, lower medical costs, and more time to live in a meaningful way are obvious potential benefits of good health. But many latent financial benefits are also derived from maintaining good health. One example is being able to perform certain daily activities that may save you money.

Those with health problems often simply cannot perform tasks that may be taken for granted by healthy individuals, like packing and moving house, walking to the grocery store 15 minutes away, or living in a more affordable walk up building on a non-ground floor. Those who are unhealthy may need to hire people to help them move, to shop for them, or be required to pay a premium for access to a building with an elevator (or potentially even more costly, have a chair lift installed in their home).

A possible benefit of healthier eating is an appreciation for more subtle tastes that are not overpowered by sugar and salt. Those who regularly eat low salt or low sugar foods may create a positive feedback cycle wherein they remain healthy because they start to truly enjoy healthier food. This can lead to a wider range of options of enjoyable food and may help lower food costs.[iii]

Saving on transportation costs can be a benefit of health as well if you’re able to bike or walk to work. Living too far from your place of employment may make this impossible, but for those who live nearby, commuting by bicycle or walking on days with suitable weather may cut down costs on transportation while simultaneously providing the benefit of exercise.

One of the less evident but easily identifiable benefits of maintaining good health may be stronger cognitive abilities and better mood balancing. Eating healthy[iv] may contribute to brain health, while regular exercise[v] may help stimulate improved memory function and thinking skills. Better health may lead to more opportunities. Improved mood may also help navigate society more adeptly, possibly leading to even further opportunity, both economically and in personal fulfillment.

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This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies that may be available to you. As with any health-related change you may wish to make, seek the advice of a professional nutritionist, medical doctor, or health practitioner.

[i] https://qz.com/1396035/life-insurance-giant-john-hancock-is-asking-customers-to-wear-health-trackers/
[ii] https://www.healio.com/cardiology/chd-prevention/news/online/%7b3fa64285-7e6e-4068-833e-eb85182aa285%7d/cdc-heart-disease-cancer-leading-causes-of-death-in-2017
[iii] https://www.consumerreports.org/healthy-eating/healthy-food-does-not-have-to-cost-more/
[iv] https://www.health.harvard.edu/blog/nutritional-psychiatry-your-brain-on-food-201511168626
[v] https://www.health.harvard.edu/blog/regular-exercise-changes-brain-improve-memory-thinking-skills-201404097110

February 4, 2019

When is it OK to use a credit card?

When is it OK to use a credit card?

Even though your budget might be 100% on point, your retirement accounts well-funded, and you’ve got something stashed away for the kids’ college tuition, sometimes an emergency rears its ugly head.

And despite your best efforts, your only option to cover it might be to use a credit card.

Let’s face it. Once in a blue moon there may not be enough emergency fund to go around. Sometimes the water heater needs replacing right before the in-laws arrive for Thanksgiving. Doesn’t this kind of thing seem to always happen the same week your child falls off the swingset and needs an ER visit?

What is the best way to handle using your credit card for an emergency? Here are a few tips that may help you get out of a jam if you choose to use your credit card.

Take out a loan
If you’re planning on putting an emergency expense on a credit card, make sure it’s truly a last resort. If possible, try to find other ways to cover the expense first. Can you ask a friend or family member for a loan? You may consider other loan options such as a personal bank loan or a home equity loan. These options do carry interest, but the rate may be lower than the one for your credit card.

Use a low interest card
Find and keep the lowest interest rate card you can. Many credit cards may come with an introductory zero percent interest rate for a specified period. But pay attention to the interest rate that applies after the initial period. This is what you’ll be obligated to pay after the introductory period expires.

Keep a healthy credit score
If you have good to excellent credit, you may be able to secure a zero percent interest card to use specifically for the emergency. The idea is that you would plan to pay off the balance during the introductory period.

If your credit score isn’t high, work on it. Make your payments on time and strive to keep a low credit card balance.

Build your emergency fund
At one time or another, many of us have been caught off guard with an emergency. A well-stocked emergency fund is the first line of defense when those unplanned expenses come up.

Aim for an emergency fund equivalent of 6 to 12 months’ worth of expenses. If that seems overwhelming, focus on smaller goals such as saving $500 and then try hitting $1,000. With time and diligence, your emergency fund will grow, and you may not have to worry so much about needing to put emergency expenses on a credit card.

Getting through a pinch with a credit card
If you are in a pinch and absolutely must put emergency expenses on a credit card, shoot for the lowest interest rate and pay it off as quickly as you can. Meanwhile, continue to build your emergency fund so you can be prepared in the future.

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January 28, 2019

Renting vs. buying a home: Which is right for you?

Renting vs. buying a home: Which is right for you?

100 million Americans live in homes they or their families rent.

Which means about 250 million live in homes that are owned by themselves or their families.[i]

What about you? Are you a renter or an owner? If you’re thinking about making a change, take a look at these important factors when deciding to rent or own.

The Case for Ownership
One very oft-cited benefit of owning over renting is building up equity. When one rents, the entire rent payment goes to the landlord, and the tenant does not own any part of the dwelling at all. With a mortgage, on the other hand, the payer receives some percentage of ownership after every payment (assuming the payment is going towards the principal rather than interest alone), eventually leading to full ownership of the property.

For those with enough capital to outright purchase a property, ownership is almost certainly the best decision financially: no money is paid to a landlord for a service that is consumed but non-saleable in the future. Even for those without sufficient capital, mortgages tend to offer low interest rates (compared to other loan products), and the buyer can usually justify the mortgage interest in return for eventual full ownership. Even if the owner decides to move before the mortgage is completely paid off, the equity that was built thus far can be recouped and used later.

Other reasons to own may include more privacy and greater ability to customize the property. There is also the feeling of stability that you won’t have to renew a contract or potentially pay higher rent during the next cycle when your lease renews.

One of the biggest drawbacks of ownership is the potential that the property value may decline, particularly when still under mortgage. If the value of the property goes down – possibly due to a natural disaster or a lot of foreclosures in your neighborhood [ii] – the equity that was built by the owner may decline, not the amount owed on the loan. Thus a substantial decrease in prices as happened in the late 2000s, could cause an owner to be in the same position financially as a renter – that is, with no equity to speak of.

The Case for Rentership
For those who cannot meet ownership’s capital requirements, renting is not a choice – it’s a necessity. However, even those who would qualify for a mortgage may be better off renting, especially if they insist on flexibility. Selling a property is an involved, complex financial transaction that may take many months to complete. If you’re renting and you need to move, finding a subletter (if allowed) is a possibility, and even when not, a standard rental agreement usually only lasts one year, after which the renter may decline to renew. Thus flexibility is one of the most important factors for those who wish to rent.

And while there is usually much less customization allowable at rental properties, there may be significant benefits included in rent with utilities paid, maintenance performed, and communal facilities like gyms, pools, or laundry facilities available. For owners, maintenance, utilities, and tax bills are solely the responsibility of the owner, whereas for renters, these may be paid in part or in full by the landlord. Regarding the investment side, renters do not own the property, so they do not have to worry about losing equity if the property market decreases in value.

Some drawbacks of renting may be less privacy, not being able to build equity, and the uncertainty of future rental prices or even availability. Of course, if the rent increases too much, the renter has the flexibility to leave the property at the next cycle.

So whether you’re thinking of renting or buying, before you sign on the dotted line, examine your short and long term goals, the risks you’re willing to take, and your budget.

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[i] https://www.citylab.com/life/2018/08/who-rents-their-home-heres-what-the-data-says/566933/
[ii] https://www.thebalancesmb.com/causes-of-property-value-decrease-2124863

January 21, 2019

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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