Your health and your finances

February 20, 2019

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Luis Puente

Luis Puente

Educator and District Leader

2711 LBJ Freeway Suite 300

Farmers Branch, TX 75234

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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.


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 13, 2019

How to know when you need life insurance

How to know when you need life insurance

You might expect someone in the insurance business to tell you that anyone and everyone needs life insurance.

But certain life events underscore the reasons to secure a policy or to review the coverage you already have in place, to help ensure that it’s structured properly for your needs going forward.

Following are some of them…

You got married. Congrats! If you have a life insurance policy through your employer, it probably won’t provide enough coverage to replace your income for more than a year or so if you pass unexpectedly. (You might want to find out the specifics for your policy.) It’s time to get a quote and learn your coverage options now that you have a spouse.

You started a family. Having children is a responsibility that lasts for decades – and costs a lot. The average cost of raising a child until age 17 is estimated at $285,000.[i] Families with children have an average of 1.9 kids[ii], which nearly doubles those long-term costs. (That figure doesn’t include college tuition, fees, room and board, etc.) It’s time to consider a coverage strategy.

You bought a house. We don’t always live in the same house for the length of a mortgage, but a mortgage is a long-term commitment and one that needs to be paid to help ensure your family has a roof over their heads. In many cases, two incomes are needed to cover the mortgage as well as life’s other expenses. Buying a home is among the top reasons families buy life insurance.

You started a business. Congrats, again! Starting your own business may be a terrific way to build your income, but it isn’t without risk. Business loans are often secured by personal guarantees which may affect your family if something were to happen to you. Also consider the consequences if you aren’t around to run the business. How much time and money would be needed to find a replacement or to close the business down? All things to consider when looking for coverage.

You took on debt. Any sizeable debt can be a reason to consider purchasing life insurance. When we die, our debt doesn’t die with us. Instead, it’s settled out of our estate and paying that debt may require liquidating savings, selling assets, or both. In some cases, family members may be on the hook for the debt, particularly if the only remaining asset is the home they still live in. Life insurance can help put a buffer between creditors and your family, helping prevent a difficult financial situation. Your birthday is coming. Seriously. Life insurance rates may be more affordable now than they’ve been in the past – but every year you wait may cost you money in the form of higher premiums. Life insurance rates go up with age.

It never hurts to take some time and review the coverage that you have in place. To be sure, life insurance can be an essential part of a financial strategy and help provide a safety net for your family if something were to happen to you.


[i] https://smartasset.com/retirement/the-average-cost-of-raising-a-child
[ii] https://www.statista.com/statistics/718084/average-number-of-own-children-per-family/

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.

February 4, 2019

Renter or Owner: What type of insurance do you need?

Renter or Owner: What type of insurance do you need?

Whether you’re renting or you own your home, there are various insurance options you may want to consider.

Like any insurance, they’ll help provide financial coverage in the event of an unexpected disaster. There are also varying levels of insurance that you may choose.

For Homeowners
There’s a general category known as “homeowner’s insurance”, which usually covers four categories: interior and exterior damage, damage to or loss of possessions on the property, and personal liability coverage that will help cover the cost of injuries sustained while on the property (such as if a guest slips and falls down the steps to the front door). The damages section of the policy usually won’t cover acts of war or nature, the latter including things like volcanic eruptions or floods. However, many policies will cover lodging and meals while the property is under construction and not able to be inhabited for the duration, such as if an exterior wall is destroyed by fire.

For geographical areas prone to certain disasters, a separate, specialized insurance policy may need to be purchased in order to cover damages or loss caused by such disasters. For example, for areas that are low-lying and near rivers where frequent heavy storms occur, general insurance may not cover damage to the property. Conversely, properties in mountainous areas are unlikely to need flood insurance but may need earthquake and/or landslide insurance if such events are more common there.

For Renters
While homeowner insurance will cover damage to the property – which is a major concern for those with a financial stake in the property – renter’s insurance usually covers damage to and loss of possessions, and also offers coverage for personal liability for injuries sustained on the property. The landlord likely has an insurance policy on the property to help protect against financial loss in the event of physical damage, but their insurance unlikely will extend to the tenant’s possessions or guests’ injuries. Thus, those who rent the property will need to consider insurance policies for these events.

Which Policies to Choose
As with any insurance policy, there may be deductibles, liability limits, covered and noncovered events and assets, and premiums. Generally the higher the limits and the broader the group of included incidents or assets, the higher the premium will be.

Some issues to consider:

  • If you choose a high deductible you may have a lower premium.
  • If you have guests over regularly, greater coverage for personal liability may be worthwhile.
  • If you travel often, an extension to protection may be a good idea. This is because many insurance policies may not cover theft or certain damages (like those arising from fire) for “vacant” homes, since these can be a greater risk when no one is living there for an extended period.
  • Many companies and policies may offer discounts to the premium if you have certain protections, like an alarm system, if you regularly perform maintenance, or opt for fire-retardant materials.
  • Some companies offer premium discounts if you have for example, both your car insurance and your renter’s or homeowener’s insurance with them.

The bottom line is that you should shop around for the best rates and coverage. Each individual will need to find the best fit. Make sure you have coverage for any specific circumstances that may be common in your area. And most importantly, make sure you thoroughly read and understand your policies, and the situations they cover, and don’t cover.

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.


[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.

January 21, 2019

Preparing to buy your first home

Preparing to buy your first home

Home buying can be both very exciting and very stressful.

Picking out your dream home is thrilling, but credit scores, applications, and mortgage underwriting requirements? Well, not so much. Don’t let yourself be deterred. Here are a few moves to make before you amp up your home buying search that will help increase the fun and decrease the stress.

Know what you can afford
One of the first steps to home buying is knowing how much you can afford. Some experts advise that a monthly mortgage payment should be no more than 30% of your monthly take-home pay. Some say no more than 25%. If you stretch past that you could become “mortgage poor”. Consider this carefully. You might not want to be in your dream house and struggling to pay the utility bills, grocery bills, etc., or find yourself in a financial jam if an emergency comes up.

Get your finances ready for home buying
If you’re scouring listings, hunting for your dream home, but you’re not sure what your credit score is – stop. There are few things more disappointing than finally finding your dream home and then not having the financial chops to purchase it. You’ll need to get your finances in order and then start shopping. Focus on these areas:

Credit score: Your credit score is something you should know regardless of whether you’re home shopping. Usually, to get the best mortgage rates, you’ll want a score in the good to excellent range. If you’re not quite there, don’t despair. If you make payments toward your other obligations on time and pay off any debt you’re carrying, your credit score should respond accordingly.

Down payment: A conventional mortgage usually requires a 20 percent down payment. That may seem like a lot of money to come up with, but in turn, you may get the best interest rates, which can save you a significant amount over the life of the mortgage. Also, anything less than 20 percent down and you may have to purchase Private Mortgage Insurance – it’s a type of insurance that protects the lender if you default. Try to avoid it if you can.

Get pre-qualified before you shop for a home
Once you have your credit score and down payment in order, it’s time to get pre-qualified for a mortgage. A prequalification presents you as a serious buyer when you make offers on houses. Mortgage pre-approval doesn’t cost you anything, and it doesn’t make you obligated to any one house or mortgage. It’s just a piece of paper that says a bank trusts you to pay back the loan.

If you go shopping without a pre-approval, expect to get overlooked if there are other bidders. A seller will likely go with the buyer who has been pre-approved for a mortgage.

Prepare your paperwork
Getting approved for a mortgage is going to require you to do a little legwork. The bank will want to see documentation to substantiate your income and lifestyle expenses. Be prepared to cough up income tax documents such as W-2’s, paystubs, and bank statements. The sooner you get the paperwork together, the easier it will be to complete the mortgage application.

Shop for the best mortgage
Mortgage rates differ slightly depending on the lender, so shop for the lowest possible rate you can get. You may wish to use a mortgage broker to help. Also, get familiar with mortgage terms. The most common household mortgages are a 30-year term with a fixed rate, but there are 15-year terms, and mortgages with variable interest rates too.

Do your pre-home-buying homework
With a little legwork early on, home buying can be fun and exciting. Get your finances in order and educate yourself about mortgage options and you’ll be decorating your dream home in no time.


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. Before taking out any loan or enacting a funding strategy, seek the advice of a financial professional, accountant, and/or tax expert to discuss your options.

January 7, 2019

More financial tips for the new year

More financial tips for the new year

There’s nothing like the start of a brand new year to put you in a resolution-making, goal-setting, slate-cleaning kind of mood.

Along with your commitment to eat less sugar and exercise a little more, carve out some time to set a few financial aspirations for the new year. Here are some quick tips that may add up to significant benefits for you and your family.

Check your credit report
Start the new year with a copy of your credit report. Every consumer is entitled to one free credit report per year. Make it a point to get yours. Your credit report determines your credit score, so an improved score may help you get a better interest rate on an auto loan or a better plan for utilities or your phone.

Check your credit report carefully for accuracy. If you find anything that shouldn’t be there, you can file a dispute to have it removed. There are several sites where you can get your free credit report – just don’t get duped into paying for it.

Up your 401(k) contributions
The start of a new year is a great time to review your retirement strategy and up your 401(k) contributions. If saving for retirement is on your radar right now – as it should be – see if it works in your budget to increase your 401(k) contribution a few percentage points.

Review your health insurance policy
The open enrollment period for your health insurance may occur later in the year, so make a note on your calendar now to explore your health insurance options beforehand. If you have employer-sponsored health insurance, they should give you information about your plan choices as the renewal approaches. If you provide your own health insurance, you may need to talk to your representative or the health insurance company directly to assess your coverage and check how you might be able to save with a different plan.

Make sure your coverage is serving you well. If you have a high deductible plan, see if you can set up a health savings account. An HSA will allow you to put aside pretax earnings for covered health care costs throughout the year.

No spend days
Consider implementing “no spend days” into your year. Select one day per month (or two if you’re brave) and make it a no spend day. This only works well if you make it non-negotiable! A no spend day means no spur of the moment happy hours, going out to lunch, or engaging in so-called retail therapy.

A no spend day may help you save a little money, but the real gift is what you may learn about your spending habits.

Do some financial goal setting
Whether we really stick to them or not, many of us might be pretty good at setting career goals, family goals, and health and fitness goals. But when it comes to formulating financial goals, some of us might not be so great at that. Still, financial goal setting is essential, because just like anything else, you can’t get there if you’re not sure where you’re going.

Start your financial goal setting by knowing where you want to go. Have some debt you want to pay off? Looking to own a home? Want to retire in the next ten years? Those are great financial goals, but you’ll need a solid strategy to get there.

If you’re having trouble creating a financial strategy, consider working with a qualified financial professional. They can help you draw your financial roadmap.

Clean out your financial closet
Financial tools like budgets, savings strategies, and household expenses need to be revisited. Think of your finances like a closet that should be cleaned out at least once a year. Open it up and take everything out, get rid of what’s no longer serving you, and organize what’s left.

Review your household budget
Take a good look at your household budget. Remember, a budget should be updated as your life changes, so the beginning of a new year is an excellent time to review it. Don’t have a budget? An excellent goal would be to create one! A budget is one of the most useful financial tools available. It’s like an x-ray that reveals your income and spending habits so you can see and track changes over time.

Make this year your financial year
A new year is a great time to do a little financial soul searching. Freshen up your finances, revisit your financial strategies, and greet the new year on solid financial footing.

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. Before investing or enacting a savings or retirement strategy, seek the advice of a financial professional, accountant, health insurance representative, and/or tax expert to discuss your options.

December 31, 2018

Considering a home equity loan?

Considering a home equity loan?

Home prices may be leveling off in some areas but they’ve had a healthy recovery nationwide, leading to massive amounts of untapped equity.

According to a recent report, the average homeowner gained nearly $15,000 in equity in the past year and has nearly $115,000 available to draw.[i]

This can be good news if you need to increase your cash flow to pay for a special project or unusual expense.

Home equity risks
It might be obvious, but a home equity loan is secured by your home, based on the equity you’ve built. Your eligibility for a home equity loan involves several factors, but a primary consideration is going to be the difference between your home’s market value and the remaining balance on the mortgage. Keep in mind that missed payments due to a job loss, illness, or another financial setback may put your home at risk from two loans – the original mortgage and the home equity loan. Before you take out this type of loan, make sure you have a solid strategy in place for repayment.

Home equity loan costs
Funds acquired through a home equity loan can feel like found money, but keep in mind that a home equity loan takes an asset and converts it to debt – often for up to 30 years. As such, you’ll be paying certain fees to use the money.

Home equity loans often have closing costs of 2% to 5% of the loan amount.[ii] It might be worth it to shop around, however, to see if you can find a lender who won’t bury you in fees and loan charges. Interest rates may vary depending on your credit rating and other factors, but you can expect to pay about 6% or higher. If you were to borrow $100,000 of the $115,000 the average homeowner now has in equity, the interest costs over 30 years would be $115,000 – $15,000 more than you borrowed. If you can manage a 15-year term instead, this would drop the interest costs down to about $52,000.[iii] Carefully consider what you’ll use the funds to purchase. A new patio addition to your home or a pool with a deck may not add enough value to your home to offset the interest costs.

Tax benefits
Once upon a time, the interest for a home equity loan was tax deductible, much like the interest on a primary mortgage. Now, there are some rules attached to the tax benefit. If you use the loan funds to make improvements to the home you’re borrowing against, you can usually deduct the interest. In the past, the tax benefit didn’t consider how the funds were used.[iv]

Home equity loans can be a powerful financial tool. But as with many tools, it’s important to exercise caution. Before signing on the dotted line, be sure you understand the long-term cost of the loan. With interest rates climbing, a home equity loan isn’t as attractive a source of funding as it once was.

Depending on how the funds are used, a home equity loan can make sense. If you’re buried in high-interest debt, like credit cards, the math might work to your favor. However, if the money is spent on a shiny, red sports car and a trip to Vegas, it might be tough to make a financial argument for that – unless you win big.

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. Before taking out any loan or enacting a funding strategy, seek the advice of a financial professional, accountant, and/or tax expert to discuss your options.

[i] https://www.cnbc.com/2018/07/09/homeowners-sitting-on-record-amount-of-cash-and-not-tapping-it.html
[ii] https://www.lendingtree.com/home/home-equity/home-equity-loan-closing-costs/
[iii] https://www.mortgageloan.com/calculator/loan-line-payment-calculator
[iv] https://www.cnbc.com/2018/05/21/5-things-to-know-before-taking-out-a-home-equity-loan.html

December 31, 2018

Top 10 ways to save more than last year

Top 10 ways to save more than last year

If you’re starting the new year resolving to save a little more money than last year – great idea!

A healthy savings habit is foundational to good financial health. But maybe you’re looking at your budget (you have a budget, right?) and wondering how you’re going to come up with that extra money to put away.

Maybe your budget is already pretty tight with very little wiggle room. Don’t despair! Read on for ten ways even the most financially strict households can save a little more this year.

Automatic savings from your paycheck
One of the easiest ways to stash some extra cash is to have it directly deposited into a separate savings account. Update your direct deposit to include a percentage or a dollar amount from your paycheck that will go directly into a savings account every time you get paid.

Cashback offers
If you use credit cards for household expenditures such as groceries or gas, find a card that gives you money back on the purchases you make. When it comes time to redeem the rewards, opt to deposit the extra cash right into your savings account.

Cut the grocery bill
Food for your household can often be one of the biggest monthly expenses. You can help cut your food costs by meal planning, buying what’s on sale, using coupons strategically, and shopping at farmers markets. Try to steer clear from pre-made foods and convenience frozen items. The least expensive way to buy food is often to purchase whole food items in bulk.

Make sure that if and when you fall under budget for groceries, you’re saving that leftover money. If this becomes a trend, try cutting your grocery budget by the average amount you’re falling under each month and officially allocating the surplus to your savings.

Shop the sales
Using coupons or buying items that are only on sale is a great way to save extra money. The challenge here is to avoid buying something just because it’s been marked down. Simply put, if you do need a new item, like a pair of glasses, try not to pay full price. It’s worth it to shop around for the best deal.

Eat at home
Whether you’re single or have a family, cooking and eating at home is probably going to be better for your wallet. No one could deny that eating out can be expensive, and the cost can quickly add up. Prep meals ahead of time and pack your lunches and snacks.

Make sense of your cents
What do you do with your pocket change? Most of us find a little of it everywhere – in our car, on the dresser, in the washing machine, and at the bottom of our purses. Pocket change is money, and it adds up. Treat your pocket change with the same attention you give to paper money.

Start by keeping it in one place, like a change jar or dish. Then, periodically deposit it into your bank account.

Take advantage of free entertainment
Learn where to look, and you’ll find free entertainment abounds. Instead of paying to see a local band, look for a free show. Craving a little café culture? Save the cost of a designer coffee and bring your homebrew to the city park.

Create an emergency fund
Creating an emergency fund doesn’t sound like a money-saving strategy, but it is. Why? Because when an emergency comes up, you’ll have money at hand to deal with it. An emergency fund keeps you from putting surprise expenses on a credit card and potentially incurring interest.

Stash the windfalls
Found money can boost your savings this year. Found money may include bonuses, gifts or inheritance. Any income that is not accounted for in your regular budget is found money. Stash found money and your savings account will grow. If you can’t bear not to treat yourself to something, go for it but commit to saving half.

Curb impulse buys
Impulse purchases may wreck even the most conscientious savings plan. If you want to save successfully, you’ve got to curb your impulse buys. Try using the 24-hour rule. For any non-essential purchase, wait 24 hours. This will give the impulse a chance to fade, and you might realize you don’t really need or want the item.

Reward yourself
Saving money isn’t easy, but with the right strategy, you can make your savings goals a reality. Good luck and here’s to a prosperous year!

December 10, 2018

How young people can use life insurance

How young people can use life insurance

Sometimes life insurance doesn’t get the credit it deserves.

Most of us know it’s used to replace income if the worst were to happen, but that’s about it. If you’re in your twenties and just starting out on your own, especially if you’re single or don’t have kids yet, you might be thinking that getting a life insurance policy is something to put off until later in life.

On closer inspection however, life insurance can be a multi-faceted financial tool that has many interesting applications for your here-and-now. In fact, there’s probably a life insurance policy for most every person or situation.

Read on for some uses of life insurance you may be able to take advantage of when you’re young – you might find some interesting surprises!

Loan collateral: If you have your eye on entrepreneurship, life insurance can be of great service. Some types of business loans may require you to have a life insurance policy as collateral. If you have an eye on starting a business and think you may need a business loan, put a life insurance policy into place.

Pay off debt: A permanent life insurance policy has cash value. This is the amount the policy is worth should you choose to cash it in before the death benefit is needed. If you’re in a financial bind with debt – maybe from unexpected medical expenses or some other emergency you weren’t anticipating – using the cash value on the policy to pay off the debt may be an option. Some policies will even let you borrow against this cash value and repay it back with interest. (Note: If you’re thinking about utilizing the cash benefit of your life insurance policy, talk to a financial professional about the consequences.)

Charitable spending: If a certain cause or charity is near and dear to you, consider using the death benefit of a life insurance policy as a charitable gift. You can select your favorite charity or nonprofit organization and list them as a beneficiary on your life insurance policy. This will allow them to receive a tax-free gift when you pass away.

Leave a legacy of wealth: A life insurance policy can serve as a legacy to your beneficiaries. Consider purchasing a life insurance policy to serve as an inheritance. This is a good option if you are planning on using most or all of your savings during your non-working retirement years.

Mortgage down payment: The cash value of a whole life policy may be able to be used for large expenses, such as home buying. A whole life policy can serve as a down payment on a home – for you or for your children or grandchildren.

Key man insurance: Key man insurance is a useful tool for businesses. A key person is someone in your business with proprietary knowledge or some other business knowledge on which your business depends.

A business may purchase a life insurance policy on a key man (or woman) to help the business navigate the readjustment should that person die unexpectedly. A life insurance policy can help the business bridge that time and potential downturn in income, and help cover expenses to deal with the loss.

Financing college education: With the rising cost of college tuition, many families are looking for tools to finance their children’s college education. You may consider using the cash value of your life insurance policy to help with college tuition. Just remember to account for any possible tax implications you may incur.

Life insurance policies have many uses. There are great applications for young people, business owners, and just about anyone. Talk to a financial professional about your financial wishes to see how a life insurance policy can work for you.


Read all of your policy documents carefully so that you understand what situations your policies cover or don’t cover. 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. Before purchasing an insurance policy, seek the advice of a financial professional, accountant, and/or tax expert to discuss your options and the consequences with use of the policy.

December 3, 2018

First time home buyer? Beware hidden expenses.

First time home buyer? Beware hidden expenses.

If you’re getting into the home buying game, chances are you’re feeling a little overwhelmed.

Purchasing a home for the first time is exciting but it can also be very stressful! Anyone who’s been through that process could probably share a story about a surprise hidden expense that came along with their dream home.

Read on to help prepare yourself for some common costs that can pop up unexpectedly when you’re purchasing a home.

Emergency fund
Before we get into the hidden costs of homeownership, let’s talk a little about how to help handle them if and when they do arise. If you’re getting ready to buy a home but don’t have an emergency fund, you may want to strongly consider holding off that purchase, if at all possible, until you do have an emergency fund established. It’s recommended to put aside at least $1,000, but preferably you should save 3-6 months of your expenses, including mortgage payments. An emergency fund is the most fundamental personal finance tool you can have in your toolkit. It’s like the toolbox itself that holds all your other financial tools together. So, before you start home shopping, build your emergency fund.

Homeowners associations
If your dream house happens to be in a neighborhood with a homeowners association (HOA), be prepared to pony up HOA fees each month (some HOA’s may charge these fees every quarter, or even annually). HOA fees may cover costs to maintain neighborhood common areas, such as pools or parks. They may also cover maintenance to your front lawn, and/or snow removal from driveways, etc. Typically, a homeowners association will have a board that enforces any agreed-upon property standards, such as having you remove ivy from your home exterior, or making sure your sidewalk is pressure washed regularly.

If you purchase a home with an HOA, be prepared for the added cost in fees as well as adhering to the rules. You may incur a fine for such things as your grass not being mowed properly, or parking your boat or camper in your yard.

Private Mortgage Insurance (PMI)
PMI comes into play if you can’t make at least a 20% down payment on your new home. If that’s the case, your mortgage lender charges PMI which would kick in to protect them if you default on the loan. It can cost 0.3 to 1.5% of your mortgage. However, once you have 20% equity in the home, you don’t have to pay it anymore. (Note: You may have to proactively call your mortgage company and tell them to remove it.)

Maintenance costs
If you’ve been living the maintenance-free life in an apartment or rental home, the cost of maintaining a house that you own may come as a shock. Even new homes require maintenance – lawn care, pressure washing, clearing rain gutters, painting, etc. There’s always going to be something to upgrade or repair on a home, and many first-time home buyers aren’t prepared for the expense.

A good rule of thumb is to budget about 10 percent of the value of your home for maintenance per year. So, if you buy a $250,000 home, you should prepare for $2,500 a year in maintenance costs.

Home insurance
Be prepared for some sticker shock when purchasing your homeowners’ insurance. Homeowners insurance is typically significantly more expensive than purchasing a renter’s policy. If you live in an area prone to natural disasters, be prepared to pay top rates for homeowners’ insurance. If you live near a body of water, you may also need flood insurance.

Life insurance
Many first-time homebuyers may not give life insurance a thought, but it’s an important factor that can help protect your investment. You probably need life insurance if anyone is depending on your income. Especially if your income helps pay your mortgage every month, you should strongly consider a life insurance policy in case something were to happen to you. This will help ensure that your spouse or significant other can continue to live in your home.

Homebuying is exciting and part of the American dream. But don’t neglect to come back to reality – at least when making financial decisions – so you can budget properly and anticipate any hidden costs. This will help ensure that your first-time home buying experience is a happy one.

December 3, 2018

Home Insurance: A Primer

Home Insurance: A Primer

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

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

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

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

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

How much insurance do you need on your home?
The limit for your home policy is based on the cost to replace your home – not the value of the home – and on several other factors. Considerations for replacement cost include:

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

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

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

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

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

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

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

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

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

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


Please consult with a qualified professional and read all of your homeowners insurance documents carefully. Make sure you understand your policy(s) and know what situations are covered or not covered.

[i] https://lendedu.com/blog/average-homeowners-insurance-deductible/

November 26, 2018

Travel Insurance: What to know before you go

Travel Insurance: What to know before you go

Postcard-worthy sunsets. Fascinating cultures and customs. Exotic people and maybe even a new language to learn – at least enough to order food, pay for souvenirs, and find the nearest bathroom.

Travel can leave us with some amazing memories and lead us to grow simply by being exposed to different ways of seeing the world. It’s also fraught with peril – much of which we don’t consider when daydreaming about our trip. Travel insurance has the potential to provide protection if the daydream turns into a nightmare in a number of ways.[i]

An auto or life insurance policy is designed to provide a limited set of coverages, making the policies fairly easy to understand. Travel insurance, by comparison, can cover a wide range of unrelated risks, making the coverage and its exclusions a bit more difficult to follow. Depending on your travel insurance provider, your travel insurance may cover just a few risks or a wide gamut of potential mishaps.

So how do you know what kind of travel insurance you should purchase? Read on…

Trip Cancellation Insurance
One of the most basic and most commonly available coverage options, trip cancellation insurance provides coverage to reimburse you if you are unable to take your trip due to a number of possible reasons, including sickness or a death in the family. Cancellations for reasons such as a cruise line going bust or your tour operator going out of business are also typically covered. Additionally, if you or a member of your party becomes ill during the trip, trip cancellation insurance may reimburse you for the unused portion of the trip. Some trips you book will allow cancellation with full reimbursement (within a certain timeframe) for any reason, whereas some trips only allow reimbursement for medical or other specific reasons – make sure you check the travel policy for any limitations before you purchase it.

Baggage Insurance
Your travel daydreams probably don’t include lost baggage or theft of personal items while abroad – but it happens to travelers every day. Baggage insurance is another common coverage found bundled with travel insurance that provides protection for your belongings while traveling. If you already have a homeowners insurance or renters insurance policy, it’s likely that you already have this coverage in place. As a caveat, homeowners insurance and renters insurance policies typically limit the coverage for certain types of items, like jewelry, and may only pay a reduced amount for other types of items. Home insurance policies also have a deductible – typically $1,000 or more – that should be considered when deciding if you should purchase baggage insurance with your travel insurance.

Emergency Medical Coverage
Most people don’t know if their health insurance will cover them internationally – it could be that your policy does not protect you outside of the country. Accidents, illness, and other conditions that require medical assistance are border-blind and can happen anywhere, leaving you wondering how to arrange and pay for the medical attention that could be needed by you or your family. Travel health insurance can cover you in these instances and is often available as a stand-alone policy or bundled as part of a travel insurance package.

Accidental Death Coverage
Often bundled as a tag-along coverage with travel health insurance, accidental death coverage provides a limited benefit for accidental death while traveling. If you already have a life insurance policy, accidental death coverage may not be needed – and chances are good that your life insurance policy has fewer limitations and provides a higher death benefit for your named beneficiaries or loved ones.

Other Travel Coverages
A number of other options are often offered as part of travel insurance packages, including missed connection coverage, travel delay coverage, and traveler assistance. Another coverage option to consider is collision and comprehensive coverage for rented cars. Car accidents are among the leading types of mishaps when traveling. Typically, a personal car insurance policy will not cover you for vehicle damage, liability, or medical expenses when traveling abroad.

When you’re ready to cross “See the Seven Wonders of the Modern World” off your bucket list, consider travel insurance. It may provide some relief so you can concentrate on the important things, like making sure you bring the right foreign plug adapter for your hair dryer.


[i] “Should you buy travel insurance?” Insurance Information Institute, 2018, https://bit.ly/2Lv9BPc.

November 19, 2018

Before you have your life insurance medical exam...

Before you have your life insurance medical exam...

When you apply to purchase a life insurance policy, you may be asked to submit to a life insurance medical exam.

The insurance company requests this exam to determine your risk for certain medical conditions. They may also test for drugs in your system, including nicotine.

Depending on the insurance company, the medical exam may include blood work, a urinalysis, physical examination, and maybe even an EKG.

Also, in case you were wondering, many insurers will pay for the exam when you’re seeking a whole or term life insurance policy.

What you can expect during a life insurance medical exam
After you submit your application for life insurance, a third party company will contact you to schedule your exam. These companies are hired by the life insurance carrier to conduct exams on their behalf. They may come to your home or have you visit a medical facility.

You may be asked to refrain from having anything to eat or drink for at least 12 hours prior to your exam.

The exam typically takes less than 30 minutes and may consist of:

  • Taking your height and weight
  • Questions about your health as stated on your application
  • A blood draw
  • Urine sample

When your test is complete, and your results are ready, the company furnishes your results to the insurance carrier. You may also request a copy.

What does a life insurance medical exam test for?
A life insurance medical exam investigates three major areas:

  • Confirming the information you provided on your application
  • The condition of your health
  • Illicit drug use

The exam may test for diseases such as HIV or other sexually transmitted diseases. It also may identify indicators of heart disease such as a high cholesterol level. The test results may also point out kidney disease or diabetes.

How to prepare for your life insurance medical exam
Be honest: It’s important to complete your application completely and honestly. If the insurance carrier finds a misrepresentation on your application, they can deny coverage. Keep in mind, the application may ask about your lifestyle and if you regularly participate in dangerous activities, such as skydiving. You may also be asked about driving history and speeding tickets.
Eat a healthy diet: Be mindful of your diet in the days and weeks leading up to your exam. Lower your sodium intake as well as your consumption of fatty or sugary foods. Salt, sugar, and fat may elevate your blood pressure and cholesterol, so it may be best to avoid them to help get the best results. Shed a few pounds: If you’re above a healthy weight for your height, try to shed some pounds before the exam. If you’re overweight, your insurance carrier may charge a higher premium on your policy. It’s best to be as close to your healthy weight as possible.
Abstain from alcohol: Refrain from drinking alcohol for at least 24 hours before your exam. This will help ensure you don’t have a high blood alcohol level.
Drink plenty of water: Hydrating properly helps to flush toxins out of your system, and it may also make the exam more comfortable. You’ll have an easier time producing a urine sample and your veins will be easier to reach for a blood draw.

Dress lightly and practice good posture: Clothing can increase your weight by a few pounds, so dress lightly. Especially if you are approaching an unhealthy weight, your clothing may push you into a higher weight class. Also, stand tall so you are measured at full height.

Keep calm and…
Undergoing a life insurance medical exam can make even the healthiest person a little nervous. Stay calm and complete the application as honestly as you can.

Hint: If you can’t pass a life insurance medical exam, consider a guaranteed issue life insurance policy.


This article is for informational purposes only. You should discuss your exam criteria with a qualified financial professional.

November 19, 2018

How to handle an inheritance

How to handle an inheritance

If you’ve just come into an inheritance or another windfall like a settlement, it may be tempting to spend a little (or a lot) on some indulgences.

Even if – especially if – you’re already prudent with your budget and spending habits. You might be thinking, “I’m on top of my finances. What’s the harm of blowing a little cash on a few treats?” But read on. An inheritance or other monetary bonus – if handled wisely – has the potential to make a lifelong financial difference.

Start with these tips to help you make some lasting decisions about your newfound money.

Don’t make quick decisions
If you’ve received an inheritance from the death of a family member, you may want to take some time to grieve and start to develop a “new normal” before you make any big financial decisions.

Consider parking the money in a money market account or a high-interest rate savings account and letting it sit until you’re ready. A good rule of thumb when making a major financial decision is to give it at least 30 days. Shelve it for 30 days and then see how you feel. If you’re still not sure, put it back on the shelf for another 30 days.

Don’t feel rushed into making decisions about how to handle the money. It’s more important to take your time and make a careful decision than rushing into purchasing big-ticket items or making investments that may not be right for you.

Don’t shout it from the rooftops
Be cautious with whom you talk to about the inheritance. It’s best to discuss it with only a few trusted friends or family members. The more people you tell, the more “advice” you’re going to get about what you should do with the money. Some might even ask you to invest in one of their interests. (Which may be OK – that’s up to you!)

If you do come in to some money, one of your first calls should be to a qualified financial professional. Remember, it’s probably best to keep input minimal at this point, so tell as few people as possible.

Create a financial strategy
When you’re ready, it’s time to create a financial strategy. A financial professional can help you clarify your financial goals and offer a roadmap to get you there. No matter how much you inherited, developing a financial strategy is a must. Here are a few considerations to start:

Debt: If you have debt that is costing you money in the form of interest, this may be a good time to pay it off.
Emergency fund: If you don’t have a proper emergency fund, consider using some of the inheritance to fund one. An emergency fund should be 6-12 months of expenses put away in an easily accessible account for emergencies. An emergency is something like home or car repairs or unexpected medical bills (not a spur of the moment vacation or purchase).
Pay down your mortgage: If you have a mortgage, you may want to pay down as much as possible with some of the inheritance. The smaller your mortgage the better, because you’ll end up spending less in interest.
Saving for retirement: Saving some of your inheritance is probably never going to be a bad choice. Work with a financial professional to see what your options are.
Charitable donations: A charitable gift is always a good idea.

Have some fun
Coming into some unexpected money is exciting! You may be tempted to rush out and start spending. Make sure you do your financial decision-making first and then be sure to have some fun. Maybe give yourself 10 percent of the money to just enjoy. Maybe you want to take a cruise or buy a new high-end kayak. The point is to treat yourself to something, but only after you have a solid financial strategy in place.

An inheritance is a gift
Keep in mind that an inheritance is a gift. Somewhere along the line, someone worked for every one of those dollars. Something to keep in mind is that you can honor that person’s hard work by being a responsible steward of their gift.

November 5, 2018

How to have your dream wedding without nightmare spending

How to have your dream wedding without nightmare spending

Planning a wedding is both exciting and stressful. There are many moving parts to coordinate – guest lists, venues, menus.

Not to mention the fact that you’re making some major financial decisions – maybe your first as a couple. Needless to say, your wedding is a huge milestone. It’s easy to get caught up in the wave of excitement. But it’s also easy to go overboard with spending. One day you get engaged and the next thing you know, you’re looking at your wedding album (along with some potentially major credit card bills).

To keep your wedding costs as reasonable as possible, consider a fresh perspective. Read on for a few pointers to keep in mind as you embark on this new adventure.

Take the time to get your mind in the game
When you first commit to walk down the aisle together, it may be tempting to rush right out and buy your fantasy dress, secure the location where you’ll exchange your vows, and get your order in for your dream wedding cake. But slowing down a little and thinking about what would really make your day special can help corral your wedding costs (so you’ll have that much more for a down payment on your first home, for example).

Set a budget and stick to it
The average cost of a wedding in the United States is more than $33,000.[i] But don’t panic. You don’t have to spend $33,000 to have an unforgettable day. You’ve probably been to wonderful weddings that cost less than $1,000 as well as huge ballroom style weddings that can approach six figures.

Spend as much or as little as you can afford. The important point is to set a budget and stick to it. So sit down with your partner and create a budget you can live with, not just for the day itself, but for your future together. Decide on your most important elements, set the costs for them, and get started checking items off your list!

Spend only on what’s important to you
One thing to keep in mind is that this is your day. Your wedding doesn’t have to be all things to all people. What is most important to you and your fiancé? Love gourmet food? Maybe you splurge a bit on your menu. Into fashion? Maybe your attire is the big ticket item. Don’t care much for alcohol? Skip it and budget more money toward the DJ.

Call in favors and use your friends’ talents
Enlisting help from your friends not only can save money on wedding costs, but it can also make your wedding feel more personal and special. Gather up your talented friends and ask for their help.

Ask close friends to participate in the wedding prep instead of purchasing gifts. Acquaintances? Ask them if they will share their expertise for a minimal fee.

Hint: If your style is more casual, skip the professional photographer and ask your guests to take pictures with their smartphones. You can save a ton of money and end up with great true-to-life photos of your wedding (instead of professional portraits that might look a bit stuffy).

Stay calm and plan on
If you begin planning without a clear vision for how you want your day to unfold, you can quickly get caught up in the frenzy. Vendors and party planners will be happy to sell you lots of extras you may not want or need. So, think carefully about your plan, know it well, and stick to it as execution gets underway.

In short, the best way to save money on your wedding isn’t about cutting corners and limiting your guest list. Like any financial matter, it’s about knowing what’s important to you, setting a budget, and getting creative. Not only can this help save money on your wedding, but it also ensures a wedding that is uniquely yours. And the best news? Having some money left over for the honeymoon!


[i] https://www.theknot.com/content/average-wedding-cost-2017

November 5, 2018

Understanding compounding in investments

Understanding compounding in investments

Successful investors like Warren Buffett didn’t just hit a home run on a stock pick.

Warren Buffett hit lots of home runs, but compounding turned those home runs into history-making investment achievements.

Compounding doesn’t have to be a big mystery. It just means that the annual increase is added to the previous year’s balance, which, on average, gives each year a larger base for the next year’s increase. The concept of compounding applies to any interest-bearing savings or investments or to average percentage gains.

Here’s a quick example:

Starting investment: $10,000 Interest rate: 7%

Screen Shot 2018-11-06 at 1.32.35 PM

The rule of 7 & 10
There’s a reason a 7 percent return was chosen for this example. You can see that the total interest return over 10 years is about double the original investment. This is an example of the “Rule of 7 & 10”, which says that money doubles in 10 years at 7 percent return and that it doubles in 7 years at 10 percent interest. It’s not an exact rule, but it’s close enough so you can quickly estimate without a spreadsheet or calculator.

The simple interest example above only begins to show the power of compounding. It doesn’t include any additional investments after year one. In investing, compounding can come from more places than one, particularly if the stocks you own pay dividends. (A dividend is a share of the profit that is distributed to shareholders.)

Compounding in investing
Investing in stocks or mutual funds may provide an average annual return in line with the simple interest example, assuming investments are well diversified to mimic the broad market performance. For example, the S&P 500 return over the past 10 years is just over 7 percent annualized.[i] When you adjust for dividends, the annualized return is close to 10 percent. If those numbers sound familiar – like the rule of 7 & 10 – it’s a coincidence, but the past 10 years of S&P returns are very close to historical averages. Knowing what we now know, it’s easy to figure out that $10,000 will double in 7 years, assuming that market performance is aligned with historical averages. In reality, market performance may be higher or lower than past averages – but over a longer time line, short term peaks and valleys usually blend into an overall trend in direction.

If you’re concerned that you don’t know as much about investing as Warren Buffett, don’t think you need to be an oracle to be a successful investor. Many times, the best stock to pick for individual investors may be no stock at all. There are a myriad of investment options from which to choose without buying stocks directly. Talk to your financial professional about what choices may be available for you.


[i] https://dqydj.com/sp-500-return-calculator/

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. Before investing or enacting a retirement strategy, seek the advice of a financial professional, accountant, and/or tax expert to discuss your options.

October 29, 2018

How much home can you afford?

How much home can you afford?

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

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

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

The 28-36 Rule
Lenders look closely at income and debt when qualifying you for a certain mortgage amount. One of the rules of thumb at play is that housing expenses shouldn’t run more than 28% of your total gross income.[i] You also may hear this referred to as the “housing ratio” or the “front-end ratio”. The 28% rule is a good guideline – even for renters – and has been a common way to budget for household expenses over many generations. Using this rule of thumb, if your monthly income is $4,000, the average person would probably be able to afford up to $1,120 for a mortgage payment.

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

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

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

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


[i] https://www.bankrate.com/calculators/mortgages/new-house-calculator.aspx

October 22, 2018

How to expect the unexpected

How to expect the unexpected

Unexpected expenses can put a damper on your financial life.

You never know what may come up – vet bills, car repairs, unplanned travel expenses. Life is nothing if not full of surprises.

So, how do you pay for unexpected expenses when they arise? Borrow? Use your credit card? Take out a payday loan?

There is a better way. Wouldn’t it be nice to have some cash stored away to help you out when those emergencies pop up? Well, you can! It’s called an emergency fund. That’s what it’s for!

What is an emergency fund?
An emergency fund is a designated amount of cash – easily accessible – to prevent you from going into debt in case of a financial emergency. But how much should you put aside? Most experts agree a suitable amount for an emergency fund is 6-12 months’ worth of expenses.[i]

Sound like a lot of money? It is, but don’t let that stop you. An emergency fund can help make the difference between getting through a single emergency with merely a hiccup or spiraling down the financial rabbit hole of debt. Or it may help you ride through a few months if you lose your source of income.

It’s okay to start small
The thought of saving six months’ worth of income might make most of us throw up our hands in defeat before we even start.

Don’t let that get you down, though. The point is to start, even if it’s small. Just don’t give up. Begin with a goal of saving $500. Once you’ve achieved that, celebrate it! And then work on the next $500.

Slowly, over time, your emergency fund will increase and hopefully, so will your peace of mind.

Take advantage of “found money”
Found money is extra money that comes your way, that isn’t part of your normal income. It can include things like bonuses, inheritances, gifts, or cash from selling personal items.

When you find yourself with some found money, keep the 50/50 rule in mind. Put half the money toward your emergency fund, and put half toward whatever you like – your retirement, making this holiday season a little extra special, or add it to the college fund.

Let’s say you earned a bonus of $500 at your job. You worked hard and want to reward yourself. Go for it! Use half the bonus to buy the new shoes or the basketball game tickets, but put the other half in your emergency fund. It’ll be a win-win for you.

Take advantage of direct deposit
One of the best ways to help build your emergency fund is to make your deposits automatic. Siphon off a percentage of your paycheck into your emergency fund. Again, it’s key to start small here.

Know what an emergency is and what it is not
One of the fundamentals of building and maintaining an emergency fund is knowing what an emergency is and what it’s not. Unexpected expenses that require a dip into your emergency fund will happen – that’s what it’s for. But tapping in to your emergency fund on a regular basis shouldn’t be the norm. (If it is, you might need to take a look at your overall budget.)

Unexpected expenses your emergency fund may help cover:

  • Car repairs
  • Unexpected medical bills
  • Emergency home repairs
  • Unplanned travel for a death in the family

Some expenses that are not really emergencies:

  • A great sale on a cute winter coat
  • A spur of the moment weekend getaway
  • A spa day – no matter how much you need it!

Keep financial safety in mind
So the next time you see a gorgeous pair of shoes that you just “have to have” – ask yourself if they’ll be worth it if your 10-year-old dishwasher fails and your next dishwasher has to be you!

Don’t forget – start small. An emergency fund is about helping put a financial safety net in place. Don’t find yourself potentially compounding the difficulty of a true emergency by not having the funds to deal with it.


[i] https://www.nerdwallet.com/blog/banking/banking-basics/life-build-emergency-fund/

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