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 18, 2019

Do you use the 20/4/10 rule?

Do you use the 20/4/10 rule?

If you’re in the market for a new car, you may already be aware that the average cost of a new car is about $35,000.

This pricetag has been increasing steadily in recent decades.[i] As a result, there are some “new” loan options that allow you to spread out your payments for up to 7 years.

Having a longer time to pay back your auto loan may seem like a great idea – stretching out the loan period may lower the payments month-to-month, and help squeeze a new car purchase into your family budget without too much financial juggling.

Reality check
One thing to keep in mind is that cars depreciate faster than you might imagine. Within the first 30 days, your new car’s value will have dropped by 10%. A year later, the car will have lost 20% of its value. Fast forward to 5 years after your purchase and your car is now worth less than 40% of its initial cost.[ii]

If you go with a longer loan term, it will take that much more time to build equity in the vehicle. A forced sale due to an emergency or an accident that totals your vehicle may mean you’ll still owe money on a car you no longer have. (This is what’s meant by being “upside down” in a loan: you owe more than the item is worth.)

If you’re not sure what to do, consider the 20/4/10 rule.

1. Try to put down 20% or more. Whether using cash or a trade-in that has equity, put down at least 20% of the new vehicle’s purchase price. This builds instant equity and may help you stay ahead of depreciation. Also add the cost for tax and tags to your down payment. You won’t want to pay interest on these expenses.

2. Take a loan of no longer than 4 years. Longer term loans may lower the monthly payments, but feeling like you need a loan term of more than 4 years may be a red flag that you’re buying more car than you can comfortably afford. With a shorter term loan, you may get a better interest rate and pay less interest overall because of the shorter term. This may make quite a difference in savings for you.

3. Commit no more than 10% of your gross annual income to primary car expenses. Your primary expenses would include the car payment (principal and interest), as well as your insurance payment. Other expenses, like fuel and maintenance, aren’t considered in this figure. The 10% part of the 20/4/10 rule may be the most difficult part to follow for many households considering purchasing a new car. Feeling pinched if you go with a new car could suggest that a reliable used car may be a better financial fit.

Cars are often symbolic of freedom, so it’s no wonder that we sometimes get emotional about car-buying decisions. It’s often best – as with any major purchase – to take a step back and look at the numbers and how they would affect your overall financial strategy, budget, emergency fund, etc. The money you save if you need to go with a used car could be used to build your savings or treat your family to something special now and then – and you’ll enjoy the real freedom of not being a slave to your monthly auto payment.


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, seek the advice of a financial professional, accountant, and/or tax expert to discuss your options.

[i] https://www.prnewswire.com/news-releases/average-new-car-prices-jump-2-percent-for-march-2018-on-suv-sales-strength-according-to-kelley-blue-book-300623110.html
[ii] https://www.carfax.com/blog/car-depreciation

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.

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 14, 2019

Should I pay off my car or my credit cards?

Should I pay off my car or my credit cards?

Credit card statements and auto loan statements are often among the bigger bills the mail carrier brings.

Wouldn’t it be great to just pay them off and then use those monthly payments for something else, like building your savings and giving yourself a bit of breathing room for a treat now and then?

Paying extra money on your credit card bills and your car loan at the same time may not be an option, so which is better to pay off first?

In most cases, paying down credit cards might be a better strategy. But the reasons for paying off your credit cards first are numerous. Let’s look at why that usually may make more sense.

  • Credit cards have high interest rates. When you look at the balances for your auto loan vs. your credit card, the larger amount may often be the auto loan. Big balances can be unnerving, so your inclination may be to pay that down first. However, auto loans usually have a relatively low interest rate, so if you have an extra $100 or $200 per month to put toward debt, credit cards make a better choice. The average credit card interest rate is about 15%, whereas the average auto loan rate is usually under 7%, if you have good credit.[i]

  • Credit cards charge compound interest. Most auto loans are simple-interest loans, which means you only pay interest on the principal. Credit cards, however, charge compound interest, which means any interest that accrues on your account can generate interest of its own. Yikes!

  • You’ll lower your credit utilization. Part of your credit score is based on your credit utilization, which specifically refers to how much of your revolving credit you use. As you pay down your balance, you’ll not only pay less in interest, you may also give your credit score a boost by reducing your credit utilization.

The numbers don’t lie
Let’s say you have a 5-year auto loan for $30,000 at 7% interest. You also have an extra $100 per month you’d like to use to pay down debt. By adding that 100 bucks to your car payments, over the course of the loan you can cut your loan length by 10 months and save $972.32.[ii] Impressive.

Let’s look at a credit card balance. Maybe the credit card interest rate is higher than the car loan, but hopefully the balance is lower. Let’s assume a balance of only $10,000 and an interest rate of 15%. With your minimum payment, you’d probably pay about $225 monthly. Putting the extra $100 per month toward the credit card balance and paying $325 shortens the payment length for the card balance by 26 months and saves $1,986 in interest expense.[iii] Wow!

The math tells the truth. In the above hypothetical scenarios, even though the balance on the credit card is one-third that of the total owed for the car, you would save more money by paying off the credit card balance first.

Financial strategy isn’t just about paying down debt though. As you go, be sure you’re saving as well. You’ll need an emergency fund and you’ll need to invest for your retirement. Let’s talk. I have some ideas that can help you build toward your goals for your future.


[i] https://www.valuepenguin.com/auto-loans/average-auto-loan-interest-rates
[ii] https://www.bankrate.com/calculators/auto/early-payment-payoff-calculator.aspx
[iii] https://www.bankrate.com/calculators/credit-cards/credit-card-payoff-calculator.aspx

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.

January 7, 2019

Read this before you walk down the aisle

Read this before you walk down the aisle

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

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

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

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

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

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

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

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

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

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

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

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

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 24, 2018

It may not be as hard as you think

It may not be as hard as you think

Once upon a time, a million dollars was a lot of money.

And it still is. If you time it right, becoming a millionaire might be within reach for nearly anyone. There are some catches, however – you’ll have to stay focused, and time plays a significant role, so starting early is part of the millionaire game.

Time is important because you’ll use the leverage of compound interest to help build your nest egg. For example, let’s assume an average rate of return of 8% in a tax-deferred account, like an IRA or a 401(k). This 8% example is lower than the historical return for the S&P since its inception in 1928. Historically, the S&P has rewarded investors with about a 10% average annual return, including dividends.[i]

Then let’s assume your current savings are at zero. Let’s also assume that you can find $100 per month in your budget to invest. $100 per month is about $3 per day.

Starting your account with your first $100 and then contributing $100 per month (every month) will yield the following amounts, assuming that your account’s returns stay at the 8% average:

  • After 10 years, you’ll have about $17,600\
  • After 15 years, you’ll have about $33,000\
  • After 20 years, you’ll have about $55,000

Uh oh. None of those numbers are even close to $1 million. To reach $1 million by saving $100 per month, you’ll need 55 years at the 8% rate of return, at which time your account would be worth approximately $1,025,599. (By the way, the account would grow by $75,000 from year 54 to year 55 since your compound growth would be based on a much bigger number.)

If you can step up your investment to $150 per month, you might be able to shave five years off your goal and reach $1 million in 50 years. At $200 per month, you might reach your goal in just over 45 years.[ii]

Looking at these numbers, ask yourself how much you can save each day. When you spend money now, it’s gone. It never has a chance to grow. By saving (and investing) instead of spending, you can help set yourself up for a comfortable future where you can afford the treats you’re skipping now so you can fund your savings.

At $15 per day – the price of dinner at a fast food restaurant – you could save $450 per month, enough to make you a millionaire in just over 35 years.

The market refers to the process of investing a consistent amount monthly, regardless of the price of shares, “dollar cost averaging”. Let time take care of the math through compounded returns. Just keep saving for your future consistently.


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

[i] https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp
[ii] https://www.investor.gov/additional-resources/free-financial-planning-tools/compound-interest-calculator

December 17, 2018

How much will this cost me?

How much will this cost me?

If you’re dipping your toe in the pool of life insurance for the first time, you’re bound to have a lot of questions.

At the top of your list is probably how much setting up a policy is going to cost you.

There are several things that can determine how much you’ll pay for life insurance, including the type of policy you select. But before we dive in and look at cost, let’s check out the types of life insurance available.

Major types of life insurance
Life insurance is customizable and can suit many different needs, but for the most part, life insurance comes in three main varieties.

Term life insurance: A term life policy is active for a preselected length of time. It could be 15, 20, or 30 years. If something happens to you during that term, your beneficiary will receive the death benefit of the policy.

Permanent life insurance: Permanent life insurance is a policy that stays active as long as you’re alive. When you pass away, the policy pays out to your named beneficiary. The value of the policy increases over time, and you can borrow against this “cash value” in some circumstances.

Universal life insurance: Universal life insurance works like a permanent life policy in that it pays out to your beneficiary, but it also accrues interest over the policy term (which may be affected by market performance).

How your cost is calculated
The insurance company estimates the cost of a life insurance policy based on your risk factors. Risk factor data is gathered and evaluated based on the information in your application. Then the insurance company uses historical data, trends, and actuarial processes to come up with a premium for you.

The cost of some life insurance policies can change over time, while others remain the same.

What risk factors does the company use?
When the insurance company is calculating your rate, they look at several factors, including:

Your demographics: Your demographics include your age, weight, gender, and health. The company will also want to know if you smoke, and other health-related issues you may have.

The amount of the death benefit: The death benefit is the amount the policy will pay to your beneficiaries when you pass away. The larger the death benefit you select, the more expensive the policy.

Your lifestyle: Lifestyle habits and hobbies can affect the cost of your policy. The insurance company will want to know if you ride a motorcycle regularly, or how often you drink alcohol, for example.

Your risk and life insurance cost
The risk of when your death will occur ultimately determines your life insurance costs. That’s why the younger you are the less the policy should cost. If you wait to purchase your life insurance policy when you’re older, the policy will most likely cost more.

But there are things you can do that may help lessen the cost of the policy. Anything that will increase your health status may help with your life insurance costs. Quitting smoking and starting a regular exercise program can promote your health and in turn this may also have a positive effect on your health insurance premium.

A life insurance agent can help
If you’re looking for a life insurance policy and wondering about the cost, a qualified life insurance agent can be a great help. A life insurance agent has access to many different insurance companies and can work to get you matched with the right policy at the right price for you.


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

December 17, 2018

Permanent or Term Life: Which is right for you?

Permanent or Term Life: Which is right for you?

Life insurance has many benefits.

Most people purchase life insurance to serve as a safety net for the financial health of their family if something happens to them as the primary provider. A life insurance policy in such cases could be used for funeral costs, medical bills, mortgage payments, or other expenses.

You’re finally convinced you need a life insurance policy, and you’re ready to buy. But what do you need exactly? What type of life insurance is best for you?

When preparing to purchase life insurance, there are two main types of policies to consider – permanent and term. Read on for a short primer on the differences and which one may be right for you.

Term life insurance at a glance
Term life insurance offers life insurance coverage for a set amount of time – the “term”. If you pass away during the term, the policy pays out to your beneficiary. A term policy is sometimes called a pure life policy because it doesn’t have financial benefits other than the payout to your dependents should you die within the term.

There are different terms available depending on your needs. You could purchase a term life policy for 10, 20, or 30 years.

Term life insurance pointers
When purchasing a term life policy, consider a term for the number of years you’ll need coverage. For example, you may want life insurance to provide for your child in case you die prematurely. So, you may select a 25-year term. On the other hand, you may want a life insurance policy to help with the mortgage should something happen to you. In this case, you may opt for a 30-year term which will expire when your mortgage is paid off.

You’ll need to purchase enough insurance to cover your family’s needs if something happens to you and you cannot provide for them. Term life insurance benefits could serve as income replacement for your wages, so buy enough to pay for the expenses your paycheck covers.

For example, if you cover the mortgage, car payment, and child care, make sure the term life policy you purchase can cover those expenses.

Term life insurance policies when appropriately used should expire around the time the need for them goes away, such as when your children are self-sufficient, or your mortgage is paid off.

Permanent insurance at a glance
This type of policy can provide coverage for your entire life, unlike a term policy that expires at a set time. A permanent life policy also contains an investment benefit which is known as the policy’s cash value. The cash value of a permanent life policy grows slowly over time but is tax-free (provided you stay within certain limits), so you don’t pay taxes on the accumulating value.

A permanent life policy can be borrowed against. You can borrow against the cash value, but you must abide by the repayment terms to keep the policy payout unchanged.

Some permanent life insurance policies offer dividends. The dividends are paid to the policyholders based on the insurance company’s financial profits. Policyholders can take dividends in the form of cash payouts or use them to earn interest, payback a loan on the policy, or purchase additional life insurance coverage.

Some of the key points regarding permanent life insurance include:

  • The premium can remain the same throughout the policy term if you abide by the conditions and terms in the policy
  • The policy offers a guaranteed death benefit

Cost of life insurance
Term life insurance is generally less expensive than permanent life insurance because the policy has a pre-selected term. Permanent life insurance, on the other hand, covers the insured for their entire lifespan, so you can expect premiums to be higher.

Which life insurance policy is right for you?
If you aren’t sure which policy is right for you, talk to a qualified financial professional who can help you find the right type of life insurance policy to meet your goals and budget.


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

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 10, 2018

Savings accounts vs. CDs – which is better?

Savings accounts vs. CDs – which is better?

Interest rates are on the rise, which might not be great news if you carry revolving debt.

But savings accounts and certificates of deposit (CDs) might start looking more attractive as places to put your money. Currently, both savings accounts and CDs might be good options, so which is better? In large part, whether a savings account or a CD is the better tool for saving depends on your savings goal.

Access to funds
Savings accounts offer more flexibility than CDs if you need to withdraw your money. However, be aware that many banks charge a fee if your balance falls below a certain threshold. Some banks don’t have a minimum balance requirement, and some credit unions have minimum balance requirements as low as a penny. It could be worth it to shop around if you think you might need to draw down the account at any moment.

CDs, on the other hand, have a maturity date. If you need access to your funds before the maturity date, which might range from six months to up to five years depending on which CD you choose, expect to sacrifice some interest or pay a penalty. Accessing funds held in a standard CD before its maturity date is called “breaking the CD”.

“Liquid CDs” allow you to withdraw without penalty, but typically pay a lower interest rate than standard CDs.

Interest rates
CDs are historically known for paying higher interest rates than savings accounts, but this isn’t always the case. Interest rates for both types of accounts are still hovering near their lows. Depending on your situation, it might be better to choose an account type based on convenience. If interest rates continue upward, CDs may become more attractive.

In a higher interest rate environment, CDs might be a great tool for saving if you know when you’ll need the money. Let’s say you have a bill for college that will be due in thirteen months. If you won’t need the money for anything else in the meantime, a twelve-month CD might be a fit because the CD will mature before the bill is due, so the money can be withdrawn without penalty.

If your goal is to establish an emergency fund, however, a CD might not be the best option because you don’t know when you’re going to need the money. If an emergency comes your way, you won’t want to pay a penalty to access your savings. Keep an eye on current rates, and if CD interest rates start to increase, then you might consider them for longer-term savings if you won’t need the funds until a fixed date in the future. For emergency savings, consider a savings account that keeps your money separate from your checking account but still provides easy access if you need it.

Depending on your situation, a CD or a savings account may be the better fit. Shop around for the best rates you can find, and make sure you understand any penalties or fees you might incur for withdrawing funds.


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

November 26, 2018

Dig yourself out of debt

Dig yourself out of debt

I hate to break it to you, but no matter what generation you are – Baby Boomer, Generation X, or Millennial – you’re probably in debt.

If you’re not – good on you! Keep doing what you’re doing.

But if you are in debt, you’re not alone. A study[i] by the financial organization, Comet, found:

  • 80.9 percent of Baby Boomers are in debt
  • 79.9 percent of Generation X is in debt
  • 81.5 percent of Millennials are in debt

There are some folks whose goal is to eliminate all debt – and if that’s yours, great! But one thing to keep in mind while you’re working towards that finish line is that not all debt is created equal. Carrying a mortgage, for example, may be considered a “healthy” debt. Student loan debt may feel like an encumbrance, but hopefully, your education has given you more earning power in the workforce. A car loan may even be considered a healthy debt. So, there are some types of debt that may offer you advantages.

Any credit card debt you have, however, should be dealt with asap. Credit card debt can cost money every month in the form of interest, and it gives you nothing in return – no equity, no education, no increase in earning potential. It’s like throwing money down the drain.

So, let’s get to work and look at some of the best tips for paying down credit card debt.

1. Get to know your debt
Make a commitment to be honest with yourself. If you’re in denial, it’s going to be hard to make positive changes. So take a good, hard look at your debt. Examine your credit card statements and note balances, interest rates, minimum monthly payment amounts, and due dates. Once you have this information down in black and white you can start to create a repayment strategy.

2. Get motivated
Taking on your debt isn’t easy. Most of us would rather not confront it. We may make half-hearted attempts to pay it off but never truly get anywhere. Need a little motivation? Getting rid of your credit card debt may make you happier. The Comet study asked respondents to rate their happiness on a scale of one to seven.[ii] It turns out that those who selected the lowest rating also carried the highest amounts of credit card debt. Want to be happier? It seems like paying off your credit card debt may help!

3. Develop your strategy
There are many strategies for paying off your credit card debt. Once you understand all your debt and have found your motivation, it’s time to pick a strategy. There are two main strategies for debt repayment. One focuses on knocking out the highest interest debt first, and the other method begins with tackling the smallest principal balances first. Here’s how they work:

  • Start with the highest interest rate: One of the items you should have noted when you did your debt overview is the interest rate for each account. With this method, you’ll throw the largest payment you can at your highest interest rate debt every month, while paying the minimum payments on your other debts. Utilizing this method may help you pay less interest over time.

  • Start with the smallest balance: As opposed to comparing interest rates, this method requires you to look at your balances. With this strategy, you’ll begin paying the smallest balance off first. Continue to make the minimum payments on your other accounts and put as much money as you can towards the smallest balance. Once you have that one paid off, combine the amount you were paying on that balance with the minimum you were paying on your next smallest balance, and so on. This strategy can help keep you motivated and encouraged since you should start to see some results right away.

Either strategy can work well. Pick the one that seems best for you, execute, and most importantly – don’t give up!

4. Live by a budget
As you begin chipping away at your credit card debt, it’s important to watch your spending. If you continue to charge purchases, you won’t see the progress you’re making, so watch your spending closely. If you don’t have a budget already, now would be a good time to create one.

5. Think extra payments
Once you are committed to paying off your debt and have developed your strategy, keep it top of mind. Make it your number one financial priority. So when you come across “found” money – like work bonuses or gifts – see it as an opportunity to make an extra credit card payment. The more of those little extra payments you make, the better. Make them while the cash is in hand, so you aren’t tempted to spend it on something else.

6. Celebrate your victories
Living on a budget and paying off debt can feel tedious. Paying off debt takes time. Don’t forget to take pride in what you’re trying to accomplish. Celebrate your milestones. Do something special when you get that first small balance paid off, but try to make the occasion free or at least cheap! The point is to reward yourself for your hard financial work. (Hint: Try putting up a chart or calendar in your kitchen and marking off your progress as you go!)

Reward yourself with a debt-free life Getting out of debt is a great reward in and of itself. It takes discipline, persistence, and patience, but it can be done. Come to terms with your debt, formulate a strategy, and stick to it. Your financial future will thank you!


[i] & [ii] https://www.cometfi.com/details-of-debt

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 12, 2018

Starting a business? Here's what you need to know.

Starting a business? Here's what you need to know.

Starting your business requires making a myriad of decisions.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

How much and what kind of insurance do you need?
Insurance may be one of the last things to come to mind when you’re launching your business, but going without it may be extremely risky.

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

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

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


This article is for informational purposes only. For tax or legal advice consult a qualified expert. Consider all of your options carefully.

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 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/

October 22, 2018

Are you stressed about saving for retirement?

Are you stressed about saving for retirement?

Most of us might feel at least a little anxiety when the subject of preparing for retirement comes up.

Many Americans feel like they haven’t saved enough. In fact, 79% of American workers plan on working longer to make up for what they haven’t saved.[i]

But anticipating staying in the workforce may not be the best strategy when it comes to funding your golden years. Why? Because there are many unforeseen events that can affect your ability (or desire) to work – health problems, caretaking, loss of opportunity in your field… or just wanting to spend time with your grandkids or travel with your partner.

With so much uncertainty, it’s no wonder many Americans feel stressed, burdened, and unprepared when it comes to saving for retirement.

But don’t let retirement worries steal your joy. When it comes to saving for retirement there are a lot of choices you can make to help you prepare. Read on for some principles and tips that may help lessen your stress about the future.

Small changes add up
Retirement saving may seem like an insurmountable task when faced with the high cost of daily life. It’s easy to think we can’t afford to save for retirement and get stuck in a pattern of defeat. But small changes over time can add up to big results.

Shake off despair by implementing small strategies. Consistent saving adds up over time, and it can help build your finance muscle. Read on for some more easy tips.

Direct deposit
Set up a portion of your direct deposit to go straight into a savings account. This is a “set it and forget it” savings strategy, and you’ll be amazed how quickly it can build.

Save found money
Found money is extra cash that comes your way outside of your normal income. It can be from bonuses, gifts, or even a side gig. You weren’t planning on receiving that money anyway, so throw it right into your savings.

Practice frugality
Instead of becoming stressed out and hyper-focused on saving every possible penny, practice frugality. Frugal living can put your energy into something positive – creating a new habit and lifestyle. Also, frugal habits may help prepare you for living on a fixed income during retirement. Try these tips for starters:

Consider downsizing your home
Cut back or eliminate “extras” such as dining out, movies, and concerts When making a purchase, use any available coupons or discount codes Seek sources of free entertainment such as community festivals or neighborhood gatherings

Hire a financial professional
If no matter what you do you still can’t help feeling unprepared and stressed about your retirement, consider hiring a financial professional.

A financial professional may be able to help you change your perspective on preparing for retirement and help empower you with strategies custom made for you.

Remember, financial professionals work with people of all income levels, so don’t hesitate if you need help to get a handle on your retirement. They may assist with:

  • Creating a budget
  • Setting up savings accounts
  • Clarifying your retirement goals
  • Strategies for eliminating debt

Change your perspective on preparing for retirement
If you’re anxious about having enough money for your retirement, try changing your perspective. Focus on small goals and lifestyle habits. Frugality, consistent savings, and solid financial strategies may help take the stress out of retirement planning.

Consistency over time is the name of the game with retirement savings. So implement a few strategies that you can live with now.


[i] https://www.washingtonpost.com/news/get-there/wp/2018/03/19/no-retirement-savings-thinking-youll-just-work-longer-think-again/?utm_term=.bd1f94eea6e3

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