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April 19, 2021

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Rich & Kristina Messenger

Rich & Kristina Messenger

Senior Vice President



McKinney, TX

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April 14, 2021

The Time Value of Money and College

The Time Value of Money and College

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

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

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

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

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

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

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

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

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

March 29, 2021

Personal Finance Moves For Small Business Owners

Personal Finance Moves For Small Business Owners

As a small business owner, you’re responsible for everything—from saving on office supplies to making sure folks get paid to knowing what taxes to file and when.

A big part of success is educating yourself on how your personal finances affect your business and vice versa. Here are a few moves that can help keep your personal finances healthy while you grow your business.

Keep track of your monthly income and expenses. Your business income can vary dramatically from month to month, depending on the season, number of sales, trends in your market, etc. These could potentially cause your average bottom line to be lower than anticipated.

That’s why it’s critical to track your monthly income and then budget accordingly. As your income grows and shrinks, you can adjust your spending.

Set up an emergency fund. This money can be used to cover unexpected costs, such as unanticipated repairs or an illness. But, when you own a business, it can also help you make ends meet if business is slow or, say, if a global pandemic shuts down the world economy. Save up 6 months’ worth of spending in an account you can easily access in a pinch!

Know what you owe, to whom, and when it is due. Personal debt can be a serious challenge for small business owners. It may motivate them to make foolish financial decisions to pay off what they owe, regardless of the consequences.

That’s why it’s important to manage your finances responsibly so that debt doesn’t become a problem. Adopt a debt management strategy to reduce your debt ASAP. Your business may benefit greatly from it.

Get professional advice if you need help with your finances. If it’s at all feasible for your business’s budget, get a professional set of eyes on your books. They’ll help you navigate the world of finances, share strategies that can help make the most of your revenue, and show you how to position yourself for future success!

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March 22, 2021

How to Manage High Costs of Living

How to Manage High Costs of Living

It’s no secret that living in a larger city can be more expensive than in other areas.

Depending on where you live, the cost of buying groceries, public transportation, and even rent can vary drastically! If you want to learn how to manage your finances when living in an area with a higher cost of living, read on…

Lower your housing costs. Keeping a roof over your head is probably your number one expense, especially if you live in a major city. The most straightforward way to free up cash flow, then, is to downsize your apartment or home size.

While that sounds simple, it’s not always easy, particularly if you own a house! But if your budget is too tight and it’s at all possible, moving to a cheaper home or apartment can be the single most effective way to cut your spending and increase your cash flow.

Consider moving to a cheaper area. To find less costly housing, you may choose to relocate to a new neighborhood. But be sure to keep tabs on the price of daily expenses like groceries or increased transportation costs in your new stomping grounds—just because housing is cheaper doesn’t mean everything else will be!

Take on a second job, like freelancing, dog walking, or babysitting. Fortunately, living in a high cost of living area might mean you have access to plenty of part-time or side work. Check out sites like Upwork, and leverage your social networks to find viable gigs.

If you live in an area that’s high cost and has poor employment opportunities, you may need to consider relocating entirely.

Trim your budget. Try using a free budgeting app like Mint or PocketGuard for this one! They’re easy-to-use tools that can help you identify problematic spending patterns. Once you know where you’re wasting money, you can develop a strategy for cutting costs.

Coping with a high cost of living can be challenging, especially if you love the lifestyle of a big city or your work requires you to live in a certain area. Using these strategies can help reduce the burden of living in an expensive neighborhood. Which one would be easiest for you to apply to your financial life?

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March 15, 2021

What You Need To Know About Life Insurance

What You Need To Know About Life Insurance

Buying life insurance is something that many people put off.

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

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

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

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

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

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

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

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

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

March 1, 2021

How to Find Your Net Worth

How to Find Your Net Worth

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

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

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

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

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

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

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

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

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

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

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

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February 22, 2021

What Are The Odds of Winning the Lottery?

What Are The Odds of Winning the Lottery?

Your odds of winning the Powerball are 1 in 292.2 million. For Mega Millions, your odds are 1 in 302.5 million.¹

Translation—you almost certainly will not win the lottery.

You have a greater chance of being killed by lightning (1 in 2 million), having a fatal encounter with a venomous plant or animal (1 in 3.4 million), or being crushed by a falling plane (1 in 10 million).²

The worst part? Playing more doesn’t improve your chances of winning. The probability of drawing the lucky numbers resets every time you buy a scratch-off or choose your “lucky number.” You’re throwing money at a tiny moving target that you’re almost guaranteed to miss.

If you do like to purchase lottery tickets for entertainment—try to keep it to just that. Make sure you budget in ticket purchases with other fun-related activities, and if you do reap some winnings, make sure you have a strategy for saving a portion towards your financial goals.

Buying lottery tickets is generally an unproductive activity. If left unchecked, it can turn into a money blackhole that will almost certainly never pay off. You work too hard for your paycheck to waste it on what amounts to impossible odds.

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¹ “What Are the Odds of Winning the Lottery?,” Kimberly Amadeo, The Balance, Nov 4, 2020, https://www.thebalance.com/what-are-the-odds-of-winning-the-lottery-3306232

² “The Lottery: Is It Ever Worth Playing?,” Investopedia, Jan 29, 2021, https://www.investopedia.com/managing-wealth/worth-playing-lottery/

February 3, 2021

Strategies for Coping With Medical Bills

Strategies for Coping With Medical Bills

What’s your strategy for paying medical bills?

It’s a question anyone serious about protecting their finances must answer. Afterall, medical expenses are the number one cause of bankruptcy in the country.¹

But there are resources at your disposal. Read on for some strategies to help you lighten the financial burden of medical bills.

Review your bill for mistakes. Somewhere between 30% to 80% of medical bills contain errors.² Check every bill you receive for any mistakes and report them immediately. You don’t need to pay for medical services you didn’t use!

Negotiate a payment plan. The scary price tag on your medical bill isn’t always final. Hospitals are sometimes willing to negotiate a lower cost if they’re aware of your financial situation. Contact your healthcare provider and inform them if you’ll struggle to pay the sticker price. Then, ask for price alternatives or for a more lenient payment plan.

Avoid using credit cards for medical bills, if possible. Using credit cards to cover medical bills can be a critical blunder. Instead of paying a low interest–or maybe no interest–bill to a hospital, you may end up making high-interest payments to your credit card company.

Whenever possible, use cash to pay for medical expenses. That may mean cutting on vacations, not dining out, and holding off on purchasing new clothes until the bill is settled. (Hint: A great reason to keep an emergency fund is to pay unexpected medical bills.)

If none of these strategies make a dent in your medical expenses, consider reaching out to a professional for help. Hospitals and insurance companies sometimes have case workers who can point you towards programs, organizations, and agencies who may be able to help provide some financial relief.

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¹ “Top 5 Reasons Why People Go Bankrupt,” Mark P. Cussen, Investopedia, Feb 24, 2020, https://www.investopedia.com/financial-edge/0310/top-5-reasons-people-go-bankrupt.aspx

² “Over 20 Woeful Medical Billing Error Statistics,” Matt Moneypenny, Etactics, Oct 20, 2020, https://etactics.com/blog/medical-billing-error-statistics#:~:text=80%25%20of%20all%20medical%20bills%20contain%20errors.&text=Some%20experts%20across%20the%20web,between%2030%25%20and%2040%25.

January 27, 2021

A Penny for Your Thoughts?

A Penny for Your Thoughts?

Would you rather have a million dollars cash – or – a penny that doubles every day for 31 days?

If you’re eyeing that million dollar suitcase of cash, you’re not alone. Many go ahead and just take the million. Shoot, people don’t even stoop to pick up pennies in parking lots any more, right?

Well, hold on there, Daddy Warbucks. Before you flick that little copperhead in your change jar and run off on your shopping spree, check this out! The total of a penny doubling every day for 31 days equals (drumroll please) over $10.7 million!

Seem impossible? Here’s the play-by-play – or, rather, day-by-day:

Penny doubling corrected (resized 55%)

$10,737.418.22! Are you regretting not choosing the penny?

By day 31, one cent has become over ten times the value of the million dollar cash lump sum. That’s the power of exponential growth – the pure power of compounding.

So how can you apply the power of compounding in your personal financial strategy? It’s unlikely you’ll find someone willing to double your money (in fact, be wary of anyone claiming they can). But you can find effective strategies that leverage compounding through interest rates.

Contact me, and let’s talk about how to put the power of compounding to work for you.

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January 6, 2021

Bridging the Retirement Gap

Bridging the Retirement Gap

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

Here’s a doozy: women age 65 and older are 80% more likely to be impoverished than men of the same age.¹

That number represents a staggering degree of human tragedy. But there’s a sad logic to it when you consider that women save 43% less for retirement than their male counterparts.¹

But that’s not all. According to the 2016 Financial Finesse Gender Gap in Financial Wellness Report, to retire at age 65 (without a career break):

  • Men need $1,559,480.
  • Women need $1,717,779.

Women have to come up with $158,299 more! This increase is due to the unique set of circumstances women face while preparing for retirement:

  • Women live longer
  • Women pay more for healthcare

To summarize, women all too often aren’t in a position to save as much as men, even though they need more to sustain their retirements. The tragic result is that many spend their retirements in poverty instead of living out their dreams.

But that doesn’t have to be your story. The savings gap may seem huge, but it can be bridged. And it all starts with a solid insurance strategy. Just think of it as pulling the footrest lever on your dream retirement recliner!

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

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December 28, 2020

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.

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This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies for saving and/or investing that may be available to you. 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 21, 2020

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.

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This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies for saving and/or investing that may be available to you. Market performance is based on many factors and cannot be predicted. 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 9, 2020

Setting Up Your Reindeers For Success

Setting Up Your Reindeers For Success

Dasher. Dancer. Prancer. Vixen. Comet. Cupid. Donner. Blitzen. (And Rudolph too, of course.)

This is a holiday roll-call that’s instantly recognizable: the reindeer that pull Santa’s magical sleigh. But what if things got so hectic at the North Pole (not a stretch when you’re in charge of delivering presents to every child on Earth), that when it was time to hitch up the reindeer on Christmas Eve, they were all out of order?

Prancer. Cupid. Dasher. Comet. Dancer. Vixen. Blitzen. Donner.

Hmmm, someone’s missing…. what happened to Rudolph? (Looks like he got left behind at the North Pole. In all the hubbub one of Santa’s elves forgot to review the pre-flight checklist.)

Since so much can change during the year from one crazy “Happy Holidays!” to the next, your ducks – or reindeer, that is – may not even be in a row at this point. They could be frolicking unattended in a field somewhere! And who knows where your Rudolph even is.

We can help with that. An annual review of your financial strategy is key to keeping you on track for your unique goals. Lots of things can change over the course of a year, and your strategy could need some reorganizing. I mean, did you hear about everything that changed for Prancer? (What do you call a baby reindeer, anyway?)

Here are some important questions to consider at least once each year (or even more often):

1. Are you on track to meet your savings goals? A well-prepared retirement is a worthy goal. Let’s make sure nothing drove you too far off track this year, and if it did, let’s explore what can be done to get you back on the right path.

2. Do you have the potential for new savings? Did your health improve this year? Did that black mark on your driving record expire? Changes like these have the potential to positively impact your life insurance rate, but we’d need to dig in and find out what kinds of savings might be in store for you.

3. Have your coverage needs increased? Marriage, having a child, or buying a home are all instances in which your life insurance coverage probably should be increased. Have any of these occurred for you over the last year? Have you added the new family member as a beneficiary?

If you haven’t had a chance to review your strategy this year, we can fit one in before Santa shimmies down the chimney. Which of your reindeer do you need to wrangle back into the ranks before the New Year gets going?

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December 7, 2020

How To Save Money On Transportation

How To Save Money On Transportation

Americans drain a huge portion of their income on transportation.

It eats up roughly 16% of our income every month, the majority of which is spent on car purchases ($331 per month), then gas and oil ($176 per month), and then insurance ($81 per month).¹

But what if you made that money work for you?

Here are some simple ways to spend less on getting around, so you can save more for your future!

Drive the speed limit
Speeding is never a good strategy. Zipping around town with your pedal to the floor is dangerous for you and others and realistically doesn’t save you much time.¹ Even worse, speeding can cost you money in the long term.

Obviously, speeding tickets are expensive. They cost about $150 on average.² They also have a nasty habit of increasing insurance premiums by up to 25%.³ But that’s not all. Rapidly accelerating and suddenly stopping reduces the efficiency of your engine and can cost you at the pump as well. Stick to the posted speed limit, accelerate gradually, and drive safely!

DIY the basics
There are plenty of car maintenance basics you can handle from the comfort of your own garage. For instance, a new air filter can boost your gas mileage by up to 10%.⁴ They’re also cheap and usually easy to change out once they get dirty. Even something as simple as inflating your tires can boost your car’s performance.⁵ Remember to do your research and consult your car’s owner manual.

Take the bus
If public transportation is available, use it! Research says trading your car for a bus or train can save you over $10,000 annually.⁶ The cost of tickets and metro passes pales in comparison to car insurance premiums, car maintenance, loans, and gas.

Buy Used
Don’t have access to public transportation? Stick with used cars and drive them as long as you can.

New cars almost always lose value. By the end of their first year, a new ride will shed 20% to 30% of its value. Over 5 years it loses 60% of its value.⁴ Unless you’re restoring a vintage masterpiece or have cash to blow, you’re much better driving an older model of the same car for a fraction of the price.

Remember, how you get around is a practical problem. It doesn’t need to be fancy or flashy when you’re starting your journey towards financial freedom. Utilize local transportation options, buy a clunker that you maintain yourself, and drive the speed limit. Your wallet will thank you in the long term!

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December 2, 2020

Facts About Disability Insurance

Facts About Disability Insurance

How are you protecting your income?

Maybe you already have a life insurance policy worth about 10 times your annual earnings. That should help protect your family in the case of your untimely passing.

But what if you aren’t able to work during your lifetime?

It’s more common than you might think. 1 in 4 20-year-olds will become disabled before they reach 67, and 67% of private-sector workers have no disability insurance.¹ Here are some basic facts about this essential line of protection for you and your family.

Disability insurance has a lot in common with life insurance.
At first blush, it might be hard to distinguish between life insurance and disability insurance. But there are some key differences that are worth exploring.

Disability insurance activates when you can’t work
Life insurance pays out in the case of your passing. Disability insurance can provide a stable income replacement if an injury, accident, illness, or something else renders you unable to work.

There are two types of disability insurance: long-term and short-term Short-term disability insurance can replace your income if you can’t work for a few months. Long-term disability insurance can protect you if a serious health issue takes you out of the field for more than 6 months.

Employers sometimes offer disability insurance (but it might not be enough) It’s not uncommon for employers to provide their workers with some form of disability insurance. As of 2018, 42% of private sector employees had access to short-term disability insurance via their work, while 34% had long-term disability insurance options.²

However, it’s worth noting that this might not be enough to fully protect you and your family. Disabilities can increase your expenses, so you’ll need a strategy that replaces your current income and then some. Make sure your employer-provided plan will give you enough to cover all of your needs in the case of a disability and help your family for the long haul. If it doesn’t do either of those, you may need to turn to private coverage.

The government offers disability benefits (but they might not be enough, either)
Social Security does provide disability coverage to individuals who have worked long enough and paid enough into the system. However, applying for it is a time consuming process. Also, average monthly payments were just over $1,000 as of 2017.⁴ Do your research to see if you’re eligible and if you’ll receive enough before you apply.

Above all, meet with a licensed and qualified financial professional to weigh your options and start developing a plan. They’ll assist you as you evaluate your need for protection, what employer-provided options you might have, and how disability insurance fits into your overall financial strategy.

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¹ “Fact Sheet: Social Security,” Social Security Administration, https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf

² “Employee access to disability insurance plans,” Bureau of Labor Statistics, U.S. Department of Labor, https://www.bls.gov/opub/ted/2018/employee-access-to-disability-insurance-plans.htm

³ “Disability Benefits,” Social Security Administration, https://www.ssa.gov/benefits/disability/

⁴ “Disability Insurance: Why You Need It and How to Get It,” Barbara Marquand, Nerwallet, Oct. 20, 2017, https://www.nerdwallet.com/blog/insurance/disability-insurance-explained/

November 23, 2020

Dollar Cost Averaging Explained

Dollar Cost Averaging Explained

Most of us understand the meanings of “dollar” and “cost”, and we know what averages are…

But when you put those three words together – dollar cost averaging – the meaning may not be quite as clear.

Dollar cost averaging refers to the concept of investing on a fixed schedule and with a fixed amount of money. For example, after a careful budget review, you might determine you can afford $200 per month to invest. With dollar cost averaging, you would invest that $200 without regard to what the market is doing, without regard to price, and without regard to news that might impact the market temporarily. You become the investment equivalent of the tortoise from the fable of the tortoise and the hare. You just keep going steadily.

When the market goes up, you buy. When the market goes down, you can buy more.

The gist of dollar cost averaging is that you don’t need to be a stock-picking prodigy to potentially succeed at investing. Over time, as your investment grows, the goal is to profit from all the shares you purchased, both low and high, because your average cost for shares would be below the market price.

Hypothetically, let’s say you invest your first $200 in an index fund that’s trading at $10 per share. You can buy 20 shares. But the next month, the market drops because of some news that said the sky was falling somewhere else in the world. The price of your shares goes down to $9.

You might be thinking that doesn’t seem so great. But pause for a moment. You’re not selling yet because you’re employing dollar cost averaging. Now, with the next month’s $200, you can buy 22 shares. That’s 2 extra shares compared to your earlier buy. Now your average cost for all 42 shares is approximately $9.52. If your index fund reaches $10 again, you’ll be profitable on all those shares. If it reaches $12, or $15, or $20, now we’re talking. To sum up, if your average cost goes up, it means your investment is doing well. If the price dips, you can buy more shares.

Using dollar cost averaging means that you don’t have to know everything (no one does) and that you don’t know for certain what the market will do in the next day, week, or month (no one does). But over the long term, we have faith that the market will go up. Because dollar cost averaging removes the guesswork involved with deciding when to buy, you’re always putting money to work, money that may provide a solid return in time.

You may use dollar cost averaging with funds, ETFs, or individual stocks, but diversified investments are potentially best. An individual stock may go down to zero, while the broad stock market may continue to climb over time.

Dollar cost averaging is an important concept to understand. It may save you time and it may prevent costly investment mistakes. You don’t have to try to be an expert. Once you understand the basics of dollar cost averaging, you may start to feel like an investment genius!

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

November 11, 2020

How Much Should You Pay For a Car?

How Much Should You Pay For a Car?

Cars will drain your wealth.

In 2019, Americans were spending about $773.40 per month on their vehicles, or $9,281 annually.¹ That’s like owning a tiny house whose value nosedives the instant you buy it!

That’s not even counting the opportunity cost of throwing that money at a car. How much could that cash grow if it were invested or saved?

That’s why you should follow this simple rule for guarding your wealth from a car.

It’s called the 20/4/10 rule, and it’s composed of three parts. Let’s explore them one by one.

Start with at least a 20% downpayment.

Committing a hefty downpayment to a car curbs how much you’ll lose in interest later down the road. It’s always best to cover as much as you can up front with cash.

Finance the car for no more than 4 years.

How long would you want to dump money into an “investment” that doesn’t grow in value? Not long! Keep your financing period short and sweet and then get back to saving for your future.

Dedicate no more than 10% of your income to car expenses.

Your cash flow is a powerful wealth building tool if it keeps, well, flowing. Don’t let a car divert it somewhere else that it won’t grow and won’t build wealth.

Remember, this is not a bulletproof strategy.

You might be facing substantial mortgage or credit card debt obligations that make it difficult to afford the car you want. It’s always a good idea to meet with a licensed financial professional before you commit to buying a new vehicle.

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November 4, 2020

Disappearing Pensions and Protecting Your Retirement

Disappearing Pensions and Protecting Your Retirement

The old days of working at the same company for 30 years and retiring with a company pension are just about over.

Today, very few companies offer pension plans and those that do are finding those plans in peril.

Most modern workers must learn to plan their retirement without a pension. Luckily, there are still great financial tools for your retirement strategy, and workers who save diligently and prepare well can still look forward to a well-funded retirement.

Disappearing Pensions and the Rise of the 401(k)
A company pension was commonplace a few decades ago. In exchange for hard work and service for somewhere around 30 years, a company would provide you with a guaranteed income stream during your retirement.

Many Americans enjoyed a comfortable and secure retirement with a pension. Coupled with their social security benefits, they lived fairly well in their golden years.

The reason pension plans are going the way of the wind has many factors, including changes in workers’ behavior, longer life expectancies, and rising costs for employers.

A study by the professional services firm Towers Watson found that from 1998 to 2013, the number of Fortune 500 companies offering pension plans dropped 86 percent, from 251 to 34.1 Couple that with the Revenue Act of 1978, which allowed for the creation of 401(k) savings plans, and you’ll have a good view of the modern retirement landscape.

How to Retire Without a Pension
The company pension isn’t coming back, so what can workers do to secure a retirement like their parents and grandparents had?

Here are a few retirement planning tools that every worker can put to good use.

Take Full Advantage of Your Company 401(k) Plan
If your company offers a 401(k) retirement plan, make sure you’re taking full advantage of it. Here are a few ways to maximize your 401(k) plan.

  • Make the match: If your employer offers matching contributions, don’t leave the match on the table. Contribute the required percentage to collect the most you can.
  • Get fully vested: Make sure you are fully vested before you make any employment changes. Your contributions to a 401(k) will always be yours, but to keep 100% of your employer contributions, you must be fully vested.

Open a Roth IRA
A Roth plan is funded with taxed income. The upside is that you won’t pay taxes when you take it out. If your 401(k) contributions are maxed out, a Roth could be a good savings vehicle for you.

Consider an Annuity If you like the idea of a guaranteed income stream, consider an annuity. An annuity is an insurance product, so most of the time it isn’t invested. In exchange for a lump sum of money, an annuity will pay a guaranteed monthly income stream.

Talk to a Trusted Financial Professional
Pensions are all but gone. This means today’s workers must be more involved in how they create a strategy for their retirement. There are many great retirement savings tools. Talk to a trusted financial advisor to understand and learn how you can make sure your retirement income is going to be there when you need it.

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.

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“Pensions Are Taking the Long, Lonely Road to Retirement,” Lou Carlozo, U.S. News and World Reports, Jul 20, 2015, https://money.usnews.com/money/personal-finance/mutual-funds/articles/2015/07/20/pensions-are-taking-the-long-lonely-road-to-retirement

October 26, 2020

Is Your Home An Investment?

Is Your Home An Investment?

It’s a law of the universe that your house is an investment, right?

Just ask your grandparents who bought a $250,000 home for $50,000 during the 1950s. Better yet, listen to your savvy landlord buddy who rules an urban real estate empire that they gobbled up following the Great Recession. We’re surrounded by evidence that conclusively demonstrates the power of houses as investments… or are we?

Hmmm.

It turns out that buying a place of residence may not actually pay off in the long run like it might appear on paper. Here’s why you might want to rethink having your primary residence be an investment only.

Houses (usually) don’t actually grow more valuable
Think about that suburban mansion your grandparents snagged for $50,000 that eventually “grew” to be worth $250,000. On paper, that looks like an awesome investment; that house quintupled in value! But remember, $1 in 1950 had about the purchasing power of $10 today. Four gallons of gas or two movie tickets were just one buck!¹ That means $50,000 at that time could buy a $539,249 house today. Your grandparents actually lost money on that house, even though it looked like they made off like bandits!

It’s all because of one simple feature of economics: inflation. Prices tend to rise over time, meaning that your dollar today doesn’t go as far as it would have in 1950. So while it looks like your grandparents netted a fortune on their house, they actually didn’t. They lost over half its value! Unless your neighborhood suddenly spikes in popularity with young professionals or you start renting, your house probably won’t accrue any real worth beyond inflation.

Houses have to be maintained
But it’s not just that houses usually don’t actually appreciate in value. They also cost money in property taxes, utilities, and maintenance. Homeowners spend, on average, $1,105 annually to maintain their dwelling places.² You can expect to pay $12,348 annually on the average mortgage and $2,060 for utilities.³ & ⁴ That comes out to a total of $15,513 per year on keeping the house and making it livable. Let’s say your home is worth about $230,000 and appreciates by 3.8% every year. It will grow in value by about $8,740 by the end of the year. That’s barely more than half of what it costs to keep the house up and running! Your house is hemorrhaging money, not turning a profit.

It’s important to note that homeownership can still generally be a good thing. It can protect you from coughing up all your money to a landlord. Buying a property in an up-and-coming neighborhood and renting it out can be a great way to supplement your income. Plus, there’s something special about owning a place and making it yours. But make no mistake; unless you strike real estate gold, your place of residence probably shouldn’t be (primarily) an investment. It can be home, but you might need to rely on it to help fund your retirement!

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

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


“7 Things You Could Buy For $1 in 1950,” Megan Elliott, Showbiz Cheatsheet, Oct 9, 2016, https://www.cheatsheet.com/money-career/things-you-could-buy-for-1-dollar.html/

“How Much Should You Budget For Home Maintenance,” Paula Pant, The Balance, May 26, 2020, https://www.thebalance.com/home-maintenance-budget-453820

“National Average Monthly Mortgage Payment,” Hannah Rounds, LendingTree, July 11, 2018, https://www.lendingtree.com/home/mortgage/national-average-monthly-mortgage-payment/#:~:text=What%20is%20the%20average%20monthly,the%20typical%20homeowners'%20monthly%20income

“How much is the average household utility bill?,” Nationwide, https://www.nationwide.com/lc/resources/personal-finance/articles/average-cost-of-utilities#:~:text=The%20typical%20U.S.%20family%20spends,climate%2C%20and%20your%20usage%20patterns

October 14, 2020

Bankruptcy – Consequences and Aftermath

Bankruptcy – Consequences and Aftermath

If you or a loved one is at (or think you may be at) the place where you’re wondering if declaring bankruptcy[i] may be the path to take, there are several serious consequences to be aware of.

Depending on the type of bankruptcy (Chapter 7 or Chapter 13)[ii], debts may be eliminated, reduced, or restructured into a less burdensome repayment plan.

But what about the consequences that arise during the process itself, and what is the aftermath?

Before and During Filing
Before you even file there are consequences that can arise from bankruptcy proceedings: the law requires that the filer undergo credit counseling [iii] by a government-approved entity to ensure the filer understands what will take place during the process and have a chance to look at other options. If bankruptcy still seems to be the only viable option, the filer will then have to file in federal court, paying a filing fee of hundreds of dollars.[iv]

During the process, a schedule of assets and liabilities must be submitted for review by the court. That means the creditors and court will be able to look into your private financial life. Furthermore, the bankruptcy will become part of the public record, and therefore your financial details will be exposed to public scrutiny. Next, in Chapter 7, nonexempt assets will be sold by the trustee to help pay creditors. For Chapter 13, the court, creditors, and debtor will work out a repayment plan based on the financial situation of the debtor.

Discharge usually occurs for Chapter 7 within a few months, and the debtor will be free of the debts. In Chapter 13, discharge comes as a result of successfully completing the repayment plan. If the schedule of assets and liabilities is not filed in a timely manner, the request may be dismissed. If the repayment plan is not strictly followed, the court may dismiss the process and decide in favor of the creditors (who may repossess assets).

Impact on Your Credit Report
Once discharge occurs, the debtor will have escaped from the shadow of debt. However, the ghosts of the filing will remain on the credit report for several years.[v] A Chapter 13 filing will stay for seven years, while a Chapter 7 filing will remain for ten years. It should be no surprise that a bankruptcy, regardless of type, will negatively impact your credit score.[vi] However, over time if an applicant can show a good faith attempt to repay the debts, and begin to develop good credit habits, creditors may be more willing to cooperate.

Successive Filings
One important point to consider is the ability to refile. Because Chapter 7 completely erases debts, possibly with very little partial payment required if the debtor’s nonexempt assets are minimal, the debtor must wait eight years before another discharge would be granted. (One may file bankruptcy before this time, but a discharge – the actual debt elimination – would not be granted.) On the other hand, a restructuring under Chapter 13 is less detrimental to creditors, so another discharge may be granted in a bankruptcy that is filed just two years after the first bankruptcy is filed.

The concurrent and subsequent, long lasting consequences of filing bankruptcy are significant, and those who can avoid bankruptcy should certainly consider all the alternatives. If bankruptcy seems to be the only option, filers should thoroughly understand the consequences of the process before committing to that course of action.

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This article is for informational purposes only and is not intended to offer legal advice or promote any certain plans or strategies that may be available to you. Always seek the advice of a financial professional, accountant, attorney, and/or tax expert to discuss your options.

[i] https://www.uscourts.gov/services-forms/bankruptcy
[ii] https://www.nolo.com/legal-encyclopedia/what-is-the-difference-between-chapter-7-chapter-13-bankrutpcy.html
[iii] https://www.consumer.ftc.gov/articles/0224-filing-bankruptcy-what-know#counseling
[iv] https://www.nolo.com/legal-encyclopedia/bankruptcy-filing-fees-costs.html
[v] https://www.experian.com/blogs/ask-experian/removing-bankruptcy-from-your-credit-report/
[vi] https://www.moneycrashers.com/bankruptcy-affect-credit-score/

October 12, 2020

Who Can Be My Life Insurance Beneficiary?

Who Can Be My Life Insurance Beneficiary?

Do you have a recipient in mind for the proceeds of your life insurance policy?

Many people have someone in mind before they purchase their policy. This person or entity can be named as your beneficiary. Naming your life insurance beneficiary helps to ensure that the party you choose gets the proceeds of your life insurance policy, even if your will leaves your estate to someone else. If you’ve decided that you want to provide for a special person or organization through your life insurance policy, it’s important that the beneficiary section will do what you expect.

Here are some simple tips that can help point you in the right direction:

Choosing Your Life Insurance Beneficiary
Who you name as your beneficiary is a deeply personal decision, and there’s no right or wrong answer. Here are some areas to consider:

  • Family: Spouses, children, siblings, and parents are all very common choices as life insurance beneficiaries. However, children under the age of 18 are a special case. Life insurance companies won’t pay a death benefit to a minor, so you may want to choose a responsible adult whom you trust with the welfare of your child.
  • Legal guardian: If your life insurance policy does name a minor as your beneficiary, your insurer may require that you designate a legal guardian.
  • Business / Key Person Life Insurance: In business partnerships, other partners can be a named beneficiary. Businesses also sometimes insure the life of a key employee with the business as the beneficiary.
  • Friends, etc: You can also name a friend as a beneficiary – assuming your friend isn’t a minor.

Note: Contrary to popular belief, you can’t name a pet as your beneficiary — but you can name someone you’d trust to care for your pet. (Sorry, Fluffy.)

Multiple Beneficiaries and Contingent Beneficiaries
You can name multiple beneficiaries for your life insurance policy, but when doing this, it’s better to use percentages rather than fixed dollar amounts. For permanent life insurance policies, like whole life insurance and universal life insurance, the death benefit payout amount can change over time, making percentages a better strategy for multiple beneficiaries.

You can also name contingent beneficiaries. Think of a contingent beneficiary as a back-up beneficiary. In the event that your primary beneficiary passes before you do (or at the same time), the proceeds of your policy would then go to the contingent beneficiary.

Final Thoughts
Avoid using general designations, such as “spouse” or “children” as your beneficiary. Spouses can change, as divorce statistics remind us, and you never know which long-lost “children” might appear if there’s a chance of a payday from your life insurance policy. In the very best case, general designations will cause delays in payment to your intended beneficiaries.

Choosing a life insurance beneficiary isn’t necessarily complicated, but there’s some room for error in certain situations. While the decision is always yours to make, it’s best to discuss your options with your financial professional to help make sure the settlement goes smoothly and your wishes are honored.

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