Don't Panic: What You Need To Know For Your Life Insurance Medical Exam

May 20, 2019

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Scotty Byers

Scotty Byers

Financial Professional

2711 LBJ Freeway
Suite 300
Farmers Branch, Texas 75234

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May 13, 2019

6 Financial Commitments EVERY Parent Should Educate Their Kids About

6 Financial Commitments EVERY Parent Should Educate Their Kids About

Your first lesson isn’t actually one of the six.

It can be found in the title of this article. The best time to start teaching your children about financial decisions is when they’re children! Adults don’t typically take advice well from other adults (especially when they’re your parents and you’re trying to prove to them how smart and independent you are).

Heed this advice: Involve your kids in your family’s financial decisions and challenge them with game-like scenarios from as early as their grade school years.

Starting your kids’ education young can help give them a respect for money, remove financial mysteries, and establish deep-rooted beliefs about saving money, being cautious regarding risk, and avoiding debt.

Here are 6 critical financially-related lessons EVERY parent should foster in the minds of their kids:

1. Co-signing a loan

The Mistake: ‘I’m in a good financial position now. I want to be helpful. They said they’ll get me off the loan in 6 months or so.’

The Realities: If the person you’re co-signing for defaults on their payments, you’re required to make their payments, which can turn a good financial situation bad, fast. Also, lenders are not incentivized to remove co-signers – they’re motivated to lower risk (hence having a co-signer in the first place). This can make it hard to get your name off a loan, regardless of promises or good intentions. Keep in mind that if a family member or friend has a rough credit history – or no credit history – that requires them to have a co-signer, what might that tell you about the wisdom of being their co-signer? And finally, a co-signing situation that goes bad may ruin your credit reputation, and more tragically, may ruin your relationship.

The Lesson: ‘Never, ever, EVER, co-sign a loan.’

2. Taking on a mortgage payment that pushes the budget

The Mistake: ‘It’s our dream house. If we really budget tight and cut back here and there, we can afford it. The bank said we’re pre-approved…We’ll be sooo happy!’

The Realities: A house is one of the biggest purchases couples will ever make. Though emotion and excitement are impossible to remove from the decision, they should not be the driving forces. Just because you can afford the mortgage at the moment, doesn’t mean you’ll be able to in 5 or 10 years. Situations can change. What would happen if either partner lost their job for any length of time? Would you have to tap into savings? Also, many buyers dramatically underestimate the ongoing expenses tied to maintenance and additional services needed when owning a home. It’s a general rule of thumb that home owners will have to spend about 1% of the total cost of the home every year in upkeep. That means a $250,000 home would require an annual maintenance investment of $2,500 in the property. Will you resent the budgetary restrictions of the monthly mortgage payments once the novelty of your new house wears off?

The Lesson: ‘Never take on a mortgage payment that’s more than 25% of your income. Some say 30%, but 25% or less may be a safer financial position.’

3. Financing for a new car loan

The Mistake: ‘Used cars are unreliable. A new car will work great for a long time. I need a car to get to work and the bank was willing to work with me to lower the payments. After test driving it, I just have to have it.’

The Realities: First of all, no one ‘has to have’ a new car they need to finance. You’ve probably heard the expression, ‘a new car starts losing its value the moment you drive it off the lot.’ Well, it’s true. According to CARFAX, a car loses 10% of its value the moment you drive away from the dealership and another 10% by the end of the first year. That’s 20% of value lost in 12 months. After 5 years, that new car will have lost 60% of its value. Poof! The value that remains constant is your monthly payment, which can feel like a ball and chain once that new car smell fades.

The Lesson: ‘Buy a used car you can easily afford and get excited about. Then one day when you have saved enough money, you might be able to buy your dream car with cash.’

4. Financial retail purchases

The Mistake: ‘Our refrigerator is old and gross – we need a new one with a touch screen – the guy at the store said it will save us hundreds every year. It’s zero down – ZERO DOWN!’

The Realities: Many of these ‘buy on credit, zero down’ offers from appliance stores and other retail outlets count on naive shoppers fueled by the need for instant gratification. ‘Zero down, no payments until after the first year’ sounds good, but accrued or waived interest may often bite back in the end. Credit agreements can include stipulations that if a single payment is missed, the card holder can be required to pay interest dating back to the original purchase date! Shoppers who fall for these deals don’t always read the fine print before signing. Retail store credit cards may be enticing to shoppers who are offered an immediate 10% off their first purchase when they sign up. They might think, ‘I’ll use it to establish credit.’ But that store card can have a high interest rate. Best to think of these cards as putting a tiny little ticking time bomb in your wallet or purse.

The Lesson: ‘Don’t buy on credit what you think you can afford. If you want a ‘smart fridge,’ consider saving up and paying for it in cash. Make your mortgage and car payments on time, every time, if you want to help build your credit.’

5. Going into business with a friend

The Mistake: ‘Why work for a paycheck with people I don’t know? Why not start a business with a friend so I can have fun every day with people I like building something meaningful?’

The Realities: “This trap actually can sound really good at first glance. The truth is, starting a business with a friend can work. Many great companies have been started by two or more chums with a shared vision and an effective combination of skills. If either of the partners isn’t prepared to handle the challenges of entrepreneurship, the outcome might be disastrous, both from a personal and professional standpoint. It can help if inexperienced entrepreneurs are prepared to:

  • Lose whatever money is contributed as start-up capital
  • Agree at the outset how conflicts will be resolved
  • Avoid talking about business while in the company of family and friends
  • Clearly define roles and responsibilities
  • Develop a well-thought out operating agreement

The Lesson: ‘Understand that the money, pressures, successes, and failures of business have ruined many great friendships. Consider going into business individually and working together as partners, rather than co-owners.’

6. Signing up for a credit card

The Mistake: ‘I need to build credit and this particular card offers great points and a low annual fee! It will only be used in case of emergency.’

The Reality: There are other ways to establish credit, like paying your rent and car loan payments on time. The average American household carries a credit card balance averaging over $16,000. Credit cards can lead to debt that may take years (or decades) to pay off, especially for young people who are inexperienced with budgeting and managing money. The point programs of credit cards are enticing – kind of like when your grocer congratulates you for saving five bucks for using your VIP shopper card. So how exactly did you save money by spending money?

The Lesson: ‘Learn to discipline yourself to save for things you want to buy and then pay for them with cash. Focus on paying off debt – like student loans and car loans – not going further into the hole. And when you have to get a credit card, make sure to pay it off every month, and look for cards with rewards points. They are, in essence, paying you! But be sure to keep Lesson 5 in mind!’


April 22, 2019

A Pocket Guide to Homeowners Insurance

A Pocket Guide to Homeowners Insurance

Homeowners insurance should bring peace of mind.

The right policy is there to help protect you if something happens to your home. Since a home may be the most significant investment many of us make in our lives, the proper homeowners insurance should be a major consideration.

Getting the right homeowners insurance is essential, but doesn’t have to be difficult. Still, how do you know if you’re selecting the right type of insurance policy for your house? Read on for answers to some common questions you might have.

What is the purpose of a homeowners insurance policy?
A homeowners insurance policy is a contract by which an insurance company agrees to pay for repairs or to replace your home or property if it is involved in a covered loss, such as a fire. A home insurance policy may also offer you liability protection in case someone is injured on your property and files a lawsuit.

Do I have to have homeowners insurance?
Your mortgage company will probably require a homeowners insurance policy. A lender wants to make sure their investment is protected should a catastrophe strike. The mortgage company would need you to insure your home for the cost to replace it if it were to be destroyed in a covered accident.

How do I know how much insurance to buy for my home?
The limit – or amount of insurance you place on your home – is determined by several factors. The construction of your home is typically going to be the largest determinant of the cost to replace it. So consider what your home is made of. Construction types include concrete block, masonry, and wood frame. Also, consider the size of your home.

Personal property is another consideration when determining how much insurance to purchase for your home. A typical homeowners insurance policy usually offers a personal property limit equal to half the replacement cost of your home. So if your home is insured for $100,000, your policy may automatically assign a personal property limit of $50,000.

What is the best deductible for a homeowners insurance policy?
When it comes to deductibles, consider selecting one that you can easily and quickly come up with out of pocket, just in case. Homeowners insurance policy deductibles may range from $500 to $10,000. Some policies offer percentage deductibles for certain damages, such as windstorm damage. For example, a coastal resident may have a windstorm deductible of two percent of the dwelling limit and a $1,000 deductible for all other perils.

There may be some cost savings features when you select a higher deductible on your homeowners insurance. Talk with a licensed insurance professional about your deductible options and premium savings.

Know the policy exclusions
All homeowners insurance policies typically contain exclusions for accidents and damages they don’t cover. For example, your policy likely does not cover damage to your home caused by an ongoing maintenance problem. Also, most homeowners insurance policies don’t automatically cover losses resulting from a flood.

Exclusions are important because they drive coverage. Talk to your insurance professional about your policy’s exclusions.

Know the basics and talk to a professional
As far as homeowners insurance policies are concerned, it’s crucial for homeowners to know the basics – limits, coverages, deductibles, and special exclusions. If you have specific concerns about your homeowners insurance, seek guidance from a licensed insurance professional.


This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies that may be available to you. Before taking out any loan or enacting a funding strategy, seek the advice of a licensed financial professional, realtor, accountant, and/or tax expert to discuss your options.

April 15, 2019

Is a home really an investment?

Is a home really an investment?

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

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

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

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

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

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

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

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

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

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

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


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

March 25, 2019

Credit unions: What you should know

Credit unions: What you should know

If you’ve always used the services of a traditional bank, you might not know the ins and outs of credit unions and if using one might be better for your financial situation.

Credit unions are generally known for their customer-focused operations and friendliness. But the main difference between a bank and a credit union is that a credit union is a nonprofit organization that you have to be a member of to participate in its services. Credit unions may offer higher interest rates and lower fees than banks, but banks may provide more services and a greater range of products.[i]

Read on for some basics about what you should know before you join one.

Protection and insurance
Just like banks, your accounts at a credit union should be insured. The National Credit Union Share Insurance Fund (NCUSIF) functions to protect consumer deposits if the credit union becomes insolvent. The fund protects up to $250,000 per customer in deposits.[ii] Be sure the credit union you select is backed by the NCUSIF.

What credit union is best for you?
Today there are many credit unions available. Many now offer 100 percent online banking so you may never need to visit a branch at all.

The most important feature in selecting a credit union is to make sure they meet your personal banking needs and criteria. Here are a few things to consider:

  • Does the credit union offer the products and services you want? Can you live without the ones they don’t?
  • Do they have competitive interest rates when compared to banks?
  • Are the digital and online banking features useful?
  • What are the fee schedules?
  • What are the credit union membership requirements? Do you qualify for membership?

Take your time and do some research. Credit unions vary in the services provided as well as the fees for such services.

What to expect when opening a credit union account
Each credit union may have slightly different requirements when opening an account, but in general, you will most likely need a few things:

Expect to complete an application and sign documents. When opening a credit union account, you will likely have to fill out some forms and sign other paperwork. If you don’t understand something you are asked to sign, make sure you get clarification. Be prepared to show identification. You will likely be asked to show at least two forms of identification when opening an account. Your credit union will also probably ask for your social security number, date of birth, and physical address. Be prepared to show proof of your personal information.

Make the required opening deposit. On the day you open your credit union account, you’ll likely be asked to make an opening deposit. Each credit union may have a different minimum deposit required to open the account. It could be up to $100 (or more), but call the credit union to make sure.

Unique benefits
Credit union accounts offer some unique advantages for members. You may enjoy more comfortable access to personal loans or even auto financing and mortgages. Credit unions may offer other perks such as fee waivers, as well as discounts on other products and services that come from being a member.

If participating in a customer-owned bank sounds interesting to you, a credit union may be a good option. There are more credit unions available today than ever. Do your research. You may find an option that compares to your current bank, but offers some greater benefits that will make it worth the switch.


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

[i] https://www.creditkarma.com/advice/i/difference-between-credit-union-and-bank/
[ii] https://www.ncua.gov/support-services/share-insurance-fund

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/

January 28, 2019

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

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

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

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

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

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

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

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

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

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

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

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

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


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

January 28, 2019

Your credit score – 4 things you need to know

Your credit score – 4 things you need to know

You’re probably aware that your credit score is usually accessed when you apply for new credit, such as a credit card or an auto loan.

But you may not know it might also be requested by landlords, employers, and even romantic partners.[i]

So what are your credit score and report, what are the factors that determine them, and why do so many diverse parties request to see them?

What is a credit score and what is a credit report?
Your credit score is simply a number that encapsulates your ability to repay debt. It isn’t the only way interested parties can assess your creditworthiness, but it’s certainly often used as a preliminary factor. Having a higher score may lead to lower interest rates, more successful credit applications, and possibly more trust in general.

Your credit report is much more comprehensive and shows your outstanding debts, how well you pay them, the age of the accounts, and so forth. A single bad account on your credit report might damage your score, but your counterparty may be willing to work with you if you can show a strong history with your other accounts – and can justify the problem account.

What constitutes your credit score?
Credit reports are maintained by the three main credit reporting agencies: TransUnion, Equifax, and Experian. A credit score is generated by FICO, VantageScore, and some financial institutions may have their own proprietary algorithms to determine their own scores.

In general, scores are determined by the variously-weighted categories of payment history, the amount owed (credit utilization), the age of the accounts, how much new credit you’ve requested recently, and the types of accounts (revolving, mortgage, student loans, etc.).[ii] Of course proprietary scores may take many other factors into consideration.

Who wants to see your credit score?
Lenders may screen you based on your credit score, then use other factors to determine if they’ll give you a loan. Instant-approval lenders, like credit card companies, may just use your credit score to determine your creditworthiness. For large, long-term loans, like mortgages, you can expect to have to turn over your credit report as well.

Landlords may ask for a report, but might also request your credit score as well. They have the obvious financial interest in relying on you to pay your rent from month to month, but they also may have in mind that if you’re responsible with your money, perhaps you’ll also be responsible to take care of your rented living quarters.

Employers may ask to see your credit report. They may make hiring decisions based on the report, but some states have disallowed the practice.[iii] The chance that financial hardship may prompt employee theft is one reason they may ask, as well as wanting to see your consistency in paying debts over time, which may correlate with your punctuality and persistence at work.

How to improve your score
Those with poor credit may want to improve their credit history, which may in turn improve their credit scores. Payment history makes up 35% of the FICO scoring factors, and this will take time to improve. However, 30% of the score is determined by how much you owe, which can quickly be improved by paying down your debt. The 15% determinant that is credit age can, of course, only improve with time, but the 10% of your score attributed to new requests and 10% to types of credit can be managed in a short timeframe, too; try to avoid applying for a lot of new credit and, when you do, try to get different types of credit.[iv]


[i] https://www.businessinsider.com/good-credit-score-can-help-you-get-a-date-2018-2
[ii] https://www.thebalance.com/fico-credit-score-315552
[iii] https://www.thebalancecareers.com/why-do-employers-check-credit-history-2059598
[iv] http://money.com/money/collection-post/2791957/what-is-my-credit-score/

January 21, 2019

Do you know your net worth?

Do you know your net worth?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

January 21, 2019

Preparing to buy your first home

Preparing to buy your first home

Home buying can be both very exciting and very stressful.

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

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

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

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

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

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

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

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

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

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


This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies that may be available to you. Before taking out any loan or enacting a funding strategy, seek the advice of a financial professional, accountant, and/or tax expert to discuss your options.

December 31, 2018

Considering a home equity loan?

Considering a home equity loan?

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

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

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

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

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

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

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

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

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

This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies that may be available to you. Before taking out any loan or enacting a funding strategy, seek the advice of a financial professional, accountant, and/or tax expert to discuss your options.

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

December 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 3, 2018

First time home buyer? Beware hidden expenses.

First time home buyer? Beware hidden expenses.

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

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

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

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

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

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

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

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

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

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

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

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

December 3, 2018

Home Insurance: A Primer

Home Insurance: A Primer

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

November 26, 2018

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.

October 29, 2018

How much home can you afford?

How much home can you afford?

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

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

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

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

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

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

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

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


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

October 15, 2018

Budget Like a Rock Star with Your First Job

Budget Like a Rock Star with Your First Job

Congratulations! Landing your first full-time job is exciting, especially if you’ve been dreaming of that moment throughout college.

Now you can loosen your belt a little and not spend so much brain power on creative ways to make ramen noodles. But before you go and start spending on the things you’ve had to skimp on in school, it’ll be worth it to take a breath, do some self-examination, and create a budget first.

This is probably the absolute best time in your life to start a habit of budgeting that will last you a lifetime – before life gets more complicated with a family, mortgage, etc. If you become a whiz at your personal financial strategy, tackling all the things that life will bring your way may (hopefully) go a lot smoother.

So here are a few tips on setting up your budget with your first job:

1. Think about why you want a budget
It may sound silly, but knowing why you’re putting yourself on a budget will help you stick to it when temptations to overspend flare up. Beginning a budget early in life when you start your first job will help lay the foundation for responsible financial management.

Think about your goals here. Having a budget will help you (when the time is right) to acquire things like a home, new car, or a family vacation to the islands. Budgeting can also help you enjoy more immediate wants, like a designer handbag or new flat screen TV.

2. Get familiar with your spending
You can’t create a budget without knowing your expenses. Take a good, hard look at not just your income but also your “outgo”. Include all your major expenses of course – rent, insurance, retirement savings, emergency funds. But don’t forget about miscellaneous expenses – even the small ones. That coffee on the way to work – it counts. So does the $3.99 booster pack in your favorite phone game.

Track your expenses over the course of a couple of weeks to a month. This will give you insight into your spending, so your budget is accurate.

3. Count your riches
Now that you have your first job, add up your income. This means the money you take home in your paycheck – not your salary before taxes. Income can also include earnings from side jobs, regular bonuses, or income investment. Whatever money you have coming in counts as income.

4. Set your budget goals
Give yourself permission to dream big here and own it! Set some financial goals for yourself – and make them specific and personal. For example, don’t make “save up for a house” your goal because it’s not specific or personal. Think about the details. What type of house do you want, and where? When do you see yourself purchasing it?

For example, your budget goal may look something like this: “Save $20,000 by the time I’m 27 for a down payment on an industrial loft downtown.“ A good budget goal includes an amount, a deadline, and a specific and detailed outcome.

5. Use a tracker
A budget tracker is simply a tool to create your budget and help you maintain it. It can be as simple as a pen and paper. A budget tracker can also be an elaborate spreadsheet, or you can use an online tool or application.

The best budget tracker is the one you’ll stick to, so don’t be afraid to try a few different methods. It may take some trial and error to find the one that’s right for you.

6. Put it to the test
Test your budget and tracking system to see if it’s working for you. Try to recognize where your pitfalls are and adjust to overcome them, but don’t give up! It’s something your future self will thank you for.

7. Stick to it
Creating a budget that works is a process. Take your time and think it through. You’re probably going to need to tweak it along the way. It’s ok!

The best way to think about a budget is as an ongoing part of your life. Make it your own so that it works for your needs. And as you change – like when you get that promotion – your budget can change with you.

October 1, 2018

Consumer Debt: How it helps and how it hurts

Consumer Debt: How it helps and how it hurts

What exactly is consumer debt? It’s “We the People” debt, as opposed to government or business debt.

Consumer debt is our debt. And we, the people, have a lot of it – it’s record-breaking in fact. In May of 2018, U.S. consumer debt was projected to exceed $4 trillion by the end of 2018[i].

That’s a lot of zeros. So, in case you’re wondering, what makes up consumer debt?

Consumer debt consists of credit card debt and non-revolving loans – like automobile financing or a student loan. (Mortgages aren’t considered consumer debt – they’re classified under real estate investments.)

So, how did we get buried under all this debt?
There are a few reasons consumer debt is so high – some of them not entirely in our control. The rise of student loan debt: Most consumer debt consists of school loans. During the recession, many Americans returned to school to re-train or to pursue graduate degrees to increase their competitiveness in a tough job market.

Bankruptcy: Changing bankruptcy laws under the Credit Card Protection Act of 2005 made it harder for Americans to file for bankruptcy. This led to consumer credit card debt climbing to a record high of $1.028 trillion in 2008[ii].

Good auto loan rates: The number of auto loans has skyrocketed due to attractive interest rates. After the recession, the federal government lowered interest rates to spur spending and help lift the country out of the recession. Americans responded by financing more automobiles, which added to the consumer debt total.

Is all this consumer debt a bad thing?
Not all consumer debt is bad debt. And there are ways that it helps the economy – both personal and shared. A student loan for example – particularly a government-backed student loan – can offer a borrower a low-interest rate, deferred repayment, and of course, the benefit of gaining a higher education which may bring a higher salary. A college graduate earns 56 percent more than a high school graduate over their lifetime, according to the Economic Policy Institute. So, getting a student loan may make good economic sense.

Credit card debt that won’t go away
Credit card debt is a different story. According to the National Foundation for Credit Counseling (NFCC), 61 percent of U.S. adults have had credit card debt in the past 12 months. Nearly two in five carry debt from month-to-month.

Still, the amount of credit card debt Americans carry has been on the decline, with the average carried per adult a little more than $3,000.

Credit card debt won’t hurt you with interest charges if you pay off the balance monthly. Some households prefer to conduct their spending this way to take advantage of cashback purchases or airline points. As always, make sure spending with credit works within your budget.

If you’re carrying a balance from month to month on your credit cards, however, there is going to be a negative impact in the form of interest payments. Avoid doing this whenever possible.

Stay on the good side of consumer debt
Consumer debt is a mixed bag. Staying on the good side of consumer debt may pay off for you in the long run if you’re conscientious about borrowing money, plan your budget carefully, and always seek to live within your means.


[i] https://www.lendingtree.com/finance/consumer-debt-report-may-2018/
[ii] https://www.creditcards.com/credit-card-news/up-g19-federal-reserve-credit-debt-02072018.php

August 20, 2018

A Surprising Help After Buying a House

A Surprising Help After Buying a House

When I say “buying a house,” what kind of insurance do you think of?

Homeowners insurance. Obvious, right? But there’s another type of insurance you should consider with a few amazing-yet-unexpected benefits for new homeowners. Give up? It’s… life insurance.

Mortgage payments and the cost of upkeep won’t stop with an untimely passing. Life insurance is a significant tool for homeowners because it’s a great way to help protect your loved ones from a sudden and unexpected financial burden. Your family wouldn’t have to lose their home because of missed payments, and if you co-signed a mortgage with someone outside your nuclear family, the benefits of life insurance have the potential to cover your contribution for a time, not leaving that friend or business partner in a financial bind. As for the upkeep of your home, a general rule of thumb is to set aside 1% annually of the purchase price of the house for routine repairs and/or maintenance. For instance, if you paid $250,000 for your home, set aside $2,500 each year. So if you’ve already had to convince yourself that the hole in the roof is almost, sorta, kind of the same as that skylight you always wanted to put in, just imagine what your family might experience if the income you or your spouse provides was no longer available.

Not sure if you have the right policy to help out with your new home in the event of a sudden death? Be sure to talk with a financial professional to make sure you’re financing the future you want – and that you’re doing everything in your power to help your family stay in the house that you’re all working to make a home!


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