5 Ways to Manage Your Finances Under COVID-19

5 tips

Managing your finances isn’t simple. Throw a global pandemic into the mix and you might be finding yourself overwhelmed and unprepared for the future. Now is the time to self-educate and start finding ways to manage your money for both the short and long-term. 

Here are a few tips on how to manage and improve your financial situation during the coronavirus pandemic. 

 

  • Focusing on building savings

 

While it is always important to invest and allow your money to compound, it is crucial to focus on building up your savings account to ensure you have a cash cushion for a rainy day, or in our case, the coronavirus pandemic. While you may be currently saving around 20-30% of your income, right now focus on investing 10% of your income towards a long-term goal, such as your retirement plan. 

 

  • Spending money on take-out/delivery, and supporting local businesses

 

As we approach the beginning of July, finally entering country-wide re-opening stages, it is still important to be supporting local businesses who have suffered a beating these last few months. Ordering takeout/delivery is a great way to mix up your daily meals and give your kitchen a break, while also stimulating the economy. 

 

  • Building a larger emergency fund

 

As mentioned earlier, it is crucial to have a cash emergency fund to be able to cover around 6 months of living expenses. No matter your job, we see how great of an impact unprecedented global events can have on our economy, so knowing you have a few dollars in your pocket is a great reassuring measure to take. 

 

  • Buying Comfort

 

As we slowly begin to reacclimate into our daily routine, it is important to put our spending into perspective. While there is nothing wrong with retail therapy, there are ways to make online shopping less expensive. Make sure to use free browser extensions to get cash back on your purchases. Also, if you always pay your full credit card balance monthly, you can use your credit card to accumulate miles and points. Lastly, remember to ask yourself if your purchase is necessary and worth it before submitting your order. 

 

  • Giving more

 

Now more than ever, it is important to give back to the community and help those who are less fortunate. If you are in a stable financial situation, remember to help those around you by directing your extra income towards donating to charities and organizations you strongly believe in. 

 

By re-evaluating your financial situation and altering the ways you use your money, you can set yourself up for long-term financial success. Consider speaking to a financial advisor before making any big changes to your current financial plan. We offer a 30-minute complimentary financial consultation for those who have questions or concerns about their personal situation and how we may be able to assist you. If you have any questions on your current situation, please contact us and we will be happy to help you! 

Bullet Journaling Your Way Toward A Budget

bullet journaling

Many of us have tried to create a budget and stick to it at least once. Some people choose apps on their phone or spreadsheets on the computer to help them complete this task. But, for those who prefer a more creative approach, a better option might be bullet journaling. Bullet journaling is an organized system that helps people kickstart their to-do lists, stay on track with goals and switch up their approach to keeping their personal finances in order.

How Does Bullet Journaling Work?

Bullet journals can look like basic line writing, or you can add color and design elements to make it fun and attractive. Regardless of what you want to create, it’s most important to make your journal exciting enough to stick with. Your bullet journal should be customized to your liking in order to help you meet your goals.

How Can Bullet Journaling Help You Reach Your Goals?

Bullet journals are an all-in-one way to keep track of your expenses and reach your goals. It allows you to keep a record of:

  • Your financial goals
  • Your spending habits
  • Miscellaneous observations you have made about your money habits

Being able to actually see everything in writing and holding yourself accountable makes it much easier to keep track of how much you’re spending, what types of items you’re buying and how other factors (like your mood) could be affecting your money habits. 

How to Use Bullet Journaling For Finances

While bullet journaling can be used for anything from tracking sleep patterns to weight loss, dream journaling or tackling your daily to-do list, there are a few ways you can use a bullet journal to develop a better budget.

Plan for Upcoming Purchases or Trips

If you’ve been wanting to make a big purchase or splurge on an upcoming event, use your journal to keep track of how much you need to save. If you are planning for a vacation, find out the cost of flights, hotels, food, etc. and start putting aside money for that. If you are looking to purchase a new car, you can keep track of what your monthly payments would look like based on what the loan costs might be. Drawing a visual representation of what you’re saving for can help make your goals feel more tangible. As you set money aside, you might want to include something in your journal that you can color to visually show how much you have saved.

Track your Monthly Expenses

According to a recent survey, only 14 percent of respondents used cash to pay for everyday purchases.1 Using credit or debit cards for most of your purchases can add an extra challenge when it comes to budgeting since it is an easy way to lose track of how much is being spent.

If you still prefer to avoid cash for your purchases, use your bullet journal to track your credit/debit expenses at the end of each week or month. You should create a list of how much money was spent and what it was spent on.  You can also get creative and draw graphs symbolizing certain categories (food, gas, eating out, entertainment, etc.). Having a visual tool to compare what you’re spending and what you’re saving can be an eye-opening way to reassess your budget.

Pair it With Your Favorite Financial App

If you’re interested in using a budget tracking app, you can always pair your bullet journal with an app like Mint or YNAB. Apps can be more useful in immediately alerting you to overspending and help you budget in real-time. While journaling is still great for reflecting on your spending, an app can help keep you more accountable upfront.

 

Bullet journaling is a simple way to get your finances in order and it can make staying on track much easier. It provides a way for you to outline what needs to be done in order to accomplish your goals and allows you to constantly remain mindful of your expenses. If you need any assistance in starting your own budget journal or have any questions relating to your future financial goals, please feel free to contact us – we are here to help!

 

4 Financial Red Flags When Dating Someone New

relationship

It might seem strange to talk about finances when you first start dating someone new. People often try to overlook financial issues when embarking on a new relationship as it can be uncomfortable and awkward to discuss. However, if you see a future with that special someone, it’s important to know what kind of financial baggage they might be bringing with them and to be aware of any potential financial red flags.

Red Flag #1: Having Different Approaches to Saving

If your partner is a spender and you are a saver, this could be your first major red flag. It is critical that you both discuss your savings plans and goals in detail. If you share accounts or credit cards, you don’t want one person spending more than their fair share since this would not only negatively affect your savings goals, but it can also create a power struggle over financial control. It’s important to discuss how much money you’re okay spending on certain items and creating a budget that will help you compromise to meet your financial goals. It may be best to keep your finances separate for now, however, if you’re still unable to reach an agreement.

Red Flag #2: Not Discussing Your Credit Scores

Disclosing your credit scores is a must. Depending on what your partner’s credit score is, it could diminish your chances of getting a house together or making any other big purchase in the future.

Red Flag #3: Neglecting To Address Debt 

It is essential that you know what debts your partner may have accumulated and how they plan on handling them. If you’re still getting to know one another, they may not be comfortable divulging the actual amount. You should, however, have a good understanding of whether or not they’re paying it off responsibly and spending wisely. 

Red Flag #4: Not Sharing the Same Financial Goals 

While the relationship is still fairly new, you should outline what your end goals are. It is important to ensure your financial goals are aligned early enough in the relationship to avoid any future disappointment. 

 

The excitement of any new relationship might cause you to overlook some major financial red flags. But when the time is right, it’s important to address these issues (preferably sooner rather than later) – especially if you’re both in it for the long haul.  If you encounter any of these red flags in your relationship and have any questions regarding your finances, please contact us – we are here to help!  

Has Your Employer Suspended Its 401(k) Matching During COVID-19?

401k match

According to a recent survey, 16.1 percent of organizations have suspended matching employer contributions due to financial hardships caused by COVID-19. Worse yet, 1.3 percent of businesses have terminated their 401(k) plans altogether.1 401(k) plans and their matching employer contributions are relied on by millions of Americans to bolster their savings for retirement. If your employer has recently made an adjustment to its 401(k) offerings, you may want to consider how this could impact your future retirement and the next steps you should be taking.

Why Are Employers Changing Their 401(k) Plans?

COVID-19 has had a tremendous impact on businesses throughout the globe. With most states implementing stay-at-home orders, businesses have been forced to reduce hours or cease operation altogether. As Americans were encouraged to stay home throughout March, April and May, foot traffic all but vanished across America for months.

Even though some states have begun relaxing measures and stores are starting to open back up, America remains suspended in a fairly volatile market. People are worried about what the future will look like.  Many of them are strapped for cash and not willing to spend like they used to. In return, businesses are suffering and searching for ways to save. Unfortunately, one of the first things to go is often employer-sponsored benefits such as 401(k) plans or their matching contributions.

Is it Legal for an Employer to Suspend Matching Contributions?

In most cases, it is legal for an employer to suspend matching 401(k) contributions. While it may have been an enticing addition to your benefits package upon your hiring, employers do have the power to simply stop offering this benefit. The most important thing an employer can do in this instance is to effectively communicate with employees who will be affected by the change. For example, explaining that cutting these benefits is their solution to avoiding layoffs will likely make employees more understanding and receptive to the change.

If your employer doesn’t provide you with an explanation or any idea of if/when contributions will start up again, speak to your manager or HR department. If your employer offers contribution matches to a safe harbor 401(k) plan, they must offer notice to employees 30 to 90 days in advance of suspending contributions.  

What Should You Do if Your Matching Contributions Are Suspended?

In the case that your employer does suspend matching contributions, there are a few next steps you can take to help maintain and grow your retirement savings.

Having an employer suspend matching contributions, even if it’s only temporary, is a sign of the times. We’re facing a global pandemic, the stock market’s unpredictable and people are worried about money. If you have been personally impacted by the coronavirus, you can even withdraw up to $100,000 penalty-free as part of the recently passed CARES Act,3 although this should only be done if you are in dire need of financial assistance.  Withdrawing any amount from your 401(k) now will only rob your future retirement. 

If you have questions regarding your company 401(k), please reach out to your financial advisor.  Your advisor’s sole responsibility is to help you make unbiased, educated and objective decisions about your money. Use him or her as a sounding board to voice your concerns and discuss potential paths forward. How will you make up for the missing contributions? What financial impact will this change have on your future retirement? The market is volatile and economic confidence is low amongst investors. If you haven’t already, use this as an opportunity to reevaluate your current asset allocations and investment strategies. You likely have plenty of questions regarding any changes to your 401(k) and other investments and your advisor may be able to help you identify potential areas for improvement based on your current tolerance for risk.

Even if your employer has slashed matching contributions, that doesn’t mean you still can’t contribute to your 401(k). If you have the means to do so, consider upping your contributions, for now at least, to help offset the loss of any missing contribution matches. The contribution limit for a 401(k) increased in 2020 to $19,500. If you’re over 50, you’re allowed to contribute an additional $6,500 in catch-up contributions.4

In these challenging times, you are not alone if you find yourself working for a company that has suspended its 401(k) matching contributions.  Hopefully, these changes are just temporary, but it is necessary to plan accordingly for what is happening in the present.  Every penny counts when it comes to preparing for retirement and it is important to know how these 401(k) changes will affect your future savings.  If you have any questions about the impact this may have on your future retirement earnings and what you should be doing right now to make up for any lost funds, please contact us.  We are here to help!

  1. https://www.psca.org/sites/psca.org/files/uploads/Research/snapshot_surveys/CARES%20Act%20Snapshot%20Summary.pdf
  2. https://www.irs.gov/retirement-plans/mid-year-changes-to-safe-harbor-401k-plans-and-notices
  3. https://www.congress.gov/bill/116th-congress/house-bill/748/
  4. https://www.irs.gov/newsroom/401k-contribution-limit-increases-to-19500-for-2020-catch-up-limit-rises-to-6500

National 529 College Savings Plan Day

529 day 2

Today is Friday, May 29 which means it’s “529 Day” or “National 529 College Savings Plan Day”. Each year, National 529 College Savings Plan Day draws awareness to the tax-advantaged way of putting money away for education costs. To help ease the burden of student loans, some parents put money aside each year for their children’s education. 529 plans have grown in popularity over the years, however many people still remain unaware that 529 plans are even an option for education savings.

So, what exactly is a 529 plan? 529 plans, also referred to as “qualified tuition plans,” are tax-advantaged savings plans sponsored by states, state agencies or educational institutions. Earnings are federally tax-exempt and most states exempt earnings from state income tax.

There are two types of 529 plans: Prepaid tuition plans and education savings plans. Both can be used as a way to save for a child or beneficiary’s education, but differ in their methods.

Prepaid tuition plans allow people to purchase units or credits at higher education institutions at current prices to be used in the future by the beneficiary. The credits are purchased for participating colleges or universities, which are usually public and in-state. However, it may be able to be used for an equal payment to private or out-of-state institutions.

The second type of plan is an education savings plan. It serves as an investment account that can be used for future qualified higher education expenses. Similar to a Roth401(k) or Roth IRA, plans offer several investment options and funds will rise and fall based on the investment’s performance. Generally, the accumulated funds can be used at any participating college or university, regardless of its location. You can also use up to $10,000 to pay tuition at elementary or secondary schools.

The ways you can spend this saved money differs based on the plan. Prepaid tuition plans can be used for tuition and mandatory fees, but not room and board. Education savings plans, however, can be used for tuition, fees, books, supplies, equipment, computers and sometimes room and board. Technically, a person can use the funds accumulated in an education savings plan for any expense they choose, but if the funds are used for a non-qualified distribution, they are subject to income tax, a 10 percent penalty and any additional state penalties. If a beneficiary doesn’t need the funds, they can be withdrawn with the payment of income tax and penalties, although there are exceptions to the penalty fees.

529 Day is a great time to review your college savings progress and if you haven’t started saving for college yet, it’s not too late!  Some states currently have different contests and incentives to try to boost interest and participation in their 529 savings programs. Click here to see what your state might have to offer.  If you have any questions about 529 plans or would like us to help set up a plan for your beneficiaries, please contact us – we’re here to help!

What Happens If You Try To Spend More Than Your Credit Limit?

credit cards

When you sign up for a credit card, you are often assigned a credit limit when that account is opened.  These limits typically start at $200 and go up to tens of thousands of dollars.  With so many people out of jobs and finding it hard to make ends meet these days, credit cards have become a necessary resource to pay for things that we might not have the money for right now. However, the more you charge on your cards, the closer you may come to hitting that max limit.  If you do hit that amount, you are likely to get hit with over-the-limit fees. Before you decide to use your credit card to pay for necessities, there are alternatives to going over your max before risking having your credit limit cut or incurring unnecessary fees.  

Can You Go Over Your Credit Limit?

Yes, you can go over your credit limit, but there’s no surefire way to know how much you can spend in excess of your limit. Card issuers may consider a variety of factors, such as your past payment history, when deciding the risk of approving an over-the-limit transaction. Any approved transactions above your credit limit are subject to over-the-limit (or over-limit) fees. This credit card fee is typically up to $35, but it can’t be greater than the amount you spend over your limit. So if you spend $20 over your limit, the fee can’t exceed $20.

Due to the CARD Act of 2009, over-limit fees can’t be charged without your consent. As a result of these regulations, most card issuers have done away with over-limit fees and the default for any transactions over your credit limit may be that the transaction is simply denied.

If you do consent to a one-time over-limit fee, you can change your mind and opt-out at any time. However, in doing so, your card issuer will likely decline any purchases you attempt to make over your limit. Even if you opt-in to over-limit fees, transactions exceeding your credit limit may still be denied.

Should You Go Over Your Credit Limit?

While spending over your credit limit might relieve some short-term problems, it can also cause long-term financial issues, including fees, debt and damage to your credit score. The best practice is to try to maintain a low credit utilization rate – avoid maxing out your card and spending anywhere near your credit limit.  If you do go over your limit, you should sit down and consider why it happened in the first place and review your budget. You should figure out what purchases caused you to spend more and whether you can make any changes to your spending habits.

Alternatives If Your Credit Limit Is Low

For those that may have a low credit limit or if your credit limit recently got cut, there are some options to ensure you don’t max out your spending. If you’ve had a low credit limit for a while and currently have a stable job, you may want to request a credit limit increase. This can be a good idea if you have good credit (scores 670 to 739) or excellent credit (scores 740 and greater) or if you haven’t updated your income in a while and make more money than what’s listed. Your card issuer may pull your credit report for this request, which may cause a small, temporary ding to your credit score.

However, if your credit limit was reduced, you may want to consider other options. Cardholders with good payment history and a stable job should call their card issuer and ask for reconsideration.  You should ask why your credit limit was cut, explain that your account is in good standing and that you have a stable source of income to pay off your bill. This may shed light on why your limit was lowered and potentially result in your credit limit increasing — though there is no guarantee. Rather than asking for a credit limit increase on the card that had a reduction, you may want to consider any other cards you have instead. If you have three credit cards and one got the limit cut, see if you can get an increase on one or both of the other two,

If you have a history of missed payments or maxing out your cards, you are likely not a good candidate for reconsideration and don’t want to draw attention to yourself. Therefore, if you fall into one of these categories, it’s best to not try to request a higher limit.

When To Apply For A New Credit Card

Cardholders with only one credit card and a low credit limit may want to consider opening a new credit card, but should be aware of any potential risks. For starters, if you were recently laid off or faced a reduction in income, you may not be in the best position to be approved for a new card, and there’s no sense in adding a new credit inquiry to your credit report if your chances are low. Also, if you have a history of maxing out your card, you should be aware that more credit can lead to more debt. An additional credit limit can be helpful for affording your expenses, but it can also be harmful if you overspend.

Before opening a new card, give yourself clear guidelines on how you’ll use the card and stick to keeping a low credit utilization rate. When it comes time to pay your bill, make on-time payments of at least the minimum every month for all of your cards.  If you are able to do so, pay in full so that your credit score will  improve and your debt will be minimized. When applying for a new card, check your credit score first to narrow down your options. Then consider cards based on your credit score. 

In these tough times, we need to be responsible when it comes to spending and not see going over your credit limit as a choice. If you do need to use your credit cards to pay for utilities, groceries and other necessities right now, make sure you are aware of your max and other options you might be able to work out with the credit card companies before going over your limit. When you do receive those credit card statements, make sure to pay at least the minimum amount each month to maintain a positive credit score. And, make sure you are paying the bills on time to ensure you won’t incur any late fees either.  If you have any questions about credit, credit cards or other issues concerning your finances, please contact us.  We are all in this together and we’re here to help! 

Ways To Build Wealth And Boost Your Savings While You’re Stuck At Home

finances during quarantine

We’re all spending more time at home these days and it’s likely that money and finances are a stress for many during this pandemic. As the markets continue to be extra volatile,  many people are feeling a lack of control when it comes to their money.  Even though there isn’t much we can do about the state of the overall economy, there are some small-scale things you can do right now, from the comfort of your own home, to help you feel more in control of your finances. If it is all you can do right now to keep up with your bills, that should continue to be your main priority.  However, if you’re in the fortunate position of having an income or some extra cash, the following tasks take 30 minutes or less and might just have you feeling a little better about the state of your finances.

REVIEW YOUR BUDGET

 

 

Every solid financial plan starts with a good budget, and now is a great time to go over yours. You should review your spending habits and try to determine which areas of your spending are relatively fixed — such as monthly rent and insurance coverage — and those that are discretionary, like your lattes, subscriptions and eating out. 

Since you’ll likely be spending a lot of time at home this month, most of your convenience purchases will probably trail off. Comparing last month’s expenditures to this month, you will see where you are spending your money and you will be better positioned to make changes to your spending habits in order to prioritize saving money and spending on what you deem essential for your household.

GET SPECIFIC ABOUT YOUR FUTURE

 

 

Write down all the things that you want to do in your future – you can do this by yourself or with a significant other. Break it down into five-year segments. What do you want to do, where do you want to go, and what do you want to accomplish during each five-year segment? If you have career goals that include starting a business, making more money, or changing your job, you might need to learn some new skills to start down that path. 

Being confined to our home offices gives us a great opportunity to focus on learning something new and developing plans for the next steps in life, whether it is signing up for an online class or doing some research on what it might take to take your career in another direction.

SET UP A 529 COLLEGE-SAVINGS PLAN FOR YOUR KID(S)

 

 

If you’ve been considering a college savings plan for your child, setting one up online is quick and easy. You should start by reviewing the 529 plan options where you live, since they often provide tax benefits while you save for your child’s college education. Just remember to keep your own future financial goals in mind, as well. Saving for your children’s education is very important, but should come second to saving for your own retirement.

REVIEW YOUR BENEFICIARY INFORMTION

 

 

You should make a list of your financial accounts that include beneficiary designations —  like your IRA, 401(k), or life insurance — and make any necessary beneficiary information adjustments. Since these designations determine who will receive your account upon your passing, if they are left blank or not updated, your wishes could be ignored and assets could go to an ex-spouse, or state law could become applicable and decide how to split your accounts.

 

SET UP A NEW SAVINGS ACCOUNT

 

Now is the perfect time to set up a separate online high-yield savings account for your specific goals, whether it be for a vacation, saving for the holidays or possibly a new car. To make things even easier, you can also set up a direct deposit so that you put a little bit away from each paycheck towards that objective. However, remember that these “extras” should take a backseat to your emergency fund.  Having three to six months of expenses set aside in a money market or high-yield savings account can provide peace of mind and can be a lifesaver in times of temporary job loss or medical costs.

DO SOME BOOKKEEPING

 

 

Now might be a good time to do some overall bookkeeping.  This can include reviewing your insurance policies to see if you still have sufficient coverage for your needs, or working on your estate plan (are your medical directives all updated?).  If your kids are old enough, this could even be a good opportunity to teach them how to balance a checkbook by showing them how you do yours.

 

EVALUATE YOUR INVESTMENT PORTFOLIOS

If you have money in the market that’s earmarked for retirement, you might be a little worried about how current events will impact your goals. Now is a good time to have a call with your financial planner to determine if your portfolio is still meeting your long-term goals, or if it needs to be adjusted based on current events. 

 

Even though we may not have expected to be spending this much time in our homes over the past few months, it’s important to take advantage of the time while we can.  These unprecedented times have given us the opportunity to slow down and focus on our families, as well as other important aspects of our lives like our finances.  Taking just a half hour each day or week to go over these tasks can help us to feel more in control and less stressed about our money as we deal with the uncertainty of the times.  As always, if you have any questions about any of the suggestions above or any other concerns about your finances, please contact us.  We are here to help and we are all in this together!

What To Do With Your Stimulus Check Once You Receive It

stimulus check

The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act was recently enacted to assist families, individuals, small business owners and medical facilities across America amidst the COVID-19 pandemic.1 As part of this legislation, many individuals and families became eligible to receive stimulus checks of up to $1,200 per person.1 Many Americans have received their checks already, while some are preparing to receive theirs shortly. If you or your household received a check, here are some things you may want to consider doing with it.

#1: Cover the Essentials

The stimulus checks are designed to help Americans who may be financially struggling due to COVID-19. Whether you’ve been furloughed, forced to reduce hours or dragging financially, you should use this money to cover any immediate, essential expenses like rent, utilities, groceries or internet.  

This check should be looked at as a mini emergency fund. Look at your bills over the coming weeks and determine how you can best utilize these funds. If you’re currently receiving unemployment payments from the government, remember to account for this income when making your financial strategy as well. If you are still coming up short after the stimulus check has been used up, remember to check with companies (power companies, insurers, gyms, cable companies, etc.) regarding any relief efforts or forgiveness policies they may have enacted amidst the global pandemic.

#2: Fill Your Emergency Fund

Many adults say they don’t have enough saved to cover a $400 emergency.2  With so many people living paycheck to paycheck, this extra bump in funds could be the cushion needed to prepare for any potential financial surprises.  

Even if your income remains unaffected by the pandemic or you find yourself with some additional dollars leftover, it’s never a bad idea to tuck some away for a rainy day. If you don’t have an emergency fund, saving any surplus from your stimulus check is a good way to start one. An ideal emergency fund should have three to six months’ salary to help cover unexpected expenses such as job loss, medical bills, home damage, car repairs, etc. 

#3: Address High-Interest Debt

Total household debt in America was already quite high before the pandemic hit.  Now, overall American debt is soaring. While some of these debts include lower-interest debts like auto loans or student loans, an extremely large portion of the overall amount is attributed to credit card debt.3

If you’re currently facing any amount of high-interest debt, such as credit cards or personal loans, paying this down should be a top financial priority. If your current financial situation allows it, use your stimulus check to make a dent in (or pay off completely) any high-interest debt your family may have.

#4: Support Local Businesses

It is extremely important to patronize local shops in your community if you are able to. Whether you order food from a local restaurant, purchase gift cards from your favorite boutique or frequent your local coffee shop or bakery for take-out, small business owners have been some of the hardest hit during these times. Many of these small businesses don’t have the backing of a larger corporation or franchise and are experiencing a severe drop in revenue that could jeopardize their ability to stay open after the pandemic.  Your patronage could make a big difference in their ability to continue operation.

#5: Donate It

If you are fortunate enough to be financially comfortable during the COVID-19 pandemic, you may want to consider giving to those most affected – medical facilities, food banks, shelters, etc. The devastating impact of COVID-19 means assistance is needed now more than ever before.

While the ability to make physical donations (such as clothing, toys, pantry items, etc.) may be limited right now, you can still use your stimulus check to provide crucial monetary relief.   You can search for charity organizations using tools such as Charity Navigator or The Better Business Bureau’s Giving Alliance or you may hear about local nonprofits that are in need through social media or word of mouth.  

#6: Fund Your Future Retirement

Even if you are far off from retirement, putting any excess income into a retirement savings account can be a rewarding move. You may consider using your stimulus check to pad your IRA or 401(k) if you are able. The power of compounding interest means that $1,200 could turn into a couple thousand or more by the time retirement rolls around.

In these unprecedented times, many of us are left wondering what the best next move is when it comes to our stimulus checks. No matter what you choose to do, remember to be intentional with these additional dollars. If you have any questions regarding how to move forward when you receive your stimulus check, please contact us.  We are here to help and we are all in this together!

  1. https://www.congress.gov/bill/116th-congress/senate-bill/3548/text
  2. https://www.federalreserve.gov/publications/2019-economic-well-being-of-us-households-in-2018-dealing-with-unexpected-expenses.htm
  3. https://www.newyorkfed.org/microeconomics/hhdc.html

The Importance of Financial Literacy

financial-literacy

It was recently announced that the state of South Carolina was pushing to pass a bill that would require all high school students to take a course on financial literacy in order to graduate. Five states (Alabama, Missouri, Tennessee, Utah, and Virginia) are the only other states to have passed a similar law. As professionals who strive to preach the importance of this topic, we are very happy to see these developments. In fact, we think it’s particularly great that we, as a nation, are beginning to demand that children learn the basic of personal finance, before they step out into the real world.

But first off, let’s tackle what the actual definition of “financial literacy” is. Financial literacy is the combination of financial, credit and debt management and the overall knowledge that is required to make responsible decisions regarding financial matters. Really, we are talking about the impact of finances on the daily issues an average family may encounter.

Is the rate of financial literacy low in the US? Yep. (Actually, it’s low around the world.) Of course, the level of financial literacy varies according to education and income levels. However, there is a lot of evidence out there that shows that highly educated individuals with above-average incomes are almost equally as under-educated on these topics as those who may live a more modest lifestyle.

source: S&P GLOBAL FINLIT SURVEY

Given this information, it is becoming increasingly more important to ensure that we are preparing our children with this knowledge well before they are starting college, creating families, and living an “adult” life. Why? Because it’s about the “long game”. Financial literacy is critical in helping people plan for retirement and avoiding high levels of debt. Last year, a study from TIAA-CREF showed that those with high levels of financial literacy  are more likely to make astute decisions and typically, over their lifetime, amass twice as much wealth as those without a plan.

If you can’t build a simple household budget, then you are likely financially illiterate. If you are oblivious to money-related decisions, are unsure of the consequences of these decisions, or you simply don’t care, then you’re financially illiterate. Most importantly, If you have learned the “hard way” over the years that not being up-to-date on financial matters has affected your life in a negative way, it is imperative that you do not allow your children to make the same mistakes. Important financial decisions are popping up earlier and earlier in life, as the world becomes more complex. You don’t “build” wealth and then figure out how to manage it properly. That ability to grow comes with managing it properly along the way.

The statistics mentioned above are some of main reasons we have created the “Beers with Brad” seminar series. We feel that increasing your financial literacy is incredibly important to your long term financial goals and obligations. If you are in the DC/Maryland/ Virginia area and would like to hear more, feel free to stop by our next event.

How empty nesters can get back on track

empty-nest

Now that you’re done spending money on clothing, food, child care – and don’t forget the biggest expense, education – it’s time to focus on your own financial needs. After all, the average cost of raising a child today in middle-class America is nearly $250,000, excluding college tuition expenses. These types of numbers leave many couples in “catch up” mode when it comes to their savings and retirement planning.

The first step, as we all know, is creating a plan. You can’t make any headway towards debt and savings goals without a clear, executable strategy. Three big keys are: concentrate on building up your investments, boost your credit, and reevaluate your real estate needs. This is a major inflection point in your life, and thus an ideal time to consider all these topics.

Regarding your savings, your cash flow is (hopefully) growing, or at least turning positive. Because you have a limited amount of time to get things in order, taking action in the areas mentioned above should be done as soon as possible, especially if any emergency funds have been drained. More parents tend to undersave and overspend while their children are still living under their roof. Here are some questions to ask yourself:

  • Do we have enough cash to make it through the next economic contraction or bear market?
  • Is our credit card debt manageable?
  • Are the balances in our 401(k) and IRA accounts where they need to be?
  • Is our house “too much” for us without the children?
  • Do they kids still need insurance?

Now that some of your larger expenses have come and gone, there must be a mental shift from “paying the bills” to “creating a better future”. You will need to monitor your assets more closely now, and extra money should be going more towards retirement accounts and less towards material things. There is good news for those who may be a little behind, as the IRS has increased contribution limits in 2019 for 401(k) and IRA accounts.

However, one key to keeping your nest empty is taking the time to educate your children on the importance of personal finance. This is a very important step in creating and maintaining a “moat” around your new-found savings. The more educated your children are on the basics of day-to-day money management, the less likely they are to need your assistance in the immediate future. These are great opportunities to preach to them about not living beyond their means, sticking to a budget, saving a little each month, and the consequences of debt.

There are a few important things than can be tackled that will allow you to get off on the right foot towards rebuilding your retirement savings. The key is to capitalize on the new-found opportunities to do so. And one of those, in this moment, is a focus on your future, not your child’s future. Of course you should give them the tools to financially fend for themselves, but going forward the main goal is retirement for you and your spouse.