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Archive for financial planning – Page 5

Your Financial Road Map

Posted by Frank McKinley on
 June 1, 2021

Are you making progress toward your financial goals? Are your finances in order? Are you prepared for a financial emergency? If you’re not sure, take time to thoroughly assess your finances so you have a road map for your financial life:

Assess your financial situation.

Evaluating where you currently stand financially will help you determine how much progress you are making toward your financial goals. There are several items to consider:

Your net worth — Prepare a net worth statement, which lists your assets and liabilities with the difference representing your net worth. Prepared at least annually, it can help you assess how much financial progress you are making. Ideally, your net worth should be growing by several percentage points over inflation.

Your spending — Next, prepare a cash-flow statement, detailing your income and expenditures for the past year. Are you happy with the way you spent your income? You may be surprised by the amount spent on non-essential items like dining out, entertainment, clothing, and vacations. This awareness may be enough to change your spending patterns. But more likely, you will need to prepare a budget to help guide your future spending.

Your debt — Debt can be a serious impediment to achieving your financial goals. To assess how burdensome your debt is, divide your monthly debt payment, excluding your mortgage, by your monthly net income. This debt ratio should not exceed 10% to 15% of your net income, with many lenders viewing 20% as the maximum. If you are in the upper limits or a uncomfortable with your debt level, take active steps to reduce your debt or at least lower the interest rates on it.

Increase your savings.

Calculate how much you are saving as a percentage of your income. Is it enough to fund your future financial goals? If not, go back to your spending analysis and look for ways to reduce expenditures. That may mean reassessing your lifestyle choices. Commit to saving more  immediately and then take steps to make that commitment a reality.

Rebalance your investments.

At least annually, thoroughly analyze your investment portfolio:

Review each investment in your portfolio, ensuring that it is still appropriate for your situation.

Calculate what percentage of your total portfolio each asset type represents; compare this allocation to your target allocation and decide if changes are needed.

Compare the performance of each component of your portfolio to an appropriate benchmark to identify investments that may need to be changed or monitored more closely

Finally, calculate your overall rate of return and compare it to the return you estimated when setting up your investment program.

If your actual return is less than your targeted return, you may need to increase the amount you are saving, invest in alternatives with higher return potential, or settle for less money in the future.

Prepare for financial emergencies.

To make sure you and your family are protected in case of an emergency, set up:

A reserve fund covering several
months’ of living expenses.
The exact amount you’ll need depends on your age, health, job outlook, and borrowing capacity.

Insurance to cover catastrophes.
At a minimum, review your coverage for life, medical, homeowners, auto, disability income, and personal liability insurance. Over time, your insurance needs are likely to change, so you may find yourself with too much or too little insurance.

Review your estate plan.

Take a fresh look at your estate planning documents and review them every couple of years. Even if the increased exemption amounts mean your estate won’t be subject to estate taxes, there are still reasons to plan your estate.

You probably still need a will to provide for the distribution of your estate and name guardians for minor children. You should also consider a durable power of attorney, which designates someone to control your financial affairs if you  become incapacitated, as well as a healthcare proxy, which delegates healthcare decisions to someone else when you are unable to make them.

If you’d like help evaluating your finances, please call.

Categories : financial planning, Financial Services, Investing, Retirement, Savings

Money Personalities and Saving – Which One Are You?

Posted by Frank McKinley on
 May 17, 2021

Everyone approaches their finances differently, but there are common mistakes that certain money personalities make. The following highlights five different money personalities, the mistakes they make, and how they can improve their financial picture.

Entrepreneur

Because they put all their financial resources and energy into their business, entrepreneurs may make mistakes such as cashing out their retirement plans to fund their business, holding too much debt, or even getting behind on self-employment taxes.

Entrepreneurs would be best served by developing a business plan with income and expense projections to ensure they use debt wisely to fund their business. They should also make contributions to a retirement plan annually, even if it’s only a few thousand dollars. And finally, entrepreneurs should work with a tax professional to help reduce their taxes as much as possible,
while making sure quarterly tax payments are made.

The Saver

This is the person who follows all the rules and does it just right. They fully fund their retirement
accounts each year, don’t carry much debt, and have plenty of savings in the bank for any unexpected expenses. While this money personality may get to retire early, they may want to stop and smell the roses once in a while.

The High-Income Earner

Professionals, such as doctors and lawyers, fall into two groups: savers and spenders. Those who
fund a large lifestyle may find they have trouble funding their retirement because they’ve spent too much.

Big earners need to develop a financial plan so they understand how much money they will need

 to fund their retirement based on the lifestyle they want to live. They should also pay themselves first with a predetermined amount to
saving, before buying nicer cars or bigger houses, as well as considering setting monthly spending limits.

I Need to Save?

This money personality spends their paycheck as soon as it hits their account, and in some cases, live beyond their means. They have no savings if an unexpected emergency comes up, and they are likely carrying too much debt. To be able to retire, this person needs a financial plan with a strict budget to help pay down debt and develop both long- and short-term savings.

Doing Fine and Enjoying Life

This person saves and spends. They want to enjoy life experiences along the way to retirement, such as vacations, maybe a boat or

cabin. While they contribute to their 401(k) plan, they may not have a financial plan that includes short-term financial goals and how much they need to save for retirement.

While it is great that this money personality saves, they need to ensure that their spending isn’t outpacing their savings. By developing a solid financial plan, this money personality can create a more balanced approach to saving and
spending.

What’s Your Money Personality?

You should determine where you fall on the spectrum of money personalities so you can develop a financial plan that suits your personality, but also helps you secure your future.

Please call if you’d like to discuss this topic in more detail.

Calculate your savings goals
Categories : financial planning, Investing, IRA, Savings Goals
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How Much Should You Save in Your 401(k) Plan?

Posted by Frank McKinley on
 May 10, 2021

To make sure you’re on track for retirement, you should have an idea of how much you need to set aside to reach your retirement goal.

Know Your Limits — Before you come up with an annual savings target, it’s important to understand how much you’re allowed to contribute to a 401(k) plan. In 2021, workers younger than 50 can save $19,500 in a 401(k), 403(b), or similar plan, while those age 50 and older can save $26,000 annually, an extra $6,500 per year.

Contribution limits usually go up slightly every year; if you’re an aggressive saver, you’ll also want to pay attention to that and adjust accordingly.

At a Minimum, Get Your Match — The first rule of 401(k) plans is to save enough to get your full employer match. You’ve probably heard it before, but not contributing enough to get your employer’s matching contributions
is like leaving free money on the table. Even if you’re not impressed with your company’s 401(k) plan and would prefer to save in some other way, it still makes sense to at least get that free money.

But How Much Do I Really Need? — So you know how much the government will let you save and that you should be contributing enough to get your employer match. But how much should you be setting aside to prepare yourself for a comfortable retirement? That’s the ultimate question.

Unfortunately, there’s no magic number because every individual situation is different. People have different tolerances for risk, market performance varies over time, and everyone has their own idea of an ideal retirement. That’s why it’s best to talk to a financial advisor who can help you determine how much you need. But in the meantime, there are a few rules of thumb that may help you get a sense of where you stand.

One guideline suggests saving a certain percentage of your salary every year for retirement. Between 10% and 15% is usually the recommended number. If you started saving when you were young, your target savings percentage is usually lower, but if you procrastinated, you’re more likely to be looking at having to save 15% or even 20% of your pay to get you on track to a  comfortable retirement. The good news is that your employer match counts in that number, so if your goal is to save 10% and your employer match is 5%, you only need to save 5% of your pay.

what to consider when saving
Categories : Blog, financial planning, Financial Services, IRA, ROTH
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Leaving a Meaningful Financial Legacy

Posted by Frank McKinley on
 May 3, 2021

Many of us want to do our part to leave the world a better place. Below are five different ways you can leave a financial legacy.

1. Give gifts in your lifetime.
If you have the financial  freedom to do so, making financial gifts while you are still alive is a great way to leave a legacy. Money you donate to qualified charitable organizations can be  deducted from your taxes, saving you money while also helping you support a good cause. If you want to leave a family legacy, consider giving
gifts to loved ones while you are living, like helping pay for your grandchild’s college education. Just make sure you’re aware of annual limits on what you can give to individuals without triggering gift tax ($15,000 per person in 2021).

2. Make a bequest in a will.
Many people use their will to make philanthropic bequests, leaving funds to their favorite charity, alma mater, or church. For people who have money to give, recognizing an organization in their will is a relatively easy way to leave a legacy. Bequests in a will don’t require any additional
planning and are exempt from estate tax, provided the recipient is a qualified charitable organization. However, if you plan to make a substantial bequest to a charity, you may want to inform them of your plans in advance. This is particularly important if you plan to donate physical property, like real estate or artwork, as not all charities will want or be able to accept such donations, or if you plan to place restrictions on how the gift is used.

3. Create a charitable remainder trust.
If you would like to make a substantial gift to a charity but also want to provide for your heirs
or continue to receive income during your lifetime, a charitable remainder trust (CRT) may be an option. Here’s how it works: You transfer

consider giving gifts to loved ones while you are living

property to the trust (and get a tax deduction at the time of the transfer), and you or your heirs receive income from the trust for a specified period of time. Then, when that period ends, the remaining assets go to the charity of your choice.

A word of caution: CRTs are irrevocable, which means once you’ve made this decision, you can’t reverse it.

4. Set up a donor-advised fund.

Know that you want to leave money to a charity, but not ready to hand it over just yet? Consider setting up a donor-advised fund. A donoradvised
fund allows you to make contributions to a fund that is earmarked for charity and claim the associated tax deduction in the year you contribute the funds. You continue to make more contributions to the fund, which are invested and grow free of tax. Then, when you are ready, you can choose a charity to receive all or some of the accumulated assets. It’s a great way to earmark funds for charity now while also accumulating a more substantial amount of money to leave as a legacy.

5. Fund a scholarship.
Endowing a scholarship is a great way to make a difference in the life of a talented student. Here’s how it typically works: You give a certain amount of money to the school of your choice,

which earmarks it to fund scholarships, often for certain types of students (e.g., female math majors, former foster children, or people suffering from a certain disease). Other scholarships are established through community foundations. A seed gift of $25,000 or $50,000 may be enough to get started. Be aware, however, that while you may be able to have a say in selection criteria for the scholarship, there’s a good chance you won’t be able to select the recipient yourself. If you want to do that, you’ll need to distribute the money in another way, perhaps by setting up your own nonprofit organization.

6. Start a foundation.
Starting a family foundation is appealing to
many, especially those who like the idea of having greater control over how their money is used as well as the prestige that comes with running a foundation. Well-managed private foundations can also endure for many generations after you’re gone. But you’ll need substantial assets to make setting up a foundation worth it. Plus, foundations are complicated and expensive to set up and
administer. But, if you are committed to the idea of giving back, and especially if you want to keep the entire family involved in giving (a concern for many wealthy families), a private foundation could be the way to go.

Curious about steps you can take to leave a meaningful legacy? Please call to discuss this topic in more detail.

Frankly Speaking

“You don’t buy life insurance because you are going to die, but because those you love are going to live.” – Anonymous

Since mid-February, the average retail investor has underperformed the S&P 500 by 11%.- Investopedia Sunday, March 26, 2021

“We could say that the government spends money like drunken sailors, but that would be unfair to drunken sailors.” -Ronald Reagan

OK, nobody wants to talk about Life Insurance or Estate Planning BUT…what will happen to your family when you’re gone? And we will ALL go someday. Yet there is no reason they should be left in a lurch, unable to stay in their home or finish the kid’s education. This last year should have made you seriously realize Life Insurance is for THEIR sake as are a Will and related documents. Still need help? PLEASE ask me about additional coverage and for guidance on Estate Planning FREE OF CHARGE! What have you got to lose besides sleepless nights worrying?

If you would like more information or to discuss your financial concerns

Click Here
Categories : Contributions, financial planning, Financial Services
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Review and Reevaluate Your Portfolio

Posted by Frank McKinley on
 April 16, 2021

Periodically, you should thoroughly review your portfolio to ensure it is still helping you work toward your investment goals. Follow these steps:

Review your current portfolio mix. List the current value of all your investments.  Determine what percentage of your portfolio is held in stocks, bonds, cash, and other investments. Take a closer look at where the stock portion of your portfolio is invested.

Break out your stock investments by market capitalization (small-, mid-, and large-cap), by style (growth and value), by area (domestic and  international), and by sector (technology, financial, utilities, energy, etc.).

Analyze each investment. Determine whether it still makes sense to own each investment. Don’t let emotions get in the way. Review why you purchased each investment and whether those reasons are still valid.

Emotionally, it is difficult to sell an investment at a loss, but holding on until you get back to breakeven
may not be the best strategy. It may never get back to that price or may take an excessively long time to do so. You may want to sell the investment and reinvest in another with better prospects. Instead of worrying about what you paid for the investment, decide whether you would buy it today at its current
price.

Determine if changes are needed to your current allocation. If we’ve learned anything over the past few years, it’s that your portfolio should not be highly concentrated in one area or sector. Instead, look to broadly diversify your portfolio.

Some points to consider include:

Decide how much to allocate to stocks and bonds. Your stock and bond mix is a major factor in determining your expected portfolio return and how much your portfolio will fluctuate with market movements. However, be careful not to let recent events cause you to allocate too much to bonds just to avoid stock market fluctuations. Make this decision based on your financial goals, risk tolerance, and time horizon for investing. If you are investing for the long term — say, 10 years or more — you probably still want a major portion of your investments allocated to stocks.

Reassess your stock allocation. Is your stock portfolio too heavily weighted in technology stocks or blue chip stocks? Have you selected only growth stocks, ignoring value stocks? Do you prefer large-cap stocks, ignoring smaller stocks? The stock market moves in cycles, with different sectors outperforming other sectors at different times. Since no one can predict when one sector will outperform, it is typically best to broadly diversify your stocks over all areas.

Move your allocation closer to your desired allocation. When making changes, first consider the tax ramifications of the transactions. If you can make changes without incurring tax liabilities, you may want to make the changes immediately.

If substantial tax liabilities will be incurred, look for other ways to get your portfolio closer to your desired allocation. For instance, any new investments should be made in under-weighted areas of your portfolio. Or you may be able to reallocate in your tax-deferred
accounts, such as individual retirement
accounts and 401(k) plans, where you typically won’t incur tax liabilities.

However, if you can’t get your allocation in line within a year using these approaches, you might want to sell some of the poor performers and reinvest the proceeds.

If you’d like help reevaluating your portfolio, please call.

Analyze your investments and reasses your stock allocations

If you would like more information or to discuss your financial concerns

Click Here
Categories : Blog, financial planning, Financial Services, Investments, Retirement
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6 Signs You Need a Financial Plan

Posted by Frank McKinley on
 April 9, 2021

A clear financial plan helps you prepare for the future, brace yourself for the unexpected, and positions you to pursue your goals. Below are six signs
it may be time for you to get a financial plan.

You’re planning (or just had) a big life change.
New job. New baby. New house. All of those milestones and more are signs you should take a big picture look at your finances. When your life changes in big ways, it often brings with it changes in how you approach money.

You’re worried about your finances — and your future.
If money worries keep you up at night, a financial plan can help ease your mind. Whether you have immediate worries or are just feeling uneasy about what tomorrow may hold, you can regain control over your life by having a clear direction.

You’re making good money, but you’re not sure where it goes.
If you want to turn today’s income into tomorrow’s wealth, you need a financial plan. That way, you’ll be able to take the money you’re bringing in today and use it to create a secure future for yourself and your family.

You have financial goals, but you’re not sure how to make them a reality.
Does retirement seem like a distant dream? Do you wish you could upgrade to a bigger home, send your kids to college without taking on debt, or start a
business? With a financial plan, you’ll know what you need to do financially to make those dreams a reality.

You and your partner are fighting about money.
If you and your partner can’t see eye-to-eye on money issues, a financial plan might be part of the solution. Meeting with an objective third party can help you both recognize where you stand when it comes to your finances, and then negotiate a path forward that works for both of you.

Your investments and finances are getting so complicated, it’s difficult for you to keep track of everything.

Many people start out managing their investments and finances on their own. That often works for a time, but as your money and life get more complex, it can be difficult to manage all the details without help.

A good financial plan will help provide security for you and your family

If you would like more information or to discuss your financial concerns

Click Here
Categories : financial planning, Financial Services, IRA, Retirement
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