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Archive for Financial Services – Page 10

How to Avoid Credit Card Dependence

Posted by Frank McKinley on
 February 12, 2021

Ask yourself these questions to evaluate your dependence on credit cards:

Do you rely on credit cards to make it until your next paycheck?

Does it seem you always have to put unexpected expenses on your credit card?

Do you think you spend more than you would with cash because your card has rewards or discounts?

Do the holidays leave you with a mountain of credit card debt?

If you answered yes to these questions, you are probably relying too much on your credit cards. If you are concerned you are too dependent on credit cards, there are steps you can take to become credit card independent.

Put your credit cards somewhere for safekeeping to reduce the temptation to use them as your regular form of payment.

Become more disciplined with spending by enacting a cash only policy. While many people use debit cards as a convenient way to pay cash, be careful. Many financial institutions will allow you to overdraft your account when you use a debit card and may charge a large fee for this overdraft privilege.

Consolidate your balances to the cards that have the lowest interest rates and close the rest of your credit card accounts to reduce the amount of available credit and, thus, the potential amount of debt you could incur. While closing credit cards can have a negative impact on your credit score, it’s
still better to have a temporary credit score setback than to go deeper into debt if you can’t control your spending. To reduce the impact to your score, you should also consider keeping your oldest credit card in addition to a lower interest-rate card.

Shock yourself into reality by looking at a few important things on your credit card statement, including: how much you are paying in interest on an annual basis, how long it will take you to pay off the balance, and how much
you will pay in interest if you are only making the minimum monthly payment. This information can be a real eye-opener.

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

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Categories : Credit Card Debt, Financial Services

Six Ways to Get Your Financial House in Order During the Virus

Posted by Frank McKinley on
 February 9, 2021

Many families think they have a sound “financial plan” because they own investments or have established a saving strategy for retirement.  This is a good start but it’s incomplete. There are many components to ensuring your financial future and getting your “house in order” is the first step. What do I mean by that? I’d like to share 6 ways you can accomplish this. Let me explain…

Do you know what the three leading causes of death are in the United States? Many people correctly guess cancer and heart disease as numbers one and two. What is number 3? Accidents? Alzheimer’s? Strokes? You may be surprised to learn that the third leading cause of death in America is medical malpractice! The doctor’s fault? Nope- our fault. We go to the hospital totally unprepared. The average American over the age of 65 will take 11 different prescription drugs this year. You’re in an accident and brought to the hospital, the hospital administers a pain reliever and the combination of what you are taking and what they have given you- kills you. Have you ever had a heart attack? Do you carry nitroglycerine with you? Have you been warned that the combination of Cialis and Nitro will kill you? Is this a risk you are willing to take? Or maybe when they ask you what prescriptions you are taking you mispronounce Omicor when you meant Amicar. Yes, medical malpractice is third leading cause in America. We don’t want this to happen to you, so it is time to get your house in order!

Resolution number 1.  Don’t go to the hospital unprepared!

Do you remember the story about Terri Schiavo? At 26, Terri had a massive coronary, was resuscitated but experienced irreversible brain damage that left her in a coma. Fifteen years later, the Supreme Court made the final decision to remove the feeding tube. This long-term ordeal would not have happened if a simple healthcare directive and a living will had been in place. A misconception we frequently encounter is that healthcare directives are only for older adults. We’ve seen clients experience unexpected, lifechanging circumstances at all ages and believe that health care directives should be a priority for everyone. Please don’t let this happen to you or a loved one; get your house in order!

Resolution number 2.  Sign a healthcare directive and living Will.

What do Steve McNair, Abraham Lincoln, Pablo Picasso and the musician Prince have in common? They all died without a Will. Steve McNair’s mother was removed from the house he had given her because there was no Will to prove he had given it to her- I’m pretty sure that was not his intent. Having this document is essential to ensuring your wishes are carried out but it is one of the most frequently postponed documents to be put in writing. Your Will protects you and ensures that your future wishes for your estate are carried out. According to the Virtual Attorney, 32% of Americans would rather do their taxes, get a root canal, or give up sex for a month than create or update their Will! Even though I am not an attorney, I can help you facilitate this- let me help you get your house in order!

Resolution number 3.  Create or update your Will.

In 2005, Anne Friedman, a former school principal, died suddenly of a massive heart attack. She had accumulated over $900,000 in her Teachers’ Retirement Fund but never named anyone as her designated beneficiary. By law, her surviving spouse would have been entitled to the money. However, in 1978, in a previous job, before she was married, she had filled out a designated beneficiary form naming her mother, her uncle and her sister as her designated beneficiaries. Her mother and uncle had since passed away, but her sister was still living. By law, the sister was entitled to the money, which she received, and didn’t share a dime with the now destitute husband. We see this every day. Proceeds from Life Insurance, 401(k) plans, and IRAs are being left to the wrong beneficiaries because the owners never thought to update them.  Your financial documents must be regularly reviewed and evaluated as your life evolves, particularly when it comes to your beneficiaries. Marriages, divorces, births, deaths and other major life events can all warrant changes. These documents are too important to leave unattended. Let me review these for you.

Resolution number 4.  Review and update beneficiary designations with life changes.

How many of you own a business?  How about those of you that have a real estate investment?  Better yet, how many of you have children driving a car? Do you have proper insurance?  Have you fully limited your liability? Are your investments titled properly to limit liability? If you have trust documents, titling of property, insurance coverage(s) and other liability documents, also need to be regularly reviewed. I can help you do this.

Resolution Number 5.  Regularly review legal/liability documents.

Frederick Vanderbilt, J.D Rockefeller, JP Morgan, Franklin Roosevelt, and Elvis Presley all died without an estate plan. Please re-read that list. Some of the most successful, intelligent, and powerful people in America did so much for so many- they failed, however, to protect all the wealth they had created. Although we can’t predict the future, it’s important to have a comprehensive plan in place for how your money and other assets should be distributed when needed.  Your life stage will determine the needs of your estate plan. If you’re young and single, your plan may only include a few items, such as a Will, beneficiary designations and medical and financial powers of attorney. If you have substantial wealth, you may need one or more trusts to control how your assets are taxed, managed and distributed.

Resolution Number 6.  Establish an Estate Plan.

It’s critical to remember that financial planning is not solely based on investment planning or picking the right insurance coverage. While this must be done properly, there are many other vital areas that get overlooked or forgotten. Keep your financial house in order by regularly reviewing your plan and ensuring that you have the fundamentals in place. By this time next year, you’ll be glad you did.

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

Categories : Blog, estate planning, financial planning, Financial Services

Pump Up Your Retirement Savings

Posted by Frank McKinley on
 February 5, 2021

Don’t give up on your retirement goals if you find you’ve entered middle age with little to no retirement savings. Sure, it may be harder to reach your retirement goals than if you had started in your 20s or 30s, but here are some strategies to consider:

Reanalyze your retirement goals. First,  thoroughly analyze your situation. Calculate how much you need for retirement, what income sources will be available, how much you have saved, and how much you need to save annually to reach your goals. If you can’t save that amount, it may be time to change your goals. Consider postponing retirement for a few years so you have more time to accumulate savings as well as delay withdrawals from those savings. Think about working after retirement on at least a part-time basis. Even a modest amount of income after retirement can substantially reduce the amount you need to save. Look at lowering your expectations, possibly traveling less or moving to a less expensive city or smaller home.

Contribute the maximum to your 401(k) plan.   Your contributions, up to a maximum of $19,500 in 2020 and 2021, are deducted from your current year
gross income. If you are age 50 or older, your plan may allow an additional $6,500 catch-up contribution, bringing your maximum  contribution to $26,000. Find out if your employer offers a Roth 401(k) option. Even though you won’t get a current year tax deduction for your contributions, qualified withdrawals can be taken free of income taxes. If your employer matches contributions, you are essentially losing money when you don’t contribute enough to receive the maximum
matching contribution. Matching contributions can help significantly with your retirement savings. For example, assume your employer matches 50 cents on every dollar you contribute, up to a maximum of 6% of your pay. If you earn $75,000 and contribute 6% of your pay, you would contribute $4,500 and your employer would put in an additional $2,250.

Look into individual retirement accounts (IRAs). In 2020 and 2021, you can contribute a maximum of $6,000 to an IRA, plus an additional $1,000 catch-up contribution if you are age 50 or older. Even if you participate in a company sponsored retirement plan, you can make contributions to an IRA, provided your adjusted gross income does not exceed certain limits.

Reduce your pre-retirement expenses. Typically, you’ll want a retirement lifestyle similar to your lifestyle before retirement. Become a big saver now and you enjoy two  advantages. First, you save significant sums for your retirement. Second, you’re living on much less than you’re earning, so you’ll need less for retirement. For instance, if you live on 100% of your income, you’ll have nothing left to save toward retirement. At retirement, you’ll probably need close to 100% of your income to continue your current lifestyle. With savings of 10% of your income, you’re living on 90% of your income. At retirement, you’ll probably be able to maintain your standard of living with 90% of your current income.

Move to a smaller home. As part of your efforts to reduce your pre-retirement lifestyle, consider selling your home and moving to a smaller one, especially if you have
significant equity in your home. If you’ve lived in your home for at least two of the previous five years, you can exclude $250,000 of gain if you are

a single taxpayer and $500,000 of gain if you are married filing jointly. At a minimum, this strategy will reduce your living expenses so you can save more. If you have significant equity in your home, you may be able to use some of the proceeds for savings.

Substantially increase your savings as you approach retirement. Typically, your last years of employment are your peak
earning years. Instead of increasing your lifestyle as your pay increases, save all pay raises. Anytime you pay off a major bill, such as an auto
loan or your child’s college tuition, take the money that was going toward that bill and put it in your
retirement savings.

Restructure your debt. Check whether refinancing will reduce your monthly mortgage payment. Find less costly options for consumer debts, including credit
cards with high interest rates. Systematically
pay down your debts. And most important — don’t incur any new debt. If you can’t pay cash for something, don’t buy it.

Stay committed to your goals.
At this age, it’s imperative to
maintain your commitment to saving.
Please call if you’d like help reviewing your retirement savings program.

Frankly Speaking

When then Fed Chairman, Alan Greenspan used this phrase 12-5-96 the DJIA closed at 6318; by 12-5-99 it was at 11,225, nearly double. Nobody knew the Tech Wreck was only three months away…

My friend Mark Zinder helps me add perspective to this column: ‘Yes, horrible things have happened this year, but let’s also remember the events that made us pause and chuckle, for example, the Pentagon finally released the UFO videos (and nobody really cared), San Francisco
voted to ban cigarette smoking in apartments but smoking marijuana in your apartment is still OK, and to top it all off, Oregon passed a bill that prohibits stores and restaurants from providing single-use plastic straws but this year decriminalized cocaine.’

Or as the great philosopher and Yankee catcher, Yogi Berra once said, “It ain’t over til the fat lady sings”.

So, remember to maintain perspective and that it ain’t over yet! If you or someone you know needs to be reminded of this, PLEASE contact me!

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

Click Here
Categories : Financial Services

Long-Term Portfolio Management

Posted by Frank McKinley on
 January 25, 2021

If you’re in the markets for the long haul and look to capture the benefits of long-term trends, you should focus on the tools that maximize your long-term rate of return while managing the risks you take:

Asset allocation. A long-term asset allocation strategy aims at determining an optimal mix of stocks, bonds, and cash equivalents in your portfolio to suit how much risk you’re willing to take. The benefit of investing in all three asset classes is diversification — spreading investments among assets that have different cycles of return.

Portfolio rebalancing. This may be the most overlooked technique for potentially boosting returns and control-ling risk. Yet the technique is relatively simple: once a year (or some other pre-determined time period), compare the percentage of your assets in each class to your strategy. Then sell some assets from the categories that are larger than your strategy calls for and use the pro-ceeds to buy more of the assets that decreased in value. The principle is that rebalancing forces you to sell high and buy low.

Dollar-cost averaging. This technique actually puts market downturns to work in your favor. The

method is to invest a set amount of money on a recur-ring basis in each asset class. By continuing to make purchases when prices decline, you buy more shares than you do when prices are high. Keep in mind that dollar-cost averaging neither guarantees a profit nor protects against loss in a prolonged declining market. Because dollar-cost averaging involves continuous investment regardless of fluctuating price levels, investors should carefully consider their financial ability to continue investment through periods of low prices.

Between the strategies of trading actively and managing your portfolio strictly for the long term is a technique called tactical asset allocation. This involves moving significant chunks of your portfolio from one asset class to another, depending upon your reading of the changing prospects for risk and reward.

Trading involves market timing, which in turn depends on reading market and economic indicators with precision. Is watching the indicators for the right moment to move in a new direction the right approach for you?

To determine the approach right for you, please call me at 973-515-5184.

Borrow Wisely

Use debt only for items that have the potential to increase in value, such as a home, college education, or home remodeling.

Consider a shorter term when applying for loans.

Make as large a down pay-ment as you can afford. If you can make prepayments without incurring a penalty, this can also significantly reduce the interest paid.

Consolidate high interest-rate debts with lower-rate options. It is typically fairly easy to transfer balances from higher-rate to lower-rate credit cards.

Compare loan terms with sev-eral lenders, since interest rates can vary significantly. Negotiate with the lender. Although most lenders have official rates for each type of loan, you can often convince them to give you a lower rate if you are a current customer or have an outstanding credit score. Review all your debt periodically, including mortgage, home equity, auto, and credit card debt, to see if less expensive options are available.

Review your credit report before applying for a loan. You then have an opportunity to correct any errors that might be on the report.

Financial Thoughts

Based on data from the Survey of Consumer Finances, older adults with more outstanding debt commonly respond to liquidity constraints by working longer, delaying retirement, and postponing claiming Social Security benefits. The researchers found that more household debt translates to an expectation of about an extra 2.5 months of full-time work and an additional year of overall work. Individuals with a negative net worth (or more debt than financial assets) work for an additional two years. The study deter-mined that mortgage debt remains the most significant and common source of debt among older households, representing 69% of total debt in 2016. Older adults with a mortgage are 4.8% less likely to be retired and 3.1% less likely to receive Social Security benefits (Source: AAIIJournal, June 2020).

Emerging research on cognitive aging found declines in financial capability and concurrent lower investment performance among older individuals. Investors older than 75 on aver-age experience investment returns that are 3% lower than those of middle-age investors. The return disparity rises to 5% among older investors with greater wealth (Source: AAIIJournal, July 2020).

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

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Categories : financial planning, Financial Services, Investing, Investments

How to Set Savings Goals – A Few Thoughts

Posted by Frank McKinley on
 January 18, 2021

Setting clear, specific savings goals is one of the best ways to achieve your financial objectives, but it’s a task that many people struggle with. Unfortunately, establishing savings goals is a bit more complex than simply picking a number out of the sky and hoping you can eventually set aside that much cash. Below is a simple seven-step plan that you can use to set — and reach — your savings goals.

1. Select Goals

Before you start saving, it helps to know what you are saving for, since most of us find it easier to save money if we know it will eventually be used for a specific purpose. Common savings goals are creating an emergency fund with at least six months of living expenses or saving for retirement, a child’s college education, a down payment, or a vacation. Your goals will be as unique as you are; the most important thing is that you select them and make them as specific as possible.

2. Determine How Much You Need to Save

Exactly how much money do you need to accomplish your goal? For example, you may want to have $5,000 saved for your dream vacation, $30,000 for a down payment on your first home, or $1 million for retirement. Don’t pick a random number at this point — research how much you’ll actually need so you can be confident that your savings will be sufficient to achieve your goals.

3. Consider Your Timeline

Savings goals can generally be divided into three broad categories: short-term (those that you hope to reach in a year or less), mid-term (those that are roughly one to five years away) and long-term (goals you hope to achieve in five years or more). It’s important to know your timeline, since it will have a direct impact on how aggressively you need to save to hit that target and where you put your money.

what to consider when saving

4. Determine How Much to Set Aside Each Week or Month

For short-term goals, this step is fairly simple. Say you plan to get married in a year, and you want to have $10,000 saved toward that goal before your big day. To meet that goal, you’ll need to save roughly $833 per month for the next year, or $10,000 divided by 12. Determining how much you need to save to hit your long- and mid-term goals can be a bit more complicated, as you’ll need to take into account the growth of your in-vestments. Whatever the timeframe for your goals, making these calculations is important because it allows you to adjust your savings as your budget allows. For example, if you can’t afford to save the over $800 a month you need for the wedding, you have two options: You can ei-ther adjust your timeline or opt to keep it the same and save less.

5. Automate Your Savings If Possible

Once you know how much you need to save, you’ll likely find it easier to stick to your plan if you can automate your savings. Adopt the pay-yourself-first principle and set up automatic transfers to your savings or investment accounts. The key is to save the money before you ever have a chance to spend it, as well as to avoid forgetting to make the transfers.

6. Choose the Right Way to Save

Depending on your goals and timeline, you have different options for savings. Traditional savings ac-counts are a good option for short-term goals, since your money will be safe. Investment accounts and retirement accounts, like a 401(k) plan or IRA, are good options for longer term goals, since you’ll earn money as you save.

7. Watch Your Money Grow

Once you have your savings plan in place, keep an eye on how it is doing. You will need to periodically review your results and make adjustments as necessary. Please call if you’d like to dis-cuss your savings goals in more detail.

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

Click Here
Categories : Blog, Financial Services, Savings, Savings Goals

Financial Rules of Thumb

Posted by Frank McKinley on
 January 11, 2021

Rules of thumb are designed to provide quick guidelines for your finances. However, you shouldn’t blindly follow them without giving
thought to your personal circumstances. Some of the more common
rules of thumb include:

Save 10% of your gross income. While this will give you a good start, it’s typically the minimum, not the maximum, you should be saving. Analyze how much you’ll need for your financial goals, and then work backwards to calculate how much you should be saving.

Plan on spending 80% of your pre-retirement income during retirement. This may be true if you don’t plan to be very active during retirement, but more and more people expect retirement to include extensive travel and expensive hobbies. On the other hand, if you’ve paid off your mortgage and your children have finished college, you may need less
than this. Review your individual situation to determine how much
you’ll need.

Set the percentage of stocks in your portfolio to 100 minus your age. With increased life expectancies, this can result in a portfolio that is too heavily weighted in income investments. Set your asset allocation based on your risk tolerance and time horizon for investing. Stocks should be considered for long-term financial goals of 10 years or more.

Keep three to six months of income in an emergency fund. While an emergency fund is a good idea, how much you keep in that fund will depend on your circumstances. You may need a larger fund if you are the sole wage earner in the family, work at a seasonal job, own your own business, or rely on commissions or bonuses.

A smaller fund may be required if you have more than one source of
income, can borrow significant sums quickly, or carry insurance to
cover many emergencies.

Pay no more than 20% of your take-home pay toward short-term debt. Once considered a firm rule by lenders, you may now be able to obtain loans even if you exceed this amount. Try to reduce your debt or at least reduce the interest rates on your debt.

Keep your mortgage or rent payment to no more than 30% of your gross income. While you can obtain a mortgage for more than that, staying within this rule will help ensure you have money to devote to other financial goals.

Refinance your mortgage if interest rates decline by 2%. This rule of thumb assumes you’ll pay significant refinancing costs, including points, title insurance, appraisal fees, and other fees. However, many lenders now offer refinancing deals with significantly lower costs.  Thus, you should assess whether it makes sense to refinance when mortgage rates decline by as little as half a percent.

Obtain life insurance equal to six times your annual income. Different individuals require vastly different amounts of insurance, depending on whether one or both spouses work, minor children are part of the family, or insurance is being obtained for other needs, such as to fund a buy-sell agreement or to help pay estate taxes. Thus, you should  determine your precise needs before purchasing insurance.

Most financial rules of thumb should not be followed without first considering your individual circumstances. Please call if you’d like to address your needs in any of these areas.

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

Click Here
Categories : Blog, estate planning, Financial Services, Life Insurance, Retirement
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