Financial Planning Truths

So you decided you need a financial plan that’s great. You started reading my blog and other articles and realize there are lots of great savings and investment options and so many things to save for you don’t know where to start. You can’t possibly do them all! First off congratulate yourself for realizing you need a plan and then take a deep breath. If you are committed to saving at least 20% of your salary there is not a wrong answer so you have won the biggest part of the battle. Some choices may be better than others but the most important thing is deciding to pay yourself first . While everyone’s situation is different I will try to give you some guiding principles to get you started on how to divvy up those dollars you are saving . While the guiding principles apply to anyone the details of this post will be geared toward young professionals and recent graduates just starting out. The guiding principles for your savings dollars should be 1.     ...

I have often written about the difference between needs and wants. To be successful in planning for your financial future you have to understand the difference between the two. You need, food, shelter, basic transportation and any required health maintenance items. These days I would accept you also need a cell phone and decent internet access. The one most people miss is the need to save and invest for the future so you can pay for all the other needs once your income stops or is diminished. Almost everyone hopes to retire at some point, but you can’t if you have not met the need of saving and investing in your early years. You do not need Cable TV, to eat out, the fastest shiniest car, or the biggest house you can afford. There are a lot of other things you don’t need that you may want. I am not saying you can’t have any of your wants, what I am saying is whatever money you have left after you meet all your needs can be used to purchase the wants. But you first must recogni...

This is a great article I would encourage everyone read it and tell every millennial they know to read it also. 14 money lessons rich parents teach their kids I help people of all ages with their financial planning and sometimes people want to compare themselves to others. They will make excuses for not doing what they need to do with comments like “it is easier for so and so because his parents are rich and my parents were poor”.  I don’t like to compare individuals because everyone’s circumstance is unique and everyone is only responsible for their own plan. What I will say is that while there is no disputing the fact that somethings may be easier for the child to the extend wealthy parents give their children more money that is the least important thing they give their child in determining how well the child accumulates and grows their own wealth. The most important thing they do is teach their child how to grow their own wealth along with leading by setting a good ...

I often talk about the need to save and invest over the long term and how you need to let your money work for you. While I think charts and grafts show this in great detail it is always nice to show how it works with a real life example. Some people need that tangible evidence, so here it is. I was given a $100 savings bond thirty years ago as a gift. It cost $50.00 to the buyer. I held it for thirty years and just cashed in for $207.36 more than four times the original investment. That comes out to an average annual interest rate of about 4.86%. Historically over that period of time that is a pretty good rate of return for cash and everyone should have some cash or cash equivalents in their portfolio. See my post How much cash do I need . While rates have gone up since that post, it is still a good idea to shop them occasionally to make sure you are getting the best rate. Just a small difference in a rate of return can have a huge impact over a long period of time. For instance...

Are you saving enough? Two recent articles really concern me and I hope my readers do not fall into either of these groups. The first had to do with how much Millennials think they need to save to retire comfortably .  And the Second had to with the fact that Most Americans can’t cover a $1,000 emergency . In one of the post on my blog I talk about how much cash you need . While most of my writing centers on the need for long term saving and investing, this post talk about short term savings, how much cash you should have on hand and what you should do with it. If you are reading my post hopefully you are not one of the many Americans that have failed to put any money aside in an emergency fund. If you do not have an emergency fund I hope this article will help encourage you to set one up immediately.  Not having one will make any emergency you face that much worse both in the short term and for you long term financial stability. One of my recent posts was abou...

I have written often about the importance of saving and investing over time and although I know this and have been doing it since my first full time job I still am just amazed when I look at my portfolio and see how much it has grown over the years.   If you start saving and investing from day one of your first job and set this in motion you will be able to retire at age 50 . It does not mean you have to retire that early but it is certainly nice to have that option. As I approach the 25 th anniversary of my being able to contribute to a 401K I thought it would be interesting to do an analysis of where all the money came from. Almost 60% of the money in my 401k account comes from the return on my investments . This is really amazing since, as a result my salary increases and contributions limits increases, 50% of the money I contributed was contributed in the last 8 years. So the bulk of return on investment came from the first 17 years. My first year investment is worth aro...

No this is not a Nigerian prince scam. You can really earn over $2,000,000 tax free pretty easily it just takes commonsense, discipline and patience. Read on. Around this time of year people start thinking about their taxes. In all my years of financial planning I am yet to find a person that wants to pay any more tax then they absolutely have to. While most people want to pay less tax many fail to take advantage of all the tax deferral and tax free accounts available to them . Many people that do use some of these accounts often fail to take the time to make sure they maximize the benefits by using the accounts correctly or timing the contributions to, or withdrawals from these accounts. I am going to start out with giving you some very simple general rules. 1.        Any time you can put money in an account that grows tax free or tax deferred you are far better off than putting that money in an account that has no tax advantaged status...

If you want to be secure in your retirement you must have a plan. I f you fail to plan you are planning to fail . Most Americans are completely unprepared for their retirement and I have made it a goal of mine to reach as many people as I can to encourage them to prepare for this stage of life. One financial planning firm has a number of funny commercials out there about the length some people will go to in order to avoid talking about or putting together their financial plan. While the commercials are funny they represent a sad truth and help me understand how painful it is for some people to talk about and face these issues. I have tried to adopt a position of not offering advice unless it is asked for but I am certainly willing to talk about these issues with any of my readers that feel they need a helping hand. During the past year I had several people talk to me about their plans, some engaging in the need to set goals, make some assumptions about how much they need in ...