Your Wealth Puzzle » Recommendations

Financial Stability in Your 50′s

yourwealthpuzzle — Mon, 08 Mar 2010 23:36:25 +0000

Case Study on James and Anne, both are 57, married with 3 children. Annual Household Income of $120,000. Mortgage: $20,000. College tuition expense: $15,000 a year for 6 more years. They have 8 more years until they retire.

If your are like James and Anne you would want to pay down your debt as quickly as possible so that you can invest as much as possible into your retirement accounts over the next 8 years.

In your 50′s you are in your final working years. You are close to the next stage of your life which is your retirement years. These are the years you should increase your savings substantially and reduce your debt to near nothing. The more you are able to save before your retirement years, the more compounding will work to your advantage.

Going into retirement financially strong can make the difference between an average retirement and a great retirement. Have you decided is you will you work part-time or work on a hobby in your retirement years? If so, will that need to be financed? Have you included that expense in your planning?

Plan today so that your retirement is what you have dreamed of during all your working years.

Financial Habits in Your 50′s

yourwealthpuzzle — Mon, 08 Mar 2010 23:21:00 +0000

Case Study on Randy and Frances who are married and are both 59 years old. They are retired and have 6 grandchildren. They have no mortgage debt, credit card or car loan debt. Their personal monthly expenses are $2200. Their monthly expenses for spoiling their grandchildren are $1500.　

If you are lucky enough like Randy and Frances to have 6 grandchildren and the financial resources to spoil them, you are in a great position. So they are actually in a teaching position. They can teach their grandchildren financial spending habits. The best way to teach is by example. Good financial habits is what put Randy and Frances in the position that they are in.

It is not what you make but what you keep that counts. Financial habits involve saving and spending. Children do not understand money and finances at a young age, but can be taught.

Set up a savings account at your bank to help the children learn the basics. Have them deposit into the account any money they receive as gifts so they can see the account grow.

Buying stock is a good habit to teach children. They cannot afford large purchases, but some companies do sell their stock in one share. So a great teaching moment for a child would be to buy one share of stock and let them see the dividends and/or splits occur. Let them see the statements. Your financial planner may have material that you can use to teach them.

Financial Management in Your 50′s

yourwealthpuzzle — Mon, 08 Mar 2010 23:04:35 +0000

Case Study on Edward and Dorothy who are married and in their late 50′s. They have 3 grown children and 2 grand children. Annual Household Income: $160,000 Mortgage Debt: $25,000 Monthly Household Expenses: $3,000.

If you are at Ed and Dotty’s age you are close to retirement. Your late 50′s are your final working years. At this stage of your life things should be settling down.

Now would be a good time to start looking more closely at your investments and debt. You may consider talking with a financial advisor. An advisor can give you some clarity. An advisor can analyze your debt to income ratios and determine when you may be able to retire comfortably.

Now would be a great time to increase your retirement account investing. Now may be a good time to consider changing your investment strategy to a more conservative model. You may consider investments with lower risk.

At this age you should avoid taking on additional debt. Avoid a new home purchase at this late in the game so that you are not carrying large mortgage debt.

Talk with your financial advisor about the benefits of other products and services available to people in their late 50′s. Should you consider estate planning? Should you set up a trust? Should you look into a long-term care policy? These are all questions that a financial advisor can help you explore.

Financial Planning in Your 40′s

yourwealthpuzzle — Mon, 08 Mar 2010 22:44:29 +0000

Case Study on Chuck who is a divorced Dad with 3 children. Chuck is 45, the children are ages 10, 13 and 15. Chuck makes a good living so is not worried about taking care of the basics for his children; he is concerned about supporting the children through college.

If you are a divorced parent trying to support yourself and your children on one income there is a lot of help available; you just need to reach out.

College planning should start when the children are very young; but it is never too late to start. Contact the financial aid offices of your local colleges. There are many grants, scholarship and loan opportunities available. The colleges offer financial counselors because they know that parents can be overwhelmed with getting their children on the right track.

Once your children reach an age where they can start working, have them look into getting a part time job to help. Part time jobs do not pay young people a lot, but maybe their pay check can help pay for their books or any little extras. They can get a part time job on campus. College libraries or the bookstore are great places to start.

Financial Advice in Your 40′s

yourwealthpuzzle — Mon, 08 Mar 2010 22:43:00 +0000

Case study on Albert and Suzanne. They are married in their mid 40′s, with 3 children. Annual Household Income: $115,000 Mortgage: $156,000 Monthly Household Expenses: $10,000. They have projected some large upcoming family expenses and are not sure how to handle them.

Life has many moving parts. In your 40′s all of the parts are moving at the same time putting great demands on your financial resources. Your child may need braces at the same time that your parents may need to consider moving to an assisted living facility. If you have limited financial resources, whom do you help first, your child or your parent? You should not have to choose.

Juggling your finances to meet all of those demands that are put on you can become a touch challenge. To help you ease that pressure, you may consider meeting with your financial planner. If you do not have a planner, ask your insurance agent or attorney for a referral to one.

A financial planner can help you refocus your financial priorities. A planner can help you visualize. Since they are looking from the outside in, they can see more clearly. A planner can be impartial because they are not emotionally involved. Keeping emotions out of financial decisions is crucial.

Financially Prepared in Your 40′s

yourwealthpuzzle — Mon, 08 Mar 2010 22:41:14 +0000

Case Study on Diana and Marcus. Married, early 40′s, 2 children. Annual Household Income: $100,000 Mortgage: $145,000 Credit Card Debt: $12,000. Diana and Marcus want to have another child. They have great insurance at work but are unsure about the other added expenses of adding another child to the family..

If your situation is similar to Diana and Marcus’s you are in your 40′s, established in your career, but may be unprepared for some of life’s other financial challenges?

Are you prepared financially for relocation if it improves your opportunities for advancement in your career? Are you prepared for more children? Are you prepared for marriage or divorce? All of these situations come at a cost. Are you prepared for more expenses? Are you prepared for unexpected expenses?

You can be prepared for anything – - if you plan ahead. Start slowly. Start by opening a rainy day fund. The money you save in this rainy day account is to be used for unexpected expenses only, nothing else.

It is never too late to start your rainy day fund. It requires planning and discipline. Deposit a portion of each pay check into that account, even if it is only a small amount, it will add up over time. When you get a raise or a bonus, deposit that into your rainy day fund. Simply develop the discipline to make deposits into this special account

Financial Management in Your 40′s

yourwealthpuzzle — Mon, 08 Mar 2010 22:39:49 +0000

Case Study on Daniel who is single and in his late 40′s. His annual income is $75,000. Mortgage on his condo is $65,000. He has credit card debt of $5,000 and auto loans of $10,000.

If you are like Daniel, by the time you reach your 40′s you think that you have it all figured out; after all, you have been through enough financial challenges. You finished college and paid your way. You own a home and paid many expenses on improving the property. You have taken additional classes to advance your career and paid for that. Every financial challenge that you have faced, you have conquered – so you have it all figured out, right?

Yes, you have accomplished much, but, are you prepared if you have a major event? Will you fall apart financially if some unexpected major event occurs to you or your family?

A major event could be a new job, moving, marriage, divorce, death or a spouse or child, personal illness or taking on the responsibility of caring for your parents. These situations may seem like every day events, but they are not because they are unexpected. Sometimes these unexpected situations require so much additional financial resources that you may not be ready. You do not plan for an illness or the death of a loved one; but you can plan financially for those situations by preparing today.

Keep your debt low. First, pay off your credit cards. Second, pay off your auto loan. Third, pay down your mortgage. Once you lower or zero out your debt, save half of your pay check every month. Have a goal of building up an account to equal a balance that is half of your annual income. This safety account will be your financial cushion for any major event that may occur.

Debt Reduction in Your 40′s

yourwealthpuzzle — Fri, 12 Feb 2010 22:22:46 +0000

Case Study on Al & Amy, married, late 40′s, 3 children. Annual Household Income: $120,000 Mortgage: $120,000 Car Loans: $30,000 Credit Card Debt: $5,000 Monthly Household Expenses: $10,000 Investments: $450,000. If your financial situation is similar to the Al & Amy in the case study, your output (expenses and debt) is too high compared to your input (income). Recommendation would be to focus on reducing your debt.

Credit card interest rates are excessive so pay off your credit cards immediately. Start a new financial habit – avoid carrying a credit card balance. If you cannot afford it – you do not need it. Credit cards are nice to have in an emergency – but then pay off the balance every month. You will be amazed at how much money you will save by not paying credit card interest.

Then take the money that you do save by avoiding credit card interest and apply it to your mortgage. If you increase your mortgage payment by a few hundred dollars every month, you will shorten the life of the loan and the total interest paid.

If you receive an employer match in your 401k plan, you are receiving a bonus in free money; so invest as much as possibly can into those 401k accounts. Remember your children can get loans and grants for college – but you cannot get a loan for retirement.

Debt Reduction in Your 50′s

yourwealthpuzzle — Thu, 11 Feb 2010 23:25:12 +0000

Case Study on Rick & Dee Dee, mid 50′s, married. Annual Household Income: $90,000 Mortgage: $110,000 Credit Card Debt: $3,000 Monthly Household Expenses: $6,000. If you are in your mid 50′s like Rick and Dee Dee, you are in your final working years. During your final working years you need to focus on equity accumulation and debt reduction. To increase your financial stability for the future you have two choices, either earn more or spend less.

Earning more means asking for a raise or finding part time work. With a little tweaking, cutting expenses may actually be easier.

Your insurance premiums may be an expense you can trim down. Ask your insurance agent for a review of your home, auto and umbrella policies. Ask your agent for suggestions on how to lower your premiums: Are you carrying too much insurance on an older car for example? Are your coverages in line with other insured’s who have the same square footage of their home? Will increasing your deductibles lower the premiums?

Other ways to cut expenses may include cutting back on “extra’s”. Do you really need all of the extra cable channels or the extra cell phone features? Do you have memberships to places that you rarely visit, the gym for example? Be careful about over draft fees – avoid them by being more diligent on balancing your check book. Pay off your credit card balance every month – credit card interest rates are excessive.

Cutting expenses now, will smooth out your journey during your retirement years.

Financial Balancing in Your 30′s

yourwealthpuzzle — Thu, 11 Feb 2010 18:10:21 +0000

Case Study on Fred & Belinda, married, both in their mid 30′s. Belinda’s Annual Income: $42,000 Fred’s Annual Income: is inconsistent, it changes every year. Mortgage: $90,000 Savings: $63,000

In today’s tough economic environment many people may find themselves in Fred & Belinda’s situation. Inconsistent household income is a common situation in turbulent economic times. If you fit that profile, you can get through this – if you manage your finances properly.

First of all you need to establish some structure so that you can meet your financial obligations in good times as well as lean times. A financial planner can help you set up a solid structure. Find a financial planner that does not charge an initial consultation fee.

The financial planner can help you establish a budget that will work with your unique situation. You must follow this budget. It will have some flexibility, but you must stay on course.

Almost all employer sponsored retirement plans have an automatic deduction/deposit system. If you are not already making automatic deposits into a 401k plan at work – start. And in case of emergencies do not be tempted to borrow against your 401k assets – find other sources.

One source for emergencies should be your emergency fund. If you do not already have an emergency fund – start building one. Due to the inconsistency of household income, the balance in this emergency fund should be at least one year’s worth of income.