Congratulations, College Graduates!

7 Point Plan for the Real ‘Financial’ World

You’ve graduated from college– what a momentous occasion! With the flip of a tassel and toss of a mortarboard, you’ve officially made the passage from adolescence to adulthood. To help you make a smooth transition from college campus to the ‘real world’, please accept this gift—a blueprint for a solid financial start in life.     

1. Make the most of your “total” compensation. Salary is a primary reward for a job well done. But it’s not the only form of pay. Equally important are benefits like health, life and disability insurance, retirement plans, and vacation time. Some companies go further and offer perks like continuing education, health club subsidies, and discounts on services or products, even company stock. Take the time to fully understand all benefits available to you and how they can enrich your life. To do anything less is to risk leaving money on the table. You’re way too smart for that. 
2. Set up your financial house. While setting up your new crib, be sure to outfit your financial house. Start with the basics:
• Checking account with convenient ATMs (to avoid “foreign ATM” fees).
• Online bill payment; set up as many bills as possible on automatic pilot.
• Text alerts to effortlessly track your bank balance.
• Credit card in your name only, ideally with rewards that you care about—cash back, airline miles, etc.
• Direct deposit of paycheck and reimbursements. 
• Secure filing system for important documents and bills. Start a file for tax information so you don’t have to dig around for paperwork when it’s time to file your taxes next April. 
• Paper shredder for safe disposal of sensitive info you don’t need to keep.
3. Spend about 25% of your pay on housing. Speaking of the new crib, you get to choose what you need and how much to spend. Decisions about homes can be emotionally charged and it can be easy to get carried away. Before signing the lease, think about your priorities. The more you spend on the roof over your head, the less you have for your social life, travel, hobbies and oh yeah, savings. And visa-versa. One rule of thumb is to spend about one-fourth of your gross pay on rent, parking and utilities (heat, electric, cable/internet).  
4. Create a cash slush fund. If you’ve sailed through college, you may not believe that life can be difficult. Challenging and costly curve balls can and do come along in life, sometimes at the worst possible time. The best plan is to be ready with a stash of cash. Set money aside in a separate savings or money market account and label it “Emergency Exit Only”.
5. Save at least 15% of pay towards retirement. One unique advantage of being in your 20s is time– to save and invest for something that is priceless: your financial freedom. Start saving early and you can enjoy your life and career on your own terms; wait to save for retirement until you are in your 30s or later and you are destined to be a slave to your job, assuming the company still wants you in 35 years. If you dream of being master of your universe, start saving now for future freedom.  
6. Keep investing in yourself and your skills. With the world and knowledge moving at light-speed, be committed to lifelong learning so that your skills stay relevant and cutting edge. Jump on every opportunity to develop your genius, so that you are as highly valued and sought-after talent as soccer’s Lionel Messi. Remember you are your #1 asset. How you choose to use your talents to create wealth is key to a successful financial future.    
7. Nurture your relationships. Think of the many people who have supported your journey so far: your family, friends, professors, coaches, advisers, employers, and even the guy at your neighborhood coffee shop. They’ve cared about you and for you for years, and have a vested interest in your success and happiness. Don’t ditch them now that you’re moving on. Thank them. Stay in touch. You may need their help in the future. Who knows, maybe someday they will need you and give you the chance to return their kindness and support. Now that’s what the ‘real world’ is all about. 

Celebrate your accomplishments thus far in life, and face the future with confidence that there’s more goodness to come. Plan well and live well!

Karin Maloney Stifler, CFP®, AIF®
President
True Wealth Advisors
Hudson, OH

Are Your Finances Driving You Crazy?

3 ways to ease money stress

Do money worries rob you of a good night’s sleep and set off aches and pains in your health — and relationships? Are your shoulders — and your life — sagging under the crushing weight of financial responsibilities?

If you’re nodding your mind-boggled head, then it’s time to rethink who’s driving your financial bus. Before the wheels come off, slide into the driver’s seat and steer towards a new direction. Try these three easy ways to lighten the load of managing your personal finances to enjoy a more relaxed ride.

1. See:
   • Knowing where you are and what you’ve got is less stressful than uncertainty and imagining the worst. Go ahead, open your eyes to your finances. It’s a good time get a snapshot of your financial picture with year-end financial statements landing in your mailbox. 
   • Clear off a workspace (the kitchen table will do!) and sort your financial stuff into piles of: 
     • Bank statements
     • Investment statements
     • Bills
     • Insurance statements
     • Tax information (*bonus: this will help you get organized to file your taxes, too)
   • Identify your most to least favorite places to do business, and why.
2. Simplify:
   • Think HGTV’s “Clean House” and de-clutter your financial house. Most of us have multiple IRAs, 401(k)s and investment accounts since we tend to change jobs often. Explore how you can cut down on the number of accounts without giving up services. Consider transfer of most or all accounts to your “favorite” companies. Consolidating your financial accounts and relationships will save time and hassle, and maybe costs. Bigger accounts and loyalty are often rewarded with lower fees.
   • Opt for online versus paper statements and go “green”. You will save trees, free up space in your file cabinet, and reduce time shredding outdated information.
   • Set up recurring bills on auto-pay. If you’re concerned about control, set up a repetitive automatic online bill payment at your bank (not your payee) that you control and can change at any time.
3. Share:
   • There are so many jobs involved in managing household finances, that it’s no wonder finances can be overwhelming. Check it out:
     • Paying bills – monthly
     • Renewing insurance – annually
     • Overseeing investments – at least, quarterly
     • Filing taxes – annually
     • Recordkeeping – monthly
     • Legal – periodically
   • Most of us take a divide-and-conquer approach to running our lives. See if you and your significant other can split jobs or take turns being in charge. Not only does sharing reduce the burden, but it also empowers everyone with information and knowledge that is essential, especially if we find ourselves on our own someday.
   • We make decisions every day to either do it ourselves or to hire and outsource it. Some of us mow our own lawn and shovel our own driveways, while others hire a service. To decide whether DIY vs. outsource is right for your money life, let your time, talent and interest in managing your finances be your guide. 

Hey readers, speaking of sharing… What helps you to manage money stress?  

Karin Maloney Stifler, CFP®
President
True Wealth Advisors
Hudson, OH

Money Seasons – How Can We Get More Summer in Our Lives?

Is it winter, spring, summer or fall in your financial house? Following the solstice and assuming residence in the northern hemisphere, winter officially ended March 20 just after lunch and we’ll get to summer June 21 as we sit down to breakfast. Spring is that suspension bridge between the two. Some days are dark, wet and windy and others are filled with the music of birds, the tease of tree blossoms, and warm sunshine. 

What do the seasons mean to you? How can you get more summer in your life? And how can we connect the seasons of the hemisphere to the seasons of our financial lives? As I’ve written about before, we have a lot of folks stuck in their own version of a financial freeze – a never-ending winter. I’ve seen clients who quite literally hibernate when it comes to their own finances. I never wonder about how many winters I have left but I do daydream about how many summers I have left. And then my thoughts move to how I can get more ‘summer’ in all aspects of my life. 

To me, summer means: lazy days, sultry nights, cool drinks, light(er) food, the movement of water, the sound of water, the coolness of water, hot sun, sleepy breezes, the shade of  a good tree, longer light, more walks and more fun. I revert to a childhood delight of riding a bicycle without gears, with foot brakes, and no helmet (My sons are grown and so no fear of prying eyes to remind me of the helmets they wear). The feel of the wind in my hair is one of those treasured experiences that no amount of ‘common sense’ could convince me to alter for myself. 

I am frightfully full of common sense however when it comes to personal finances. Not only is it my life’s work, but I want as much ‘summer’ as possible in my life and that means I have do things in such a way that ensures I won’t have too many winters or freezes on my financial goals. 

So we’ve got just under 6 months until the Fall Equinox arrives about lunchtime on September 22 and another of life’s summers will be behind us. What can you get done between now and then to insure that your financial life is more like an endless summer? Start with savings – are you saving as much as you can and as much as you need? We know that somewhere around 20% of gross income is optimal and that 10% is not enough. Next take care of your health – we see retirees sending their hard-won savings off to health care bills instead of travel. Continue to build your communities and your capital – are your job skills where they need to be? Think about expanding who you know and developing the things that interest you outside of work. It’s always later than we think – the best time to get going is right now – as spring leads us into our next summer.

Bonnie Hughes, CFP®
Principal
American Capital Planning, LLC
Reston, VA / Miami, FL

Your Financial House

The most important structural aspect of any house is, of course, the foundation. Yet when it comes to people’s financial house the foundation is often overlooked. In this case, your foundation is risk management, or, as it’s commonly called, insurance coverage.  This coverage includes life, health, disability, long-term care, and personal liability, as well as automobile and homeowners insurance.   Without these elements to build a strong foundation for your financial house, you are bound to have big problems along the way.

Insurance is important and you can expect your financial adviser to talk about this issue in addition to the first and second floors of the financial house, such as investment, retirement and taxes. Insurance isn’t as glamorous as stocks, and for many, it’s an uncomfortable topic to broach.  The unfortunate result is that many in the United States are vastly underinsured and unintentionally putting their financial future at severe risks.  

As we become drivers we naturally get automobile insurance, since it’s the law. Most people would get that coverage anyway, even if it weren’t the law, because they have seen or experienced the damage that is done in an automobile accident. Similarly, when one buys a house they get the home insured, not only because the mortgage company tells them they must, but also because they know the replacement of such an expensive asset is generally not one that could be done without such protection. The cost of health care dictates that once people join the workforce, they sign up for health insurance.  Surprisingly, when it comes to protecting income, which makes all other asset purchases possible, the vast majority of people avoid purchasing life insurance, contrary to their own best interest. 

Studies have shown that 75 percent of Americans believe in the benefit of life insurance protection, yet 34 percent have not purchased any coverage themselves and 18 percent don’t have any coverage at all. Many people rely on “group term” coverage through their employer, which is very risky. They might lose their job, change employers to one who doesn’t provide benefits, or become self-employed. Often these group policies don’t even provide adequate amounts of coverage.

Disability income insurance, which protects our income in the event we become injured or ill and are unable to work for extended periods, is the least owned insurance coverage in the economy. Often, people believe they have coverage through work, which they often do, however this type of coverage was not meant to last as long as most disabling conditions do. Just as it is for life insurance, our health often declines with age and the cost of the coverage increases, if we can get it at all.

The best prescription to fix your faulty financial foundation is to see your financial planner and ask for a complete risk management review. Be sure to include all areas, life, health, disability, long-term care, and liability along with your auto and homeowners coverage. There is no better security than knowing you have a rock solid foundation!

Find a financial planner.

Jim Barnash, CFP®
Senior Partner
Stride Consulting, Inc.
Chicago, IL