Tag Archives: Mansfield Financial Planner

Tying the Knot

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Financial Tips for Newlyweds

By Steve Davis, CERTIFIED FINANCIAL PLANNER™

Do you remember that summer a year or two after you graduated from college? You know, the summer when you attended weddings almost every weekend? It started in June and it seemed that almost all of your hard earned cash was going toward wedding presents for your friends who were tying the knot. Well, June is here again and soon the church bells will be ringing as brides and grooms walk the isle.
Here are some financial issues that couples should consider when embarking on a matrimonial journey.

1. Discuss your finances before marriage — Start your marriage off on the right foot by having an honest discussion about financial habits, objectives and history. If one of you is a saver and the other tends to spend every dollar earned, figure out a plan to get on the same financial page. Talk about your short and long term financial goals and review them periodically.
And before your big day, share your statements from your bank accounts, credit cards, student loans, and 401k plans. In the business world — when companies merge — they take the time to carefully explore each other’s financial records. Couples should do the same thing. Also share credit reports and FICO scores. It’s not necessary to make your spouse a joint accountholder on your credit cards, especially if he or she has a poor credit history, which can drag down your own credit rating. If there are any financial concerns or problems, seek out an accountant or CERTIFIED FINANCIAL PLANNER™ for guidance.

2. Create a Spending Plan — Marriage Counselors say that failing to create and stick to a mutually agreed upon budget is one of the leading causes of marital strife. And while nothing seems less romantic than budgeting, remember that the process doesn’t have to be complicated. Start off by listing your monthly take-home pay. Then add up expenses, everything from your rent, car payments, student loans, to groceries, gym membership and utilities.
If you’re making more than you spend each month, you can begin planning how to set aside money for long-term financial goals. If not, time to consider ways to cut spending.

3. Think holistically — Consider each spouse’s investment portfolio as part of a whole. For instance, if both you and your mate contribute to 401(k) plans and IRAs, see how your investment choices match up. You might find that your combined portfolio is more exposed to risk than the two of you can tolerate. Or, you might learn that when you combine your portfolios, your asset allocation is out of whack. Remember, you can rebalance your asset allocation by shifting money from one asset class (stocks, bonds and money market instruments) to another or by adding new money to the underrepresented asset class.

4. Review documents — Along with other legal documents, remember to update your beneficiaries on life insurance policies, IRAs, employer-sponsored retirement plans and pensions. Also, be sure to either create or modify your wills.

5. Meet with a professional — Make a date with a qualified financial professional to discuss your financial goals, such as buying a home or investing for retirement. Then, after making sure that all of your financial bases are covered, relax and enjoy the beginning of your life together.

Retirement Dreams

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The Importance of Retirement Goals and Visions

By Steve Davis, CERTIFIED FINANCIAL PLANNER™

What does your dream retirement look like? For one couple it's living on a lake and having the grandchildren come to visit

More than Numbers -

Financial Planning has traditionally been about numbers.  How much do I need to save?  How many years before I can retire?  How long will my money last?  And yes, crunching numbers is one part of the financial planning equation.  But there’s more to it than that.  Some say that financial success is 80% behavior and just 20% numbers.

Go back in time for a moment.  Imagine yourself back at your very first job; you’re sitting in the conference room listening to the company’s 401k provider talk about the retirement plan.  He says, “If you’re 25 years-old and save about $300 each month, then you’ll likely have $1 million when you’re ready to retire at age 65.”  Admittedly, that’s an impressive number.  But how many 25 year-olds actually have the discipline to set that money aside month after month?  Not too many.  Why?  Because retirement is a long way away and that shiny new car sure looks nice today.  Or because the latest iPad is a must-have.  Or because that trip to the Bahamas is too tempting.  There are hundreds of reasons why.

If you’ve ever struggled with setting money aside for retirement, perhaps it’s because your vision for the future isn’t clear enough.  A clear vision is motivating and motivation energizes, directs and sustains behavior; it gets us moving, points us in a specific direction, and keeps us going forward.  Having a vision for the future and planning for that vision are as important as money in achieving long-term financial success.

Your Dream Retirement?

So, what do retired people do anyway?  What will you do when you retire?   When you have no job to go to and no kids left in the house, where will you find purpose and satisfaction? What would you like to do?

Albert Einstein once said, “Imagination is more important than knowledge.”  So set some time aside to imagine your dream retirement.  As a CERTIFIED FINANCIAL PLANNER ™, one of the exercises I take my clients through is based on identifying their top goals and priorities for life after work.  For some, it’s more time with family.  For others, it’s about travelling the world, going to school, volunteering and serving others, or moving to a warmer climate.

One couple recently told me that living on the water was their dream.  Waking up each morning and seeing the constant change of scenery and wildlife was a goal worth having.  Living in a home where their grandchildren could come to swim, boat, fish — and even skate in the winter — was something they could get excited about.  Scott Freerksen, owner of Lake Front Living Realty, explained that his clients often come to him when their children have grown up and have left the house on the cul-de-sac where they grew up. “The empty-nest parents often say they want to downsize, but when they see how little space downsizing provides, they realize they need enough space for their kids and grandkids to visit.”  Using a play on the word vacation, his clients call living on the water a “stay-cation”.

So if you’re looking for some motivation to start and continue your retirement savings, imagine yourself brewing a cup of coffee and walking down to your dock where you can relax and watch the ripples across the water while the rest of the world goes off to work.

 

Safety Net – The Importance of Disability Insurance

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Insurance that works when you can’t

By Steve Davis, CERTIFIED FINANCIAL PLANNER™

Disability Insurance Provides a Safety Net

Before you step out onto the high wire act of life, make sure that you’ve got a saftey net in place — make sure that your income is protected.

I received a phone call not long ago from a client of mine who needed to file a claim on his disability insurance policy.  He and his wife had gone to the movies on one of their bi-weekly “date nights”.  Before the movie ended – while the house lights were still dim — he got up to get some popcorn, but tripped on a broom an employee had left in the isle.  He ended up falling down the stairs and was severely injured.  Can you imagine?  Who would have thought a date night could end so badly?

Disability — More Common than you might imagine.  Let’s face it: Nobody wants to imagine getting sick or hurt.  Nobody wants to think about what life would be like should a disability strike.  But the reality is one in three Americans between the ages of 35 and 65 will become disabled at some point during their working career for at least three months.  And 90 percent of those disabilities aren’t work related and therefore don’t qualify for worker’s compensation benefits.  So what’s a worker to do?   Think about it.  One of your greatest assets is the ability to earn an income. If you were to lose that ability due to a disabling accident or sickness, how would you pay your bills, send your kids to college, and save for retirement?  Mounting medical expenses, coupled with a loss of income can be so devastating that many disabled end up cashing in their retirement plans, losing their homes or filing bankruptcy.

Insuring your income:  People naturally think about purchasing insurance to protect their homes and their cars, and rightly so.  But more importantly, people should first look to insure the very thing that pays for everything else — namely, their paycheck!  If you’re self-employed, have a family, are the primary bread-winner, and have more years to work before you’re able to comfortably retire, you should carefully review your disability insurance coverage.  Before you step out onto the high wire act of life, make sure that you’ve got a saftey net in place — make sure that your income is protected.

Do you have group disability insurance?  The good news is that most employers offer some form of group disability coverage.  Start your insurance review by obtaining a description of your company’s plan from your human resource department.  A typical group plan offered by an employer will replace up to 60% of your salary.  But the amount may actually be far less than that. That’s because most group plans have a benefit cap of, say, $5,000 a month or $60,000 a year.  Another surprise for many is that bonuses don’t usually make it into the equation — a group plan will only insure your regular salary.  Ideally, benefits will typically be paid until you reach retirement age, but some group plans will pay for a set number of years (say five years, for example). 

Do you need your own disability insurance policy?  If your company doesn’t offer disability insurance, or if you believe you need to supplement your coverage, work with an independent insurance broker or CERTIFIED FINANCIAL PLANNER ™ to evaluate your options.  All disability income insurance policies are not alike.  When shopping for a policy, consider the company’s financial stability.  In addition, know that policies can differ in how they treat partial or recurring disabilities, how they make adjustments for inflation, and how different occupations are underwritten.  Here are a few of the basics you should consider:

• Definition of disability. Unlike life insurance which pays benefits when an insured is no longer alive, disability insurance pays benefits only when an insured meets the definition of disability.  Not all policies are the same; one might pay benefits is you are unable to perform the duties of your own occupation while another policy would not pay benefits unless you couldn’t work in any occupation.

• Amount of monthly coverage. You can purchase disability insurance that will replace a certain percentage of your income —normally up to 70% or 80% of your pre-disability income.  You should purchase coverage that will enable you to meet your monthly financial obligations.

• Waiting period. The waiting period represents the amount of time that must pass between the date you become disabled and the date that disability income payments begin.  Be sure to coordinate your waiting period with short-term disability insurance or your emergency fund reserves.  In other words, a six month waiting period may be fine, unless you only have three months of income set aside as an emergency fund.

• Benefit period. The benefit period can range from several months to life. The longer the benefit period, the higher the cost of insurance.

Fortunately for my client, he had purchased disability insurance and the resulting monthly disability benefits were paid to him income tax free because he paid his premiums with after-tax dollars.  Without his disability income policy, a bad situation could have been a whole lot worse.  As a financial advisor, it is painful to see friends and clients suffer, but it’s also rewarding to know that proper planning works and can provide a safety net when it’s needed most.