Jacob Sensiba, Author at The Free Financial Advisor

How to Set Investing Goals

December 15, 2021 by Jacob Sensiba Leave a Comment

Saving money for the future is important, but I believe it’s even more important to invest that money and make it work for you. With that said, you can’t just start investing. You need to lay some groundwork first, you need to have goals in mind, and you have to be intentional so that when things get difficult, you stick with the plan instead of abandoning it during the discomfort. Today, we’re going to talk about how to set investing goals.

What kind of goals are there?

There are typically three-goal time horizons: short-term, medium-term, and long-term. A short-term goal is something you plan on achieving in 2-10 years. Saving for a down payment is a pretty common goal that fits into that window. A medium-term goal is 10-20 years. Saving for educational expenses for a child fits into that window. A long-term goal is retirement or anything else that’s 20+ years down the road.

These time windows are my opinion, though I think they’re pretty close to conventional opinion. Also, there are more goals than the ones I listed above.

How to think through your goal-setting

There are three things to keep in mind when you set investing goals (not to mention figuring out the goal itself). How much time do you have? Is this a short-term, medium-term, or long-term goal? Do you have time to take some risks or do you have to play it safe?

Speaking of risk…what are you comfortable with? Usually, this goes hand in hand with how much time you have. A short-term goal like saving for a down payment will need to be invested conservatively, if at all. In this scenario, you’ll have a set price you’re saving for so you can’t take a chance that the market dips and your savings fall below what you need it to be at.

Conversely, when you’re saving for retirement, you’ll have an opportunity to be more aggressive (at least in the beginning) because you have time to make back the money that you’ve potentially lost.

The last part of positioning your portfolio according to your goals is your comfort level/investor psychology. Time horizon and risk tolerance are small factors here, but it’s more about how volatility affects your mind. If the market drops and you’re panicked, maybe you need to be more conservative.

How to invest based on your goals

Here are some thoughts on how to invest based on your goals. If you’re saving for a short-term goal, like a down payment, I wouldn’t even invest it. UNLESS you’re very confident and you’re an expert in the particular field (though that applies to all of the time horizons).

If you’re saving for a medium-term goal, like saving for college, here’s what I’d do. You can be a little aggressive in the beginning because you have time to earn some money back. As you get closer to the end of your window, you’ll need to be more cautious. Maybe start 50/50 (stocks/bonds) and as you get closer, either get out of the market entirely or something like 10/90 or 20/80.

For your long-term goal, you’re able to be more aggressive for a longer period of time. 90/10, 80/20, 70/30, 60/40 all work great here. It depends on what you’re comfortable with. Same as the last one, as you get closer to the end of your window, you need to shift your allocation to be more conservative.

Keep in mind, these are blanket recommendations. I don’t know your situation, so you need to talk to a professional first before you set investing goals and make investment decisions.

Disclaimer:

**Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation. Please see the website for full disclosures: www.crgfinancialservices.com

Jacob Sensiba

My name is Jacob Sensiba and I am a Financial Advisor. My areas of expertise include, but are not limited to, retirement planning, budgets, and wealth management. Please feel free to contact me at: jacob@crgfinancialservices.com

www.crgfinancialservices.com/

Financial Resolutions: Debt, Savings, Investing, Real Estate, and Crypto

December 8, 2021 by Jacob Sensiba Leave a Comment

The new year is right around the corner so I thought it fitting to layout some resolutions for a few different financial topics. Here are financial resolutions for crypto, investing, real estate, savings, and debt.

Debt

Pay down or pay off your debt. If you have credit card debt, make it a goal for next year to pay it off completely. The interest rates that credit card companies charge are so brutal. Getting rid of credit card debt would relieve a lot of stress and save you a lot of money that you’re wasting on interest. Not to mention, whatever you’re currently paying towards your credit card can be used for something way more productive.

If all you have is a mortgage, make extra payments. If you have no debt, congratulations! Try and save more so there’s no chance of you going into debt again.

Savings

Would you like to buy a house next year? Save for your down payment. The bigger your down payment is the smaller your responsibility will be; in terms of monthly payments and in terms of total money owed. Especially if your down payment is 20% or more. If that’s the case, you don’t have to pay mortgage insurance (AKA PMI).

If a down payment isn’t something you need to save for, increase your savings rate for retirement. Or set yourself up to cover some unexpected expenses by creating an emergency fund. Do some math, establish a goal number (emergencies, down payment, retirement savings), and then create a plan to save and hit that number.

Investing

For the most part, investing will take place in your retirement account. And for most people, the amount of time you have until retirement is a couple of decades. With that said, you can be a little more aggressive with your investments.

If this description doesn’t fit you, then figure out what works for you. Determine your time horizon, risk tolerance, and what you’d be able to tolerate in terms of short-term losses. If you’d like to get a good idea about what your preference is, take our risk tolerance quiz.

Real Estate

This one is a little challenging because it’s not like you’re going to move once per year. Also, investing in real estate isn’t for everyone. So I’m going to try and hit a few groups with this one.

Buy a new home. If you need more space for your growing family, you got a new job that requires relocation, you want to be closer to your church or family members, then make a move.

Make improvements to your current home to increase the value of your home or to make better use of the space. It can also improve tax credits especially if you use sustainable materials like solar panels. Either way, the improvement has a positive effect on your living situation.

Most people can invest in real estate, they just do it differently. Some people are going to invest in physical properties and some can invest in Real Estate Investment Trusts (REIT). Either way, you need to be picky (like all investments) so you get a good return on your money.

Crypto

This applies to everything in this post, but especially here…do your homework. I like crypto. I think there are investment opportunities, but I also think there’s a possibility it all collapses. I like the technology it’s created on, but I don’t know how it’ll transform and what the adoptability will be. Invest only what you can afford to lose is my best advice. With all that said, make financial resolutions to get more educated about cryptocurrencies and the blockchain.

Disclaimer:

Jacob Sensiba

www.crgfinancialservices.com/

The Factors Causing Inflation

December 1, 2021 by Jacob Sensiba Leave a Comment

It’s no mystery. Inflation is becoming a problem. We thought it might be an issue a while ago when the economy started to come back and the FED continued easing. The FED then said the inflation was transitory, meaning it would only be here temporarily until it went back down to pre-pandemic levels. That no longer looks like it’ll be the case. What are the factors causing inflation? Is there a major force behind it? What are the industries that’ll be hurt the most and which industries will be unfazed?

Demand returns to normal

There are several factors causing inflation. Because of the pandemic, we saw demand evaporate instantly. Then, as vaccines started to roll out, demand started to pick back up again. Also, in the middle of the pandemic, the government sent out three stimulus payments and increased unemployment benefits. People realized what it felt like to bring in more money and sought out better-paying jobs, or demanded higher wages. Demand picked up and people started to make more money, so they had more disposable income.

The wage/price loop

The recovery got going, but the FED continues to buy bonds and keep interest rates low. What also happened was the supply chain crisis. Prices went up because demand stayed the same and supply dried up. There’s also a wage/price loop that takes place. Wages go up, so companies raise prices to make up for the increased cost of wages. Increased prices create wage pressures. Wages go up. Then prices go up to make up for the increased cost of labor. And so on.

What industries are affected?

There are several current industries and product lines that are being affected by inflation. The most notable is gasoline. But I don’t need to tell you that. I’m sure you’ve noticed when you go to fill up your tank. A lot of food items have also increased a bunch since before the pandemic. To be honest, I can’t think of many industries that aren’t affected by inflation. I would assume if you provide a service you can be more flexible with your charges.

Competition decreasing?

Something else that’s being said is industries are becoming increasingly centralized, so there’s less competition. If there’s less competition, companies are able to do what they wish with their product offerings and their prices. I really don’t know if that’s the case or not. I would think not because the current administration said they were going to limit anticompetitive practices, but who really knows what they’re actually going to do.

Related reading:

What Currently Presents a Risk to Markets?

What Does an Increase in Yield Look Like?

Why Financial Literacy Matters

Disclaimer:

Jacob Sensiba

www.crgfinancialservices.com/

Big Tech Moving Into Finance

November 24, 2021 by Jacob Sensiba Leave a Comment

Big tech wants a bite of the financial services pie. I think technology and finance go hand in hand, but I also think it’s mostly a one-way street, in terms of benefits. Technology has definitely given the financial services industry an upgrade, but the finance industry tends to think of big tech as a threat. Why is that? Today, we’ll take a look at big tech, how they’re changing financial services, and if those big banks actually have something to worry about.

What do you mean by “Big Tech”?

The names you know off the top of your head. Apple and Google to name two, but there are other players that don’t get as much publicity. Cloud storage from Amazon and/or Microsoft. Software companies like Oracle. Chipmakers like Nvidia. Data companies like IBM. There are a lot of moving parts and it’s no surprise, everything uses technology. What’s different about financial services is the regulation, so adoption of new technologies is typically slower.

How tech changed finances

From a consumer standpoint, banking is easy. Checks are deposited directly into your bank account. You use your bank’s app to review expenses and deposit any real checks you may have. Practically all bills are able to be paid electronically. Not to mention you can automate bill payments and transfers. Also, if you want to save for retirement or invest some money, there are several companies that can do it all online (though we always advise you to speak with a person for advice).

Big tech in finance moving forward

Big tech is already offering some financial products. Google has Google Pay, Samsung has Samsung Pay, and Apple has Apple pay. Apple is also working on a Buy Now, Pay Later (BNPL) offering, but nothing is out yet.

Big tech will be able to compete with legacy financial services companies because they have a competitive advantage. They don’t have the regulatory oversight that current companies do and they have a customer base (and their data) that they can leverage with new offerings.

Parting thoughts

Do I think several big tech companies will come out with financial services offerings? No. I think there will be a select few that come out with some, but I don’t think it’ll be the scale of Wall Street, for example. I think it would behoove big tech and other large companies to remember that being a conglomerate doesn’t work right now. Just this year, there were several companies that split their business up, based on industry (like GE). Could the conglomerate model come back around? Absolutely, but I don’t think now is the time.

How to Teach Children about Budgeting through Holiday Shopping

November 17, 2021 by Jacob Sensiba Leave a Comment

Teaching kids about money is a worthwhile endeavor no matter what time of year it is. Holiday shopping might be one of the better times to take them to school, though. Here are some ways to teach children about budgeting through holiday shopping.

You can take your time

Because of the internet, the majority of the shopping is done online. You are able to take your time and actually show them what you’re doing and why you’re doing what you’re doing.

Let’s say you’re on a website and you’re buying several things for your family members (as long as it’s stuff for them…no spoiling surprises). The items in your cart total $200 and your budget per person is $50. With those numbers, you’re able to show your children that you’re buying for 4 people. You’re able to show that you set a number and you’re sticking to it.

Saving money

With spending comes saving. Another item you can incorporate when teaching your children about budgeting is saving money.

Our family has a separate savings account specifically for holiday spending. We determine how much we’re going to spend per person and add up how many people we’re going to buy for. Then we take that total and divide it by 52 (for 52 weeks in a year). The next thing we do is take the total from that equation and set up an automatic transfer from checking to holiday savings. That way, we have the money saved and ready when we start buying gifts for people. That enables us to continue with our normal budget and financial plan without eating into our regular cash flow.

How to teach

I think there are a lot of parts of the holiday season that you can model for your children. When you walk into a store, there’s typically someone outside ringing a bell for the Salvation Army. That could be a good opportunity for you to teach your children about paying it forward and giving it to someone less fortunate than them.

You could give your children $20 or some other dollar amount of your choosing. With the money you gave them, you could give them some options. Buy something for yourself, buy something for someone else, or split up the money and buy for a few people. Depending on what they do, it could be a good opportunity for your to teach them about thinking of others instead of thinking about yourself.

Disclaimer:

Jacob Sensiba

www.crgfinancialservices.com/

Set a Holiday Budget That Works

November 10, 2021 by Jacob Sensiba Leave a Comment

With the holidays right around the corner, it’s time to get your shopping and holiday preparation done. That means you’re going to have to spend money. The holidays can be rather expensive for people. Especially, if you have a lot of people to buy gifts for, you have to travel, or you’re hosting a party. Here are some tips on how to set a holiday budget that works for you.

Start by asking some questions

If you want to make progress, it all starts by asking questions.

How many people do you have to buy gifts for?
Would your friends or family be open to a gift exchange?
Do you have to travel?
Do you have to host a part?
Would you be open to a potluck?

Having answers to these questions would help a lot when budgeting for the holidays. While we’re here, you should ask these questions far in advance so you can save throughout the year.

Budgeting

For example, you have 10 people to buy gifts for. How much do you want to spend on each person? Do you want to spend more on your parents than you do on everyone else? Let’s say you plan on spending $50 per person. That’s $500 worth of gifts. If you save $10 per week, you’ll have enough saved for gifts in your holiday budget.

Traveling

Knowing ahead of time if you have to travel is useful too. Then you can be picky about your flight, but buying in advance is usually more economical than waiting until the last minute.

When it comes to buying your plane tickets, it might not be a bad idea to put them on a credit card and pay off the balance right away. When you do this, you’ll show some activity to the credit card company, show an on-time payment, and accrue some rewards points.

Planning ahead

Another point about planning ahead – supply chains are disrupted and products are more expensive. If you plan ahead, you a) allow enough time for your purchases to be sent to you and b) you’re able to find deals on the things you want to buy.

Decorating

When it comes to holiday preparation and decoration, it might make sense to get a few items to get you through this holiday season, and then when everything goes on sale, load up for next year.

Gift exchange

A gift exchange could relieve a lot of financial pressures during the holiday season. If you get a group together and establish a budget, you could enjoy the gift-giving and receiving process without breaking the bank. You could also have fun with it and make the gift exchange a white elephant, where you buy gag gifts instead.

Buy Now, Pay Later

One last thing you can keep in mind. With the rise in popularity of Buy Now, Pay Later (BNPL), you might want to consider it if your finances are tight. BNPL gives you the ability to spread payment over several months. Be careful though, you can get into trouble if you start missing payments, and your credit can take quite the hit.

The holidays can be expensive, but if you plan ahead it doesn’t have to have an impact on your wallet. Set a holiday budget that works for you.

Disclaimer:

Jacob Sensiba

www.crgfinancialservices.com/

How to Prep your Finances Before you Quit your Job

November 3, 2021 by Jacob Sensiba Leave a Comment

There are a lot of jobs open right now. Maybe you’re not particularly happy in your current role so you’re looking for other opportunities. Before you leave, you need to make sure you have your affairs in order. Here’s how to prep your finances before you quit your job.

Some things to make note of first.

Plan Ahead

If you want to quit, but don’t have anything lined up yet, get that process started ASAP. There may be a plethora of jobs available right now, but that doesn’t mean you’re going to get one right away.

Ideally, you’ll have an accepted job offer before you quit your current job, but that won’t apply to everyone.

You could be leaving a hostile work environment, you could have a bad work/life balance, or you’d like to explore different opportunities.

That’s why you must do your best to always be prepared because you never know what is going to happen. You can’t predict the future.

Before you quit your job, here’s what you have to do.

Have Money Saved

Make sure you have money saved. You truly don’t know how long it’s going to take to find another job. That’s why I say you should have one lined up before you quit your current job. That’s also why the common advice is to have 3-6 months of living expenses saved in case you lose your job.

It’s also important to see what’s out there. As I mentioned in the beginning, there are a lot of jobs available, but that doesn’t mean you’re going to find a better one. Do your research.

Prep Your Finances

If you want to be able to have less liquid money available, work on your expenses. Cut down where you can. If you’re servicing debt, get it paid off so you don’t have that liability sitting out there. If you don’t have any liabilities, you remove the chance that you’ll miss a payment (which is bad for your credit score). Your credit score is important in today’s economy, especially when looking for a job.

Back-Up Plan

Whether you are exploring a different field entirely or looking for a better role in your current industry, it’s a good idea to have something to fall back on. Even with a record number of job offerings, the job market is still unpredictable. Make sure you have a contingency job picked out that matches your skillset and expertise just in case the role you’re pursuing doesn’t work out.

Make Money in the Meantime

Learn how to make money…quickly. If the job hunt is taking longer than you expected, find a way to supplement the income you lost. There are several ways to hustle your way into a wage nowadays. Uber, Lyft, Instacart, UpWork, Fiverr, and more. There are plenty of companies that’ll hire you as a contractor. If you’re making money, that could enable you to be very picky on the job you take.

Health Insurance

Last thing. Don’t forget about healthcare costs. If you get benefits from your current job, figure out how/if you’re going to get health insurance while you are out of work. Short-term plans might meet a need if you’re just looking for disaster coverage, but if you’re someone that requires ongoing medical care, there’s probably something else that’ll meet your needs better.

Prep your finances BEFORE you make a move.

Disclaimer:

Jacob Sensiba

www.crgfinancialservices.com/

Here Is What To Do If You Have Debt In Arrears

October 25, 2021 by Jacob Sensiba Leave a Comment

This article is a response to a reader’s question about paying off debt on an irregular income. They write:

Can you advise me how to manage to settle my absa loan & credit card because they are in arrears

At my work I earn with commission , sometimes I didn’t earn.

Here is my answer:

Being in debt is a challenge. It takes away money you could use for more productive things. It’s even more difficult when you’ve missed payments and your debt is now in collections. If that’s you, here are some tips to help you settle your debt that’s in arrears.

Pay down debt

Utilize some debt repayment strategies.

Debt snowball – pay your smallest balance first while making minimum payments to your other debts. When you pay off your smallest balance, move on to the next smallest balance. As you get rid of debts, you’ll be able to make larger payments to the following debt.

Debt avalanche – pay your highest interest rate first. Similar strategy as the “snowball”. Once your highest interest rate debt is eliminated, pay as much as you can towards the debt with the next highest interest rate.

Use retirement funds to pay off your debt. You’ll likely, depending on your age, pay a 10% tax penalty, however (if you’re under 59 1/2). Do you have any cash accumulated in a whole life insurance policy? Use that cash value to pay off your debts

Negotiate

How much, in terms of dollars, can you pay to your creditors as a settlement? Figure out what that number is before you start contacting creditors.

It may take a couple of phone calls, so don’t get discouraged. If you don’t like what you’re hearing from the representative you’re talking to, try and get a hold of a different one. Remember the dollar amount you can pay and don’t go over that amount. If you can pay 50% of what you owe, start with an offer to pay 30%. The creditor will counteroffer and hopefully, the agreed amount is 50% or lower.

Make sure you’re clearly communicating the financial hardship you’re experiencing that put you behind on your debts. Getting sympathy from a representative could help you! Get any settlement or repayment plan in writing as soon as possible.

Make sure you’re speaking to your creditors, not collections agencies. Collections agencies will take a settlement amount and sell whatever is left to another agency. Before you’ll know it, they’ll be after you again. Speak to the creditor you initially owed. Also, be prepared to pay taxes on the forgiven amount.

Bankruptcy

Nobody likes to think about it and it would be a very difficult decision, but it might be one to strongly consider if you want to settle your debt.

If you don’t have luck with negotiations, you might have to consider bankruptcy. There are generally two options – Chapter 7 and Chapter 13. Chapter 7 clears all of your debts. Chapter 13 is more of a reorganization.

Check credit reports

Clarify with the credit reporting agencies how things were settled. Clean up the report and it could help your score a little. Late payments and charge-offs stay on your credit report for 7 years. Debts in collections stay on your credit report for 180 days.

Debt settlement is about commitment. There are penalties if you miss ONE payment of your agreed-upon settlement, so don’t miss!

One more thing. Know your rights. There are several things collectors can’t do:

They can’t threaten you
They can’t shame you
They can’t force you to repay your debt
They can’t falsify their identity to trick you
They can’t harass you

It’s a tough road, but getting out of debt is paramount for your psyche and your financial success. Utilize strategies to pay down debt. Speak with your creditors about negotiating. If negotiation doesn’t work, consider bankruptcy. Once you settle your debt, review your credit report and dispute errors.

Disclaimer:

Jacob Sensiba

www.crgfinancialservices.com/

Financial Planning Month

October 20, 2021 by Jacob Sensiba Leave a Comment

October is Financial Planning Month so I want to go into a little detail about why financial planning is so important and what aspects need to be considered.

Now let me start by saying money is not the end all be all, but having some is better than having none. Being financially prepared is incredibly important, both for your psyche and for your budget.

Why financial planning is important

Saving some of what you earn is the first step to financial preparation. Having an emergency fund is essential. Those who don’t have emergency funds probably have to pay for emergencies with credit cards. That leads to debt and money wasted on interest.

What about saving for medium-term goals? Being able to save for a down payment for a house can save you money on your monthly payment, and can make your offer to buy more enticing in this competitive market. The less you “finance” the more you save because you’re not paying (or you’re paying less) interest.

Saving for retirement is paramount. Social security will not pay all of your expenses. You need supplemental income to be able to live when you no longer can earn money.

To be able to save, you need to plan. That plan is called a budget and you need to set one so you know how much you HAVE to spend on necessities, how much to save, and how much you COULD spend on wants.

Planning also matters so you stay out of debt. Unplanned expenses come up and it’s vital to have money saved up during those times.

What goes into a financial plan

A few of them I’ve mentioned so far – having an emergency fund, having a savings plan in place for medium-term goals, having a retirement plan in place for when you need it, and budgeting.

A great financial plan takes two approaches – macro and micro. A macro view of your financial plan is more of an outline. How much do you save for this, that, and the other (emergencies, short-term and medium-term goals, and retirement).

The micro has to do with the details and how you meet those goals. What kind of debt payments do I need to make in order to have it paid off in three years? How much do I need to save per month to have my down payment ready? How much do I need to save, given a projected ROI, to meet my retirement nest egg goal?

Insurance

Another important piece to your financial plan is your insurance. Are your home and vehicles adequately protected? Are you protected? Is your ability to earn a living protected? Making sure you have proper coverage for your property, liability, and your life is vital.

Estate planning

Creating a plan for yourself and for your family is the last step. If you have assets you want to leave them and/or liabilities you want to take care of, you need to spell that out in a legal document (like a will or a trust). An estate plan is all-encompassing and needs to include your investments, property, liabilities, and insurance.

Disclaimer:

Jacob Sensiba

www.crgfinancialservices.com/

Who Needs to Worry About the Stock Market and Why?

October 6, 2021 by Jacob Sensiba 1 Comment

Earlier this week we saw the NASDAQ take a dive and Facebook lost 5% in one day. Volatility is part of the stock market. That’s how it’s been and I think that’s how it’s always going to be. Suffice it to say that the stock market is otherwise unpredictable and it’s something that investors are aware of. But who really needs to worry about the stock market?

Who needs to worry?

The complicated answer is, it depends. It depends on what you’re saving for, how old you are, and your time horizon.

Generally speaking, if you’re saving for retirement, the people closer to retirement need to pay attention to the market more than the younger people. That’s also why asset allocation is important. The closer you are to retirement, the more money you should have in less risky investments.

Time Horizon

If you have a short-term goal you’re saving for then you have to be a little more careful. If you’re saving for college, for example, the closer you get to having to use those funds to pay for college, the more conservative you’ll have to be.

What happens in the stock market only concerns people with a short time horizon. I actually should phrase it differently. What happens in the stock market SHOULD only concern people with a short time horizon.

Asset Allocation

When I say all of these things, I’m specifically talking about broad-based financial planning. People who are saving for a particular goal and are using asset allocation for their investments. Meaning they’re selecting mutual funds or ETFs that follow some sort of index. If you’re investing in specific stocks or thematic ETFs, then you probably have to pay a little more attention.

And I’m not saying that people with long-term time horizons shouldn’t pay attention to their accounts. I’m simply saying that they shouldn’t live and die on what the value of their account is day in and day out. Don’t worry about the stock market.

Disclaimer:

Jacob Sensiba