You may have got insurance for your home, car or health because this is something that everyone does. But have you thought about insuring your ability to make a living? Probably not, even though you will now realize that it matters the most! Getting disability insurance is a smart move in this context because it pays up a portion of your income if you cannot work for a prolonged period due to an injury, illness or workplace accident. In fact, anyone who relies on a paycheck and has dependents to support should absolutely have this coverage. Here are some facts that you need to know about disability insurance.
Holiday Saving & Spending
With the holidays quickly approaching, I think it’s time we discuss proper spending and saving for this time of year.
The holiday season is a special time of year that brings together family and friends to share a special day with one another.
That said, it also brings along expenses. Buying gifts, food, and for some, plane tickets. What can you do to help save money during this time of year? Let’s find out.
Save!
Your holiday spending plan should start on January 1st. Set up a recurring transfer from your checking to your savings account.
Start with an amount that’s realistic. Personally, I do a weekly transfer. $10 per week. Multiply by 52 and we get $510 (technically) for holiday spending.
Another way to boost your savings is to start with one dollar amount, say $5, and increase it incrementally throughout the year.
There are a ton of savings challenges out there. Check this one out!
Start early
When buying gifts, a lot of people wait to buy big items on Black Friday or Cyber Monday. Regularly marked down items are priced relatively similar to those items that go on sale after Thanksgiving.
Save yourself the hassle and stress, and buy items throughout the year.
Make a list
Create a list of the people you want to buy gifts for. After that, assign a dollar amount to that person. This is how much you will spend on each person.
Here’s an idea for next year. Make that list right away and add it up. Whatever the total is, that’s how much you need to save for your holiday budget.
Another point I’d like to make. If your list is long and the total $ spent is high, you might want to consider removing some people from your list.
I know this might sound harsh, but you don’t have to buy them something. Maybe bake some cookies for those you won’t buy gifts for.
Use tech to your advantage
There are so many apps and programs out there that can help you save money. A few of my favorites are Coupons.com and Gas Buddy.
For online shopping, there are browser extensions and apps like RetailmeNot and Honey that find coupon codes for you.
The link below is an article about 7 different apps that can help save you money during the holidays.
7 Best Apps for Holiday Shopping
Track your spending
There’s no better way to gauge outgoing cash flow than tracking your spending. When you track your spending, you not only figure out how much your spending, but on what.
Better yet, use that list you created earlier and record what you spent on them. It keeps you honest and gives you a “checklist” so you don’t buy for someone more than once.
Make gifts
Handmade gifts are so much less expensive than store-bought gifts (most of the time). Also, in my experience, they are more appreciated than purchased ones.
Take a skill or craft you enjoy and make something special for someone.
Holiday party alternatives
There’s a large number of things you can do instead of your normal holiday party. For one thing, if you do have a party, make it a potluck! Everyone brings a dish so the financial burden of preparation doesn’t fall on one person.
Take the family sledding. Start a Secret Santa. Go for a walk/drive through a neighborhood and admire all of the Christmas lights.
One thing I found when researching for this article that moved me was volunteering at your local food pantry. Serve and set up a meal for those in need.
Treat yourself
There’s one other person I want you to put on that list. Yourself. We bust our backs trying to make a living, and often, we think about treating everyone else, but not ourselves.
This year, do something for yourself. Buy that thing you’ve wanted or take yourself to dinner. Whatever #treatyourself looks like, do it. You deserve it.
Related reading:
Does Money Reduce Your Holiday Cheer?
Read More:
What Is The 2023 Walmart Holiday Schedule?
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
Can You Afford Not To Use Index Funds?
One of the most popular investment vehicles in use today is the index fund. Recently, the assets under management in the index fund category surpassed that of which is managed in active mutual funds.
That said, what is an index fund? How did it come about? What are the characteristics of an index fund?
What is an index fund?
In its simplest form, an index fund is a passively managed mutual fund that tracks an index. It started out by tracking the S&P 500 and for a long time, that’s all these funds tracked.
Now, there are index funds for anything. The DJIA, biotech sector, micro-cap stocks, the list goes on and on.
In terms of stock market history, index funds aren’t old. The first index fund was created by Vanguard in 1975.
Through the late seventies and into the eighties, the index fund failed to catch on. It seems that only in the last decade or two, index funds were recognized as compounding machines and grew in popularity.
So what’s the big deal? Why are these investments so popular? What are the advantages and disadvantages?
Pros
- Low maintenance – Similar to a target-date fund, in the sense that you can invest a percentage of your portfolio in a single index, and leave it for an extended period of time. However, these funds won’t reallocate and shift from stocks to bonds, that’s on you.
- Low cost – Most index funds are low cost. I’m talking about the general funds that track large indexes. It also makes a big difference if the fund is with a big fund family or not. The big fund companies have more capital and more products, so they can offer for less. Also, as a general rule, the more specific an index gets, the higher the expense ratio.
- Participation in the broad market – you have the chance to grow your principal (original investment) by participating in the potential growth of the stock market
Cons
- Concentrated index – most index funds are market cap-weighted, which means the larger companies make up a greater portion of the index. That provides you less exposure to smaller companies AND can leave you concentrated in one industry. Four of the top five companies by market cap are tech companies.
- You ride the index up, and down. When the stock market tanks, there’s no protection if you invest in an index. For example, during the Great Financial Crisis, the S&P 500 lost 55%. The Vanguard S&P 500 index (VFINX) lost 55% from peak to trough.
Commonalities with active funds
Active mutual funds and passive index funds do have similar characteristics.
- Potential growth – Each of these has the chance to grow and compound over time. History shows that passive has a leg up in this category, but a portfolio manager of an active fund could outperform the index
- Target date funds – I briefly mentioned these before, but you pick a date in which you plan to retire. For example, 2040. You would then pick a 2040 target-date fund. At this point in time, the fund would probably be allocated 80/20, stocks/bonds. As we get closer to 2040, the fund will progressively shift its allocation more towards bonds.
What I think about index funds
I’m a big fan of index funds, especially for the general public. Fees, over the long-term, are really good at eating into your returns. Selecting low-cost index funds reduces your fee exposure.
That said, I’m also a believer in active management. When the economy is booming like it has the last 10 years, index funds will win almost every time. However, when the market finally turns over, that’s where an active manager can set themselves apart.
Related reading:
The Pros and Cons of Index Investing
The Different Between Mutual Funds and ETFs
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
How to Be Self-Employed Wisely and Safely
Around 16 million people are self-employed in the US alone. That number will likely grow significantly over the next few years as millenials opt out of traditional employment.
While many people dream about running their own business or working for themselves, it’s not a simple or easy ride. You assume many risks and responsibilities that employers handle for their workers. Just as importantly, your family typically assumes the same risks you do by default.
Understanding Life Insurance: 9 Tips on How to Choose the Right Plan
In the US, about 66 percent of adults are covered by life insurance. However, 1 in 5 say they do not have enough life insurance. And, 44 percent of millennials say they overestimated the cost of life insurance.
Clearly, a lot of us could be doing a better job of choosing and understanding life insurance.
How Does Financing a Car Affect Your Car Insurance
According to experts, 44% of Americans rely on auto loans to buy their cars. Are you one of them? Maybe you’re planning on doing some auto financing, but want to make an informed decision.
Besides your monthly payment and interest rate, you should also consider your car insurance policy. Learning the basics about the insurance requirements for a financed car will prepare you for when you make your purchase. Don’t know what we’re talking about?
Anxiety, Depression, and Money
Levels of anxiety and depression seemingly climb every day. This week, we are covering a different subject. It’s incredibly important, personal, and relevant.
I want to go over my personal struggle with mental illness, the things that I use/do to help, and how I figure out when I need help. Towards the end, I’ll tie in some instances of how your finances can impact your mental health.
My diagnosis
I have anxiety and depression. I was diagnosed earlier this year. Once you can put a name to how you’re feeling, your eyes open.
When I was diagnosed, it forced me to look back on my life and I realized that I’ve had this for a long time. Mannerisms, behaviors, etc. all made sense.
With the diagnosis, however, came a new challenge. How do I treat this? How do I cope?
How I feel
At the time of writing, not great. I call these, funks. A funk means I’m depressed. Reluctant to hang out with friends and family. Reluctant to talk to anyone. I just want to be alone.
That said, the funks don’t usually last long. My current one is going on for four days.
The question I often ask myself when I’m in these funks is, is this the depression or my current situation that’s causing this? The answer is both, but is one playing a bigger role than the other? That question will never have an answer because there is no way of knowing.
What I do
There are a few things that I’ve started to help cope with anxiety and depression.
- Exercise – You have to. In my opinion, this is the most important thing you can do for your mental health.
- Talk to someone – I go to therapy every three weeks. When I started, I was going every other week, but I got to the point where I felt good enough to wait one more week. It’s also a good idea to have a “person” you can go and vent to. Get it off of your chest.
- Journal – Before I go to sleep, I review the day to see how I felt throughout and try to figure out why I was feeling a certain way. I also list a few specific things I was grateful for.
- Medication – I’m on an anti-depressant, which has helped, but I also think I need to change this up. Talk to your therapist and/or psychiatrist to get this figured out.
- Meditation – I don’t have a formal mindfulness practice. Mine is centered around movement and breathing. Specifically, I do Tai-Chi every morning. It has helped tremendously.
When to get help
I have a very obvious line in the sand for when I need to get more help.
When I’m depressed and in a funk, I know it’s only temporary and will get better, but if I ever think that it won’t get better, that’s the sign.
That’s when the thought of suicide can become more prevalent.
Finances
There are a few examples when your finances can hurt your mental state.
- Too much debt – If you are in a hole and can’t see a light at the end of the tunnel.
- Feeling like you aren’t where you thought you’d be.
- Making just enough to pay your bills, with very little, if any, leftover.
- Investments – having an emotional attachment to your portfolio is never good. In this case, I usually recommend people ask themselves two questions.
- What type of portfolio allocation will help me meet my goals?
- What type of portfolio allocation will help me sleep at night?
- The right allocation is usually somewhere in the middle, but it’s a good idea to backtest the allocation to see what you are really comfortable with.
Related reading: The Psychology Of Money, The Questions You Need To Ask Yourself
My pledge to you
Whether it’s finance-related or not, I’m here if any of you need to talk. Below you’ll find my email.
Mental illness is a big problem in this country and around the world. If you or anyone you know is struggling, utilize the resources below!
Remember, you are never alone. There is always, ALWAYS, someone that wants to help.
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
Which Car Financing Option Should You Consider?
Buying a car is a substantial financial decision. For some people, it takes careful consideration and planning. Apart from choosing how to finance the purchase, you also need to account for running expenses. But, since a car is already considered a basic necessity in modern societies, the best way to buy a vehicle is to consider all financing options and select one that is right for you.
Building a Financial Future: Why You Need a Financial Advisor
Did you realize nearly 20 percent of Americans have no money in savings? If you are one of these people, now is the time to take control of your finances. The longer you allow these financial mistakes to linger, the harder you will find it to live comfortably.
Most people don’t have the knowledge or the experience needed to make important financial decisions on their own. This is why working with a financial advisor is a good idea. These professionals will be able to offer you advice on everything from creating a budget to planning for retirement.
New Social Security Legislation
We finally have a little movement on Social Security reform! Sometime this fall, the House will introduce legislation and hold a vote in order to keep the Social Security Trust Fund solvent through this century.
What is Social Security?
Social Security is a benefit program introduced during FDR’s presidency. You pay into the program via payroll taxes, commonly referred to as FICA, and then receive a specified amount during retirement.
Social Security also provides disability payments for those who can’t work, as well as spousal benefits for widows/widowers.
The calculation that determines your monthly benefit takes into account your 30 highest-earning years, with at least 10 years, or 40 quarters, needed to qualify.
If you are short a quarter, a year, or more, SSA uses $0 for that period of time, which can drastically reduce your monthly benefit.
That’s enough about the nuts and bolts, let’s dive into the current program, followed by the new legislation.
How healthy is the current program?
It depends on how you define healthy. Currently, the Social Security Administration is paying out more than it’s taking in.
Social Security has a reserve fund that they go to in order to make good on payments. That reserve fund is set to run out in 2035. Now that does not mean that Social Security is doomed!
If nothing is done, the reserve will run out and then benefits will have to get cut. Most calculations are saying a 15%-25% reduction.
The current set up for Social Security is like this:
- People born before 1946 – Full-retirement age (FRA) is 65.
- People born between 1945 and 1965 will see a 2-month increase in their FRA each year with the cap at 67.
- Anyone born after 1964 – FRA is 67.
- Current FICA taxes are 6.2% for employees and 6.2% for employers.
- Maximum taxable earnings – $132,900 – Anyone who makes more than that does not pay FICA taxes.
Full retirement age (FRA) is the age you must attain in order to receive your full benefit. If you apply early, your benefits are reduced, and if you put off receiving those benefits, you’ll get more.
With that said, let’s get into the new legislation.
Proposed legislation
There are four parts to this new law, which is called the Social Security 2100 Act.
- First change – FICA is going up to 7.4% for employees and 7.4% for employers
- Second – Maximum taxable income is going up to $400,000
- Third – Benefits will see a 2% increase
- Four – SSA will use a new index to adjust benefits for the cost of living
My thoughts
This has been a long time coming. The Federal Government desperately needed to act in order to ensure Social Security would be here for the coming generations.
While I like the changes that have been proposed, I have two things I want to gripe about.
One, the 2% bump in benefits was not necessary. Though the Cost of Living Adjustment (COLA) has been minimal in the last few years, it still exists. Benefit recipients will continue to see an increase in benefits.
Two, they did not address the retirement age. As I mentioned, the current FRA is 67. With current life expectancy nearing 80 and improvements in medicine coming every day, this should have been increased, as well as the age cap for collecting benefits.
You have to take benefits when you turn 70, whether you want to or not. If we are living longer, FRA and the age cap should go up. Either way, I’m glad we’re starting to see movement on this front.
Here are some sources and some related reading:
Future Financial Status of the Social Security Benefit Program
When Should I Take Social Security?
Will Social Security Run Out Of Money?
Tips for Avoiding Social Security Disability Denial
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
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