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My Goals for 2020

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Now that we’ve turned the calendar to another year, another decade, it’s time to figure what goals we would like to set.

Specifically, in this post, I’m going to go over the goals that I’m setting for myself, why I’m setting that goal, and how I’m going to put a system in place to achieve that goal.

What are my goals for 2020?

  • Get out of debt – Bought a house in 2019 and bit off more than I could chew. The divorce also threw a wrench in my financial planning.
  • Save for retirement – I’ve put my savings on hold for the time being due to poor financial decisions that led to the debt, etc.
  • Incorporate a meditation practice – I’ve harped on it and studies show how much it helps. I need to do this.
  • Journal every day – When I remember to journal, those are generally good days. I need to do this consistently.
  • Read every day – Reading can only help me, so why wouldn’t I do it more? I’ll learn something new and it’s shown to provide some meditative benefits.
  • Spend more dedicated time with my son – I’ve found myself over the last month or so having my phone out more than normal. I mean, I’ve had quite a lot going on with work and mentally, but that’s no excuse. He deserves better.
  • Exercise regularly – it’s good for my body and my mind. It’s a must.

Typically, when you’re setting goals, you should be very specific. You’ll notice, that I wasn’t. I get more granular with my goals in the systems section.

My systems

Getting out of debt and saving for retirement we can lump into one system, as they both revolve around finances and me reigning in my spending.

Until April, this will be incredibly challenging, as I am currently paying my mortgage on my house and the rent for my apartment.

So until I get my house rented (I have tenants set to move in, in April), I’m kind of stuck. Once that happens, however, I’ll have the debt repayment pedal down to the floor.

Simultaneously, I’ll contribute $20 per month to my retirement account, just to get in the habit of doing it again. Start small, enforce the habit, then increase the dollar amount.

Meditation

Of my goals, incorporating meditation practice should be relatively easy. I know my preferred style – I’m not one to sit pretzel-legged on a cushion. I lay down on the floor, on my back, which some relaxing music playing.

The hard part is a) making the time for it and b) doing it consistently. To start, I’m going to set my alarm for 5 minutes earlier than normal.

5 minutes might not seem like a lot, but if I wake up 5 minutes earlier, that gives me 5 minutes to meditate. If I do that consistently for the next, say three weeks, those extra 5 minutes won’t seem that, and I can scale it to 10 minutes.

As I noted in last week’s article, when forming a habit, you have to start small and then scale up.

Reading

Reading every day. This is a must-do for me. It’s good for my mind, it’s good for my soul, it’s good for everything. I have a great many books on my list, but they will all fall into a specific genre – finance, philosophy, religion, or biographies.

The first one will help with work. The last three will help with life.

Every day, before bed, I’m going to read for 15 minutes. That’s my starting point. Once I get into the habit, the amount of time I read will increase.

Spending time with my son

Spend more dedicated time with my son. This is an easy one. Just stay off my gosh darn phone.

Keep it in my room or in the kitchen. Not in my pocket, where I can easily access it. Put the ringer on and leave it alone.

If it’s an emergency, someone will call and I will hear it.

This will also eliminate a distraction, so if he goes to bed for the night, I can immediately pick up a book without getting sucked into the social media black hole.

Exercise

Exercising every day. I read recently in a book about the Dalai Lama that exercising your mind is more important than exercising your body, so I’ve put that on the back burner.

I have a pull-up bar in the doorway to my bathroom and I do 5 pull-ups every time I go in, but that’s not enough dedicated, consistent time for exercise.

I think doing it in the morning makes the most sense. I’m too tired in the evenings to exercise. The question is, do I do this before or after meditation?

Probably after, as I need my mind at ease when I meditate.

So instead of waking up 5 minutes earlier, I’ll start by waking up 20 minutes earlier. Dedicated 15 of those minutes to exercise and the remaining 5 for meditation.

Related reading:

A Systematic Approach to Goals

Worthy Goals for You to Set and Crush

How Do You Set Financial Goals?

A Systematic Approach to Goals

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With 2020 staring us in the face, it’s time to review goal setting and the systems you can put in place in order to reach those goals.

“A goal without a plan is just a wish.” – Antoine de Saint-Exupery

That said, let’s look at systematic ways to approach goal setting and actionable tools you can use to smash those goals.

How to begin

  1. Large/Lifetime goals – These are things you want to accomplish throughout your life. They can be philanthropic, health, financial, etc. Figure these out first.
  2. Short-term – Now that you have your long-term/lifetime goals determined, you can break them down into shorter-term goals. Consider these stepping stones, and a lot of these will change as you age. For example, your philanthropic goals. There may be causes you care deeply about now, but that can change.
  3. Actionable steps – Once you have your lifetime goals broken down into manageable targets, it’s time to create steps to get there and I’ll illustrate that using the three examples above.
    1. Philanthropic – Research causes and charities. Pick the ones you most identify with. Review your budget to find out how much you can give. Do a little more research to find out if your donations are tax-deductible (most, if not all, should be).
    2. Health – Establish the specific reason you want to be healthier (for yourself, your partner, your kids, grandkids, etc.). Research a diet that could work for you. Research an exercise regimen that could work for you. Consult experts (i.e. nutritionist and personal trainer).
    3. Financial – Create a budget/spending plan. Cut expenses. Save for emergencies. Insure you and your belongings. Save for retirement.

Here are a few articles I’ve written in the past about financial goals:

Worthy Goals For You To Set And Crush

How Do You Set Financial Goals?

Systems

We can think of systems as the sub-category of actionable steps. A routine is another word for it. When it comes to goals and habits, you can’t rely on will power. You have put a plan in place to do the work for you.

Take exercising for example. You need to create low barriers for yourself. Wear your gym clothes to bed or have your bag packed the night before.

If you go to the gym, put your bag and your keys in a place where you have to pass them to get to your car.

If you exercise at home, have your routine and your equipment laid out and ready for you.

Habits

When it comes to creating habits, James Clear, the author of Atomic Habits, likes to break down the habit into bite-sized pieces.

For example, if your saving for a down payment, go to your banking app and transfer $1 from checking to savings every morning (or whatever amount is realistic for you).

When that becomes second nature, bump it up a dollar a day.

Another thing that James says is, “People ask me all of the time, how many days does it take to create a habit? My answer, all of them because if you stop doing it for one day, it’s no longer a habit.”

External versus Internal

This section is speaking specifically to mental health versus other goals. You could also consider physical health as an internal goal, but for this article internal relates to mental health.

There are several things you can do to work on your mental health. See a therapist, exercise, and start a journal. Those three are low-barrier, easy things you can implement into your day to help.

Meditation, medication, and other forms of mindfulness training/practice can also help. There’s a podcast that I listen to regularly called “10% Happier” that will help you with establishing a meditation practice.

Do some research about this. Meditation can and will take many different forms, and not each modality will be right for you. Reading has also proven to have meditative benefits.

Financial Goals

It really is up to the individual as to what they consider, short, medium, and long-term, but my definitions are as follows: Short-term – less than 3 years. Medium-term – 3-15. Long-term – 15+.

My definitions are almost entirely based on the investability of those assets for that specific time period.

  • Short-term – Emergencies, a new car, what have you. This is money you will need soon, so risking it in the stock market is out of the question. High-yield savings accounts should be your go-to in this scenario.
  • Medium-term – Things like down payments for a house or sending your kid to college. What you’re saving for will dictate the vehicle that you use. If it’s saving for college, a 529 or a Coverdell ESA should do the trick. If it’s for a down payment, your best bet is usually a taxable brokerage account, as there are no fees for early withdrawal.
  • Long-term – This should be strictly focused on retirement. Assets should be in a retirement account(s) and invested (investment selection should be based on risk tolerance and time horizon).

Once you’ve established your short, medium, and long-term goals you can break them down into actionable steps as we talked about earlier.

Wrapping it up

Each New Year brings about resolutions that we hope to achieve. Whether it’s getting in shape or paying down debt, your barometer for success should be progress and consistency.

Are you in a better place than you were on January 1st? Do you have more saved? Are you still committed to the goals you set in the first place?

Yes. It feels great to set a target and hit it, but as far as I’m concerned, if you’re better than you were yesterday, that’s all that matters.

Take it one day at a time and keep your eyes on the prize. You got this!

Related Reading:

How to Set Long & Short-Term Goals (And Reach Them Too!)

401k Withdrawal Taxes and Penalties

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The 401k has grown in popularity over the last couple of decades because pensions have all but vanished; as a result, strategies around taking withdrawals and how to limit taxes and penalties are extremely prevalent.

In this article, we’re going to discuss the common penalties and taxes, and some of the strategies you can deploy to reduce them.

When a penalty typically applies

In almost all cases, a penalty applies if you withdraw from your account before the age of 59 ½. This is a 10% tax penalty. (Be advised: All withdrawals are subject to ordinary income taxes)

There is also a tax penalty if you fail to withdraw your Required Minimum Distribution (RMD). This applies to individuals over the age of 70 ½. This penalty, however, is 50% of the amount you should’ve withdrawn.

There are several exceptions, however.

Additionally, with the new Secure Act, there have changes to required minimum distributions, contributions, and others. For more information, click here.

When you are exempt from penalty

  • Withdrawal after 59 ½
  • Left employer after 55
  • Left employment in public safety after 50
  • Death distributions: your beneficiary is able to take distributions without penalty, regardless of their age
  • Totally and permanently disabled as defined by the IRS
  • 72t rule – Agree to withdraw the same amount for a fixed period of five years or until you turn 59 ½, whichever is greater.
  • Unreimbursed medical expenses: You’re allotted to withdraw the unreimbursed medical expenses minus 10% of your adjusted gross income
  • If you over contribute to your retirement plan for the year, you’re allowed to withdraw the excess without incurring a penalty.
  • IRS Tax Levies
  • Divorce: Depending on your state and how you settle the divorce with your former spouse, he/she can withdraw their respective portion without penalty
  • Roth conversion: you pay taxes on the conversion, but there is no 10% tax penalty

*All exceptions may have certain requirements that need to be met to qualify for the exemption. Please check with your 401k Plan Administrator and Financial Advisor regarding your personal situation.

Taxes

With regard to tax-saving strategies on 401k withdrawals, there are no short-cuts or exceptions like there was for the penalty section.

The best way to save money on taxes when taking distributions is to be strategic.

If the expense you are withdrawing for is something that can be planned ahead of time, determine your current tax bracket, figure out how much you’ll need at that future date, and withdraw slowly over time (how much you withdraw depends on how soon you’ll need it).

For example, if you are in the 22% tax bracket, are $10,000 from going into the next bracket, and need $40,000 for a down payment in 4 years, then withdraw just under $10k each year.

This assumes that your income and tax bracket will stay the same.

Another way to go about it is to utilize Roth conversions. If the intention is to minimize or eliminate your tax liability for retirement, do a Roth conversion every year. Just be mindful of where you are in your current bracket, so you aren’t bumped into the next one.

In this example, however, it can be counter-intuitive because in most cases, your tax bracket in retirement is lower than it was while you are working. This is commonsense, though. You’re making less, so logically you would be in a lower bracket.

With regard to taxes, it comes down to math. If you need to withdraw from your 401k, crunch the numbers and figure out how you can do that while limiting your tax exposure.

Related reading:

How to Save Money Effectively

Business Retirement Plan Guide

*Be advised – 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

Best Gold IRA Companies of 2019

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Source: Pexels.Com

A gold IRA (individual retirement account) comes with more costly fees as compared to a traditional IRA. While traditional IRA invests solely in bonds, mutual funds, and stocks, a gold IRA serves as a good hedge against debilitating inflation focused in a single asset class. It’s a self-directed IRA that involves investing in physical gold and other precious metals. 

Gold IRA Is A Growing Trend

There’s no doubt about the popularity of gold IRAs today. This retirement investment appeals to a lot of investors that want to diversify their retirement portfolio. The main reason for this is because gold prices move in the opposite direction of traditional assets, like paper bills. 

Adding IRA to your investment portfolio balances the risks involved over a long-term period, making it a smart investment. As evidenced by historical data, gold and precious metals are depleting, and their value is getting higher as the years go by. While paper assets decline, gold remains strong. 

Rollover Your Retirement Funds to Gold and Silver

Investing in an IRA would involve finding a custodian or trustee and an approved depository. It involves buying approved gold and other precious metals, then transfer them to the depository so your custodian can account for them. 

Investing your retirement funds into gold and silver is a smart decision. However, it’s a tough decision, so you have to ensure that the gold IRA rollover is done correctly. Secure your future by working with a reputable gold IRA company. 

That being said, here are the important qualities to look for in a gold IRA company: 

  • Impressive reputation: Choose an IPA company with years of experience that reflects their expertise and good trust rating. 
  • Low minimum investment: Find an IRA company offering flexible investment options, such as low minimum investment and flat fees.
  • Exceptional customer service: Choose a company known for top-notch customer service.

Best Gold IRA Companies

Birch Gold

Birch Gold offers different types of coins and items for customers. Its customers may acquire items such as American Gold Buffalo uncirculated coins. Birch Gold Gold IRA account holders are able to purchase gold, silver, palladium, and platinum.

The organization has been operating since 2003, setting its pace as a dealer of physical precious metals in the US. It has a team of wealth managers, commodity brokers, and financial advisors to support customers in their investment decisions.

Goldco

Goldco helps its customers to set up a gold IRA to protect their investments and prepare for retirement. Account holders with Goldco need to adhere to minimum purity standards set by the IRS. Gold must be at least .995 pure while silver must be .999 pure, and platinum .9995 pure.

Goldco promises to keep precious metals in secure depositories that are licensed and insured. Representatives from Goldco may contact an individual to help them get their account set up and funds transferred.

Noble Gold

Noble Gold is known for its strong emphasis on honesty, penchant for client rapport, and its commitment to providing expertise on precious metal investments. It is on a mission to preserve wealth.

Noble Gold is the first and only custodian-approved gold dealer storing in the new Texas depository. The depository is the third IRS-approved gold IRA rollover depository in the US. Only clients of Noble Gold have access to it.

JM Bullion

JM Bullion likes to keep its net wide, making its best efforts to supply a wide variety of precious metals. It helps customers to invest in such metals for the purpose of enhancing their IRAs.

JM Bullion offers discounts and sales for customers, giving them a chance to set up accounts and make purchases at lower costs. The organization processes 30,000 transactions per month from its headquarters in Dallas.

Lear Capital

Lear Capital has shown time and time again why it is considered a leader in the gold IRA industry. It has spent over two decades creating stellar customer experiences for investors in precious metals. Market Business News confirms the good reviews which customers have for Lear.

In 2019, Lear Capital continued to set the pace for its industry with over $3 billion in investments in precious metals. Its wildlife series of gold and silver coins has taken the markets by storm, peaking the interest of both new and veteran precious metal buyers. In September, 2019 Lear Capital reported a year on year increase in the demand for its wildlife card series of gold and silver coins.

Just Entering The Workforce? Let’s Talk About Retirement

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Can you remember the first day you worked and earned money? It might have been babysitting for your neighbor’s kids or a retail job at the local mall. As a kid, you might have imagined your parents going to work as something that just happened. You didn’t think of the financial ramifications or why going to work was important.

The older you got, the more likely you were to start seeing the value of money. Want to go to the movie with your friends? Want to purchase a new video game? All those things cost money.

So, you got a job and chances are, you weren’t the best saver. Money was for activities and fun.

But now that you’re entering the real workforce, there are lots of other things your money is going to such as rent, groceries, utilities, and retirement.

Retirement? But you just started working!

Even though you might be 40+ years from retiring, it’s never too early to start thinking about the day when you hang it up. Below, we have some tips and questions you should be asking yourself and those around you when it comes to your retirement.

Does Your Work Have Retirement Benefits?

While a pension was the norm for your grandparents and maybe even your parents, roughly just 54% of businesses these days offer pension plans for their employees. While that may seem like a solid number, the financial crisis of 2009 put a real dent in those numbers and they have been slow to recover.

While your work may not offer a pension, they may offer other benefits like a 401(k) or a 401(a). 401(a) plans are typically offered by government or nonprofit institutions and participation in these plans is often mandatory. Contributions are determined by the employer and can be either pre or post-tax.

401(k) plans are the opposite. They are more popular in the private sector, don’t have a contribution limit, and participation is not mandatory (although it might be).

Contribution is pretty simple, that you take X amount of money out of your paycheck and put it towards these plans each month. Money accrues and grows over time.

Let’s say you need the money, can you take it? Of course, it’s your money but it comes at a cost. The IRS will take a 20% as a penalty for early withdrawal. There are certain stipulations to withdraw money without the penalty, but they are never guaranteed.

Your Personal Savings

Hopefully, you aren’t living paycheck to paycheck and you’re putting away a certain amount of money each month. That could be saved for an emergency or saving up to make a big purchase.

It’s important to set up a personal savings plan because that money could be put into an individual retirement account (more on that later).

Budgeting is boring but highly necessary. Whatever you’re putting away each month should be treated like your 401(a) or 401(k). It should be untouchable. Make sure to take a certain percentage of your savings and plan to put that towards your retirement.

Individual Retirement Accounts

You might have seen this written as IRA and they are pretty common. The idea is that you yourself put money into a non-Roth or Roth IRA each year (up to $5,500 maximum) and that money is invested.

Many people seek out the advice of financial planners to help them plan a strategy for their IRA. The biggest difference between the two lies within the taxes.

Traditional IRAs mean your contributions are taxed in the year they are made. With a Roth IRA, you’re not going to be taxed when you start making withdrawals.

It’s important to note that not everyone is eligible to contribute to a Roth IRA and access can be restricted if you are using a 401(k).

The best thing to do is to meet with a financial planner and discuss your options. Ask your parents or others who might have a contact they can set you up with. They can help you do much more than just manage your retirement, but help manage your entire portfolio as well and give tips on sound money management policies.

Even though it may seem silly, it’s never too early to start thinking about your retirement.

Image source: Flickr.

Our New Low(er) Interest Rate Environment

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With the talk of interest rates and recession in the headlines, I figured it was a good time to check-in, and give a little update on interest rates and how lowering them can impact the economy, issuers, and investors.

Why is the FED cutting?

Basically, the FED is cutting to extend the current economic expansion we are in.

The fundamental reason behind that is lower interest rates encourage corporations and consumers to spend more.

For two reasons.

One, they get paid very little, in interest, to put their money in the bank. And two, they are able to borrow money at lower rates.

Current income needs

People who need income, retirees, for example, invest their money in income-producing securities. Often times, those securities are fixed income instruments, like bonds.

Bonds pay interest on a semi-annual basis. The higher the credit quality of the issuer (company or government entity) the lower the payout. The inverse is true for a low credit quality issuer.

It’s the ever-present adage in investing, more risk equals more potential for reward.

When interest rates continue to creep lower, then those people start to make different choices.

What people are doing now

People are getting paid less, in interest, to invest in high-quality debt issuers, so they’re getting riskier. Meaning, they are investing that money with low credit quality companies and/or government entities.

Their risk of not receiving interest payments and getting their principal (the initial investment) back goes up.

The FEDs tool kit

I’ve touched on this point a few times in the past, but I’m going to hammer it home.

The Federal Reserve, essentially, has two tools. Lowering interest rates and buying Treasuries. Lowering interest rates promotes spending and buying Treasuries provides liquidity.

Because they are lowering interest rates during an expansion (whether we are still in one or not is debatable, but let’s say we are for the sake of argument), they are, effectively, removing the number of tools they have available.

When the next recession comes, my fear is they won’t be able to do enough to help us out of it.

Corporate debt

Currently, the amount of corporate debt in the market is the largest in history. Additionally, the amount of debt that’s rated BBB is also the highest in history.

BBB is the last rung on the investment-grade scale. Investment grade is anything BBB and above.

That’s a problem for basically one reason. When a BBB rated issuer gets downgraded (to BB) they are classified as junk (high-yield). When that happens, they need to tighten up their debt and improve their balance sheet. This means less borrowing and less spending.

It’s a dynamic that feeds itself. The issuer is downgraded, they spend less, GDP gets weaker, more corporations follow suit, and here comes the recession.

Investors

Once the corporate (high-yield) debt pops, issuers of debt will have trouble meeting their obligations. They’ll start to default, and their investors will be left high and dry.

Conclusion

This post is not intended to scare people, it’s to inform.

One last point. Because interest rates have been so low for so long, there are economists/academics that think the lowering of interest rates won’t actually help.

Related Reading:

Interest Rates And Trade

What Is A Bond?

Why Do Interest Rates Matter?

 

 

*The opinions and forecasts expressed are those of the author, and may not actually come to pass. This information is subject to change at any time, based on market and other conditions and should not be construed as a recommendation of any specific security or investment plan. Past performance does not guarantee future results.

Why You Should Absolutely Retire With Gold

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Retirement planning is a complex process, and there isn’t one single, right strategy for guaranteed retirement success. Gold is an attractive asset to throw into the mix, and the closer you get to retirement, the more important having a hard asset with gold’s qualities will be.

There is a wide range of opinions when it comes to how much gold you should own by retirement. Between 5 to 20% of your portfolio could reasonably be invested in precious metals, depending on its size, your growth needs, your age, and how close to your retirement you are. There are some great reasons why gold should absolutely be part of your retirement savings, and if it isn’t already, find out where to buy gold online and make it part of your portfolio now.

High Liquidity

For an investment asset, it is highly liquid, possibly second only to cash. No commodity, besides maybe silver, enjoys the liquidity of gold. One of the problems with over-exposure to stocks or real estate is trying to sell it. If the market is bad, you may have to wait a long time to sell or you may be forced to sell at a steep loss. By comparison, gold is as close to money as you can get without taking on the risk of paper currency. There’s always a market for bullion.

Low-Risk Funds

The closer you get to retirement, the lower your risk tolerance. Stocks are some of the highest-risk investments you can get. They provide the highest growth rates, but could correct or crash at any time. When you want to retire, you need your assets to be worth what you were planning them to be worth. Gold provides stability of value, allowing you to draw on your assets when you need them.

Protect Against Inflation

If low-risk and high liquidity are important, why not keep your retirement savings in cash? Inflation will erode the purchasing power of your savings. Your retirement could last 20-30 years or even longer. At an average 2% inflation per year, your savings would lose 54% of their purchasing power over 20 years.

Gold prices rise against inflation. Investors regularly use the metal to avoid the erosion of value of paper currency, without taking on the risks of the stock market.

Leave an Inheritance

Many parents don’t just want to retire comfortably, they also want to leave something to their children and grandchildren. An inheritance may not be something you want to risk on the stock markets or committed in bonds, especially since they will have to pay an inheritance tax, even if you bought the investments as part of a retirement savings plan.

Leaving gold coins allows your family to decide what’s best for them. When you inherit gold, you may want to keep it or sell it, depending on whether you:

  • Already have retirement savings and want to keep bullion
  • Want to re-invest the money in stocks and more diverse investments
  • Use the proceeds to become debt-free
  • Use the proceeds to create an emergency fund

Gold coins and bars can help you retire comfortably and confidently. Prepare today with bullion investments.

Different Ways To Think About Money

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Your money philosophy and how you think about your finances make a big difference in the decisions you make.

Whether you’re just starting your financial journey or you’re well into it, it’s a good idea to take a step back and define that philosophy.

Money is a tool

Sure, there are monetary goals you would like to achieve. For example, $1 million nest egg has long been touted as the number you need to hit for a comfortable retirement, but hitting, somewhat, arbitrary numbers aren’t everything.

Money is a tool. If used properly, you really can achieve financial success. Taking the money you’ve saved and putting it to work for you is a very simple, yet effective way to use it.

Another monetary tool is a credit card. Credit cards offer a variety of reward programs, like travel miles, cashback, among others. Additionally, it enables you to build and strengthen your credit report.

It is important, however, that if you are using a credit card, you must do so responsibly. Accumulating credit card debt can really set you back, financially.

Related reading: A Deep Dive Into Credit Cards

Focus on the solution, not the problem

Often times, we focus too much on the issues with our finances. I have too much debt, I have too little saved for retirement, or my expenses are killing my ability to save.

Instead of focusing on the problem, focus on what can be done to fix it.

If you have too much debt, develop a plan to pay it down. If your retirement savings are low, figure out how you can increase your savings rate. Expenses hurting your ability to save, cut your expenses.

“Whatever the problem, be part of the solution. Don’t just sit around raising questions and pointing out obstacles.” Tina Fey

Related reading: How To Cut Spending

Money using emotional bandwidth

It is true that money is relatively important. I say relatively to try and redirect to my first point when I mentioned that money is to be used as a tool.

It affords you food to eat, clothes to wear, and a place to live, among other things. If your basic needs are met and future goals are being worked towards, you have to try and stop worrying that you don’t have enough.

This is extremely challenging to do because we, as a society, are so fixated on money and material items that money can buy. It also doesn’t help that comparing ourselves to others is essentially baked into our DNA.

Believe me, I know that learning to stop worrying is incredibly difficult, but retraining your brain to view your finances differently can be extremely liberating.

Related reading: The Psychology Of Money

Think long-term

To be a successful investor or to be able to financially plan effectively, you have to think long term.

The market is going to have its ups and downs. As an investor, it’s important to ride out those down periods and continue to invest. If you have 15+ years until you need that money, you should be able to recoup your losses.

With regard to saving, I typically take the “bucket” approach. I have three buckets, short-term, medium-term, and long-term. Be advised: the following is how I define these time horizons.

  • The short-term bucket is for items under 5 years away. For example, when I want certain debts paid off or a down payment for a house.
  • Medium-term is anything 5-15 years away. The main one in this category is my son’s college savings.
  • Long-term is retirement savings, exclusively.

Related reading: How To Make Long-Term Investing Decisions

Buying experiences versus buying stuff

Money to a certain extent can buy happiness. As long as it’s being spent on experiences rather than stuff.

Memories with family and friends, visiting different destinations and attractions are the things we’ll cherish most.

Stuff breaks and toys are outgrown. What people won’t forget, however, is the time you spent with them.

Make that a priority. I know, as a fairly new parent (my son is almost 2), that I am constantly aware of how finite time is and that I need to make the most of those moments I spend with him.

The way you think about money pulls weight in how you use it. When creating a financial plan, I would prioritize figuring that out. How you think can lead to how you act.

The Questions You Need To Ask Yourself

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Questions are a fantastic way to understand things better. They are vitally important in our everyday lives.

One area where I think they are underutilized is personal finance.

You NEED to ask yourself questions on the regular so you can discern if you are doing the right things and taking the correct steps for YOU.

In the following article, we’re going to explore the various questions you need to ask yourself in order to be financially effective.

What is my goal with money?

This is a fairly general question, so we’ll break it down into three buckets: short term, medium-term, and long term.

  • Short-term (Under 2 years) – If you are saving for a short-term goal, what is it? A vacation? Down payment on a house? No matter the goal, that money will be used soon so the best place for it is in a savings account.
  • Medium-term (2-10 years) – This could be anything from a down payment for a house to saving for your kids’ college education. What you do in the interim depends on when you’ll need it and the goal you are saving for. If it’s less than 5 years, I’d still recommend a savings account or short-term bonds. Something that can earn you a little interest, but is still relatively safe. That 5-10 year period depends on the goal. If there’s a particular dollar amount you need to it (down payment, for instance) I’d go no more than moderately aggressive. You want to earn a little, but you don’t want that saved amount to go under what you need.
  • Long-term (10+ years) – Most often, a goal that’s over 10 years away can be invested in the stock market, though the percentage of your assets that’s actually in the market depends on the risks you are willing to take and when you need to access those funds.

Related reading: Financial planning for all ages

How much am I willing to lose before I sell?

I almost always propose this question to new clients because it gives me a good understanding of their risk tolerance.

If they are only comfortable with losing 10 percent of their portfolio, they’ll be invested pretty conservatively.

On the other hand, if they can tolerate a 50 percent drawdown and not bat an eye, then we can “put the pedal to the floor”, excuse the expression.

Determine how much of a loss you can stomach and that will give you a good idea of how to allocate your assets.

Related reading: Are you taking on too much investment risk?

How long will it take to adjust my allocations?

Questions regarding asset allocation, typically, pertain to risk and time horizon. For example, if you start saving for retirement when you’re 25, the majority of your portfolio will be in equities (stocks).

This allocation, generally speaking, is suitable for you for a couple of decades. At which point, you’ll probably (again, speaking generally) want to shift a little more of your portfolio to bonds.

Your allocation will, and should, shift over time, and once you get within a few years of your goal, the primary objective of your portfolio becomes capital preservation.

Related reading: Why asset allocation matters

Are my actions suitable for my current financial situation?

Financial situation takes everything into consideration (income, debt, spending, savings, etc.) Actions can be anything related to those items.

Specifically what I’m talking about is how much you are saving, how much you are spending, and how much $ you’ve dedicated to paying down debt.

If you have a sizeable amount of debt and not a whole lot of savings, it’s time to cut your spending. Conversely, if you’ve paid down your debt and are ahead of the game with your savings, it would be alright if you loosened up a little and enjoy yourself.

Like everything in life, your personal finances are a delicate balancing act, and when you ask questions, you can figure out how to shift your priorities.

How is my money being spent?

Kind of related to the last point. Tracking your spending to find out exactly where all of your dollars are going is an important step.

Another recommendation I usually make is to create a financial playbook. Here’s a brief outline of how I create a financial playbook:

  1. Big picture – List all assets and liabilities. How much you have saved and how much debt you have.
  2. List your necessary expenses – These are things that you have to pay (rent, utilities, transportation, food, minimum debt payments, etc.)
  3. List your monthly income
  4. Total up your monthly necessary expenses and your monthly income and see how much you have leftover. What’s leftover will help you discern what to do with it.
  5. I would list another line item for “fun,” though I would keep it to a minimum.
  6. What’s left after fun should be saved and used on debt.

Related reading: How to cut your spending

Conclusion

As I said in the beginning, questions help us understand the world, and ourselves, better.

Having a better grasp on why and when we make certain changes or do certain things is a must if we are to be more effective in managing our finances.

Your Wealth: What You Shouldn’t Do

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Establish an emergency fund, pay down debt, save for retirement, and grow your wealth! Much of your financial life is focused on the things you should do.

However, what I think to be more important are the things you shouldn’t do!

Educational Debt

There’s been a lot of literature/news over the last few years about how much of a problem student loan debt is. As of 2018, total student loan debt was $1.47 trillion. With a T! (Source)

That said, here are some things you should avoid.

  • Taking on too much – Some degrees/professions require a lot of schooling, which can lead to large amounts of student loan debt. And I don’t mean to speak ill of any degrees/professions, but if your desired career requires a “basic” 4-year degree, it’s probably best to find an in-state university to cut costs. Better yet, start at a local 2-year university or tech school until your Gen. Eds. are complete, then transfer.
  • Not having a plan for after – I think this is a common fear for Millennials and Gen Z, but you have so much time to figure things out. Don’t just go to college to get a degree. If you need time, take time. Once you figure out what you want, determine what you need to do to get there.
  • Not researching options – There are SO many student loan options. Depending on what type of loan you choose (private or public), you could have a wide range of payback methodologies. I wrote about student loan options and payback options in two previous posts. Check them out!

Credit cards

There are two BIG problems with credit cards. People who use them irresponsibly and people who don’t use them at all.

  • Using irresponsibly – This one pretty much speaks for itself. This pertains to people who spend way more than they ought to. A good rule of thumb is to only buy something using a credit card if you have the funds readily available to pay the balance off. Don’t have the money, don’t put it on the card. Doing so will cost you in interest and can really set you back.
  • Not using at all – Better than the first point, but still not great. Using a credit card can help your financial situation if you use it correctly. Most of them have rewards of some sort. It’s another credit account on your report. Charging and paying off right away establishes a good payment history. All good things for your credit score.

No emergency fund

Establishing an emergency fund is Step 1. If you don’t have money set aside for unexpected expenses, you’ll have to charge it. This leads to the point above about irresponsible use.

Save $1,000 for emergencies, turn your attention to high-interest debt (credit cards), and then shift your focus back to your emergency fund once that debt is paid off.

Spending

  • Paying bills late – Not paying your bills on time, especially ones shown on your credit report is a big mistake. The #1 factor in calculating your credit score is payment history. Paying ONE bill late will knock your score down. Just one. Don’t do it.
  • Spending too much – (See irresponsible credit card use) This is especially harmful if you frivolously spend BEFORE taking care of important “budget items”. Things like saving, debt payments, and bills.
  • Being too frugal – Though frugality is helpful in building wealth, it can also hurt you. There comes a point when you are too frugal. A vital life skill is doing things in moderation. If you pinch pennies and forego rewarding yourself, you run the risk of breaking the bank on a “bender”.

Investing

  • Waiting – I cannot stress enough the importance of investing early. What helps you make the most of your retirement savings is compound interest. The more time you have to invest, the more compound interest works in your favor.
  • Panic selling – This is a timely point since the market dropped almost 5 percent in the last week. Selling out of fear is always bad. More often than not, when you “panic sell,” you’ve already experienced the majority of the drawdown. Now, this depends on your particular situation, but it behooves you to stay invested during that period.
  • Using generalities when setting up an investment plan – Your investment plan needs to reflect your goals, risk tolerance, time horizon, and behavior. Using generalities is good for someone who writes about this stuff, but it’s not good for YOU. Your plan has to be tailored to YOU.

Life and Wealth

  • Sticking with a job you hate – Sometimes money and comfort makes us do things we don’t want to do. Being unhappy at your job is not worth it. It’s important, however, to thoroughly think through this decision. Quitting is tough, but if your family counts on you for income, you need to have a plan in place before you jump ship.
  • Comparing yourself to others – I’m going to encourage you to develop a new mindset because society taught us that wealth looks like fancy cars and big houses. I want you to think about stealth wealth. It’s probably my most favorite phrase/term. Someone with stealth wealth lives within their means. They live in a modest home, drive a car for transportation only, but saves more than the average person. They don’t “look” wealthy, but their retirement account says otherwise.

Further reading:

What it takes to be a successful investor

How to pay off credit card debt

Creating a financial plan you can stick to