Financial Anxiety Part 4

Over that last few weeks we have looked at the different financial anxieties Americans experience. We have talked about creating a budget and maximizing your savings to alleviate the fear of not being ready for emergencies. And, we have talked about investing your money to ensure there is enough to sustain you throughout retirement. Now, we are going to look at your finances, specifically reviewing your finances.

As you get older, your life changes. You may have kids, move several times, start new jobs, etc. Everything your situation changes you need to take a look at your finances to see if they still align with your goals. While we said creating a budget and sticking to it was the most important part of financial security, reviewing your finances periodically would have to come in a close second.

When you created a budget, you also created financial goals. If you want to stay focused on your goals and reach your goals, you will have to review your finances on a regular basis to make sure you are still on track. According to the Northwest Mutual study, 82% of Americans believe that finances should be reviewed every six months, but 62% surveyed stated they did not have a financial advisor of any kind. This means that many Americans are going years without reviewing their finances.

Since finances change over time, this is distressing and is a source of some of the anxiety. When you review your finances you are insuring that you are still headed in the direction you need to be going. You may need to change some numbers, such as what is going into retirement or savings.

One option to keep everything in line is to have a financial advisor that reviews your finances for you at least once a year. This does not mean you lose control of your finances, but it gives you someone to get ideas from or talk over investment opportunities.

Another option is to rely on friends or family to help keep the finances on track. They can offer suggestions or guidance on what to invest and maybe even where to invest.

American’s financial fears are not going to disappear overnight, but with some guidance and help from everyone around them they can be reduces over time. All it takes is planning, commitment, and the right advice.

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Financial Anxiety Part 3

Last week we explored creating a budget to maximize your savings. This week we are looking at another step that helps reduce financial anxiety. Another worry that was in the top five was running out of money during retirement and becoming a financial burden. Investing in the right assets and using the right tools can go a long way in alleviating those financial worries. Let’s look at some strategies that will help make sure the money last for as long as you need it to last.

Being able to create wealth and maintain it for the long term has been statistically linked to investing in the stock market. While this may not be for everyone, it is a good option to build and create wealth that last for the long term. The stock market has about a 7% return rate annually which is greater than savings accounts and savings bonds. If you reinvest the dividends into more stock, then you are starting to make your money work for you. If the stock market maintains a 7% return rate annually, then it is more than the inflation rate, so you will come out ahead. This is good news for people wanting to create wealth to sustain them throughout retirement.

In a study by JPMorgan Chase, they confirmed that the buy-and-hold strategy was showing the best value for most investors. In their study if an investor purchased stock in the S & P 500 index in January 1995 and held it thought December 2014 they would have netted 555% returns, despite this going through the both the dot-com bubble and the Great Recession. In contrast, if they were trading this stock and missed more than 30 of the best trading days out of roughly 5000, then they would not have made any gains at all. Investing in good stock and hanging on to it is better for the average American than trying to be a trader on Wall Street.

There are a couple ways to take advantage of the gains provided by investing in stocks. A great place to start is a Traditional IRA and employer sponsored 401(k)s both defer taxes until you begin to withdrawal in retirement. This is a great choice for many people who want to go the brokerage account to grow their nest egg while deferring their tax liability. An even better choice can be the Roth IRA. The Roth IRA allows any gains made within the investment are completely tax free for life. It also offers more flexibility since there are no minimum required distributions and no age-based contributions.

In the next part we will examine the final component that can help relieve financial anxiety.

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Financial Anxiety Part 2

Last week we talked about financial anxieties of 85% of Americans. With over three-quarters of Americans expressing worry over financial well-being, it is important to understand what causes it and if there are ways to reduce the stress. Depending on your financial situation, some of these suggestions may be easier than other, but they are worth talking about and could set you up for financial security if done right.

The first way to reduce stress is to build an emergency fund. Since the number one and two fears was not being able to pay for an emergency or unexpected medical expenses, having an emergency savings is vital to the financial well-being of everyone. Building an emergency savings is probably easier said than done, but to ease the anxiety, Americans need to work on optimizing their savings to build that emergency fund.

Building an emergency fund is not easy for everyone because if requires sacrifice and creating the dreaded “B” word (a budget). Only one-third of American households keep a detailed budget. By creating a detailed budget, you build a financial road map for you and your family. Since two-thirds of American don’t understand cash flow, so that means they don’t understand how they use their money. The way to start creating a budget is to examine your expenses and track them over a month. Find out where your money goes. This is the easy part because there are many different software and apps that can help you do this. All you have to do is plug in your numbers and it will help you create a budget.

After the budget is made and you understand where your money is going, the hard part is committing to the budget and holding yourself accountable. Accountability is the most important component to keeping a budget. All the promises and plans mean nothing if you cannot keep to your budget.

Finally, set a goal for your savings. Determine how much you can afford to put away and stick to that amount. Most employers allow this to be deducted from your paycheck. Take advantage of this because chances are if you don’t see the money, then you don’t remember it is there until you need it.

Set a goal for yourself and stick to the SMART (Smart, Measurable, Attainable, Realistic, and Timely) goal. You need to measure your progress toward your goal. Share the goal with your family or friends so they can help keep you accountable.

Next week we will look at another way to reduce your anxiety with choosing the right assets and tools to advance your financial health.

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Financial Fears Part 1

Americans all over the nation are worrying about their finances and their financial well-being. Nobody ever told us it would be hard to make ends meet and preparing for retirement. If it was easy we all would have our fantasy house in the mountains or on the beach and the nation would not be facing a wide spread epidemic of poverty.

So what are our biggest fears? According to a study conducted by Northwestern Mutual, there are many aspects to financial health that are worrying Americans. With almost 85% of Americans reporting they have financial anxiety that affect their heath, 70% reporting it affects their home life, and 51% reporting it affect their social life, this is a problem that is not going away anytime soon. Many of their fears are justified, but there are ways to help. Over the next few weeks we will be looking at ways to address these concerns, so let’s look at them and see if there is any way to alleviate them. The following is the list of fears listed from greatest to least (responders were allowed to choose more than one):

  1. Having an unplanned emergency
  2. Having an unplanned medical expense due to illness
  3. Having insufficient saving to retire
  4. Outliving retirement savings
  5. Becoming a financial burden
  6. An inability to afford health care
  7. Losing my job
  8. Identity theft/theft
  9. Extended unemployment
  10. Death/Loss of primary breadwinner
  11. Havinf poor credit
  12. Having to claim bankruptcy
  13. Becoming a victim of a financial scam

All these fears are legitimate and there are ways to alleviate them. With 36% of Americans reporting an increase in financial anxiety over the last three years, this has become an epidemic. In the next few weeks we will look at ways to reduce your financial anxiety.

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Excelling at Networking

In today’s society everything is about networking. I know you’ve heard of it, but what does it mean and how can you excel at it. How can it make you better at your job? Networking is defined by Google as “interacting with other people to exchange information and develop contacts, especially to further one’s career.” Even though we network all the time, is there a right way to accomplish this? The answer is yes. Just like everything else there are some guidelines and rules that can make you networking more successful. The goal is to be confident, so let’s look at a few ways we can help ourselves be better networkers.

  1. Adopt A Confident Posture. When your mother told you to stand up straight she was not just trying to give you good posture, she was trying to give you confidence. People who stand straight with their shoulders back and feet aligned with their hips appear open and receptive. It is more comfortable. People find they want to talk to you and want to be around you more. Make sure your tone of voice and eye contact follow up with the good posture. Everything about you needs to speak of confidence.
  2. Ask OpenEnded Questions. The conversation will quickly die if everything can be answered with a yes or no. Ask questions that can be turned into a conversation. Shine the light on other people by asking them questions about themselves. They will feel important. Do not be the guy that just talks about himself. It is annoying. Practice asking who, what, where, when, why and how questions. Prepare answers to the standard questions, and if you are asked a one-answer question find a way to expand you answer.
  3. Wear Something Distinctive. There are other ways to begin a conversation. Having something distinctive to wear, such a jewelry, a pin that supports a charity, or even a flower can help draw people in making it easier to start a conversation. It also gives them something to remember you by. Make sure you have a story to go along with it to make it stand out more. It can also reveal something about your interest and build a rapport with people.
  4. Know When and How to Extract Yourself from a Conversation. The goal when networking, especially at an event, is to meet as many people as possible. So it is important not to get trapped with just one person. You need to move on, but make sure you are polite about leaving. You can ask to call them later to finish the conversation, or have them make an appointment if they are wanting advice. Make sure to take their information and politely leave to meet someone else.
  5. Follow Up. This is the most important step in making networking successful. The first meeting is just a start. Send them a note, give them a call, send them what you promised, etc. The following gives the opportunity to continue to build the relationship.
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No Emergency Savings

In a recent study, it was revealed that 66 million US adults have no money saved in an emergency fund. This mean that we are unprepared for unplanned expenses.

When we look at all the different ages represented the survey finds that the Generation X have the worst time saving money. One-third of people ages 35-51 have nothing in savings. This compares to almost 20% of all the other ages 18 and above. So how can this be?

Most people over the age of 25 generally have a saving of at least six months, but during the age of 35-51 is usually when the need to use the emergency fund catches up with you. Most Gen Xer save money when they can but they have most likely used it to pay for the fridge that broke down or the car that needs to be repaired. Some may have even been laid off and are using the money to pay for bills.

This is a common experience across America. But you know that growing a savings take time, and Americans spend money as fast as it comes in during the child rearing and home buying stage of life. Families are not in the habit of saving and whatever you do manage to save is wiped out almost as soon as it is saved.

So what is the answer. Around 47% of Americans say they could not cover an emergency of $400, or would cover it by selling something or borrowing money. We all know that it is important to have at least 6 months of expenses saved for an emergency fund. Only 28% have saved this much and it is an improvement over last year’s 22%.

How do we get there? We form a habit. Saving is a habit and must come a little at a time. It is recommended to put away $20 a paycheck into a savings account. Don’t stress your cash flow, but dsave what you can.

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Tips for Paying Off Students Loans

You have now graduated and the time is coming when you must pay back your students loans. These debts can be overwhelming and enormous to recent graduates. In 2015, the average college student graduates with $35,000 in student loan debt. That is as much as buying a car or a healthy down payment on a home. So how do you pay them off and not eat ramen noodles for the next ten years? That is a good question.

Anymore when you take out a student loan your probably went through some type of financial training. I know most don’t pay attention to this at the time because paying back loans is so far away, but it is really important to pay attention. The following are tips to help make paying back loans easier.

  1. Use Online Financial Tools: Online financial tools such as Feed the Pig or 360 Degree of Financial Literacy are committed to helping young people get control of their finances. Many even go beyond just paying pack loans and can even assist in creating monthly budgets that coincides with your current life stage.
  2. Create A Budget: This may seem like a given, but it is honestly one of the easiest ways to get finances under control. There are many apps and budget ideas to keep you on track. Do your research and find the one that works for you. Some good ones are Mint and YNAB (You Need a Budget). Mint is free and YNAB is free for students. Prioritize your needs and set the budget to accommodate them. Pay extra when you can towards your highest interest loan. Keep an eye on your money.
  3. Seek Assistance: If you can’t do it on your own, check into financial resources such as financial counseling, which are available on most campuses. Look at employers and see if they offer incentives that help pay off loans. Debt consolidation is another option. This can make it even more overwhelming, but it may work for you. Keep your options open.
  4. Make Timely Payments: By making timely payments you keep your credit score high, which in turn will open opportunities for you in the future. This could include lower car payments, a bigger line of credit at a bank or in a home loan. Good credit should never be underrated.
  5. Find Creative Ways to Save: If you can find ways to save money then do it. Coupons, local deals, renegotiate payments, or see if payments can be lowered. If you can save yourself money, then you can put more money towards paying off loans or saving it for another day.
  6. Focus On the Whole Picture: Loans are just one aspect of your finances. It is important to keep an eye on the future and get comfortable with the fact that this process will take time. There is no easy fix and it cannot be expected to go away overnight.
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Beware of Scams

In the wake of the Orlando shooting, we once again think of all the possibilities to give, but beware of the scams. Inevitably someone will try to take advantage of people’s generosity. These scams may involve phone, social media, email, or in-person solicitations. The following are tips to keep yourself safe while helping where you can.

  • Donate to Recognized Charities: Beware of charities with similar names to the familiar or nationally known charities. Websites can look legitimate or sound respectable, but are far from it. The IRS has a list of qualified charities that can help you decide which one you want to donate to. Go to https://www.irs.gov/charities-non-profits/search-for-charities to find legitimate charities.
  • Don’t Give Personal Information: A legitimate charity will not ask for your social security number, passwords to accounts, or other personal identifying information. The legitimate charities allow you donate through secure websites.
  • Don’t give or send cash: Only send check or use credit cards. This provides documentation and can be tracked if necessary. Cash can get lost and has no way of being tracked.
  • Bogus Website: These website by ask for funds for victims and mimic legitimate websites. There may go as far as saying they are affiliated with the legitimate charities.
  • Scammers Often Send Emails: Emails can lead to the bogus websites. They may look legitimate, but you need to check them out before you decide to send money. If you receive an email or phone call you believe to be a scam you can report it to the IRS by going to https://www.irs.gov/uac/report-phishing.

Don’t fall victim to peoples need to get money for free. Be cautious, but don’t lose your ability for compassion and willingness to help.

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Is There a Monster Lurking?

Retirement is always something workers struggle with most of their working career. We are three decades into the 401(k) era and still millions of works struggle to make the most of their investment. According to new research only 32% of workers in the us believe they are on track for retirement.  So what about the other 68%?

In 1980, Ted Benna, a benefits consultant, designed a savings plan that was meant to supplement traditional pensions and savings. 401(k) retirement savings plans quickly dominated the retirement arena becoming the retirement funding vehicle for most working Americans. Americans have invested $3 trillion over the last few decades to 401(k)s. While in the beginning these plans were complicated and heavily laden with fee, over the year the fees have significantly lowered and through features like automatic enrollment and escalation of contributions, the investing mistakes have minimized. Many experts would like to make the 401(k) and other retirement programs mandatory to help close the gap in retirement savings for everyone.

But it this possible? According to a survey from Transamerica Center for Retirement Studies, one-third of the workers in the US would like to see the government increase funding to Social Security. Many workers expect half their retirement to come from government funded programs, which have been eroding over the year making them unstable and ready for collapse anytime.

With the increasing of longevity over the past decades, people are living longer but still retiring as early as 63. This put a strain on the Social Security system. To help alleviate the strain, the minimum retirement age needs to be pushed back to 65 and the max out at 70.

Another way to help is to have employers rethink their retirement policies. There is a frustration with retirement because there has been very little financial education in their lifetime. If there was financial education available for many workers, they would understand the importance of a financial plan. Almost 755 of employees with financial plans are habitual savers, versus 18% without a financial plan.

So what are some things that can be done to help with retirement? Well, you have probably heard this before, but it is important to save. Having a savings account, or some retirement saving plan is the best. Do not rely on social security to be there for you when you retire. Plan ahead, and even if it is as little as ten dollars a week, save something. You will eventually be able to roll that money into something bigger. Have a plan. Execute that plan, and keep it going.

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Millennials in the Work Force

A Millennial is defined as a person reaching young adulthood around the year 2000. They were born between 1982 and 1994, and they most defining feature is they believe they are special. Now I’m not trying to knock millennials. Right now they make up the largest generation since baby boomer. They believe that they are highly intelligent, overachievers, and think they pay their dues quickly before getting on to that large salary. Many have been given an easy road and expect that road to continue into adulthood. But like I said, I’m not trying to knock millennials. They have a lot of good qualities, but many companies have found that the typical retention tools do not work with millennials. So how do you keep millennials in the work force and productive.

So far the biggest worry facing employers is the high level of turnover seen in millennials. In the past jobs were looked at as a way to anchor yourself to adulthood. You chose you career and found ways to advance through the ranks. Millennials see jobs in a completely different light. A job to a millennial is just a stepping stone to something bigger and better. They presume the job market has total job mobility. They focus on the proximity to friends and family, their schedule, opportunities for many different activities, etc. Because they are the focus, it is hard to retain a millennial when they are focused on something other than work.

So the next question is how to you retain a millennial? Since you cannot eliminate turnover completely among millennials, your goal should be to control the turnover among millennials. So how is this achieved? Simple, or at least the concept is. You use the prestige factor. Millennials are used to having the awards and acclamations doled out to them, so reward them with prestige and status. Give the high performers a way to shine in the spotlight, and eventually the lower performers will stick out.

The next item to check off the list to retain millennials, is to understand them as a unique and individual employee who wants or needs to be rewarded in a meaningful way. Many times it is to your benefit to work out special deals with the millennials that meet some of their more unusual needs. Other employers may not be able to replicate those rewards, and that is a card in your pocket when you are trying to retain a millennial.

You know that not all millennials will act or want to be treated this way, but for the vast majority lavishing attention on them when they are talented, skilled and motivated is the way to succeed with a millennial. You have to change your thinking and understand that all they want if to have a happy work environment. If you use this philosophy with everyone, than you can create a happy work environment that everyone flourishes in.

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