Tuesday, November 20, 2012

Celebrate Thanksgiving By Giving Back: 5 Places To Give

Matthew 25:35-40
For I was hungry and you gave me something to eat, I was thirsty and you gave me something to drink, I was a stranger and you invited me in, I needed clothes and you clothed me, I was sick and you looked after me, I was in prison and you came to visit me.’

“Then the righteous will answer him, ‘Lord, when did we see you hungry and feed you, or thirsty and give you something to drink? When did we see you a stranger and invite you in, or needing clothes and clothe you? Where did we see you sick or in prison and go to visit you?’

“The King will reply, ‘Truly I tell you, whatever you did for one of the least of these brothers and sisters of mine, you did for me.’

Celebrate Thanksgiving by giving back. 5 Places in Rutherford County, TN to give back this Thanksgiving:

Feed America First
A faith-based hunger relief organization. We collect large scale food donations from manufacturers, growers, distributors, and other charities, and then distribute that food at to some of the numerous small agencies already engaged in hunger relief in our poor communities. We currently supply about 200 agencies, most of them on a monthly basis. These agencies are on the front lines. They are children's homes and church pantries, homeless shelters and substance abuse recovery centers. Often, they are neighbors helping neighbors, and, as is common in rural America, those doing the giving hardly have any more than those who receive the help. We believe that hunger will no longer be a problem in America when we refuse to allow our neighbors to go hungry.

Good Shepard Children's Home
The Good Shepherd Children's Home is a Christian-based home for disadvantaged boys and girls facing difficult circumstances in their lives at no fault of their own. Many of the children we serve struggle with the effects of poverty, abuse or neglect and in most cases, just need stability and a little extra love and support to reach their full potential. Our goal is to provide hope and healing in a Christian environment, where kids can develop academically, physically, socially, and most important, spiritually. We strive to make each child feel safe, loved, and cared for and to provide them with a biblical perspective for life and an understanding that they are special and that God has a perfect plan for their life if they will let Him have control.

The Journey Home
The Journey Home is a Christian Outreach Center for the homeless and at-risk individuals and families in Rutherford County.  When someone comes to The Journey Home, they often are looking for a place to feel at home. Everything that a person might find in a home, our clients can find within the walls of our Outreach Center, with the exception of a place to sleep.  

Greenhouse Ministries
Greenhouse Ministries offers life transformation as volunteers make themselves available to encourage and motivate the clients, to inspire them to dream, to make better choices and needed changes in their lives, to promote wholeness, and to give back to others in the community.

A Soldiers Child
As citizens of the U.S.A., we are forever indebted to the men and women who so unselfishly protect our freedoms. It is our objective to communicate through ASC to the children left behind, that the memory of their parent will not fade away. We want them to know that there are many Americans that are forever grateful for their parent's sacrifice.

Wednesday, November 14, 2012

6 Things That Cause Couples To Fight About Money

If you and your “honey bunny” are like most couples, chances are, you argue about money sometimes. Hopefully not ALL the time! Many studies have shown that money fights are a leading cause of divorce. Here is what sparks the six most common types of arguments:

1.) Marrying Your Money. Should you merge everything you have into one joint account, or should you maintain individual accounts and open a joint one for household expenses? Many couples find that the ideal solution is some sort of blended system. They share a joint account for household finances, but each has a personal account to do with as they please. With this hybrid approach, the real decision is about how to divide the household income.
  • If you and your partner make roughly the same amount, you could contribute equally to the joint account, and then keep what’s left over in your personal accounts.
  • Some couples use a proportional system: If one partner earns 2/3's of the household income, then they contribute 2/3's to the joint account. After funding the joint account, the partners can do whatever they want with the leftovers.
  • A final option is to use the “adult allowance” system. In this case, both spouses put their entire paycheck into the joint account, and then withdraw a fixed amount into their personal accounts every month.
What’s most important is honesty and communication. Any system in which spouses are open about their money habits is a good one

2.) Dealing With Debt. Whenever debt enters the relationship, it’s good to remember that no one is perfect. The debt is not a way to keep a “scorecard” in the relationship. People in mature relationships accept that solving the debt as a team not only strengthens the relationship, but helps reduce the debt more quickly.

3.) Overspending. In many relationships, one gets labeled the “saver” and the other gets labeled the “spender.” Labels and categories never serve to make you feel closer to your spouse. They key here is to remember that you’re simply trying to avoid surprises, which a budget goes a long way toward fixing. You must both agree on how your money will be spent or you'll be in more money arguments than you can count.

4.) Bone Head Investments. Various studies show that men are more willing to take financial risk than women. It's far too common for a husband to make a poor investment decision which starts a marriage towards deterioration. However, investments are a secondary argument. The biggest issue is achieving agreement and understanding of how specific investments will be made based on your goals. Once a discussion of goals and time frames are clarified for different accounts and sums of money, it becomes much easier for couples to align themselves with common goals and objectives.

5.) Money Secrets. Let’s face it… Most of us have trouble not lying to ourselves, let alone other people. Lies about what we ate, what we spent. This is one of the fundamental challenges of a relationship, to be vulnerable and transparent in all areas (and not letting your own guilt and money secrets come to such a point they damage you and the people around you). Each must keep in mind that most relationships aren’t destroyed by one dramatic act, but a series of small, even individually inconsequential acts that chip away at your foundation of love and trust.

6.) Cash Reserves. Just like couples vary on the degree of risk they are willing to take, they also vary on the level of reserves they need to feel safe. Once a budget is clarified, issues of cash reserve savings become secondary. Discuss it, make a decision about it, then don't dip into it behind the others back.

With honesty, open communication and a willingness to look at your finances objectively, couples can avoid the top money arguments.

Thursday, November 8, 2012

Should You Move Your Old 401k to Your New Employer?

Answer: MAYBE

Moving your old 401k to your new employer’s 401k plan could be good, but like all things in financial planning… There is no cookie cutter answer.

Check out the rules with your new company.
Your old employer has no say in the matter. If you want to move the 401k, you can. But your new employer may or may not allow plan-to-plan rollovers.

You may want to keep things simple.
The advantage of the rollover to another 401k is that all of your money is in one place, and you only have one account to think about. You can also make all of your asset allocation decisions inside one account. 

What are the costs in new plan?
This one trumps the first two considerations in my opinion. The downsides of many 401ks are their exorbitant costs, and these costs can wreak havoc on your retirement goals. The cost of the mutual funds in your new 401k plan is likely to be higher than the mutual funds you could select inside your own IRA. For that reason, I like rolling over into IRAs most of the time. Check the fees on the mutual funds in your new 401k. If most of the funds have an annual expense ratio more than 1% per year, you can do better in an IRA. Ask your human resources department for their latest 401k fee disclosure

Will you be able to get diversified?
Make certain your new 401k has enough choices for you to allocate your assets the way you need to. If not, a good IRA provider offers all the choices you could possibly need—and more. Basic asset classes your new 401k should have: US Stocks (large, mid, & small), International Stocks (large and emerging markets), Fixed Income (US & foreign with a range of maturities), Real Estate, and Hard Assets/Commodities.

Don’t be a do-it-yourselfer!
You may be able to grout the tile in your shower because you watch the DIY network, but investing doesn’t work this way. Most retail investors way under-perform the market because they have no clue what they are doing. Also, most Financial Advisors are just mutual fund salespeople. They have no incentive to show you all the great commission free funds that are out there. By using a traditional Advisor, you may end worse than if you just screwed it up yourself. I suggest working with a FEE-ONLY Certified Financial Planner because they must act in your best interest, and have been trained in all aspects of financial planning.

For more about my Fee-Only Financial Planning practice, go to www.JasonQuallsCFP.com or call 615-878-2134.

Friday, November 2, 2012

10 Financial Planning Myths

1.) “I can retire when I save $X dollars.”  How do you know that? When I hear someone say that a million dollars (or any another number) is the exact amount you need to retire, it shows a lack of understanding.  First, many facets of your financial life tend to change both before and after retirement: inflation, deflation, tax rates, market returns, health care costs, family situations, etc.  The “magic number” is going to change right along with them.  What if you decide to relocate and the cost of living is different?  What if you get divorced?  What if your spouse dies?  What if your deceased spouse never updated his/her will and the estate goes to a previous spouse or children?  What if you suddenly face a serious medical condition that isn’t fully covered by your insurance?  What if you need assisted living and don’t have long-term care insurance?  What if a parent or child falls on hard times and you want to help support them financially?

2.) “Bonds are a safe investment.”  Bonds have different risks than stocks, but they still have risks.  There’s interest rate risk, inflation risk and risk of default.  As interest rates and inflation rise, bond prices fall.  That means your “principal” or amount paid when purchasing the bond will drop.  If you sell your bond to get a better interest rate, you may recognize a capital loss on the original bond.  The reverse is also true.  Your bond’s value will rise when interest rates drop, because your bond will have a higher interest rate than what can be purchased on the market. Interest rates are at historical lows, and many experts are fearful of what may be the fate of bonds in short-term.

3.) “Once you retire, you’ll spend about 25% less than when you were working.”  A recent survey done by Phoenix Wealth indicated that many people will need 100% or more of their current income in retirement.  Usually the same amount of money is just spent in different ways. Health care costs, inflation, and long-term care expenses are a few of reasons why you may need more than you think.

4.) “I only trust investing in real estate.”  Now we all know better, but a few years ago we couldn’t imagine real estate prices dropping so dramatically.  The amount of time it now takes to sell property is much longer than normal.  The biggest problem with real estate is that it is illiquid, meaning you can’t readily convert it to cash. Now that the real estate market has started to re-bound, I fear many folks will slip back into this pitfall.

5.) “You should have X% / Y% portfolio allocation when you retire.” (pick your percentages) How can anyone know this without knowing your entire financial situation?  Each investor’s risk tolerance, timeline and goals are different, as are their intentions for their future lifestyle.  The other main factor influencing an asset allocation is the amount saved.  A long-term saver can afford to take less risk, whereas a late saver may need more growth to make their savings last longer.  Other sources of income such as pensions and post-retirement employment also need to be taken into account.  There is no one size fits all.

6.) “Your tax rate will be lower in retirement.”  Have you watched the news lately? Sounds like everyone’s taxes may be going up next year. And with the debt crisis our country is facing it’s not likely that tax rates will come down anytime soon. There are some instances where you could be pay less in taxes at retirement mainly because you would no longer be paying FICA taxes. But, you’ll likely lose some itemized deductions. Most people don’t realize that there social security could be subject to taxation as well.

7.) “My financial situation is really simple and straightforward.”  You may think so, but when a qualified professional reviews it, they may see opportunities for improvement or danger zones you haven’t noticed. 

8.) “I don’t need a financial advisor. I can do it all myself. I read a lot of financial magazines and watch CNBC”  You might do a great job, but then, how do you really know for sure?  A trained professional with on-going continuing education across the spectrum of income tax planning, cash and debt management, asset allocation, investments, insurance, retirement planning and estate planning can best objectively evaluate your finances in an integrated manner.  He can look at how various aspects influence one another.  He can identify strengths and weaknesses and recommend appropriate actions to take.  Plus, all those talking heads on TV and magazines are focused on the latest hot tip.  A Certified Financial Planner® will help you design a course of action that makes sense for you for many years to come, adjusting along the way as needed.  A professional can help you focus on what counts, not on the noise.

9.) “All financial planners just want a piece of my money.”  As noted above, the financial planning process as defined by the CFP Board of Standards covers a lot more than just investment advice.  It involves a six-step process:  gather client data and goals, analyze and evaluate the client’s financial status, develop and present recommendations, implement the recommendations and monitor the results.  In addition, an unlicensed person may hold themselves out as a financial planner.  A Certified Financial Planner® practitioner must pass the CFP Board exam, continue their education requirements and uphold the standards of integrity, objectivity, competence, fairness, confidentiality, professionalism and diligence. 

10.) “I can’t afford to pay for advice.  Perhaps the reason you can’t afford financial planning is that you may not be managing your money as well as you could.  Perhaps you really need professional advice.  In the long run, those who use a Certified Financial Planner® reach their goals more often and more quickly than those who don’t.

The fact is, there are no certainties about our financial futures, only many changing variables.  Those who go forward alone, face those doubts, situations and decisions alone with limited resources.  They may make decisions based on emotion, not professional experience and training.  Others  wisely use the advice from a Certified Financial Planner. Their futures are just as uncertain, but they have seasoned guidance to help steer their boat on both calm seas and through rough waves.  Their CFP® practitioner is required to objectively put the client’s interest first at all times.  Which way would you rather proceed?

For more about how my financial planning process can help you go to www.JasonQuallsCFP.com

Article by C. Stone, CFP