Bad Money Habits to Break

Posted by on Feb 17, 2019 in 401k, 403b, bank statements, Boomers. Millenials, Budgeting, cars, college planning, Consumer Tools, Credit & Debt, credit card statements, Deflation, estate planning, family finances, financial advice, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, IRS, Life Stages, Persoanl Financial tips, Retire Happy, Retire Happy Now, Retirement, retirement, retirement calculator, retirement planning, sales, Saving Money, social security, tax returns, taxes, TSA | 0 comments

   Behaviors Worth Changing Provided by Frederick Saide, Ph.D.   Do bad money habits constrain your financial progress? Many people fall into the same financial behavior patterns, year after year. If you sometimes succumb to these financial tendencies, now is as good a time as any to alter your behavior.   #1: Lending money to family & friends. You may know someone who has lent a few thousand to a sister or brother, a few hundred to an old buddy, and so on. Generosity is a virtue, but personal loans can easily transform into personal financial losses for the lender. If you must loan money to a friend or family member, mention that you will charge interest and set a repayment plan with deadlines. Better yet, don’t do it at all. If your friends or relatives can’t learn to budget, why should you bail them out?   #2: Spending more than you make. Living beyond your means, living on margin, or whatever you wish to call it – it is a path toward significant debt. Wealth is seldom made by buying possessions; today’s flashy material items may become the garage sale junk of the future.   #3: Saving little or nothing. Good savers build emergency funds, have money to invest and compound, and leave the stress of living paycheck to paycheck behind. If you are not able to put extra money away, there is another way to get some: a second job. Even working 15-20 hours more per week could make a big difference.   #4: Living without a budget. You may make enough money that you don’t feel you need to budget. In truth, few of us are really that wealthy. In calculating a budget, you may find opportunities for savings and detect wasteful spending.   #5: Frivolous spending. Advertisers can make us feel as if we have sudden needs; needs we must respond to, or ones that can only be met via the purchase of a product. See their ploys for what they are. Think twice before spending impulsively.   #6: Not using cash often enough. No one can deny that the world runs on credit, but that doesn’t mean your household should. Pay with cash as often as your budget allows.   #7: Thinking you’ll win the lottery. When the headlines are filled with news of big lottery jackpots, you might be tempted to throw a few bucks at a lottery ticket. It’s important, though, to be fully aware that the odds in the lottery and other games of chance are against you. A few bucks once in a while is one thing, but a few bucks (or more) every week could possibly lead to financial...

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Strategic vs. Tactical Investing

Posted by on Feb 11, 2019 in 401k, 403b, Boomers. Millenials, Budgeting, college planning, Consumer Tools, Credit & Debt, Deflation, estate planning, family finances, financial advice, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, IRS, Life Stages, Persoanl Financial tips, Retire Happy, Retire Happy Now, Retirement, retirement, retirement calculator, retirement planning, Saving Money, social security, taxes, TSA | 0 comments

  How do these investment approaches differ?   Provided by Frederick Saide, Ph.D. Ever heard the term “strategic investing”? How about “tactical investing”? At a glance, you might assume that both these phrases describe the same investment approach. While both approaches involve the periodic adjustment of a portfolio and holding portfolio assets in varied investment classes, they differ in one key respect. Strategic investing is fundamentally passive; tactical investing is fundamentally active. An old saying expresses the opinion that strategic investing is about time in the market, while tactical investing is about timing the market. There is some truth to that.1 Strategic investing focuses on an investor’s long-range goals. This philosophy is sometimes characterized as “set it and forget it,” but that is inaccurate. The idea is to maintain the way the invested assets are held over time, so that through the years, they are assigned to investment classes in approximately the percentages established when the portfolio is created.1 Picture a hypothetical investor. Assume that she starts investing and saving for retirement with 60% of her invested assets held in equities and 40% in fixed-income vehicles. Now, assume that soon after she starts investing, a long bull market begins. The value of the equity investments within her portfolio increases. Years pass, and she checks up on the portfolio and learns that much more than 60% of the value of her portfolio is now held in equities. A greater percentage of her portfolio is now subject to the ups and downs of Wall Street. As she is investing strategically, this is undesirable. Rebalancing is in order. By the tenets of strategic investing, the assets in the portfolio need to be shifted, so that they are held in that 60/40 mix again. If the assets are not rebalanced, her portfolio could expose her to more risk than she wants – and the older she gets, the less risk she may want to assume.1 Tactical investing responds to market conditions. It looks at the present and the near future. A tactical investor attempts to shift the composition of a portfolio to reduce risk exposure or to take advantage of hot sectors or new opportunities. This requires something of an educated guess – two guesses, actually. The challenge is to appropriately decide when to adjust the portfolio in light of change and when to readjust it back to the target investment mix. This is, necessarily, a hands-on style of investing.1 Is it better to buy and hold, or simply, to respond? This question has no easy answer, but it points out the divergence between strategic and tactical investing. A strategic investor may be inclined to “buy and hold” and ride out episodes of...

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Coping With the Shutdown

Posted by on Jan 21, 2019 in 401k, 403b, Boomers. Millenials, Budgeting, Consumer Tools, Credit & Debt, estate planning, family finances, financial advice, financial planning, insurance, Investing, Persoanl Financial tips, Retire Happy, Retire Happy Now, Retirement, retirement, retirement calculator, retirement planning, Saving Money, social security, tax returns, taxes, TSA | 0 comments

A look at who is affected, and the potential economic impact.   Provided by Frederick Saide, Ph.D.     Right now, many households across the country are contending with the financial pressures resulting from the partial federal government shutdown. About 800,000 federal workers have been furloughed, and about 4 million government contractors are now working for free. Besides the interruption of key services, the closures risk causing a degree of disruption in the economy.1     Nine federal departments have scaled back operations. The list: Agriculture, Commerce, Justice, Homeland Security, Housing and Urban Development, Interior, State, Transportation, and Treasury. (About 240,000 workers have been furloughed by Homeland Security alone.) Even so, many essential federal government services are still being provided. The Social Security Administration is continuing to send out retiree benefits, and the Postal Service is still delivering mail.2,3     The longer the shutdown lasts, the deeper its possible economic impact. Kevin Hassett, who chairs the Council of Economic Advisers, estimates that each week of the shutdown hurts quarterly GDP by 0.13%. If Hassett is correct, then first-quarter growth may already be about 0.5% short of federal government projections. Some analysts think the economy could contract in Q1 if the shutdown drags on through the start of spring.4   What options do furloughed workers have? The gig economy beckons, with short-term jobs that can be left behind with little notice if the shutdown ends. It may come down to driving for rideshare or meal delivery companies or working as a barista or waiter – something with a flexible or alternative schedule. Some can find part-time accounting, editing, or health and safety work. (The New York Times recently noted a turn-of-the-year spike in online job searches by workers at federal agencies.)4   Of course, some furloughed federal workers are barred from accepting interim employment. Those not classified as “excepted” or “exempt” cannot even volunteer while furloughed.3   On January 16, President Trump signed a bill into law to reimburse federal workers for lost wages when the shutdown ends. Furloughed federal employees who are receiving state unemployment benefits will have to return those benefits after they collect their back pay.3,5   As the gridlock continues, these employees and contractors are showing great patience and resourcefulness. Hopefully, they will not have to cope with financial anxieties and hardships much longer.   Fred Saide may be reached at 908-791-3831 or Email at Frederick2@gmx.us www.wealthensure.com and www.moneymattersusa.net   This material was prepared by a third party, and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future...

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The Anatomy of an Index

Posted by on Jan 13, 2019 in 401k, 403b, atuos, bank statements, Boomers. Millenials, Budgeting, cars, college planning, Consumer Tools, Credit & Debt, credit card statements, Deflation, Elder Care, estate planning, family finances, financial advice, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, Life Stages, Persoanl Financial tips, Retire Happy, Retire Happy Now, Retirement, retirement, retirement calculator, retirement planning, Saving Money, social security, tax returns, taxes, TSA | 0 comments

The S&P 500 represents a large portion of the value of the U.S. equity market   Provided by Frederick Saide, Ph.D.   Did you know that nearly $10 trillion in assets are benchmarked to the Standard & Poor’s 500 Composite Index, including about $3.5 trillion in index assets?1   The S&P 500 is ubiquitous. It is constantly referenced in financial and non-financial media, and we may compare the return of our own investments to its performance. As the index represents approximately 80% of the value of the U.S. equity market (or about 80% of market capitalization), it may be worthwhile to gain a better understanding of its structure and workings.1   Breaking down the benchmark. The S&P 500, as we know it today, was introduced in March 1957. It tracks the market value of about 500 large firms that are listed on the Nasdaq Composite and the New York Stock Exchange. The S&P is structured to include companies from across the sectors of the business community, in an effort to represent the breadth of the U.S. economy.1,2   There are a number of criteria a company must meet to be considered for inclusion in the index. A firm must be a U.S. company publicly listed on a major equity market exchange, have a market capitalization of $6.1 billion or more, and have at least 250,000 of its shares traded in each of the six months prior to its consideration for index membership by Standard & Poor’s. A company must also be financially viable: the ratio of its annual dollar value traded to its float-adjusted market cap must be greater than 1.0.3   The S&P has changed over time. Companies have been gradually removed and added over the past 60-odd years. At the benchmark’s fiftieth anniversary in 2007, just 86 of the original components remained. Subsequent mergers and acquisitions have reduced that number further.3   Right now, about 20% of the weight of the S&P is held in ten companies, and the performance of tech shares influences the benchmark’s return, perhaps more than any other factor.3   The index has been altered through the years in response to changes in the economy. Across several decades, the makeup of the index’s various sectors has differed, along with their weightings. This leads to frequent updates for the equity funds that aim to replicate the index; in order to maintain that replication, they may quickly need to buy or sell shares of corporations that are being added or removed.3   Keep in mind that amounts in mutual funds and ETFs are subject to fluctuation in value and market risk. Shares, when redeemed, may be worth more or less than their original cost. Equity...

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Why Having a Financial Professional Matters

Posted by on Dec 30, 2018 in 401k, 403b, bank statements, Boomers. Millenials, Budgeting, Consumer Tools, Credit & Debt, Deflation, estate planning, family finances, financial advice, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, Life Stages, Medicare Planning, Persoanl Financial tips, Retire Happy, Retire Happy Now, Retirement, retirement, retirement calculator, retirement planning, sales, Saving Money, social security, tax returns, taxes, TSA | 0 comments

A good professional provides important guidance and insight through the years.   Provided by Frederick Saide, Ph.D.   What kind of role can a financial professional play for an investor? The answer: a very important one. While the value of such a relationship is hard to quantify, the intangible benefits may be significant and long lasting. A good financial professional can help an investor interpret today’s financial climate, determine objectives, and assess progress toward those goals. Alone, an investor may be challenged to do any of this effectively. Moreover, an uncounseled investor may make self-defeating decisions.   Some investors never turn to a financial professional. They concede that there might be some value in maintaining such a relationship, but they ultimately decide to go it alone. That may be a mistake.     No investor is infallible. Investors can feel that way during a great market year, when every decision seems to work out well. In long bull markets, investors risk becoming overconfident. The big-picture narrative of Wall Street can be forgotten, along with the reality that the market has occasional bad years.   This is when irrational exuberance creeps in. A sudden market shock may lead an investor into other irrational behaviors. Perhaps stocks sink rapidly, and an investor realizes (too late) that a portfolio is overweighted in equities. Or, perhaps an investor panics during a correction, selling low only to buy high after the market rebounds.   Often, investors grow impatient and try to time the market. Poor market timing may explain this divergence: according to investment research firm DALBAR, the S&P 500 returned an average of 8.91% annually across the 20 years ending on December 31, 2015, while the average equity investor’s portfolio returned just 4.67% per year.1                  The other risk is that of financial nearsightedness. When an investor flies solo, chasing yield and “making money” too often become the top pursuits. The thinking is short term.   A good financial professional helps a committed investor and retirement saver stay on track. He or she helps the investor set a course for the long term, based on a defined investment policy and target asset allocations with an eye on major financial goals. The client’s best interest is paramount.   As the investor-professional relationship unfolds, the investor begins to notice the intangible ways the professional provides value. Insight and knowledge inform investment selection and portfolio construction. The professional explains the subtleties of investment classes and how potential risk often relates to potential reward. Perhaps most importantly, the professional helps the client get past the “noise” and “buzz” of the financial markets to see what is really important to his or her financial life.   This...

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S Some Changes Are Coming For 401(k) Plans

Posted by on Dec 23, 2018 in 401k, 403b, atuos, bank statements, Boomers. Millenials, cars, college planning, Consumer Tools, credit card statements, Deflation, Elder Care, estate planning, family finances, financial advice, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, IRS, Retire Happy Now, Retirement, retirement, retirement calculator, retirement planning, social security, tax returns, taxes, TSA | 0 comments

Take note of them for 2019. Provided by Frederick Saide, Ph.D. Some notable developments are about to impact 401(k) plans. They follow a major change that became effective in 2018. Thanks to the Tax Cuts & Jobs Act, workers who borrow from 401(k) accounts and leave their jobs now have until October of the following year to repay plan loans.1 The Internal Revenue Service has eased the rules on 401(k) hardship distributions. Plan participants who arranged such withdrawals in 2018 (and years prior) paid an opportunity cost. The Internal Revenue Code barred these employees from making periodic contributions to their 401(k) accounts for six months after the withdrawal, and it also prevented them from exercising any stock options for that length of time.2 In 2019, some flexibility enters the picture. The Bipartisan Budget Act of 2018 (passed in February) allows plan sponsors to remove both of those restrictions in 2019, if they wish.2 Some fine print worth noting: the BBA also permits plan sponsors to give employees more sources for hardship withdrawals. In 2019, plan participants may take hardship distributions from their 401(k) account earnings, qualified non-elective employer contributions (QNECs), and qualified matching contributions (QMACs) in addition to elective deferral contributions, discretionary employer profit-sharing contributions, regular matching contributions, and earnings on contributions made before December 31, 1988.2 In 2018 and years prior, a plan participant could only take a hardship distribution after taking a loan from his or her 401(k) account. Next year, plan sponsors can waive this requirement, if they choose, and let their employees take hardship withdrawals from 401(k)s without a loan first.2 In addition, plan sponsors may let victims of California wildfires make special hardship withdrawals. An individual who suffered economic losses due to the massive fires in the Golden State (and whose principal residence is in a California wildfire disaster area) may take qualified wildfire distributions of up to $100,000 from a 401(k) through December 31, 2018. The money withdrawn is fully taxable, but the withdrawal is not subject to a 10% early withdrawal penalty. The amount withdrawn can also be recontributed to the plan within three years of the distribution. This type of hardship withdrawal may be permitted immediately; the plan sponsor has until the last day of the first plan year, beginning on or after January 1, 2019, to revise the plan documents to denote the new terms.2 What do these rule changes mean for companies sponsoring 401(k) plans? The message is clear. Review your plan documents and hardship withdrawal guidelines before 2019 begins, and decide whether you want to include these provisions. Lastly, annual contribution limits for 401(k) accounts are rising. An employee can put up to $19,000 into a 401(k) in...

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