Best Ways to Fund Spring Home Repairs

  • 17 May 2017
  • Posted by Amarasco

Now that spring has blossomed into full-on allergy mode, the time we spend outside is even more appreciated — especially with the help of a good antihistamine. The next time you venture out, take a moment to do a walk-around inspection of the old homestead. See some room for improvements? Maintaining, repairing and upgrading a home can range in cost from a minor trickle to a major cash drain.

Paying for minor repairs

If you see the need for only modest repairs, you might be able to tackle them within the bounds of your cash flow. But remember, your emergency fund is best left intact for unexpected cash needs, not for replacing a gutter or downspout.

If you have a bit of a cash cushion in your checking account or in a contingency savings account, small home projects can be covered with your close-at-hand liquidity, even if it means a temporary trim to discretionary spending, such as a couple of “family nights out” spent at home.

If the need exceeds the cash

If your home-repair needs are more costly, you might consider turning to your secondary tier of financial resources: a credit card. While average credit card interest rates are in the double digits, you can do a lot better, particularly with introductory rates that can last more than a year.

When it comes to minor improvements or repairs, having that extra spending power available will allow you to fix what’s needed now, while budgeting the repayment over a period of time. It’s best to keep that payback schedule from extending longer than three to six months.

If you need to spread the payments out beyond that, you might protect your credit score — and pay less interest — by considering our next funding alternative.

Raising the roof on expenses

Larger home upgrades or repairs are going to require bigger investments. A new roof, exterior painting, foundation repairs or other projects will protect your home’s value — and can end up costing more the longer you delay. Under these circumstances, a loan often can get you more than your credit card limit will allow, as well as save you money.

A secured loan will offer a better rate than an unsecured loan, while both likely will offer much better long-term interest rates than a credit card. Longer repayment terms will be favorable for these larger projects, too.

Covering the cost of major upgrades

Your strolling inspection — in, around and outside your home — might have revealed a need for a major upgrade. Perhaps the furnace has heaved its last gasp, or the air conditioning is already struggling with the warmer spring weather. Or it might be time to do a bit of renovation to a bath or kitchen that is well past its “best by” date.

In that case, it might be well worth tapping a home equity line of credit, or HELOC. Accessing the value of your home — up to 100% of your existing equity — will allow you even greater financial flexibility. Once approved for an open-ended revolving credit line, you can draw from it at any time, as needed. And you’ll pay interest only on the balance you’ve withdrawn.

Not only are the variable rates very favorable on HELOCs, but the interest paid may be tax-deductible. Your tax advisor can give you details on that. And repayment terms can stretch as long as 15 years, depending on the amount financed.

From a small repair to a major improvement, there are prudent ways to fund whatever spring home project you decide to undertake.

© Copyright 2016 NerdWallet, Inc. All Rights Reserved

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Do You Know How Your FICO Credit Score Is Calculated?

  • 21 Apr 2017
  • Posted by Amarasco

 

credit scoreGuidewell Financial’s’ “Incredible Edible Credit Score” Has the Answer

Credit scores and reports aren't just used to determine if consumers qualify for loans and credit cards. They also help determine what interest rate and terms borrowers receive and are increasingly used in decisions by landlords, cell phone companies, utility companies, insurance companies, and employers. Most Americans know that it's important to have a good credit score, but fewer are fully aware of the factors that affect the score they receive.  To help remedy this situation, nonprofit Guidewell Financial Solutions has created the "Incredible Edible Credit Score," a one-minute video that's informative, tasty and FUN. It shows how your FICO score is calculated. This is the credit score most lenders will use to evaluate your financial standing.

Why not join their virtual pizza party and share the video with your co-workers, family, and friends? In return here are three credit score facts everyone needs to know:

  1.   Credit reports and credit scores are not the same. 

Studies show that many of us don't know the difference between credit reports and credits scores. To keep them straight, just remember when you were in school: Your credit report and credit score are a lot like the school report card and grades you used to receive.

Like report cards, credit reports provide an overview of your performance, showing how well you manage your finances and credit. Compiled by the three major credit reporting companies -- Experian, Equifax, and TransUnion, they each contain a detailed history of your current and past credit accounts and debt,

third-party collections, certain public records and requests by lenders for the credit reports. They also list the dates accounts were opened, loan amounts, current balances and payment history, including late payments or defaults.

Consumers are legally entitled to request and receive a free credit report copy from each of the major credit reporting companies every 12 months. To access yours, visit

annualcreditreport.com or call 1-877-322-8228.

Credits scores are like the individual grades you received in school.  Each one offers a numerical snapshot measuring how much of a credit risk you are. There are many types of credit scores, each with its own scoring model.  FICO scores are the most common, but even these focus on slightly different information relevant to the industry for which they're geared. Scores are generally based on information from your credit report. There's also a rising movement to help consumers who don't have credit scores build and qualify for credit using other means.

  1. Your credit score regularly changes. 

It's true.  Your credit score may change any time new information is added to any of your credit reports.  For example, if you miss a payment, close an account, or apply for a new loan, this may change your score. One thing that doesn't change your credit score: How often you check it.  That's right, you can do so at any time and it doesn't affect your credit rating in any way.


If you want to check out your current credit score, MyFico.com charges a small fee.  Sites like CreditKarma.com and CreditSesame.com also provide consumer versions of a person's score. If you choose to go this route, make sure the site you use is reputable and be aware that the score it shows may not be the same as the one FICO provides.

  1.   Building a good credit score is more important than ever.

Why?  Because credit scores are used in more ways than ever.  They may help determine the rate you pay for insurance or what terms you receive on your next mobile phone plan. In the coming months, if interest rates go up and you have a low credit score, you'll pay even more for interest when you apply for credit cards, mortgages, and other loans than you did before. Understanding how your credit score is calculated provides you with an important key to building better credit.
That brings us back to the "Incredible Edible Credit Score."  Check out the video to see the factors that affect your FICO score and receive tips on how to improve your credit. You may go away hungry but also better informed!

 

About Guidewell Financial Solutions   

Guidewell Financial Solutions (also known as Consumer Credit Counseling Service of Maryland and Delaware, Inc.) is an accredited 501(c)(3) nonprofit agency that helps stabilize communities by creating hope and promoting economic self-sufficiency to individuals and families through financial education and counseling. Maryland License #14-01 / Delaware License #07-01

Copyright © 2017 by Guidewell Financial Solutions.

 

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How to Save $1,000 a Year -- Without Breaking a Sweat

  • 13 Apr 2017
  • Posted by Amarasco

Nonprofit Guidewell Financial Solutions offers 10 tips for saving big on a limited budget.

GuidewellConsumers who have never saved before sometimes worry they won’t be able to make it a habit, especially if they’re living paycheck-to-paycheck.  However, small changes in financial choices and lifestyle can lead to tangible savings rewards. To celebrate Financial Literacy Month, nonprofit Guidewell Financial Solutions (aka Consumer Credit Counseling Service of Maryland and Delaware) shares these tips on how to save a thousand dollars in a single year:

Use direct deposit. This is an effective way to start saving. Here’s how it works - Have paychecks electronically deposited into a checking account.  Before the money goes into checking, have $10 automatically deducted and directly placed in a personal savings account.

Savings = $240/yr or more 

Brown bag it!  Bring lunch from home ($1-3 per meal) instead of dining out at work ($8-15 per meal).

Savings = $1,300/yr or more

Less is more.  Downsizing the family cell phone, cable, or satellite television package is a simple way to put more money in the bank.

Savings = $600/yr or more

Avoid putting the pedal to the metal.  Even in this era of low gas prices, the cost of fuel, oil, tires, and vehicle depreciation averages about 52 cents a mile for consumers who regularly drive to work. To reduce transportation costs, consider carpooling, walking, or biking just two days a month.

Savings =  $288/yr or more

Compare banking options. Paying for checking account services? Shop around and find an account that doesn’t charge monthly fees.

Savings = $120/yr or more

Say “no” to the one armed bandit.  Putting change into the office vending machine is convenient, but it comes at a cost.  Bring snacks and sodas from home instead.

Savings = $100/yr or more 

Stick to in-network ATMS. It’s handy to get cash from on-the-spot ATMs, but the fees really add up. Plan withdrawals so they only take place a ATMs that belong to your bank.

Savings = $100/yr or more

Go local. Rent free books and DVDs from the public library instead of renting or buying them online or at a store.

Savings = $100/yr or more

Do some homework. Comparison shop before purchasing or renewing auto, renters, or homeowners insurance. Also think about increasing the plan deductible.

Savings = $100/yr or more

Practice paycheck power. Employees who get paid bi-weekly receive three paychecks for the month twice a year.  Each time this happens, place the extra paycheck into savings.

Do the math!

Consumers who have never saved before can begin by tracking where their money goes. Before setting up a savings plan, it may also help to get outside budgeting advice and support from a reputable nonprofit agency. Guidewell Financial provides financial counseling and financial coaching in person or by phone. For an appointment or resources, call 1-800-642-2227 or visit the agency website. Small changes made now and carried throughout the year will lead to less stress and greater financial security in 2016.

About Guidewell Financial Solutions

 Guidewell Financial Solutions (also known as Consumer Credit Counseling Service of Maryland and Delaware) is an accredited 501(c)(3) nonprofit agency that helps stabilize communities by creating hope and promoting economic self-sufficiency to individuals and families through financial education and counseling.  Maryland License #14-01 / Delaware License #07-01  

Copyright © 2017 Guidewell Financial Solutions.

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Celebrate Financial Literacy Month With Five Empowering Services

  • 06 Apr 2017
  • Posted by Amarasco

According to recent studies, less than half of American families live on a budget or keep track of their expenses, and one in three carries a credit card balance from month-to-month. Nonprofit Guidewell Financial Solutions (also known as Consumer Credit Counseling Service of Maryland and Delaware, Inc.) is working to reverse these trends. In celebration of Financial Literacy Month, it offers five financial services to help local residents to take control of their finances. Guidewell

President and CEO Helene Raynaud says, “Sound financial decisions don’t just happen. They are learned and perpetuated through practice. Here at Guidewell Financial, we have a 50-year track record of helping clients gain these skills. We provide them with advice and resources to make better choices and ultimately get ahead.”

The five services that help clients become financially confident and secure are:

  1. Budget counseling. All financial counseling appointments begin with a holistic financial assessment to help clients figure out where they stand and where they want to go. Counselors also help them set up a budget and look for ways to reduce expenses and increase income.
  2. Credit counseling. Credit counselors help clients review their credit and loan accounts and evaluate possible repayment strategies. Based on this information, they then come up with a workable plan.
  3. Debt management. Once clients have a budget in hand, they may be able to repay what they owe on their own. If not, they may be eligible to participate in the agency’s structured debt management program or in worst cases situations to receive bankruptcy counseling and education.
  4. Student loan counseling. Student loan debt counselors help borrowers review their loan agreements and consider possible repayment options. They also serve as client advocates during phone contact with loan providers and servicers. Counseling is available no matter if student loan payments are coming due, delinquent, or defaulted.
  5. Credit building. Guidewell Financial’s Save2Build loans help clients with no credit or poor credit build healthy credit. This type of loan is held in a locked savings account for 12 months. Program clients make payments of about $26 per month until their loan is satisfied. Their payments are reported to major credit reporting companies to help them build better credit. At the completion of the loan, they receive the $300 they saved.

All of Guidewell Financial’s counselors are certified.  Counseling and screening sessions take place by phone are at its offices in Catonsville, MD or Wilmington, DE. Call 1-800-642-2227 to schedule an appointment.  Visit the agency’s website to learn about its other services.

Raynaud says, “Guidewell Financial is delighted to offer these services to help Maryland residents increase their financial skills and wellbeing. The more we all learn now, the better off we’ll be!”

About Guidewell Financial Solutions   

Guidewell Financial Solutions (also known as Consumer Credit Counseling Service of Maryland and Delaware, Inc.) is an accredited 501(c)(3) nonprofit agency that helps stabilize communities by creating hope and promoting economic self-sufficiency to individuals and families through financial education and counseling. Maryland License #14-01 / Delaware License #07-01

Copyright © 2017 by Guidewell Financial Solutions.

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Seven Things You Probably Don't Know About SBA Loans

  • 16 Feb 2017
  • Posted by Amarasco

SBA-backed loans provide affordable financing options for small businesses that may have difficulty obtaining financing via traditional channels. Howard Bank is a preferred lender for loans that are guaranteed by the Small Business Administration.

Here are seven things you probably don’t know about SBA loans:

  1. The SBA doesn’t actually lend directly to businesses.
    The bank makes the loan, and then works with the SBA to get them to guarantee between 50% and 90% of the loan.
  1. Personal credit is important in the SBA loan process.
    Especially with true startups, there is usually no credit history for the business and little collateral, so the credit history of the business owner(s) is significant. The owners' credit history is an indication of how they handle credit.
  1. The SBA won’t deny a loan because of collateral (lack of), but all collateral must be taken into account
    The SBA requires the bank to consider all available collateral for the loan request. This could include the business owner’s equity in their home, vacation home, etc.
  1. Quality is more important than quantity when you are deciding whether to apply.
    Business Plans should be concise and cover the important details. The What, Why, Who, How and When of your business.
  1. Banks are interested in small business loans.
    Banks in general, and Howard Bank specifically, are very interested in helping small businesses grow and become really good bank customers. The SBA is a great tool that helps Howard Bank add value to the businesses in the communities we serve.
  1. The SBA process doesn’t take as long as most people think.
    Especially with an experienced SBA-preferred lender like Howard Bank, it is easy to navigate this process smoothly and avoid any potential obstacles. The experience Howard adds cannot change the SBA rules, but it does make it a lot less painful!
  1. Borrowers must be a small for profit business in order to be eligible for an SBA loan.
    A business must meet size standards to qualify for an SBA loan. Generally this means $7.5 million or less in revenue and 500 employees or less (depending on the industry).

With more than 20 years of SBA-backed lending experience, Rosa Scharf is the SBA Champion at Howard Bank, who works to provide SBA loan solutions to small businesses in various industries.

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Build Your Balance Sheet, And Other Advice From A Commercial Banker

  • 21 Sep 2016
  • Posted by Amarasco

At Howard Bank, we pride ourselves on supporting our community. Small and medium sized businesses are the backbone of any community, and supporting them is a key goal of ours.

James Witty, executive vice president and chief lending officer for Howard Bank, works every day to help businesses grow and thrive.  In his almost 30 years in the industry, he’s helped businesses work through nearly any situation imaginable: “It’s amazing the different ways people can make money. I’ve financed a wide range of things, from art to laundromats to heavy construction equipment to office buildings. I can tell you there’s probably not many things that I haven’t been a part of.” witty-jim-new

Build Your Balance Sheet

So what advice does Witty offer for businesses? “Build your balance sheet,” he says. “A lot of people focus just on their income statement – how much they’re earning – and that’s their scorecard for the year. But your balance sheet is going to stand the test of time.”

“There are always going to be ups and downs, so if you focus on strengthening your balance sheet it will ultimately lead to improved earnings. It’s also going to give you a sleeping pill when there are tough times; you know you have something to fall back on.”

“Remember the old adage that cash is king.  In a downturn you can never

have enough,” he says.

Don’t Over Leverage Yourself

Businesses often need to incur debt in order to grow. For example, they may need to invest in more equipment, more trucks to build a fleet or more real estate.

“Debt has its place and use it appropriately,” Witty states. “Having equity in your equipment or real estate gives you options in the future if circumstances change.  Too much leverage puts more stress on everything.”

Have Good Advisors

All successful businesses have good advisors: a banker, an accountant and a lawyer. Witty suggests you ask a lot of questions. After all, they’ve probably seen similar situations before. They can help you avoid mistakes that they may have seen past clients make.

As for bankers, Witty says “What a banker does for you – a really good one – is to sit there and say ‘Let’s talk about your business in detail. Where do you see your business in the future and what are the areas that you are most concerned with and keep you up at night?’ A banker can review your plans and draw attention to the amount of risk you may be assuming. As a business owner, it’s up to you to decide whether or not you’re comfortable assuming that risk. But the banker’s job is to make you aware of it.” “We want to be part of the team that helps you be a success,” Witty says.

Choose Howard Bank

If you’re looking for a banking partner for your business, Witty suggests you consider Howard Bank. He joined Howard Bank less than a year ago and was instantly struck by the commitment and quality of the associates here.

“I see it every day. It’s that people care. [Care] may sound like a trite word, but it’s not, because that is why we are successful. People really care what our customers are doing.”

“We’re truly going to add value to our relationship by understanding your business in great detail, offering sound advice and being there for you…in good times and in bad.”

The team at Howard Bank goes above and beyond to develop relationships with our business customers. All business is built on relationships and all relationships are built on trust.

Howard Bank associates actively go out and visit their clients. Face-to-face and personal interaction allows our associates to speak directly with you and to talk through issues. Witty concludes with “Communication for us is always important and I think it has to be done at a higher level.”

Howard Bank offers a number of banking services for businesses. Visit our website to learn about the various products and services we have to help you finance your business’ growth, optimize your cash flow, and simplify your banking transactions.

About Howard Bank
Howard Bancorp is a bank holding company with total assets of $989 million as of June 30, 2016. Its principal operating subsidiary, Howard Bank is a locally managed, headquartered and growth-focused community bank serving businesses, professionals and individuals in the Greater Baltimore area through 13 full service branches. Howard Bank is a wholly owned subsidiary of Howard Bancorp (NASDAQ: HBMD). For information visit www.howardbank.com.

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Take control of your financial destiny with one word: Budgeting

  • 02 May 2016
  • Posted by Kathy Armstrong

I’ve never quite understood the vast majority of the public’s aversion to the word “budget.” If you are one of the millions of “budget-phobes” who equate the word with such unappealing terms as “restrictive,” “limiting” and even “scary,” let me share with you some of the terms I associate with the word: “freedom,” “dreams” and “control.”

Why the drastic difference in perception? I believe the answer lies in many individuals’ lack of awareness of the budget’s potential to help them achieve their goals. Some of the soundest advice I give my clients is to examine their

lives and then to ask themselves if they like what they see.  Your budget should reflect the life YOU want to live – now and in the future.  Brilliant!

Hopefully I’ve softened you to the idea of creating a budget for you and your family. If so, and you don’t know where to start, here are a few pointers. First, determine your total annual household income. Next, figure out your expenses. You don’t need any complicated computer software – a simple budget worksheet, which you can download from any number of sites on the Internet, will more than suffice. Hopefully, once you subtract your spending from your income, you’ll have a positive figure. If not, you will definitely need to cut somewhere. (Before you start thinking budget = scary again, think how much scarier and stressful it is to be hounded by creditors!)

Now that you have everything down in black and white, ask yourself what I mentioned earlier: “Do I like what I see?” If what you see and feel is a throbbing reminder of how poorly you’ve managed your debt, resolve to get a better handle on your spending. Make the necessary changes to reflect the life you want to be leading.

Many people do not realize how much they spend on pricey coffees, biscotti and other snacks and insignificant purchases that are forgotten within days. Such purchases can literally amount to thousands of dollars each year. For a real wake-up call, keep dibs on all expenses for two weeks.

Then ask yourself, is it worth it? Is there anything else I would rather be doing with this money that better reflects my values, dreams and goals?

Hopefully I’ve helped convince you that budgets aren’t restrictive, limiting or scary in the least. On the contrary, they are simple tools that give you the freedom to live the life you want, placing you more firmly in control of your financial situation.

 

Kathy Armstrong is a CERTIFIED FINANCIAL PLANNERTM professional and works with Heritage Financial Consultants in Hunt Valley.  She is an investment advisor representative through Lincoln Financial Advisors Corp, a registered investment advisor and broker-dealer, member SIPC, 307 International Circle, Suite 390, Hunt Valley, MD  21030, 410-771-5655.  Neither Heritage Financial Consultants nor Lincoln Financial Advisors is affiliated with Howard Bank. CRN 201105-2054472

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5 Core Values of the Happy, Wealthy, & Wise

  • 07 Apr 2016
  • Posted by Admin

There are hundreds, if not thousands of personal finance tactics that can be executed that will leave you better off financially than before you started.

coreDown sizing your home, bike commuting, cooking your own meals, cutting the cord, using an MVNO vs a smartphone, etc. – all positive tactics.

There are just as many tactics to get you in trouble as there are to help you – payday loans, credit card debt, massive student loans, buying a house that is

too big, leasing a pricey car, dining out every night, replacing your wardrobe every six months, etc. – nasty stuff.

It’s fairly easy to separate the good from the bad (much less easy to stick to just the good). But tactics are just tactics. They are something we do. They may provide short or even long-term financial benefits. But they aren’t who we are.

What trumps tactics? Values. Virtues. And purpose.

Those who truly are the most successful in life and finance lead a purposeful life, driven by a select group of core personal values. THIS is what leads to long-term happiness, wealth, and wisdom.

And who wouldn’t want those things?

Here are 5 personal core values that if you look closely enough, are usually in abundance for those who are happy, wealthy, and wise:

  1. They De-Value Stuff

How many times have you lusted over something shiny and new, bought it, and lost interest almost immediately? And then version 2.0 or 5.0 comes out, and you start the craving -> buying -> disinterest cycle all over again? Then there’s the ensuing guilt and shame when you come to the realization that you fooled yourself again.

Everyone has been has fallen victim to this. But those who seem to be happiest have made significant progress in recognizing it for what it’s worth and in devaluing their current possessions and future possessions.

Perhaps the thing they end up buying will enhance their life in some way, but they have developed a big picture perspective that lets them take a step back and rationally think about the short and long-term costs needed to obtain it.

And never do they rely on a material possession for their happiness. Except a bicycle now and then.

  1. They have a Hatred of Debt

Nobody enjoys debt (although some may be addicted to it).Many are indifferent to it. A good number don’t like it.

But, it is the rare few that have developed a healthy hatred for it that tend to be the happiest (and definitely the wealthiest).

When used effectively – i.e. put towards an education that produces immediate subsequent dividends or used to finance a very modest first home or income producing rental properties – debt can be a net positive tool.

But most debt is not. Payday loan debt. Credit card debt. New car payment debt. High mortgage rate debt. Rent-to-own (debt in disguise). Personal loans. All bad stuff. Those who have developed a healthy hatred for debt attack it with a vengeance. And if the hatred pre-dated the debt, it most likely does not exist at all.

Why? They realize that the power of compound interest is one of the best things they can have on your side to improve their financial situation. Debt is the exact opposite. It is the power of compound interest working against you.

  1. They have a Healthy Respect for their Future Self

If your future 20-year from now self could travel back in time to talk to you today, what would you hope the slightly grayer/balder/wrinklier version of you would say?

“Hey – thanks a lot for leaving me with zero savings so that I have to now take on two jobs to pay off my debt and have any shot of retiring one day! Jerk!!!”

or

“Hey – thanks a lot for leaving me with enough savings that, with compound interest, made it so I don’t have a financial worry in the world. I was even able to retire early. I’m rich, [email protected]$%#!!!”

Of course, this hypothetical doesn’t have to be limited to money. It could just as easily apply to:

  • health
  • exercise
  • risk-taking
  • relationships
  • education

and just about anything else in life that leads to happiness.

But it’s not just withholding from the present to make for a brighter future. There needs to be a healthy balance between the present and the future. And no, that does not mean a blank check for spending.

  1. They have an Ambition for Personal Growth

What good is a life without personal growth?

All the personal wealth in the world carries no value if it is not used in a way that allows us to explore, enjoy, learn, re-invent, and grow.

This doesn’t mean that you have to be in a constant state of unhappiness or unease with yourself. That would make you… well… miserable.

You are what you are, but you don’t have to always stay there, if that makes sense. A curiosity to explore and push your personal limits and boundaries is healthy for the soul – and the happiest and wisest among us have learned this virtue over the years.

And those who tend to push themselves also seem to have opportunity and money follow them, don’t they?

  1. Appreciation & Gratitude

For the little things. Never gets old does it? There are plenty of things that are better than money that can be appreciated on a daily basis.

Set aside time to appreciate them.Landmark points in life are rare. Exciting when they come along, no doubt. But rare.

And there’s a whole lot of life in between. Find the enjoyment within it, and you’ll become far wiser than your years. And much happier.

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The ABCs of Retirement Planning

  • 05 Apr 2016
  • Posted by Admin

by Kathy Armstrong

Are you saving enough for retirement? You know, “the golden years”, the time when you kick back, relax and enjoy a life of leisure?  It’s possible that a very large percentage of people who answer that question with a nod may be mistaken.

 Ouch! While whether or not you are saving enough depends partly upon the lifestyle you expect to have at retirement age, there are some general rules you should be following to help ensure you can focus on your newfound hobbies – and not whether or not you can afford to replace your aging Buick.

The general rule of thumb has been to save 10 percent of your income for retirement, but for women, that percentage needs to be bumped up to

12 percent. (Attribute it to our longer life span!)

But it’s not enough simply to tuck away your 12 percent into a savings account, and then expect to retire comfortably. All savings methods were not created equal, and investing wisely is the key to retiring comfortably.

First, the smartest thing you can do is to invest as much as you can of your pre-tax income before Uncle Sam and the state get their share.  For example, if you pay 28 percent of every dollar you earn to federal taxes, and another 7 percent for state taxes, 35 percent of your earnings are gone before you have touched it.

But there is a way to pay yourself first. Tax-deferred retirement plans.

The three workhorses of tax-deferred retirement plans are the 401(k), the SEP IRA, and Individual Retirement Accounts (IRAs).

  • The 401(k) is a company-sponsored plan where the employee elects to defer a portion of their salary up to $18,000 a year in 2016 ($24,000 if you’re age 50 or older).  The employer often matches the contribution (up to a set amount) -- it’s free money, but only if you contribute.
  • The SEP (Simplified Employee Pension) IRA is a traditional IRA that may accept an expanded rate of contribution (even as high as $53,000 in 2016).  It is owned by the employee, who might be self-employed.
  • A traditional individual retirement plan is a personal retirement savings program toward which eligible individuals may contribute both deductible and nondeductible payments.  The traditional IRA allows you to make contributions up to $5,500 each year ($6,500 if you are age 50 or older) in 2016 with the benefit of tax-deferred build-up of income.  The Roth IRA, on the other hand, is an after-tax retirement savings program whereby qualified distributions are received income-tax free!

I will stress, however, that retirement plans and options are complicated, and require much more space than provided in this single column to explain.  Whichever plan you use, though, make certain that you allocate your dollars wisely. The biggest mistake people make where retirement plans are concerned is placing money into their accounts, but failing to move it into the right mix of stocks and bonds. By default, undesignated monies might go directly into a money market account which currently pays less than 1% in interest.

How you allocate your funds when you are 30 should differ from when you are 50.  A financial advisor can help you in selecting a proper mix of stocks and bonds.

Just remember, if you ever question whether or not you are saving enough, save a little extra for good measure! And recall the adage “better safe than sorry”.

 

 

Kathy Armstrong is a CERTIFIED FINANCIAL PLANNERTM professional and works with Heritage Financial Consultants in Hunt Valley.  She is an investment advisor representative through Lincoln Financial Advisors Corp, a broker/dealer (member SIPC) and registered investment advisor, 307 International Circle, Suite 390, Hunt Valley, MD  21030, 410-771-5655.  Neither Heritage Financial Consultants nor Lincoln Financial Advisors is affiliated with Howard Bank. Heritage Financial Consultants, LLC is not an affiliate of Lincoln Financial Advisors Corp.  CRN-1264151-080315

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10 Things Millennials Should Do to Reach the Next Financial Level

  • 29 Mar 2016
  • Posted by Admin

Millennials have come a long way, but they're still behind on many key measures.

ObstaclesMillennials have had a rough road when it comes to money.

Not only did they come of age during the Great Recession, which made jobs scarce and benefits even scarcer, but many saw their parents lose big time in the stock or real estate markets, which scared them off of making their own investments. Still, there's no more time for excuses, because millennials are all grown up and taking on increasing amounts of responsibility. From mortgages and parenthood to

caring for aging parents, millennials are facing big financial milestones, whether they're ready or not.

According to Bank of America's Year-End Millennial Snapshot, which analyzed 2015 data from over 3,500 millennials, this young cohort of 20- and early 30-somethings continues to struggle financially: a tough job market, hesitancy to invest and student loans are just a few of the challenges in their way to prosperity. Still, the data suggest they are firmly committed to achieving financial independence one day. About half of millennials said the Great Recession changed the way they think about saving, investing and spending, with 40 percent saying they are more reluctant to invest in the stock market and 36 percent saying they are more hesitant to buy a house.

Yet over 80 percent of millennials are optimistic that they will be able to save and invest more in the future. There is still a sense of optimism with the millennials. Although they're more hesitant, it's not stopping them. They feel good about the future

Many are also getting some big financial assists from their parents, and 46 percent of millennial-supporting parents say they don't plan to stop anytime soon.

A survey by the investment app Acorns of 1,020 millennials found that almost half of those surveyed said they were "treading water" financially or worse and would be in big trouble if they missed a paycheck. Most millennials (85 percent) said they haven't yet invested any money in the stock market, largely because they don't feel comfortable with it. While respondents said they wanted to save more, they found it difficult to do so given the pressures of living expenses and student loans.

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"So many millennials are working on a contract basis or as freelancers; they don't have full-time benefits," says Jennifer Barrett, vice president of editorial and founding editor of Grow, a digital magazine published by Acorns and aimed at millennials. "They have to be more proactive ... [and] engage with finances much earlier than with earlier generations. Millennials are on their own in a lot of ways," she says.

That's why forming good money habits is a key part of creating financial stability for the millennial generation, Barrett adds. "We recommend that people get in the habit of investing early on," she says.

That's a message echoed by other millennial financial experts. "The biggest money mistake most people make – and I know I certainly did – is simply waiting too long to care," says David Weliver, 34, founder of the millennial finance website Money Under 30. When you're juggling your career, love life and other big issues, it's hard to also find time for your finances.

Here are some steps millennials can take to bring their finances to the next level.

  1. Skip the credit card offers.

After college, young people tend to get bombarded with credit card offers, Barrett says, but they're usually better off skipping them. If you take on credit card debt, especially on top of student loan debt, then it's easy to get stuck in a trap of constantly feeling like you're falling behind. "Some millennials are embarrassed by [their debt]; it weighs pretty heavily on them," she adds.

  1. Increase your savings whenever you get a raise.

Anytime you experience a windfall – perhaps you earned a bonus or got a raise – Barrett suggests putting it directly into your retirement savings. "If you can increase your contribution right away before you have time to even register that you have a raise, that's what really makes the difference," she says.

  1. Get comfortable with investing.

Because so many millennials are scared of investing in the stock market (and understandably, since they came of age during the Great Recession), Barrett says it's particularly important to dive in early so long-term savings can outpace inflation. At the same time, though, she adds that it's important to have an emergency fund stashed in a safe spot, like a bank account, so you can cover unexpected expenses without reaching for a credit card.

  1. "Stop the bleeding."

That graphic expression is how Weliver describes the need to prioritize. "Make sure you're not going into more debt," he says, adding that you should look for ways to downsize your lifestyle or earn more money (or both). Once you find a way to end the month positive at least a couple hundred dollars, then you can start making choices about saving, investing and paying off debt.

  1. Pay off student debt.

Student loans are the albatross that hounds so many millennials; Weliver still remembers the day he made his final payment. Along with the day he realized he had enough in savings to live on for a year if necessary, it was a momentous occasion, and one that reinforced his choice to be more conscious about his spending and money management.

  1. Imagine your future.

Considering where you want to be down the road can help you make the right choices today, Weliver adds. While taking out insurance or funding retirement aren't the most exciting investments now, they could save you from financial challenges in the future.

  1. Embrace your earning power.

If you're working entry-level jobs or getting by on sporadic freelance work, then it's hard to feel in control of your finances, warns Stefanie O'Connell, 29, author of "The Broke and Beautiful Life," a money guide for millennials, and contributor to the U.S. News Frugal Shopper blog. "Even if you reduce your monthly expenses to zero, you're only saving as much as you were once spending … I tripled my income in 2015 and it's been absolutely life changing," she says.

O'Connell adds that given today's tough job market, millennials have to show initiative and aggressively pursue higher-earning opportunities. "Take the initiative to show how you contribute to the bottom line. It's hard to argue against a raise when you have the numbers and track record to back it up," she says.

  1. Talk to your parents.

With parents still playing such an outsize role in so many millennials' financial lives, Jordan says parents and adult children should each make an effort to have open conversations about money. "Parents should take a proactive approach to shore up their own finances and teach children about responsible saving. Parents don't realize how much of a connection they're going to have; that conversation is really important, and they need to start early," Jordan says. On the flip side, millennials should also prepare to potentially assist their aging parents with money one day. "That's a conversation they really need to start having," he adds.

  1. Keep things as simple as possible.

It's easy to feel overwhelmed with the various financial management choices you have, but the bottom line is that you need to save more and spend less to accumulate more wealth, says Erin Lowry, 26, founder of BrokeMillennial.com and contributor to the U.S News My Money blog. "Don't get so aggressive with paying down debt that you completely eliminate savings of any kind. Everyone should have at least $1,000 tucked away in an emergency savings fund," she adds. "The best way to shed the feeling of living on a tight budget is to cut spending while increasing your earning power."

That's exactly what she did: When she first moved to New York City in 2011, she was living paycheck to paycheck with a desirable but low-paying job in the entertainment industry. She picked up shifts at Starbucks, worked as a babysitter in her off-hours and severely limited her spending. Eventually, she created enough of a buffer that she could scale back her extra work (and catch up on sleep).

  1. Always look for the next level.

Once you achieve a basic level of comfort with your savings and budgeting efforts, then it's time to tackle the next task. Perhaps it's fully filling your emergency savings fund, investing or opening a retirement account. "Don't get comfortable with your status quo," Lowry says. "Push yourself further by contributing another percent or 5 to your 401(k). Learn more about investing. Most importantly, set financial goals and make them specific."

 

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