When Should You Start Preparing For Retirement?

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When Should You Start Preparing For Retirement?

Depending on where you are in life’s journey, retirement may seem like a distant mirage, or it may be closing in faster than expected.

You might think that deciding when to start preparing for retirement requires complicated algorithms. Yes, there may be some math involved – but the simple answer is – if you haven’t started preparing yet, the time to start is right now!

The 80% rule
Many financial professionals recommend saving enough to provide 80% of your pre-retirement income in your retirement years so you can maintain your standard of living. Following this rule isn’t an exact science though, because expense structures for each household can differ greatly. It is, however, a good place to start. How do we get to 80%? Living expenses typically decrease in retirement because costly commutes, investing in business clothing, and eating lunch out 5 days a week are reduced or eliminated. The other big expense that often changes is housing. At retirement, it’s common to trade in your 3, 4, or 5-bedroom home for something smaller, easier, and less expensive to maintain.

Preparing for retirement when you’re young
When you’re younger, preparing for retirement may be a fairly simple process. The main considerations are life insurance and savings. This can’t be overstated: Now is the time to buy life insurance. If you’re young and healthy, rates are much more likely to be low. This also can’t be overstated: Now is also the time to start saving. Every penny you put away now can get you closer to your goal. As anyone who’s older can tell you, life is full of surprises that end up costing money, and these instances have the potential to interfere with your savings strategy.

Longevity considerations
Life expectancy rates are essentially averages, with low and high numbers in the mix. If you’re fortunate enough to beat the average life expectancy, your retirement savings may become slim pickings in your later years, a time when you might not be able to generate supplementary income.

Manage your expenses
Whether you’re young or getting on in years, the time to start saving is now. But if you’re nearing retirement age, it’s also time to take an honest look at your expenses. Part of the trick to stretching retirement savings is to eliminate unnecessary costs. If you’re considering moving to a smaller home to cut costs – and you’re feeling adventurous – you might want to consider moving to a different state with a lower tax rate to enjoy your golden years. If you’re younger, it’s still a great time to assess your budget and eliminate any and all unnecessary spending that you can.

For younger people, time is your ally when it comes to saving for retirement, but waiting to start saving might leave you with less than you’d hoped for later in life. If you’re closer to retirement age, there’s still time to build your nest egg and examine your projected expenses. Talk to your financial professional today about options that may be available for you!

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WSB260061-07.20

What Does “Pay Yourself First” Mean?

Bills, bills, mortgage payment, another bill, maybe some coupons for things you never buy, and of course, more bills.

There seems to be an endless stream of envelopes from companies all demanding payment for their products and services. It feels like you have a choice of what you want to do with your money ONLY after all the bills have been paid – if there’s anything left over, that is.

More times than not it might seem like there’s more ‘month’ than ‘dollar.’
Not to rub salt in the wound, but may I ask how much you’re saving each month? $100? $50? Nothing? You may have made a plan and come up with a rock-solid budget in the past, but let’s get real. One month’s expenditures can be very different than another’s. Birthdays, holidays, last-minute things the kids need for school, a spontaneous weekend getaway, replacing that 12-year-old dishwasher that doesn’t sound exactly right, etc., can make saving a fixed amount each month a challenge. Some months you may actually be able to save something, and some months you can’t. The result is that setting funds aside each month becomes an uncertainty.

Although this situation might appear at first benign (i.e. it’s just the way things are), the impact of this uncertainty can have far-reaching negative consequences.

Here’s why: If you don’t know how much you can save each month, then you don’t know how much you can save each year. If you don’t know how much you can save each year, then you don’t know how much you’ll have put away 2, 5, 10, or 20 years from now. Will you have enough saved for retirement?

If you have a goal in mind like buying a home in 10 years or retiring at 65, then you also need a realistic plan that will help you get there. Truth is, most of us don’t have a wealthy relative who might unexpectedly leave us an inheritance we never knew existed!

But you might be surprised by much you can save if you put your mind to it. And you might want to do that… but how do you do that?

The secret is to “pay yourself first.” The first “bill” you pay each month is to yourself. Shifting your focus each month to a “pay yourself first” mentality is subtle, but it can potentially be life changing. Let’s say for example you make $3,000 per month after taxes. You would put aside $300 (10%) right off the bat, leaving you $2,700 for the rest of your bills. This tactic makes saving $300 per month a certainty. The answer to how much you would be saving each month would always be: “At least $300.” If you stash this in an interest-bearing account, imagine how high this can grow over time if you continue to contribute that $300.

That’s exciting! But at this point you might be thinking, “I can’t afford to save 10% of my income every month because the leftovers aren’t enough for me to live my lifestyle.” If that’s the case, rather than reducing the amount you save, it might be worthwhile to consider if it’s the lifestyle you can’t afford.

Ultimately, paying yourself first means you’re making your future financial goals a priority, and that’s a bill worth paying.

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WFG259750-07.20

The Advantages Of Paying With Cash

Debit cards are convenient.

Just swipe and go. Even more so for their mobile phone equivalents. We like fast, we like easy, and we like a good sale. But are we actually spending more by not using cash like we did in the good old days?

When using plastic, the reality of the expense doesn’t sink in until the statement arrives. And even then it may not carry the same weight. After all, you only need to make the minimum payment, right? With cash, we’re more cautious – and that’s not a bad thing.

Try an experiment for a week: pay only with cash. When you pay with cash, the expense feels real – even when it might be relatively small. Hopefully, you’ll get a sense that you’re parting with something of value in exchange for something else. You might start to ask yourself things like “Do I need this new comforter set that’s on sale – a really good sale – or, do I just want this new comforter set because it’s really cute (and it’s on sale)?” You might find yourself paying more attention to how much things cost when making purchases, and weighing that against your budget.

If you find that you have money left over at the end of the week (and you probably will because who likes to see nothing when they open their wallet), put the cash aside in an envelope and give it a label. You can call it anything you want, like “Movie Night,” for example.

As the weeks go on, you’re likely to amass a respectable amount of cash in your “rewards” fund. You might even be dreaming about what to do with that money now. You can buy something special. You can save it. The choice is yours. Well done on saving your hard-earned cash.

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WFG259665-06.20

5 Things You Can Do With A Bonus

It’s your lucky day and you’re flush with cash.

Maybe you just got a bonus at work, or a tax refund, or won that scratch-off lottery ticket.

Hold up. Don’t spend it all just yet. There are some great ways you can put that windfall to work for you before it disappears during a spontaneous shopping spree.

1. Pay off those credit cards
This may not seem like quite as much fun as the Paris vacation you were daydreaming about – but paying down debt is like finding money every single month. Every $100 you pay in interest equals about $130 you’d have to earn when you consider taxes. Paying down debt is the fastest way to give yourself a monthly raise if you come into some unexpected cash.

2. Save it
Experts recommend that you have enough savings to cover at least 3 to 6 months of expenses. This is the perfect opportunity to break away from the statistics and get prepared. Consider a high-yield checking account that allows easy access to your savings.

3. Put it in the college fund
If you have kids, this is a great time to contribute to the college fund or to start one if you haven’t already. Tuition can range from around $10,000 for in-state public schools to nearly $35,000 for private schools (1). And that’s not counting books and boarding! It’s never too early to give your kids a head start!

4. Invest in yourself
This might be the perfect chance to finish off those last few credits for a degree or to earn that certification you’ve been wanting but couldn’t justify spending money to complete. If you choose carefully, the right degree or certification can open doors in your career, potentially enhancing your earning power and helping you break out of the holding pattern.

5. Take a vacation
Maybe it’s a trip to Paris or maybe it’s someplace else you’ve always wanted to go. If all the above are in good shape, go ahead and treat yourself. You deserve it!

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(1) Justin Song, “Average Cost of college in America”, ValuePenguin, 2020


WFG258641-06.20

4 Easy Tips To Build Your Emergency Fund

Nearly one quarter of Americans and almost half of Canadians have no emergency savings, according to a recent report. (1&2)

Without an emergency fund, you can imagine that an unexpected expense could send your budget into a tailspin. That’s why building an emergency fund is so important. You CAN do this!

4 tips to building your emergency fund

Where to keep your emergency fund
Keeping money in the cookie jar might not be the best plan. Mattresses don’t really work so well either. But you also don’t want your emergency fund “co-mingled” with the money in your normal checking or savings account. The goal is to keep your emergency fund separate, clearly defined, and easily accessible. Setting up a designated, high-yield savings account is a good option that can provide quick access to your money while keeping it separate from your main bank accounts.

Set a monthly goal for savings
Set a monthly goal for your emergency fund savings, but also make sure you keep your savings goal realistic. If you choose an overly ambitious goal, you may be less likely to reach that goal consistently, which might make the process of building your emergency fund a frustrating experience. (Your emergency fund is supposed to help reduce stress, not increase it!) It’s okay to start by putting aside a small amount until you have a better understanding of how much you can really “afford” to save each month. Also, once you have your high-yield savings account set up, you can automatically transfer funds to your savings account every time you get paid. One less thing to worry about!

Spare change can add up quickly
The convenience of debit and credit cards means that we use less cash these days – but if and when you do pay with cash, take the change and put it aside. When you have enough change to be meaningful, maybe $20 to $30, deposit that into your emergency fund. Look into ways of automating your savings to make putting away money seamless and hassle free!

Get to know your budget
Making and keeping a budget may not always be the most enjoyable pastime. But once you get it set up and stick to it for a few months, you’ll get some insight into where your money is going, and how better to keep a handle on it! Hopefully that will motivate you to keep going, and keep working towards your larger goals. When you first get started, dig out your bank statements and write down recurring expenses, or types of expenses that occur frequently. Odds are pretty good that you’ll find some expenses that aren’t strictly necessary. Look for ways to moderate your spending on frills without taking all the fun out of life. By moderating your expenses and eliminating the truly wasteful indulgences, you’ll probably find money to spare each month and you’ll be well on your way to building your emergency fund.

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(1) Maurie Backman, “Nearly 50% of Americans Don’t Have Enough Emergency Savings to Get Through the COVID-19 Crisis”, the Motley Fool, March 27, 2020.

(2) Steve Randall, “Almost half of Canadians have no emergency fund”, Which Mortgage, January 9, 2019.


WSB258602-06.20

How To Save For A Big Purchase

It’s no secret that life is full of surprises. Surprises that can cost money.

Sometimes, a lot of money. They have the potential to throw a monkey wrench into your savings strategy, especially if you have to resort to using credit to get through an emergency. In many households, a budget covers everyday spending, including clothes, eating out, groceries, utilities, electronics, online games, and a myriad of odds and ends we need.

Sometimes, though, there may be something on the horizon that you want to purchase (like that all-inclusive trip to Cancun for your second honeymoon), or something you may need to purchase (like that 10-years-overdue bathroom remodel).

How do you get there if you have a budget for the everyday things you need, you’re setting aside money in your emergency fund, and you’re saving for retirement?

Make a goal
The way to get there is to make a plan. Let’s say you’ve got a teenager who’s going to be driving soon. Maybe you’d like to purchase a new (to him) car for his 16th birthday. You’ve done the math and decided you can put $3,000 towards the best vehicle you can find for the price (at least it will get him to his job and around town, right?). You have 1 year to save but the planning starts now.

There are 52 weeks in a year, which makes the math simple. As an estimate, you’ll need to put aside about $60 per week. (The actual number is $57.69 – $3,000 divided by 52). If you get paid weekly, put this amount aside before you buy that $6 latte or spend the $10 for extra lives in that new phone game. The last thing you want to do is create debt with small things piling up, while you’re trying to save for something bigger.

Make your savings goal realistic
You might surprise yourself by how much you can save when you have a goal in mind. Saving isn’t a magic trick, however, it’s based on discipline and math. There may be goals that seem out of reach – at least in the short-term – so you may have to adjust your goal. Let’s say you decide you want to spend a little more on the car, maybe $4,000, since your son has been working hard and making good grades. You’ve crunched the numbers but all you can really spare is the original $60 per week. You’d need to find only another $17 per week to make the more expensive car happen. If you don’t want to add to your debt, you might need to put that purchase off unless you can find a way to raise more money, like having a garage sale or picking up some overtime hours.

Hide the money from yourself
It might sound silly but it works. Money “saved” in your regular savings or checking account may be in harm’s way. Unless you’re extremely careful, it’s almost guaranteed to disappear – but not like what happens in a magic show, where the magician can always bring the volunteer back. Instead, find a safe place for your savings – a place where it can’t be spent “accidentally”, whether it’s a cookie jar or a special savings account you open specifically to fund your goal.

Pay yourself first When you get paid, fund your savings account set up for your goal purchase first. After you’ve put this money aside, go ahead and pay some bills and buy yourself that latte if you really want to, although you may have to get by with a small rather than an extra large.

Saving up instead of piling on more credit card debt may be a much less costly way (by avoiding credit card interest) to enjoy the things you want, even if it means you’ll have to wait a bit.

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WFG258466-06.20

Why You Should Pay Off High-Interest Debt First

Credit card debt can be sneaky.

Often, we may not even realize how much that borrowed money is costing us. High interest debt (like credit cards) can slowly suck the life out of your budget.

But paying down high-interest debt can free up cash flow in a big way. It might take time to produce a meaningful return. Your “earnings” will seem low at first. They’ll seem low because they are low. Hang in there. Over time, as the balances go down and more cash is available every month, the benefit will become more apparent.

High Interest vs. Low Balance
We all want to pay off debt, even if we aren’t always vigilant about it. Debt irks us. We know someone is in our pockets. It’s tempting to pay off the small balances first because it’ll be faster to knock them out.

Granted, paying off small balances feels good – especially when it comes to making the last payment. However, the math favors going after the big fish first, the hungry plastic shark that is eating through your wallet, bank account, retirement savings, vacation plans, and everything else. In time, paying off high interest debt first will free up the money to pay off the small balances, too.

Summing It Up
High interest debt, usually credit cards, can cost you hundreds of dollars per year in interest – and that’s assuming you don’t buy anything else while you pay it off. Paying off your high interest debt first has the potential to save all of that money you’d end up paying in interest. And imagine how much better it might feel to pay off other debts or bolster your financial strategy with the money you save!

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WFG258307-06.20

Should You Give Your Child An Allowance?

Should parents give their children an allowance?

It’s a surprisingly difficult question to answer. Teaching your kids how to handle money is important. But how you go about giving them cash can set precedents that last a lifetime. Here are a few different takes on giving your kids money.

Not giving your kids money
There’s a lot to not love about this system at a glance, especially if you’re the kid. It seems like a way to simultaneously prevent your children from having fun and learn nothing about handling money. But it has some silver linings. Not paying your kids to do chores can be a way to teach them about the value of work without tying it to a monetary reward. That’s an important life lesson that can be applied to volunteer work and responsibilities with their future family. You also may be on a tight budget and handing out an allowance is just not part of your financial strategy right now.

Giving your kids an allowance (no work required)
This is a system where you give your kids a set amount of money each week or month. This is a straightforward way to get your kids some cash that they can spend, save, and use to learn about money.

But just giving your kids an allowance without requiring something in return, like doing chores, has some potential drawbacks. Most people will eventually have to get a job so they can earn money. Giving cash to your kids without tying it in some way to work may create a sense of entitlement that simply isn’t realistic.

Paying your kids commission
In this system, you pay your kids as they complete tasks. You would set up a job posting with different payments for different chores. Pay your kids when they’ve completed the work. If they get the job done quickly with a good attitude and some extra flourish? Give them a raise! It’s a great way of rewarding excellence and teaching children the monetary value of their time and hard work.

But this system also has flaws. Some of the most rewarding work we do can be for family or friends, or to serve our communities—with no reward other than appreciation and pride in a job well done. Giving the impression that one should only put in hard work or help out with the family for cash isn’t something every parent is comfortable with.

Fortunately, there are many ways to combine each of these systems. You could have non-paying chores that are duties simply because the kids are members of the family and then extra paid jobs. Or maybe offer a base allowance to teach your kids about saving, giving, and spending, and then paid chores added on. These systems can evolve over time as your kids grow. Let the needs of your family and what you want to instill in your children guide you.

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WSB257276-05.20

Healthy Financial Habits

Consistency is essential for anything, and the key to consistency is habit.

Habits are behaviors that we do so frequently that they feel second nature. So your friend who’s woken up at 5:00 AM to work out for so long that it seems normal to him? He’s unlocked the power of habit to wake up, get out of bed, and make it happen.

Healthy money habits are the same way; they open up a whole new world of financial fitness! Here are a few great habits you can start today.

Begin with a Budget
Developing a budgeting habit is foundational. Consistently seeing where your money is going gives you the power to see what needs to change. Notice in your budget that fast food is hogging your paycheck? Budgeting allows you to see how it’s holding you back and figure out a solution to the problem. The knowledge a budget gives you is the key to help you make wise money decisions.

Pay Yourself First
Once you’re budgeting regularly, you can start seeing who ends up with your money at the end of the day. Is it you? Or someone else? One of the best habits you can establish is making sure you pay yourself by saving. Instead of spending first and setting aside what’s left over, put part of your money into a savings account as soon as you get your paycheck. It’s a simple shift in mindset that can make a big difference!

Automate Everything
And what easier way to pay yourself first than by automatically depositing cash in your savings account? Making as much of your saving automatic helps make saving something that you don’t even think about. It can be much easier to have healthy financial habits if everything happens seamlessly and with as little effort as possible on your part.

Healthy financial habits may not seem big. But sometimes those little victories can make a big difference over the span of several years. Why not try working a few of these habits into your routine and see if they make a difference?

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WFG256622-05.20

The top 8 reasons to consider life insurance

Life will often seem to present signals about financial moves to make.

Starting your first job babysitting or mowing lawns? Probably a good idea to begin saving some of those earnings. Need to pay for college? You’ll want to apply for scholarships. Have a friend who’s asking you to invest in his latest business scheme? Maybe you’ll pass.

As for life insurance, there are certain events that herald when it’s an appropriate time to think about purchasing a policy.

Following are a few of those key times…

Tying the knot or taking the plunge
Whatever you call it, if you’re getting ready to walk down the aisle, now is a good time to think about life insurance. A life insurance policy will protect your spouse by replacing your income if something were to happen to you. Many couples rely on two incomes to sustain their lifestyle. It’s important to make sure your spouse can continue to pay the bills, make a mortgage payment, and provide for any children you might have, etc.

Buying a home
If you’re in the market for a home, life insurance should also be a consideration. There are particular types of life insurance policies that will pay off the remaining mortgage if something happens to you. This type of life insurance can help provide a safety net for you and your spouse if you are planning on taking on a mortgage.

Someone becomes dependent on you financially
Another life event that signals a need for life insurance is if someone were to become dependent upon you financially. We might think our only dependents would be our children, but there are other situations to consider. Do you have a relative that depends on you for support? It could be a sibling, parent, elderly aunt. It’s prudent to help protect them with a life insurance policy.

You’ve got a business partner
Life insurance can be invaluable if you’re starting a business and have a business partner. A life insurance policy on your partner or the key leaders in your company can help protect the business if something happens to one of the main players. While the payout on a life insurance policy won’t replace the individual, it can help see the company through financial repercussions from the loss.

You have debt that you don’t want to leave behind
If you’re like most Americans – you probably have some debt. There are two problems with carrying debt. One, it costs you money and isn’t good for your financial health. Second, it can be a problem for your loved ones if you pass away unexpectedly. A life insurance policy is helpful to those who are left behind and are taking on the responsibility of your debt and estate.

You have become aware of “the someday”
Sooner or later we all have to consider our last stage of life. A life insurance policy can help you plan for those last days. A life insurance policy can help cover funeral costs and medical bills or other debts you may have at the end of your life. The payout can also help your beneficiary with any final expenses while settling your estate.

You fell in love with a cause
If you are attached to a certain charity or cause, consider a life insurance policy that can offer a payout as a charitable gift when you pass away. If you are unattached or don’t have any children, naming a charity as your life insurance beneficiary is a great way to leave a legacy.

You just got your first “grown-up” job
Cutting your teeth on your first “grown-up” job is a great time to consider your life insurance options. If you have an employer, they may offer you a small life insurance policy as a perk. But you likely will need more coverage than that. Consider purchasing a life insurance policy now. The younger you are, the less you may pay for it.

Life gives us clues about financial moves
If we know what to look for, life seems to give us clues about when to make certain financial moves. If you’re going through any of these times of life, it’s time to consider purchasing a life insurance policy.

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WSB112836-0119

So You’ve Graduated...Now What?

Graduating from college is a big deal.

It represents a transition from student to adult for millions of people. But leaving university and joining the workforce can be intimidating. Looking for a job, paying bills, commuting, and living independently are often uncharted territory for recent grads.

Here are a few tips for fresh graduates trying to get on their feet financially.

Figure out what you want
It’s one thing to leave college with an idea of what career you want to pursue. It’s something else entirely to ask yourself what kind of life you want. It’s one of those big issues that can be difficult even to wrap your head around!

However, it’s something that’s important to grapple with. It will help you answer questions like “What kind of lifestyle do I want to live” and “how much will it cost to do the things I want?” You might even find that you don’t really need some of the things that you thought were necessities, and that happiness comes from places you might not have expected.

Come up with a budget
Let’s say you’ve got a ballpark idea of your financial and lifestyle goals. It’s time to come up with a strategy. There are plenty of resources on starting a budget on this blog and the internet on the whole, but the barebones of budgeting are pretty simple. First, figure out how much you make, how much you have to spend, how much you actually spend, then subtract your total spending from how much you make. Get a positive number? Awesome! Use that leftover cash to start saving for retirement (it’s never too early!) or build up an emergency fund. Negative number? Look for places in your unnecessary spending to cut back and maybe consider a side hustle to make more money.

Looking at your spending habits can be difficult. But owning up to mistakes you might be making and coming up with a solid strategy can be far easier than the agony that spending blindly may bring. That’s why starting a budget is a post-graduation must!

Meet with a financial professional
Find a qualified and licensed financial professional and schedule an appointment. Don’t let the idea of meeting with a professional intimidate you. Afterall, you trust your health, car, and legal representation to properly trained experts. Why wouldn’t you do the same with your financial future?

Being scared of starting a new chapter of life is natural. There are a lot of new experiences and unknowns to deal with that come along with leaving the familiarity of college. But the best way to overcome fear is to face it head on. These tips are a great way to start taking control of your future!

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WSB255927-04.20

Financial Strategy - The Importance of Having One

A financial strategy is many things.

It’s not just a budget. In fact, a solid financial strategy is not entirely based on numbers at all. Rather, it’s a roadmap for your family’s financial future. It’s a journey on which you’ll need to consider daily needs as well as big-picture items. Having a strategy makes it possible to set aside money now for future goals, and help ensure your family is both comfortable in the present and prepared in the future.

Financial Strategy, Big Picture
A good financial strategy covers pretty much everything related to your family’s finances. In addition to a snapshot of your current income, assets, and debt, a strategy should include your savings and goals, a time frame for paying down debt, retirement savings targets, ways to cover taxes and insurance, and in all likelihood some form of end-of-life preparations. How much of your strategy is devoted to each will depend on your age, marital or family status, whether you own your home, and other factors.

Financial Preparation, Financial Independence
How do these items factor into your daily budget? Well, having a financial strategy doesn’t necessarily mean sticking to an oppressive budget. In fact, it may actually provide you with more “freedom” to spend. If you’re allocating the right amount of money each month toward both regular and retirement savings, and staying aware of how much you have to spend in any given time frame, you may find you have less daily stress over your dollars and feel better about buying the things you need (and some of the things you want).

Remember Your Goals
It can also be helpful to keep the purpose of your hard-earned money in mind. For example, a basic financial strategy may include the amount of savings you need each month to retire at a certain age, but with your family’s lifestyle and circumstances in mind. It might be a little easier to skip dinner out and cook at home instead when you know the reward may eventually be a dinner out in Paris!

Always Meet with a Financial Professional
There are many schools of thought as to the best ways to save and invest. Some financial professionals may recommend paying off all debt (except your home mortgage) before saving anything. Others recommend that clients pay off debt while simultaneously saving for retirement, devoting a certain percentage of income to each until the debt is gone and retirement savings can be increased. If you’re just getting started, meet with a qualified and licensed financial professional who can help you figure out which option is for you.

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WFG255747-04.20

Watch out for these 5 Credit Card Red Flags

Credit cards aren’t free money — that should go without saying, but millions of Americans don’t seem to have received that memo.

Americans now owe a record $1.04 trillion in credit card debt.¹ If you’re not careful, credit card debt could hurt your credit score, wipe out your savings, and completely alter your personal financial landscape.

So: debt, debit, both, or neither? Before you apply for that next piece of plastic, here’s what you need to watch out for.

Low interest rates
Credit card companies spend a lot of money on marketing to try to get you hooked on an offer. Often you hear or read that a company will tout an offer with a low or zero percent APR (Annual Percentage Rate). This is called a “teaser rate.”

Sounds amazing, right? But here’s the problem: This is a feature that may only last for 6–12 months. Ask yourself if the real interest rate will be worth it. Credit card companies make a profit via credit card interest. If they were to offer zero percent interest indefinitely, then they wouldn’t make any money.

Make sure you read the fine print to determine whether the card’s interest rate will be affordable after the teaser rate period expires.

Fixed vs. variable interest rates
Credit cards will operate on either a fixed interest rate or a variable interest rate.² A fixed interest rate will generally stay the same from month to month. A variable interest rate, by contrast, is tied to an index (fancy word for interest rate) that moves with the economy. Normally the interest rate is set to be a few percentage points higher than the index.

The big difference here is that while a fixed rate may change, the credit card company is required to inform its customers when this happens. While a variable APR may start out with a lower interest rate, it’s not uncommon for these rates to fluctuate. What’s more, the credit card company isn’t required to tell you about a variable rate change at all!³

Low interest rates are usually reserved for individuals who have great credit with a long credit history. So, if you’ve never owned a credit card (or you are recovering from a negative credit history) this could be a red flag.

Of course, you could avoid these pitfalls altogether if you pay off your credit card balance before the statement date. Whatever the interest rate, be sure you’re applying for a credit card that’s affordable for you to pay off if you miss the payoff due date.

High credit limits
While large lines of credit are usually reserved for those with a good credit history, a new cardholder might still receive an offer for up to a $10,000 credit limit.

If this happens to you, beware. While it may seem like the offer conveys a great deal of trust in your ability to pay your bill, be honest with yourself. You may not be able to recover from the staggering size of your credit card debt if you can’t pay off your balance each month.

If you already have a card with a limit that feels too high, it may be in your interest to request that the company lower your card’s limit.

Late fees
So you’re late paying your credit card bill. Late payments not only have the potential to hurt your credit score, but some credit cards may also assess a penalty APR if you haven’t paid your bill on time.

Penalty APRs are incredibly high, usually topping out at 29.99%.⁴ The solution here is simple: pay your bill on time or you might find self paying ridiculous interest rates!

Balance transfer fees
It’s not uncommon for a cardholder to transfer one card’s balance to another card, otherwise known as a balance transfer. This can be an effective way to pay off your debt while sidestepping interest, but only if you do so before the card’s effective rate kicks in. And, even if a card offers zero interest on balance transfers, you still may have to pay a fee for doing so.

Whatever type of credit card you choose, the only person responsible for its pros and cons is you. But if you’re thrifty and pay attention to the bottom line, you can help make that credit card work for your credit score and not against it.

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¹ Samuel Stebbins “Where credit card debt is the worst in the US: States with the highest average balances,” USA Today (March 7 2019, updated April 26, 2019)
² Latoya Irby, “Credit Card Interest Rates: Fixed vs. Variable Rates,” The Balance (May 20, 2019)
³ Latoya Irby, “Credit Card Interest Rates: Fixed vs. Variable Rates,” The Balance (May 20, 2019)
⁴ Latoya Irby, “Credit Card Default And Penalty Rates Explained,” (August 12, 2019)

WFG254213-04.20

How to Budget for Beginners

Everybody needs a budget.

But that doesn’t stop “budget” from being an intimidating word to many people. Some folks may think it means scrimping on everything and never going out for a night on the town. It doesn’t! Budgeting simply means that you know where your money is going and you have a way to track it.

The aim with budgeting is to be aware of your spending, plan for your expenses1, and make sure you have enough saved to pursue your goals.

Without a budget, it can be easy for expenses to climb beyond your ability to pay for them. You break out the plastic and before you know it you’ve spent fifty bucks on drinks and appetizers with the gang after work. These habits might leave you with a lot of accumulated debt. Plus, without a budget, you may not be saving for a rainy day, vacation, or your retirement. A budget allows you to enact a strategy to help pursue your goals. But what if you’ve never had a budget? Where should you start? Here’s a quick step-by-step guide on how to get your budgeting habit off the ground!

Track your expenses every day
Start by tracking your expenses. Write down everything you buy, including memberships, online streaming services, and subscriptions. It’s not complicated to do with popular mobile and web applications. You can also buy a small notebook to keep track of each purchase. Even if it’s a small pack of gum from the gas station or a quick coffee at the corner shop, jot it down. Keep track of the big stuff too, like your rent and bill payments.

Add up expenses every week and develop categories
Once you’ve collected enough data, it’s time to figure out where exactly your paycheck is going. Start with adding up your expenses every week. How much are you spending? What are you spending money on? As you add your spending up, start developing categories. The goal is to organize all your expenses so you can see what you’re spending money on. For example, if you eat out a few times per week, group those expenses under a category called “Eating Out”. Get as general or as specific as you wish. Maybe throwing all your food purchases into one bucket is all you need, or you may want to break it down by location - grocery store, big box store, restaurants, etc.

Create a monthly list of expenses
Once you’ve recorded your expenses for a full month, it’s time to create a monthly list. Now you might also have more clarity on how you want to set up your categories. Next, total each category for the month.

Adjust your spending as necessary
Compare your total expenses with your income. There are two possible outcomes. You may be spending within your income or spending outside your income. If you’re spending within your income, create a category for savings if you don’t have one. It’s a good idea to create a separate savings category for large future purchases too, like a home or a vacation. If you find you’re spending too much, you may need to cut back spending in some categories. The beauty of a budget is that once you see how much you’re spending, and on what, you’ll be able to strategize where you need to cut back.

Keep going
Once you develop the habit of budgeting, it should become part of your routine. You can look forward to working on your savings and developing a retirement strategy, but don’t forget to budget in a little fun too!

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¹Jeremy Vohwinkle, “Make a Personal Budget in 6 Steps: A Step-by-Step Guide to Make a Budget,” The Balance (March 6, 2020).

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Now’s the Time for Future Planning

What happened to the days of the $10 lawn mowing job or the $7-an-hour babysitting gig every Saturday night?

Not a penny withheld. No taxes to file. No stress about saving a “million dollars” for retirement. As a kid, doing household chores or helping out your friends and neighbors for a little spending money was vastly different from your grown up reality – writing checks for all those bills, paying your taxes, and buying all the things that children seem to need these days, all while trying to save as much as you can for your retirement. When you were a kid, did those concepts feel so far away that they might as well have been camped out on Easter Island?

What happened to the carefree attitude surrounding our finances? It’s simple: we got older. More opportunities. More responsibilities. More choices. As the years go by, finances get more complicated. So knowing where your money is going and whether or not it’s working for you when it gets there is something you need to determine sooner rather than later – even before your source of income switches from mowing lawns and babysitting to your first internship at that marketing firm downtown.

A great way to get a better idea of where your money is going and what it’s doing when it gets there? A financial strategy.

A sound strategy for your money is essential, starting as soon as possible is better than waiting, and talking to a financial professional is a solid way to get going. No message in a bottle sent from a more-prepared version of your future self is going to drift your way from Easter Island. But sitting down with me is a great place to start. Contact me any time.

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WFG131530-0919

Big Financial Rocks First

A teacher walked into her classroom with a clear jar, a bag of rocks, a bucket of sand, and a glass of water. She placed all the large rocks carefully into the jar.

“Who thinks this jar is full?” she asked. Almost half of her students raised their hands. Next, she began to pour sand from the bucket into the jar full of large rocks emptying the entire bucket into the jar.

“Who thinks this jar is full now?” she asked again. Almost all of her students now had their hands up. To her student’s surprise, she emptied the glass of water into the seemingly full jar of rocks and sand.

“What do you think I’m trying to show you?” She inquired.

One eager student answered: “That things may appear full, but there is always room left to put more stuff in.”

The teacher smiled and shook her head.

“Good try, but the point of this illustration is that if I didn’t put in the large rocks first, I would not be able to fit them in afterwards.”

This concept can be applied to the idea of a constant struggle between priorities that are urgent versus those that are important. When you have limited resources, priorities must be in place since there isn’t enough to go around. Take your money, for example. Unless you have an unlimited amount of funds (we’re still trying to find that source), you can’t have an unlimited amount of important financial goals.

Back to the teacher’s illustration. Let’s say the big rocks are your important goals. Things like buying a home, helping your children pay for college, retirement at 60, etc. They’re all important –but not urgent. These things may happen 10, 20, or 30 years from now.

Urgent things are the sand and water. A monthly payment like your mortgage payment or your monthly utility and internet bills. The urgent things must be paid and paid on time. If you don’t pay your mortgage on time… Well, you might end up retiring homeless.

Even though these monthly obligations might be in mind more often than your retirement or your toddler’s freshman year in college, if all you focus on are urgent things, then the important goals fall by the wayside. And in some cases, they stay there long after they can realistically be rescued. Saving up for a down payment for a home, funding a college education, or having enough to retire on is nearly impossible to come up with overnight (still looking for that source of unlimited funds!). In most cases, it takes time and discipline to save up and plan well to achieve these important goals.

What are the big rocks in your life? If you’ve never considered them, spend some time thinking about it. When you have a few in mind, place them in the priority queue of your life. Otherwise, if those important goals are ignored for too long, they might become one of the urgent goals - and perhaps ultimately unrealized if they weren’t put in your plan early on.

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130968WFG-WFG0919

7 Tips for Talking to Your Partner About Money

Dealing with finances is a big part of any committed relationship and one that can affect many aspects of your life together.

The good news is, you don’t need a perfect relationship or perfect finances to have productive conversations with your partner about money, so here are some tips for handling those tricky conversations like a pro!

Be respectful
Respect should be the basis for any conversation with your significant other, but especially when dealing with potentially touchy issues like money. Be mindful to keep your tone neutral and try not to heap blame on your partner for any issues. Remember that you’re here to solve problems together.

Take responsibility
It’s perfectly normal if one person in a couple handles the finances more than the other. Just be sure to take responsibility for the decisions that you make and remember that it affects both people. You might want to establish a monthly money meeting to make sure you’re both on the same page and in the loop. Hint: Make it fun! Maybe order in, or enjoy a steak dinner while you chat.

Take a team approach
Instead of saying to your partner, “you need to do this or that,” try to frame things in a way that lets your partner know you see yourself on the same team as they are. Saying “we need to take a look at our combined spending habits” will probably be better received than “you need to stop spending so much money.”

Be positive
It can be tempting to feel defeated and hopeless that things will never get better if you’re trying to move a mountain. But this kind of thinking can be contagious and negativity may further poison your finances and your relationship. Try to focus on what you can both do to make things better and what small steps to take to get where you want to be, rather than focusing on past mistakes and problems.

Don’t ignore the negative
It’s important to stay positive, but it’s also important to face and conquer the specific problems. It gives you and your partner focused issues to work on and will help you make a game plan. Speaking of which…

Set common goals, and work toward them together
Whether it’s saving for a big vacation, your child’s college fund, getting out of debt, or making a big purchase like a car, money management and budgeting may be easier if you are both working toward a common purpose with a shared reward. Figure out your shared goals and then make a plan to accomplish them!

Accept that your partner may have a different background and approach to money
We all have our strengths, weaknesses, and different perspectives. Just because yours differs from your partner’s doesn’t mean either of you are wrong. Chances are you make allowances and balance each other out in other areas of your relationship, and you can do the same with money if you try to see things from your partner’s point of view.

Discussing and managing your finances together can be a great opportunity for growth in a relationship. Go into it with a positive attitude, respect for your partner, and a sense of your common values and priorities. Having an open, honest, and trust-based approach to money in a relationship may be challenging, but it is definitely worth it.

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The Birds Have Flown the Coop!

The kids (finally) moved out!

Now you can plan those vacations for just the two of you, delve into new hobbies you’ve always wanted to explore… and decide whether or not you should keep your life insurance as empty nesters.

The answer is YES!

Why? Even though you and your spouse are empty nesters now, life insurance still has real benefits for both of you. One of the biggest benefits is your life insurance policy’s death benefit. Should either you or your spouse pass away, the death benefit can pay for final expenses and replace the loss of income, both of which can keep you or your spouse on track for retirement in the case of an unexpected tragedy.

What’s another reason to keep your life insurance policy? The cash value of your policy. Now that the kids have moved out and are financially stable on their own, the cash value of your life insurance policy can be used for retirement or an emergency fund. If your retirement savings took a hit while you helped your children finance their college educations, your life insurance policy might have you covered.Utilizing the cash value has multiple factors you should be aware of before making any decision.*

Contact me today, and together we’ll check up on your policy to make sure you have coverage where you want it - and review all the benefits that you can use as empty nesters.

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*Loans and withdrawals will reduce the policy value and death benefit dollar for dollar. Withdrawals are subject to partial surrender charges if they occur during a surrender charge period. Loans are made at interest. Loans may also result in the need to add additional premium into the policy to avoid a lapse of the policy. In the event that the policy lapses, all policy surrenders and loans are considered distributions and, to the extent that the distributions exceed the premiums paid (cost basis), they are subject to taxation as ordinary income. Lastly, all references to loans assume that the contract remains in force, qualifies as life insurance and is not a modified endowment contract (MEC). Loans from a MEC will generally be taxable and, if taken prior to age 59 1/2, may be subject to a 10% tax penalty.

WFG132467-1019

Money Saving Tips for the Holiday Season

The holidays shouldn’t be a time for worrying about your finances.

But the cost of travel, food, and gifts can add up quickly, making it hard to focus on the things that matter most. Here are some tips to help protect your pocketbook this holiday season so you can focus on sharing old traditions and making new memories with friends and family.

Play secret Santa
Secret Santa is an easy way to divvy up gift buying duties, especially if you have a large family or friend group. Have everyone participating put their names in a hat. Everyone then draws a random name out of the hat and must buy a gift for the person they’ve selected. It’s a simple and fun way to limit how many people you need to buy gifts for and control how much you spend on presents. Optional Secret Santa: Only do the gift swap with the kids and skip the adults this year.

Buy gifts with cash when you can
Watch out for credit card debt this holiday season. Purchasing presents with credit can be tempting (especially during the Black Friday frenzy), but how much you’re going to owe can quickly add up. Set a budget for yourself and then take that much cash out of the bank. Once it dries up, stop buying gifts! Your future self will be glad come January when you don’t have a whopping credit card bill to pay off.

Take advantage of sales and coupons early
Start collecting wishlists a few months before the holidays begin. If Aunt Margaret mentions a new cookware set she has her eye on in August, take note! Shopping early is an easy way of increasing your chances of finding sales and deals before the hardcore holiday shopping ensues. For online shopping, investigate couponing apps and add-ons. They can automatically add discounts to purchases, potentially saving you big money over a few gifts!

The holidays are about remembering what really matters, not worrying about money. The goal of these tips isn’t just to save you some cash, but to help you celebrate the things and people you love, free of financial distractions. Happy Holidays!

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Royal Wedding or Vegas? Keeping your wedding costs under control

The average cost of a wedding in the U.S. is over $33,000.[i]

That’s an expensive day by any standard!

That amount might be enough for a down payment on a first home or for a well-equipped, late-model minivan to shuttle around your 1.9 kids – assuming your family has an average number of children as a result of your newly wedded bliss.[ii]

If you’re having cold feet about shelling out that much cash for one day’s festivities – or even worse, if you fear you might have to go into debt to pay for it – here are a few ideas on how you can make your wedding day a special day to remember, and still save some money for other things (like that minivan).

Invite Close Friends and Family
Many soon-to-be newlyweds dream of a massive wedding with hundreds of people in attendance to honor their big day. But at some point during any large wedding, the bride or the groom – or maybe both – look around the well-dressed guests and ask themselves, “Who are all these people, anyway?”

You can cut the cost of your wedding dramatically by simply trimming the guest list to a more manageable size. Ask yourself, “Do I really need to invite that kid who used to live next door to our family when I was 6 years old?” Small weddings are a growing trend, with many couples choosing to limit the guest list to just close friends and immediate family. That doesn’t mean you need to have your wedding in the backyard while the neighbor’s dog howls during your vows – although you certainly can. It just means fewer people to provide food and drink for and perhaps a less palatial venue to rent.

Budget According to Priorities
Your wedding is special and you want everything to be perfect. You’ve dreamed of this day your entire life, right? However, by prioritizing your wish list, there’s a better chance to get exactly what you want for certain parts of your wedding, by choosing less expensive – but still acceptable – options for the things that may not matter to you so much. If it’s all about the reception party atmosphere for you, try putting more of your budget toward entertainment and decorations and less toward fancy food. Consider trading the seven-course gourmet dinner with full service for a selection of simpler, buffet-style dishes catered by your favorite restaurant.

Incorporate More Wallet-Friendly Wedding Ideas
A combination of small adjustments in your plan can add up to big savings, allowing you to have a memorable wedding day and still have enough money left over to enjoy your newfound bliss.

  • Consider a different day of the week. If you’re planning on getting married on a Saturday in June or September, be prepared to pay more for a venue than you would any other day of the week or time of the year. Saturday is the most expensive day to get married[iii], and June and September are both peak wedding season months.[iv] So if you can have your wedding on, say, a Friday in April or November, this has the potential to trim the cost of the venue.
  • Rent a vacation house – or even get married on a boat. The smaller space will prevent the guest list from growing out of control and the experience might be more memorable than at a larger, more typical location. Of course, both options necessitate holding the reception at the same location, saving money once more.
  • Watch the booze costs. There’s no need to have a full bar with every conceivable drink concoction and bow-tied bartenders that can perform tricks with the shakers. Odds are good that your guests will be just as happy with a smaller-yet-thoughtfully-chosen selection of beer and wine to choose from.
  • Be thrifty. If you really want to trim costs, you can get creative about certain traditional “must-haves,” ranging from skipping the flowers (chances are that nobody will even miss them) to purchasing a gently-used gown. (Yes, people actually do this.) Online outlets may provide beautiful gowns for a fraction of the price of a new gown.

There’s a happy medium between a “royal wedding” and drive-thru nuptials in Vegas. If you’re looking for a memorable day that won’t break the bank, consider some of the tips above to keep things classy, cool – and within your budget.

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