Year-End Planning for Retirees
As we approach the last quarter of each year, it is a good time to plan for the next one. Year-end planning is especially important for existing retirees and those hoping to retire in the next few years. There are tax and income strategies you might consider regarding your financial assets. Here are three steps you may take when planning the end of the tax year and preparing for the next one.
Suppose you hold equities, with unrealized losses, in an account subject to tax. In that case, you may be able to sell these equities and harvest the tax loss to balance out any realized gains made from other stocks. Harvesting only works when the procedure is completed within a single tax year.
For example, if you are sitting on a loss in one stock, you may sell it and also sell a better-performing stock with the same amount in long-term gains without triggering a tax event. This technique may lower your tax liability by using these two assets to offset each other instead of just paying taxes on the one with a gain.
Be aware of the wash-sale rule that prevents the deduction of certain capital losses from an investor’s capital gains. The wash-sale rule applies when an investor sells equities at a loss and within 30 days before or after the sale date, bought or buys another equity that is substantially the same. A wash-sale occurs if a person’s spouse or a substantially controlled company buys an equivalent security.3
After enough time passes, you may avoid the wash sale rule. Then, you may buy back into the lower-performing stock if you like.2 Unless that stock had a massive recovery during the time that you did not own it; you may be able to enjoy any long-term appreciation in its future value by starting over again at a lower cost basis.
Rebalance Your Asset Allocation
In retirement, it may be helpful to review both your risk tolerance and your asset allocation. As some assets increase in value while others remain stagnant or drop, your actual asset allocation may begin to stray from the goals for your portfolio. This circumstance may require some rebalancing, such as selling overperforming funds and buying back underperforming ones. Also, evaluate the future of these sectors with your investments to see whether other investments may be a better fit for your needs.
Update Your Income, Health Care, and Emergency Expense Plans
A low-stress retirement may hinge on having access to a stable source of income, such as an annuity, a pension, or rental or other passive income. Without this, you may be at risk of major market fluctuations occurring just when you need to withdraw some cash. The end of the tax year may be a great time to revisit your income plan for the next year. Consider whether to set aside additional funds for healthcare-related expenses and evaluate how you would pay for an emergency. By having a plan in hand, you may be able to weather whatever the next year may bring.
Important Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This information is not intended to be a substitute for specific individualized tax advice.
We suggest that you discuss your specific tax issues with a qualified tax advisor.
Asset allocation does not ensure a profit or protect against a loss.
Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction
costs and does not assure a profit or protect against a loss.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by WriterAccess.
The Scary Truth About Loss Aversion and Fear of Investing
Loss aversion, or the phenomenon of experiencing losses much more severely than gains, can lead to unwise investment decisions. Whether you’re hanging on to a loser of a stock for longer than you should or are afraid to invest at all for fear of purchasing at a high point, making emotion-based investment decisions could mean leaving money on the table.
Below, we discuss how fear and anxiety can negatively impact your investing decisions, as well as some steps you can take to minimize this impact and reduce the stress of investing.
How Loss Aversion and Other Fears Can Impact Investing
Fear of losing your hard-earned money may lead to irrational behavior and bad decisions. In behavioral psychology, loss aversion is incredibly common; this means that most people will be more upset about losing $100 than they would be happy to find $100.
For investors, this means you could find yourself hanging onto an investment you’ve lost money on, despite the opportunity cost of having that money tied up, just because you don’t want to cash out and realize the loss. This not only risks a further decline in the investment, but it can also prevent you from allocating these funds in a wiser way.
Loss aversion also comes into play during recessions, depressions, or other volatile markets. No one wants to lose money on an investment, so the temptation to cash out when the market is on a downswing can be overwhelming. However, this also may mean that you may be equally reluctant to re-enter the market when it’s back on an upswing. This approach has a double negative impact: instead of buying low and selling high, you’re selling low and buying high.
How to Manage Emotional Investing
Investing with your heart instead of your mind could result in losing money. Instead of letting emotions drive your investment decisions, try the following strategies:
-
Review asset allocation. If the way your funds are invested no longer meshes with your risk tolerance and investment timeline, rebalancing your funds could help avoid making snap decisions.
-
Consider a buy-and-hold or “set it and forget it” approach. The more closely you monitor your investment balances, the more tempted you may be to take action. By checking investments periodically to ensure they still fit into your desired asset allocation, then consciously leaving them alone until the next scheduled checkup, you should be able to reduce a great deal of financial stress.
-
Work with a financial professional. Having a financial professional on your team can make investing less scary and provide an appropriate check on your decision-making process. A financial professional can help talk you through investing decisions to make sure they make logical sense and fit into your overall wealth-building strategy.
-
By focusing on rational, prudent trading strategies, you can mitigate many of the most common traps that can arise when loss aversion and other psychological phenomena may impact your judgment.
Important Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
Asset allocation does not ensure a profit or protect against a loss.
Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss.
This article was prepared by WriterAccess.
A New NBA Season and a Great Time to Review Your Financial Strategy
Basketball fans are eager for October when the NBA season kicks off. It is a new beginning, a fresh chance for teams to showcase their unique talent and strategies for staying at the top of the leaderboard in a wholly unpredictable sport. One day you are winning, everything is going great, and the next, you are in a slump, wondering if you will ever get out of it.
As with NBA basketball, the financial world can be complicated and overwhelming. Both involve numerous moving parts, including salaries, setbacks, and logistics, making any attempts to comprehend every last detail a formidable challenge for fans and analysts. Moreover, basketball and finance aren’t just comparable in terms of their complexities. The strategy and skills employed in the NBA also share some surprising similarities with those in the financial world.
Here are five similarities that a basketball fan might recognize and be able to apply to their financial journey.
1. You have to have offensive and defensive strategies
There has to be a balance of well-designed offensive and defensive strategies. Creating these strategies requires knowledge, being flexible in an unpredictable environment, having open and honest lines of communication, and understanding your risk tolerance. You want to be offensive, but not so much that you risk your financial condition. You want to be defensive regarding your finances but not so scared that you keep your money in accounts with little growth opportunity. There has to be a balance.
2. Set achievable goals
Having achievable goals can make a journey much more meaningful. It allows you to stay focused when day-to-day life can often seem mundane, and the temptation of procrastination is hard to ignore.
3. You have to be willing to evolve
Basketball is a sport that is particularly susceptible to changes, with players and coaches switching teams annually and, winning streaks suddenly becoming losing spells. In contrast, players and coaches keep trying new plays to determine what will work. Being flexible allows you to stay on top of an ever-changing world and market.
4. Preparation
Being prepared means taking steps, often years in advance, to pursue a specific goal or set of plans. When it comes to financial independence or winning championships in sports, making critical decisions when it matters, staying disciplined, and effectively visualizing where you hope to be can help set the stage for your future.
5. You need competent coaching
Whether you are an NBA player or someone interested in designing a financial strategy, having a competent coach that understands the current environment and what you are trying to accomplish changes the game’s stakes. Any plan of action involves risks; however, receiving guidance from an experienced coach in sports or a financial professional in the financial world provides you with a chance to potentially manage some of the risk and to recognize problems before they have an opportunity to knock you off course.
Consider consulting a financial professional to review your financial strategy and condition and determine if any modifications need to be made. An experienced financial professional, like a basketball coach, can recognize issues or areas that need adjustment as you develop a confident financial game plan.
Important Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by LPL Marketing Solutions
LPL Tracking # 1-05377602
Finding Focus with Financial Planning: A Step-By-Step Guide
You have probably heard about financial planning and its potential benefits, but you are unsure how to apply the principles to your life. A financial plan is a collection of steps that help you to evaluate your financial condition and determine how to prepare for your financial future. A financial plan may impact every aspect of your life, from your credit score to your savings, investments, spending habits, and retirement. This guide will discuss some steps to help you get a foothold to begin that climb toward possible financial wellness. Help from a financial professional is also highly recommended to navigate some of the more complex nuances of financial planning.
STEP 1: Cleaning Up Debt
One of the first things you want to consider dealing with when putting together a financial plan is working to eliminate your debts. It is no secret that having debt, primarily high-yield debts, is a barrier to wealth preservation and accumulation. Settling any debts needs to be taken care of sooner rather than later.
There are ways you can tackle debt that can potentially help you if you are disciplined and patient. For most people, debt is not cleared up overnight. It takes time, but you may start to see results by following one or more techniques. Here are a few common debt management strategies:
Debt Avalanche Method – You make the minimum payment on each account where you owe money but pay as much as possible to the one with the highest interest rate until it gets paid off. Then you apply this method with the second highest interest rate, and so on.
Debt Snowball Method – You pay off the smallest balance first and then work up to the largest. When you have extra money after your bills and necessities get paid, put it toward your debt. [i]
Debt Review – It can seem suffocating when a person struggles to repay debts. With a debt review, a debt counselor will intervene and contact the creditors to make more manageable payment arrangements. This might seem like a saving grace for some people, but it must be carefully considered. Be aware of the stipulations that come with debt review.
-
Your credit may plummet until creditors agree to a payment schedule and you begin making those payments. This could be a few months before everything is in place.
-
You cannot apply for new credit while in a debt review program.
-
You cannot leave the program until all debts get settled.
STEP 2: Keeping Your Credit In Check
Having strong credit can help you maintain your financial wellness. One way to measure this is through a credit utilization ratio check.
How to Check Your Credit Utilization Ratio – You take the sum of all the credit card balances and divide that number by the credit limits of each card. Say you have two credit cards, in this hypothetical, one with a $1,000 limit and the other $500. You owe $750 on one card and $200 on the other. Divide $950 ($750 plus $200) into $1500 ($1,000 plus $500). Your credit ratio is 63.3 percent. This ratio would not be good. (This is a hypothetical example and is not representative of any specific situation. Your results will vary.) You generally don’t want your credit ratio to exceed 30 percent. [ii] If you’re looking to improve your credit score, keeping your credit utilization ratio in mind can help you manage your spending and monitor your credit card use.
Try to Make Regular Credit Card Payments
-
Make sure not to overspend and then open up new cards because you may find yourself living above your means.
-
You do not want to get in too deep where the minimum payment is more than you can afford and you end up with past due charges.
STEP 3: Consider A College Savings Plan
In this day and age where competition for jobs is as stiff as ever, and it might be just as much in the future or worse, it is critical that children pursue an education. But along with the accessibility of college today, graduates often have to contend with the immense debt that comes with acquiring an education. Parents and grandparents can help with this through a college savings plan.
Choosing a College Savings Plan – There are a few options when deciding on a college savings plan, including a 529 plan, Prepaid Tuition, Custodial Accounts, and other methods. Using a college savings plan can potentially benefit your child or grandchild’s future. For example, let’s look at the pros and cons of the 529 Plan. [iii]
-
Tax-free growth of your money.
-
Tax-free if withdrawn to pay for college.
-
Flexibility in how the funds can be used. You can easily transfer money from one child to another.
-
Parents have control of the plan.
-
There are upfront costs.
-
Contributions are not deductible.
-
Your child’s financial aid could be reduced.
-
Penalties may occur for withdrawals that are not for educational purposes. There are also penalties for ill-timed withdrawals.
If you have questions about college savings plans, consider working with a financial professional to help you determine which option is appropriate for you and your family.
STEP 4: Diversifying And Rebalancing Your Portfolio
Understanding how your wealth is distributed amongst asset classes is essential to financial planning and preparations for the future. A bit of guidance from a knowledgeable source, like an experienced financial professional, can go a long way as asset allocation and portfolio rebalancing go hand-in-hand and can become rather complex. Here’s a quick rundown of these two strategies:
Asset Allocation – Depending on where you are in your life and your career, your risk tolerance can help determine how to allocate your assets among different asset classes, including stocks, bonds, mutual funds, and cash. First, determine your time horizon. This is the amount of time required (months or years) that you are aiming to see your goals through. Then work with a financial professional to help you determine where to allocate your wealth and how much to put into each separate account.
Portfolio Rebalancing – After completing an asset allocation, you may find that the weighting of each asset has changed. This fluctuation in price is normal and it means the market value is earning a different return. Depending on your risk level, you may want to make some modifications to your portfolio. Rebalancing is essentially buying or selling assets to get portfolio diversification. Everyone has unique circumstances, goals, and levels of risk that apply to them. Before you move forward with selling a bunch of assets, consider the tax implications of these sales. [iv]
STEP 5: Tax Planning
Taxes are just a part of life. You will have to deal with tax consequences if you work and generate income. Knowing how the tax laws affect you may help mitigate the burden you will face both now and in the future.
Addressing Tax Planning Needs – When it comes to tax legislation, everybody’s tax situation is different. You may find yourself in a maze of regulations, layers of rules, and complexity that a seasoned financial professional can walk you through. There is so much involved depending on your assets, so it is highly recommended to seek help.
STEP 6: Making Preparations For Your Long-Term Health
We all eventually grow old. As kids, we were bewildered by Peter Pan and how he could seemingly stay young forever. Unfortunately, this isn’t the case, and as we grow older, we have to understand the financial considerations of the aging process.
Long-Term Care Insurance – Nobody ever wants to believe that when they grow older, there will be any reason to need long-term care. According to the Administration for Community Living, people 65 and older have almost a 70 percent chance of needing long-term care. That is a significant number and not one to brush off. In fact:
STEP 7: Keeping Your Documents Organized And Secure
Being organized does not just benefit you in terms of keeping a tidy house and knowing where your phone and keys are. It can also be beneficial when sorting through your financial documents.
Organization of Financial Documents – If you have never been one to keep an organized file containing your financial documents, it could be a good idea to look into it. Doing so could help you monitor your finances much easier. You would have easy access to what you need, especially in case of an emergency or unexpected situation. You could save money by reviewing these documents periodically and looking for ways to update your financial positions. If you’re ready to whip your financial filing system into shape, give these simple organization tips a try:
-
Organize your bills and financial statements in a monthly folder or by a specific account.
-
Take care to keep documents that are hard to acquire separate and put them in a safe place. Some of these documents may include:
-
Tax Returns
-
Insurance Claims
-
Proof of Identity
-
Legal Contracts
-
When it comes to this type of organization, chronological order is your friend. You can use this for tax returns, mortgage contracts, property appraisals, financial statements, and more.
-
Hold onto store receipts, or print out a copy of your purchases from your banking app (if you have one), reconcile them, and ensure there are no unexplained expenditures. This can also help you to keep track of your spending habits.
-
If you are tech-savvy, you can scan the documents and maintain digital folders.
STEP 8: Preparing For The Unexpected
One day everything is running smoothly, and the next, you’re neck-deep in a financial crisis. Are you prepared for this? Those that prepare for an emergency by having a financial emergency plan can at least stave off some of the burdens they might face.
Updating Your Financial Emergency Plan – Having an updated emergency plan or fund is critical to your financial wellness. No matter how careful you are, life has the potential to throw you unexpected curveballs. It can be a financial nightmare for those unprepared for such an incident. To prevent this from happening, creating a financial emergency plan starting today can benefit you in the long term. [vi]
Spending too much can potentially create problems regarding your financial well-being. Take a step back, evaluate where your money is going, and determine if there is anything you can do to modify your habits that can benefit you now and in the future.
STEP 9: Modify Your Spending
Reduce Expenditures – Look for ways to manage your expense burden. Sometimes you may not see it right away, but there are numerous ways to cut a percentage off of what you are spending on everything from bills to everyday expenditures. Here are a few ways you can cut back:
-
Cut back on unnecessary, everyday expenses.
-
Refinancing a mortgage.
-
Rethinking your car insurance.
-
Working with a financial professional to help you navigate ways to shave off expenses. [vii]
-
Curbing energy costs.
-
Funneling more money from a paycheck to an emergency savings account.
STEP 10: Meet With A Financial Professional
Whether this is your first venture into the world of financial planning or you already have a knack for the basics, it’s never too early or too late to seek guidance and ask questions. Are you ready to find focus with financial planning? Work with a financial professional to help you pursue your financial goals as you take these first ten steps towards a confident financial future.
[i] Debt Avalanche vs. Debt Snowball: What’s the Difference? (investopedia.com)
[ii] Is 0% a Good Credit Utilization Ratio? (cnbc.com)
[iii] The Top 9 Benefits of 529 Plans – Savingforcollege.com
[iv] Rebalancing Your Portfolio | FINRA.org
[v] How Much Care Will You Need? | ACL Administration for Community Living
[vi] Financial Preparedness | Ready.gov
[vii] 12 Easy Ways to Cut Expenses at Home (debt.org)
Important Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security or Long Term Care Insurance. To determine which investment(s) or product(s) may be appropriate for you, consult your financial professional prior to investing or purchasing.
Prior to investing in a 529 Plan investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
Asset allocation does not ensure a profit or protect against a loss.
Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by LPL Financial Marketing Solutions.
LPL Tracking #1-05337522
Retirement Security Starts With Visualizing Your Future
Planning for your financial future and retirement looks much different now than in previous years. Some people must supplement their Social Security to have enough to maintain their desired lifestyle. This means financial planning is now a critical component of retirement. While having a financial professional on your side is vital to managing your financial future, so is visualizing what your future may include.
Visualizing Helps You Determine How Much You Need in Retirement
One of the most important reasons for visualizing your future is that it may help you understand how much money you might need to afford the retirement you want. Imagine what your retirement may look like for you. Might it include travel? Do you anticipate making significant purchases? Do you want to leave a large estate to family members? Consider what you want to have in the future and calculate how much money you may need to accomplish those desires.1
Visualizing Helps You Consider Aspects of Retirement That May Affect Your Financial Needs
Visualizing your retirement may help you determine what steps need to be taken and how your retirement may be affected by certain aspects of your future. You may decide working longer is the ideal way to get to the future you visualize. You may also find that your plans could involve downsizing or upsizing your living situation, which may lead to adjustments in your financial plan.2
Part of Your Visualization Needs To Consider a Few Inescapable Factors
Certain parts of the future, such as aging and retirement, are inescapable. To improve your visualization and planning, here are a few things that you might want to factor in:
-
You may live longer than expected: With advancements in technology and better health care, people are living much longer than the average life span used to be, so you may need to manage your financial plan in order to provide you with enough money to get you through the remainder of your life.
-
You may face major health care bills: For most people, getting older means more health concerns and higher medical bills. As medical costs continue to rise, this challenge is expected to get worse in the future.
-
Inflation: The cost of living may continue to increase as you age. In some cases, the inflation cost may be significantly higher than expected. During your visualization, you must account for the fact that prices might increase from now through your retirement and make sure you plan accordingly.
Planning for retirement involves trying to see into the future, so you may imagine how to cover your wants and needs. One of the easiest ways to start your plan is by visualizing what you want your financial future to look like. With the help of a financial professional, you might then come up with the necessary steps in your plan to help you get there.
Important Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by WriterAccess.
Footnotes
1 How To Prepare For Retirement Through Visualization https://www.businessinsider.com/prepare-for-retirement-through-visualization-2011-4
2 Visualize your way to a better retirement https://www.cbsnews.com/news/visualize-your-way-to-a-better-retirement/
Investing vs. Saving: Key Differences and Why Your Money Mindset Matters
You often hear people discuss “saving for retirement,” but in many cases, they’re actually referring to their investing. The adage “you can’t save your way to wealth” is simplistic, but has a kernel of truth; putting your money in a savings account often won’t be enough to outpace the rate of inflation, which can erode the value of your savings over time. Below, we discuss some of the key differences between investing and saving and how to choose the most optimal course of option for you.
Saving: A Low-Risk Way to Set Aside Funds for the Future
Saving is just a method to set aside money for future use, whether you’re putting it into a general “emergency fund” or earmarking it for a new vehicle, a home down payment, or medical expenses. You can keep savings in a checking account, a regular or high-yield savings account, a certificate of deposit (CD), or even certain types of government bonds.
Investing: Putting Your Money to Work for You
Investing, on the other hand, involves putting your money into financial instruments like stocks, bonds, exchange-traded funds (ETFs), and mutual funds. Investing is riskier than saving, but can also earn higher returns over the long term. Even accounting for recessions and depressions, the S&P 500 (composed of the U.S.’s 500 largest companies) has averaged just over 11 percent per year in returns since 1980.1
Investing can be one of the most efficient ways to reach your long-term financial goals like paying for a child’s college education, purchasing a home, or retiring. For example, if you’re saving $100 per week toward your retirement and keeping it in a savings account earning a minimal amount of interest, you’ll have about $52,000 in 10 years. If you instead invested this money and achieved an average 10 percent annual rate of return, you’d have around $82,500 in a decade. This is more than a $30,000 increase in value over regular savings.2
Differences Between Saving and Investing
One of the key differences between saving and investing is the security of your funds. Savings is low-risk and low-reward, meaning that over time, you won’t earn enough in interest to overcome inflation, but you also won’t risk losing your initial funds.
With an investment, you have the opportunity to have a double-digit rate of return over time; but if you’re investing in an individual stock and the company goes bankrupt, your funds are gone.
This means it’s a good idea to seek some degree of balance. You’ll want to keep an emergency fund or any money you expect to use over the next couple of years in a low-risk account, like a savings account or CD. This will ensure the money is there and accessible whenever you need it.
But for longer-term funds, like retirement funds, it can be helpful to try and get ahead of inflation by investing these funds in the stock market. You can invest in whatever you’d like, from conservative bond funds to an aggressive growth portfolio. A financial professional can work with you to assess the best investments based on your risk tolerance, desired asset allocation, and retirement timeline.
Important Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments. All indexes are unmanaged and cannot be invested into directly.
Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.
An investment in Exchange Traded Funds (ETF), structured as a mutual fund or unit investment trust, involves the risk of losing money and should be considered as part of an overall program, not a complete investment program. An investment in ETFs involves additional risks such as not diversified, price volatility, competitive industry pressure, international political and economic developments, possible trading halts, and index tracking errors.
Investing in mutual funds involves risk, including possible loss of principal. The funds value will fluctuate with market conditions and may not achieve its investment objective. Upon redemption, the value of fund shares may be worth more or less than their original cost.
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.
CD’s are FDIC Insured and offer a fixed rate of return if held to maturity.
S&P 500 Index: The Standard & Poor’s (S&P) 500 Index tracks the performance of 500 widely held, large-capitalization US stocks.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by WriterAccess.
Sources:
1 “Stock Market S&P 500 Returns Since 1980,” https://www.officialdata.org/us/stocks/s-p-500/1980
2 “Compound Interest Calculator,” https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator
5 Must-Have Items for Your Financial First Aid Kit
Every year, around 3 million Americans are required to evacuate their homes due to a natural disaster.1 What’s more, this figure does not include the millions of other individuals who are temporarily displaced as a result of fire, flood, or other damage to their homes.
Do you have the documents you need if you find yourself required to vacate your residence suddenly? Do you know how to get in touch with your financial providers? Do you know how to get a new driver’s license? Do you have a way to access lines of credit? These and other questions may be answered by having a financial first-aid kit to use during an emergency.
Here are five items you want to keep in a safe place as your financial first-aid kit.
Contact Information for Financial Service Providers
In a disaster, you may not have reliable internet access, which might make it tough to track down contact information for your bank, homeowner’s or renter’s insurance company, credit card companies, and other lenders. Without a way to easily get in touch with these providers, especially lenders, you may not be able to make your scheduled payments—putting you at risk of financial harm.
Keep an updated list of contact information (including phone numbers and websites) for the financial service providers you interact with regularly.
Originals (and Copies) of Identification
Having your driver’s license, passport, Social Security card, and birth certificate (even copies) in one spot is useful if you are required to prove your identity. Some disasters may require you to evacuate for months. If you need to apply for government aid, like FEMA, you need some way to show that you are who you say you are.
Current Insurance Policy Information
Having insurance information handy is invaluable if you need to make a claim—from damage to your home or auto after a natural disaster to hotel costs associated with an evacuation. By having your insurance company’s contact information and copies of your policies handy, you are able to answer questions and assess your insurance coverage.
Property Ownership Records
Having your insurance information and property ownership records may make disaster claims easier for homeowners. Instead of relying on a government agency (which may also be in the natural disaster zone) to confirm ownership, you should be able to prove it yourself.
Inventory and Appraisal Records for Personal Property
If you have valuable personal property, it is a good idea to have this property itemized on a document in digital and printed format. This itemization may be as simple as a hand-written list of personal property or a series of photos; you could also create a video inventory by walking through your home, naming and pointing out certain items. Having this information on hand might make it easier to prove damages in an insurance claim and help get the appropriate value for your lost or damaged items.
Important Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by WriterAccess.
Footnotes
1 Disasters Displaced More Than 3 Million Americans in 2022 https://www.scientificamerican.com/article/disasters-displaced-more-than-3-million-americans-in-2022/
Why Financial Preparedness Is a Smart Investment
During turbulent financial times, having a financial emergency plan might provide you with a proverbial life preserver. Whether it is an emergency fund to help you tackle an unplanned expense, insurance to cover an unexpected accident or disaster, or a “go bag” that contains all your most important records, organizing your finances may help you feel prepared to handle anything that might come your way.
However, this financial preparedness does not come naturally. In fact, only about two-thirds of Americans could cover an unexpected $400 expense.1 Here are some of the most crucial steps you may take to work on financial preparedness.
Create an Emergency Savings Account
Having some cash set aside for emergencies or unplanned expenses may help you avoid going into debt when disaster strikes.
If you do not think you have the ability to save, start with a small amount. Even as little as $10 per week may add up to more than $500 by year-end. Consider cost-saving strategies like canceling or downgrading subscription services, using coupons, or taking on a part-time gig—then banking your money earned as savings.
Eliminate Debt
Every dollar you pay toward interest on debt is a dollar you are not able to spend on something else—or add to your emergency savings account.
If you have high-interest debt like credit card debt, payday loans, or auto title loans, and you are not in the position to afford to repay them immediately, investigate any lower-interest options that you may find. Those with moderate to good credit may qualify for a low-interest or no-interest balance transfer offer. This strategy may allow you to transfer a high-interest debt into a lower-interest debt, helping your payments go further toward paying off the principal balance.
Review Your Insurance Coverage
Even the most-wealthy households might have a challenge covering the cost of a life-changing emergency, such as a fire, flood, or natural disaster that destroys your house or an auto accident that results in severe injuries. It is important to have adequate insurance to manage risk and provide a source of funds if you are in a serious situation. Check your insurance policies regularly to determine if you have sufficient coverage for the unexpected.
Secure Important Documents
If your home caught fire today and you had to escape quickly, would you have the money and documentation in your possession to start rebuilding? Keep your most important documents—birth certificates, passports, Social Security cards, insurance policies, and financial statements—in a waterproof, fireproof container you may easily grab in an emergency. You may also want to keep some cash in a safe location in case of a power outage or other emergency when ATMs are not working.
This information should make it easier to contact your insurance company, make any claims for disaster relief funds, or take the other steps you need to move forward.
Important Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by WriterAccess.
Footnotes:
1 Most Americans do not have a penny of emergency savings, survey finds — use these 5 techniques to build a safety net
https://finance.yahoo.com/news/most-americans-dont-penny-emergency-110000942.html?
Football, Finances, and Fumbles: What to Do When Life Calls an Audible
Are you a football fan? If so, you understand the significance of an audible call at the line of scrimmage and how sometimes you are also forced to call an audible in life. Modern football has evolved since the late 19th century when Walter Camp at Yale University first pushed the idea of a quarterback receiving the ball from someone at the line of scrimmage. Over the years, players and referees have had to adapt to changes in the rules and new technologies. Flexibility and being able to adapt quickly are crucial skills that can help you navigate many aspects of your life, including financially. When it comes to emergency preparedness and planning, we often think about small steps taken over a long period of time. For example:
Creating a budget and reviewing it regularly
It not only helps you prepare for unexpected market fluctuations and changes to your life that impact you financially, but also, doing so can provide you with an idea of how much money you can comfortably put aside for emergencies. Football coaches have backup plays and players to use when their initial plans are challenged. Things inevitably happen in our lives, forcing us to call a financial audible. Being prepared can help to mitigate financial stress.
Saving $10 –$20 a week in a separate emergency account
Many people feel they are living paycheck to paycheck and can’t afford to save anything. Putting $10 or $20 in an account now and then might not seem like much, but money accumulates over time. Sit down and review your spending. You might be surprised at how much money you spend on non-necessities. Consider making sacrifices, like eating out less, and put that money toward an emergency fund. An emergency fund can allow you to call a life audible should you face unseen challenges. Football teams don’t have just one play; they have a playbook and many plays they can use should the first or second not be feasible. The playbook in football is the emergency account they can dip into if needed. Having a little nest egg is also helpful should you find yourself short on money when it comes time to pay your debt minimums.
Focusing on reducing your debt
One of the biggest financial stressors we have in life is debt. Paying debt is important because if you stop paying your debts, you could lose your car or home, or damage your credit. It would help if you also considered the late charges and accruing interest when it comes to paying debt. Significant debt can seem nearly impossible to get out of. However, you can work to put those debts behind you with a manageable strategy, steady payments, and discipline. A financial professional can help you with various techniques, including debt snowball or avalanche methods, so you can try to get on top of loans, especially those with high interest. They can also provide guidance on dealing with student loan repayment and the variety of ways you can pay those back.
Reviewing your credit and ensuring nothing is lowering it
Having and maintaining good credit is crucial to living a financially confident and independent life. Keeping your credit where it should be requires paying your bills and debts on time, living within your means, and reviewing your credit report periodically to ensure nothing on it is driving the score down. Solid credit also helps when you are forced to call a life audible. People with good credit can get lower-interest loans, credit cards, and mortgages while managing their financial objectives.
Consult a financial professional
Being willing to change with the times and understanding when to make critical decisions can benefit you, both in football and life, especially during a volatile market or game. When dealing with your finances, seeking the guidance of a financial professional can help you create strategies, design payment schedules, learn the most efficient budgeting method for your lifestyle, and keep you prepared should you wake up tomorrow and have to call an audible.
Important Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This script was prepared by LPL Marketing Solutions
Sources:
LPL Tracking # 1-05375121
How Chess Can Help You Work Toward Becoming a Grandmaster of Investing
In a single game of chess, there are approximately 400 possible moves after each move played. When investing, there is also a seemingly endless selection of choices and critical decisions. The basics of chess could potentially help you become a more adept investor. There are risks involved in investing; however, having a strategy that considers your risk tolerance can help mitigate unforeseen changes in the market from adversely impacting you over the long term. Here are six fundamentals of chess that you can apply to your investment strategy.
Understand the game before you start playing
Just like in chess, before you begin investing in a company or investing in general, it is essential to do your research. You should learn investing basics and research companies before you start, especially if you are a beginner. Doing so can help mitigate some of the risks involved. Chess players and investors both know you can never be entirely risk-free. However, with knowledge and the guidance of a professional, you can work toward preserving your chessboard and wealth, even in a down market.
You have to think a few moves ahead
As in chess, investing requires a certain amount of strategy and understanding the repercussions of a move you make three or four moves down the line. Learning how to do this requires a comprehension of the fundamentals. The hardest part about investing is that you cannot predict how the market will fluctuate. However, it is possible to recognize a healthy company from one that is potentially struggling or being mismanaged by doing your research and consulting a financial professional who has investment and wealth preservation experience.
Finding the strategy that works for you
Not everybody invests the same way, just like not everybody plays chess the same way. Everyone has a different risk tolerance and their own strategy. Knowing what works for you and being consistent can be a beneficial approach to a long-term strategy.
Being willing to be flexible
When you are playing chess or investing, sometimes the chessboard or the financial environment can change and force you to rethink your strategy or make decisions you may not have considered making. Flexibility and adapting to changing conditions can help preserve your wealth, like winning after a long chess match.
Understanding the value of patience
Patience when investing involves taking a long-term commitment to your strategy, being confident in both your decision-making, and believing that the market will be able to correct itself should it temporarily go down.
Getting help from a professional
Consider consulting a financial professional who can help guide you as you make decisions that align with your financial goals, similar to learning the basics of chess from a chess master.
Important Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by LPL Marketing Solutions
Sources:
LPL Tracking # 1-05375300
