How to Build Wealth

How to Build Wealth

Get rich slow with these simple strategies — and a little discipline.

What does wealth look like to you? Your mental picture might be different than others. But for a lot of folks, wealth isn’t an over-the-top ride or a mega-mansion. Rather, it’s the freedom from financial burdens and the confidence that you can retire to an enjoyable and relatively worry-free life. Fortunately, that outcome is achievable for many people with some planning and a little discipline.

Save Now and Often

If you haven’t been saving regularly and consistently, start right away. The mantra is “pay yourself first.” Make saving for retirement a priority, and make it easy by having contributions to your 401(k) automatically withdrawn from your paycheck. You can arrange this through your HR Department. If you want to save additional funds, consider regular, automatic transfers from your checking account to a savings account.


Take Advantage of Tax-Deferred Growth

You don’t pay taxes on money put into your 401(k), and it grows tax free until you withdraw it. This means you have more of your money working for you year after year. Upon retirement, you’ll owe taxes, but you’ll have a larger account balance to draw from due to the tax advantages you’ve enjoyed over the years.


Don’t Leave Free Money on the Table

Many employers offer a matching contribution for the retirement plans they sponsor. If yours is one of them. they’ll match all or a percentage of your 401(k) contributions up to a certain amount. That’s free money — and there’s no better deal anywhere in the world of retirement savings. So don’t miss out!


Build Equity

Owning a home can be an important component of wealth, and comprises about a third of the overall net worth for American families. The industry rule of thumb is that you shouldn’t pay more than 28% of your gross income for housing (loan principal, interest, taxes and insurance). So buy a house if you want to be a homeowner but not so much house that it cripples your ability to add to your retirement savings and build wealth. It’s tempting to think, “I’ll be making more money in five years, so this mortgage won’t be a problem.” But when in doubt, underbuy rather than overbuy. As you pay down your mortgage, you build valuable equity that you may be able to borrow against should you need to in the future.


Keep Spending in Line

Live within your means. Don’t overbuy housing, transportation, entertainment, clothing or anything else. The less you spend, the more you can save. And the earlier you start to save, the more time that money can grow. Do you really need that top-tier cable package? Can you use coupons at the grocery store? Your grandparents were right when they said, “a penny saved is a penny earned,” and those pennies can really add up.


Manage Debt

Some debt can be necessary and useful. It can help you afford a home, transportation or a college degree. But don’t get in over your head. Weigh the costs and benefits of a new car payment versus increasing 401(k) contributions for a more secure retirement. A big warning sign is the need to use credit cards to pay for everyday expenses. Carrying high-interest debt — like a hefty credit card balance — can seriously undermine your ability to build wealth.


Insure to Be Sure

You don’t want to lose the wealth you’ve built in the event of an emergency, so insure yourself and your assets. A full-line insurance agent can help you choose appropriate plans for home, auto, life, disability and long-term care. They may suggest that you purchase an umbrella policy that protects you from legal liability as well.


Get Expert Advice

Especially when you get into more complex areas of investing and tax planning, it’s prudent to seek out professional advice. Financial advisors aren’t just for the already wealthy — they can help you get there. Discuss your personal vision of wealth with your advisor and work with them to start turning that vision into reality so one day, your future self can raise a glass to toast your present-day prescience and persistence.



Should I Buy or Lease a New Car?

Should I Buy or Lease a New Car?

Your once reliable set of wheels is getting less reliable lately, and you’re longing for that new car smell once again. You meander through the local dealership lot trying to avoid the salesperson because you know the very first question that they’re going to ask you is, “Do you want to lease — or buy?”


What’s the better choice?


The short answer is … it really depends. The longer answer depends on your particular circumstances and priorities. Let’s drill down and look under the hood (so to speak) of each option.




Pros: With a lease, you generally can drive a new car at a lower monthly cost. The leasing process is perhaps less onerous than buying, and you can get into a new car every few years. With a lease, you can score some deductions if the vehicle is used for business. So, the bottom line is that you often get more new car for a lower initial cash outlay by leasing, and you can enjoy that new car smell every couple of years.


Cons: When you lease, you aren’t building any equity toward your next vehicle. So you’re starting from scratch each time. Additionally, you may have to contend with costly end-of-lease charges, mileage overage costs and incidental damage charges. You may even have to pay for new tires for a car you turn in.




Pros: When you purchase a car, you know for certain the price you’ll pay without having to wonder about unexpected fees down the road. You can also build equity in the vehicle over time, which can be particularly beneficial if you intend to keep the car and drive it long after the loan period. Plus, since it’s yours, you can customize your rims, your stereo or anything else you want as you wish (as long as its street legal). And you can sell or trade in your vehicle whenever it suits you rather than at a predetermined end-of-lease date. 


Cons: Buying is usually more expensive than leasing at the outset. And you can’t just turn it back in and walk away — you eventually will have to sell or trade in the car. Finally, if you buy new, you’ll take a big depreciation hit as soon as you drive off the dealer lot.


Your Ride, Your Reasons


Getting back to the original question, if the goal is to spend as little as possible to get into that new car, and you think you’ll be ready for another vehicle in a few years, then leasing likely makes the most sense. However, if you can’t wait to rebuild your engine and add a mega-sized subwoofer in your trunk — and you want more control over when your next purchase may be, than buying new might be right for you.


But remember that the real cost of a car is not only the price tag, it’s how much it costs you during the entire time you own it, including maintenance, gas, repairs and insurance. When analyzing the per-month cost of leasing vs. owning, remember to amortize the equity you have in the car over the entire period of ownership.


If you’re still confused, ask your financial advisor to help you run the numbers.

How Do I Save for My Child’s College and Retirement?

How Do I Save for My Child’s College and Retirement?

You juggle multiple financial priorities, whether it’s buying a house, having children, starting a business or buying a car. Saving for retirement and a child’s college fund at the same time is no different, but that’s not to say it’s easy.


Get It Down on Paper

Start by setting a budget and timeline for both retirement and college. While the college start date is probably somewhat fixed, you may have more latitude concerning your retirement. Once the kids are old enough, include them in the conversation about how much you can afford to help with college and what they can do.


It’s important to set realistic goals about the types of colleges within your budget. Don't let higher education costs get out of control. If your child has their heart set on a specific school or major, there may be ways to lower costs (e.g., subject-specific scholarships and grants). The expectation shouldn't be that you're going to write a lot of checks. And always have a backup plan or safety school.


Controlling College Costs

Explore ways to reduce college expenses. Help your child identify special interests early on. Athletics? Music? Science? Math? Money may be available for all of those IF your child is exceptional. Identify colleges early too. See if they can attend special interest camps there to (a) see how they like it, and (b) meet faculty who might recommend them for a grant/scholarship.


Also, 529 plans can be a good way to divide retirement from college savings and offer a number of benefits, including the option of contributions by relatives. Coverdell Education Savings Accounts (ESA), sometimes called education IRAs, are tax-advantaged savings vehicles that allow tax-free distributions for qualified educational expenses. Read more about the rules and restrictions of the program in the link below.


Reevaluating Retirement

Similarly, find ways to boost your retirement savings or scale back your retirement goals. If time is tight, consider whether you can work a little longer or adjust the kind of retirement lifestyle you’re budgeting for. For example, could you downsize your home or move to an area with a lower cost of living?


Also, make sure you’re contributing at least enough to your employer-sponsored 401(k) to earn the maximum company match — this is free money, and you don’t want to leave it on the table. What you also don’t want to do, however, is ramp up your level of investment risk beyond what is appropriate for your personal tolerance and your retirement timeline just to try to boost returns.


The most important thing you can do during this juggling act is to sit down and have a frank conversation with your financial advisor about your goals. He or she may be able to come up with options you haven’t even considered. 




Retirement Planning Starts with A Dream

Retirement Planning Starts with A Dream

There can be a lot to get your head around when it comes to retirement planning: asset allocation, risk tolerance, real rates of return, target date funds — not to mention Social Security and Medicare. Sometimes, it can make you feel like you need a Ph.D. in economics just to make a retirement investment decision — or at least a helpful and knowledgeable financial professional


But there’s one area where even the best advisor can’t step in — and that’s knowing the ideal retirement for you. Only you know what that dream is. And this is really where the retirement planning process needs to begin, because the more specific you get, the better chance your plan has to achieve your retirement goals.


Besides … isn’t dreaming the dream the fun part? So, grab a pen and paper (or your laptop) and start by answering these basic questions:


When do I want to retire? This is a big one. You may think that everyone wants to retire yesterday. While it’s true that some people want to end the daily grind as soon as possible, others may want to work longer because they still enjoy what they do or who they do it with. And for others, the ideal situation might be to downshift into part-time work for a few years before fully retiring — or taking a different job that pays less doing something that’s really fun. Think about what that perfect timeline looks like for you rather than treating your 65th birthday as an arbitrary deadline.


Where will I want to live? Perhaps you plan on staying in your current home or relocating to be closer to your children and grandchildren. Maybe you want to sell your house and buy a condo on the beach — or downsize to save money in exchange for an earlier retirement. If you’re really adventurous, your ideal destination might even be outside the U.S. entirely.


How much do I want to travel? Many retirees look forward to traveling more once they’re no longer clocking in. Consider to what extent travel factors into your retirement dream. Do you want to cruise around the world? Buy an RV and hit the road for months at a time? Or travel to Europe every spring? Also, consider your travel tastes. Are you the type who aspires to stay in four-star resorts lounging in your own personal pool cabana — or are you more of a roadside motel and grab-a-burger type?


What hobbies do I plan to enjoy? Some activities may not cost much at all. If you enjoy tending your garden and watching the birds and butterflies visit, that’s going to cost you a lot less than a passion for dressage. There will be a lot of time to fill during retirement, so think carefully about how you’ll want to spend it.


What about eating out? Do you look forward to frequent fine dining during your golden years — five-course, white-tablecloth meals complete with a good bottle of cabernet? Eating out frequently, especially at nice restaurants, costs a lot, so it’s important to know how this expense factors into your retirement.


Visualize All the Details


Once you get all the specifics laid out, create a binder (or a computer file) with photos and descriptions of all the elements of your ideal retirement. Many self-help experts recommend visualizing goals to improve your chance of achieving them. Add to your retirement “dream book” whenever you feel inspired.


Of course, there are many other retirement expenses to consider that aren’t quite as fun to think about, such as medical costs. But, starting your plan with a clear picture of your retirement dream will not only help you set more accurate and realistic goals, but it can also help keep you motivated to stay the course when it comes to your saving and investing objectives along the way.

COVID-Era Finances: It’s Time for a Checkup

COVID-Era Finances: It’s Time for a Checkup

2020 was an unprecedented year by any standard. Despite spending more time at home than ever before, many people feel like the last 12 months of the global pandemic went by in a blur. So much changed so fast, and no one is really certain to what extent these changes may persist into the future.


For many families — home and work life, schooling and socializing — all have been upended. Many people are eating out less and spending more on groceries, canceling vacations, skipping movies, but buying a lot more online.


Spare rooms have been turned into remote offices, backyards into staycation spaces and attics into home gyms. Even if you kept your job, your spouse could have lost his or hers. Your adult children may have needed additional financial support or moved back home. And many have faced tremendous impacts as a direct result of COVID-19, whether resulting from the loss of a loved one or unexpected medical bills. Perhaps you’re working from home — for some, that change could become permanent.


With so much in flux, this is a good time to schedule a financial check-up to review what’s changed and how those changes may affect your financial plan moving forward. Some potential areas to cover include:


Budget. As mentioned earlier, many household budgets have been severely impacted by the pandemic. For some, money has gotten tighter, while others may find themselves in an improved financial position. Either way, you’ll want to revisit how you’re allocating your funds.


Emergency Fund. COVID-19 has perhaps been the strongest illustration in recent memory of the need for an ongoing emergency fund. Many families have depleted the money they’d set aside. If this is the case for you, prioritize replenishing that account as best you can, even if it’s just a little bit each month.


Debt. You may have run up additional debt to cover shortfalls from lost family income or a pay reduction during the crisis. As a result, it’s important to reevaluate your debt payoff strategy, revisit interest rates on the debt you’re carrying, and try to minimize adding to your total debt if you can. Make a list of all of your debts along with their current balances and interest rates. Where possible, consolidate revolving credit debt onto your lowest-interest cards — and try to negotiate lower rates with creditors when you can’t.


Retirement Plan. Some employees have borrowed from their 401(k) as a stopgap measure. If you’re one of them, make a plan to repay these funds when possible, to avoid setting back your retirement timeline. Additionally, with so much volatility in the market, you may want to revisit your asset allocation and rebalance your portfolio, if necessary, to make sure it continues to align with your investment goals and risk tolerance.


Estate Plan. It’s the subject no one likes to talk about, but COVID-19 has made clear how important it is to address this issue. If you need to make or change any beneficiary designations, update your will, draft a power of attorney or establish advance directives, this would be a great time to tackle those types of tasks.


It can be very helpful to schedule a one-on-one (or Zoom) check-in with your financial professional, who can help you run the numbers and help you make any needed adjustments to your budget, saving and investment strategy or any other areas of your personal financial plan.

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