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Coping With Financial Setbacks

Coping With Financial Setbacks

Sep 2021

It’s not always a smooth ride when it comes to managing personal finances. Bumps in the road can derail your plans if you don’t take steps to protect yourself and stay on top of the situation. Here are some strategies that can help.

Financial Challenges

There are a number of difficulties you can face on the journey through life. Some events that can negatively impact your personal finances include:

     Layoff or furlough

     Illness or disability

     Lawsuits

     Divorce

     Death of a spouse

     Investment losses

     Fire or theft

     Pay cut or reduced hours

     Major repairs (including home or auto)

Plan, Prepare and Protect Yourself

You can prepare financially for most of these situations. Combining approaches to create multiple layers of protection is even better.

     Insurance. A good home or auto insurance policy can help lower expenses related to an insured event such as a theft, fire or accident. Health and disability insurance can cover some costs related to illness or injury. And life insurance can assist your family in the event the unthinkable occurs.

     Umbrella policy. If you’re worried about major accidents and lawsuits that target your assets, an umbrella policy can protect you in a way that a regular insurance policy might not. An umbrella policy’s coverage generally picks up where home and auto policies leave off.

     Emergency fund. Set aside money in an emergency fund to cover expenses without having to rely on credit cards. This dedicated account can also help you withstand investment losses as you wait for a recovery or adjust your strategy.

     Maintain good credit.  Should you need a loan to help with certain setbacks, having good credit can go a long way toward ensuring access to lower rates and more affordable terms.

With the right planning in place, you have a better chance of weathering financial storms. Take action before you’re in the middle of a crisis if at all possible.

Additional Tips for Managing Financial Setbacks

     Don’t panic. Take a moment to stop and breathe. It can be difficult to make decisions at this time, but it will be harder to think clearly if you’re panicked.

     Look for community and state resources. If you can access a food pantry, apply for unemployment benefits or connect with other programs, it can free up necessary cash to deal with a crisis. Remember that these services are meant for times of distress. Consider returning the favor for others when you get through this setback.

     Take care of yourself. Do your best to eat healthy, get adequate sleep and exercise. You’ll make better decisions and have greater resiliency when you practice self-care.

     Do some research. There’s a plethora of articles and advice online, but seek out only reputable sources of financial information not chat rooms or social media.

     Seek social support. Get emotional support from friends and family who won’t judge you. Find people who can serve as a sounding board as you work through financial challenges.

The Bottom Line

Seek information and advice from reliable sources as you navigate financial setbacks. Your WellCents financial professional can be a value resource to help you plan and pivot to adjust your financial strategy to help weather whatever storm blows through.

Is Your Financial Plan in Need of an Update?

Is Your Financial Plan in Need of an Update?

Sep 2021

An important part of a financial plan is keeping it up to date. Life can throw you a lot of curveballs, and your financial plan will need occasional tweaks to adjust for them — whether they’re the kind of changes you wanted or not.
The Times They Are A-Changin’

Major life events often require adjustments to budgets and expenses. There could also be significant tax implications to consider. Here are some changes that should alert you to the need for a financial reevaluation — especially when it comes to their potential impact on your retirement plan.

Marriage or divorce. Depending on the situation, marriage can add new debts and obligations. If you’re combining expenses and incomes while merging households, you might see your situation improve. On the other hand, divorce can be financially devastating. For women over 50, the termination of a marriage can lead to a 45% reduction in standard of living. Planning for this contingency is important as you approach retirement.

Birth or adoption of a child. Parents can expect to spend more than $233,000 when raising a child from birth to age 18. And that doesn’t include the cost of college. Adjust your financial plan after a birth or adoption to make sure you remain on target to achieve all your dreams — for you and your growing family.

Empty nest. You might be able to set aside more for retirement or shift focus to other goals once your last child leaves home. After you send off your first care package, start reviewing your financial plan to see where you might reallocate financial resources.

Buying a home or moving. A new living situation can come with higher — or lower — expenses as taxes, changes in insurance and maintenance costs as well as renovations can significantly impact your budget. Ideally, speak with a financial professional ahead of any move.

Illness or serious diagnosis. The average cost of healthcare in the United States is about $11,000 per person each year. And this number can skyrocket with a major illness or disability. If you have a chronic condition or significant healthcare crisis, it can be helpful to involve a financial professional early on to help you navigate.

Other Finance-altering Life Events:

     Job loss or change

     Pay raise

     Inheritance

     Fire, theft or accident

     Lawsuit

     Death of a spouse

     Starting (or selling) a business

Don’t Go It Alone

All these events can alter your financial trajectory. Reviewing your financial plan periodically is prudent as you navigate life’s twists and turns. You may need to increase retirement account contributions or end up being able to retire sooner than planned. But no matter what’s next, contact your WellCents financial professional for expert advice to help keep your retirement plan on track.

Sources

Gen Z — Start Investing Now!

Gen Z — Start Investing Now!

Sep 2021

If you’re a member of Gen Z — those born after 1997 — now is a great time to start investing for retirement. The power of compounding returns is one of the best ways to grow wealth over time. And the earlier you start, the less you have to set aside each month to reach your goals.

Consider that a one-time $10,000 investment you make at age 20 would increase in value to more than $70,000 by age 60, assuming a 5% interest rate. Meanwhile, it would only grow to approximately $43,000 if you make it at age 30. And the same investment at age 40? That would grow to a mere $26,000. As you can see, when it comes to investing, time really is money.

Here’s how to make the most of your investment dollars.

Find a Way to Invest

Even coming up with $200 can feel like a daunting task at this point in your life. Not only is your starting salary likely to be lower today than it will be in a few years, but you might also have student loan debt and other bills to contend with.

The good news is that you don’t have to invest a lot to begin building your wealth and preparing for retirement. Start with what you can afford, even if it’s only $50 per paycheck. Look for ways to free up a small amount of money in your budget each month so that you can contribute to your 401(k) and start putting that money to work.

Have a Plan

Create a plan for increasing your contribution down the road. If your employer offers a 401(k) match, try to invest enough to get the maximum. That match represents free money — and it’s the best deal you’ll find in the world of investing. Once that money is in your account, it begins growing, and it can boost your overall portfolio down the road.

Plan to increase your retirement account contribution each time you get a raise. Depending on your company, you could even plan an incremental increase in your contribution each year. For example, you could arrange to increase your contribution by 1% each year up to a certain percentage of your income.

The important thing is to get started and then up those contributions as often as you can. Get in the habit of investing, and you’ll be more likely to reach your long-term wealth goals even if you have to start small.

Give Yourself a Cushion

No matter your situation, there’s a good chance that, at some point, you’ll end up with an emergency where you must come up with a significant sum of money all at once. This can be stressful, and you might consider tapping into your retirement savings to help cover the cost.

However, it’s better to avoid using your retirement investments for emergencies since an early withdrawal can result in hefty penalties. Even if you get a 401(k) loan and avoid the penalties and taxes, anytime your money is out of the market, it’s not working on your behalf. You might replace what you withdrew, but you can’t replace the opportunity cost of time in the market. This is why establishing an emergency fund is so important.

Don’t Go It Alone

Investing for retirement can be daunting if you’re just starting out. Contact your WellCents financial professional to help you set realistic goals to grow your nest egg over time and give you a head start on the road to retirement.

Source: 

https://www.investopedia.com/financial-edge/0212/5-advantages-to-investing-in-your-20s.aspx 

Summer Fun on a Budget

Summer Fun on a Budget

Aug 2021

Planning for the future is important, but so is enjoying the present. Luckily, there are many fun summer activities that don’t have to break the bank. Here are some tips to have a blast on a budget as the thermometer heats up.

 

Dining. Whether you enjoy freshly caught fish at an Italian trattoria or boardwalk funnel cake, waterfront restaurants are inherently appealing. But sometimes all you really need is a great view. Save money on your next trip to the beach or lake by packing a picnic meal. Bringing your own food adds a simple charm to your day, and you’ll often find that purchasing tasty treats from the grocery store saves money and leaves you with great leftovers for your next summer adventure.

 

Travel. Road trips are synonymous with summer travel value for good reason. Airline or cruise travel often leaves you with additional costs beyond the ticket price, such as rental cars or Wi-Fi. In contrast, a road trip lets you better control your budget by bringing more snacks, minimizing surcharges, and picking cheaper lodging through Airbnb or a discount hotel chain. If possible, plan your summer trips well away from major holidays or conventions to avoid price spikes.

 

Entertainment. You don’t have to leave town to see something new. Check out your city’s social media pages or good old fashioned bulletin boards for upcoming events. Even if crowded fireworks celebrations aren’t your thing, you’ll often find art shows and antique festivals that bring interesting wares — and unique food — to a cultural district near you. In addition, many libraries and parks host free movie screenings that let you experience a familiar classic at a pleasant venue.

 

Nature. Many people choose the place they live just for easy access to a beach or an unspoiled forest. But city folk need not despair. Use Google Maps to search for city or national parks in your area. Some may be close enough to justify a day trip. Others may be just a turn away from the main road but conceal the bustle in ways that feel like you’ve entered another world.

 

Activities. Learning about your parks will also show you great places to go for tennis, basketball, baseball and other sports. Certain parks may specialize in specific activities, while others go all-in on a massive multi-sports complex. Flow down the river in a kayak at a state or national park or take your kids to a public pool with slides and fountains that feel like a mini water park! There are also your local YMCAs, athletic clubs, and rec centers for air-conditioned fun, which could include slower-paced games like billiards and shuffleboard for family and friends of all ages. Checking social media may help you find amateur leagues or informal groups that connect you to other enthusiasts.

 

Staycation. Don’t assume you know your area inside and out. Even small towns have museums and cultural centers you may be unaware of — or offer new exhibits that reveal unknown parts of its history. Unorthodox attractions like ghost tours or escape rooms can be a fun diversion for date nights. If you enjoy camping, pack up some gear for an overnight trip or set up a tent in the backyard.

 

Don’t head into Labor Day with a huge credit card bill over your head. Keeping your summer activities budget-friendly will help rein in expenses so you can keep the fun going all year long.

 

 

Putting off 401(k) Enrollment Could Cost You More Than You Think

Putting off 401(k) Enrollment Could Cost You More Than You Think

Jul 2021

You just landed a new job, and there are so many things to do. You have to set up your new workspace (even if it’s at home), become acquainted with your boss and coworkers and get up to speed on your new responsibilities. And there’s the company-sponsored 401(k) you should sign up for.


It could be tempting to put off investment- and retirement-planning decisions until you settle in. But that’s an idea that could cost you more than you might expect, especially if you have a longer time horizon to retirement.

According to The Motley Fool, a 25-year-old employee making about $47,000 who saves 15% of their income and realizes a 7% annual rate of return would have almost $100,000 more at retirement than another worker with all the same parameters — except that they waited until age 26 to begin their contributions.

 

So, move signing up for your 401(k) to the top of your to-do list. If the options are a little overwhelming, sit down with a financial advisor who can help you determine your personal risk tolerance and recommend investments accordingly.

 

Another option to consider if you’re unsure about making investment decisions is electing to contribute to a target date fund (TDF), if your plan offers one. These funds create a mix of investments according to an estimated retirement date.

 

The fund automatically adjusts the mix and risk of investments to become more conservative as the target date approaches. A TDF handles much of the decision making for you. However, it’s still important to monitor the fund’s performance and periodically check in with your financial advisor to ensure you remain on track to meet your retirement goals.

 

You generally want to contribute as much as you can to your 401(k) plan. But at minimum, try to contribute at least enough to earn the maximum company match.

 

Companies that offer a what’s called a 401(k) “match” will match your retirement contributions either dollar for dollar, up to a certain amount — or according to a percentage or formula. You always want to aim for contributing at least enough to receive the maximum possible employer match or you’re leaving free money on the table.

 

What you may intend to be a small delay in contributing to your 401(k) can lead to months or years as life gets busy. If this should happen, you can easily miss upswings in the market and opportunities for growth to compound over time.

 

Choose to make retirement planning a priority and put yourself first. Your employer-provided financial advisor can be a tremendous resource whether it’s the first time you enroll in a 401(k) plan or your third or fourth time around. And if this isn’t your first experience with a 401(k), be sure to discuss the options for any funds remaining in 401(k) accounts from your previous employers as well.

 

Don’t delay this important decision set up an appointment with your financial advisor today.

 

Source:

https://www.fool.com/retirement/2020/08/18/waiting-to-save-for-retirement-heres-how-much-itll/

 


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