For Richer or Poorer: Financial Tips for Engaged Couples & Newlyweds

This week, one of our very own advisors posted as a guest blogger on StJoeWedding.com.  Laura Price, Investment Advisor and Chief Compliance Officer, covered the always relevant topic of finances for engaged couples and newlyweds.

Quite often, couples make the mistake of waiting until after marriage to discuss their money situation.  Although financial circumstance is not the easiest of conversations, it is one of the most crucial for any successful and long-lasting relationship.

Click here to read the guest blog Laura wrote, titled "For Richer or Poorer: Financial Tips for Engaged Couples & Newlyweds".

Test Your Skills - Financial Soccer

Has your enthusiasm for the game of soccer been kicked into high gear with the recent excitement of the World Cup?  Now you too can join in on the fun of getting away from the sidelines and onto the playing field online, while also stretching your financial knowledge muscles!

 

Take a timeout from your regular routine and get your head in the game - Play a round of Visa's "Financial Soccer" and see how you score!

 

 

Make the Right "BIG" Decisions (pt. 1 of 5)

By Olivia Sandham

 

Earlier this week, an email circulated through our office with this article.  It is typical for us to share work-relevant articles every so often, but what was NOT typical was that for the next several minutes, everyone in the office emailed their thoughts and responses to the article.  The most memorable quote one of our advisors pulled from the article was:

“Make the right BIG decisions, and the small ones won’t mean so much.”  We even jokingly (okay, maybe seriously) considered ordering coffee mugs with this quote.

This article and our comments got me thinking (and researching) about the “small decisions” we make when attempting to better our financial position.  Several decisions could include:

• Cut back on expensive coffee (the premise of the article)
• Cut back on monthly subscriptions
• Use homemade shampoo, laundry detergent, cleaners, etc.
• Use coupons
• Use a fan instead of air conditioning, or more clothes/blankets instead of heat
• Buy generic brands at the grocery store
• Buy from second-hand or thrift stores
• Eat out less
• Drive less

Somewhere along the lines of researching small financial changes (and maybe because it was lunch time), I ran into articles about making small diet and exercise changes to improve lifestyle.  This got me thinking, does the same quote apply?  So, I put together a list of “small decisions” we make when attempting to better our diet and exercise:

• Use a food journal
• Cut back on alcohol, sweets, fat, and carbs
• Eat out less (repeat item!)
• Walk/bike more (aka drive less - repeat item!)

Does anyone notice a trend with most of these ideas, besides the fact that they are “small” changes?  When I read this list, all I see is the word SACRIFICE.  I can’t speak for everyone, but when it comes to making any decisions that are going to stick for the long-haul, I need to be motivated and I need to feel like the change is worthwhile.  But cutting back on the small joys in my life is not motivating, and putting in a lot of extra time and effort for a small result is not a worthwhile change to me.  Here’s what comes to mind for me when I look at these ideas:

• Cut back on expensive coffee:  The couple of extra bucks for expensive coffee might be worth it.  A smooth and flavorful coffee is either a morning ritual to get your day started (as necessary to waking up as showering in the morning), or as is the case for me, it is an occasional indulgence because I don’t drink coffee that often, so it better taste really good when I do.
• Cut back on monthly subscriptions:  There seems to be no better deal than movies or TV shows on demand in my living room (or on-the-go smart devices) for a monthly price of what it would cost for me to go out to or rent a movie only ONE TIME.  And don’t get me started on movie theater snack prices versus snacks at home!
• Use homemade shampoo, laundry detergent, cleaners, etc.:  Anything DIY (do-it-yourself) almost 99% of the time ends up being a BWTM (big-waste-of-time-and-money) because I make a big mess and don’t use half of it anyway because it never works as well as the real stuff.
• Use coupons:  I am already panicking just thinking about how much extra time I would have to spend finding, cutting, organizing, and remembering to actually use coupons.
• Use a fan instead of air conditioning, or more clothes/blankets instead of heat:  My house is a place of solace, and the temperature being (as the nursery rhyme says) “not too hot and not too cold, but just right” is an extremely important part of that.
• Buy generic brands at the grocery store:  Most generic brands just aren't the same - they don't taste right, they don't smell right, they don't feel right!
• Buy from second-hand or thrift stores:  Second-hand and thrift stores are okay for certain purchases (I have found some neat furniture and gifts), but there is something that just irks me about buying some items like clothes and children’s toys that have been used before by someone I don’t know.
• Use a food journal: I feel anxiety just thinking about how much effort it takes to measure and write down every little thing that goes into my mouth.
• Cut back on alcohol, sweets, fat, and carbs:  I don't know what happens, but if I am trying to eat less of something, I suddenly feel deprived and as if it is the only thing I want to consume, and then I feel guilty for wanting what I am not supposed to have, and it's just a big awful cycle that always seems to backfire.
• Eat out less:  Eating out is already a once-in-a-while affair, and usually involves an event or celebration of some sort.  This would just be taking away all my fun!
• Drive less OR walk/bike more:  If I didn’t drive as much, I would either stay at home all the time or I would have to bike/walk, and I have no desire to arrive to work or other engagements either freezing with icicles of snot running down my face, or sweating profusely out of every pore.  Plus, imagine how much earlier I would have to leave...

Okay, so you might be thinking that my inner child ("But I want that!") and my inner laziness ("But I don't wanna!") is definiting sneaking out between the lines.  But isn't that just what happens with any decision?  If we make decisions that dissatisfy our inner needs on a regular basis, how can we expect to succeed at these changes?  As you can see, it’s pretty obvious for me that the “small” changes listed above (sacrifices!), no matter how many times I try, probably aren’t going to stick.  So what kind of decisions would?  As the quote says, “Make the right BIG decisions.”   Here is a list of a few financial “BIG”s that might be better to think about:

• Automate payments
• Renegotiate rates
• Earn more money

And now a list of the lifestyle “BIG”s that might stick better:

• Plan and prepare ahead
• Completely remove and replace “bad” food items
• Focus on getting MORE

The “BIG” financial decisions can be exciting when accomplished and can take very little time and work, sometimes just a few minutes online or over the phone.  And the lifestyle “BIG”s can be fun and effortless, too.  What's great about these decisions is you only have to find the nerve once in a while to implement these changes, and the best part, they could actually SATISFY your inner needs instead of making them feel like sacrifices!

Read our blog for next week as we dive into the tips and tricks on how you could accomplish each of these “BIG” decisions!

AARP Retirement Calculator: Are You Saving Enough?

Are you looking for a fun, free, and easy method to try estimating your retirement? We discovered the AARP Retirement Calculator, a neat online device that can make thinking about your future and retirement a little more enjoyable. Using the calculator can be a great way to check if the plan you currently have for your financial future should allow you to retire when and how you want. Discover all your options and how the choices you make today and in the near future could ultimately affect your retirement finances!

Before using the calculator, we encourage you to read our list of “Pros and Cons of Using the AARP Retirement Calculator”:

PROS:

• Using this calculator can be a good starting checkpoint to see if you are currently on track for retirement, currently way off track for retirement, or somewhere in between.
• After inputting your information, click on “Options” to see what changes you can make in retirement to help you have more income available if needed or desired.
• At any point, you can also go back to the “About You” section and change answers, allowing you to see how different choices starting now could possibly affect how much income will be available to you in retirement. This can be a helpful tool if you are able to actually implement some of these changes in your life, such as how much of your income you and your partner save for retirement each year.
• When deciding your lifestyle in retirement, click on “Learn more about Retirement Lifestyle Assumptions” and you can manually input what percentage of your current lifestyle expenses you plan to have in retirement.

CONS:

• The calculator does take into consideration the multitude of creative ways you can collect more Social Security income (to be discussed in next week’s blog!)
• The calculator cannot substitute for the valuable knowledge and experience of a financial advisor. This tool should only be used for fun to see where you are at now and how different decisions could affect your future outcome, but make sure you discuss any officially changes in your retirement plans with your financial advisor.

Think you’re ready to give it a try? Click here to Get Started.

MoneyRate.com Survey: Best Savings Accounts 2014

 

Reference to any specific commercial product, process, or service, or the use of any trade, firm or corporation name is for the information and convenience of the public, and does not constitute endorsement, recommendation, or favoring by Family Investment Center.

 

Earlier this year, MoneyRates.com Senior Financial Analyst Richard Barrington, CFA, published an online article analyzing a survey that MoneyRates.com performed to find the Best Savings accounts for 2014.

 

"The study indicates that the yields on the nation's best savings accounts have offered more than four times the interest of the survey's average rates, and that the top accounts have been consistently at the front of the pack quarter after quarter,” according to Barrington.

 

Barrington’s article points out the importance of finding savings accounts with consistently high rates. Barrington states, “It is smart to compare savings account rates before choosing a bank, but it is even smarter if you look at a bank's interest rates over a span of time rather than on any one day. Some banks temporarily raise rates in an attempt to draw some quick attention, but the more consistently a bank has featured leading rates in the past, the more likely it is that this is a long-term strategy that will continue in the future.”

 

But where can this information be found, and why is comparing it so significant? “Every quarter MoneyRates.com lists the top savings accounts, based on their average rates throughout the quarter, in its America's Best Rates articles. Then, once a year, MoneyRates.com [calculates] which savings accounts had the best rates over the course of the prior year,” says Barrington. “Identifying the banks that offer the best interest rates is important [because] if you chose the wrong bank to open a savings account a year ago, you would have earned less than a quarter of the interest you could have at one of the higher-paying institutions. At a time when bank rates are generally low, shopping for that kind of edge is more important than ever.”

 

Based on the mentioned survey, MoneyRates.com created this list of the top rate performers of the past year (2013). According to Barrington’s article, “Their strong performance over the last four quarters places these institutions as the current favorites to offer the best savings accounts in 2014”:

 

1) Ally Bank. “With its user-friendly web site and welcoming policies, such as free ATM use anywhere in the country, Ally has become something of a model for how online banking should be done,” says Barrington. “Ally also delivers some substance to back up its customer-centric style, in the form of the highest average savings account rates over the past year.” While savings account rates at the banks MoneyRates surveyed throughout the past year averaged just 0.186 percent, Ally's average was 0.883 percent. According to Barrington, “Whether it is the style or the substance, whatever Ally Bank is doing, it is attracting customers.” The most recent FDIC figures available show Ally Bank's total deposits up 15 percent year-over-year.

 

2) American Express Bank. With savings account rates that averaged 0.869 percent over the past year, Barrington claims American Express Bank to be “a strong runner-up to Ally Bank.” Barrington continues to state that the savings account rates at American Express Bank “edged out those at Ally Bank during the two most recent quarterly surveys, so this could be a fun competition to watch over the next year.” Like Ally Bank, American Express Bank demonstrates that offering competitive rates helps attract business, with its deposits up 22 percent year-over-year.

 

3) Sallie Mae Bank. Sallie Mae Bank's savings account rates averaged 0.867 percent over the past year, putting it behind American Express Bank by a miniscule margin, just two one-thousandths of 1 percent. “Though considerably smaller than Ally and American Express, Sallie Mae Bank is coming on strong,” claims Barrington.  Its deposits were up by 48 percent year-over-year.

 

4) Discover Bank. Discover Bank's savings account rates averaged 0.800 percent over the past year, and “it showed true consistency by having the same average rate through each of the last four quarters,” states Barrington.

 

5) EverBank. Savings account rates at EverBank averaged 0.717 percent over the past year. Barrington says, “This is another bank whose high interest rates are helping it attract customers, [since] its deposit base grew by 27 percent year-over-year.”

 

6) Capital One Bank. Capital One kept its savings account rates above the 0.500 percent mark all year, averaging 0.508 percent. Also, Capital One Bank's new online arm, Capital One 360, has been offering even higher rates “and might be a competitor to watch,” claims Barrington.

 

7) Zions Bank. Zions Bank's savings account rates averaged 0.495 over the past year. “Zions Bank is a bit of a throwback compared to most of the institutions on this list, in that it still has a fairly extensive branch network, albeit one that is limited to Idaho and Utah. For consumers in those states who want decent rates and traditional, branch-based banking, this might be an option worth looking into,” according to Barrington.

 

Barrington also includes his list of Honorable Mentions:

 

“It should be noted that besides the consistently strong performers listed above, a number of banks that were added to the MoneyRates.com survey during the course of the year made the top 10 in their first two quarters.” These banks included Barclays, GE Capital Bank, FNBO Direct and CIT Bank. “With these banks having shaken up the leader board so quickly, it will be interesting to watch if they can continue their strong rate performance in 2014,” writes Barrington.

 

Barrington summarizes: “Given the recent strengthening of the economy, it seems likely that bank rates will move upward in 2014. Though rates may change, it is reasonable to think that banks that offered the best rates at the bottom of the interest rate cycle are likely to lead the next upward phase of that cycle as well.”

 

Barrington finishes his analysis and recommends, “Looking for even higher deposit rates? Check out the CD offerings from GE Capital Bank, Barclays and Ally.”

Video: How to Build a Budget

Financial situations can change quite frequently.  Everything from employment changes to new family life stages can greatly alter your income and/or expenses.  Therefore, it's a good idea to reevaluate your budget every few months.  Watch this video from Investopedia.com on "How to Build a Budget" and follow the steps to see if you are still on track, or if your current budget may need a few adjustments.

HOW TO: Save Money and Pay Off Debt

By Olivia Sandham

Although the two don’t seem to logically go hand-in-hand, saving money while also paying off debts is certainly possible.  With a few simple adjustments to your lifestyle and budget, you can create a comfortable and debt-free future.

 

The first step to saving while paying off debt could be to create a household budget that trims unnecessary expenses.  This budget will only be feasible if it allows for some discretionary spending to avoid feeling trapped or “broke”.  Examples of areas that could easily be trimmed without too much lifestyle shock include eating out one less night a week, consuming one or two less high-priced beverages (such as cutting back on a latte or cocktail), and switching groceries to generic brands.  Think about how much you could save each week by making these changes, then multiply that by 4-5 times per month!  These small changes can certainly impact the amount of additional money you will have to put toward paying off debts and increasing your savings.

 

The second step to saving while paying off debt is to consider designing a debt payoff strategy that best suits your needs.  Paying off debts utilizing the “snowball” effect is a popular method of paying your debts in a specific order.  You could choose to either 1) Pay off the smallest balance first, which can be motivating in a short period of time because you see the number of debts you owe drop, or 2) Pay off the highest interest rate first, which makes the most sense from a pure financial approach, since you will keep more of your money in the long-term.  Choosing the best debt payoff strategy will be a personal choice so that you find a strategy that you will want to maintain over the long-run.

 

The last step to saving while paying off debts is to build your emergency fund and future investments.  Once you have designed a trimmed budget and chosen your debt strategy, you can plan to have additional money placed into an easy-to-access emergency savings account.  Although this account will not produce much (if any) interest, there will be no penalty for taking the money out should you absolutely need it.  However, once you are able to build your savings to a sufficient amount (three to six months of expenses is typically recommended), you can then start to invest part of your monthly additional money into accounts that will produce higher return rates, such as an investment account or an IRA holding diversified mutual funds.

FIC Double Puzzle

 

Click here to view the Answer Key!

HOW-TO: Keep Spending Under Control During the Holidays

The Southeast Missourian daily newspaper published a time-relevant online article entitled “Holiday Budgeting: Some Ways to Keep Your Holiday Spending Under Control.” We have included the article in this post, or you can click here to read the article in its original form. Comment below to let us know if you found any of these suggestions helpful!

Holiday Budgeting: Some Ways to Keep Your Holiday Spending Under Control

By Robyn Gautschy

A little budgeting before and during the holiday season wouldn’t do you any harm. On the contrary, if you are searching for a way to get out of debt, getting appropriate financial advice before the gift-giving season begins is the best thing that you can do. Most people spend a lot of money on travel, entertaining and presents during the holidays. A significant part of expenditure is done on credit, at huge interest rates. This brings along a lot of debt, which usually destroys people’s cheer after the holiday. If you wish to avoid this, you should check the following 10 tips, which explain how you can have a great holiday without risking some unpleasant financial consequences:

1. Make a List:   Writing down the items that you want to purchase can help you to avoid spending money on unnecessary things. Additionally, the list will remind you to buy everything that you need in order to spend a wonderful holiday with your family.

2. Always Stick to Your Budget:  Another great financial tip that can help you to avoid holiday overspending is to stay within your budget. If you are tempted to spend more money than you should, you can shop together with one of your friends, who can provide a voice of reason whenever you need it.

3. Look Out for Bargains:  Although you cannot find some really good deals during the holiday season, there are major price variations among the same products provided by different stores. To benefit from these variations, you should take the time to compare certain offers. Another great idea would be to look for presents before prices go up for the official shopping season.

4. Check Return Policies:  It is very important to verify the return policies of various stores prior to buying gifts. This is because these policies indicate the terms that all customers who intend to return goods must comply with. These terms mainly relate to time frames and condition of goods.

5. Record Your Purchases:  This is another useful financial tip for the holiday season. Keeping track of your purchases can help you to understand whether you will exceed the limit of your budget or not.

6. Choose the Right Payment Methods:  If you wish to lower your debt, it is very important to leave the credit card at home. The best payment methods include debit cards, checks and cash.

7. Transfer Your Credit Card Balance to a Low-Interest Credit Card:  If you possess a low-interest card, you should transfer the balance of the high-interest cards to it. This can be a very lucrative financial practice because paying off $1,000 at 6% instead of 18% interest will save you a lot of money.

8. Use Stores’ Point Structure:  Numerous stores are involved in cash-back reward programs, which offer rebates on particular purchases. Although most programs only offer small discounts, these can add up to a substantial savings over one year.

9. Get Gift Cards: Using gift cards in order to keep your budget under control is a truly beneficial idea. Occasionally, this type of deal helps people to get two gifts for the price of one.

10. Use Coupons:  A large number of websites offer coupons that can bring you significant discounts, especially during the gift-giving season.

The time to look for financial advice is before the official holiday shopping season starts. Although shopping might not be as much fun as you expect, the tips presented above can help you to get through the holidays without increasing your debt.

Quiz: Do You Know the Keys to Financial Security?

The following quiz has been designed based on economic journalist Knight Kiplinger’s “8 Keys to Financial Security”, an enlightening publication with Kiplinger’s own personal financial wisdom.  The article was first introduced in 1997 in the 50th anniversary of Kiplinger Magazine, and again in both 2002 and 2008.  Along with being an economic journalist and active philanthropist, Kiplinger is the Editor in Chief of Kiplinger Washington Editors in Washington D.C.

1. Where should your money be spent or invested first?
a. Giving money to my children
b. Investing in myself
c. Paying off debts
d. Increasing my investment portfolio

ANSWER: (b) Investing in myself.  Developing and increasing your knowledge and skills through continuous education and training should be considered your most valuable asset, since this will ultimately determine your overall earning power.

2. What is one of the most important items to acquire as you move forward in life?
a. Stocks/bonds
b. A house
c. 401K
d. Insurance

ANSWER: (d) Insurance.  Prior to investing in financial assets, make sure you have enough insurance to cover the big risks in life such as serious illness, disability, or early death.  If an emergency arises, insurance will take care of it and you will not have to dip into your financial investments as much.

3. What items should you purchase using borrowing methods (credit)?
a. Everything should be purchased with credit
b. Low price, short-term items that you can pay off quickly, such as clothing, travel, and entertainment
c. High price, long-term items such as education courses or a car or home
d. You should never borrow or use credit

ANSWER: (c) High price, long-term items.  Use your borrowing methods wisely to purchase investments of lasting value, and make sure to pay off as much as possible as quickly as possible to avoid interest fees.

4. In what order should your payments take place?
a. Investments, savings, bills, credit card
b. Credit card, investments, bills, savings
c. Savings, bills, credit card, investments
d. Bills, investments, credit card, savings

ANSWER: (a) Investments, savings, bills, credit card. Trim and prioritize your spending so that you are able to pay into your mutual fund, money market, or brokerage account first so these investments can continue to grow.  Then add money to your savings account/emergency fund and pay all of your regular monthly bills.  Finish up by making a payment toward your credit card or other debts.

5.  What is the best method to investing?
a. Take big risks; the more times you swing, the more homeruns you will hit.
b. Take moderate risks; you hit some and you miss some.
c. Take a risk and swing only when you think the time is right.
d. Don’t take any risks at all; you can’t lose if you don’t play.

ANSWER: (b) Take moderate risks.  Use dollar-cost averaging to invest regularly in markets whether they seem good, bad, or indifferent, and maintain the patience to wait out the occasional bear market.

6. What should be included in your investment portfolio?
a. Strictly liquid assets, such as savings and cash accounts
b. Only safer investments like bonds and CDs
c. Only high return assets such as stocks and high-yield bonds
d. All of the above

ANSWER: (d) All of the above. Successful investors know that each asset category will perform at some point, and on the reverse, each category will also have a time of lull.  Having a diversified portfolio with all of these types of assets will ensure the best performance over the long-haul.

7. Which famous quote should be your personal money mantra?
a. “We are what we repeatedly do; excellence, then, is not an act, but a habit.” –Aristotle
b. “I’d like to live as a poor man with lots of money.” –Pablo Picasso
c. “You only live once, but if you work it right, once is enough.” –Joe E. Lewis
d. “A penny saved is a penny earned.” –Benjamin Franklin

ANSWER: (a) Aristotle said it best.  Saving money is always a good idea (Franklin), but making investments allows for growth you wouldn’t otherwise experience.  Also, you shouldn’t have to feel as if you are living in poverty (Picasso), but living beyond your means (Lewis) is not the right concept either.  Instead, get in the habit of making consistent and informed financial decisions on a daily basis, and you can lead an agreeable lifestyle while keeping your long-term goals achievable.  If you need to, look closely at your current lifestyle and budget, trim back dispensable spending, and invest and save on a regular basis.

8. How generous should you be when giving your time and money to others.
a. I should occasionally give a small amount to others
b. Giving to others should come first
c. I shouldn’t give anything to others
d. I should give what I can afford to give, when I can afford it

ANSWER: (d) I should give what I can afford to give, when I can afford it.  You own financial security is connected to the financial, physical, and spiritual health of others in your community, in our nation, and in our world.  Sharing your good fortune by donating your money, time, and talent helps to create a stronger economy and a healthier, safer world, which benefits us all in the long run.

Are You Making Smart Money Moves?

A recent post under Personal Finance on the U.S. News & World Report website listed 50 Smart Money Moves. We have taken our top 30 from this list and created a "Financial Check-Up" for our blog readers. Check each smart money move you believe you follow on a regular basis, and see where your money-moves rank with our results below.

 

( ) Decide on financial goals.
( ) Create a spending plan.
( ) Resist retailers' enticements.
( ) Track your own spending.
( ) Don't accept posted prices (i.e. price-matching).
( ) Research products online before visiting stores.
( ) Earn money from more than one source.
( ) Negotiate your salary.
( ) Don't shy away from all debt and make sure to choose the best credit card or loan for you.
( ) Pay off high-interest-rate debt quickly.
( ) Check your credit report and build a solid credit history.
( ) Track and review account statements.
( ) Take advantage of rewards cards.
( ) Adopt a hands-off approach to investing (consider a professional).
( ) Remember the risk-versus-reward rule.
( ) Start early, invest often.
( ) Don't try to time the market, and don't follow the market every day.
( ) Check your Social Security statement online and calculate your own retirement number.
( ) Take baby steps.
( ) Save even when you're not earning.
( ) Live with family members.
( ) Look for non-financial ways to help family members.
( ) Prepare to help aging parents.
( ) Avoid sharing credit accounts.
( ) Live more simply, use fewer products, and find cheaper hobbies.
( ) Plan weekly meals.
( ) Insure yourself.
( ) Make sure you're ready for X (house, baby, retirement, etc.).
( ) Cancel/avoid catalog subscriptions.
( ) Find ways to lower your utility bills.
 
If you checked 0 to 10 Smart Money Moves, you are:
Moving at the Speed of Slow.  Though you may not be where you should be now, there’s still hope!  Which of the above are you doing regularly and which areas do you need to work on?  Consider the ways you can start to implement these things into your life, put them into practice, and monitor as you go.  You’ll be glad you did.  If you need help getting started, don’t be afraid to ask for it!
 
If you checked 11 to 20 Smart Money Moves, you are:
Moving in the Right Direction.  So you’re not quite there, but don’t give up.  Be sure to track your progress and make adjustments when necessary.  If you need advice to reach your goals, contact a professional.
 
If you checked 21 to 30 Smart Money Moves, you are:
Moving toward Financial Freedom...and freedom is fun!  Way to go!  You’ve worked very hard and it’s paying off.  Slip-ups and setbacks can (and likely WILL) happen, so be careful not to regress backward.  Keep up the good work and you can enjoy the fruits of financial freedom!