Life

Millennials Shun Investment Markets

October 30, 2017 By Twila Van Leer

Millennials Investing — Millennials tend to shy away from the usual investment markets to a greater degree than other age groups

When it comes to personal finances, today’s Millennials tend to shy away from the usual investment markets to a greater degree than other age groups, according to research by Wells Fargo.

The bank surveyed more than 1,700 individuals relative to financial literacy and opinions about the investment markets. Twenty percent of those in the Millennial age group (20 to 36) said they would never invest in the markets. Another 53 percent said they would be uncomfortable making such investments.

That raises concern among the experts that the Millennials won’t be ready for retirement when it rolls around. The prevalence of student loans in the age group is a factor. The average debt is now $34,144, up 62 percent over the past 10 years. Repayment often runs well into the prime earning years.

Wells Fargo devised a Positive Financial Indicator to determine how well an individual is faring financially. The five attributes of those in good financial shape are: Having enough money to put some into savings; saving specifically for retirement; a perception of being in control of finances; taking an active role in setting and achieving goals; and the ability to pay monthly expenses without strain.

Those who score higher on the indicator tend to be happier and more confident about finances, the bank found.

The survey also indicated more healthy attitudes among the Millennials who communicate with parents and grandparents on financial issues.

Graduating From College? What Next?

October 21, 2017 By Twila Van Leer

There’s an interesting dichotomy related to the college grads who are diving into first post-college jobs this spring. The majority, 69 percent, have student debt and almost exactly the same percentage, 70, said their college didn’t prepare them for real-world personal finance decisions.

Finance leaders/researchers Experian and KeyBank both reached the same conclusions. Bottom line, about one in five graduates has a sense of their financial goals, but are not certain how to reach them.

Based on the numbers, KeyBank offers these insights to grads and those who share a financial link with them:

Budget. The first paycheck post-grad may look large, especially compared with the part-time, campus and vacation jobs that are typical for students. New realities call for new budgets. Be sure to include all income and all fixed expenditures, including student loan payments, rent, utilities, transportation, clothing (Your new status might mean a new wardrobe), insurance, food and other necessities. Then work on a budget that leaves 10 percent of your income unencumbered so you can begin saving. If necessary, make lifestyle changes to support your decisions. Learn early the difference between wants and needs.

Establish a savings strategy. Small but consistent steps will eventually make noticeable results. A three-pronged approach provides for short-term goals, long-term goals and retirement. Keep an emergency fund intact, building up to a three- to six-month cushion. Try to have sufficient savings that you don’t have to use a credit card for car repairs and other unexpected expenses. Take advantage of your employer’s 401(k) plan if they have one. Start with the minimum necessary to trigger the employer match and increase your contribution by 1 percent per year until you are saving 10 to 15 percent of your salary. Learn about investing and when you are able, start. Know about compounding and be patient. A small investment, well-managed over time, can become a substantial nest egg against retirement.

Take a crash course in credit, preferably before you need to use it. It’s part of the financial reality for the majority of Americans. Know about credit ratings, how they are calculated, how you can protect your own and how you can maintain a respectable score that will kick in when you want to purchase a home, car or other top-ticket item. You’ll hear talk of “good credit” and “bad credit,” but what it boils down to is good or bad credit management.

Ways To Maximize Investment Earnings

October 4, 2017 By Twila Van Leer

It’s a sad statistic. Barely 8 percent of college students who responded to a survey regarding personal finance management could have received an A for doing it right. And in a 2014 survey among adults, only 18 percent showed top grade knowledge in personal finances.

It isn’t all that hard. One financial expert and University of Chicago professor reduced the basic elements to fit onto an index card.

To help, here are seven steps, compiled by Suzanne Woolley, to get you into the groove and keep you there:

First, save early and automatically. Some companies now enroll new hires directly into the company 401(k) so they are saving automatically. Others wait until the employee opts in on his own. If you can, save up to the maximum allowed by the employer so you get the benefit of their declared match. Many companies start to chip in when the employee savings reach 3 percent of their earnings. The benefit is that the money is withdrawn before you get a chance to see it, so you don’t miss it.

If your company does not offer a 401(k), start a savings account elsewhere, but aim for an automatic withdrawal of funds. Even a small amount, faithfully put aside, will grow over time. Try to find an option that offers the best interest. The idea is simply to make saving a habit.

Second, expect financial emergencies. It’s a rare individual who gets through life without one – or more. Almost half of those surveyed in a Federal Reserve analysis said they couldn’t cover a $400 emergency without selling something or borrowing.. However, experts caution that saving for an emergency should not come before saving for retirement. Do what you must to meet both needs, if it means eating Ramen for awhile. The older you are and the higher your salary, the larger your emergency stashes should be. Emergencies such as job loss, which often means the loss of health care coverage as well, are devastating. You should have enough savings tucked away that you could continue meeting expenses for at least six months if at all possible.

Third, set an asset allocation. It’s an investor’s most important decision. A rule of thumb is that your allocation should equal your age. Consider your risk tolerance and then be aware that you won’t really know what it is until it has been tested. The risk tolerance varies from one individual to the next. The market always holds risks, but a bad market, especially when you are already in retirement, can be disastrous.

Fourth, keep fees low. With the current expectation that future stock market returns will be dampened, the drive to keep fees low is greater than ever. If you are using an adviser who receives fees and commissions if you buy the products he or she recommends, your returns are likely to be at least 1 percentage point lower each year, according to the White House Council of Economic Advisers. The council estimated the cost of conflicted advise on IRA assets at about $17 billion per year. Keeping your investments simple and bypassing the advisers may save you money. Warren Buffet, in an annual publication, advised putting 10 percent of your money into short-term government bonds and 90 percent in a very low-cost S&P 500 index fund. The long-term results will likely be better than those attained under the advice of a high-cost manager, he says.

Fifth, if necessary, use an adviser who is a fiduciary. A clip from Last Week Tonight With John Oliver gives succinct advice: “Financial analyst is just a fancy term that doesn’t actually mean anything.” An adviser who gets a commission on an investment you make at his urging may be looking more to his own return than yours. Ask your potential adviser if he or she is fiduciary. If the answer is “no,” run, the clip advises.

Sixth, spend less than you earn. This basic, common sense advice seems unarguable. But some 23 percent of millennials and 19 percent of GenXers ignore it, spending above their earnings. No wonder they have no emergency fund. The end of every pay period is an emergency. Lifestyle creep – the tendency to spend more as we earn more – is a trap too many mid-lifers fall into. Saving really is easier than paying interest on a loan you have been forced into to take care of an emergency.

Seventh, maximize employee benefits. A career isn’t forever. The working years are when you need to build your retirement accounts. Financial Engines conducted a survey that showed only one in four employees had taken full advantage of their company’s 401(k) benefits. The survey was taken among 4.4 million participants at 533 companies. An average loss of $1,336 was experienced by those who failed to contribute the maximum their 401(k) allowed. That’s about 2.4 percent of annual income. Low salaries and budget constraints are the usual excuse given by employees who fail to make full use of the savings option, but even many employees in the upper reaches of the salary scale don’t do it. Most large companies also provide disability insurance as a benefit. If you choose to pay the premium, the tax-free provision could be big. Watch for changes in your employee benefits, such as the addition of flexible spending accounts, a health savings account or a commuter assistance program. Such perks lower the amount of salary on which you have to pay taxes.

Make Financial Mistakes? Who Doesn’t?

September 24, 2017 By Twila Van Leer

Make Mistakes — Deal with issues as they arise

Financial mistakes are the norm. Even the most successful money-makers have a few on their records. It all adds to the anxiety, confusion and frustration that circulate around money.

Most people are doing better financially than they think they are, experts agree. Look at the bottom lines over time and see if there is a steady increase. That indicates you haven’t failed.

Money is not static. It is dynamic. So are the stock market and other investment options in which you may put your money. Plan for the future and don’t get too hung up on today, according to Lauren Lyons Cole, certified financial planner and editor of “Your Money at Business Insider.”

Individual bumps or dips in your net worth are not necessarily indicators of success or failure. One mistake doesn’t doom you to a lifetime of struggle any more than one lucky break assures that you’ll never have tough times. Enjoy the ups and don’t let the downs get you down.

Since money is dynamic, your financial goals also can fluctuate with circumstances. Long-term planning is essential, but not beyond adapting when necessary. Don’t underestimate your potential.

Deal with issues as they arise. If you lost your job, look for a new one. If you have too much debt, cut spending to the bone while you pay it down. If your progress toward the goals you have set seems too slow, don’t give up. Keep working toward them. If you can cross some off the list, set new ones. Keeping the target in view is the secret to making your personal goals come to fruition.

A Living Trust Protects Assets

September 4, 2017 By Twila Van Leer

If you want to keep control of your assets while you are alive and set out guidelines for their distribution after your death, a living will may be what you need. Even if you need to make amendments over time, that can be easily done.

With a living trust, you can set specifics for all types of properties and have the flexibility to make changes as needed. For instance, you can name alternate beneficiaries if the individual you initially named dies. You can’t do that with joint tenancy or a pay-on-death bank account.

Compared with a will, a living trust does have some downsides. They are more time-consuming to establish and involve more ongoing maintenance. It is harder to modify them.

The usual cost of having a living trust prepared by a lawyer is about $1,000, but you can significantly reduce this cost by making your own trust. There are self-help tools to guide you through the process. Even if you create a living trust, you will need a simple will as a backup.

Age and wealth are the two most important factors in considering a living will. Greater wealth makes it more desirable to protect your inheritors from the inconvenience and cost of probate. The nature of assets also is important. If you own a small business or other assets that you don’t want tied up during probate, you are more likely to consider a living trust at a younger age. Although your expectation of dying is not immediate, you don’t want to risk having an executor obligated to report to a judge for a year or more.

The steps you should follow if you need to amend your living trust include: Locate the documents and identify the provisions you want to change.

Draft an amendment form or purchase one from a legal publishing store or office supply. Be sure all pertinent information is included, such as the name of the trust, the trust grantors, the trustees as named in the original document and the date it was created. Specify which article in the trust allows for amendments and which article you want to change.

Bring the trust grantors and trustees before a notary public and have all parties sign and date the amendment and specify who they are in the presence of the notary, who will then notarize the signatures.

Attach any changes you make to the original trust papers. Keep them is a secure place. If you filed the trust initially with your county records department, be sure you add any amendments as they are made.