Building Wealth

Money Management Tips For 30 Somethings

March 29, 2016 By Twila Van Leer

Manage money carefully in your 30's. — Manage money carefully in your 30’s.

What you do in your 30s, personal finance-wise, makes a difference to what your retirement will look like. There are some common mistakes people make in their 30s that influence the future. Here are some of them:

Over-spending for children

What you spend on cute clothes, sophisticated toys and even educational apps must be subtracted from what you expect to live on after you are through working. Better to spend conservatively and save money for your children’s college funds.

Not discussing finances before marriage

Getting married without discussing finances can be destructive. If by your 30s you have not learned to negotiate financial options, you could be in trouble. Money issues can become serious marital conflicts, leading to divorce or ongoing clashes. Learn to talk about finances and how to set monetary goals together.

Ignoring debt

Coping with consumer debt well into your middle years can be worrisome. There are always excuses to burden yourselves with debt. Children and the ordinary crises of life are among them. But ignoring debt can come back to haunt you. Budget aggressively, live thriftily, earn as much as you can and try to anticipate retirement free of consumer debt.

Keeping up with the Joneses

Over-extending for things like a house and/or cars is another pitfall. Temper your desires to have everything and to give your children everything and you’ll find yourself better prepared to make do in your retirement years. People don’t really need a huge house and several vehicles to rear happy children. Keeping up with the Joneses occupies the minds of too many of those in their 30s. Remember that the Joneses probably are trying to keep up with someone else up the ladder. Be reasonable. Buy within your means and put something aside for later.

Not leaving a will

Make out a will or set up a trust for your kids and your spouse. Save them the hassle of trying to sort things out in case of your passing. Set up a power of attorney and power of healthcare so things don’t get sticky at that point. Ditto life insurance. If you unexpectedly leave your family when they are still depending on your income or time, you need life insurance, enough to cover their needs, not just the minimum usually offered by an employer. Consider disability insurance. In your 30s, the chances of becoming disabled are greater than early death.

Ignoring investments

Re-evaluate retirement goals now and again. By 30, your income probably has increased. Re-calculate to ensure that your retirement will support the lifestyle you want to retain. Pay attention to how your investments are performing relative to those goals. Readjust if necessary to meet goals and risk tolerance. Find a capable financial planner to help you.

Not starting a college fund when kids are young

Don’t wait until your child/children are ready to go to college to prepare financially for that expensive undertaking. Put money into an online savings account toward that eventuality. Find ways, if possible, to enlarge your education savings. Some adults at this time of life, too, consider going back to school to enhance their employment possibilities. Be certain to carefully study how much you can expect to gain by more schooling before you enroll. You could be making an expensive mistake.

Not pursuing other income opportunities

Diversify your income. The days are essentially gone when you could expect to work for one employer throughout your life. If you have a hobby that can be converted to income, pursue it. Job loss is no longer uncommon and you may need fallback sources to get you from one job to another. Taking good care of your personal finances in your 30s could pay big dividends down the road. Pay attention.

Sharks Experts Share Advice

February 24, 2016 By Twila Van Leer

Shark Tank Experts — Kevin O’Leary, Barbara Corcoran, Daymon John, Lori Greiner, Robert Herjavec, Mark Cuban

What would the experts on the popular ABC show “Shark Tank” advise those who are 50-plus to help make them financially secure? In its February/March AARP The Magazine, which is aimed at those in that age group, editors asked the Sharks. And here is some of their advice:

Kevin O’Leary warns that you must be prepared for financial downs.

Keep 10 percent of your total assets in cash. Three basic investing rules include: Never put more than 5 percent of your money in one stock or more than 20 percent in one sector such as energy. Do put 50 percent of your investments in dividend-paying stocks and 50 percent in interest-bearing bonds. Over the past 40 years, 71 percent of the returns on Standard and Poors came from dividends, not capital appreciation.

Mark Cuban warns that you must “follow the green, not the dream.”

Too many entrepreneurs focus so closely on their dream that they forget the practicalities. The advice carries over to planning for retirement. To better align the dream with the green, determine your savings; assume you’ll earn 4 to 6 percent on investments; commit to living on the returns and not spending the principal; calculate what that leaves you with annually, monthly and weekly; adjust accordingly.

Cuban suggests some healthy paranoia. Learn to spot “Slick Willies.”

If you are listening to one, take a time out to think things through and then follow your good sense. Long-term, consider every financial activity with caution and the expectation that things could change. Health considerations, for instance.

No deal is better than a bad deal.

Three ways to hone your skills to avoid bad deals: Understand the investment. Keep emotion out of it. Getting emotionally attached to such things as a house can blind you to the realities. Speak the truth, not what others want to hear. In making financial decisions, you are not trying to make friends. Separate the two.

Learn from the past.

Take risks, but do it based on your knowledge of outcomes in similar circumstances over a period of time. Invest in what you know. What companies and products do you love and trust? Build your portfolio around them. Do your homework using the many resources of the Internet. Focus first on recouping your capital, then on how much profit you can make.

Negotiate everything.

Don’t simply accept the fact that utility bills are going up, for instance. Call the provider and see if there is anything you can do to lower your bills. If your financial adviser wants 1.5 percent, offer 1 percent. Negotiate with medical providers, etc. If you don’t get a reduction, you haven’t lost anything by trying.

Listen and keep learning.

Ask the question: “What did I learn from this experience?” Age doesn’t matter. There is always opportunity for learning from what life hands you. More knowledge and wisdom mean more opportunity, according to Shark Robert Herjavec. “It’s just a matter of opening doors and finding it.”

Depreciating Assets Can Hurt Your Finances

November 30, 2011 By Sherry Tingley

Everyone has them— depreciating assets. What are they? Assets that lose value over time rather than gaining value. It isn’t possible, it seems, to avoid purchasing a car, major appliances and electronics. They are financial realities. However, the trick is to purchase what you need rather than what you want and to be aware up front what depreciation rates assets can have. There are some assets you probably could do without if you took into consideration how fast they depreciate. If you can’t do without them, take special care in acquiring them.

Common Depreciating Assets

Timeshares: Many people purchase them without realizing the money holes they can become. Unlike the majority of standard real estate, most timeshares lose 50 percent of their value immediately upon their purchase from a resort. Additional depreciation, up to 90 percent, occurs over the next few years.

Boats: There is a reason why boat owners often lament that the two happiest days of their lives were the day they bought their first boat and the day they sold that same piece of property. The dream of boat ownership is quickly absorbed in the reality of the expense such ownership entails. Boat rental may seem an expensive alternative, but it is usually far less expensive than to own your own. Your own boat is usually a depreciating asset you could do without.

Recreational vehicles: Just like cares and boats, RVs love a large percentage of their retail value the minute you depart from the dealer’s parking lot and they continue to lose value as they age. Few people use RVs as much as they expect to when they plunk down the purchase price. Add the costs of gas and the space rental many people have to pay for the RVs when they are not in use and ownership doesn’t make much sense.

Luxury cars: There is not much chance of avoiding a car purchase forever, but keep in mind that it is a depreciating asset. To get the most out of your purchase, focus on what you really need, not what suits your ego or what will keep you in the running with the Joneses. A used car in good condition has already seen much of the initial depreciation priced out. The corollary is someone who wants to have the benefit of gold’s stability and buys jewelry instead. You can’t have it both ways.

Electronic Gadgets: They not only depreciate, they do it quickly. Owning the latest and, purportedly the greatest in computers or electronic gadgets may be popular, but it also is the least cost-effective option. The latest models always come with a premium price. Last year’s model is usually just as effective for most people. And last year’s models will be heavily discounted as soon as the new model appears on the horizon. Make sure your purchase checks out with your wealth building plans.

The prospect of any large purchase should trigger the question: “Do I really need this?” If the answer is “Yes.” proceed wisely. Opt for the product that fulfills your actual needs at the best possible value. Depreciating assets eventually affect your finances, so avoid them when possible and consider devaluation as one of the factors to evaluate as you make your purchasing decisions.

Distribution of Wealth Between Young, Old is Growing

November 21, 2011 By Twila Van Leer

The recession that keeps dragging along has had a serious effect on the difference in what older Americans have accumulated and what younger Americans are expected to end up with over time. A relative dearth of work opportunities for young adults, coupled with housing and college debt, has doubled the disparity since 2005, Census figures show. And the gap is nearly five times what was evident a quarter century ago, after adjusting for inflation.

Older Generation May Be Better Off

It is expected that older people who have accumulated over a lifetime, would be better off than those who are just starting down the economic trail. But the current figures show the gap growing wider at an escalated pace. The Census figures were prepared for a special congressional committee that is working to find where they can cut $1.2 trillion out of federal budgets over a 10-year period. The figures tend to pit the benefits paid to older Americans in the form of Social Security and Medicare against programs that benefit those at the younger end of the scale, such as education and assistance for the poor. The debate is narrowing down to whether some of the money allocated to the elderly might be better spent at the opposite end of the spectrum.

Net Worth Of Younger Generation

The current economic downturn has hit younger Americans particularly hard. Many of them are paying for higher education and many are accumulating debt while they wait for the job market to regain its equilibrium. Many are paying for homes, sometimes for homes that are worth less now than when they bought them during the housing boom that preceded the economic slide. The Census figures show that the median net worth of households headed by someone 65 or older was $170,494 — 40 percent more than in 1984. The median net worth for households headed by younger people was $3,662, down by 68 percent compared to a quarter-century ago, according to the Pew Research Center. The older folks often have paid off their mortgages and built up more savings than their younger peers. In 2009, households headed by someone under 35 saw their median net worth reduced by 27 percent, largely due to credit card debt and student loans. It was the largest hit in any age group. Those in the 35-44 age category saw a 10 percent dip.

In all, 37 percent of younger-age households have a net worth of zero or less. That’s nearly double the figure posted in 1984. Among households headed by a person 65 or older, the percentage of those labeled at zero net worth has hovered nearly unchanged at 8 percent. While the young face the highest unemployment rate since World War II, older Americans are staying on their jobs longer.

Social Security accounts for 55 percent of the annual income for the older-age households. The payments are indexed to inflation, so have not lost relative value. Young people, on the other hand, have seen increases far in excess of inflation in such items as college tuition. At the same time, college aid has dwindled. While Pell Grants to needy students have increased somewhat, they cover a smaller portion of higher education costs.

If the current trends continue, experts say, the rising generations may be the first in America for whom the long-held expectation that each generation will do better than the one before will not come to fruition.