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New Year’s Resolutions Help Boost Your Fiscal Fitness

January 26th, 2016 | No Comments | Posted in Lifestyle

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January, 2016 - New Year's Resolutions Help Boost Your Fiscal Fitness-1 January, 2016 - New Year's Resolutions Help Boost Your Fiscal Fitness-2

The Lottery Is No Retirement Plan

January 26th, 2016 | No Comments | Posted in Financial News

Pay yourself first instead, with your future in mind.

shutterstock_63543031Powerball fever swept across America last week, with a record jackpot of $1.5 billion eventually being split by three winners in the January 13 drawing. Millions lined up for lottery tickets, hoping to realize their dreams of being rich, independent, and carefree.1,2

This infinitesimal chance at massive wealth was certainly alluring – to too many, more alluring than the practical steps that can be taken in pursuit of personal wealth and retirement security.

The passion for Powerball defied logic. It may have been a commentary on our wishful thinking, and on the lack of financial literacy in America as well.

As Creighton University professor Brad Klontz remarked to CNBC, “A lot of individuals who are not saving for their retirement are standing in line to buy a Powerball ticket. It’s a lot more seductive than instituting a savings plan.”1

On January 13, a Powerball ticket buyer had a 1-in-292-million chance to win the big prize. In comparison, the odds of someone being killed by a falling vending machine within the next 365 days are 1 in 112 million, and the odds of a person being struck by both lightning and a meteorite during their lifetime are 1 in 210 million.2

When the Powerball jackpot reached $1.3 billion last week, a widely circulated Internet meme claimed that the jackpot could end poverty, stating that every American would get $4.3 million if it were divided equally among the population. This was passed along as truth rather than colossally bad math – it would only apply if there were 300 Americans. Since there are roughly 300 million Americans, divvying up the $1.3 billion across the entire U.S. population would give each of us $4.33, give or take a few cents – enough to buy a flavored latte.3

What if we simply saved $4.33 per day, or more? Our financial lives might take a turn for the better.

Usually, wealth is not a matter of fate or luck. We can all take practical steps toward financial freedom, and even if we do not end up rich, those steps may improve our personal finances and retirement prospects.

First, spend less than what you make. Two or three percent less, 5% less, 10% less – whatever the number, it must be calculated from a comparison of your monthly income versus your monthly budget. That comparison may take a half an hour, but it is time well spent. Size up the money coming into your household per month with the money going out of it per month, and set a percentage that you would like to save every month. In effect, you will be paying yourself X dollars a month – and paying yourself, rather than your creditors, is a fundamental move for financial independence.

Two, direct these savings into investment accounts as well as savings accounts. It is vital to build up savings so that you can have an emergency fund – a good, strong emergency fund amounts to several months’ worth of salary. Another portion of the money can go into retirement savings accounts, preferably to be invested in equities. Yes, 2016 has started poorly on Wall Street, but one bad month (or year) is not the historical norm for the market.

Three, cut down bad debts. There are some “good debts” in life – debts that we take on in pursuit of a worthy outcome, such as a home loan or an education loan. Bad debts outnumber them, and the average credit card statement will note many. Some financial professionals and consumer advocates will tell you to try and pay off the debt with the highest interest rate first, then the one with the next highest interest rate, and so on; others will tell you to eliminate the smallest debt first and work your way up to the largest. One way or the other, you want less debt and you want to pay off any credit card balances in full each month.

Four, chat with a financial professional to determine your money goals. When will you have enough savings to retire? When should you claim Social Security, and how long should you keep working? How much monthly income might you need when you are retired? Most people retire without any answers to these questions, only guesses. It is important to know not only what you are doing, but also where you are going – and through a long-run saving and investing strategy, you can set objectives and measure your progress toward them over time.

The fantasy of receiving great wealth with no effort inspires people to play the lottery and try other forms of gambling. The reality is that saving for retirement takes planning and commitment. While some may not want to acknowledge this reality, those who do may find themselves making financial strides as others struggle.

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.
1 – cnbc.com/2016/01/14/lost-the-powerball-now-its-time-to-really-focus-on-finances.html [1/14/16]
2 – latino.foxnews.com/latino/money/2016/01/13/what-powerball-chances-likelier-hit-both-meteorite/ [1/13/16]
3 – cnet.com/news/can-powerball-end-poverty-lottery-meme-fails-to-check-the-math/ [1/12/16]

The Dangers of Hands-Free Devices

January 26th, 2016 | No Comments | Posted in Lifestyle

shutterstock_216099478It’s commonly believed that hands-free accessories are a safe way to use cellphones while driving. However, more than 30 studies show that they are actually no safer than handheld devices.

Though hands-free devices are marketed as a way to keep a driver’s hands on the wheel, they present other dangers. For example, many of these devices require a driver to take his or her eyes off of the road—such as to navigate through an infotainment system or to ensure the accuracy of a voice-to-text system. In fact, new studies from the National Safety Council (NSC) show that drivers are more distracted by voice-to-text systems than typing a text message by hand.

Another study, released by the American Automobile Association (AAA), found that even when a driver’s eyes are on the road, the distractions from a hands-free device cause significant impairments. These include, but are not limited to, decreased awareness of surrounding traffic, a sense of tunnel vision and increased reaction time.

To keep you and other drivers safe, it is best to wait until you reach your destination to make a phone call or send a text.

©2015 Zywave, Inc. All rights reserved.

Why You Should Stay in Stocks in 2016

January 26th, 2016 | No Comments | Posted in Financial News

One bad trading day is not the year.

shutterstock_96365069The stock market has wavered recently. A lackluster year just ended, and this year has started inauspiciously. You may be wondering … should you really be invested in stocks right now?

Yes, you should be.

In moments like these, investors should not panic and overreact to the headlines. Instead, they should take the long view of stock market investing. Impulsive selling now can lead an investor to try and time the market later, and market timing usually leads investors to make mistakes.

Stock market investing is a long-run proposition. On a bad day, it may seem like the whole market is falling apart – but stock market performance is not measured only in days.

Consider the following statistics, which highlight some underpublicized truths:

**Even with their poor showing in 2015, stocks have advanced notably in the last three years. Across 2013-15, the Dow Jones Industrial Average gained 9.97%, the Nasdaq Composite 18.37%, the S&P 500 12.74%, and the small-cap Russell 2000 index 10.18%. The Dow Jones Internet index advanced 28.85% in those three years, the Nasdaq Biotech index 35.26%.1

**Just recently, the Dow gained 7.00% in a quarter. The Nasdaq rose 8.38% and the S&P 6.45% in the same interval. When did this happen? The fourth quarter of 2015. Yes, the same quarter that just ended with everyone talking about how sluggish the market was.2

**The S&P 500 did lose 0.73% in 2015 in terms of price return, but its 2015 total return (including dividends) was positive – a yearly gain of 1.38%.3

And now, some long-term historical perspective:

**Through the decades, the S&P 500 has recovered very well from many of its major one-day descents. Its January 4 plunge was comparable to its August 24 drop, when it was down more than 4% during the trading session and lost 3.2% on the day to close at 1,893.21. It took the S&P just three days to recover the entirety of that big loss. Before that, there had been 54 market days in the past 32 years in which the S&P had lost 3.5% or more. There were 45 year-over-year advances after such days, in contrast to 9 year-over-year retreats.4,5

**In the 88 market years from 1928-2015, the S&P had 63 profitable years with its average yearly gain being 21.5%. So across the rough equivalent of a human lifetime, the S&P 500 has advanced on an annual basis 72% of the time.6

**Looking at the 74 possible 15-year intervals of S&P performance occurring during 1928-2015, roughly 60% of these periods have seen the S&P post a compound return of 10% or better. During 1985-99, the index’s compound return was a striking 18.3%.6

Yes, there have been down years for stocks, severe ones among them – think of 2008. There have also been great years, and far more positive years than negative ones. You have to take the good years with the bad. It is simply part of stock market investing.

Those who sell when the market is down often buy back in well after the market recovers. Selling low and buying high is a formula for disappointment. Staying invested through market downturns positions you to buy quality shares when they are cheaper, and when stocks rally, you are in the market and ready to benefit.

A particular headline or economic indicator may jolt the market on a particular day, but you are not invested for one day – you are investing for a lifetime. We have many positive signs in our economy – solid hiring, appreciable wage growth, steady consumer spending, a strong housing market – and they may lead to better corporate earnings in 2016. So be patient; better days may be ahead for the market.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

1 – wsj.com/mdc/public/page/2_3023-monthly_gblstkidx.html [12/31/15]
2 – wsj.com/mdc/public/page/2_3022-quarterly_gblstkidx.html [12/31/15]
3 – stockcharts.com/articles/chartwatchers/2016/01/do-dividends-matter.html [1/2/16]
6 – marketwatch.com/story/understanding-performance-the-sp-500-in-2015-02-18 [2/18/15]

January, 2016 – Monthly Economic Update

January 26th, 2016 | No Comments | Posted in Monthly Economic Update

Weekly Economic Update

How Parents Can Fight the Birthday-industrial Complex

January 26th, 2016 | No Comments | Posted in Lifestyle

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If you thought children’s birthday parties are little more than a couple of streamers, a few balloons and a cake, think again.

I just went to a 9-year-old’s party that put most weddings to shame, with a luxury venue, a deejay and dance floor, gourmet food, unlimited video-game play, a bowling alley, laser tag arena and a multi-person staff that kept everything moving with military precision.

Happy birthday, indeed.

“It is getting a little ridiculous,” said Rachel Cruze, co-author of the book “Smart Money Smart Kids.” “It has become a lot more about the parents than about the kids.”

While an over-the-top birthday will cost thousands of dollars, even a run-of-the-mill package at a chain restaurant can hit several hundred, or much more in some locales.

Popular kids’ spot Chuck E. Cheese, for instance, charges roughly $18 per guest for pizza, drinks, a reserved table, party favors and tokens. A Bounce U party for 15 with pizza runs $300 or more, depending on the location.

The bill is high even when children are too young to remember the event. According to a poll by website BabyCenter.com, 26 percent of parents report spending more than $500 for the first birthday party alone.

Think about the financial ripples. Multiply a $500 annual party by two, three or four children, and we are talking about a significant portion of after-tax income that could be earmarked for more important goals.

According to one survey by supermarket retailer Asda, the average parent in the United Kingdom spends an astonishing $28,000 on a child’s birthdays through age 21.

Even half of that is a punishing bill. “That amount could cover 45 percent of your child’s first year at a private college, and probably much more, when you factor in investment growth,” said Atlanta-based financial planner Niv Persaud.

The big-bash trend has some parents saying that trying to outdo peers with the best party pics on social media is not worth the price tag.

Nonprofit director Jen Wohl of Brooklyn, New York, decided she just could not afford to keep up anymore. So her son’s last birthday party consisted of a gathering with friends in a public playground, some home-baked coffee cake and brownies, and a total bill of $50.

Her verdict: It was the best decision she ever made.

“I just thought, ‘What is it my kid really likes to do?'” she said. “I realized that a good football game with 10 of his friends would be way more fun for him than a big $2,000 party.”

Some tips for hosting an affordable birthday party for your precious little one:

* Get creative

Kids adore sleepovers, which will let you skip the retail markups. Or you can gather in a public park with a few picnic tables and have a potluck, suggested Cruze, whose father is personal finance guru Dave Ramsey.

Brooklyn’s Wohl once asked local firefighters for a tour of the firehouse for 10 kids, to which they readily agreed. “Throwing money at something is actually the least creative thing you could do to celebrate your child,” she said.

* Limit the numbers

One reason behind whopping birthday bills: Parents and children feel obligated to invite everyone in class, or to invite everyone who has ever invited them.

Succumbing to Chuck E. Cheese? Keep that celebration to 10 kids instead of 40, and save 75 percent.

* Make it an occasional splurge

A big birthday party once in a while can be fun, but it does not have to be every single year.

“One of the things I have practiced personally is to only have one child have a ‘big birthday’ each year,” said Chris Hardy, a financial planner in Suwanee, Georgia. “I have three kids, and they rotate which year is the big year for their party.”

For bigger milestones like bar mitzvahs or sweet 16s, for instance, feel free to loosen the purse strings. Otherwise, keep it cheaper and low-key.

* Use it as a teachable (and charitable) moment

Children learn from every financial decision you make, whether you realize it or not. One way to make it count is to do something like turn a birthday into a fundraiser.

Charity: water, a nonprofit organization working to bring people clean drinking water, said its average birthday campaign raised $770.

Says Cruze: “If you can encourage that spirit of giving, that is an amazing thing.”

Source: reuters.com

Catch-up Contributions Can Put Retirees Way Ahead

January 26th, 2016 | No Comments | Posted in Financial News

shutterstock_366840773

If Paulus Prajudha ever stops working, he will be exceedingly happy about the decision he made in his early 50s to supersize his retirement account with catch-up contributions.

“Right now, I’m just maximizing what goes into the pot,” says Prajudha, 63, who is an accountant for a technology firm in Sunnyvale, California.

This year, on top of the $18,000 regular limit to a 401(k) plan, workers 50 and older can add $6,000 per year in catch-up contributions, which are aimed at helping individuals save enough for retirement.

Contributions are tax-free, but withdrawals are taxed as income in retirement.(Individual Retirement Accounts also allow catch-up contributions, but only at $1,000 per year, on top of the regular $5,500 limit.)

The additional 401(k) savings could amount to an additional $1,000 per month once a worker enters retirement, according to calculations done by Fidelity, one of the largest holders of retirement accounts.

“It’s a game changer,” says Meghan Murphy, director of workplace thought leadership at Fidelity.

Most employees, however, do not even come close to the regular limit, let alone put in extra.

According to new data from Fidelity, just 8 percent of its clients who are 50 and over make use of the catch-up program. Vanguard found in its last “How America Saves” report that 16 percent contribute.

While those numbers sound really low, Vanguard senior research analyst Jean Young says there is a rosier picture in certain demographics. Among those 50+ who make more than $100,000 per year, the participation rate was 42 percent.

INCOME MATTERS

The key to bigger catch-up contributions: “Give everyone higher wages,” suggests Young.

If you make less than $100,000, maxing out a 401(k) and then adding catch-up contributions would mean saving more than 20 percent of earnings. But the national average of people who max out at the regular limit is just 9 percent, according to Fidelity.

Those easiest to reach may be the 10 percent of workers Fidelity found who max out the regular contribution but do not do catch-ups once they hit 50.

Paulus Prajudha got on the catch-up bandwagon after Googling retirement topics: Every year, he does a search for the maximum limits and sets his goals accordingly.

Some companies do their own outreach, messaging workers as they approach 50. You can start your catch-up contributions in the calendar year you turn 50.

Jonathan Reitzes, who helps administer his event-staging company’s 401(k) plan in Boca Raton, Florida, signed up as soon as he hit 50 last year and has done a good job of bringing along his colleagues. Out of ten eligible employees, six have already maxed out their catch-up contributions and two have put in requests to start in 2016. He plans on checking in immediately with the remaining holdouts.

Reitzes also had a financial planner to nudge him towards making those contributions, in the way of Adam Vega, a wealth manager at United Capital in Fort Lauderdale, Florida. Vega uses software to alert him when clients approach age-based milestones.

While there is a bottom end of the income spectrum who opt for catch-ups, there really is no top, Vega says.

“Somebody earning $300,000 is still considering a 401(k) strategy,” Vega says. “It’s more about the tax benefit – not that they need to save more money.”

For Timothy Noonan, managing director at Russell Investments in Seattle, Washington, and author of “Someday Rich,” turning 50 coincided with the end of paying college tuition for his two daughters. Noonan was able to seamlessly fold more money into his retirement savings without missing it from his daily budget.

He doubts that most people will consider catch-up contributions because of the issue of delayed gratification. His motivation was more about facing mortality. After attending several funerals of friends who died young, he decided that time was more valuable than money.

“The change after 50 was that I wanted to accelerate the point at which future employment was voluntary,” he says.

For others, a fat bottomline may do it.

Fidelity found that the average 401(k) balance of those doing catch-ups was $417,000, versus $157,000 for those who did not.

Source: reuters.com

Pursuing an Encore Career in Retirement

January 26th, 2016 | No Comments | Posted in Videos

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