It’s all about the cash flow.

When I meet with my clients, we review their investments as to quality, mix, and performance. That is not the most important part of what I do for my clients. Cash flow is the most important issue when preparing for, and when you are in retirement. People tend to focus on income vs how that income is spent. Don’t get me wrong, earnings, social security, pensions, and dividends are all important, but not the most important.
What you need in retirement is cash flow. Each month you have expenses, and you need cash coming in to meet those expenses. Depending on how you plan for retirement, that cash flow might come from many different places, and not all of it will fit the technical definition of income.
Suppose you retire at 65, but you make a plan and start Social Security at age 70. What do you do to fill that gap to cover your expenses? How you spend your sources of income will be the biggest determinate as to how comfortable your retirement is. It’s all about the cash flow and the decision you make on how to spend it.

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Don’t be part of the 43%.

New Year resolutions are a funny thing – some people always make them, and others do not. Of the people that normally make financial resolutions, 43% fail by the end of the first quarter. A study by Chime Financial showed that by the end of the year, only 8% of those who made financial resolutions stuck to them. I have four resolutions that should be pretty easy to keep.
1. Pay yourself first. Review your payroll deduction retirement plan and increase your contributions. You may think you can’t afford to increase your savings, but it is either pay Federal Income Tax, or pay yourself.
2. Spend below your means. When spending, ask yourself if the item is a need or a want. If it is a want, ask yourself how you will feel having spent that money on that item one month from now. I have no problems with setting a certain amount for discretionary spending each month. It is the spending beyond that amount that gets people into trouble.
3. Pay down your debt. If you have consumer debt beyond your mortgage or car payment, get rid of it as fast as possible. Always pay more than the minimum due and don’t rack up more consumer debt – pay cash instead.
4. Build up your cash reserves. Look at trying to always have 6 months of income in a liquid account. With strong cash reserves, you will not have to use credit when an emergency arises.
Anytime you want to make a major change, the resolution is simply a way to make explicit your intent. The real key is to make this resolution into a habit.

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I’ve joined the 70 million!

As of two weeks ago, I have joined the ranks of 70 million grandparents in this country. I have a new grandson and my new name is Nana. Along with babysitting and all of the other fun stuff that goes along with my new title, as virtue of my profession, I am also thinking of the financial responsibility we want to take on. I have often advised my clients to be the owner of their grandkid’s 529 accounts – in that way, they can still apply for grants and scholarships without having to list the 529’s as assets.
At 70 million strong — up 24% from 56 million in 2001 — the group spends a collective $179 billion on their grandkids annually, according to new research from AARP. The average spent is $2,562.
I look forward to all of the fun that goes along with being a Nana, and welcome the opportunity to help provide for his education.

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It is an enticing offer, but don’t fall for it.

Every time I shop a certain department store they ask if I would like to open their store credit card and get a 10% discount on my purchase. I always say no for two reasons: I don’t need another credit card, and I like the perks I get with the one that I use. Now that it is holiday season, the store credit card offer has gotten bigger with some discounts as high as 20%. It is still not in your best interest to take this bait, and here is why.
The average annual percentage rate (APR) for retail cards now stands at 26.01%, up 37 basis points from a year ago, according to a separate report from CreditCards.com. That’s nearly nine percentage points higher than the overall average credit card APR of 17.21%.
Interest rates on retail cards have risen over the past year even as the prime rate, which most credit-card issuers use to set their APRs, has fallen 25 basis points over the past year.
As many people get a bit over generous during the holidays, these cards add to their debt, potentially reducing their credit scores.
Set a holiday budget and pay cash. You will be in a holiday happy mood throughout the next year.

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How could this happen?

One of the worst things a family can go through is probate. Probate is the judicial process by which a decedent’s estate is valued, beneficiaries are determined, an executor in charge of estate distribution is declared, and the estate is legally transferred to the determined beneficiaries. Probate is very public, and the results may not be what the deceased had intended. Even worse, is when there is a specific place to name a beneficiary, thus avoiding probate, and that place is skipped. On top of that error, having a retirement account managed through a large, national company, and their representative does not take time to alert an employee that they did not name a beneficiary. This is the case for a client whose parent did not name beneficiaries on their 401k.
The parent lived in another State, so my client now has to brush up on that State’s probate law, hire an attorney in that State, and see this process through. It is hard enough dealing with the loss of your parent and the loss is compounded by the now necessary probate process.
Your will or trust will not override what is named in the beneficiary designation on a life insurance policy, annuity, or retirement account (like an IRA or 401(k) plan). As you gather with your family for the holidays, bring this topic up. It may not be in the holiday spirit, but it can be a short conversations that saves time, money, and anguish later in life.

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Make holiday cheer last, not the bills.

The holidays are always so exciting, and it is easy to get caught up in the excitement. We have parties galore with family, friends, and co-workers, and let’s not forget the presents! Here are my tips for making sure the joy extends all year, not the bills.
Every year we go through the holiday debt hangover but never learn a lesson. According to MagnifyMoney’s annual post-holiday debt poll, last year we racked up more than $1,000 worth of debt from the holidays. Determine in advance how much you want to spend and have that cash set aside. Do not go over your budget no matter how much you want to justify the extra expenses.
This year, 1 in 6 plan to open a credit card for holiday shopping. Here’s the kicker: 1 in 5 will be in debt until at least February, according to a poll from personal finance website WalletHub. You do not need another credit card, period. Cash is king
Holidays are fun, budgets are not. This year’s budget will ensure that you can afford next year’s holidays.

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When 4% is better than 44%.

When did you first start saving? Some people are much more disciplined and save from their very first dollar earned, others, not so much. With my own child, it has been a “do as I say, not as I have done” scenario. When I first started working, my family dynamics were different than for my daughter. I have insisted that she start depositing into her 401(k) from her first paycheck, which she has done. But what is the true cost of waiting?
If you start saving at 25 and plan to retire at 70, you’ll need to save just 4% of your income; meanwhile, if you start saving at 45 and plan to retire at 62, that percentage is 44%. The visualization uses data collected by the Center for Retirement Research at Boston College, which assumed you had a real rate of return of 4%, earned an average wage and were saving enough to replace 70% of your preretirement income in retirement (which includes Social Security benefits), among other assumptions.
By the way, if you’re thinking that barely anyone waits until their 40s or later to save for retirement, you’d be mistaken: Data show that more than 1 in 5 people don’t start saving until their 40s or older.
So take advantage of the biggest saving asset you have – time.

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