Financial Planning Blog Posts
September 29, 2017
Retirement planning is more than just participating in your company’s retirement plan. You have to take an active role to achieve your goal. Here are five retirement planning mistakes you could be making and how to fix them.
Turning Down Money
About 1 in 4 participants don’t take advantage of their employer's maximum match. It’s can be due to confusing policy choices, but be sure you are pocketing the maximum match from your employer. Also, a typical plan should include a 6 percent contribution from your salary. Most auto-enrollment programs default employee’s contribution to 3 percent.
The fix: Even with auto-enrollment, it’s important to check that you are contributing enough of your salary to achieve the maximum match.
2. Contributing Too Little
Studies have shown that you should save around 15 percent of your earnings to have the income you will need upon retiring. Most people are only saving up to 6 percent and even with a matching program from employers, it is still not enough.
The fix: Increase your contribution rate by at least one percent every year if not more. Contributing up to 15 percent is key to a steady retirement fund.
3. Turning down the Roth 401(k)
Half of employers now offer a Roth 401(k) but less than 10 percent of people take advantage of it.
The fix: Focus on the payoff of a Roth 401(k) even though your contributions are made with after-tax dollars.
4. Poor Allocation Strategy
Most people are either too conservative or gamble with no awareness of the downside.
The fix: Most retirement plans offer tools to help you sort through allocation decisions. Try to create an age-appropriate mix of stocks and bonds as well. With all of these allocation decisions, be sure to benchmark it using your expected retirement date.
5. Staying in an Expensive Plan
When you leave a company, you have the option to move your money out of that retirement fund. A good test to see if you should find another option is whether or not the plan’s investment options charge an above-average annual expense ratios which could easily be found online.
The fix: If the fees on your current 401(k) are high, it’s time to figure out your next move. Before transferring money into a new plan, check to be sure that the options are low cost. Another option is to move your money directly into an IRA account.
These are very common 401(k) mistakes but following these tips will jumpstart your retirement planning success.
September 15, 2017
Retirement planning is extremely important, but some people lose all of their money from scammers. The monetary cost of financial elder abuse has been estimated to be from $3 to $36 billion. While that’s a large range, the numbers tell a frightening story. What are the scams, big and small, that seniors need to be wary of?
1. Pump and Dump Investment – telemarketers often call seniors to sell them shares of a new company which sound too good to be true (trust us, it is). Once the share prices shoot up, the marketers dump their shares and collect their “hard earned” money, leaving seniors with a boat load of worthless stock.
The best way to avoid this scam is to either do independent research on the Internet from trusted sources like Yahoo Finance or work with a licensed professional.
2. Medicare Open-Enrollment – Every fall, right before Medicare Open Enrollment begins, scammers who claim to represent the Centers for Medicare and Medicaid Services call unsuspecting seniors about new Medicare identification cards. The ploy works by having the seniors give their bank account info and their social security numbers.
This is why it’s important to never respond to phone calls asking for sensitive personal information! In addition, Medicare does not call, e-mail, or visit anyone asking for that kind of information.
3. Anti-Aging – perhaps not as potentially disastrous as the above two scams, bogus anti-aging products can still put a serious dent in senior financials. "Anti-aging quackery and hucksterism are pervasive on the Internet and in clinics advertising anti-aging treatments," writes Thomas Perls, MD, MPH, of the New England Centenarian Study, Boston Medical Center.
You can typically spot a bogus anti-aging product by the excessive use of testimonials and “scientific” evidence, and absurd claims that they have helped thousands of people, even though you’ve never heard of them.
Remember, don’t believe everything you read. Now more than ever, false information is floating around, and people will use it to take your money! We help seniors find legitimate means of growing their savings and do the often difficult task of sorting the bad from the good.
August 15, 2017
Early last month, The Plan Sponsor Council of America (PSCA) released results of a survey that intended to get people’s thoughts on a new tax preference for retirement savings plans.
So what does this mean?
This new plan would include reducing or eliminating pre-tax contributions to raise tax revenues and offset losses in tax receipts from lowering marginal income tax rates.
The survey found that more than 90 percent of respondents indicated that they agree that eliminating or reducing pre-tax contributions to retirement savings plans is a bad idea.
These proposals could impact millions of Americans that participate in tax-qualified retirement savings programs.
Strategic retirement planning is important and it’s never too early to start. Here at BIG, we can help you prepare for your future as well as for tax reforms. Looking ahead at future expenses is the first step to preparing for retirement. This will allow you to be ready for whatever expenses are to come and not let the cost of retirement or reforms get in your way.
Most importantly, you can work with us to create strategies to not only preserve but help grow your retirement balances while determining your spending amounts.
Tax reforms can come and go but your retirement savings should stay the same. Work with us now and we can ensure a successful financial future.
June 29, 2017
Whether you’re in your 20s and haven’t even thought about retirement yet, or in your 50s and dream of retirement every day, it’s important to either start or continue saving. A mix of universal retirement advice with some little known tricks can be used to boost your savings for what are supposed to be your most relaxing years.
Invest Aggressively – a high percentage of your portfolio should be in stocks, especially if you are younger since you have more time to endure the ups and downs of the market. But don’t invest in individual stocks. Instead, select mutual funds or exchange-traded stocks in order to add some needed diversity to your portfolio.
Sign Up for a 401(k) – this advice is not just for our clients in their 20s; many baby boomers do not take advantage of what is essentially free money! If your workplace has a 401(k), you need to participate. Most employers will match your contributions. In addition, any money you deposit into the account will not be taxed now, so less of your income will be taxed. Use a 401(k) calculator to plan accordingly.
No 401(k)? No Problem – if your workplace doesn’t have a matching 401(k), then open a Roth IRA. Roth IRAs are funded with money that has already been taxed from your normal paycheck. However, when you withdraw and use the money in retirement, it will be tax-free. A tip from the wise is to have money from your paycheck automatically deposited into your Roth IRA.
Don’t let current expenses be an excuse to keep you from saving for retirement! A little financial planning now will save you a lifetime of regret.
June 15, 2017
Don’t let the nice weather fool you; competition is heating up. And if you don’t maintain a strong awareness of your business and its finances, then you’ll no longer be able to complain about the pain and hassle of managing your business’s money; because it will be gone. So, let’s keep your dreams healthy and alive by doing the following this summer.
1. Choose the right accounting software – not every accounting software is going to work for every business. Even if you have already have software, do your due diligence and click around the Internet to make sure you’ve picked the right one. With that said, the real pressing need is to move your financial data from desktop software to the cloud if you haven’t done so yet.
2. Do you have a professional bookkeeper? –we often find entrepreneurs aren’t thrilled about doing the bookkeeping for their business, which actually makes a lot of sense. Most people aren’t numbers people, and those with big ideas typically like to focus on the forest instead of the individual trees. If you’re finding that you’re spending a disproportionate amount of time doing the accounting for your business instead of running it, it’s probably time for some outside help. In the end, you’ll make more money since you’ll have more time doing what you do best.
3. Work with a trustworthy credit union – credit unions are ideal for small business owners. Credit unions do not have to answer to the whims of shareholders, so they are able to focus on you and your business’s needs. In addition, they generally keep profits local, so there’s a higher chance of them either investing in you or other area entrepreneurs in the future.
Keeping track of your finances will enable you to take opportunities which would not otherwise exist. Like we said, just because it’s nice outside doesn’t mean it’s okay to get loose with your money or get distracted! You’ve come too far to let a little hiccup derail your dreams from coming true.
April 30, 2017
Just because you’re a small business owner doesn’t mean you have to perform every job your business needs forever! And as experience tells us, most entrepreneurs dread the monotony of accounting. So, maybe you’ve finally decided your time and money is better spent on what you excel at, and that you should leave the number crunching for someone else. The question is, who should that someone else be – a CPA or a bookkeeper?
The question may seem daunting, but it’s not nearly as complicated as it sounds. The decision basically boils down to how complex the accounting needs to be. Bookkeepers are best used for simple accounting functions like day-day transactions, run payroll, make payments for business expenses, send out invoices and collect payments, as well as monitor bank account activity. Some bookkeepers will even prepare financial statements for internal business use. With that said, it’s important to know your bookkeeper’s background, as an education in accounting is not required in order to call oneself a bookkeeper.
But when the going gets really rough, we recommend turning to a CPA for help. CPAs can help businesses obtain loans, file a tax return and help with tax planning, as well as offer general strategic financial advice. Obtaining a CPA is a rigorous process which requires passing multiple exams on tax, regulation, financial reporting, audit, economics, and ethics, but it’s still important to do a thorough background check before you spend the money on a CPA.
What all of this means, is that you must divide to conquer. CPAs are expensive, so it’s best to use their services for truly difficult accounting issues. We recommend hiring a bookkeeper who can manage the day-day finances of your business and who can work well with a CPA when needed, or look for professional bookkeeping firms who can lend a hand.
December 12, 2016
There’s no way to get around some of the challenges that come with being a small business owner. But the proper tools and support can help you navigate the world of debits and credits more smoothly. Here are a few financial challenges you may face and some small business finance tips for managing them.
Small Business Finance Tips
Many small business owners can become overwhelmed by trying to manage their cash flow. Of course, you know you need accurate and timely data to line up the resources to handle crucial transactions – such as payroll – when needed. And the longer you wait to sort out your cash flow, the greater the risk for a mistake or oversight that can potentially damage your financial reputation.
Accurate and timely financial statements are a must because they help you make important decisions and manage your fiscal obligations. They’re also a critical component to getting extra capital through a loan if needed. Unorganized financial records can be a red flag to lenders and may convey the wrong impression about the company’s fiscal health.
Having a modern, often cloud-based, accounting system is a staple of many well-run small businesses. In fact, helpful accounting apps have become quite popular because they integrate into a lot of other services for easier and more efficient use.
For example, if a sale is recorded in one department, a well-integrated accounting app can almost serve as a virtual employee and immediately make the necessary income or balance sheet adjustments to manage the transaction accordingly.
Small businesses should consider utilizing financial/accounting apps offered through their business bank or business credit card to help them keep their finances in check.
A Company Credit Card
Is a company credit card the right choice for your small business?
Naturally, there are pros and cons.
For example, a business credit card such as Ink from Chase helps keep personal and business expenses separate. The card also rewards spending. And those reward points are capital that can be easily re-invested into the business.
Burgeoning businesses can benefit from a business credit card too; this is a great way to establish credit and build financial stability.
Meeting the Financial Challenge
Even the smallest of companies today have access to financial and accounting tools and resources that can rival those of a business twice their size. These technological advances are narrowing the accounting and financing gap for small businesses.
“Small businesses are strapped for time,” said Laura Miller, president of Ink from Chase. “The more we can bring together useful tools, the more we can help them be successful.”
In the absence of a fully-staffed financial department — or even a single dedicated person — a small business owner can rely on the numerous services offered by their financial institute or business cards to help navigate any financial management challenges they may have.
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August 15, 2016
If you're in your 40s, you are at a time in your life when you should be doing financial planning for your future and your family's future. Many people in their 40s say they need to be saving for college tuition for their kids, putting money into a retirement account and at the same time buying a house or saving for a down payment. Financial planning experts can help you see where your savings should be going. Not having a financial plan is worse than having a bad plan! These financial planning tips are meant to help people in their 40's find balance in their lives with spending and debt.
Establish an Emergency Fun
You should have three to six months of income in an account that's safe and liquid. You should also have in that account savings for planned expenses. For instance, if you know you will go on vacation next year, you should be setting aside money for that in your savings account. There's no right or wrong answer about how much cash to have on hand, but you need to be prepared in case your engine goes out or you lose your job.
Eliminate Credit Card Debt, Student Loans and Medical Bills
If you have credit card debt, you need to pay that down as quickly as you can. If you have student loan debt, then you should first look to see if it's tax-deductible based on your tax bracket. If not, then you should pay that off as soon as possible. In addition to financial planning, you should check the interest rates on your credit cards & student loans to see if you can get lower rates. If you have a lot of debt, you should be using all available funds to pay it off. If you have a little bit of debt you should use one-third to pay down that debt, and then use the rest for retirement savings.
Max Your Employers 401K Match
In your 40s, you should at least be saving as much in your 401(k) as your employer matches. Even if you weren't making any profit on that investment, your money doubles just because of the employer match. Every employer has a different retirement plan, you should find out how much you can contribute, and maximize your contributions up to that limit. People in their 40s can contribute up to $18,000 in a tax-deferred 401(k) in 2015.
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July 29, 2016
Do you picture yourself owning a new home, starting a business, or retiring comfortably? These are a few of the financial goals that may be important to you, and each comes with a price tag attached.
That's where financial planning comes in. Financial planning is a process that can help you target your goals by evaluating your whole financial picture, then outlining strategies that are tailored to your individual needs and available resources.
Why is financial planning important?
A comprehensive financial plan serves as a framework for organizing the pieces of your financial picture. With a financial plan in place, you'll be better able to focus on your goals and understand what it will take to reach them.
*There is no assurance that working with a financial professional will improve investment results.
Common financial goals
- Saving and investing for retirement
- Saving and investing for college
- Establishing an emergency fund
- Providing for your family in the event of your death
- Minimizing income or estate taxes
One of the main benefits of having a financial plan is that it can help you balance competing financial priorities. A financial plan will clearly show you how your financial goals are related--for example, how saving for your children's college education might impact your ability to save for retirement. Then you can use the information you've gleaned to decide how to prioritize your goals, implement specific strategies, and choose suitable products or services. Best of all, you'll know that your financial life is headed in the right direction.
The financial planning process
Creating and implementing a comprehensive financial plan generally involves working with financial professionals to:
- Develop a clear picture of your current financial situation by reviewing your income, assets, and liabilities, and evaluating your insurance coverage, your investment portfolio, your tax exposure, and your estate plan
- Establish and prioritize financial goals and time frames for achieving these goals
- Implement strategies that address your current financial weaknesses and build on your financial strengths
- Choose specific products and services that are tailored to help meet your financial objectives*
- Monitor your plan, making adjustments as your goals, time frames, or circumstances change
Some members of the team
The financial planning process can involve a number of professionals.
Financial planners typically play a central role in the process, focusing on your overall financial plan, and often coordinating the activities of other professionals who have expertise in specific areas.
Accountants or tax attorneys provide advice on federal and state tax issues.
Estate planning attorneys help you plan your estate and give advice on transferring and managing your assets before and after your death.
Insurance professionals evaluate insurance needs and recommend appropriate products and strategies. Investment advisors provide advice about investment
June 27, 2016 Page 1 of 2, see disclaimer on final page
options and asset allocation, and can help you plan a strategy to manage your investment portfolio.
The most important member of the team, however, is you. Your needs and objectives drive the team, and once you've carefully considered any recommendations, all decisions lie in your hands.
Why can't I do it myself?
You can, if you have enough time and knowledge, but developing a comprehensive financial plan may require expertise in several areas. A financial professional can give you objective information and help you weigh your alternatives, saving you time and ensuring that all angles of your financial picture are covered.
Staying on track
The financial planning process doesn't end once your initial plan has been created. Your plan should generally be reviewed at least once a year to make sure that it's up-to-date. It's also possible that you'll need to modify your plan due to changes in your personal circumstances or the economy. Here are some of the events that might trigger a review of your financial plan:
- Your goals or time horizons change
- You experience a life-changing event such as marriage, the birth of a child, health problems, or a job loss
- You have a specific or immediate financial planning need (e.g., drafting a will, managing a distribution from a retirement account, paying long-term care expenses)
- Your income or expenses substantially increase or decrease
- Your portfolio hasn't performed as expected
- You're affected by changes to the economy or tax laws
Common questions about financial planning
What if I'm too busy?
Don't wait until you're in the midst of a financial crisis before beginning the planning process. The sooner you start, the more options you may have.
Is the financial planning process complicated?
Each financial plan is tailored to the needs of the individual, so how complicated the process will be depends on your individual circumstances. But no matter what type of help you need, a financial professional will work hard to make the process as easy as possible, and will gladly answer all of your questions.
What if my spouse and I disagree?
A financial professional is trained to listen to your concerns, identify any underlying issues, and help you find common ground.
Can I still control my own finances?
Financial planning professionals make recommendations, not decisions. You retain control over your finances. Recommendations will be based on your needs, values, goals, and time frames. You decide which recommendations to follow, then work with a financial professional to implement them.
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July 14, 2016
Student Loan Debt: We Can Provide the Decision-Making Details You Need
Did you know that the average student loan balance is $24,803? Student debt is taking a heavy toll on borrowers, according to an American Institute of CPAs survey, which found that 75% of respondents or their children had made personal or financial sacrifices because of monthly student loan payments. Sacrifices included putting off saving for retirement (41%); delaying car purchases (40%); postponing a home purchase (29%); and even waiting on marriage (15%).
Among the most troubling findings were that only 39% fully understood the burden that student loan debt would place on their future and 60% had at least some regrets about their decisions on financing their education. That’s why it’s always critical to understand the full potential impact of all your financial choices. The good news is that your CPA can help. Contact us with all your financial questions and we’ll provide the knowledge and insights you need to make the best decisions for you.
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