Posts Tagged ‘investment’

Is There a Secret Formula for Financial Wellness?

Tuesday, February 5th, 2019

There are many prescriptions to get to financial health. Here are four proven strategies to help you get there:

 Setting and sticking to a budget

In 2017, 78% of Americans said they were living paycheck to paycheck, up from 75% three years earlier.1 Part of the reason may be that only 41% of us use a budget,2 even though it’s one of the best ways to keep track of where our money goes.

Fortunately, it’s a pretty easy problem to fix. Try writing down what you spend every day for six months. At the end of six months, add up what you have spent in major categories (living expenses, transportation, dining out, and so forth), and see if what you’re spending money on brings you joy. If it doesn’t, time to create a budget! Budgeting is the process of taking control of your money, rather than trying to figure out where it went. Budgeting looks forward, not backward.

Saving for emergencies

Just 39% of U.S. households have the savings for an unexpected

$1,000 outlay,3 such as making out-of-the-blue house or car repairs. Many experts think you should have three to six months of living expenses stashed away. Saving up doesn’t need to be hard. Simply put $40 or $50 a month into an account, and let it build — it will help you feel more secure financially.

Paying down debt

The average household has $134,058 in debt, including credit cards, mortgages, and auto and school loans.4 We suggest attacking two kinds of debt first:

  • High-interest-rate credit cards: Every dollar you spend paying down a credit card that charges 19% per year is like getting a 19% return on that money.
  • Small credit-card balances: Maybe you signed up for a store credit card and used it once or twice. Carrying a small balance may not seem like a big deal, but retiring this type of debt can give you an emotional boost.

Planning for retirement

The median working age couple has only $5,000 saved for retirement, according to a Federal Reserve study.5 Unfortunately, most people don’t start saving until it’s too late. There’s even a big cost if you delay savings just one year. Look at how much money a 26-year-old gives up by delaying the start of contributions by just 12 months:

Your Starting Age Your Contributions by Age 65 Your Account Value at Age 65 The Cost of Waiting One Year
25 $48,000 $324,180  
26 $46,800 $299,008 $25,172

This is a hypothetical illustration intended to show how a one-year delay in investing might affect savings. It is not intended to depict the performance of any particular investment. Assumes monthly contributions of $100, an annual 8% hypothetical rate of return in a tax- deferred account, retirement at age 65, and no withdrawals. Savings totals do not reflect any fees/expenses or taxes. The accumulations shown would be reduced if fees and taxes had been deducted.

You may be able to achieve financial health simply by following these four guidelines.

1 Source: http://careerbuilder.com. National survey conducted online by Harris Poll on behalf of CareerBuilder from May 24 to June 16, 2018.

2 Source: U.S. Bank, CNN.com, October 24, 2016. https://money.cnn.com/2016/10/24/pf/financial-mistake-budget/index.html

3 Source: https://www.bankrate.com/banking/savings/financial-security-0118/

4 Source: https://www.nerdwallet.com/blog/average-credit-card-debt-household/.  Balances as of June 2018.

5 Source: https://www.marketwatch.com/story/the-typical-american-couple-has-only-5000-saved-for-retirement-2016-04-28

 

Looking At ‘Generational Money Habits’

Thursday, October 11th, 2018

Generational money habits – How did my grandparents manage their money?

One thing that has changed significantly over the past century is people’s attitude towards money and how they manage it. Do we learn these habits from our parents, or do we recognise their bad habits and implement change to ensure we don’t do the same thing?

When I was growing up, the phrase my parents constantly used was “We can’t afford it”; even today, when I hear those words it sets me off.

My poor husband has to deal with the onslaught of comments that come from me when he has to deliver the message that we need to “tone down our spending”. In all honesty, the overspending most of the time is down to me, but the fact that I have not been able to break the “can’t afford it” cycle infuriates me!

Many articles have been written about baby boomers spending everything before they die, or millennials being overwhelmed with student loan debt, but rarely do you read articles that describe exactly how different generations manage their money.

My 99-year-old grandfather is part of “the Greatest Generation”, people who were born between 1910 and 1924. It’s crazy to think my grandfather was actually born in 1919! However, what is almost incomprehensible is that in 1929, at the start of the Great Depression, my grandfather’s parents were both killed by a horse-drawn milk truck when he was only 10 years old. My grandfather was then raised by his older sisters and a spinster aunt, and even during the Great Depression his aunt, who was illiterate, made sure my grandfather went to school so he would not be.

I imagine the events of 1929 and later greatly influenced the person he became and certainly guided his choices and decisions on how he managed what he earned. Fast-track his life to 1969: he retired at age 50 and is still living a financially comfortable retirement 49 years on. Whatever he did, he certainly did it well!

One thing my grandfather was most proud of was the fact he never borrowed money, not even for his home. In fact, he has never borrowed from anyone or owed anyone anything. I can’t even imagine being able to buy a home without a mortgage – home ownership and a mortgage go hand in hand these days.

My grandfather told me that he saved 20 per cent of each pay cheque from day one because he wanted to make sure he could take care of himself and never have to rely on anyone financially.

Nowadays, the benefits of a company pension plan that requires both the employer’s and the employee’s contribution are pathing the way for our long-term retirement goals. Our grandparents, and even some of our parents, never profited from employee benefits, and although these are mandatory, they have been put in place to secure our financial future.

At the end of the day, if you look at money management through the generations, there are still binding principles that hold true: set aside money for your future and borrow as little as you can. The reality is, it doesn’t matter how much money you make if you can’t figure out how to manage it.

Taken from a column in bernews.com. Carla Seely is the Vice President of Pension and Investments at FM Group. If you would like any further details, please contact her at cseely@fmgroup.bm or call +1 441 297 8686.

Test Your Money Smarts

Tuesday, July 17th, 2018

Think you have a good handle on the basics of investing? Take this 10-question quiz to see how you rate on basic investment skills.

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Planning For Your Child’s Education

Thursday, June 21st, 2018

As parents, you want to make sure your children have the best education possible, yet the cost of schooling and university can be extremely high. The money that you spend on your children’s education can be one of your largest lifetime expenses, so saving early is key.

Starting to save early will enable you and your child to select an excellent school or university based on the programme and their academic ability, rather than your financial situation. (more…)

Five ways to wreck your retirement (and marriage)

Monday, July 21st, 2014

Spending your retirement in comfort depends largely on what you and your spouse do today.

Retirement, like marriage, comes under enormous strain when money is constantly an issue and recognizing this sooner rather than later can make the difference between traveling and living out your years together in relative comfort or having to scrape by for years as you get older and less healthy. It’s a pretty stark contrast.

Here are five things to avoid with your retirement today:

1. Not saving early or often

It’s the little things that add up. While you may think there’s plenty of time between your current situation and retirement, saving now means you won’t have to catch up later, when you may face other issues or unplanned expenses. It’s also the single most effective habit you can develop: saving a little bit all the time.

2. Underestimating your needs and lifestyle (more…)

Insuring your retirement is not unlike insuring your car

Sunday, July 6th, 2014

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You can insure your home and car from disasters and accidents. Life insurance essentially protects your family from the loss of your income should tragedy strike. You can’t insure your retirement accounts in the quite same way, but there are a few tried and true strategies that can help safeguard them.

1. Save for retirement even during…retirement

There is no rule that you have to stop investing when you hit your golden years. One of the best hedges to outliving your retirement assets is to continue investing even when you reach retirement age. While there are mandatory age distributions from 401(k) retirement plans and traditional IRAs, you can continue to make investments in other assets during your retirement.

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Grow up financially while you’re still young.

Monday, June 23rd, 2014

imagesThe old adage of ‘the earlier you start to save for retirement, the better’ holds true today especially today. Here are a few questions you should ask yourself when starting to think about your options:

How much should I save?

Try to start out at around 15 percent, and that’s a minimum figure — 15 percent of your salary. It should be as easy putting that much away and more into a 401(k) plan. If you have a 401(k) with a match, up to half can of your savings can come from your employer.

Where should I invest my savings?

Index funds are a great way to get started since they allow you a wide range of investments including funds that invest in domestic stocks and bonds, and international stocks. A solid investment portfolio mixes equal parts of all three. The key aspect of an index fund is that it is generally cheaper.

What if I have a low paying job that doesn’t allow me to save much? (more…)

Being financially savvy with your 401(k) can earn you more.

Tuesday, May 27th, 2014

If ever you needed an incentive to learn more about money, this might be it. A new study shows that the more financially savvy you are, the more you’ll earn on your 401(k) plan. And not just a little bit more, a whole lot more–up to 1.3 percentage points more per year on your retirement plan investments than your less sophisticated counterparts.

In fact, being financially literate could help you build over the course of a 30-year working career a retirement fund some 25% larger than that of less-knowledgeable peers, according to the study, “Financial Knowledge and 401(k) Investment Performance,” which was recently published as a working paper on the National Bureau of Economic Research website.

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Your 401(k) can start to blossom this spring with these handy tips

Monday, May 5th, 2014

Unless you scour the voluminous info about your plan (which you should, but probably don’t) you might miss some important tips that can make a real difference in your planning down the road.  Here are seven things to bear in mind when reviewing your porfolio.

1. You can rollover.  When you leave your employer, you can transfer your 401(k) plan to an individual retirement account – and it is not a taxable event. This type of transfer is called a rollover. Many 401(k) participants think that any type of distribution from their 401(k) plan is taxable and subject to penalties. That isn’t true.

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