Little Tips That Can Make a Big Impact

 

I’m always looking for ways to improve the way that I build my wealth. It often comes from reading new information, trying it out and taking notes to see if it adds to my strategy. It is often the strategy and habits you form that create your circumstance. That’s why this week I thought I would share with you some tips that I found to be interesting and useful.

Keep Track of Your Spending

How many of you keep tabs on your spending? I know that I haven’t, until recently. Up until now I’ve thought that keeping a budget was enough to keep myself on track. However, tracking your spending on top of having a budget keeps you doubly honest. In addition to this you get to see any potential mistakes that were made. This may end up saving you a lot of money over a long period of time because nothing is slipping past you. In addition to this, you will also be able to detect any indications of fraud early on. Finally, tracking your spending is  a great way to trim the fat off your spending. After going over your purchases, you may see some purchases that stand out as the thing you spend on the most. Cutting back or eliminating this cost may increase you income in the long run.

Set Short Term Financial Goals

You may have goals of how much money you want in the distant future, but do you have financial milestones for the short term? This practice can help keep you on track towards reaching your goals, give you an idea of what you need to do to get there, and let you know how well you’re holding to your goals. For example, you should have a goal of what you would like your net worth to be in the next six months to a year.

Save but Don’t Over Do it

Having an emergency savings fund is very important. However, there is a point where saving can be a detriment to increasing of your wealth. The goal of an emergency fund is to have enough money to be unemployed for six months, unless there is an extreme reason  Also keep in mind the money you save should be in a high yielding interest account to keep up with inflation. After you have six months of savings, you should put that money into some form of investment to make your money grow rapidly.

Setup Calendar Alerts to Pay Bills on Time

In a previous blog, we’ve said that you should automate your finances to make your life much easier. However, I recognize that one may not be comfortable having to pay their credit card bill automatically. In addition to this, one may not be able to automate certain payments. That’s why another great alternative is setting calendar reminders. Setting a reminder a few days before you bills are due is a great way to keep on top of paying for things and not racking up late fees. You can also set up reminds for starting your taxes on time.

Wait a Day or Two Before Making a Purchase

Walking through the mall or through a store can invoke strong emotions that may cause you to want to spend. Often after a purchase you may have buyers remorse over something that you decidedly may not have needed as badly as you thought. To prevent this you can try waiting a day or two to make the purchase on the thing that you thought you wanted. Either  the emotion of purchasing the item will wane or  it will still be as strong as the first time you wanted to purchase it. Doing this will keep you from making unnecessary purchases. If you are concerned about the item not being there in a day, put it on hold.

These are a few little tips that I thought could make a big difference in the amount of money that you retain. I hope you found at least one useful. At the end of the day it is the little things that you do that make a big difference in life, and in accumulating wealth.

 

Is there another personal financial topic you would like to learn more about? Comment below or send your inquiries to stashadvisor@gmail.com. We are all about bringing you the most value!

This blog post is provided for discussion purposes, and is not intended as professional financial advice. It’s intent is not to be used as the sole basis for your investment or tax planning decisions. To get more information please speak with a financial planner. Under no circumstances does this information represent a recommendation to buy or sell securities.

 

Do You Know the Best Retirment Plan for You?

Figuring out your retirement can be confusing. You know you should do it, however knowing which plan to pick is when you can get a little lost. Check out our infographic below on the top pros and cons of some of the most common retirement plans companies offer or that you could invest in independently as it is always important to have a diversified portfolio for your retirement.  

What to know the pros and cons of any other retirement plan or got a great idea or suggestion of what you would like us to blog about? Please send your inquiries to stashadvisor@gmail.com. We are all about bringing you the most value!

This blog post is provided for discussion purposes, and is not intended as professional financial advice. It’s intent is not to be used as the sole basis for your investment or tax planning decisions. To get more information please speak with a financial planner. Under no circumstances does this information represent a recommendation to buy or sell securities.

Automating Your Finances

Handling your finances can be a chore that takes a lot of self control and energy. You have to make sure that you are saving the right amount, investing the right amount, paying your credits on time, keeping on top of your budget. The list goes on and on and it can sometimes feel overwhelming.  However, in this chaos, there is one strategy you can use to significantly reduce this stress. This strategy is called automating your finances. Many banks, and financial services offer the services of periodic payments to your account. As a result, you no longer have to worry about staying on top of your money as you may have once had to do. If you do this long enough you can basically go on living without paying attention to you accounts, and simultaneously watch your wealth grow.

How to Automate Your Finances:

The first step in automating your income is determining how much money from your income you can automate. For instance, let’s say you make $4000 every month and you have a total expenses list of $1284. These monthly expenses are made up of things such as your credit card payments, gym memberships, insurance, rent ,electric, utilities, retirement accounts, and investments. Your next step is to identify which expenses from your budget can be automated. Basically you want to find everything that can be automated to make your life easier.

After determining how much money you need to spend on obligations, and wealth building, it’s time to divide the money you plan on spending into the different categories of payments and choosing which day you plan to pay them. You have the choice to chose whichever day works for you and your schedule. At this point you have all the money that you need going into the different places they need to go, so when you’re dealing with your budget It’s not as much of a concern. In this situation if you end up spending more than you would have liked to on your current budget, you can take solace in knowing that you already have  a safety net of stored money to touch whenever you desire.

Example:

step 1:

Income = 4000/mo

Name	Expense	Wealth Builders	Monthly Price	Can I Automate This?
Credit card payment	x		$200	x
Gym Membership	x		$70	x
Insurance	x		$64	x
Rent	x		$1,200
Electric	x		$50	x
Utilities	x		$60
Savings Accounts		x	$100	x
Retirement		x	$400	x
Stock Portfolio		x	$400	x

Step 2:

Automated payments:

Credit card payments  $200/mo    (can automate)

Gym memberships  $70/mo   (can automate)

Insurance   $64/mo    (can automate)

Electric   $50/mo   (can automate)

Savings accounts $100 (can automate)

Retirement  $400 (can automate)

Stock portfolio $400 (can automate)

 

Total amount automated:

$1,284

Remaining for budget:

$4,000 – $1,284 = $2,716

Notice how instead of worrying about $4,000 of your income you are now only worried about managing $2,716 because you automated the parts of your budget that you could. This also will trick your mind into thinking you have less. as your payments become automated and you get into the flow of your budget you will stop thinking about all the extra money you have and your savings will grow rather than be depleted from overspending.

Today we live in a world filled with distractions. Within this world it gets easier than ever to find ourselves overwhelmed because of all that is going on, including taking care of our finances. Despite this there are ways to overcome this overload. Automating your finances is a great and easy way to do this. All you have to do is choose what you are going to automate, and if you do it correctly you can forget about it later and watch your accounts grow.

Got a great idea or suggestion of what you would like us to blog about? Please send your inquiries to stashadvisor@gmail.com or comment below. We are all about bringing you the most value!

This blog post is provided for discussion purposes, and is not intended as professional financial advice. It’s intent is not to be used as the sole basis for your investment or tax planning decisions. To get more information please speak with a financial planner. Under no circumstances does this information represent a recommendation to buy or sell securities.

 

An Easier Way to Make Money Than the Powerball

Yesterday everyone was lining up in gas stations, and 7-Elevens for Powerball tickets in the hopes of getting the $1 billion dollar prize. Did you win? Statistically speaking I would guess you probably didn’t. Winning the lottery is extremely hard, contrary to popular belief. Want to know a quicker, and easier way to make money? Pay yourself first. What is paying yourself first you ask?

Paying yourself first isn’t a hard concept to understand, but it’s critical to building wealth. It’s the simple idea of setting aside money from your income and putting it into your bank account before using the rest of your money for whatever else you normally use your money for. This technique is important because it’s the difference between perpetually being broke and having a nest egg of money that you can call on whenever you want.

There are many obligations that look to separate you from your money. Taxes, rent, and insurance companies to name a few. But these are not the only ones taking money from you, even you take money from yourself, in the form of overspending and buying thing you don’t need. After all this spending, you’re at risk of being in the same position you were before your last pay day. Just because you didn’t put away money before you started spending it. Don’t be a hamster on a hamster wheel. Pay yourself first!

How to Pay Yourself First

When I was first trying to learn how to build wealth I stumbled upon a book called “Rich Dad, Poor Dad” by Robert T. Kiyosaki. While reading this book I was introduced to the concept of paying yourself first. As I read, Rob introduced me to the difference between those who pay themselves first and those who don’t.

People Who Pay Themselves First                                   People Who Pay Themselves Last  

As you can see from the graphs the person who pays themselves first puts away a portion of their income into their savings and assets, while the person who doesn’t pay themselves first puts their money into their expenses first and doesn’t have any money left to put into their assets. You can imagine what each person’s bank account looks like over time. As Rob says “Poor people have poor habits” therefore all you have to do is start changing your financial habits to make your bank account look different.

Rob got the idea of paying yourself first from another book called “The Richest Man in Babylon” by George C. Clason. In this book you are told to put no less than a tenth of your income towards yourself. This may seem insignificant at first but imagine someone who saved $200 every month out of $2,000 (1/10th). In a year that person would have $2,400. If they did this for 10 years they would have $24,000, and these calculations are not including the increase in income they would probably make over time, or the amount they could gain if they continually invested that money resulting in a much higher return!

As George Clason wrote “Wealth, like a tree, grows from a tiny seed.” If you faithfully water your assets by consistently paying yourself first, before you know it, the money you make will literally grow on your money tree. Although this money tree may not be as much as Powerball winnings you will be satisfied knowing that you were the one who worked hard to grow it.

If you’ve got a great idea or suggestion of what you would like us to blog about? Please send your inquiries to stashadvisor@gmail.com or comment below. We are all about bringing you the most value!

This blog post is provided for discussion purposes, and is not intended as professional financial advice. It’s intent is not to be used as the sole basis for your investment or tax planning decisions. To get more information please speak with a financial planner. Under no circumstances does this information represent a recommendation to buy or sell securities.

 

3 Easy Budgeting Tips

It’s always hard around holiday season to stay on budget. You’re balancing your normal expenses along with added expenses of gifts, dinners or drinks with friends, and travel. Many times it comes to the end of the month and you realize you have spent  more than you intended to. So here are three tips to stay on budget.

Have Small & Large Financial Goals

We all have big financial goals, whether it be buying a car or having a worry free retirement, however many people do not focus on the small goals. Setting smaller financial goals makes larger financial goals more achievable along with helping you stay on budget. After studying my budget I discovered I was spending way more than necessary on coffee. So, I set a small financial goal of only allowing myself to purchase two coffees a week. Setting a small goal of only purchasing two coffees a week when I was normally purchase four, saved me $10 per week, that is $40 per month, and $480 per year. Take a look at your spend habits especially around the holidays can help you figure out where you can compromise, whether it be eating out, entertainment, drinks, or cab rides, you will be surprise when you break things down by category and learn how much you are spending. To learn more about setting financial goals check out our post on Accomplishing Your Financial Goals.

Check Yourself

Set aside 30 minutes each week to check your spending and budget. Doing this allows you to see if you are meeting both your financial goals as well as letting you know where you are at financially.This also creates a much easier end of month calculation of expenses and no surprises when you get your bank statement.

Keep it 100

It is important to have a budget that is not only realistic to your income but also one that best suits you. The main goal of budgeting is to allow for you to pay all you need to monthly and to also save money for your future (either short or long term goals). So, when you are creating your budget take an honest look on where you spend your money. There may be areas where you do need to cut your spending but that does not mean you need to get eliminate a category completely. For example, I love to eat out so my eating out budget is larger than the average person. I also do not have a car so all associated costs with a car I do not have, however I do need to budget money for the metro, buses, and cabs. So keep it 100 with yourself and your budget to make sure you never end up in the red.

Staying on budget can be hard but if you have developed a good budget to begin with and then identify steps to take to stay on budget it becomes a lot easier.

 

Got a great idea or suggestion of what you would like us to blog about? Please send your inquiries to stashadvisor@gmail.com. We are all about bringing you the most value!

This blog post is provided for discussion purposes, and is not intended as professional financial advice. It’s intent is not to be used as the sole basis for your investment or tax planning decisions. To get more information please speak with a financial planner. Under no circumstances does this information represent a recommendation to buy or sell securities.

The Importance of Investing

Investing is something that not many people take part in because there is so much mystery surrounding the topic. However, the more information someone gets and the earlier they start, the better off they will be when they do invest.

What is Investing?

At a very basic level, investing is the process of putting your money into something that you believe will return your investment with more money. Based on how successful, and/or valuable the item you invested in becomes, the money you invested will also grow in proportional value.

Why Should you Invest?

There are many reasons to invest your money. The most important reason is because it’s a great way to build your wealth. If you do your research on an investment, and choose wisely, you are making your money work for you around the clock without you having to lift a finger. If you do this well, and often enough, you can get to the point where you don’t have to work anymore. That isn’t all, it will also protect you against the inevitable inflation that will happen to the price of items as time goes on.

Investing isn’t Gambling

I’ve heard many people say that they don’t want to invest because they believe that it is gambling, and they don’t want to lose their money. This is a common misconception. The difference between gambling and investing is that investing involves research, and if done correctly, will greatly improve your chances of bringing you a profit. Gambling on the other hand is throwing your money away in hopes of making a profit. There is no research involved. There is no effort in learning how to win a game of dice, if you did that would be cheating. You are relying on “luck” and in reality the odds are stacked against you, otherwise casinos would be a very bad business venture. In the case of investing, the odds are in your favor, if you do the right research.

Investment Types

When talking about investments, there are many different ways you can invest your money. Some people prefer to invest their money in certain types of investments. We will go over the different types of investments for you to have a starting point for your own research. This way you can find out which type of investment works for you. The different types of investments are:

Ownership Investments

This is what most people think of when it comes to investing. Ownership investment is when you own an asset, which is something the owner expects will become more valuable as time goes on. Some examples of ownership investments are:

Stocks: A stock, also known as a share or equity is an item that represents partial ownership in a company. As a result of a company’s success, their stock price will increase and become more valuable overtime which means that the purchaser can sell it in the future to increase their wealth.

Real Estate: This includes living spaces such as houses, apartments, condos etc. that you rent or resell. According to Investopedia, the house you live in does not count as an investment because it’s fulfilling a basic need.

Precious objects: Valuable metals such as gold, paintings by a famous artist, and hopefully someday Pokemon cards are considered precious objects. These are considered investments if you plan on selling them in the future for profit.

Business: A business that you own is an ownership investment because you put time, effort, and money into it. Your business can pay you back exponentially the more successful it becomes.

Lending Investments

For Lending investments, think of yourself as a bank, your offer your money and whoever borrowed your money is indebted to you and will pay you back with interest. These aren’t considered very risky investments because it is not likely that you won’t be paid back, but at the same time you will not make a lot of money from lending investments.

Bonds: Bond is a general word for any investment where you loan money to an entity like a business or government, and they pay you back over a period of time with a fixed interest rate.

Cash Equivalent

According to Investopedia, cash equivalent investments are investments that are considered “as good as cash” because they can easily be converted back into money.

Money Market Funds:This type of investment gives back low returns, and is much more liquid than other types of investments because you can write checks from a money market account. Think of a savings account when you think about a money market fund.

Investing is a great way to increase your wealth. With all the resources and types of investments out there for you, it would be foolish not to take advantage of an opportunity to increase your wealth. In the future, we will go more in depth about investment options that are available to you. But no matter what, remember to start as soon as possible, and to stay informed!

 

Got a great idea or suggestion of what you would like us to blog about? Please send your inquiries to stashadvisor@gmail.com. We are all about bringing you the most value!

This blog post is provided for discussion purposes, and is not intended as professional financial advice. It’s intent is not to be used as the sole basis for your investment or tax planning decisions. To get more information please speak with a financial planner. Under no circumstances does this information represent a recommendation to buy or sell securities.

Accomplishing Your Financial Goals

No matter what stage of life you’re in, you should have financial goals. Your financial goals may be simple or complex, short or long term, small or big. Some more common financial goals are saving money for retirement, purchasing a house, traveling, or paying down debt. So, how do you accomplish these financial goals?

Think of the goal you would like to accomplish and when you would like to accomplish it. Keep in mind many financial goals align with personal goals. Do you want to retire with a certain amount of money, do you want to pay down your debt by a certain date, do you want a car, do you want to travel? Then, consider how much money you need to accomplish your  goal and when you would like to accomplish it. You can discover this number by some simple research on what your goal is.

Once you have a list of your goals, their estimated cost, and when you would like to accomplish them by, you need to prioritize them by their importance to you. When setting financial goals I find it easier to work backwards. Look at the goal at the top of your list and it’s deadline, calculate the number of months between today and your deadline date, this number will tell you how many months you have to save money. Divide the total estimated budget, of your goal, by the number of months till its deadline and you will then have the amount of money you need to save each month.

For instance, I set a personal goal of traveling once a year because it is something I greatly enjoy and it’s something I want in my life. This translated into a short term financial goal of saving $1,500 for my first trip. I estimated this should cover airfare, accommodations, food, transit, etc. Keep in mind, some financial goals take more research than others. I wanted to take my trip in one year, providing me with 12 months to save. To figure out my monthly savings amount I did the simple math of 1500/12=125. I needed to save $125 per month to take my dream trip. My next step was to review my budget and figure out where the $125 per month would come from.

When you really look at your budget, once you have been tracking it for a couple months, you will be surprised to learn where some of your money is going. For instance, how I started saving for my trip was by not purchasing as many coffees per week. I set a small financial goal of only purchasing 2 coffees per week. Setting a small goal of only purchasing 2 coffees a week when I was previously purchasing 4, saved me $10 per week, that is $40 per month, and $480 per year. Yes, this may not be all of the money I needed each month for my travel goal but it brought down my needed amount to $85 rather than $125. Think about where you can compromise, whether it be eating out, entertainment, drinks out, or cab rides, you will be surprise when you break things down by category and learn how much you are spending. Upon further review of my budget I had a little more than $85 per month in my budget not being spent, which gave me my needed total of $125. After reviewing your budget you may not need to compromise on anything.

Keep in mind with some larger long term goals, such as retirement, you should also consider the interest gained in the accounts you deposit your funds into. You can use an estimate of the interest gained to learn how much money you will have by the end of your set deadline. Financial goals should not be overwhelming. The key is to break financial goals down into achievable steps and small goals. Once you break them down they are much more easily achieved.

 

Got a great idea or suggestion of what you would like us to blog about? Please send your inquiries to stashadvisor@gmail.com. We are all about bringing you the most value!

This blog post is provided for discussion purposes, and is not intended as professional financial advice. It’s intent is not to be used as the sole basis for your investment or tax planning decisions. To get more information please speak with a financial planner. Under no circumstances does this information represent a recommendation to buy or sell securities.

 

Everything You Need to Know About 401ks

401ks are a topic often briefly discussed, and normally given to you in a dense packet when you first join a company. However, it’s an important topic especially since everyone at one point will eventually retire. That is why we have decided to offer you some basic information on them so you can get started.

What is a 401k?

A 401k is a retirement plan offered by employers in which an employee contributes a percentage of their salary, through payroll deductions, to a sponsored retirement savings account. The employee can normally increase or decrease their contributions at anytime. The money that you contribute is pre-tax, meaning that the money gets put into your account and the government can’t tax it until you take it out and start using it as income during your retirement. Once the money is put into your retirement account, it grows based on the mutual fund investment you choose or is designated to you by your employer.

Company Matching

Based on your company’s policy, they will match the amount of money you place into your 401k up to a certain percentage. For instance, let’s say you had a salary of $50,000 and your company matches up to 3% of your salary. If you put $1,500 into your retirement account which is 3%, they would match that $1,500, and you would end up with $3,000 saved in your retirement account for that year. However, if you put 4% which is $2,000, they would still give you $1,500. Finally, if you put 2% which is $1,000, they would only give you $1,000 instead of the $1,500 that you could have gotten if you had put in 3%. Either way this is an excellent way to increase the amount of money saved in your retirement account.

Vesting

Vesting is when a company requires that you wait a few years before you can gain the full rights of their matching contributions to your retirement account. Meaning if they contributed $4,500 to your account for 3 years, and they require for you to stay with them for 4 years, you do not own that $4,500, plus the money they contributed for the 4th year until you reach your 4th year of employment. However, if you quit before the 4th year, you will not get to keep the $4,500 but you will get to keep the money that you invested. Essentially this is a way for the company to keep you with them for a certain period of time.

Withdrawal Rules

The money in your 401k must be kept there until you are 59 ½. If you take any of the money before then, it will result in a 10% early withdrawal penalty, and you will still have to pay the income tax on the funds withdrawn. There are however circumstances that you are allowed to withdraw this money without penalty. Every plan differs but you can take it out of a retirement account before the required age if you use it for:

• Buying your first home
• Costs after the onset of a sudden disability
• Higher education expenses like paying for your child’s college
• Payments to prevent eviction or a foreclosure

          (“How does a 401(k) plan work?”, 2015).

However, you don’t want to rely on your 401k for immediate financial needs because you will be taking away from your financial security in the future.

Changing Employers

If you end up leaving your company, there are many options available to you in regards to your  401k. These include:

• Rolling over your account balance into your new employer’s plan.
• Rolling over your account balance into an Individual Retirement Account (IRA).
• Based on your company’s policy, you may be able to leave your balance in its plan.
• Withdraw your account balance in a lump sum cash payout. However, with this option  you will not only reduce your retirement savings, but also face severe tax consequences.  (“What is a 401(k) plan?”, 2015)

Calculating Your Retirement Goals

The first thing you want to do is contribute enough to get a full match from your employer. This will serve as a good base for your overall retirement plan. Once you have this settled, the next step is to figure out how much you believe you will need to save in order to live how you would like to live during retirement, and for how long you plan on being in retirement. There are many ways to come up with this number.

One way of doings this is to assume that you would like the same standard of living that you currently have. In this case the rule of thumb is that you will need at minimum 80% of your current income or even better 85% (Weliver, 2014). Let’s say someone is 26, and they make $60,000 a year. Based on our 85% rule they figure they will live off of $51,000 per year. They plan to retire at age 65 and will live until they are 93 so $51,000 * 28 = $1,428,000. Another way to figure out your goal is to use a calculator such as this calculator created by CNN or this more complicated calculator created by Merrill Edge. They will help you figure out how much you need based on your age, how much you have saved, when you plan on retiring, and your investment strategy. Once you make your calculation,  you should check your calculations yearly to make sure that you are on track.

Investment Strategies

In terms of investing in your retirement you will often have a few different strategies to take. The first one is “defensive investing.” Defensive investing protects your investment portfolio from taking too many losses but you will also not gain as much as other investment strategies. This strategy is suitable for someone who will need their retirement money sooner rather than later.

The second strategy is a “balanced investment.” This method is for those who would like a balanced risk with their money, by having less losses than an aggressive strategy and more gains than an defensive strategy. This strategy is for someone who still has a good amount of time before they retire.

The third investment strategy is the “aggressive investment” strategy. This strategy is meant to get the maximum amount of money you can get by risking a large amount of potential loss. Aggressive investment strategies are especially suitable for those who are young because they still have a longer time before retirement, and can stomach the loss they could potentially incur.

The final strategy isn’t much of a strategy but an option that companies often offer which is the target age mutual fund. Basically you are placed into a target age of when the people your age generally retire, and the strategy of investment is taken care of for you because the mutual fund changes strategy from aggressive to defensive as you get older.

401ks are the cornerstone of your retirement strategy and the earlier you start thinking about it, and using it, the better off you’ll be when you retire. Hopefully, the knowledge that was offered here will give you a good place to start.

 

Got a great idea or suggestion of what you would like us to blog about? Please send your inquiries to stashadvisor@gmail.com. We are all about bringing you the most value!

This blog post is provided for discussion purposes, and is not intended as professional financial advice. It’s intent is not to be used as the sole basis for your investment or tax planning decisions. To get more information please speak with a financial planner. Under no circumstances does this information represent a recommendation to buy or sell securities.

References:

How does a 401(k) plan work? (n.d.). Retrieved November 21, 2015, from http://money.cnn.com/retirement/guide/401k_401kplans.moneymag/

Weliver, D. (2014, August 1). How Much Should You Contribute To Your 401(k)? Retrieved November 19, 2015, from http://www.moneyunder30.com/how-much-should-you-contribute-to-your-401k

What is a 401(k) plan? (n.d.). Retrieved November 24, 2015, from http://www.practicalmoneyskills.com/personalfinance/lifeevents/benefits/401k.php