What’s Your Net Worth?

Have you ever Googled a famous person to find out their net worth? I know I have. Do you know what it means? Do you know how it’s calculated? Most importantly do you know that you have one? In this week’s post, we are going to go over the basics of what a net worth is and why you should pay attention to it.

What’s a Net Worth?

A net worth is essentially the sum of your assets subtract your liabilities. Assets being the things you own such as cars, cash, homes, investments, anything of substantial value. Then liabilities being the thing you owe to others,this can include credit card debt, your mortgage, student loans,etc.

How to Calculate Your Net Worth

Calculating your net worth is an easy process. All you have to do is add up all the assets you possess, then subtract  the total sum of assets from your liabilities to get the final amount. For instance, imagine you own a house that’s worth $100,000. And a car that’s worth $40,000. Now imagine  you have $30,000 dollars worth of student loans. To calculate your net worth you add the house and car amount together to get your total assets which is $140,000 and subtract the student loans debt of $30,000 which would make your net worth $110,000. Based on the results you may find that you have a positive net worth if you have little debt, and  a negative net worth if you have a lot of debt. So, why is this important?

The Importance of Net Worth

It’s good to check your net worth from time to time because it will let you know if you’re on track to achieving your financial goals. Think of checking your net worth like checking how much you weigh. When you check out how much you weigh you have an accurate idea of if your workout and diet plans are effective. likewise checking your net worth will let you know if you will have an effective financial plan and strategy for investments, savings, and retirement.

Increasing Your Net Worth

The simplest way to increase your net worth over time is to diminish your debt and increase your assets. There are many ways to do this. Methods include paying off your debts, reducing your spending, and increasing your savings, investments, or income. However, whichever strategy you use, make sure you stick to it and stay consistent.

Net worths are not just for the rich. Although it’s a simple calculation. It’s an invaluable tool to check in with yourself to see how you are doing financially.  It will allow you to see if your strategy for accumulating wealth is working or if you need to reassess your financial plans. And who knows, if you check in with your net worth long enough and tweak your strategy, you may eventually find yourself among the very rich.

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.

 

7 Expenses That Destroy Your Wealth If You Aren’t Ready

When you’re in your twenties, there are many things that take getting used to. You start taking on many new responsibilities, and often times there are things you don’t think about,  but that doesn’t stop them from coming. One of the many things that happen are expenses that people don’t think about until they are about to undertake them. We decided to make things a little easier for you by compiling a list of 7 expenses to start considering.

Retirement

Retirement may seem like an event that is far away and may not be something that you consistently think about. However, the earlier you start planning for it, the better the chances you will have of supporting yourself when you eventually find yourself in the process of retiring. In 2013, the average age for men to retire was 63.9 and the average age for women was 61.9 (4). This means that if you are 22 you have about 40 years to save and invest before you retire. There are a few ways that you can prepare yourself. The first step is knowing how much you need for retirement. This amount varies from person to person so it’s important to do your research. After figuring how much it takes for you to retire, you need to figure out what to invest in. Examples of tools for retirement include 401ks, and Traditional or Roth IRAs. Finally, after figuring out how much you need to invest, and figuring out where you are going to invest it, you need to find out how much you are going to invest each month to get to your goals.

Insurance

You’ve probably already started paying for some form of insurance whether it be car, life, health, or home. However, it is still something to be aware of especially since it takes a percentage of your paychecks. The key to insurance is finding the right policy that works for you.

Higher Education

For those of you who are looking to get another degree, the cost of graduate school is another thing you should think about when planning your future finances. Depending on what degree you plan on getting, tuition varies widely. Of course it’s possible to get scholarships, or have your job pay for schooling but having a plan before you start applying will put you in a better position to know what you will need to do to pay for your degree.

Wedding/Honeymoon

The bottom line is that weddings and honeymoons are expensive. The average cost of a wedding is $26,444 (1) and the average honeymoon is about $5000 (2) with such a high price, and for an event for most that is generally inevitable, it’s smart to start thinking about how you are going to pay for it. It’s also a good idea to keep in mind that in 2013 the average age for marriage for women was 27, and 29 for men (5), so the earlier these costs are on your radar the better.

House/Mortgage

Buying a house is a major milestone in your life. There are two ways to pay for it. Either with cash up front or with a mortgage. A mortgage is a loan that is lent to a potential home owner so they can finance the purchase of their house. The national average for a mortgage is “$222,261 with a $1,061 average monthly payment for a 30-year mortgage at 4 percent, according to LendingTree” (3). According to Zillow, The average age of a first-time homebuyer is about 33 (5).

Babies

Babies may not be at the forefront of your mind, however they certainly are something to consider financially. According to parenting.com a 2010 USDA report, the average middle-income family will spend roughly $12,000 on child-related expenses in their baby’s first year of life, and that is just the beginning. You still have to account for the cost of taking care of your child for at least 18 years. You are looking at spending over $200,000 over 18 years.

Your Children’s College

The average annual cost of public universities is $30,000, while private universities are $40,000 which is something to consider if you plan to pay for your child’s schooling. For college alone that is a range of $120,000 to $160,000.

The future can be overwhelming, and often we are told by those who came before us that they had wished they had prepared for certain events better. If you know what is coming, you will have a much better opportunity to prepare for these events, and meeting them successfully. We have provided this list so you are sufficiently prepared for the events that will inevitably come your way. Hopefully this will help you prepare as you navigate through your life.

Did we miss any major expenses? Let us know in the comments sections below. 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.

Sources:

1 Average Wedding Cost in the United States is $26,444. http://www.costofwedding.com/

2 How to save on a Caribbean honeymoon http://experience.usatoday.com/beach/story/caribbean/2014/06/04/caribbean-value-honeymoon/9970857/

3Realtor Magazine. http://realtormag.realtor.org/daily-news/2012/01/03/what-does-average-home-owner-pay-mortgage

4The Huffington Post. Kelsey Borresen –http://www.huffingtonpost.com/2013/11/14/married-young_n_4227924.html

5 Zillow: Average First-Time Homebuyer 33 Years of Age https://www.linkedin.com/pulse/zillow-average-first-time-homebuyer-33-years-age-carlos-m-moreno

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.

 

The Crucial Skill School Didn’t Teach You

From preschool to our senior year of college, we are placed in classes to learn skills we need to become productive members of society. That’s about twenty years of education, yet we aren’t taught one of the most useful tools that we’ll need for the rest of our lives. Nowhere along our scholastic journey are we taught about finances. This subject plays such an integral part in our lives as adults, yet we don’t know much about it. Why is that? I believe that if we were given a financial education before we were placed into the work force we would have a much better chance at navigating our financial futures.

Invest in Teaching Students About Finances

I don’t know about you, but I didn’t know much about the concepts of 401k’s, until I had my first job, and the only thing people told me was to put as much money as I could into it. The same lack of understanding applies to social security, savings, and investing. Many people who graduate high school and college also don’t have this knowledge, and as a result the whole process of building wealth gets mystified. For example, if you’re in your twenties, how many of your friends do you know invest in the stock market? All my knowledge about the stock market revolved around it crashing, and it being dangerous. All the while, investing your money is one of the best ways to protect yourself from the dangers of inflation. When there is a lack of knowledge, there will also be a lack of action. Or even worse, wrong action.

A Blueprint to the Future

If schools give us knowledge about financial subjects early on, the whole process of creating wealth will be demystified. This will set the foundation for greater financial success in the future. Imagine if schools taught a class on finances, and gave students an algorithm for how much they should put into their future 401k’s. They would probably start putting in the right amount of cash out of the gates. And if not, at least they were given a fair warning of what would come if they chose not to. However, let’s not stop there. What if schools also gave students a checklist to follow to make sure that their finances were in order.

For example:

1. Create a budget with your paycheck
2. Create a savings account
3. Put the right amount of money in your retirement account
4. Learn how to handle credit cards correctly
5. Start putting money in investments such as stocks and bonds
6. Learn about mortgages, and car notes

If Schools did this graduates would have a road map to reference as they start their journey into adult life.

An Early Start

Given this road map, young adults would have the opportunity to take financial action faster than they may have done before, and would be less likely to fall into debt. Thinking back to when I was first told about 401k’s, people told me they regretted not putting more money into their accounts. If we were visually shown the difference between the amount we would get if we started late verses starting early, many people may pay more attention to their 401k’s. I believe that this theme applies to all financial topics. If we are given this knowledge at an early age, we may start applying these concepts earlier, giving us a better chance at building wealth.

The Road to Riches

Stop me if you’ve heard this anecdote from Alice in Wonderland before. Alice says to the Cheshire Cat `Would you tell me, please, which way I ought to go from here?’. The Cheshire Cat says `That depends a good deal on where you want to get to,’. Alice tells him `I don’t much care where—’. And the Cheshire Cat says `Then it doesn’t matter which way you go,’. As the Cheshire Cat alludes to, if you don’t know exactly where you want to go, then you are leaving it up to chance of where you’ll end up. If somewhere along in our schooling we are taught about financial subjects, we would have a roadmap to lead us to our financial destination much faster. This by the way, will be the main goal of Stash once it’s created.

 

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.

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!

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.

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.