Spring Cleaning Your Finances

Spring cleaning your house includes tasks such as scrubbing baseboards, moving furniture and identifying unwanted items to get rid of, like clothes, shoes, and toys. After a deep clean, your home smells like lemon, glass glistens, and the walls no longer sport fingerprints and stains from the past.

Spring cleaning your finances can offer the same feeling of renewal. You review each area of your financial life and find places that need cleaning and modifications. Actions often include getting rid of expenses that have no value, and ensuring you spend and invest the income with efficiency. Much like decluttering your home, deep cleaning your finances each year provides a lot of financial value.

When spring cleaning finances address the following:

Carefully Evaluate Current Spending

Eliminate expenses with little or no value to free up money for other financial priorities. Review automatic drafts and ensure you only pay for services you use. Then do a line by line audit on bills such as your cell phone and satellite TV bill. Companies like Bill Fixers can comb bills for savings on your behalf.

When you tally up savings, earmark it for a specific purpose to make the most of your savings.

Compare Goals with Investment Portfolio

Evaluate your investment portfolio and ensure your strategies align with current goals. Over time circumstances and financial priorities will change. Updating your investments to reflect those changes will keep you on track.

An investment review should consider diversification, time to withdrawal, and risk tolerance. Couples should match up investment strategies across portfolios, so they complement each other and work toward the same goals.

In non-retirement accounts, you might take appropriate steps to minimize taxes. A close look at your investment portfolio could result in adjusting investments and selling off low-performers. Funds’ sold within a tax-preferred account will not experience immediate tax consequences. Selling a position held more than 12 months would typically result in lower taxes, at the capital gains rate. Investments held less than 12 months pay taxes as ordinary income.

In some cases, you can use investment losses to offset gains earned in the same year. A tax advisor can help you sort out the tax implications of an investment sale.

Combine Accounts

A review of bank and investment statements can lead to combining accounts to simplify financial tracking. It is more difficult to keep up with multiple accounts. In many cases, consolidation with one company will give you a clearer picture of your financial wellbeing. However, there are times, when it is best to keep accounts with multiple companies. For example, if you tend to tap into savings, having money online or with a separate company can reduce the temptation to spend money earmarked for emergencies.

You can roll over a 401K from a previous employer into an IRA, at any time. The IRS restricts IRA to IRA rollover to one per 12-month period.

Update Beneficiaries

Investment accounts and insurance policies give you the ability to name a beneficiary, which you should keep up to date.

Check your Birthday for Qualifying Benchmarks

Retirement Accounts: Most retirement accounts require you to leave funds in place until reaching 59 ½. At that point, you can begin taking penalty-free withdrawals.

Health Insurance: Reaching 65 qualifies you for Medicare health insurance. Delaying sign-up can result in penalties.

Social Security becomes available as early as age 62. However, receiving early payments will result in a significant reduction in payments. You receive a full payout at age 66 or 67, depending on your year of birth. Further delaying payment until 70 will provide an 8% payment bonus for each year you wait, up to age 70.

Required minimum distributions (RMDs) begin at age 70 ½. The US federal government requires annual RMDs from traditional IRAs or retirement plans. In the year you reach 70 ½, you must begin taking an RMD no later than April 1st. If you do not take the required distribution by December 31, you could face a 50% tax penalty. Double distribution only applies to your first year.

Review Insurance Policies

You purchase insurance to take care of the “what ifs” in life. Over buying can cost you money and underinsuring can leave you with major financial outlays in the event of an unexpected occurrence.

Policies you might benefit from include: life, disability, auto, home, and health. Consider what the policy covers in relation to what you need and make any necessary adjustments. For example, a completed renovation could increase the home’s value, leaving you underinsured. An umbrella policy could save you money by combining coverages. Also consider riders, which address specific needs?

Update Your Estate Plan

Wills and trusts should receive an annual review. A new child, a child leaving home, marriage, divorce, or other significant change could impact the current plans you have in place. You should also update power of attorneys or medical treatment directives.

Ensure executors and beneficiaries are in place according to your wishes.

Record Storage

Organize financial records and keep both a physical and electronic copy with a cloud-based service rather than directly on your computer. In the event of an emergency, loved ones might not have access to electronic files.

Experts recommend keeping bills for one year. Keep tax returns, bank statements, investments, canceled checks, sales receipts, and paid off loans for seven years.

Other important papers to store safely include medical history, retirement documents, birth certificate, social security card, divorce decrees, wills, military discharge, marriage, and death certificates.

Maintain vehicle titles, home loan documents, and insurance policies as long as they are valid. Shred unneeded documents, recipes, and bills.

Credit

Review your credit score and report at least annually. The major credit scoring companies include FICO and Vantage Score. The three major credit bureaus, are Equifax, Experian, and Trans Union. Correct any mistakes immediately.

Video and Photograph Your Home

Document your possessions through video or photographs. Annually updating images will ensure you get credit for new purchases. Simply walk around each room in your house and get footage of what you own. Capture close-up images, brand names, and serial numbers for more expensive items. You can also preserve receipts in the same manner. Print or upload the file to cloud-based storage for secure access if you lose your computer or phone. Images and video will provide the insurance company with proper information to support a claim for destroyed items.

Financial spring cleaning can safeguard your finances for the upcoming year. You will have more security and the peace of mind, knowing your financial house is in order. The process can also highlight gaps you can address in the upcoming year.

If you are burdened with high amounts of credit card debt and are struggling to make your payments, or you’re just not seeing your balances go down, call Timberline Financial today for a FREE financial analysis.  Our team of highly skilled professionals will evaluate your current situation to see if you may qualify for one of our debt relief programs.  You don’t have to struggle with high-interest credit card debt any longer.  Call (855) 250-8329 or get in touch with us by sending a message through our website.

 

 

How to Negotiate A Raise

A low unemployment rate of 4.1% has put pressure on wages, which rose 2.8% in 2017. Increased job security and a strong economy can create opportunities to increase income without leaving your job. Asking for a raise is one strategy to put more money in your pocket.

Here are a few effective strategies to help you negotiate the raise you want.

Establish Your Worth

Know Your Value to the Company

To understand your worth to the organization, consider your position, and how it has changed since your last wage increase. Has the company downsized, developing a need for you to perform additional duties? To meet weekly or monthly expectations do you put in extra hours?

In addition to an evaluation of your workload, also consider completed training, even if paid for by the employer. New skills, training, credentials, and degrees which benefit the company and improve your performance, add value.

To help you effectively present your value to the boss, maintain a personal log of contributions you have made to the company. Consider the following:

  • Have you increased sales?
  • Have you helped the company save money?
  • Have you decreased the level of stress for supervisors and managers?
  • In what ways have you illustrated leadership?

The more details, facts, and numbers you gather, the better. Choose between five and seven of your biggest impacts to justify the request for a raise. Emails, memos, or notes when you received praise for your performance are concrete examples of high performance and your value to the company.

Creating a sense of your worth will help you quantify and justify a raise, along with giving you the confidence to ask for a higher salary or hourly wage.

How is the Company Performing?

In addition to personal performance, you also want to understand how the company is doing. Organizations struggling with sales are more likely to cut back than offer raises. Stock price growth, investor data, and personal observations can give you a better understanding of the financial strength of your employer.

How Much Are Others Making?

How does your pay compare to others working the same job? It can be difficult to learn the pay of co-workers because many employers discourage or forbid discussing salaries. However, you can use an online salary calculator to give you a ballpark of what others with your level of experience, earn in your field. The city you live and specific job functions also impact pay.

Knowing what others in similar jobs earn, can orchestrate the need to increase your pay.

Replacement Cost

When a company must recruit, hire, and train a new employee, there is a replacement cost, which increases your value. You know the company’s systems, procedures, and culture. Even when moving to a different position, you will have fewer training needs than a new hire.

Negotiation Strategies

Timing Matters

Prepare for an annual review by establishing your worth and negotiating a raise above the typical cost of living increase.

It is not always prudent to wait for an annual review. Accepting a higher level of responsibility or successfully finishing a large project can provide the opportunity to request more pay. Asking in proximity to a tangible accomplishment can increase your chances for an increase because your work ethic is fresh in your boss’s mind, making your request more relevant.

Be Professional

Begin negotiations by setting an appointment with your boss. Do not nonchalantly discuss a raise on your lunch break, or hint at an increase in the hall. Your boss will receive a formal, well thought out request seriously.

Negotiate Perks and Benefits

A raise doesn’t always translate into more income. In some cases, your boss may not have the power to increase your wages. However, they may instead offer additional perks or benefits. These could include flexible work hours, tuition reimbursement, student loan repayment, stock options, or vacation time. Other common alternatives may be telecommuting, a higher title, or the opportunity to attend a conference at the company’s expense.

If you have an interest in specific perks or benefits, include it in the negotiations.

Actions to Avoid

  • Do not compare yourself to other co-workers.
  • Do not come across as greedy or cocky.
  • Do not make it about you. Your boss does not care about your personal budget issues. They care about your contributions to the job.
  • Do not have unrealistically high expectations. An entry level position requiring few job skills, minimal work ethic, or lack of self-motivation will not lead to a large bonus or hefty raise.
  • Unless you are sincere, do not threaten to quit.

If Your Boss Says “No”

Sometimes your boss cannot or will not give you a raise, for various reasons. There could be a lack of funds, or you could earn the highest level possible in your current position, and some employers only offer raises at certain times of the year. Whatever the reason, seek to understand their position and remain professional at all times.

The conversation could lead to additional opportunities for training, which will qualify you for a future raise. It could lead to a promotion, with higher income.

Ask, “what will it take for me to get a raise?” Then do whatever your boss recommends and document your actions to present at the next meeting. Showing interest in professional growth will increase your value to the company.

If you receive an unsatisfactory outcome, you must decide your next steps. You can seek employment elsewhere, increase job skills, or do nothing.

A good work ethic is rare, and employers want to keep their best employees happy. If you are an employee who strives to exceed expectations consistently, your employer will have a strong motivation to keep you on board.

If you are burdened with high amounts of credit card debt and are struggling to make your payments, or you’re just not seeing your balances go down, call Timberline Financial today for a FREE financial analysis.  Our team of highly skilled professionals will evaluate your current situation to see if you may qualify for one of our debt relief programs.  You don’t have to struggle with high-interest credit card debt any longer.  Call (855) 250-8329 or get in touch with us by sending a message through our website.

 

 

 

 

Retirement Income Strategies

Planning for retirement involves the accumulation of assets and then spending the savings. Creating a twofold approach to retirement savings can give you a more accurate assessment of how much you will need, along with a long-term plan to address both sides of the equation.

One of the major challenges with retirement planning is the high level of uncertainty. You do not know how long you will live, how many years you will have good health, or how investments will perform.

To address these uncertainties, you can choose different withdrawal strategies. You want to employ a method that will stretch investments to last your lifetime while leaving enough money for the rising cost of care. This back-end game plan can lead your front end saving strategies.

There are four primary approaches used to steer investment decisions in retirement. They include the probability, safety-first, bucket, or weighing utility approaches.

Probability Approach

The probability approach evaluates past market performance to estimate the probability of success with a given portfolio. You choose a range of investments based on your assets and spending needs in retirement, and a computer program will review market performance, analyzes scenarios for future markets, and calculate the probability of success. You can then adjust spending levels early in retirement to reduce the probability of running out of money.

The strategy is popular among investors because it mirrors many pre-retirement investment strategies. Its strength is it alleviates the worst possible scenario. Its weakness is that it does not compensate for the fluctuation of your financial needs.

Safety First

The safety-first strategy focuses on establishing a safety net for essential expenses and then rates other costs in retirement by ranked needs. For example, a contingency fund will have a higher priority than hobbies or travel. The most recent advocate of this method is Professor Zvi Bodie author of Worry-Free Investing and Risk Less and Prosper.

The first step is to prioritize retirement goals, with the highest value given to basic needs, and a lower value given to luxuries. Then match risk characteristics to existing assets and goals. For effective implementation, you must maintain consistent spending patterns and avoid splurging on luxuries in early retirement to ensure you have enough assets to pay expenses in later years.

In most cases, you would fund your essential costs through a guaranteed income strategy such as social security, pensions, or a fixed immediate annuity, that guarantees payments for life, regardless of how long you live. An annuity can also include income for a couple, to provide enough money for you and your spouse’s lifetime, adjusted for inflation.

After meeting basic needs, you invest enough money in conservative investments to cover unexpected expenses, and then other investments earmarked for pleasure or luxury items. The safety-first strategy will not maximize annual returns or beat an investment benchmark. Instead, you chose investments based on spending needs.

The strength of the safety-first income strategy is you are less likely to run out of money because you establish guaranteed income for essential spending in retirement. The drawback is that you need more cash than other strategies because it is the most conservative of the four approaches.

Bucket Approach

The bucket approach establishes categories or buckets for retirement spending based on time. Much like you create a budget using spending categories, you set up timeframes for retirement to determine how you will invest funds in each bucket.

Harold Evensky, the financial planner who pioneered the bucket approach, focused on the basic principle that near-term living expenses should remain in cash, even with minimal yields. You can then invest assets not needed for several years, in a variety of long-term holdings, increasing gains. The cash cushion will provide peace of mind, while long-term holdings provide ongoing growth and the ability to withstand market downturns, without needing to sell investments at a loss due to income needs.

The first bucket, for immediate use, focuses on the safety of principle, rather than account growth. In some cases, returns may not keep up with inflation. To determine the amount, you need in the first bucket, analyze annual spending patterns. Subtract ongoing payments from Social Security, a pension, or an annuity, to determine the amount of deposit in cash investments.

Investments for short-term needs might include a money market for one year’s worth of living expenses, and short-term bond funds or dividend paying stocks for the remaining one to four years’ worth of expenses. You may also choose to include an emergency fund to cover any unexpected costs.

As funds deplete in the first bucket, you adjust the balances from other buckets to replace the money. The number of buckets and their investment goals will differ from person-to-person.

Longer term investments will fill the last bucket, which can withstand more market volatility because you do not need the funds in the near term. Stocks will be a major part of the long-term investment strategy, which could increase profits in the long run.

As the years in retirement progress, you can adjust spending based on the level of risk in your portfolio.

The strength of the bucket approach is the ability to capture higher returns on a significant portion of your investment portfolio in retirement, reducing the chances of running out of money, even with limited assets. The weakness is that you could incur higher costs as you move investments between buckets.

Weighing Utility

The weighing utility approach introduces satisfaction to the retirement income equation. You determine tradeoffs by weighing the value or utility of certain expenses. For example, you might need to decide whether to work an additional three years to increase your level of happiness in retirement or reduce your living costs as you age.

To calculate withdrawals, you determine the amount you need and want and put a weight on each expense. Then prioritize based on the weights. The strategy can help prioritize spending for discretionary items while ensuring you have enough to cover higher medical bills required as you age.

The strength of the weighing utility is that it considers the quality of life. The downside is that it can be hard to qualify the value of happiness.

Having an income distribution strategy in place can help you calculate the amount of money you will need in retirement. How you anticipate on living out retirement and your comfort with risk in investments will determine the best strategy for you.

If you are burdened with high amounts of credit card debt and are struggling to make your payments, or you’re just not seeing your balances go down, call Timberline Financial today for a FREE financial analysis.  Our team of highly skilled professionals will evaluate your current situation to see if you may qualify for one of our debt relief programs.  You don’t have to struggle with high-interest credit card debt any longer.  Call (855) 250-8329 or get in touch with us by sending a message through our website.

 

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