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What Costs More? Inflation Comparison Then and Now

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We all know that inflation raises prices, but how many of us really understand the compounding effect that it has on the cost of everyday items? What other factors influence prices besides official inflation numbers? And how many of us know how we may protect ourselves from inflation and, at the same time, make the most of inflationary pressures as we plan for the future?

Inflation Through the Years

Let’s take a brief look at individual inflation rates from 1990 to 2018, at the cumulative rate, and at some specific numbers over just the past 28 years.

Comparing prior years, inflation stood at 6.1% in 1990, 3.4% in 2000, 1.5% in 2010, and is expected to be around 2% for 2018. On their own, those numbers may not look too daunting, but when you look at the cumulative effect that it has over the years, small increases over time can have a huge impact.

By adding together each year’s inflation rate, we can see how much the cost of an ordinary $20 item increases over the years. Since 2010, the cumulative inflation rate is 15.4%, so the same item that cost $20 just eight years ago would now cost $23.08. Going back to 2000, the cumulative rate has been 46.1%, raising the cost to $29.22. Looking back another 10 years, we see a cumulative inflation rate of 92.5%. This means the cost to buy that $20 item from 1990 would today cost $38.50.

To put that into perspective, it means that to live in 2018 the way people did in 1990, just taking inflation into account, pay increases would have had to average 3.3% every single year. Which means that a salary of $100,000 in 1990 would need to be $248,204 in 2018. If a person’s annual raises did not average at least that much, then their savings and investments would have had to make up the difference, just to stay even. Since 2000, incomes would have had to increase every year by 2.56% to stay even.

What About Specific Items?

Inflation is not the only factor that affects prices. A company’s research and development has to be paid for, marketing costs, product launches, building new plants, funding benefit schemes, and the value of innovations to existing and new products or services all impact prices. Let’s take a look at some specific product prices today compared to their prices in the year 2000. All figures are based on the US Bureau of Labor Statistics.

You can see how the price of other items from the Consumer Price Index have changed over the years here.

Planning Ahead

No one knows what the future holds, but by planning ahead and analyzing your present versus future financial situation may be a good way to feel confident about what lies ahead.

If you’re ready to take a look at your situation and work out a plan for the future, contact Sharkey, Howes & Javer today to meet with a CERTIFIED FINANCIAL PLANNER™.

Inside the Economy: Inflation, Earnings, and More

By | Economic Discussion, Economy, Larry Howes, SH&J Blog | No Comments

 

On this week’s Inside the Economy, we review core inflation numbers. Now that we have the highest core inflation in the past decade, what could this mean for the U.S. economy? Have the second quarter earnings numbers supported the all-time highs in the U.S. stock market again? Tune in to find out the answers to these questions along with a review of the U.S. debt to GDP ratio and a new challenge public utility companies are facing.

Scholarship Websites

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With the cost of college tuition rising, more students are looking to scholarships to help take pressure off the cost. However, when it comes to athletic scholarships, the odds of a male high school athlete playing basketball at a NCAA Division I school are 107:1, and 88:1 for a female high school athlete. If your student was fortunate enough to receive an athletic scholarship, for the 2014-2015 school year, males received athletic scholarships of $14,270 and females received $15,162 on average at a Division I school. This likely still would not cover the full cost of tuition. So where else should students look for scholarships? According to a report completed by Sallie Mae, many families don’t apply for scholarships because they think they won’t qualify due to grades, finances, or simply because they don’t know what may be available.

Scholarships can come from each school independently, private or community organizations, or state and local governments. With close to $49 billion in grants and scholarships available it is likely that there is a scholarship out there for every student, the tricky part is finding it. Below is a list of websites put together by The Scholarship System to help students get started.

  1. Big Future (College Board)
  2. Broke Scholar
  3. CareerOneStop
  4. Chegg
  5. JLV College Counseling
  6. Student Scholarships
  7. Tuition Funding Sources
  8. Unigo

By using these websites, students can narrow their search by filtering scholarships that tie to their interests and majors. This saves time so they can put more focus into applying for awards they have a better chance of receiving. It is important to track deadlines for each scholarship and be wary of scams. Also, be cautious not to avoid scholarships that seem too small or not worth the time to apply. Others may not apply under the same reasoning, therefore reducing the competition and increasing your chances of receiving the award. Every dollar received can quickly add up!

Contact Sharkey, Howes & Javer at 303.639.5100 to speak to a CERTIFIED FINANCIAL PLANNER™ about how to incorporate scholarships into your child’s education savings plan.

Inside the Economy: GDP, Mortgage Rates, & the Bond Market

By | Economic Discussion, Economy, Larry Howes, SH&J Blog | No Comments

 

On this week’s Inside the Economy, we discuss the second quarter GDP numbers. The U.S. economy is continuing to see robust growth. We review some of the supporting components, and how long this expansion may last. As mortgage rates and home prices continue to increase, what effect does this have on new home buying? Tune in to find out the answers to these questions and more!

A Financial Checklist for New and Expecting Parents

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As a new or expecting parent, there are a number of expenses you need to prepare for. Raising a child isn’t cheap, and it only becomes more expensive as time goes on. If you want to be sure that you’re prepared for many of the major financial obligations associated with raising a child, this financial checklist will help confirm that you have everything in order.

Step One: Plan for Hospital and Delivery Costs

The average cost of birth in the United States is more than $30,000, without even factoring in the costs of prenatal care and checkups in the months leading up to it. Much of this amount will be alleviated by insurance, but you’ll need to consult with your provider to fully understand the amount you’ll owe following delivery. You will also want to make sure your doctor, hospital, and anesthesiologist are all in network with your insurance, prior to your delivery. By planning for these expenses, you can stay one-step ahead and take at least one worry off your plate when your child arrives.

Step Two: Build Up Your Emergency Fund

You may already have an emergency fund set up, but the amount you save up will change when you have a child. Ideally, you want to have 3-6 months of required expenses including rent or mortgage payments, car and insurance payments, groceries, and more in your emergency savings fund. The goal is that in the event of a job loss, you will have enough to be able to take care of your family while you search for a new job. Your emergency fund will also help cover things like emergency child care, hospitalization for illness or injury, or unexpected home repairs.

Step Three: Examine Your Will

Have you been putting off writing your will? Now is the time to write one or update an existing one. Make sure you’ve designated the individual that you and your spouse would like to raise your child or children in case something happens to you as well as how your assets should be handled. Do you want to create a trust for your children to access when they’re older? Do you prefer to hand over control of your assets to your child’s guardian? Make sure that your estate planning documents leaves your family with everything they will need.

Step Four: Update Your Insurance

Aside from adding your child to your health insurance plan, this will also be a good time to review your life and disability policies. As your family grows, it is more important than ever to make sure that your insurance plans are adequate to provide for the needs of your family in case of death or a disability.

Step Five: Revise Your Budget

Your budget is going to change significantly with the arrival of your child and some of your discretionary income may decrease. Make sure that you’re prepared for the changes to your budget, including:

  • The cost of items the baby will need (clothing, crib, diapers, etc.)
  • The cost of formula or baby food
  • Child care expenses
  • Medical expenses

Step Six: Start a College Fund

Many parents want to give their children the best possible start in life and that includes helping them pay for college. By opening a 529 or other college fund for your child, you can help make it possible without having to worry as much about budget constraints or taking out loans.

Getting your finances in line is an important part of preparing for a new addition to your family. By following these important steps, you’ll put yourself in a better place to deal with the new financial challenges that might be coming your way and set yourself up for better ultimate financial success on this new parenting journey. If you would like to speak to a CERTIFIED FINANCIAL PLANNER™ to learn more or for help setting up a financial plan for your family, please give us a call at 303-639-5100.

Inside the Economy: Inflation, Tariffs, the Stock Market and More

By | Economic Discussion, Economy, Larry Howes, SH&J Blog | No Comments

On this week’s Inside the Economy with SH&J, we have a discussion on inflation. The producer price index (PPI) is rising at its fastest pace in about seven years. What kind of impact might the new tariffs have on this number and the economy overall? It has been a volatile six months for the U.S. stock market. Have we gotten back to end of January highs? Tune in to find out the answers to these questions and more!

Retirement Risks

By | Investing, Investment Portfolio, SH&J Blog | No Comments

Retirement, or Financial Independence, is a relatively new concept here in the U.S. Retirement used to be pretty simple: you step away from the company where you spent your entire career and they rewarded you with a pension check in the mail every month. That was really all there was to it from a financial standpoint. With people now living longer and a shift from employer sponsored pension plans to defined contribution plans (401(k)s, 403(b)s, etc.), people are now responsible for the success of their own retirement more than ever before. Listed below are risks that are unique to retirees, with explanations on ways that these risks can be mitigated.

Longevity Risk

Put simply, longevity risk is the risk of outliving your assets. According to the Social Security Administration, life expectancy for someone born in 1930 was only 58 for men and 62 for women. Now 1 in 4 people who reach age 65 will live past age 90, and 1 in 10 will live past age 95. One of the primary ways to combat this risk is to plan for longevity. When we create financial plans for clients, it is our standard to run the plan until the youngest client reaches age 95 at the minimum. Planning for a longer time horizon forces a retiree to be more conservative when pulling from their investment portfolio throughout retirement.

Inflation Risk

Inflation reduces the purchasing power of a dollar as goods and services increase in price over time. In your working years, inflation may not be as critical of an issue as many workers see cost of living adjustments to their salary. When you’re retired and not earning a salary anymore, it’s important that whatever sources of income you have, keep up with inflation. Social Security has a built-in cost of living adjustment that has historically been around 2% per year. Some government or employer-sponsored pension plans have living adjustments associated with them as well, but they are fairly uncommon and the adjustments are usually less than inflation. One way to help your investment portfolio keep up with inflation is by having a portion of your portfolio invested in stocks. Stocks have historically helped hedge inflation risk.

Long-Term Care Risk

Long-term care risk goes hand-in-hand with longevity risk. As our society continually makes medical advancements, we are able to live longer, but for some this may come at a cost. Many elderly people no longer have the ability to care for themselves, and they have to rely on either family members or professional caretakers to watch over them. According to a study by AARP, 66% of people aged 65 in 2005 will need some type of long-term care during their lifetime. Long-term care insurance policies are the primary way to mitigate this risk, but they are expensive and many people don’t like the “use it or lose it” terms of these policies. Therefore, life and long-term care insurance hybrid policies have recently become more popular. These policies allow you to access the death benefit for long-term care needs while you are still living, yet still provide a death benefit to your beneficiary after you pass away if you do not end up requiring long-term care.

Financial Elder Abuse Risk

A growing risk that retirees face is financial elder abuse. Financial elder abuse occurs when someone tries to take advantage of an elderly person for their own financial gain. What many people don’t know is that elder abuse most often comes from family members! One way to help prevent elder abuse is to simplify your finances as you get older. The less accounts a retiree has, the less accounts they have to monitor. Another way is to work with a trusted financial advisor, who can act as a safeguard if bad actors are trying to swindle money away from those who are no longer able to track their finances as easily as they have in the past.

Sequence of Returns Risk

As we all know, investment returns are unpredictable. We often have very little warning when an event like the 2008 Financial Crisis will occur and send global stock markets tumbling. Negative returns in the first few years of retirement can be detrimental to the success of a retirement plan. It is important to make sure you have a well-diversified portfolio heading into retirement with a mixture of stocks, bonds, and cash. If the stock market were to decline while you’re pulling money from the portfolio, you need conservative investments to draw from so you can allow the stocks to recover.

Loss of Spouse Risk

Losing a spouse can be a turbulent point in anyone’s life. It can be very hard to make sure you have your financial house in order after enduring such a tragic event, especially if the recently deceased spouse handled all of the finances. One of the best ways to ensure the surviving spouse maintains their level of lifestyle is to have a comprehensive financial and estate plan. Hiring a financial advisor in retirement gives the surviving spouse an advocate in such a trying time. The advisor should help create a plan to ensure the surviving spouse has enough assets and income streams to not alter their lifestyle.

If you or anyone you know is nearing retirement, contact Sharkey, Howes & Javer to meet with a CERTIFIED FINANCIAL PLANNER™ and develop a financial plan that helps mitigate these and other retirement risks.

Inside the Economy: Real Estate, Tariffs and Oil Prices

By | Economic Discussion, Economy, Larry Howes, SH&J Blog | No Comments

On this week’s Inside the Economy, we take a look at oil prices. A barrel of crude oil is now trading up near $75. What kind of impact will this price increase have on the prices we pay at the pump? In addition, much attention has been given to the talk of tariffs. What kind of effect is this having on stock prices of Chinese companies? Tune in to find out the answers to these questions and more!

Happy Fourth of July from Sharkey, Howes & Javer

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The team at Sharkey, Howes & Javer would like to wish you and your family a very happy Fourth of July. We hope that you enjoy the mid-week break, take the opportunity to celebrate our independence with a great day of parades, barbecues, fireworks, and fun, and take a moment to remember the hard work and sacrifices that were made to protect all of the freedoms that we’re so lucky to have.

In observance of the holiday, our office will be closed on Wednesday, July 4th and we will reopen with our normal business hours on Thursday, July 5th.

Here are some fun facts about the Fourth of July that you can share around the barbecue this week:

  • Philadelphia held the first annual celebration of our independence on July 4th, 1777. Source
  • Fireworks have been a part of Independence Day celebrations since the very beginning. Source
  • John Adams first predicted that Independence Day would be celebrated on July 2nd, the day Congress approved the resolution of independence. Source
  • Only John Hancock and Charles Thomson signed the Declaration of Independence on July 4th, the majority did not sign until August 2nd. Source
  • If you’re out of the country for the 4th, you can still catch a fireworks show in England, Denmark, Norway, Portugal, or Sweden. Source
  • The Philippines and Rwanda also celebrate their independence on July 4th. Source
  • New York hosts the biggest fireworks display, with over 75,000 shells planned for this year’s show. Source

6 Tips to Consider Before Launching a Second Career

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Over the past several years, moving between companies and even jumping between industries has quickly become the norm and an increasing number of professionals are making major career changes 10, 20, or even 30 years into their original intended path.

Whether you’re returning to employment after a hiatus, coming out of retirement, or restarting with something fresh, switching careers can be a daunting endeavor. In our fast-paced business world, you may be worried that you will be left behind before you even get started.

The good news is that many individuals have relaunched or refreshed their work life with great success and it’s possible for anyone with some smart, solid planning. Here are six of the top considerations to keep in mind as you get ready to take the plunge:

  1. What are your reasons? Are you in search of more money, or do you just want to keep busy? Are you simply bored with doing the same thing day-in and day-out? Determining why you want new or different work will help steer you.
  2. What are your skill gaps? Some career shifts are easier than others. If you’re hoping to enter a career requiring specialized skills like the medical field, you may need to return to school. For other careers, you may be able to engage with a seminar or small-scale professional development opportunity to get your feet wet or start earning your required certifications.
  1. Have you volunteered in your target industry? Not all industries or career paths may have volunteer opportunities. However, if yours does, it gives you a great chance to feel out whether you might be happy in the new industry, as well as get your foot in the door to learn about what you might need for your new job. Using tools like LinkedIn or Meetup can help connect you with professionals you might be able to volunteer with or shadow if you don’t already have contacts in the new industry.
  2. What are your dreams and aspirations? For many people, a dream job is one that combines dreams and aspirations with work that makes enough money to create a comfortable lifestyle. Making a list of your goals, aspirations, and “must-haves” can help you determine how to find a job that infuses your work with your personal values. If you are a more visual person, fashioning a career vision board can help you visually display your goals. For others, a traditional list of goals may work better.
  3. Figure out your finances. Can you afford to take some time off of work to explore? Will you need to spend another year in your current job to save up a buffer? Make sure to take into account your current income, investments, and the trajectory of your intended path. If you are planning to start your own business, be sure to consider start-up costs and ramp up time.
  4. Who is in your support network? As you pursue a career change, you will need to surround yourself with people who cheer you on and support your new path. Friends, family, mentors, and contacts in your new industry can help you meet challenges and celebrate you when you reach milestones.

Starting a second career may feel like turning your life upside down, but with good planning and a clear vision, it doesn’t have to. If you’re thinking about starting your second career, contact Sharkey, Howes & Javer to meet with a CERTIFIED FINANCIAL PLANNER™.