Tips

Consumer Debt vs. Government Debt

Many people like to equate government deficit spending to using a credit card. While the government is using borrowed money similar to a credit card, this comparison does not hold up very well when you dive a little deeper. As mentioned earlier, government spending tends to spur economic growth during periods when the economy is not robust. In theory, a stronger economy means more people and businesses making more money, which in turn means more tax revenue for the government. Taking on personal credit card debt rarely produces more income for the individual spender.

Ultimately, both personal credit card debt and government debt must be re-paid to maintain healthy finances. To reduce debt, consumers and governments will generally employ some combination of increasing income/revenue and reducing expenses. When a consumer with outstanding debt passes away, their assets are liquidated to pay off their creditors. This results in fewer assets being passed down to heirs. Unlike humans, Governments exist into perpetuity. When the U.S. Government plans to spend more than what they receive in tax revenues, they issue new debt in the form of U.S. Treasury Securities. Governments, pension funds, mutual funds, and citizens rely on these securities as a substantial part of their investment portfolios. Yet, similar to credit cards, these Treasury Securities eventually need to be paid.

U.S. consumers should be conscious of their spending habits to make sure they are not over-leveraged. While the U.S. Government plays by different rules when it comes to deficit spending and debt, ultimately, the general goal remains reducing debt while stimulating the economy.

2. Put Your Bills on Autopay

Some companies, including many student loan providers, offer incentives for consumers who put their bills on autopay. By setting up autopay on your main bills, such as rent, utilities, credit cards, student loans, and other recurring expenses, you can take advantage of these incentives while also making sure everything is paid on time and you don’t get any late payment penalties.

3. Use Credit Sparingly

While it is true that one has to build credit in order to have credit, there are risks associated with credit cards, especially those with high interest rates. While it’s easy to make the minimum payment, it’s important to remember that you should only use credit cards if you can afford to pay the complete bill each month. You could spare yourself hundreds of dollars, or more, per year by avoiding interest charges, and you build your credit score at the same time.

4. Save for Retirement and Take Advantage of 401(k) Plans

Although it might seem too early to contribute to a 401(k) plan when you are beginning your career and just finished tossing your graduation cap into the air, the earlier you begin saving, the better you are preparing for your future. Even starting with small amounts, by investing early you will amass more money to support yourself in retirement. Furthermore, many employers encourage their employees to invest in 401(k) plans by “matching” the employee’s contributions. To see if you qualify for this win-win situation, check with your company’s HR staff as soon as possible.

5. Don’t Ignore Your Student Loans

Because of the rising cost of education, the typical college student graduates with $37,000 in debt and the biggest financial concern of many recent grads is their student loans. When you graduate, take charge of the situation and review the terms of your loan. You need to determine how much you owe and how your payments fit into your new budget.

The very first step to creating a solid financial base is to establish a cash reserve of at least 3-6 months of expenses. After this is established, and if your lender allows it, you may consider making extra payments and asking the company to put the additional amount towards the principal balance of the loan, rather than the interest. Paying more than the minimum can shave years off the length of the loan, save you money over the years, and help you qualify for a better mortgage or auto loan.

No matter your situation, reviewing your finances does not have to be an intimidating ordeal. Taking control of your finances early actually empowers you to set yourself up for a more stable and lucrative future.

3. A mid-2017 report from Your Castle Real Estate states “Our market inventory continues to be near record lows, with only 7,081 single family homes on the market as of June 30 2017 (16,000 – 18,000 is considered a balanced market).” When supply is low, prices increase. What would inspire an increase in supply to help create balance with demand? One option is building new homes. Colorado builders are expected to pull 23,700 single-family permits in 2017 and 26,000 in 2018, according to the University of Colorado’s Colorado Business Economic Outlook. While that looks robust compared with the sluggish pace of homebuilding seen after the recession, the CU forecast notes that builders pulled around 40,000 permits a year in 2004 and 2005, when there were 1 million fewer people living in the state.
4. The Denver Post takes a more practical view of the difference in price point: “More than 60 percent of the homes on the market in Denver are in the top third of the price distribution, while just 15 percent are in the bottom third, according to Zillow.” This issue makes home buying under $500,000 especially difficult from a competition standpoint. 5280 magazine sums it up nicely with their Panic Meter:

Your budget: $1,000,000+
Your level of panic: Low. You could find your dream home—and actually buy it.

Your budget: $750,000 to $999,999
Your level of panic: Moderate. There are houses available, but you’ll still need to match list price.

Your budget: $500,000 to $749,999
Your level of panic: High. You’ll be competing against more buyers than usual due to people stretching their budgets to get into a less intense section of the market.

Your budget: $499,999 and below
Your level of panic: Very high. You might find the perfect house, but so will 20 other buyers.

5. Contrary to popular media, millennials are “getting off the couch” and buying homes. A mortgage company reports “According to an industry-wide analysis, millennials accounted for 43% of all mortgage requests in Denver, between August 2016 and February 2017.” This statistic may help sellers understand the buying pool and how to structure a sale.

Buying a personal residence or an investment property is not a decision to take lightly and we suggest visiting with a CERTIFIED FINANCIAL PLANNER™ to see how the decision fits within your personal financial goals. Call Sharkey, Howes, & Javer at 303-639-5100 to schedule a complimentary consultation.

What Is the Time Horizon?

While downside volatility and short-term market swings are not to be ignored, assigning a time horizon to each goal is a critical step for determining appropriate portfolio construction. If a particular goal has a long time horizon, short-term market swings should be less of a driver in the asset allocation decision-making process. On the flip side, if the desire is to fund a goal within the next couple of years, market swings and volatility become more impactful. In some cases, it may be prudent to not invest the funds at all. Investing spans across an entire lifetime and it is important to pair each goal with its life stage.

Contact Sharkey, Howes & Javer to speak with a CERTIFIED FINANCIAL PLANNER™ professional about establishing a portfolio allocation that aligns with your goals and life journey.

Age 65

At age 65, you may no longer be covered under employer health insurance, which means you will need to sign up for Medicare. It is important that you enroll prior to your employer coverage ending to ensure that you have no gaps in coverage and to avoid late enrollment penalties. Once you have attained age 65, you should also refer to your county website to find out if your county has a Senior Property Discount program. As you transition into retirement, periodically review variable expenses and determine if your spending is consistent with your retirement planning goals.

Age 70

At age 70, it is good practice to do some tax planning prior to turning 70 ½ when you will be required to start distributing funds from your Traditional IRAs and any employer retirement plans that have not been consolidated to an IRA. If you delayed collecting Social Security benefits, contact Social Security to begin receiving your benefits – there is no benefit to waiting beyond age 70 to start collecting. Lastly, as difficult as it may be, take the time to start fine-tuning your estate planning and talking to your kids about your will.

No matter your age, it is never too soon or too late to meet with a financial planner to review practices for building a strong financial foundation for any stage of life. Call Sharkey, Howes & Javer at 303-639-5100 to set up a complimentary consultation with a CERTIFIED FINANCIAL PLANNER™ professional.

Source: http://time.com/money/4329616/retirement-five-most-important-years/

Should you invest in Bitcoin?

When you purchase stock in a company, you are purchasing a share of a company’s future earnings and stocks have a tangible value based on expected future earnings of a company. When you hold bonds, you receive interest payments that make bonds easy to value (assuming the debtor doesn’t go bankrupt). Unlike these traditional investments, the value of Bitcoin is not determined by any kind of cash flow; it is purely based on public sentiment and demand for the currency.

Investing is based on taking calculated risks to achieve a rate of return on your money. We invest in stocks and bonds because over long periods of time both asset classes have shown they can outperform inflation. Bitcoin is an asset that has experienced exponential growth in the past 12 months, and no one knows where the price will go from here.

3. Check Your Tires. Tires that are not optimally filled can cut down on your gas mileage, which means that you’re wasting money every time you fill up. Taking good care of your tires will also help with their longevity so you don’t have to replace them as often.

4. Conduct a Home Energy Audit. You can opt for the do-it-yourself route or hire a professional to take care of the audit for you. An audit can help you identify everything from the small ways you can save money on your electric bill over the course of the year to bigger ways you can experience huge savings.

5. Ditch Your Gym Membership. Watching online exercise videos at home is a lot cheaper and often just as effective, especially if you struggle to find time to go to the gym. While you’re at it, you can get rid of any other subscriptions that you aren’t using: do you really use both Netflix and Prime Movies? Are you watching cable enough to justify keeping it? Reviewing your subscription services can reveal an abundance of savings.

6. Don’t Spend Your Change. Every time you use cash to make a purchase, keep the change in your pocket and don’t spend it! At the end of the day, put it in a jar or container. You won’t miss the coins, but over time, they’ll likely add up to more than you think.

7. Eat out less. Many families have an unwritten rule to eat out less than twice a week. Depending on the size of your family and the places you like to eat, this can be a huge money saver. As a way to transition into this new pattern, track how much you spend on eating out and then strive to cut that amount in half. That is a good start.

Saving money throughout the course of the year is an ongoing responsibility. Keep in mind that little savings and small expenses can add up fast!

5 Reasons to be Frugal When You Can Spend More

As your income rises over the years, it can be tempting to buy that new car you’ve always wanted, upgrade to a bigger house, or even just eat out an extra couple times per week. Lifestyle creep may not seem like a big deal, but it can be easy to let it grow out of control and leave you with too little, or even no, savings.

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7 Lessons to Teach Your Kids (or Grandkids) About Money

Financial and spending habits develop early in children and it’s important that they are given good examples and lessons of healthy finances while it will have the greatest impact. Some parents may feel uncomfortable discussing money with their children, but these seven lessons can help establish a strong foundation of knowledge without ever bringing up numbers.

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5 Money Lessons Before Your Kids Leave for College

As your children continue to grow, they’ll continue to develop their financial savvy, both on their own and through the lessons that you continue to teach them. As they prepare to move on to the next big step in their lives and go to college, you should leave them with these five final lessons to set them up for a life of success.

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5 Questions to Ask Before Going Back to School

You may be interested in going back to school yourself. Many people return to college at some point in their professional career, whether for personal growth or to broaden their skillset, but before you make the plunge, it’s important to consider these five questions to determine your best course of action.

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Avoiding the 5 Most Common Mortgage Mistakes

On the other hand, buying a home is another common decision that many people make as their careers become established. Unfortunately, many people also fall prey to the same common mistakes, especially when purchasing their first home. A house is likely the largest purchase you’ll make in your entire life, and proper planning will save you huge amounts of both time and money.

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What to Do Now if You Want to Retire in 5 Years

Throughout your entire career, it’s important to review and adjust your goals, plans, and portfolios periodically. As you approach retirement age, it’s even more vital that you make the final preparations for yourself and set yourself up with a steady income over the years.

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Spending Tips for Retirees

Have you considered all of your expenses in retirement? Besides housing, groceries, and transportation, there are many other expenses to calculate into your monthly retirement budget to make sure your money lasts and you don’t have to worry about stretching yourself too thin.

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4 Great Places to Retire on a Budget

If you have followed our advice so far, stayed frugal, and prepared for your retirement, you may be looking for a great place to retire to where your money will last. We’ve rounded up four amazing places to live across the country where you can enjoy the very best that life has to offer, without needing to cash out your entire retirement.

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All of us at Sharkey, Howes & Javer thank you for making this year so fulfilling. We’re excited to venture into 2018 with you and wish you good health and much happiness in the coming year. Happy Holidays, and Happy New Year!

Holiday shopping can get very stressful if you don’t have a plan going into the season. Here are a few tips that will be able to help you become an efficient consumer this holiday season.

• • Do some preparation before you do any shopping. Figure out what everyone on your list wants and come up with a price point for each gift. This will give you a rough estimate of what you can expect to spend.
  • Be strategic about using your credit cards. If you are a responsible spender and you have a cash-back rewards card, be sure to use it on all of your purchases this holiday season. A poll conducted by Nerdwallet in 2015 estimated that consumers would miss out on $152 million in rewards by not using their cards during the holiday shopping season.

Hopefully, you are now a more informed shopper and you can tackle this holiday season with confidence. From everyone at Sharkey, Howes & Javer, we wish you and your families a very joyous holiday season!

Clear up Confusion: Fighting over an inheritance is, sadly, an all too common occurrence. If you leave money to charitable causes, old friends, or distant relatives, be sure to inform the kids so they do not consider these claims on the estate as fraudulent.

Make Your Wishes/Reasons Known: If you are leaving more money to one child because of disability, bankruptcy or unemployment, or less to another who enjoys greater financial success, let the others know it’s your decision and you were not pressured to do so.

Evaluate Your Children’s Financial Skills: You hope you taught them well: save for a rainy day, balance investing with spending, pay yourself first. Take the time to evaluate their spending and saving habits without bias and make sure they have the money management skills to make the right choices or a financial advisor who can assist them. You may also consider establishing a trust to pay out over time.

How to Start the Conversation:

Choose a Comfortable Time and Place: A family holiday dinner may seem logical because everyone is already gathered together, but talk of death and its aftermath only dampens a celebratory time. In general, it may be best to avoid birthdays, vacations, anniversaries, and other special occasions. Set up a time and place just for this conversation, and announce the purpose of the meeting ahead of time. A casual opening line may be something like, “A friend of ours passed away recently and his kids are suing each other over his estate. We don’t want any of you doing this, so let’s talk about how to avoid this situation.”

Stay Calm, React Rationally: Close the door on drama and keep your voice low and level. Don’t react with anger or frustration if your kids do; it only increases the level of intense emotion in the room and obscures the reason for the meeting in the first place. Maintaining a steady, calm tone helps to cool tensions and keep the conversation on topic.

Direct Your Children to the Documents: It’s one thing to tell them what they inherit, but it’s another to have the paperwork already prepared. Complete your will early, update it regularly, and make sure your attorney and financial advisor have current copies. Discuss your finances once a year with your children and inform them of any changes.

Have a Trusted Advisor as a Guide: Bringing a CERTIFIED FINANCIAL PLANNER™ or attorney to the meeting ensures that the agenda moves along, legal questions receive answers, and emotions and egos remain controlled. These professionals have experience handling these discussions and can make a great addition to your team.