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The Bitcoin Bubble

By Arlen T Olberding, CFP® on February 1, 2018

If I say the 2000 dot-com bubble or the 2007 housing bubble, you immediately have a pretty good idea what a bubble is. Basically it’s when the price of some asset strongly exceeds the asset’s intrinsic value. The first recorded asset bubble occurred in the 1600s when the price of Dutch tulip bulbs went through the roof. Experts have tried to predict bubbles, but have largely failed. Bubbles are only agreed on retrospectively – once a sudden drop in prices has occurred. Indeed, within mainstream economics, many believe that bubbles cannot be identified in advance; cannot be prevented from forming; that attempts to “prick” the bubble may cause financial crisis; and that instead authorities should wait for bubbles to burst of their own accord, dealing with the aftermath via monetary policy and fiscal policy.

Several causes have been identified for bubbles such as excessive monetary liquidity; extrapolating past extraordinary returns of certain assets into the future; herd behavior (investors tend to buy or sell in the direction of the market trend); and moral hazard issues (when the risk-reward relationship is interfered with, often via government policy).

Okay, this is interesting, but how can it help you protect your assets from future bubbles? Well, first of all you need to be aware that bubbles continue to exist and are impossible to accurately identify before the burst (or crash) begins. Secondly, remember the definition in the beginning of this article: watch for situations when some asset is strongly exceeding its intrinsic value.

There are a few things going on right now that deserve bubble scrutiny. This includes stock market prices overall; housing in California (which often sets national trends); hot individual stocks such as Facebook, Tesla and Google; and cryptocurrencies.

Let’s drill down just a bit on the last one. The most famous cryptocurrency is Bitcoin, but Ethereum and ripple are important players too. Bitcoin’s value increased 343% in the past year and Ethereum is up 3,600%. Ripple increased from 23 cents per coin to about $3.00 in about a month.

Now these kinds of increases are a bit thrilling and it’s tempting to want to join the party. But cryptocurrencies walk like a bubble and talk like a bubble, so they just might be a bubble. My belief is there are other investment alternatives where prices are more in line with asset values. So, for my money, it just might be better to avoid the temporary thrill as well as the likely long-term pain of cryptocurrencies.

Want to talk more about financial bubbles or any other financial matters in a no-charge, no-obligation initial meeting? Just visit our website or give us a call at 970.419.8212 to learn more.

This article is for informational purposes only. This website does not provide tax or investment advice, nor is it an offer or solicitation of any kind to buy or sell any investment products. Please consult your tax or investment advisor for specific advice.

Posted in Fundamentals, Investing

2018 Financial Resolutions

By Arlen T Olberding, CFP® on January 1, 2018

Happy New Year! As we welcome in 2018, we might want to set a couple of financial resolutions so that we have plenty of time to realize our goals. Typically, people have similar resolutions in mind. Common ones are increasing your 401(k), preparing a spending plan, reviewing the new tax rules, increasing your emergency fund, updating (or creating) estate documents and revisiting life insurance. Some of these we’ll talk about in future blogs, but let’s hit one that I emphasize with clients.

In my mind, there’s one financial resolution that stands out for many of us. It’s your 401(k) plan. In 2018, we are permitted to contribute up to $18,500 to our 401(k). And there’s an additional $6,000 contribution permitted for those of us who are 50 or older. Why does your 401(k) deserve special attention? First of all, maximizing your retirement savings is a great way to ensure a nice nest egg for your golden years. For example, saving $10,000 annually starting at age 40 and assuming a 4.5% growth rate over the next 25 years would add about $465,000 to your retirement assets. Second, these contributions lower your taxable income. That’s right, the recently passed Tax Cuts & Jobs Act still permits funding 401(k) plans with pre-tax money. So, if your income is $75,000 and you contribute $10,000, your taxes are calculated on $65,000. At this income level, your tax rate would be 22%. So, the $10,000 reduction in your income would save you $2,200! And last, but not least, there are the matching contributions from your employer. Many employers match your contributions (or at least some percentage of your contributions) up to some specified limit. If your employer has a 100% match up to say $5,000, the match to your 401(k) contribution would be $5,000. That’s a 50% growth rate! So, why not sign up for or increase your contributions to capitalize on this great deal!

We’d be happy to go over any of your 2018 financial resolutions or talk about any other financial questions you may have in a no-charge, no-obligation initial meeting. Just visit our website or give us a call at 970.419.8212 to learn more.

Posted in Fundamentals, Retirement Planning

As 2017 Winds Down…

By Arlen T Olberding, CFP® on December 1, 2017

Can you believe it, we’re only a month away from the end of the year! For many of us, we’re pretty busy with our normal activities (work, school, etc.) and then we have the holidays to prepare for too. It seems like there’s no time for anything else and yet there may be some very important financial matters to take care of before December 31^st.

You may be familiar with the many financial considerations that could stand a little time before year’s end. For example, do you have an employer-sponsored Flexible Spending Account? Such accounts often have rules about using the balance or losing it. Then there are discretionary medical expenditures. If you’ve already reached your deductible limits, December might be the perfect time to take care of some medical needs. Naturally, there’s an important budgeting exercise for December. Plan and stick to a holiday spending budget. Do your investments need rebalancing? The market has done very well this year and naturally some things have done better than others. Why not check your asset-allocation plan? Speaking of the market, you may want to sell some of your investments that have lost money to help lower your tax bill.

Here’s one end-of-year action you may want to consider. It’s got to do with your property taxes. You may have heard that congress is in the process of trying to pass some tax-reform legislation. One provision in the proposed law eliminates the deduction for property taxes. So, here’s what I recommend that you do. Keep your eye on this bill and see if it becomes law before the end of the year. If it does, consider prepaying your 2018 property taxes in 2017. Since deductions are applied to the year in which they are paid (rather than the year that they are due), you can still claim your 2018 property-tax payment even if the law goes into effect. Since the 2018 property taxes are not yet posted online and since taxes will increase 15-25% in 2018, you should visit the Larimer County Treasurer’s Office (200 W. Oak St #2100) to request a firm estimate. Be sure to take your checkbook!

We’d be happy to discuss any end-of-year financial questions (or any other questions) you may have in a no-charge, no-obligation initial meeting. Just visit our website or give us a call at 970.419.8212 to learn more.

Posted in News, Taxes

Retirement Checklist

By Arlen T Olberding, CFP® on November 1, 2017

There are many, many decisions to be made as you move from the working phase of your life to the retirement phase. Retirement planning is a common discussion that we have with our clients – regardless of their age. This article talks about some retirement considerations that seem to be universally applicable.

Retirement Date. You may have been thinking about retiring at a particular age for some time. Before actually taking the big step, see if your plans need any adjustments. For example, delaying retirement a year or two can make a significant difference in your retirement finances. This is because of two key factors. First, you reduce the number of years that your savings need to last. Second, you accumulate additional savings to help fund retirement. Additionally, you should think about whether this is the right time to fully retire or to partially retire. Not only does part-time employment provide additional income during retirement, but it may enable you to keep doing something that you love, but at a more relaxed pace.

Expenses. It’s difficult to know whether you’re financially ready to retire if you don’t know how much you’ll need. There are rules of thumb that you can use, but they vary quite a bit. The old standard was that you’ll need about 80% of your pre-retirement income in retirement. This was based on the elimination of several expenses such as commuting and saving for retirement. However, certain other expenses will actually increase such as health care and travel expenses. Many financial advisors now advise planning on having similar pre-retirement and post-retirement expenses. If affordable, this is a pretty safe bet. Another expense planning approach is to track your expenses now and adjust certain categories to see what your retirement expense might look like. A previous blog called How to Manage Expenses in Retirement can fill you in on some of the details of this approach.

Health Care. This is an expense that deserves special attention because it’s a very large portion of your total expenses and it will increase significantly as you age. The initial cost of health insurance depends on your age. If you’re 65 or older, things are pretty straightforward. Most of us will sign up for Medicare and probably choose one of the supplemental plans. After considering deductibles and co-pays, we have a pretty good idea of our initial medical costs. If we’re younger than 65, we’ll need to obtain private insurance to replace employer-supplied insurance that many of us had before retiring. This is pretty dynamic and depends on future changes to the Affordable Care Act. A special aspect of health care cost is long-term care coverage. It used to be that people were encouraged to purchase long-term care insurance. However, in recent years this coverage has become much more expensive and benefits have been reduced. Other approaches are often superior now such as life insurance policies that pay for long-term care.

Interest Expense. Another expense you’ll want to spend some time thinking about is interest. It’s interesting that many of the guidelines on interest are the same before and after retirement. That is, it’s always best to retire high-interest rate debt (such as credit card debt). Large debts also deserve some consideration, especially as you approach retirement. Does this mean you should always have your mortgage payed off before retirement? Not necessarily. Some people may have greater peace of mind if their mortgage is paid off and that is an excellent reason to do so. However, from a strictly financial point of view, there are arguments to be made both ways. The main reason to retire your mortgage is to narrow any gap between your income and your expense projections. There are several common reasons to not pay off your mortgage before retirement. These include freeing up funds for other reasons such as maximizing 401(k) contributions before retirement or paying off higher-interest debts. It may also be that you plan to move in the next few years, so it probably makes sense to maintain your mortgage until then.

Income. Once you’ve figured out your expenses, you have a good handle on the income you’ll need. You’ll need to add up all of your investment assets to see where you are on this. For many of us, this will include Social Security, any pension or defined benefit plans we have, IRAs, 401(k)s or 403(b)s and our personal portfolio of investments. A reasonable rule of thumb is to withdraw 3.0-3.5% of your nest egg annually to avoid outliving your savings. So, how do your expense and income results compare?

Portfolio Review. You probably know that you’ll want to decrease the percentage of your assets that are in the market as you age. There’s considerable variability on the best way to do this. Many advisors have their clients at 50% stocks and 50% bonds when retirement begins. (In practice, this actually varies from a 40/60 to a 60/40 stock/bond position.) A simple rule of thumb exists that can help you think about your asset allocation. You simply subtract your age from 110 to determine the percentage you should have in the market at a particular age. For example, at 70 years old you should have 40% in stocks. Beyond asset allocation, you’ll want to be sure that your portfolio is properly diversified so that you can ride out the normal ups and downs of the market.

As you can imagine, there are many other financial considerations as you approach retirement. We’d be glad to help you develop a retirement plan that makes sense in your situation. If you’ve already put together a retirement plan, we’re able to review it and point out areas you may want to think about a bit more. In addition, we can stress test your plan to see how it will hold up under a variety of market conditions over the coming decades (using Monte Carlo simulation). So, whether you’re already retired or are still preparing for it, we’d be happy to sit down with you and review your situation in a no-charge, no-obligation initial meeting. Just visit our website or give us a call at 970.419.8212 to learn more.

Posted in Retirement Planning

The Three Phases of Retirement

By Arlen T Olberding, CFP® on October 1, 2017

Congratulations if you’ve already reached retirement! This can be a wonderful time in your life. But just like pre-retirement, there will be different phases in retirement. In this article, I’ll introduce you to what many people call the three phases of retirement.

Phase One. For many of us, this is the first decade or so of retirement. Say 65-75 to make it concrete. It’s the time that hopefully we’re still in excellent health and we still have a lot of energy. It’s kind of like when we were working, except now we have the time and the money to do what we want. For lots of us, we’ll travel, do some recreational things and generally just enjoy ourselves. This is often the sweet spot of retirement.

To support it, you’ll typically spend more than you will later in retirement. Let’s get specific here. A commonly used rule of thumb is that if you withdraw 3-3.5% of your investments per year in retirement, you won’t outlive your funds. In phase one, many people increase the withdrawal rate to about 4% to pay for the extra travel and other fun things.

You may wonder how you can afford spending more in phase one. The reason this works is because you’ll spend less on just about everything else (except for health care) as you age. That’s right, you’ll spend less on food, housing, clothing, transportation and entertainment in phases two and three. In fact, the Bureau of Labor Statistics found that people who are 75 or older spend 23% less than those in the 65-74 group.

Phase Two. You might call this the middle period. Let’s say it covers ages 75-85. This is when many of us slow down a bit. Health issues and decreased energy are the usual causes of this. We’re still enjoying retirement, just in a new way. For example, we probably travel less. The Bureau of Labor Statistics found that people who are 75 or older spend 35% less on transportation than those in the 65-74 group. Medical expenses will probably increase. If they get a lot higher than the previous decade, it might be worth reviewing the various Medicare plans and getting one with better coverage. While the premium may be higher, it might save you money overall.

Phase Three. Some people think of this as the home stretch. It begins around age 85. Many of us need some help in this period. Whether it involves assisted living or hiring some in-home care, medical costs will rise. Hopefully you made plans earlier in your life to fund these long-term care needs. This is also a good time to be sure your estate documents are up to date. Don’t forget to look at your medical directives to be sure your end-of-life wishes are clear. Many of us will want to review our remaining assets and determine how we’d like to use them. Maybe we want to help a grandchild with college. Maybe we want to watch our final expenses so we can maximize the legacy we leave. The “best choice” is as individual as you are!

Whether you’re already retired or are still preparing for it, we’d be happy to sit down with you and review your situation in a no-charge, no-obligation initial meeting. Just visit our website or give us a call at 970.419.8212 to learn more.

Posted in Retirement Planning

12 Tips for New Graduates – Part 2

By Arlen T Olberding, CFP® on September 1, 2017

Last month we discussed the first six of twelve financial tips for new graduates. If you missed that post, please check it out. These tips were developed through our interactions with CSU students who come in to establish a financial vision and to jumpstart their savings program. This month we’ll go over tips seven through twelve.

Automate your savings. If you have hard time putting money away, you can have it done for you. You just have your employer take out a percentage or fixed amount of your income from each paycheck and automatically have it placed into one of your savings vehicles such as your Roth IRA, traditional IRA, or just your bank savings account. Alternatively, you can simply set up your bank account so that a fixed amount is automatically transferred to another account at whatever frequency you would like. This is an effective method that quickly gets you used to living without that money, prevents you from deciding that you “need” it this month and it requires minimal maintenance or oversight from your end.

Adjust your standard of living. A large portion of graduates received financial assistance from their parents in regards to their living situation. This means you are probably used to a relatively high standard of living. Once you are no longer receiving assistance with your expenses, you may find that it is more of a stretch to do all things you were previously able to in college. You have to get used to spending less than you make, otherwise it’s going to create a slew of financial problems in the future. Simply put, if you spend more than you make, you’ll find yourself in a very difficult situation moving forward.

Tax Planning. Although taxes can take a huge bite out of your paycheck, there are two great ways to decrease your tax liability and contribute to your retirement savings. First, you can avoid any taxes on up to $18,000 (2017 per-person contribution limit) by placing it into a 401(k) plan. Such investments are not taxed until withdrawal which usually occurs in your 60s or 70s when you might well have a lower taxable income. Second, making such 401(k) contributions can help lower your effective tax rate. For example, if your earned income just advanced you to a higher tax bracket, you can pull back down into a lower bracket by putting money into your 401(k). And, any money you can sock away for retirement will lead to a brighter future!

Insurance. You really need health insurance. Yes, you’re in great shape now, but health insurance protects you and your savings when the unexpected occurs. Now this doesn’t mean that you need to go out and get the most expensive policy that covers everything under the sun. You simply need to set yourself up with basic coverage. Most companies will pay for a portion of your health insurance premiums. Life insurance is not quite as clear cut. If you’re not making much money to begin with, paying for those premiums may or may not be worth it. If your spouse or partner also works, there’s no pressing need to have life insurance to protect them. However, if you’re planning on having kids soon, then you should definitely consider getting life insurance for both parents. If anything were to happen to either one of you, it might be very difficult for the remaining spouse or partner to raise children with a single income.

Beware of payment plans! Payment plans can look so attractive when you’re getting something you really want for only a couple bucks a month. One thing you need to consider before you get all those micro subscriptions is your budget. Of course, it seems like $15/month isn’t going to stretch your discretionary budget too much. However, taking on multiple plans just might. Cell phone plans today are upwards of $70 for just one person plus most people have car payments, rent/mortgage, cable/internet, and utilities. Odds are that you already have substantial monthly payments. On top of all that, you’re going to have student loans to start paying back as well. Before adding to your monthly payments, consider taking a look at your budget and make sure you’re not stretching yourself too thin. Remember, you’re supposed to be reducing your debt not adding to it. Payment plans are a promise to pay, so you are obligated to pay the agreed amount. If you realize you can’t pay for something anymore, you’ll have to default on it, or be sent to a collection agency, depending on the product or service. Either way it is going to be a nightmare for your credit score. If it’s something that you feel you really want in your life, consider saving up for it so you can buy it outright. At least, at that point, you’re putting away money at your own rate and are not obligated to pay anything if a particular month is rough on the budget.

Don’t be afraid to seek advice. At some point in your life you are more than likely going to need some advice on your finances. Nobody has all the answers, but meeting with a fee-only hourly planner can help guide you in the right direction. Odds are you are going to end up paying for advice at some point or another regardless; it’s just a matter of how many mistakes you have made before seeking the help of a financial professional. Developing a financial plan early on will help you avoid costly mistakes down the road. This is not to say that just because you have an advisor that nothing will ever go wrong; because many things will, but it’s nice to have a plan for when they do. A planner can help you cover many of the areas covered in this article. If you think you will struggle with any of the above topics, than you should seriously consider speaking to a fee-only planner who can get you started on the right track with good spending habits. If you don’t want to seek outside help, than I would recommend helping yourself and maybe taking some courses on personal finances.

We know a lot of this is new to many of you. We’d be happy to help you apply these ideas to your personal situation (or talk about any other financial matters) in a no-charge, no-obligation initial meeting. Just visit our website or give us a call at 970.419.8212 to learn more.

Posted in College, Fundamentals

12 Tips for New Graduates

By Arlen T Olberding, CFP® on August 1, 2017

Being located in Fort Collins, near CSU, we see quite a few new graduates who come in to talk about their financial future. This is so outstanding! It helps them develop a vision of where they want to go financially (which enables many other goals). It also puts time on their side in terms of savings. For example, $5,000 saved around graduation has about 45 years to grown until retirement. Assuming a 4.5% growth rate, that nest egg will be worth about $36,000. Seem like small change? How about saving $5,000 a year during that period? Then you end up with a half-million dollars at retirement!

Anyway, these meetings with graduates have established twelve tips that seem to be pretty much applicable to everyone. We’ll talk about the first six this month and the other six next month.

Establish Goals. In addition to retirement, there will be lots of things that you will want to do in your life that will require some saving. These things might include a new car, a boat or a down payment on your starter home. All of these things take work and will require that you put money away early and often to obtain them. Having a large down payment on a house will dramatically reduce your payments and can even increase what your able to save for your other goals. Buying a house with little to nothing down is going to increase your monthly payments drastically and tighten your budget along the way.

Know the difference between gross and net pay. Keep in mind that the job offer you receive is not actually the amount that you will be bringing home. The amount you see on paper is your gross amount and does not reflect your after-tax or net pay. This is important because some people make the mistake of taking on a living situation under the assumption they are going to be making more than they really are. For example, if you receive an offer that includes a $50,000 salary in the state of Colorado for a single tax payer with no dependents, that actually translates to roughly $36,244 after taxes. That equates to a difference of nearly $14,000. Simply put, make sure you are taking taxes and other withholding factors into account when you are planning your budget.

Make a budget and stick to it. Budgeting can seem hard, but after you get started, it’s actually pretty easy. The 50/30/20 rule is a commonly accepted budgeting practice in which you base your spending off of the amount of money that you bring home (net pay). You spend 50% of your paycheck on necessities, 30% on discretionary items such as clothes, entertainment and dining out and 20% on savings. If one-fifth of your paycheck sounds like a lot to be kissing goodbye every two weeks, make sure you are taking advantage of any work-sponsored plans. Many employers offer matches on 401(k) plans and other financial benefits. If your employer offers a 5% match, take advantage of it. Then you only have to put away 15% towards savings and your employer will take care of the rest! The more you can capitalize on employer-sponsored benefits, the more you’ll have for other goals. If you are especially savvy, consider the principles of billionaire Sir John Templeton. John started out poor in the early stages of his life, but quickly changed that through hard work and a lot of dedication. He regularly put in 60 hours a week and put away 50% of his pay towards savings. Now this is way too aggressive for most of us, but we can apply variations of this principle based on the circumstances in our lives. For example, if you receive a bonus at work, or if you have some kind of financial gain from a real estate endeavor, consider putting at least 50% of it into your savings. This principle will have a massive impact on your savings if you apply it whenever you can.

Invest. Investing is scary, especially if it’s a completely new concept to you. Risk is an inherent part of investing that never really goes away. However, if you are just lumping all of your money into a savings account or into government bonds, over time inflation is going to eat away at everything you’ve worked so hard for. Growing your money is the only real way to mitigate inflation and to make sure that you’re financially stable 40 years down the road when it’s finally time to retire. It doesn’t have to be something you do alone; there are many professionals out there whose only job is to ensure your financial success.

Start an Emergency Fund. I know it seems like pulling from your paycheck never ends, but I promise you it pays off down the road. Start an emergency fund as soon as possible to account for unforeseen events. This could be anything from your car breaking down to being laid off from work. When surprises happen, you don’t want to have to hit up your savings to pay for random big-ticket events. Having an emergency fund provides peace of mind knowing that if anything does go wrong, you can handle it without using the savings that you’ve worked so hard to put away. Life is full of surprises, so make sure you’re prepared for them.

Reduce your debt. Before you’re ready to make any major purchases, like a new car or buying a home, you need to get rid of any significant debt that you already have. This way you aren’t digging yourself a hole that you can’t get out of. If you are paying back things like student loans or credit card bills, getting rid of them should be your primary objective coming out of school. Once your debt decreases you’ll notice your credit score will begin to improve, which provides you with a huge benefit when you do decide to start making some major purchases. A healthy credit score can significantly affect the interest rate applied to your purchase. Over the life of the loan, this can save you thousands of dollars which would have been wasted paying off inflated interest. Keep in mind that you don’t have to go crazy trying to pay things off. A good strategy to use is what’s called a debt waterfall. To implement this strategy you will begin paying things off one at a time. Pick your debt with the highest interest rate and increase your payments towards that while making minimum payments towards all of your other debt obligations. If the minimum payment is $50, make payments of $100. Obviously, what you are able to pay will vary from person to person, but this principle can be applied by anyone. Keep this up until eventually all of your unwanted debt is gone. This won’t take as long as you might think if you stick to it.

Next month, we’ll cover the remaining tips for recent grads. We know a lot of this is new to many of you. We’d be happy to help you apply these ideas to your personal situation (or talk about any other financial matters) in a no-charge, no-obligation initial meeting. Just visit our website or give us a call at 970.419.8212 to learn more.

Posted in College, Fundamentals

Should High-Income People Apply for College Aid?

By Arlen T Olberding, CFP® on July 1, 2017

It’s not a newsflash to note that college is expensive. One year at CSU is about $25,000 and at CU it’s about $30,000. (That’s for in-state tuition, room and board and other expenses such as books.) Whether you’re a high-income family or not, it’s good to know that the Department of Education says that “most people are eligible for financial aid for college or career school.” That’s right, most people are eligible for financial aid. Despite this fact, many high-income families assume they won’t qualify for financial aid and so they don’t apply. In most cases, this is leaving money on the table.

Still wondering if you’re too wealthy to qualify? Okay, let’s get specific on eligibility. A Wall Street Journal analysis determined that a family making less than $350,000/year, with assets of under $1 million with more than one student attending a more expensive school or with more than one child in college should apply for financial aid.

The most important step you can take in applying is to complete the Free Application for Federal Student Aid (FAFSA). FAFSA enables access to all forms of federal aid – Pell Grants are one example. Each year, the Department of Education provides more than $120 billion in federal grants, loans and work-study funds to more than 13 million students paying for college or career school. So, lots of people receive aid.

Finally, some parents are concerned that applying for financial aid may decrease the chances that their child will be granted admission. This can be a factor, so it’s worth checking to see if your target schools do consider financial aid in their admissions process. Schools are either need-blind or need-aware. Need-blind means that acceptance is not tied to financial aid. Need-aware means that financial aid may be taken into consideration. In practice, even in need-aware situations, aid only seems to be a factor in borderline situations. As a reference point, both CSU and CU are need-blind.

Financing college is a challenge for most of us. There are many ways to prepare for this expense such as 529 plans. We’d be happy to help you think about funding your kids’ college education or any other financial matters in a no-charge, no-obligation initial meeting. Just visit our website or give us a call at 970.419.8212 to learn more.

Posted in College

Financial Spring Cleaning

By Arlen T Olberding, CFP® on June 1, 2017

The weather is turning warmer and we look forward to a beautiful spring. But first, perhaps some “financial spring cleaning” would help you enjoy the summer a bit more. While this task may not be the most exciting, it usually is rewarding in the end. This spring, while you’re tidying up your home, consider getting a fresh-start with your finances as well. This article includes three helpful ways to do a quick financial spruce-up.

Break Out the Highlighters

Spring is a great time to take a closer look at your budget and one way to do this is to go old-school.

Find your credit card statements from the past six months and a few highlighters. Use one to highlight necessary expenses (monthly bills, groceries, tuition, etc.), another to highlight items bought because you really wanted them (Netflix subscription, a new TV, new kitchenware, etc.) and another to highlight less thought-out purchases (fast food, drinks at happy hour, Starbucks coffee, etc.).

This exercise proves to be eye-opening as to how much people are spending on stuff they really don’t need or really didn’t want that badly.

After highlighting each of these areas, consider setting up a budget spreadsheet or physical folders with separate categories and spending limits for each one. For example, you can spend up to $100 on pet supplies, $300 on groceries, $100 on miscellaneous/entertainment and obviously however much your monthly necessary bills are (utilities, mortgage, etc.). Keep track of spending records/receipts/ statements and throughout the month see if you are sticking to the budget or overspending in certain areas. Then, come next spring, you will have a record of the year’s spending and can see how your spending has trended over time. (As a bonus, it will also be extremely helpful in planning next year’s expenses!)

Make it Automatic

If you haven’t made your savings contributions automatic, consider doing it now. Utilizing this free and easy system may make your life simpler. Having a deduction taken out of every paycheck for savings before you see it makes it easier to not spend and easier to accumulate a savings.

Another automatic system to take advantage of is changing your bills to auto-pay, if available. As always, you should review your bills each month, but having some of them set up on auto-pay quickens the process and also ensures payments are on time. To help avoid surprises, stick with only automating bills that are the same every month like insurance or rent. Also important to keep in mind, is to not have all your auto-payments around the same day/pay-period. Keeping them spread out will ensure you always are left with money for other important necessities and unexpected expenditures.

Go Paperless

You know that amazing feeling when you finally get rid of clothes you haven’t worn in two years? Well, getting rid of that filing cabinet filled with old bills and credit card statements can feel just as freeing. Consider both scanning your important documents into a folder on your desktop and going paperless with your statements going forward. This will allow you to find them quickly, protects them from loss, and makes your home less cluttered.

Of course, do not just start tossing. A general rule to go by is to hang onto tax records for seven years and if it is easier, just hold onto hard copies of those. But everything else, including bank and credit card statements, pay stubs, could be scanned and stored in a cloud-based filing provider, such as Dropbox or Google Drive.

We’d be happy to help you think about expense management, realistic savings goals, record retention or any other financial matters in a no-charge, no-obligation initial meeting. Just visit our website or give us a call at 970.419.8212 to learn more.

Posted in Fundamentals, Saving

Fiduciary Duty Rule Delayed

By Arlen T Olberding, CFP® on May 1, 2017

The Obama administration passed a rule that required investment advisors to adhere to fiduciary standards. Simply put, this means recommending investments that are in the client’s best interests. Previously, advisors merely had to recommend suitable investments. This often led to them recommend investments that, while suitable, offered the advisor the highest possible commission which was derived from very high customer fees.

This rule was set to go into effect in April 10. However, President Trump issued an executive memorandum on February 3 that delays implementation of this rule. The memorandum directs the Department of Labor to delay implementation until June 9 to understand the rule’s impact on investment firms and investors. Conflict-of-interest disclosures and special rules for selling annuities will be delayed until January 1, 2018.

As in most legislation, there are arguments for and against these rules. Ignoring the details of these arguments, many reporters conclude that the investment industry is against the Fiduciary Rule and that consumer advocacy groups support it. For example, AARP Executive Vice President Nancy LeaMond says that “It is time that all Americans can count on retirement investment advice that is in their best interest, not the interest of Wall Street.” Kevin Keller, who heads the Certified Financial Planner Board (of which Guidepost Financial Planning is a member), says that “Advisers should be required to put their clients’ best interest first.” You can learn more about this legislation by reading our previous blog posts on New Fiduciary Rule for IRAs, Push to Protect Investors and The Future of Financial Advice.

However this legislation turns out, you can be assured that Guidepost Financial Planning voluntarily adheres to fiduciary standards. We’re one of the Fee-Only professionals that always put your interests first. If that kind of trustworthy financial advice sounds good to you, just visit our website or give us a call at 970.419.8212 so that we can set up some time for a no-charge, no-obligation initial meeting.

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