Dream a Little Dream: Know where you want to go

July 10, 2012

People often think defining an investment strategy is the first step in creating a solid financial plan. Slow down. Before you even begin to gather all the information you’ll need to form an investment strategy, sit down on the porch or patio or in front of the fireplace (with your spouse or partner if you have one) and let your mind roam.

What do you really want from life? If you could do anything you want, what would you do? Don’t put financial restrictions on yourself now. Dream. Stretch a little. Once you have that dream defined and you know roughly where you want to go, you can begin to determine what role a financial plan can have in helping you live that dream. 

A good investment strategy begins by identifying your specific individual goals and the time you have to achieve them. Those highly personal decisions, very often driven by your love of others, will suggest your strategy. Your strategy may include shorter- and longer-term objectives.

Are you investing to buy a house, pay for college or to retire with sufficient income to support the lifestyle you desire? How much money will you want for each objective? When will you need it? How can you get there? Will you have to make trade-offs to achieve those goals? Which take the highest priority?

The answers to all of those questions will help you determine your individual strategy. Without that strategy it is nearly impossible to know how to invest.

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Be It Resolved: Meet Your 2012 Money Goals

January 4, 2012

The time for those New Year’s resolutions is upon us.

In my opinion, making financial resolutions doesn’t have to be painful. If you follow some simple guidelines, financial and other resolutions don’t have to be overwhelming. Remember that the key to reaching any goal is to make it specific, achievable and measurable. Celebrate and reward yourself once you get there. And realize that it’s perfectly acceptable – and smart – to ask for a little help when needed.

Be it resolved: Health first
Before getting into financial resolutions, I want to mention how important it is to consider your health and make it a priority. This is a great place to start with resolutions because there are so many ways to improve health without spending much money. You can go for more walks, which are absolutely free. Or take an exercise class or buy (and use!) a cookbook that focuses on healthy foods. Try a healthy new activity and see if it gives you some extra energy and enthusiasm for your financial resolutions.

Be it resolved: Save and invest more
Based on my conversations with clients, family members and friends, saving more and spending less always seem to be the most popular financial resolutions. The two things go hand in hand and may sound simple, but many people find it difficult to build their savings to the level they desire. You need the right perspective and a specific, achievable savings goal in order to succeed.

Saving really boils down to paying yourself first. For most people, a realistic goal is to save 10 percent of your income. If your employer offers a retirement savings plan with matching contributions, resolve to make the most of it and contribute as much as you can. It is one of the best ways of boosting your savings. You may also want to open and begin making regular contributions to a Roth IRA, which allows you to make tax-free withdrawals of your direct contributions at any time.

Be it resolved: Pay off inefficient debt
If you are one of the many people who want to dump a debt burden this year, you need to know that not all debt is created equal.

Efficient debt isn’t so bad, but you will want to get rid of inefficient debt as soon as possible. Efficient debt works for you because it is tax-deductible and/or appreciates in value. Examples include a home mortgage or an investment in education that can increase your earning power. Inefficient debt includes high-interest credit card debt and debt used to buy things that depreciate and are not deductible, like automobiles and many other consumer goods. Resolve to pay off inefficient debt first.

Be it resolved: Consult a financial advisor
If you feel overwhelmed just thinking about financial resolutions, it’s the perfect time to consult with a financial advisor. A professional can help you get organized, identify goals, save time and find ways for you to maximize your financial efficiency this year.

Best wishes for a healthy and prosperous 2012!

Wealth Enhancement Group


Investing and Saving

September 24, 2009

The goal of investing is quite different from saving. Saving makes money available to you in a secure place; investing seeks to make 13that money grow for some future use.

Two rules of thumb: Invest 10 percent of your income, and pay yourself first. Your deposit into your investment account should be the first check you write each time you get paid, not the last. If you pay yourself first, you’ll be able to manage on what remains. If you instead plan to invest what remains from your paycheck after you’ve met other needs (and wants), you’ll find that you have little or nothing left for investing most months.


Vacation Properties and Income – Part 2

September 14, 2009

Another way for retirees to generate income from a vacation home is to sell it. By using the federal capital gains exclusion in conjunction with the sale of your primary residence, you can potentially realize tax-free income. Here’s how it works. The basic capital gains exclusion rules state that you must have owned and used the home as your primary residence for at least two years out of the five-year period ending on the date of the sale. If you are married, the full $500,000 exclusion ($250,000 for single homeowners) is available as long as one or both of you satisfies the ownership test (two years) and you both satisfy the use test (primary residence).


Vacation Properties and Income – Part 1

September 10, 2009

If you have a vacation home, you’re already aware of the enjoyment it provides and the benefits it can offer at tax time. But you may not be aware of how vacation property can be used to generate income in retirement or how it can play into an estate plan. In fact, vacation properties offer retirees a number of different options in managing their finances and estate.
Vacation property may be used to generate income in several different ways. The first, and most obvious, is renting it. The IRS allows you to deduct mortgage interest on your primary residence and one additional property up to a limit of $1 million in combined mortgage debt for mortgages taken out after 1987. Current tax rules also allow you to rent out a second home for up to 14 days per year without having to report the rent as income. If you rent for more than 14 days, the home is considered investment property, and rent must be reported as income. Converting the property to an investment property, however, allows you to deduct rental expenses, such as insurance and utilities, if you have a net profit on the property (deductions are limited if you report a loss). You can still use an income-producing property for personal use while maintaining your tax advantages — but only for the greater of 14 days or 10 percent of the total days it is rented. Maintenance days do not count as personal-use days, but use by in-laws or other part-owners does, even if rent is charged.


Simple Truths

September 8, 2009

As a financial advising firm, one of the simple truths we have learned is that relationships are the single greatest influence on how people use their money and plan for the future. When people talk about their hopes and dreams, they talk about the people they love. Their future, the life they wish to live, is always full of the people most important to them. They don’t talk first about dollars and cents, Dow averages, or bond yields. They talk about a spouse, a parent, a child. When imagining their financial futures, even those without family often focus on others, such as employees, friends, faith communities, and charities.


Keeping Your Emotions in Check…

September 3, 2009

In times like these, with the economy in a tailspin, and the stock market in the tank, investing requires an extra dose of patience, perseverance and perspective.
It takes patience to ride out the bear market, perseverance to continue to invest even through a difficult economy, and perspective to see the long-term picture and realize that recessions and bear markets are just part of the natural economic cycle. Slumping economies and bear markets of the past have always turned around — and there is no reason to believe that this time will be any different.