Asset Allocation and Annuities

investment allocation

Asset Allocation

Knowing which direction to move toward is a key component of adequate financial planning.

I would like to take a break from the Learning Checklists and talk about my latest research.  Asset allocation recommendations and annuities have been my latest focus.

I don’t like relying on the first thing that I read, for two reasons.  One, I don’t always agree with the adviser and two, it can be too rigid.  Because my nose is in a financial book almost every day of the week, I like to combine all my resources and find the common denominators.  Here are several models:

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Money Learning Checklist 4 – IRAs

money management

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An Individual Retirement Account (IRA) is a great way to accumulate a retirement stash.  It’s also a great way to protect asset growth and investment earnings from taxation.

I highly recommend contributing as early as possible.  IRA contributions can begin when an individual has earned income.  Therefore, it can begin with a teenager’s part-time earnings.  Visit your favorite bank or online broker and open an account if you don’t already have one.

Learn what your maximum contributions are

IRA contributions come with conditions.  There’s a maximum amount that can be contributed and it can change every year.  Know what yours is.  It’s based on your filing status, married vs. single, etc.  The next condition to reach is eligibility for a tax deduction.  Again, it depends on your filing status and whether you participate in your employer’s retirement plan.

For employees that participate in their employer’s retirement plan, a full or partial deductible contribution is still a possibility if the amount is less than the range specified for the type of filer.  You can easily find the current year’s table for the income ranges by filing status by doing an internet search or by looking in the IRS publication.  Notice that I’m not spelling it out, it’s up to you to gain some awareness.

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Money Learning Checklist 2 – Spending

money management

THIS POST MAY CONTAIN AFFILIATE LINKS.  SEE MY FULL DISCLOSURE FOR DETAILS.

What a time to be writing about spending.  As I watched Hurricane Irma wind its way toward Florida, I can’t wrap my mind around the amount of emotional and financial devastation.  This would be a good time to think about an emergency fund that is funded slightly or not at all.  Yes, I know insurance covers some costs and FEMA comes through, I lived through Hurricane Sandy.  But I saw a Facebook post the other day from a Florida resident explaining that she wasn’t evacuating because she had no funds to leave.  I remember the same from New Orleans residents when Hurricane Katrina blew through Louisiana.  I can’t imagine not having an emergency fund to escape a dire situation, but, according to the stats, it’s a common position.

Let’s get this straight: Less spending = more emergency fund.

I request your fixation on the next two suggestions.

Entertain the “Enough” mentality in your life

If you reach the Enough mentality, mark the day on the calendar.  It’s a worthy milestone of your financial maturity.  Too many people don’t know what ‘enough’ means.  Marketers love these people and are happy to indulge your lack of ‘enough’.  ‘Enough’ means that you have reached a saturation point with your personal merchandise, take-out dependence, or whatever it is your bank account is hemorrhaging from.  It means that you’re happy with what you have and don’t need to cure boredom by spending endlessly.  Start feeling OK with what you have.  You don’t need any more clothes, furniture, shoes, wall hangings, candles, tablets, monthly subscriptions, sunglasses, makeup, cologne, curtains, or car accessories.  Live with what you have and realize that you can live without, too.

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Check out my Facebook page

money page

If you haven’t visited my Facebook page, you are missing out on some great money information.  I pull a variety of interesting money articles from all over the World Wide Web.

Check it out and Follow or Like!

Thoughts on the money Facebook page

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Meet Your Life Partner – Your Credit Score

credit-score

 

When you reach adulthood, you automatically get a new life partner.  Tall, dark, and handsome? Or, tall, blonde, and beautiful?  Keep dreaming, you won’t meet this one on Tinder.  This alter ego determines where you work, your standard of living, and what you can buy.  Basically, it runs your life. It hides behind your couch, if it allows you to have one, and can edge you out of your bed.  This friend shows up uninvited to cramp your style in countless ways.

Meet your credit score, your ethereal mate.  Just about every area of your life is impacted by this relationship.  And talk about being pushed around.  You can get much more flexibility out of a human.

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Financial Happiness

financial satisfaction

I like reading the latest financial tips as much as the next person, but sometimes it’s redundant.  I know how to budget, save, and spend responsibly.  I don’t need a daily article telling me to do all those things, I can write a book on that.  (Oh wait, I did – How Ally Found Her Financial Freedom.)  Anyways, instead of dwelling on the next money crisis or offering another seven-point list on how to side-hustle, let’s celebrate some financial success.

 

Yes, things are tough when you’re young because, like most, you may have started with zero, or negative zero, if you had student loans. After some time goes by, the small actions count.  Little by little, the emergency fund gets funded, the necessities are bought, then the pleasures can follow.  One day, going to work may not feel so bad and your life won’t depend on your next paycheck.  It’s when you realize that you have money left over from your last paycheck.  You get a few raises and promotions and there’s finally more money than month with a small checking account buildup.  The money gods have smiled on you and you can start moving on to bigger and better.  This is what’s known as financial satisfaction.

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Investing and Behavioral Risk

investing decisions

THIS POST MAY CONTAIN AFFILIATE LINKS.  SEE MY FULL DISCLOSURE FOR DETAILS.

So, you bought that stock and expected it to return a pile of cash to pay your current debt.  How long has it been, four months?  You watch it every day.  It’s a good day when it goes up, if it goes down, it clouds your mood.  Today, it’s down 12%, maybe it’s time to sell?  You sell the loser and put the diminishing dollars into the bank or, worse yet, into another stock that you expect to skyrocket.  Within a few months, you’re disappointed again.  The cycle repeats.

 

Here’s a sobering thought.  If you’re not happy with your investment returns, it’s your fault.  If you’re new to investing, you would best follow research-based advice – it will alleviate future regrets.

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Self-Evaluating Your Financial Behavior, Part II

financial behavior

THIS POST MAY CONTAIN AFFILIATE LINKS.  SEE MY FULL DISCLOSURE FOR DETAILS.

 

This is a continuation on evaluating your financial behavior.  See Part I for identifying your goals, gathering your financial records, and getting real with money attitudes.

The backdrop for each step describes what a financial planner would direct you to do; the self-study action is included.

These last three points put the plan in motion.

4) Develop and Present a Recommendation

Financial Planner Action: Communicate a plan, make recommendations, and identify alternative options.  At this phase, the financial professional may sense resistance and ambivalence from their client.  Financial psychology* suggests engaging the client in dialogue that fosters the client’s positive changes.  This method of conversing provokes the client to recap their goals and why the goals are important.  Instead of being directed by an outsider, which is typically not well-received, the client feels a sense of empowerment and autonomy.

Self-Evaluation:  This is where you decide what changes you’re going to make and is most likely the part where your well-intentioned launch could lie like an unhatched egg.  You’ve reached this segment, but your avoidance may kick on.  Vacuuming dust bunnies and pulling weeds might look exciting compared to figuring out how to manage your wallet.  If you sense hesitancy, acknowledge it, but don’t judge yourself.  Identify your resistance and figure out ways around it.  You should be sitting on that egg like a stubborn hen, not avoiding it.

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