•on March 23rd, 2017
Written By: Zach Bennedsen
How much did you spend at the grocery store last week? What about at restaurants last month? Or on clothes this year? You probably have only a very general idea of the answers to these questions. And frankly, that’s ok. Life is often too busy to record and categorize every expense. Luckily, technology can help do all of that for you. But is such a granular analysis even worthwhile? Today, we take a look at one of the more popular cash flow tracking apps – Mint – and provide our take on the service and on using cash flow trackers.
Most people are aware, in a general sense, of their cash flow situation. That is, they know if they are cash flow positive or negative. However, most do not know the composition of their expenses. A cash flow tracking app brings awareness to how we are spending our money.
Even if you are happy with your level of (hopefully) positive cash flow, it can be a valuable exercise to take a closer look at where exactly your money is going. A mere heightened awareness of how you are spending your dollars can often be enough to change your behavior. Furthermore, the idea that someone, even if that someone is really an app on your phone, can see your spending habits can further alter behavior. The Hawthorne effect, also known as the observation bias, states that people will change their behavior simply because they are being observed. This phenomenon is intuitively true; think of how much harder you exercise when an instructor is present versus when you are on your own. A cash flow tracker can serve to activate this psychological effect and help motivate us to improve our spending habits.
Categorization & Trend-Tracking
One of the most touted features of cash flow trackers is their ability to categorize your expenses. Mint has at least 17 categories with over 75 different descriptions, ranging from groceries to spas. In theory this feature sounds convenient, but it often proves complicated in practice. For example, if you use public transportation (such as BART) to get to work, how would you categorize such an expense? There is an auto and transport category, but no specific “public transportation” description. You could categorize it as “Gas & Fuel” and just remember why you place the expense there, but now your fully automated system is not so automatic. Plus, a non-trivial percentage of your transactions may be uncategorized, and it will be up to you to manually assign a category. Some may find the exercise helpful, as the process of manually assigning expenses to a category increase the salience of the expense. And for many, that salience is the best outcome of using a cash flow tracker. Regardless, we question the importance to categorize every expense. Instead, Mint, or other services, can help serve to identify general trends. By looking at spending over time, you can begin to understand patterns about your spending. Does your spending spike around the holidays? Do you splurge on big purchases right after payday? Setting custom date ranges can allow you to make those kind of observations. We argue that those observations and trends are more important than exactly how much you spent on dinner last Friday.
Security & Trust
One of the main concerns raised when someone mentions using an app like Mint.com is the security risk. People are generally wary (and for good reason) of handing over usernames and passwords for bank accounts. While the convenience of a cash flow tracking app sounds enticing, for many, the fear of identity theft outweighs that convenience. It is important to realize that, at least in the case of Mint.com, there is no ability to actually access your bank account and make transactions via the app (unless you use the Mint billing feature). To help protect your data, Mint stores your user name and passwords in separate encrypted databases. You can also enable two factor authentication, which we are big fans of. Finally, Mint also has some security clout behind them; the service is owned by Intuit, owners of QuickBooks and TurboTax. To read more about Intuit’s security features, visit their online security center.
We certainly do not mean to discount the importance of security. Even with extensive security features, there is inherent risk with sharing sensitive information that could be avoided simply by not sharing that info. In modern society, it is virtually impossible to function without sharing sensitive financial information with some third parties. As a reminder of what Yeske Buie does to protect your data, here’s a refresher, courtesy of a previous Digest Post. Additionally, we share some other previous posts to serve as reminders for good financial security habits.
Another question we have received regarding Mint is, what is in it for them? What does Mint get for offering this “free” service? Most people know that consumers of a free product are the actual product. Mint creates revenue through lead generation via targeted ads to credit cards and banks accounts, which create a referral fee for Mint every time a user follows a link and purchases that product. This means that they may share your information with other financial institutions. However, Mint does give you the ability to opt out of marketing with non-affiliates (non-Intuit products). For more information on Mint’s privacy policies, you can read their privacy statement here.
Using a cash flow tracker such as Mint is not for everyone. Some prefer to create their own budgeting tools in Excel, or would rather use rules of thumb in place of data tracking. Whatever way you approach your cash flow, Yeske Buie is excited to have a conversation about your methods.
•on February 22nd, 2017
Written By: Camille Bouvet
You may not think twice about acknowledging your 70 ½ “birthday” but in fact, this is an important milestone as it marks the time when you must begin taking required minimum distributions (RMD). Your RMD is the mandatory minimum withdrawal you’re subject to distribute from your retirement accounts; the amount is calculated based on your age and account balance. Every year you contributed to your IRA or 401(k), your assets were growing tax-deferred. As such, once you begin taking distributions from these tax-deferred accounts, you must pay the required taxes. To help you feel confident in understanding the considerations associated with RMDs, we share a list of five things to keep in mind before you’re subject to taking the distributions.
- Timing matters
- You may not have anything planned for your 70 ½ birthday but it is an important milestone to acknowledge as it marks the time that you must begin taking you required minimum distributions. While this date marks the beginning of your RMD requirements, you can choose to wait to take your first RMD as late as April 1st of the year after you turn 70 ½, which can be advantageous if you’re expecting lower income in the following year. For example, for those who turned 70 ½ in 2016, it is possible that you could save in taxes by taking your first distribution in 2017 considering the possible tax reform pending the new administration.
- Cash isn’t always king
- Most RMDs are distributed in cash, but they don’t have to be. You can transfer shares from your tax-deferred IRA to a taxable account, as along as the value of the shares transferred is equal to your RMD. You’ll still owe taxes on the distribution but you can save on any subsequent gains. This strategy makes sense when you transfer shares that have decreased in value because if you sell them out of your IRA, the entire value will be treated as ordinary income. However, if you transfer them to your taxable account, any subsequent gain will be taxed at the favorable capital gains rate when sold.
- You must take RMDs from IRAs and 401(k)s – and there are differences
- If you have a 401(k) or other qualified retirement plan that you haven’t yet rolled over, you’ll want to remember that they are also subject to RMDs, and there are some differences to keep in mind. First, if you have multiple IRAs you have the flexibility to take your entire RMD from one IRA or split the amounts strategically. With 401(k) plans, however, you must take separately calculated RMDs from each account. On the other hand, if you’re still working at age 70 ½ (and you don’t own more than 5% of the company), you can delay RMDs from your 401(k) until the year you stop working, which you can’t do with IRAs.
- Tax withholding isn’t actually mandatory
- As a default, the custodian or plan sponsor will usually withhold 10% of your distribution for taxes but you’re allowed to elect 0% withholdings, which can make sense for different reasons depending on your tax situation and personal preference. Furthermore, it’s an easy change to make – simply let us know if you’d like to make a change or would like to explore the withholding elections that make sense for you.
- You can donate your RMD at any time of the year
- Thanks to Congress’ firm decision that allows taxpayers over 70 ½ to donate up to $100,000 from their IRA and have it count as a RMD, you can save money in taxes and support the causes you care about. You can do this by transferring the money directly from your IRA to the charity for it to count as a tax-free transfer and if you have check-writing privileges on your IRA you can simply write a check to the charity. However, if you take a cash distribution and then donate it to charity, the distribution will be included in your adjusted gross income (and thus reducing your eligibility for AGI-triggered benefits). Although, you can still benefit by taking a charitable deduction and lowering your taxable income.
As always, we’re available to answer any questions you have about required minimum distributions or other considerations you encounter while planning for retirement.
Written By: Lauren Mireles, RP®
We’ve talked to our Clients many times about the importance of emergency preparedness. Preparing for an emergency can take the form of kits with food, water, and supplies, plans for what you and your family will do in an emergency, or the often overlooked financial first aid kit. Having a financial first aid kit helps to ensure that the tangible pieces of your financial life are safe and easily accessible at any moment.
The first consideration for your financial first aid kit is where to keep your valuable documents. We find that safes that are waterproof, fire-resistant, and easy-to-carry make the best vessel for storing your financial documents. A variety of well-reviewed safes are available on sites like Amazon and Staples including the SentrySafe Waterproof Fire-Resistant Chest or the SentrySafe Fire-Safe Waterproof File Safe. For an added layer of protection, you may consider purchasing a fire-resistant, fiberglass envelope pouch, like this one, which adds additional heat resistance in the case of a fire.
With your container in place, you can now focus your attention on assembling all of your important documents. Below is a comprehensive list of items to consider gathering to ensure your financial first aid kit is well-stocked for any emergency. While you collect these items, it’s also a good idea to give them a quick review to ensure the documents are up-to-date and accurate. Furthermore, it’s helpful to make a habit of revisiting these important documents on a regular schedule. You can use specific yearly events like tax preparation time, the start or end of daylight savings, your birthday, or the start of a new year to trigger your reminder to review the information. Finally, it’s recommended that you keep a second copy of this kit with someone you trust that is not in close proximity to your geographic location. This way, you can rest assured knowing that the information can be accessed elsewhere in the event that your copy is unavailable in an emergency.
We hope you find these tips empowering! Having a well-stocked financial first aid kit can help you be confident that your financial life is safe in the event of any challenges and complexity that may come your way. If you’d like our assistance in helping you collect any of the information below, please do not hesitate to contact us. Happy Prepping!
- Identification Documents
- Driver’s license, Passport, and other Photo ID (for yourself and your children)
- Birth Certificates and Adoption Papers
- Marriage/Divorce License
- Social Security Cards
- Military ID or Military Discharge Records
- Housing Payments
- Lease or Rental Agreement
- Mortgage, Real Estate Deeds, and HELOC Information
- Financial Obligations
- Utility Bills
- Vehicle Loan Payments and Registration Documents
- Photo Copy of Credit Card Numbers and Phone Numbers to Report Lost Cards
- Student Loan Agreements
- Alimony/Child Support Payments
- Retirement Account and Investment Account Custodians and Numbers
- Insurance Policies
- Property, Homeowners or Renters Insurance Documents
- Photos or Video of Property Inventory
- Copies of Auto Insurance, Life Insurance, and Health Insurance Policies
- Appraisals of Personal Property
- Sources of Income
- Recent Pay Stubs
- Government Benefits Information (including Social Security and Veterans Benefits)
- Tax Statements
- Previous Year’s Tax Returns (it is recommended to keep tax returns for seven years)
- Property Tax Statements
- Personal Property Tax
- Estate Planning
- Copy of Living Will
- Copy of Trust(s)
- Copy of All Medial/Durable Power of Attorney
- List of Account Beneficiaries with Contact Information
- Medical Information
- Contact Information for Physicians and Medical Specialists
- Copies of Medicare or Medicaid Cards
- Immunization Records
- List of Medications
- List of Current Prescriptions
- Disability Documentation
- Emergency Points of Contact
- Name, Phone, and Address Information for the Following Points of Contact
- Financial Advisors
- Health Professionals
- Service Providers
- Insurance Agents
- Mortgage Representative
- Work Contacts
- Extended Family
- Passwords to Financial Accounts
- List of Up-to-Date Usernames and Passwords for Important Accounts
- Small Amount of Cash
- In the event that ATMs and credit cards are not operational, it’s smart to have a small amount of cash available
Written By: Lauren Grove, CFP®
We have frequent discussions with Clients asking whether they should rent or buy – they may be asking for themselves, for their aging parents or for their children or grandchildren. As with almost every strategic planning opportunity we discuss with Clients, there are many factors to be considered. The monthly costs of a mortgage payment that adds to your equity versus a rent payment are what often come to mind first, and most times we hear that a mortgage payment will be less than a monthly rent payment so buying must be the answer. But there’s more to consider for the potential homebuyer – where do you see yourself in five years? Are you planning to relocate or look for a new job? Start a family? Have family members come to live with you? Are you looking to downsize? How do you feel about home maintenance? What does your emergency fund look like? The questions and tradeoffs are plentiful – and that’s why we’re here: to help you think about the many different tradeoffs and ‘walk it around the block’, something we pride ourselves in doing.
In thinking through the choice to rent or buy, here are a few of the many pieces to keep in mind:
Near- and Long-Term Plans and Goals
- One of the most important roles of our job as financial planners is to help our Clients recognize their unique goals and create policies to help them use their resources in ways that support these goals. Accordingly, it is imperative to consider the benefits of renting and buying in conjunction with your overall goals to ensure you make the best decision for you.
- As you think about your near- and long-term plans and goals, ask yourself questions like the following: where do you see yourself in the next one to seven years (or more)? Do you know you want to stay in the same location long-term? Or do you think you might consider moving or getting a new job? Do you want the flexibility of having that option? Do you not yet know what your plans may be?
- It’s hard to say for sure what may transpire in the future, but in cases where general desires and plans aren’t yet known, it likely makes sense to rent to provide you with flexibility until you figure out your plans.
- If you know that you would like to stay in the same place long-term and the idea of home ownership is appealing, however, buying may be your favored option.
- To expand upon the notion of flexibility, the ability to have fluid living arrangements is one of the advantages to renting that often goes unacknowledged or unappreciated. As a renter, you can pretty much pick up and move whenever you want or need to. There are, of course, some expenses to getting out of a lease early, but these expenses are often lower than the time, money and energy required to sell a home.
- Just as there are associated costs with getting out of a lease or selling a home, the costs of securing a home should also be considered when making your decision. A down payment on a home (in addition to realtor fees and closing costs) is no small expense compared to a security deposit for an apartment.
- Furthermore, with expensive housing and rental prices in many areas of the country, it can be difficult for someone to rent and save for a down payment at the same time – or at least it takes longer to save enough.
- This is likely one reason that we’re seeing a shift away from buying in the millennial generation. According to the Zillow January 2016 Housing Confidence Index (quoted here in USA Today), between 56.9% and 65.3% of people surveyed associate owning a home with the American Dream (the highest percentage belonging to the millennials interviewed), but only 9.2% of millennials surveyed expected to buy a home within a year.
- Nevertheless, if owning a home is a personal goal of yours, the down payment is certainly something that can be saved up for or planned for, or perhaps funded from the proceeds of selling your prior home – it doesn’t have to derail your financial plan!
Monthly Budget & Maintenance
- In addition to the initial down payment or security deposit, there are, of course, other monthly costs and payments to consider. Rent payments and mortgage payments are known and stable costs in general, so in both cases you can plan your budget around these known costs.
- The difference comes about when we think about potential maintenance and repair costs. When renting an apartment, the landlord takes care of (both physically and monetarily) most maintenance expenses, from replacing a broken appliance to painting the exterior of the building. When you’re the homeowner, you’re the landlord. You must either find contractors to complete projects or complete them on your own time. Neither option is “right” or “wrong”, but it’s important to ask yourself – do you enjoy being handy and taking on home design projects or would you prefer that someone else be responsible?
- Another monthly cost to consider is insurance – renter’s insurance is generally much cheaper than homeowner’s insurance. Of course, this shouldn’t be the determining factor in your decision, it is simply something to be considered and planned for.
Equity and Ownership
- One of the most common arguments in favor of buying over renting is that all of these costs are an investment into your home equity rather than payments to a rental agency. For some, the other benefits of renting outweigh this disadvantage but for others, building equity by owning a home is a personal goal to take great pride in! Additional well-known benefits of home ownership include the ability to fully customize the space to your liking and to enjoy any price appreciation in the home if or when you sell it.
- Finally, one of the big points we hear from Clients in this conversation is related to the tax deduction for mortgage interest. Based on your tax situation, the deduction could certainly be a great advantage. But, we don’t believe it should be the biggest or sole factor in the decision. As we like to say – we don’t want the tax tail to wag the investment dog (or decision dog).
In summary, there are many things to discuss and consider when you’re wondering whether to rent or buy. And all of these discussions depend on you, your situation, and your desires, goals and Live Big® dreams. Financial planning is all about tradeoffs, and we love discussing them with you! So, if you would like to ‘walk it around the block’ on this topic or any other, we would be happy to schedule time to talk.
Written By: Zach Bennedsen
Don’t Look! (at the tickers)
The first resolution we encourage you to take on this year should be the simplest, as it actually requires no action! All you have to do is not look at what the stock market is doing. Day-to-day market activity can be both exciting and terrifying, especially when you listen to the talking heads on CNBC. However, when you’re just looking at daily snapshots, the tickers don’t have much of an effect on your personal financial well-being. So, if those numbers don’t affect you, don’t look at them! The brain power you expend getting riled up about short-term market activity is better applied elsewhere.
Pay Yourself First
If your current savings plans is “I save whatever is left at the end of the month,” this resolution is for you. Instead of spending first and saving later, create a systematic savings plan for 2017. By designating a certain amount for savings every month, or every paycheck, you will be much more likely to meet your savings goals. One of the best ways to create a “pay yourself first” plan is to establish an automatic payment straight from your paycheck to your investment account. The plus side of this is if you never see the money in your checking account, you are less likely to miss it!
Have you ever enthusiastically started a strict diet plan only to relapse into old habits after a short amount of time? Establishing new habits is hard, and it can be even harder if you are too strict with yourself. This phenomenon is not limited to health goals; it can happen in your financial life as well. To combat burnout, if you meet your savings goal for three months in a row, treat yourself to that new thing you’ve been ogling. We’re not preaching asceticism here, just healthy financial habits! And just like it’s ok to indulge in that piece of cake every once in a while if you’re meeting your health goals, you can likewise reward yourself for staying on track financially.
When you make a New Year’s resolution, it is personal in nature. No one’s resolution is for everyone in America to start going to the gym. Your financial resolutions should be personal as well. You can’t have a resolution for the S&P 500 to go up by 10%, but you can have a resolution to save 10% of your salary. Control what you can control, and don’t sweat the rest.
While we suggest you adopt these resolutions for 2017, these are habits you should maintain past the end of the year. If you set a weight-loss goal, you don’t go back to eating cheeseburgers for every meal as soon as the scale reads your target number. Just like dieting is really about setting new eating habits that you can stick with, these New Year’s financial goals are designed to be sustainable. Financial health is a long-term endeavor, and you will be rewarded over time for establishing good habits now.
•on December 29th, 2016
This being the last business day of the year, we thought we’d reflect on some of the best pieces from TheLiveBigWay® Digest in 2016. We have reviewed the Digest posts from 2016 and we share with you the five most popular posts from each of our categories. We hope you enjoy reading these pieces and we wish you and yours a restful New Year’s break and a happy and prosperous New Year.
Top Five “Economy and Investing” Posts:
1) About Last Night
In most of the ways that matter to your finances, the world looks the same after the US Presidential Election.
It’s feeling to many people like the world is coming to an end. So, before I say anything more, let me cut to the chase: It isn’t.
A mere week after the Brexit, the US market has recovered to pre-Brexit levels and the UK markets are higher than they were prior to the vote.
Many are predicting a rough time in the markets if Donald Trump is elected president. Do the markets really fear Trump? And can you Trump-proof your portfolio?
They did it. The Brits voted to leave the European Union, driven, if the polls got it right, by fears of an immigrant invasion. Here’s our take on the Brexiting Brits.
Top Five “Financial Planning” Posts:
1) A Practical Approach to Cash Flow Complexities
Cash flow policies remove budgetary uncertainties and clarify the financial ripple effects of given alternatives while maintaining alignment with Client values.
2) Employee Stock Options: Simplified
In this piece, we will help make sense of the two most common forms of stock options offered: Incentive Stock Options and Non-Qualified Stock Options (NQSOs).
3) Reverse Mortgage Mini-Series: Part 1
In the first article of this mini-series, we aim to give you a basic overview of Home Equity Conversion Mortgages which could be a valuable planning tool. You may also enjoy Reverse Mortgage Mini-Series: Part 2.
Indulge with us as we chronicle the roller-coaster ride of financial decisions you must make when you decide to purchase a lotto ticket.
When a celebrity’s retirement or estate plan is discussed, it usually tells a tale about the consequences of poor planning. This isn’t the case for Gene Wilder.
Top Five “Millennial” Posts:
1) The 411 on 2FA
One way to reduce the risk of online identity theft is by using two factor authentication (2FA) which requires two means of identification to access an account.
2) Student Loan Starting Line
We share our thoughts on the standard presence of student loan debt and how to live with it in ways that will not hinder you from financial and life decisions.
Your NCAA March Madness bracket may be busted, but what if you could fill out a bracket where you couldn’t lose? Take a shot at the Financial Four bracket!
It’s officially Filing Season. For many, it doesn’t just include Federal and State Tax Returns, but also includes filing for federal student aid, or FAFSA.
A recent CNBC article by Landon Dowdy shares statistics about Millennials’ saving habits and saving tips from financial professionals including Dave Yeske.
Top Five “Firm News and Events” Posts:
1) Elissa Buie Named Top Wealth Advisor by Washingtonian Magazine
Elissa Buie, CFP® has been awarded the title of Top Wealth Advisor by Washingtonian Magazine as part of the magazine’s Top Wealth Advisors listing for 2016.
2) Yusuf Abugideiri Named One of InvestmentNews’ 40 Under 40
Yusuf Abugideiri has been named to InvestmentNews’ 40 Under 40 list for 2016 and was also featured on the cover of this week’s issue of InvestmentNews.
Lauren Vitt and her high school sweetheart, Eli Mireles, were married on Saturday, October 29th in their hometown of Pittsburgh, Pennsylvania.
This year, the Yeske Buie team worked to sow our BIG ‘seeds’ so that they may continue to grow our culture and guide how we approach our work for our Clients.
Yeske Buie is excited to welcome three new additions to our team – Mila Lavoie, Zach Bennedsen, and Ryan Klemm! We offer welcome notes from each individual.
Top Five “YeBu in the Media” Posts:
Recently, Elissa talked with a reporter from Investor’s Business Daily, Morey Stettner, for an article focused on the lifecycle of a financial planning firm.
2) Yusuf Abugideiri Named as On of Ten Top CFP Holders Under 36
Yusuf Abugideiri was named to WealthManagement Magazine’s listing of Top CFP® Holders Under 36 which is featured in the March edition of the magazine.
3) AdvisoryHQ: Top 11 Financial Advisors in San Francisco
AdvisoryHQ has ranked Yeske Buie as one of the Top 11 Best Financial Advisors in San Francisco. We share their methodology and highlights that earned the award.
We share the highlights of Elissa and Dave’s presentations at the FPA Annual Conference, the largest gathering of CFP® professionals and thought leaders.
Dave shares his thoughts on why he does not anticipate any changes regarding the fiduciary ruling as a result of the change in Presidency.
Top Three “Fun Stuff” Posts:
1) Where in the World is the Live Big® Glass?
We share a gallery of photos of our Clients, Family, and Friends enjoying their Live Big® glass from all over the world.
2) Time Saving Ideas to Live Big in 2016
We center our work on a singular priority: helping Clients make the most of their most valuable resource – LIFE. Accordingly, we offer a few time saving ideas.
It’s not often that one unfamiliar with the phrase Live Big® appreciates our worldview without additional insight. Purina pet food’s campaign is an exception.
Top Five Most Popular Posts Of All Time:
1) Perhaps the Most Beautiful Flash Mob Ever…
Our good friend Ed Jacobson, PhD, author of Appreciative Moments, sent us a video we thought you’d appreciate. Elissa called it “perhaps the most beautiful flash mob ever…
A global rendition of the classic Ben E. King song Stand By Me from the documentary “Playing for Change: Peace Through Music.”
An experiment testing the “wisdom of crowds”, the proposition that the collective wisdom of a group will surpass that of even its smartest individual members.
Yeske Buie is pleased to announce our new agreement with IdentityForce to provide identity protection services to our clients at a significant discount.
GGU Magazine’s Spring 2013 issue cover story, “The Power Couple,” profiles Elissa and Dave and their team approach to teaching, financial planning, and living.
Written By: Yusuf Abugideiri, CFP®
At an estimated population of 82 million, millennials make up the largest generation in America. Born between 1980 and 1995, members of this cohort have often found themselves to be the subject of everything from think-pieces to scholarly articles in recent years. While many labels have been attached to millennials by the media, we’ll use this space to focus on how they can use their greatest asset – time – to set themselves up for success as their financial plan unfolds.
The first thing we recommend is to start the process and engage a financial planner – it’s never too early! We’ve talked about how powerful extra time in a Client’s financial plan can be in this space before, and we recommend that millennials start their financial planning journey as soon as possible. When establishing a relationship with a Client, no matter the individual’s generation, we always conduct a Discovery Meeting; during that conversation we learn what is most important to the Client by exploring what shaped their value-system and what they want their future to look like. It is in this meeting that we seek to learn the “why” behind our Client’s goals, which becomes critical as we help them navigate the trade-offs related to decisions they will face or strategies we propose.
Connecting with a planner and establishing goals is a critical first step, but that’s just the beginning of the process. The next step is creating a financial plan that speaks to the goals uncovered during the Discovery Meeting. We’ve found that using financial planning policies is a great way to meet the financial planning needs of young Clients. In Dave and Elissa’s 2014 article in the Journal of Financial Planning (“Policy-Based Financial Planning as Decision Architecture”), they note that young people are a great fit for the use of policies because they “experience many significant changes in a relatively short period of time” as they establish the trajectory of their lives, and that “policies can help them deal with multiple life changes without requiring them to reinvent the wheel” with each change in their circumstances. We’ve previously reviewed how developing cash flow policies can clarify the best decision to make when life gets in the way of the best laid plans; this type of policy-based financial planning is critical for millennials to help ensure their financial plan has a strong base.
Building the framework for a millennial Client’s financial plan starts with cash flow planning, but certainly doesn’t end there. It is then up to the financial planner to help the Client begin addressing the rest of their financial planning needs. Some of the items we’ve helped our younger Clients tackle include:
We hope this has been a helpful introduction to ways a young person can start their financial planning journey. If you have any questions about our process, please feel free to contact us for more information or check out some of our other pieces written on topics for millennials.
•on December 1st, 2016
Open enrollment to sign up for health insurance coverage for 2017 under the Affordable Care Act is currently open and continues through January 31, 2017. For those looking to have coverage beginning on January 1st, however, the deadline for enrollment is December 15, 2016. If you are currently enrolled for coverage, you are encouraged to log in and update your information by the December 15th deadline to ensure no disruption of coverage. With these deadlines nearing, we share a quick guide from the HealthCare.gov website to help you learn more about enrollment, potential savings, picking a plan and more.
1. Open Enrollment for 2017 coverage is November 1, 2016 through January 31, 2017
- Enroll by December 15, 2016 for coverage starting January 1, 2017.
- After January 31, you can enroll in 2017 health insurance only if you qualify for a Special Enrollment Period.
2. What you pay for insurance depends on your income — and you’ll probably save
- Your savings depend on your expected household income for the year. Over 8 in 10 people who apply are eligible to save, and most can find plans for between $50 and $100 per month (after accounting for their premium tax credit).
- Get a quick idea if you’ll save. Based on your income estimate, we’ll tell you if you qualify for a health insurance plan with savings, Medicaid, or the Children’s Health Insurance Program (CHIP).
3. You can apply for coverage 4 ways
4. The Marketplace is for people without health coverage
- The Marketplace is primarily for people who don’t have health insurance through a job, Medicare, Medicaid, the Children’s Health Insurance Program (CHIP), or another source of qualifying coverage.
- If you have job-based insurance: You can buy a Marketplace plan, but you’ll pay full price unless your job-based insurance doesn’t meet certain standards. Most job-based plans do.
- If you have Medicare: You can’t switch to Marketplace insurance, use a Marketplace plan as a supplement, or buy a Marketplace dental plan. Learn about Medicare and the Marketplace.
5. If you don’t have health insurance, you may have to pay a fee
- Most people must have qualifying health coverage or pay a penalty.
- For 2017, the penalty is either: 2.5% of your household income or $695 per adult ($347.50 per child), whichever is higher. Learn about the fee.
- Some people qualify for an exemption from the health insurance requirement.
The above information and more can be found at www.HealthCare.gov.
Written By: Ryan Klemm
For many new college graduates, the following story may sound familiar… You did it! You reached the pinnacle of academic success your teachers and parents have been preparing you for. Infinite paths are laid out in front of you and you have full control over which path you take. You then begin to analyze where each path takes you and can’t help but to notice a heavy financial weight. That anchor is the existence of student loan debt. Today, in an effort to to encourage you to be the captain of your finances, we share our thoughts on the ever-becoming standard presence of student loan debt and how to live with that debt in ways which will not hinder your financial and life decisions.
According to the United States Federal Reserve, student loan debt is currently sitting at $1.26 Trillion with an average balance of $37,172 for a 2016 graduate. These numbers represent an increase in nearly 300% over the past eight years and 6% from 2015 to 2016 respectively. Beginning your life with this debt may seem like a scary thing, and while that may be true, it can become a manageable part of your everyday financial life. The existence of student loans represents your initial investment to receive a college degree and in return rewards your upfront cost with a higher paying job. A recent study by the U.S. Government concluded that those receiving a degree from higher education earn $1,000,000 more over the course of their career compared to those who did not receive a degree. This benefit alone is reason enough to coexist with the beast commonly referred to as student loan debt.
The first thing to know after graduating with student loan debt is that the lending organizations offer a six-month grace period before minimum payments are required. This grace period is beneficial in allowing a recent graduate to get settled into their new financial situation. During this period, it is in your best interest to begin tracking your income and expenses. This will help you understand your cash flow patterns and allow you to analyze the different ways to make payments that fit within your budget. As tempting as it may be to buy that brand new car or begin payments on a luxury apartment, be cognizant of your current debt balance and think about delaying those purchases until the balance on your student loan is more manageable. A proactive way to utilize this time includes setting aside what you believe to be your monthly payment to allow a significant payment right from the start. Those six months will fly by quickly, so it is important to get ahead on your student loan management and education so you are not blindsided once the payments actually begin.
Once you know you are able to handle the monthly payments and begin the repayment process, there are strategies to most efficiently begin to pay down the balance. If you are looking to get ahead on the payments, you may look towards paying down the most expensive loan first. This does not mean the loan with the highest balance, but rather the loan with the highest interest rate. Over time, the effects of compounding on the high interest rate make the loan more expensive than those with lower rates. Therefore, to get ahead, you may consider extra payments to these high-interest loans. Another strategy to help one live with the presence of student debt is to consolidate the aggregate of all outstanding loans into one. Consolidating student loans is similar to that of refinancing a house in hopes of receiving a lower interest rate on payments. This strategy also consolidates the numerous loans into one and in return allows for easy management and a single monthly payment. It’s important to note, however, that depending on the agreed upon terms, you may not be able to consolidate certain loans.
Once you have entered the repayment period, what happens if you are struggling to meet the minimum payment? If this happens to you, do not worry; there are a number of ways to help you manage your balance. It is important to recognize your payment schedule is typically based off a 10-year term. If after tracking your income and expenses you determine the minimum payment is too much to cover each month, you may be able to increase the length of the repayment schedule. This will reduce the amount you pay each month, however doing so will cause you to pay more interest over time. Accordingly, it is important to weigh the pros and cons of interest accumulation piling up and to determine if stretching out the payments is the best option for you. There is also recent government legislation created by President Obama referred to as the Pay As You Earn rule which caps your student loan payments at 10% of your discretionary income. This plan is beneficial for those whose first salary does not cover enough of their monthly payment from their outstanding loans. Another rule to be aware of is loan forgiveness which is available for those who work in public service and other qualifying organizations. If working in a qualified profession, you may be eligible for loan forgiveness after 10 years of payments.
At Yeske Buie, we work with Clients to help mitigate the accumulation of student loan debt for their loved ones by opening 529 college savings plan as an early strategy to reduce the overall debt of future graduates. We hold open conversations with Clients regarding their desire to help with college payments and consistently monitor these accounts from creation through payment of tuition and other educational expenses. We also share tools like those from the Consumer Financial Protection Bureau which help educate prospective college students about the associated costs and provide repayment resources to those who carry student loan debt. We are always available to speak with you regarding any concern you have about the cost of higher education, as well as strategies to pay off any outstanding balance and encourage you to reach out to us with any questions you may have!
Having student loan debt can be a scary reality, but it is a reality that a majority of our population is facing. It is important to know that you are not alone and that you will not hold on to this debt forever. We offer congratulations to those recent graduates of higher education programs and offer encouragement to those currently living with their student loan debt and handling the repayment of their balance!
•on October 19th, 2016
Written By: Lauren Grove CFP®
Data and money security are important to everyone! And these days, there’s a new headline about the latest major security breach or hack of personal information far more often than we would like to see. While these breaches do happen, there are many things we can do to do our best to avoid them. We all have a personal responsibility to be smart with our secure information. This includes things like smart security hygiene – using strong passwords that don’t contain personal (read: easy-to-guess) information, resetting our passwords periodically (every three months is a good idea), not making online purchases on unsecure websites, and never sending secure information via unsecure paths (like in the text of an email or on social media), to name a few. It also includes awareness – paying attention to your bank accounts, investment accounts and credit card transactions and reviewing the monthly statements for these accounts for accuracy.
In addition to being smart with our personal information and being aware of our financial activities, we expect those we trust to do the same – bankers, credit card companies, retail stores, and especially financial planners. I’m happy to report that there are many steps we take to protect your information and your money:
Daily Review of Deposits and Withdrawals
First and foremost, we review every deposit and withdrawal to every account every day. That’s right – every single account, every single day. This is an important daily task for us as it allows us to confirm money movement happened as we expected. For example, if we sent a check to Schwab to be deposited, our review of this report will confirm when that deposit actually happens, which then prompts us to invest those funds. Additionally, if a Client requests that we raise cash for a transfer he/she is planning to initiate, we will see the distribution confirmed on this report.
For security purposes, if we see an unusual transaction on this report (for example, one we weren’t expecting or one much larger than usual) we will immediately email or call you, the Client, to confirm its validity. Similarly, if we received an odd or unusual request from a Client (perhaps a suspicious email), we will call to confirm the validity and the Client’s identity before processing any transactions.
Our daily review of this report allows us to remain fully in the loop on money movement into and out of our Client accounts and allows us to jump in immediately if we see something unusual. And, if a fraudulent transaction were to happen, we enact a long list of internal fraud policies to immediately alert the Yeske Buie team and pull in our team at Schwab to rectify the situation. Also, it is important to know that Schwab will cover 100% of any losses in a Schwab account due to unauthorized activity.
Policy to Never Send Secure Data through an Unsecure Method
It is our policy at Yeske Buie to never send sensitive information via unsecure pathways – like typed in the body of an email. It is for this exact reason that we use ShareFile – a software that creates a secure link for every document we need to send to a Client. The links are only valid for one week, limited to four downloads and use 256-bit encryption. This may sound familiar if you’ve completed any Schwab paperwork recently.
It is also our policy to encourage this behavior in Clients and other professionals who work with our Clients, which is why we always offer these secure methods for returning documents with sensitive information included (which can also be found here):
- Use the secure upload form
- Fax to +1 (866) 549-4990
- Send via email with your documents included as password-protected attachments
- Mail via US Postal Service. Street addresses can be found here.
- Drop off at either office (we can scan the documents and return originals to you)
Upon receipt of documents including secure information, like a completed Schwab form or copy of your most recent Employer 401(k) statement, we save the documents to our secure server in your Client Folder. And if you uploaded them via the Secure Upload Form, we delete them from that server as soon as they are saved.
Along these same lines, if we are requesting or providing information like a Schwab Account Number, Date of Birth or Social Security Number, we will always call you or request that you call us. It is much more secure to share this information (after confirming the Client’s identity) via phone than it is to share it via typing the information in an email. Once we have that secure information, it is never written down and left sitting on a desk, but always entered into our secure database.
In the event someone sends us secure information via an unsecure pathway (like a regular email attachment without password protection), we’ll save the information then delete the email from our inbox and again from our trash folder. We’ll subsequently follow up with the sender to recommend they do the same.
Information Included on your Client Private Page®
Your Client Private Page® is a shared online workspace where you can see your monthly Portfolio Reports as well as your Financial Planning Reports, Action Items and Billing Statements. And the keyword is that it is private! We never post anything to your Client Private Page® that includes secure information like an account number or Social Security Number. For example, your monthly portfolio reports only include the name(s) of the account holder(s) and type of account – no account number is included, not even the last four digits of the corresponding account. And, furthermore, you must have your specific Client Number and login credentials to access the page.
One additional thing we do in an effort to keep you, your data and your money as secure as possible, is research and recommend services like IdentityForce. IdentityForce is a service that offers identity protection by monitoring many aspects of your life like:
- Your email address – is someone using it to open new accounts?
- Your credit – is there an application for new credit using your information?
- Your bank accounts – is there unusual activity?
Hopefully the answer to all of the above is always ‘no’. But if you find that you have been the victim of identity theft, IdentityForce will send you an email and text notification and their Restoration Services team is available 24 hours a day to help you resolve any unauthorized use of your information. Click here to read more about IdentityForce and get access to the discount code provided to our Clients.
The moral of the story is: awareness is key. We must always be aware of our surroundings, especially when it comes to the security of our money and personal information. And monitoring things on a regular basis is a great way to stay on top of this. Which is why we here at Yeske Buie find it so important to be the first set of eyes on the security of your money. It’s also why we find it so important to be a constant resource to you – we’re consistently reading and researching the best ways to keep you and your information and money safe. And we act and update our policies appropriately.
We’re always welcoming of your thoughts and we are available to discuss any questions you may have on this topic at any time. To read more on similar topics, see the following articles: