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Tag: financial planning

Getting married in 2021? How to budget for the big day and beyond

According to most bridal magazines, we are in the midst of what is known as “proposal season.”

TheKnot.com reports that nearly 40 percent of all engagements happen between November and February, with five of the most popular days for proposals landing between those four months. So, for many of you, wedding bells might be ringing soon.

For those who will be planning a wedding this year, I suggest getting your financial house in order before walking down the aisle. While finding the perfect dress or venue might be at the top of your to-do list, making sure you’re on the same page financially as your partner should also be a top priority. Reviewing a financial checklist is a good start. Here are some things to consider as you begin the discussion:

Combining bank accounts

If you share a home or apartment, odds are you also share the expenses as well, especially if you both work full time. A joint checking account can make life a lot simpler because you have a record of what you spend all in one place. You should also keep separate accounts for individual personal expenses. With your separate accounts you can each make a deposit every month into the joint account to pay the common bills.

Planning for retirement

Is saving for retirement a common goal? Do you both agree to put away money every month into your respective 401K plans? Do you save money annually with a Roth IRA or a regular IRA? A Roth IRA is a much better option if you qualify and do not make more than $206,000 jointly. Withdrawals after age 59½ are tax free. With a regular IRA you must pay taxes on withdrawals when you start taking them. You also need to decide who is going to manage your investments. Are you going to hire an investment professional or designate one of the two of you to do it? Sorting out those decisions now will result in less confusion later.

Household Budgeting

If you are sharing expenses that are not fixed every month like rent, how do you also decide on what to spend on food, utilities, cable or eating out? It is important to sit down at the kitchen table with all the monthly bills to set a budget together. You should review what you are jointly spending at least quarterly to make sure you are not wasting money on expense that don’t make sense, such as cable service you don’t watch.

Debt

Student loans, large credit card bills, or low credit scores can cause some real problems in a marriage. Better to discuss these debts before you get married. With interest rates so incredibly low today you should look to refinance all your debt at lower rates or pay debts off with excess cash.

Contact the three credit bureaus to obtain your latest credit scores. If they are lower than you think they should be, obtain a copy of your scores and see if there are any mistakes.

With fraud these days, it’s wise to check your reports to determine if identify theft could be erroneously causing you to have a lower score, which hurts you when buying a home or automobile.

See if there are ways to improve your score, such as signing up to pay bills automatically, to avoid paying late and racking up fees and marks against your score.

Prenuptial Agreements

If you are planning on getting married and your significant other has outside investments, owns their house, has investment accounts, or has inherited wealth through a trust fund, it could make sense to protect these assets legally before you get married.

Divorce is incredibly expensive and in some cases individuals with less earning power never recover a hundred percent from a divorce depending on when they separate. Most couples getting remarried with significant assets will do a prenuptial agreement to protect their assets for their children from a previous marriage just in case things do not work out. Once burned twice shy is an old adage that estate planning attorneys like to use.

Sadly quite a few first marriages will not make it and even fewer second and third marriages survive. Make sure you hire an attorney who specializes in prenuptial agreements. You want someone who does these agreements regularly. They need to be airtight and done correctly to stand up.

While you’d probably rather be planning your honeymoon than having difficult conversations about money, being transparent and honest about how you plan to handle your finances will help you and your future spouse create a strong foundation for your marriage. There is no reason to be surprised by your financial circumstances before you tie the knot. Plan now and you will be happy that you did on that front too.

0407 Northstar 24august2011 Fred Taylor co-founded Northstar Investment Advisors, LLC in 1995. The firm specializes in managing personalized investment portfolios for individuals, families, and retirees with a focus on income generation. He is a member of the Colorado Forum and also served as an economic advisor to Colorado Governor Bill Ritter from 2008 to 2010.

How to recover after holiday spending

The holiday season is filled with family, joy and excitement, but it can also include a lot of bills and extra spending. As many consumers have found themselves in unique financial situations as a result of the pandemic, this year in particular could be tricky to navigate.

Despite the economic shutdown earlier this year, holiday spending is trending upwards. The National Retail Federation expects that holiday season spending will increase between 2.6% and 5.2% over 2019 as consumer confidence has rebounded and the economy is on the mend.

Additionally, credit card debt this year fell to 9%, the lowest dollar amount since 2017 as spending decreased during the pandemic, according to Experian. But as credit card debt decreased, the Congressional Research Service found mortgage debt increased slightly in Q3 2020 and other household debt held tight.

So, it’s important that before you buy gifts, you assess your overall financial situation and make a budget. Consider selecting a payment strategy that works for you, like cash versus card, and do your research on the best time to buy. Below are some tips that will help you to feel financially fit going into the new year.

Look back and review

Before you plan for the future, you first need to assess the holiday damage. Figure out how much you spent and how much you owe on credit cards and then put together a plan to pay off your debt. Since there’s usually a substantial rise in your spending habits over the holidays, you will need to adjust to move forward and perhaps cut back the first few months of the year.

After the presents have been opened and the season comes to an end, address the credit card with the highest balance first. Your credit score is critical to your financial future. Staying on top of payments and ensuring your credit report reflects fiscal responsibility all year long is of utmost importance.

Do not let the holidays distract you from making payments on-time and in-full whenever possible.

Tighten your budget

The new year is always a good time to sit down and re-evaluate your budget and establish goals for the new year. Try to learn from your shopping experience this year.

Big holiday purchases can overhaul your normal budget so see what changes you can make over the next few months to set you up for success. Are there a few everyday purchases you could go without?

Try cutting out weekly coffee trips and opt for coffee at home while you build your savings back up. Cut costs by determining which expenses are necessary and which expenses are luxuries.

To recover quickly from the holiday, you will likely need to stop spending as much on eating out at restaurants, entertainment or the clothes and electronics you don’t need right now.

Plan for next year

Because holiday decor and other seasonal items will likely be on sale after the season ends, consider stocking up now while prices are low.

For next year, consider spreading your holiday shopping out throughout the entire year so that the financial blow will have far less of an impact at the end of the year.

If you buy all the gifts on your list at once, it can really add up quickly and impact your finances, but if you buy certain items ahead of time, it can lessen the blow to your bank account.

If your savings account felt strained this buying season, consider setting a budget for next year and tuck away a monthly amount to accumulate for next year.

The holidays should be a fun time with loved ones—either virtual or in-person—and is still a time to let your loved ones know you appreciate them, but don’t let the shopping force you into the red. Plan ahead, save early and budget effectively.

Steven Thornburg is the territory director at UMB Bank.

4 ways to financially prepare for the unexpected

If coronvavirus and Colorado’s recent wildfire season have taught us anything: it’s to expect the unexpected. It’s time to focus on a plan of action for when disaster strikes. Preparation is a way of life here in Colorado, and no detail is too small when planning for catastrophe–whether that’s a blizzard, flood, or a major wildfire.

What many tend to overlook are the financial preparation steps to take, which are among the most important. Checking these four tasks off your preparedness list will help ensure that you and your loved ones are better equipped for a post-disaster environment. After all, as yet another wildfire season tells us, it’s not if – but when.

  1. Keep Insurance Up to Date

Just recently, 2020 became Colorado’s worse fire season on record. Two of the fires that burned this season – the Cameron Peak Fire and the Pine Gulch Fire – are the largest wildfires recorded in the state of Colorado. In addition, the East Troublesome fire moved so rabidly that residents had little time to evacuate.

Without insurance, damage mitigation will either put a serious hole in your savings account – or put you in a financial hole. According to FEMA, consult with your insurance professional to be sure your policy is right for you and to ensure your home and family are protected. Most insurance companies also offer specialized options like flood and earthquake policies.

  1. Keep Cash on Hand

Even as society becomes increasingly cashless, when the power and phone lines go out, charge and credit card terminals likely won’t work. FEMA also recommends having cash on hand as part of your preparedness kit to purchase basic needs like gas, water and food. The amount you have on hand should reflect and be sufficient to accommodate the needs of your family based on size. If possible, get rolls of quarters or change and try to keep bills below $50. You’ll want the lower denomination currency to ensure you don’t overpay if a merchant can’t make change.

  1. Maintain an Emergency Fund

One of the most important ways to be prepared is to set aside an emergency nest egg to remain untouched until absolutely necessary. When disaster strikes it often ends up costing a lot out of pocket, even with insurance coverage. Experts recommend having three months’ worth of living expenses set aside. Setting up an emergency fund can seem daunting, and it can be hard to know where to start. However, resources like Bank of America’s free Better Money Habits platform can help make the beginning of this process approachable and simple.

  1. Back Up Important Documents

There are plenty of ways to keep important documents intact and accessible. Ready.gov suggests storing important documents in a safety deposit box, on an external drive or on the cloud to make it easy to access during a disaster. If you’re active on a laptop or desktop, you can schedule a recurring back up of your documents or use a hard drive or a flash drive to store documents. Hard copy documents and physical drives should be kept in a fire and waterproof safe, which can be found at affordable prices. FEMA and Ready.Gov offer an Emergency Financial First Aid Kit where you can compile all important and necessary info in one place.

It’s not pleasant to ruminate on disaster, but having these conversations now are necessary for post-disaster success and stress reduction. It’s often easier to stockpile and to check off the small tasks for disaster prep, such as buying and storing food, water, and go-bags. While these are essential, there is more to safeguarding you and your loved ones. Making sure your family is properly insured, funded, and protected may be the best way to prepare for the unexpected.

Barb Mahnen Barb Mahnen is the Bank of America Better Money Habits Expert and Denver Market Human Resources Leader.

Hitting the mark: Making and meeting financial savings goals at every stage of your legal career

With the end of the year quickly approaching, New Year’s resolutions have begun percolating in the minds of many. One of the most popular resolutions, saving money, easily rivals those new workout routines everyone swears they’ll stick to. But what do you do when it’s October and your savings account has little to show for your January promise?

You don’t panic, that’s what–mainly because there’s still time to create and follow through with an end-of-the-year savings plan. Today, we’re going to talk a little bit about some of these fourth quarter savings strategies that are great for attorneys in particular.

Assessing Your Financial Health

Your savings goals will naturally differ depending on where you are in your career. However, there are a few general things to keep in mind when reviewing you or your firm’s financial health. With 75% of attorneys working for a private practice–and half of that number working as solo practitioners–most business decisions will be in their hands. However, anyone who’s gone to law school can tell you that they didn’t come out on the other side armed with the business acumen needed to keep their practice afloat, let alone preserve their own financial health.

So, what are some different savings strategies for attorneys at varying points in their career?

  • Novice – The biggest obstacle young attorneys will face is getting over the student loan hump. It’s not uncommon for young attorneys to get their feet wet as public defenders, a role which generally qualifies them for public service loan forgiveness (PSLF), an income-sensitive repayment plan that helps reduce federal student loans for people working in public service.

But let’s say you make a career move that puts you in a higher income bracket. In that case, you most likely won’t qualify for PSLF anymore. What you can do instead is take stock of your finances, including your income, monthly expenses, savings, debt, and investments. You might discover that some of your money is funneling into certain areas more than others, which is the point when you’ll need to restructure your savings plan.

If you don’t have emergency funds in place, start setting aside money for those now. These savings should equal six months’ worth of your living expenses (not income). This number may vary depending on your income stability, though.

Moreover, there’s no better time than right now to start saving for retirement while you’re still young. If you set aside 10% of every paycheck from the beginning of your career and then work for 35 to 40 years, you can actually end up retiring on 80% of your working income, which includes social security.

  • Mid-Range – Even if you missed the early savings boat back in your late twenties and early thirties, there’s still time–and hope–to get a good savings plan going. If you’ve got more than a few gray hairs, one of your best bets will be a retirement plan. If you work for a firm, you could go the 401(k) route which sets aside pre-tax dollars for retirement. Not only is it essentially free money, but it’s tax-deferred, so it’ll accumulate nicely over time.

However, some solo practitioners–especially if they’re below a certain income threshold–may prefer a Roth IRA. These retirement plans take post-tax dollars, so you don’t pay any taxes on them after your initial contribution. However, there are a couple of caveats to remember: contribution limits are relatively low for Roth IRAs, and income phaseouts mean that you may not be able to contribute to a Roth IRA at all, and contributions to a traditional IRA may not be tax deductible. Attorneys with high incomes may have no choice but to go with a 401(k) plan, or a SEP IRA (for solo practitioners).

  • Late – So you’re nearing the end of your career without a sizable retirement fund in tow. What’s more, you have your children and grandchildren’s financial futures in the back of your mind. Now what? Experienced attorneys can opt for portfolio-based life insurance, which provides ‘Roth-like’ tax treatment when properly structured. Those with portfolio-based life insurance will see decent annual returns thanks to part of your premium going into your cash-value account somewhat similar to tax-free investments. Depending on the design, growth rates can range from standard to pretty aggressive.

If that’s not your cup of tea, then consider annuities strategies. There are a few attractive options here, depending on your circumstances.

First, you may be able to merge a variable annuity with a Roth IRA, meaning you can purchase an annuity within your existing Roth IRA. If you choose one with living benefits, then you’ll have guaranteed lifetime income. Since your withdrawals are coming from the Roth IRA, they’ll be tax-exempt. If the variable annuity has death benefits, then anything in the owner’s account will be passed to the account’s beneficiaries upon their death.

Another option that will protect your family’s future generations is a private family pension. This is similar to the previous option in that a variable annuity with living benefits will essentially create a tax-deferred inheritance for your children and grandchildren. All you have to do is name your child as the beneficiary of the annuity and one of your grandchildren as the annuitant.

However, the annuity payouts will be calculated according to your grandchild’s life expectancy, meaning that the annuity will grow not only throughout you and your child’s lifetime but your grandchild’s as well.

Of course, the best plan of action when considering how to go about a savings plan is to meet with a financial planner. Not only will they have the experience and financial know-how to construct a detailed, personalized savings plan for you, but they’ll be able to successfully field any questions you might have regarding your financial health or current savings strategies.

Mark Candler and Dave Owens of Maia Wealth are go-to wealth advisers for lawyers and law firms in Colorado. Specializing in debt reduction, investment management, retirement efficiency, and legacy planning, Mark Candler and Dave Owens are trusted professionals for attorney-focused wealth management strategies in the Denver metro area.

What to do when unemployment benefits expire

When the CARES Act was passed on March 27, 2020, one of its key elements was providing an additional $600 per week in federal aid to those receiving unemployment benefits from their state office.

This money has provided a much-needed lifeline to the tens of millions of Americans who have found themselves unemployed due to COVID-19. 

However, this federal aid expired on July 31, 2020. While new additional aid may come as a result of the executive memorandum signed by the President earlier this month, it won’t be available indefinitely, which begs the question: What do you do when your unemployment benefits are drastically reduced or eliminated?

When unemployment benefits are cut

It can be overwhelming to find yourself in this situation, but there are some financial steps you can take to stay afloat until you find steady employment again.

Cut expenses

For many people, cutting expenses has been a theme in 2020, so you may already be very familiar with where your money is going. But, it can still be useful to take another hard look at where you’re spending and consider ways to reduce costs.

For example, if you’ve turned to food delivery or grocery delivery during the pandemic, you may have noticed an uptick in items you wouldn’t normally purchase.

Impulse buying snacks can be just as easy with a click as it is with tossing items into a cart. Aim to cook more at home or stick to your must-have grocery needs.

And, if you have multiple subscriptions to streaming services such as Netflix and Hulu, pick your favorite and cancel the others. Each of these expense reductions may seem small at first but they add up, especially over time.

Contact your creditors

Times are tough, and those you owe bills to may be more understanding than you realize. If you don’t think you’ll be able to make your minimum credit card payment, contact that creditor, explain your situation, and find out if you can get a lower interest rate or minimum payment, or payment deferral.

Similarly, if you don’t think you’ll be able to pay your mortgage or your rent, get in touch with your landlord or mortgage provider and ask for leniency. You may be surprised how willing people will be to work with you.

Look into part-time or temporary jobs

As you continue to seek long-term work, you could pick up some side jobs in the meantime. Grocery stores and delivery companies such as UPS and FedEx are actively hiring in many regions.

You could also work as an independent contractor for companies such as Uber, Lyft, InstaCart, GrubHub, Postmates, Wag or Rover.

These side jobs don’t necessarily have to become your permanent source of income but could help bridge the gap while you find your next full-time position. Make sure you check with your tax professional on the paperwork and tax needs for getting started with work like this. 

Seek support from other government agencies and nonprofits

Even when federal and state unemployment benefits expire, there are other government programs that can help you stay on your feet during turbulent times. Some of these include:

  • Home Affordable Modification Program: If you’re a qualified unemployed homeowner, this program can help reduce mortgage payments.
  • Temporary Assistance for Needy Families: Each state has a Temporary Assistance for Needy Families program, which can help with food stamps, financial support, and job training and searching.   
  • Supplemental Nutrition Assistance Program: This federal food stamp program can help you purchase food and other qualified items.
  • Medicaid: If you’re unemployed or under-employed, Medicaid can help provide medical benefits and services.
  • WIC: If you’re an unemployed or low-income woman, the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) can help provide food and nutritional support if you’re pregnant, breastfeeding, postpartum or have children under age five. 

Nonprofits can be another resource to turn to for help keeping your kitchen stocked, preparing for job interviews, babysitting assistance and other needs. If you’re not sure where to start, the 2-1-1 Call Center can help you identify resources in your area.

At UMB, we’re always here to provide support, guidance and help you navigate difficult situations, so please know that you can reach out to us anytime to discuss financial education or relief measures.

Together, we can work through these unprecedented times and enjoy the brighter days that are ahead.

Nicole Watson is Senior Vice President and Territory Director of Consumer Services at UMB Bank. 

How to plan for your financial future

The COVID-19 pandemic has made it difficult to plan for the future right now. From when your children will go back to school to when you will return to the office, it feels like there isn’t much we can control. This is particularly true when it comes to your finances. Whether you are thinking about job security, your retirement or your financial portfolio, uncertainty abounds. However, there is no better time than right now to think about your financial future and evaluate where you are today and where you want to be in the years to come.

Simply counting on investment performance goals is not a true financial plan. Financial planning looks different for everyone, and it should. Everyone has individual priorities, philosophies and values. All of which should be reflected in a unique financial plan that fits your lifestyle as well as your short- and long-term goals. As you look at putting a financial plan in place or updating your current plan, here are some topics to consider and questions to ask.

Start with a financial review

If you haven’t already, conducting a personal financial review is the first step to creating your plan. A solid financial review with an advisor will help you recalibrate where you are today and where you want to go in the future. You will review your current assets, debts and income to determine the variables that can influence your plan’s success. Once you have created a foundational financial plan, you will start to discuss your concerns, passions, plans and issues to help shape and define your financial journey. Some of these discussions will include your family, career, lifestyle and retirement goals.

Put family first

Thinking about your family–or the family you’d like to have in the future–is an important part of your financial plan. Whether you are planning to have children or thinking about how you will pay for their education, there are many ways to start preparing today. This can include starting a health savings account (HSA) for future medical expenses, looking into financial options for adoption, flexible savings account (FSA) considerations for childcare, and starting a 529 or other higher-education savings plan.

There are many conversations and questions that come into play as you plan for your family’s financial future, including:

  • Do you want to pay for all of your child’s college education or a certain percentage?
  • Do you want your children to attend public or private school?
  • Do you have a will or trust set up for your child/children?
  • What does your estate plan look like and who are your beneficiaries?

Since there are several aspects of your financial plan that involve your family, it’s important to ask these questions today and continue to consider them as your plan evolves.

Career and lifestyle decisions

What does your career trajectory look like? Do you plan to retire at your current company, or have you always wanted to explore a second career that involves your passions? Do you want to take a family vacation to Hawaii or a two-week adventure to Europe? If so, how are you planning for these wants now so you can enjoy them in the future?

Conversations about your wants and desires regarding your career, travel and lifestyle should be factored into your financial plan. Philanthropy should also be a part of this conversation. Do you want to contribute your time and money to nonprofits that matter to you? Have you thought about how to do this on a weekly, monthly or annual basis? Many people want to give back to organizations that are adding good to their community and the world. This conversation will also lead into your estate planning desires and the legacy you want to leave after you are gone.

Retirement considerations

Do you want to retire at 55 or do you love to work and plan to do so into your 70s? No matter the age you want to retire, it’s important to know what you need to get there. Planning for your retirement should be an active exercise, not a passive conversation, that looks at your 401(k) and other investment accounts every year. You should be discussing what your pre-retirement and post-retirement plans look like for you and your family. Some questions to consider are: Will you and your spouse retire at the same time? What will you do in retirement? Where will you live and what does that look like? By thinking and talking about your long-term dreams, you can start planning and budgeting today.

The first step

I know it may be hard to think about some of these questions and long-term plans as we try to get through the days and weeks ahead, but I encourage you to think about your financial future. As you think about the questions posed in this article, consider partnering with a financial advisor to help you reach your short- and long-term objectives.

 

Newton NikkiNikki Newton is the president of UMB Private Wealth Management and can be reached at [email protected].