Financial Planning Then and Now [Infographic]

You might think there’s a world of difference when it comes to financial planning in the United States and the rest of the world. But in all honesty, almost every financial planning scheme and strategy is almost the same worldwide.

Looking at this infographic comparing the US financial planning behavior in the 80s against 2012. It’s quite surprising in a very positive way.

Since the 2008 financial crisis, I guess every country in the world, especially the United States, needed to adjust effectively else they might severely suffer the consequences.

financial-advisor-infographic

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The Five Ages of Financial Planning

I have created how to save money relating to certain ages like 20s and 40s. But for a summarized version of it, here you can see the five ages of financial planning:

 

Age 18: Start a regular Roth IRA savings plan

If a teenager can start by putting aside $100 a month in a Roth IRA account – a flexible savings vehicle from which they can then withdraw funds if they need to in order to cover a big cost, from a house down payment to an unexpected medical expense – and allow it to accumulate tax free, that money is going to be worth far, far more than the same $100 contributed later in life, thanks to the length of time it can sit and generate tax-free returns. Even the smallest sum, on a regular basis gets someone into the savings habit by showing them how rapidly that adds up into larger amounts.

 

Age 28: Pay down debt by rounding up your loan payments

Odds are that by this time I’ve got some debt – student loans, a car loan – and I’ll be en route to accumulating more, in the form of a mortgage. This is a good time to instil great habits with respect to debt payments.

 

Age 38: Open a 529 Plan

By this age, the odds is that I will already have kids. I will then be dreading college costs. I’ll be wanting to open a 529 plan right now. Like many other tax-advantaged vehicles, they allow assets to accumulate tax-free, and mean that I won’t have to put my retirement or my finances in jeopardy by taking out college tuition loans for Junior.

 

Age 48: Create a Health Savings Account

It’s inevitable: as I will age, my healthcare costs will rise. “The estimates are that those who retire at 65 and live to be 85 will face $300,000 in medical expenses,” Kelly says. “This is a tool that gives you triple tax savings, and addresses that cost.” Whatever I can put into a health savings account (which I can set up if I have a high-deductible health insurance plan) is tax deductible up front, accumulates tax free, and isn’t taxable when I spend it on allowable expenses – which can range from hospital bills to contact lens solution and gas to drive to and from my doctor’s appointments.

 

Age 58: Turn your hobby into a part-time job or retirement career

This is the time to think about ways to turn a hobby of mine or a passion into a part-time career. The more I prepare by finding out what options are available to me in my community and networking now, the better prepared I’ll be when the day arrives – especially since a fairly large number of 60-somethings hope or expect to work full or part time in retirement.

 

None of these ideas is terribly complicated. It’s a guarantee that if I am able to follow these simple steps – even the most simple, opening a Roth IRA, setting aside a tiny amount each month and watching it increase – I’ll feel that my finances will be more under control; that managing them will be less impossible.

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How to Save If You Are In Your 40s

After 20s will be my 40s. Well, you can never say that most of the tips in the 20s tips can be used again the age bracket of 40 but you’ll never know. Well, it’s just that, it will be not always that you will be able to use the same formula in a certain problem right? Although yes, you can use them but it cannot guarantee that it will succeed. It is just the same in the 40s.

If I am in my 40s, I could be considered either a late baby boomer or a member of Generation X. Either way I will be at a time in my life when I will be putting youth aside and should be doing some financial planning for my future and my family’s future.

 

Most problem faced by people in their 40s is the college tuition for their children. College, if you would know is a very expensive one. Aside from college, there will also be that retirement plan that you have always been planning. But don’t fret, financial experts can help you sort out where your savings should be going in your 40s. You can ask them for more advices and tips as they know much more. However, for basic tips, I can help you with that.

 

These financial planning tips can help people in their 40s to find balance in their hectic lives of spending and debt:

 

  1. Build up your cash reserves

Roy Laux, president of Synergy Financial Services in McKeesport, Pennsylvania, says the first step in any financial planning is to establish an emergency fund.

“You should have three to six months of your normal income in an account that’s safe and liquid,” Laux says. “You should also have in that account savings for planned expenses. For instance, if you know you need to replace your furnace in a few years, you should be setting aside money for that in your savings account.”

 

  1. Reduce your debt

If I do have a credit card debt, student loan debt or medical bills, my next priority should be to reduce and eventually eliminate that debt so that my income can be channelled into saving and investing for the future.

“If you have credit card debt, you need to work on paying that down as quickly as you can,” Corey says. “If you have student loan debt, then you should first look to see if it’s tax-deductible based on your tax bracket. If not, then you should pay that off as soon as possible, too.”

 

  1. Make out employee benefits

“In your 40s, you should at least be saving as much in your 401(k) as your employer matches,” Laux says. “Even if you weren’t making any profit on that investment, your money doubles just because of the employer match.”

 

  1. Make your own retirement plans

In addition to saving for retirement at work, Merrill Lynch’s Corey recommends making the maximum allowable contributions to a traditional individual retirement account or a Roth IRA, depending on your income.

 

  1. Save for college tuition

I begin a 529 college savings plan to reduce the amount me or a kids may have to borrow to attend college. Many state universities also offer a prepaid tuition plan that allows you to lock in tuition at current rates.

 

  1. Insure your family

“It’s important for people in their 40s to do an insurance-needs analysis,” Corey says. “Often, people in this age group need a lot of life insurance because they have young kids and day care costs that could be higher if one spouse passed away. It’s hard for a lot of people to have saved enough to take care of their family without life insurance if someone passes away.”

 

And these are how you should be able to plan the way you do things with your money when you are in your 40s. These are all just easy so I’m sure by the time you will turn 40, you will be able to follow these simple tips.

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Investing In Home Improvement, Is It Smart?

Your existing home structure is an investment in itself. Whether it is the inside or the outside, most likely you have designed it in stylish and functional ways. The house, together with the garden, may already be in a state that is of utmost beauty and purpose.

Hence, is it smart to still invest in home improvement?

Well, the answer to that would be yes.

Improvement by definition is a change for the better. And so, even if you are with a residence that is of a good condition, you can still work on it and make it better as can be. Many of you may not know this but when you continually upgrade your home, it can actually lead to an increasing value. That will be come to be significant in the future when, for example, you wish to put your house up on the market.

Anyhow, it has been established that home improvement is important. Even for your own intent alone, doing this can make the place more secure and more comfortable for you and your family. Making it into a space of personality and visual appeal will make you want to stay a lot in there too.

Supposing you are to embark on this project, there are loads of elements you have to take into account. You can check and see what areas needs any repairing and fix that. Also, you can determine other aspects where you want to add anything from ornaments, furniture and all that. Actually, the decision is all yours.

One would be to examine your groundwork. Is it still in a state of strength and durability? If not, then you will have to alter and install new floors. This is also the same when talking of the garage. Induct high quality garage flooring too. The floor is basically the house area. You walk and stand on it, so you will have to make it smooth, clean and safe.

You can give a fresh and updated look to any room with a new coat of wall paint. With just this, the overall mood inside can be made to be anything: happy, bright, energetic, mellow, calm and so on.

If you are to modify your furniture pieces, you can paint them a new colour too, instead of buying new ones. Or you can sell them first before you purchase a new set. Their arrangement and positioning can be what you can control too. Even if you change where the couch is placed, that in itself can bring a newness to the interiors.

On top of those mentioned, ornaments and decorations help personalise the home. If you have a bare side of the wall, you can take advantage of that and utilise it to express yourself. Give the room some character with artworks and all other embellishments.

For doors and windows, draperies and blinds, among others, can make them interesting and pretty than their plain and boring appearances. Buying them will not only benefit you aesthetic wise but also safety and privacy wise.

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How to Save If You Are In Your 20s

Well, I am still in my 20s. I wouldn’t say what specifically but you do get it. As I am still getting my way in in life, I am still a newbie. I still am just starting. So what should I do to be able to save as much money for the future? Well, here are some of the tips that I will be sharing to you for you to be able to save even if you are still in your 20s.

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  1. Live Below Your Means

The key is to live on less than you earn. Leave yourself some wiggle room so you don’t spend up to or above your limit. On my next pay check, I do try to save more and spend less. I have found an experienced financial planner who can help me visualize and plan for my long-term retirement goals. Also, I do try to save in between 3% to 10% of my monthly salary to invest in that pursuit.

 

  1. Fatten Up Your Piggy Bank

When younger workers are first starting out and trying to establish a career, they’re often tied down by student loans or major purchases such as a car, their first home or – more often than not – lingering credit card debt. The trick is to incorporate savings into your budget before you become accustomed to spending it every month. I learned this the way. I thought that by spending, I am investing but it is actually not.

 

  1. “D” Is For Discipline, Not Debt

The key is to get young clients to clear out as much debt as possible as fast as possible so more of their monthly income can be put to use in long-term investments that will pay huge dividends 30 or 40 years down the road.

 

  1. Emergency Funds Are For Emergencies Only

As a general rule of thumb, an emergency fund should be about three times your monthly expenses if you’re single and six times your monthly expenses if you are married or have children. I should stash away whatever rainy day funds I can in the best possible interest rate accounts I can find and leave it alone. This is the parachute I may or may not need and will prevent me from taking on more debt and interrupting my established retirement savings plan when things go awry.

 

  1. Continually Analyse All Your Spending Habits and Adjust as Necessary

On average, for example, I spend $10 a day on lunch. That’s $50 a week and $2,600 a year. If I earn $30,000 a year, I could potentially save up to 9% of my annual salary by brown-bagging my lunch. I should also apply the same scrutiny to coffee drinks, cocktails after work, etc. By reigning in these non-essential expenses, I will have more money to throw into mutual funds, IRAs and other income-generating investments that multiply substantially over the course of three or four decades.

 

These are the ways that I get to save money even when I am in my 20s. These are just simple actions and by doing these just simple action, you can really save a lot. Try it!

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How To Know How To Save For Your Future

I don’t always buy much. I always save my money for the future. Yes, “for the future”. What could this term mean? I don’t really know much but personally I think that this would be time when I will be retired with my children or maybe grandchildren, I wouldn’t have to work anymore but I would still be financially able because I have all of the money that I have saved. I know, what a dream but why not? Isn’t it all our dream to be free from work but is still financially able? I do. And because I do save a lot, I was able to develop many techniques into doing it.

Here are the basic techniques that I have learned and has put into action:

 

Get healthy

I always think that I already am healthy but this is not the case for I am always sick. With just a little bit of stress from work, I can already get sick. When someone has a cough or cold, I get easily infected. I always check with my doctor for medicine and other stuff and it was really pricey. All of my savings went with my medicine. As you know medicines can cause a lot. It was really heart-breaking that my saved money were gone in an instant and worse, only for medicine. I learned it the hard way that being healthy is the only reason I can be able to save my money.

 

Rethink auto insurance

Every year, I do re-examine my auto insurance policy for savings opportunities. Sometimes, I consider raising my deductible, which lowers premiums. For older vehicles, I suggest that you evaluate whether you really need collision coverage, which covers damage to your car when your car hits or is hit by another vehicle or object. I do make it a habit to usually compare auto insurance quotes annually. I searched for it on the internet.

 

Improve your credit score

Of all the painless ways to save money that I have experienced, improving my credit score was arguably the most important. A good credit score can save me a small fortune from home loans and car loans to credit cards and auto insurance. Over a lifetime, these savings can easily reach tens of thousands of dollars.

 

Invest on the cheap

For mutual fund investors, stick with funds that have low expense ratios. One rule of thumb is to keep the weighted average expense ratio for all mutual funds under 50 basis points (0.50 percent). Compared with funds that charge well over 1 percent in fees annually, the savings over a lifetime of investing can be substantial.

 

Think triple play

One of the biggest monthly expenses for most of the people is the cost of Internet service, cable and phone. Major providers today offer discounts when you bundle all three of these services together so you better watch out if they are promoting one. It is called a triple play, you will not only save money but you also get the convenience of a single bill each month.

 

I know saving is very hard. It is actually a sacrifice. I do sacrifice a lot just to be able to save a penny. But with these painless ways, I get to save my money sweat free.

 

Aside from these tips of mine, I have also other tips here in my site. Do try and look for more of these and happy saving!

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My Take on Rich Dad Poor Dad

I am entirely aware of RDPD’s success. The author, Robert Kiyosaki (hereafter I will refer as RK) time and again has been quoted by my Facebook friends. I don’t know but when I read the book something wasn’t just right. So I researched and read to confirm my suspicions. Here are some things I found out and the apparent facts surrounding them:

Rich Dad

Nowhere in the book was the name Rich Dad mentioned. I read somewhere that the Rich Dad was a neighbor, Robert developed friendship with (father-son relationship?) when he was young. Apparently, the neighbor was a self-made millionaire. But one could not be so sure. During the first publishing of the book (1992), RK mentioned a list of people who were important in his life including one Buckminster Fuller.

Poor Dad

For RK, his Poor Dad is in the person of Ralph Kiyosaki, his real father. This dad if indeed he is poor is the understatement of all time. Or could it be that poor Dad means another thing (not the term that connotes to finances)? Because in fact, Ralph Kiyosaki was upper middle class. He pursued a degree in education and even headed the Department of Education in Hawaii.

Fiction vs non-fiction

This came as a shock (at least for me). In my readings on RK, I found that in 2001, he has ‘admitted’ to fictionalizing his book, Rich Kid Poor Kid with these words in the copyright page, “Although based on a true story, certain events in this book have been fictionalized for educational content and impact”. Unacceptable. And people continue to buy, read and believe his books.

 20/20

ABC 20/20 did a program about RK who has  written 18 books. The program gave 3 people $1000 each to start a business and show their profit after 20 days. RK  coached them during the 20 days. The result: One lost all his money. Another made zero. The third made $243. An article was written about this and it did mention that all RK did was whine and gripe about the 3, the time frame and many more. So much for writing all those success books (he made $26 million!). Apparently, it helped him but not his readers. Not even the 3 participants.

The bottom line is, I may be missing his point. Indeed, he has the charm and the convincing power of a salesman. He sold 26 million books. His publishers had a field day but not him. A salesman but not a businessman. He is this remarkable salesperson who gave real estate investment advice to people who would probably never invest in real estate (Nick Gifford). Yes, that’s who he is. Enough said.

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