Category Archives: Financial Planning

Budget: 50/30/20 Rule

Posted on by

What is the 50/30/20 rule

The 50/30/20 rule is a popular budgeting method that splits your monthly income between three main categories. Here’s how it breaks down:

Monthly after-tax income. This figure is your income after taxes have been deducted and the cost of payroll deductions for health insurance, 401(k) contributions or other automatic savings have been added back in.

50% of your income: needs. Necessities are the expenses you can’t avoid. This portion of your budget should cover costs such as:

  • Housing.
  • Food.
  • Transportation.
  • Basic utilities.
  • Insurance.
  • Minimum loan payments. Anything beyond the minimum goes into the savings and debt repayment bucket.
  • Child care or other expenses that need to be covered so you can work.

30% of your income: wants Distinguishing between needs and wants isn’t always easy and can vary from one budget to another. Generally, though, wants are the extras that aren’t essential to living and working. They’re often for fun and may include:

  • Monthly subscriptions.
  • Travel.
  • Entertainment.
  • Meals out.

20% of your income: savings and debt. Savings is the amount you sock away to prepare for the future. Devote this chunk of your income to paying down existing debt and creating a comfortable financial cushion to avoid taking on future debt.

How, exactly, to use this part of your budget depends on your situation, but it will likely include:

  • Starting and growing an emergency fund.
  • Saving for retirement through a 401(k) and perhaps an individual retirement account.
  • Paying off debt, beginning with the toxic, high-interest type.

The 50/30/20 budget rule divides take-home income like so: 50% for necessities, 30% for wants and 20% for savings and debt repayment.

Your Health is an Investment

Posted on by

Your health is an investment, not an expense.

The health of Americans is on a bad trajectory, it is declining. Things such as: obesity, diabetes, heart disease, and like health epidemics are growing at a feverish pace.

Healthcare — both preventive and reactive — is becoming harder to obtain. And, unfortunately, the industry focuses more on reactive approaches to disease and pushing pharmaceuticals than preventative approaches to treating diseases.

It’s important to know think proactively about all of the things you spend money on. Some things are critical to living such as food, a roof over your head, and clothes to wear.

However, as a whole, many people tend to spend money on some things that are unnecessary like a new luxury vehicle or a glamorous vacation, and then think that they don’t have enough money to invest in our health.

The biggest and most obvious reason that you should invest in your health is that you only get one body, mind and life! If you fail to take care of your body and mind, sooner or later you will suffer the consequences and they will fail you at a great cost at a later date and time. Thus, you must regularly invest in your health. The several types of investments to make regularly are:

  • Sleep – 7-8 hrs/night
  • Food – 50-70% good fats, 20-30% healthy proteins and less than 20% carbohydrates from organic, non-gmo, non-processed and non-added sugar sources
  • Hydration – Half your body weight in ounces per day, no more than 3 quarts
  • Exercise – 30 minutes per day of some type of exercise/movement
  • Stress – Daily stress-reducing and relaxation techniques
  • Gratitude– Being grateful for your daily blessings and the joy in your life
  • Spiritual/Mindfulness – Spending time nurturing your faith daily

If you’re not, then you’re spending time regularly neglecting your health.

  • You’re either getting quality sleep or you’re not.
  • You’re either eating foods that will nourish and fuel your body or you’re not.
  • You’re either properly hydrating on a regular basis, or not.
  • You’re either exercising in some way daily, or you’re not.
  • You’re either working to reduce stress on a daily basis or you’re not.
  • You’re either focusing on all of the good in your life and working towards your goals, or not.

You should do something daily to invest back in your health. If not, some day you’re going to wish you had made different choices along the way.

Optimal health is not something you can buy; however, it might just be the most valuable investment you can ever make.

Today be thankful and think of how rich you really are. Your family and friends are priceless, your time is gold, and your health is wealth.

References:

  1. https://kellyshockley.com/your-health-is-an-investment-not-an-expense/
  2. https://thetakeawaybypokk.wordpress.com/2017/12/18/your-health-is-an-investment-not-and-expense/

Long Term Investing is about Future Cash Flow

Posted on by

Ultimately, in long term investing, fundamentals and cash flow are paramount for an investor (an investor is a business owner).

Years ago, a hockey game between the Boston Bruins and Edmonton Oilers had been paused for some technical issues with the stadium lights. To kill some time, the announcers started interviewing people including the Edmonton Oilers, Wayne Gretzky, undoubtedly the world’s greatest hockey player at the time. The announcer stated that Gretzky wasn’t the biggest guy in the league, or the strongest, or the fastest or the toughest, yet he was regarded as the greatest hockey player in the world.  So, how then did Gretzky explain his own genius?  Gretzky simply replied:

“I don’t go where the puck is; I go where the puck is going to be!”

In a simple one liner, Gretzky confirmed that his success did not come from chasing the puck. Instead it came from staying one step ahead and by anticipating  where the puck would  likely go next.

Thus, it is important to look at the future potential of a stock or investment instead of focusing solely on past performance. Long term investing is about looking from the perspective of a business owner at a company’s fundamentals and cash flow.

Cash Flow

In finance, cash flow (CF) is the term used to describe the amount of cash (currency) that is generated or consumed in a given time period by a business. It has many uses in both operating a business and in performing financial analysis. In fact, it’s one of the most important metrics in all of finance and accounting.

Every investment is the present value of all future cash flow.

Many investors are lured by short term performance.  They are interested in finding the latest, hottest, top performing stocks and investments driven by the financial entertainment media.  However, investors who buy those top performing investments today may not necessarily enjoy the same returns in the future. In investing, it’s essential you approach buying stocks like a business owner.

Cash flow is not the same as net income (or profit).

While cash flow describes the movement of money into and out of your business, profit is the surplus of money your business has after you’ve subtracted the revenue from your expenses.

The inflow and outflow of cash into and out of a company reflects the health of that company’s operations. That’s why it’s important as an investor (business owner) to be able to understand a company’s fundamentals and cash flow.

Cash flow is more dynamic in concept then profit – as it measures the movement of money – then profit, which simply demonstrates how much money you have left over after your expenses have been deducted. Even a profitable business can fail if a business doesn’t have a healthy cash flow.

Without a healthy cash flow, profit is meaningless.

Many successful companies (like Amazon, Twitter, Uber and Yelp) actually existed a long time without profits, but no company can survive without a healthy cash flow. For small to mid-cap companies, profit is still important, but cash flow is vital.

If you don’t have cash on hand, you can’t pay for your company’s basic needs like rent, employee salaries, electricity or equipment. If you don’t have enough cash on hand to replenish inventory or pay operating expenses, you will become unable to generate new sales. If you can’t afford operating expenses, your company will eventually fail. That’s why cash flow is such an accurate predictor of an investment or company’s success.

Cash Flow From Operating Activities

The operating activities reflects how much cash is generated from a company’s products or services. Positive (and increasing) cash flow from operating activities indicates that the core business activities of the company are thriving.

Cash Flow From Investing Activities

Investing activities include any purchase or sale of an asset, loans made to vendors or received from customers or any payments related to a merger or acquisition is included in this category. In short, changes in equipment, assets, or investments relate to cash from investing.

Cash Flow From Financing Activities

Cash flow from financing activities shows the net flows of cash that are used to fund the company. Financing activities include transactions involving debt, equity, and dividends. Some examples are: issuance of equity (shares), payment of dividends, issuance of debt (e.g. bonds) and repayment of debt.

Free Cash Flow

One of the most important financial number is free cash flow (FCF). It is the cash flow available to all the creditors and investors in a company, including common stockholders, preferred shareholders, and lenders.

You can calculate FCF, if not provided, quickly. FCF = Operating cash flow – capital expenditures (aka. CAPEX). Simply, capital expenditures on the CFS is the line item “Purchase of Property, Plant and Equipment” (PPE). the PPE expenditure is the “maintenance amount” of running a business. Though it says “purchase”, this includes repairing, renewal and/or maintenance of the companies assets.

No company can survive without a healthy cash flow.

Generally, you want to see a steady increase in cash flow from operations. If this number is growing (while debt being in control) at a rate of 10% or more annually.

However, past performance cannot guarantee future results. In other words: don’t assume that an investment is going to continue to perform well in the future simply because it’s done well during a specific time period in the past. 

Two of the key ingredients for success in investing is understanding that cash flow is king and your a business owner when you purchase a company’s stock.

References:

  1. https://ignorethestreet.com/cash-flow-statement-fundamentals/
  2. http://www.momentumcapitalfunding.com/cash-flow-fundamentals-business-owners/
  3. https://corporatefinanceinstitute.com/resources/knowledge/finance/cash-flow/
  4. https://www.powerofpositivity.com/make-you-rich-quotes/

Financial Planning Basics

Posted on by

Investment and financial planning can help you maintain a modest retirement — even amid COVID-19.

The latest Wells Fargo Retirement Study, underscores investment and financial planning’s role in how investors feel about their overall financial health. According to the study, those with specific financial plans indicated they save more for retirement, tap emergency sources less, and feel more in control of their finances and less stressed than those without the “planning mindset.”

“It is amazing the difference it [financial planning] can make when a client sees what the reality is and has a plan to help guide them,” Wells Fargo Financial Advisor Jenny Radke said.

“The earlier you can start planning financially and envisioning the future, the better,”

Yet, people tend to fall into two camps, according to Charles Schwab: non-planners and planners.

  • Non-planners typically save when they can, perhaps putting a small amount into a workplace retirement plan, hoping that everything will work out in the long run.
  • Planners generally know what they’re saving for, how much they need to put away, and how long it will take them to reach their goals.

Only 33% of Americans have a written financial plan, according to Schwab’s 2021 Modern Wealth Survey. Of the rest, almost half said they didn’t have enough money to make a plan worthwhile. Others said it was too complicated, or they didn’t have time to develop a plan.

Planning for anything can seem like a big headache and a lot of effort. It’s natural to wonder: Does financial planning really help?

Research show that it does. Here are five reasons why:

1. A written financial plan increases confidence

Our survey found that 65% of people with a written financial plan say they feel financially stable, while only 40% of those without a plan feel the same level of comfort. Fifty-four percent of planners felt “very confident” they would reach their financial goals, compared with only 18% of non-planners.

Having a written financial plan gives you a measurable goal to work toward. Because you can track your progress, you can reduce doubt or uncertainty about your decisions and make adjustments to help overcome obstacles that could derail you.

2. A financial plan can help jumpstart your savings, even with a small amount of money

The most common reason cited for not having a plan is “I don’t have enough money.” This is a misconception. Planning, even in small steps, doesn’t take large sums of money to start.

In fact, financial planning can have a profound impact on lower-income households by helping people improve their saving and budgeting habits. A written plan helps savers prioritize their goals and, as mentioned earlier, provides a way to gauge success.

3. A financial plan can help you create an investment portfolio

Your financial plan can give you the full lay of the land: You’ll know what your goals are, how much time you have to reach them, and how comfortable you are with risk. Once you have a comprehensive view, you can figure out how to reach each individual goal.

That will involve both saving—setting aside money you’ll need in the short term or for emergencies—as well as investing, which is setting aside money you’ll need in the long term and that, ideally, can grow. And with your financial plan as a roadmap, you’ll be better able to make thoughtful investing decisions—instead of heading out without a sense of direction and just hoping for the best.

4. A financial plan can lead to better habits

Financial planning isn’t just about investing; it’s about what money can do for your confidence, security, and quality of life—such as the protection that life insurance offers or the peace of mind that an emergency fund can provide. Research also shows that planning supports sound money habits as well.

Americans who have a financial plan also have healthy money habits

Source: 2021 Schwab Modern Wealth Survey

There are good investing habits, and there are healthy money habits. A written financial plan can lead to both.

5. Planning can be tailored to every personality type and investment style

Your approach to life can influence every decision you make, including those that involve your finances. By understanding the type of person you are with regard to planning, you can take proper steps toward reaching your financial goals. 

A financial plan is the foundation on which to build, understand and achieve your wealth goals and achieve financial freedom. Having a written plan can increase confidence and result in more constructive financial and investing behavior.

References:

  1. https://stories.wf.com/envisioning-retirement-through-investment-planning
  2. https://www.schwab.com/resource-center/insights/content/does-financial-planning-help

Goal Setting and Accomplishment

Posted on by

“Since “someday” never appears on the calendar, our good intentions don’t turn into action until we create deadlines.” Amy Morin

A staggering 92 percent of Americans that set New Year’s resolution goals never actually accomplish them, according to research by the University of Scranton.

But, when people followed two simple concepts — setting specific and challenging goals — it led to higher accomplishment of goals 90 percent of the time, according to research by Dr Edwin Locke and Dr Gary Latham. Basically, the more specific and challenging the goals you set, the higher your motivation toward hitting them while your easy or vague goals rarely get met.

Here’s an example: If your goal between now and the end of the year is to, say, lose 20 pounds, that  may be challenging, but it’s not specific enough.

It’s essential to eliminate vagueness and make it more achievable by stating it in a more detailed manner: During the month of August, I will lose five pounds by cutting off refined sugar, breads, and all fast food. I will also walk briskly for twenty minutes every day.

On the flip side, goals that are too difficult to accomplish don’t get met either. While it’s important to challenge yourself, nobody completes a goal when he/she is overwhelmed by the magnitude and difficulty in accomplishing the goal.

If you find yourself with such a scenario, break down your BHAG (Big Hairy Audacious Goal) into smaller bites you can actually chew. Use the same process of defining specific and challenging marks to hit when mapping out the smaller goals that will lead you to your final destination.

Additionally, those who succeed at accomplishing their BHAG, they tend to want it badly. So, it’s essential to determine what is your level of commitment? Are you totally committed to reaching your goal even when obstacles occur along the way? Are you committed to “do whatever it takes” to reach your destination. And, do you have the desire or passion to pursue the goal to reach it.

According to Locke and Latham’s research, there are five goal setting principles that can improve dramatically your chances of accomplishing your goals:

  1. Setting Clear Goals. Write your goal down and be as detailed as possible. Use SMART, and consider putting your goal into the form of a personal mission statement  for added clarity. Think about how you’ll measure your success toward this goal.
  2. Setting Challenging Goals. Look at your goal. Is it challenging enough to spark your interest Also, identify ways that you can reward yourself when you make progress. Incremental rewards for reaching specific milestones will motivate you to work through challenging tasks.
  3. Staying Committed. Stay committed by using visualization techniques to imagine how your life will look once you’ve achieved your goal.
  4. Gaining Feedback. Schedule time once a week to analyze your progress and accomplishments. Look at what has and hasn’t worked, and make adjustments along the way.
  5. Considering Complexity. Break large, complex goals down into smaller sub-goals. This will stop you feeling overwhelmed, and it will make it easier to stay motivated.

“Even if your goal is something that will take a long time to reach — like saving enough money for retirement — you’re more likely to take action if you have time limits in the present. Create target dates to reach your objectives. Find something you can do this week to begin taking some type of action now.” Amy Morin, Psychotherapist and author of ’13 Things Mentally Strong People Don’t Do’

Additionally, the following strategies can increase your likelihood of accomplishing your goals:

  1. Break goals into manageable chunks. If you only focus on the big picture, it’s easy to put things off until later. But, if you break those goals down into smaller, more manageable objectives such as, you can start tackling and accomplishing the manageable chunks today.
  2. Establish “now” deadlines. Even if your goal is something that will take a long time to reach – like saving enough money for retirement – you’re more likely to take action if you have time limits in the present. Create target dates to reach your objectives. Find something you can do this week to begin taking some type of action now. For example, decide “I will create a budget by Thursday,” or “I will lose two pounds in seven days.”
  3. Turn abstract ideas into concrete action steps. Abstract ideas encourage inactivity. Saying, “I’d like to be healthier,” won’t help you reach those goals. Establish concrete action steps that you can start doing today. For example, decide that you’re going to take a class, read a book, or conduct 30 minutes of research each day. Identify behavioral changes that you can begin working on immediately and you’ll be more likely to turn your abstract ideas into reality.

Identify some of those goals and dreams that you’ve always wanted to work on but just never had the motivation to start. Look for strategies that will help you view those goals in terms of the present and you’ll increase the likelihood that you’ll start taking steps to turn those dreams into a reality, explains Amy Morin

Goal setting is something that many of us recognize as a vital part of achieving success in the areas of health, wealth and emotional well-being. Understandably, goal-setting research confirms the usefulness of SMART goal setting.

To use the results of the research, you must set clear, challenging goals and commit yourself to achieving them. Be sure to get regular feedback on your progress towards achieving your goals. Also, consider the complexity, and break your goals down into smaller chunks, where appropriate.

If you follow these simple rules, your goal setting will be much more successful, and your overall performance and accomplishment rate will improve.

The path to building wealth and financial freedom is paved with goals!!!

References:

  1. https://www.inc.com/marcel-schwantes/science-says-92-percent-of-people-dont-achieve-goals-heres-how-the-other-8-perce.html
  2. https://www.mindtools.com/pages/article/newHTE_87.htm
  3. https://www.forbes.com/sites/amymorin/2014/09/04/study-the-secret-to-ending-procrastination-is-changing-the-way-you-think-about-deadlines/

Long Term Investing is about Your Behavior

Posted on by

Investing and managing money successfully is all about how you behave. Morgan Housel

Most investors are not as smart as they thought they were a year ago in the midst of a raging bull market and rising stock prices. Fortunately, they’re also not as dumb as they feel today during a market correction, says Morgan Housel, author of “The Psychology of Money”

Investing, specifically successful investing, is, and has always been, the study of how people behave with money. And behavior is hard to teach, even to really smart and educated people. Effectively, success in investing is achieved by being patient and remaining calm through ‘punctuated moments of terror’ and volatility in the market.

You can’t sum up behavior with systems to follow, formulas to memorize or spreadsheet models to follow, according to Housel. Behavior is both inborn and learned, varies by person, is hard to to measure, changes over time, and people are prone to deny its existence, especially when describing themselves.

Actually, the best strategy is to invest as a long-term business owner which isn’t widely practiced on Wall Street or Main Street. It’s one thing to say you care about long-term value and another to actually behave as a long-term business owner. None of this is easy, but it’s never been easy. That’s what makes investing interesting.

The only thing that you can control in investing is your own behavior.

There is the old pilot quip that their jobs flying airplanes are “hours and hours of boredom punctuated by moments of sheer terror.” It’s the same in investing. Your success as an investor will be determined by how you respond to punctuated moments of terror, not the years spent on cruise control.

Managing money and investing isn’t necessarily about what you know; it’s how you behave. But that’s not how finance is typically taught or discussed in business school and at financial institutions. The financial industry talks too much about what to do, and not enough about what happens in your head when you try to do it.

There were 1,428 months between 1900 and 2019. Just over 300 of them were during a recession. So by keeping your cool and staying in the market during just the 22% of the time the economy was in or near a recession would have allowed your investments to compound and to grow significantly.

You must invest in the U.S. stock market every month, rain or shine. It doesn’t matter if economists are screaming about a looming recession or new bear market. You just keep investing. How you behaved as an investor during a few months will have the greatest impact on your lifetime returns.

There is the old pilot quip that their jobs are “hours and hours of boredom punctuated by moments of sheer terror.” It’s the same in investing. Your success as an investor will be determined by how you respond to punctuated moments of terror, not the years spent on cruise control.

For many investors, they are their own worst enemies. Since, the biggest risk to you as an investor is yourself and your own biases, your win mindset, your own misconceptions, your own behaviors, that impact your returns as an investor.

“Investing is not the study of finance. It’s a study of how people behave with money. It’s a really broad, all-encompassing field of how people make decisions around risk and greed and fear and scarcity and opportunity,” says Housel.

You can’t control what the economy is going to do or how the market will react. You can’t control what the Fed is going to do next. The only thing that you can control in investing is your own behavior. Thus, it’s important you realize that the one thing you can control, your behavior, is the thing that makes the biggest difference over time. Your investing behavior is the most fundamental factor in your investing success.

Simply, investing is about how you behave with money. And, it’s the ability to sacrifice spending money in the present with the expectation of making money in the future. Investing is a risk.

“A good definition of an investing genius is the man or woman who can do the average thing when all those around them are going crazy.” Morgan Housel

References:

  1. https://acquirersmultiple.com/2021/11/morgan-housel-investing-behavior-is-inborn/
  2. https://www.msn.com/en-us/money/topstocks/how-to-prep-for-a-bear-market-morgan-housel/vi-AAThrqT
  3. https://acquirersmultiple.com/2020/09/morgan-housel-the-importance-of-remaining-calm-through-punctuated-moments-of-terror-in-the-market/
  4. https://www.cmcmarkets.com/en/opto/investing-psychology-with-morgan-housel
  5. https://acquirersmultiple.com/2020/08/morgan-housel-the-only-thing-that-you-can-control-in-investing-is-your-own-behavior/

The Great Resignation: Simple Reason Why

Posted on by

Employees may be planning their exits if they feel undervalued

Americans have quit their jobs and not returned to the workforce at a historic rate, an exodus some call “The Great Resignation.” The Bureau of Labor Statistics reported that more than 4.5 million workers voluntarily left their jobs during November 2021–the highest number in the 20 years.

A survey by PlanBeyond, a market research agency, indicated that employees were feeling undervalued as a top reason for the Great Resignation. Among all the reasons for quitting cited in the poll, feeling undervalued factored in by 22%.

The survey found that the lack of appreciation was the top factor for quitting among men, it was only the second biggest driver for women, edged out by a lack of respect for supervisors, which was seen as having a 22% influence on women’s likelihood to quit.

This phenomenon should come as no surprise, given that many organizations and industries have long overworked and burned out their people. Leaders have bought into the false narrative that high performance and humanity are mutually exclusive. 

Individuals are disillusioned with their employers and are increasingly looking to hold them to “moral” standards that would have been unthinkable years ago. As such, they are more loyal to organizations that convey and uphold a mission that aligns with their personal values.

While it may seem obvious that workers are more likely to stay at organizations that offer such opportunities, most employment situations have historically lacked, and continue to lack, many of these very attributes. This illustrates how too few organizations have internalized the truism that attracting and retaining great people requires them to first become great places to work. 

Though quitting is happening across all job sectors and among workers at all skill levels, it has particularly impacted hospitality and food services, wholesale trade, and in state and local education.

References:

  1. https://www.fastcompany.com/90716203/the-great-resignation-heres-a-simple-reason-why-your-employees-want-to-quit
  2. https://news.harvard.edu/gazette/story/2021/10/harvard-economist-sheds-light-on-great-resignation/
  3. https://www.fastcompany.com/90715043/5-overlooked-opportunities-that-could-turn-the-tide-of-the-great-resignation

Estate Plan and Wills

Posted on by

“55 percent of all Americans—regardless of wealth or status—die without a will or estate plan in place,” American Bar Association

When R&B artist Prince died in April 2016 at the age of 57, he left behind an estate worth hundred of millions of dollars, along with music and other intellectual property of inestimable value. Despite his fame and wealth, Prince died without a will or estate plan. As a result, his estate has remained entangled in probate court for nearly six years. Although the value of his estate is estimated to be more than $100 million, it has paid more than tens of millions of dollars in administration fees.

Before you express too much astonishment that someone so wealthy left no will, ask yourself: do you have one? If the answer is no, then it should not be surprising that Prince didn’t.

If you don’t have a will, you’re not alone in America. According to the American Bar Association, 55 percent of all Americans—regardless of wealth or status—die without a will or estate plan in place, and the number can be as high as 64 percent. For some reason, many people who should have wills, whether because of their age or financial situation, just don’t.

It’s hard to understand why. Maybe because it’s depressing to think about needing one. Maybe it’s because we know we won’t be around when our estates are distributed, so we let it slide.

Regardless, everybody should have at a minimum a last will and testament if you don’t have a more complex estate plan like a trust, because it’s always cheaper to administer an estate when you have a will than when you don’t have anything.

When a person passes without a will, or what the law calls “intestate,” the estate property is distributed according to state succession laws. A probate court judge will have to determine who and how the assets are distributed in the event of your passing or incapacitation.

Additionally, if you die without a Will, you’re giving the state you reside in full control over the distribution of your assets, and intestate serves as the precedent for how decisions are made and how your assets will be distributed on your behalf.

Dying intestate means the most crucial decisions — including who will care for your children, aged parents, pets or other dependents — will be made without your input. Further, your family will be forced to endure a lengthy and costly probate process and incur potentially crippling legal expenses to regain control of your finances and assets.

Most probate court cases are open to the public, which means many of the details of a person’s estate could be aired like dirty laundry. Although, a judge could decide that the documents should be sealed.

In most states, a surviving spouse is first in line for the estate’s assets. If there is no spouse, the law provides an order of succession. In many states, if there’s no spouse, the children get the estate. If there are no children or grandchildren, then the parents inherit.

If no parents are alive, then siblings, nephews, and grandnephews inherit—and on and on—all the way to first cousins twice-removed. And, if no heirs can be found, it may not surprise you to learn that your property eventually goes to the state—a process called “escheating.”

Estate Planning

When you think about Estate Planning, you must not only think about when you die, but you must think about the possibility of becoming disable.

Estate planning is much bigger than “You get my assets after I die”—it is about setting your families up for the type of generational wealth.

An estate plan ensures your medical, financial and guardianship decisions will be handled by the person(s) you choose and trust. Your plan ensures you have an advocate acting on your behalf, carrying out your wishes and directions as you intended. It ensures you have the legal documents in place if you become disabled, as well as what will happen to your assets when you die.

Statistically speaking, most people are going to be disabled for some period of time before they die now that people are living so long. If the person becomes disabled and can’t make their own medical or financial decisions, the only way that somebody can legally make decisions for them is to go to court and do a guardianship or conservatorship proceeding. It’s expensive and time-consuming, and it’s really unnecessary.

In a will, the person who makes the will picks the executor, the person that’s in charge. You can say that you want your executor to serve without posting a bond. If that’s not stated in a will, you have to get a fiduciary bond so that the court knows you’re not going to steal the assets.

If you have minor children, a will is the only legal document where you can nominate guardians for your children.

But if you don’t have the will, then it’s the state statute that determines who is the person with priority to administer your estate. And because the state doesn’t know whether the person who says they want to administer your estate is a crook or not, the court often makes someone post a fiduciary bond. You have to pay the premium for the bond and the person has to qualify financially for a bond.

What you should learn from Prince’s passing without a Will or Estate Plan is that unless you create an estate plan now, you will leave your loved ones and potential heirs with a legal mess whether you are worth millions or not.

References:

  1. https://www.cnn.com/2016/04/28/opinions/prince-died-intestate-you-might-too-cevallos/index.html
  2. https://matermea.com/estate-planning-basics-african-americans-black-families/
  3. https://blavity.com/how-black-americans-are-missing-out-on-the-largest-wealth-transfer-in-history

Emotional Well-being

Posted on by

“Watch your thoughts; they become words. Watch your words; they become actions. Watch your actions; they become habits. Watch your habits; they become character. Watch your character; it becomes your destiny.” – Lao Tzu

Experiencing stress, isolation, loss, or systemic social inequities is harmful to the health of Americans. Improving emotional well-being through research-based health promotion and prevention is critical to population health, according to the Center for Prevention and Disease Control.

Emotional well-being is your ability to produce positive emotions, moods, thoughts, and feelings, and adapt when confronted with adversity and stressful situations. It is your ability to understand the value of your emotions and use them to move your life forward in positive directions.

Emotional well-being allows you to focus on the positive, and manage the negative emotions and feelings you may have in a given situation. This can help you forge stronger relationships with those around you.

Strong emotional well-being means you’re prepared to face events that may or may not be in your control. When faced with a challenging situation, you might use one of these strategies to bring yourself into a frame of mind that allows you to manage your emotions.

Your range of emotions—and how you manage them—influences your emotional health. Here are ways you can control and improve your emotional well-being:

  1. Move your body. Do some sort of physical activity every 90 minutes. Exercise. Dance. Fold laundry. Weather permitting, get outside. Walk around the block. Run. Visit a park.
  2. Establish a routine. Create a schedule that balances the work you do with the life you want. Set time for your meetings. Block space to set goals. Create room to read. Cook a new dish. Listen to music.
  3. Connect with others. Love on your family. Check in with those who support you. Ask for help. Learn something out of your comfort zone. Spend time with someone who you respect.
  4. Forgive. Forgive others and forgive yourself. Forgiveness frees you to keep your power. Forgiveness opens the path to live in the moment. Forgiveness allows for growth and happiness.
  5. Do something for others. Offer to do something for someone you know or don’t know, for which you cannot be repaid. Pick up groceries for a neighbor. Volunteer online. Send a thank you note.
  6. Sleep. Healthy sleep gives your body the chance to repair itself. Sleep refreshes your brain to manage your memories and process information. You wake up in a better mood.
  7. Be kind to yourself. What gives you joy? Where are you most at peace? When do you have space to be you? As you are kind to yourself, you will want to extend that kindness beyond yourself.
  8. Be self-aware. Notice the thoughts, actions, habits, and character traits that serve you well. And when you spot what needs to change, you’ll be ready. You will simply know.
  9. Gratitude. Gratitude is about being thankful for the things you have in your life right now. It is, according to Harvard Medical School, “a thankful appreciation for what an individual receives, whether tangible or intangible. With gratitude, people acknowledge the goodness in their lives … As a result, gratitude also helps people connect to something larger than themselves as individuals–whether to other people, nature, or a higher power.” 

Final thoughts on emotional well-being

You become stronger emotionally as you encounter and master any situation. Whenever you have doubts, and you will, remember that you have everything you need to take care of your emotional well-being.

Expressing your thanks can enhance and improve your overall sense of emotional and overall well-being. Grateful people are more agreeable, more open, and less neurotic according to research completed in the past several decades.

References:

  1. https://positivepsychology.com/gratitude-appreciation/https://positivepsychology.com/gratitude-appreciation/
  2. https://www.betterup.com/blog/what-is-emotional-well-being
  3. https://www.cdc.gov/populationhealth/well-being/index.htm

Build Wealth in 2022: Dave Ramsey

Posted on by

According to a recent survey, eight out of 10 of everyday millionaires invested in their employer’s 401(k) plan, and that simple step was a key to their wealth building. Not only that, but three out of four of those surveyed invested money in brokerage accounts outside of their company plans.

Moreover, they didn’t risk their money on single-stock investments or “an opportunity they couldn’t pass up.” In fact, no millionaire in the study said single-stock investing was a big factor in their financial success. Single stocks didn’t even make the top three list of factors for reaching their net worth.

The people in the study became millionaires by consistently saving over time. In fact, they worked, saved and invested for an average of 28 years before hitting the million-dollar mark, and most of them reached that milestone at age 49.

Dreams of trips to visit grandkids, travel adventures, and family celebrations at your paid-for home. That’s the kind of retirement many Americans dream about. You don’t have to earn six figures to turn this dream into a reality. But you do have to live and plan today with that goal in mind.

It’s important to get started building wealth no matter how old you are. Depending on your income and current financial circumstances, it might take some folks longer than others. But the fact is, you will get there if you do these five things over and over again.

Here are the five keys to building wealth:

1. Have a Written Plan for Your Money (aka a Budget)

No one “accidentally” wins at anything—and you are not the exception! If you want to build wealth, you have to plan for it. And that’s exactly what a budget is—it’s just a written plan for your money.

You have to sit down at the start of each month and give every dollar an assignment—and then stick to it! When our team completed The National Study of Millionaires, we found that 93% of millionaires said they stick to the budgets they create. Ninety-three percent! Getting on a budget is the foundation of any wealth-building plan.     

2. Get Out (and Stay Out) of Debt

According to Dave Ramsey, the only “good debt” is paid-off debt. Your most powerful wealth-building tool is your income. And when you spend your whole life sending loan payments to banks and credit card companies, you end up with less money to save and invest for your future. It’s time to break the cycle!

Trying to save and invest while you’re still in debt is like running a marathon with your feet chained together. That’s dumb with a capital D! Get debt out of your life first. Then you can start thinking about building wealth.

3. Live on Less Than You Make

Proverbs 21:20 says that in the house of the wise are stores of choice food and oil, but a man devours all he has. Translation? Wealthy people don’t blow all their money on stupid stuff. The myth that millionaires live lavish lifestyles that include Ferraris in their garage and lobster dinners every night is just that—a foolish myth. 

Here’s the truth: 94% of the millionaires we studied said they live on less than they make. The typical millionaire has never carried a credit card balance in their entire lives, spends $200 or less on restaurants each month, and still shops with coupons—even after reaching millionaire status!1 So ask yourself: Do you want to act rich or actually become rich? The choice is yours.

4. Save for Retirement

According to The National Study of Millionaires, 3 out of 4 millionaires (75%) said that regular, consistent investing over a long period of time is the reason for their success. They don’t get distracted by market swings or trendy stocks or get-rich-quick schemes—they actually save money and invest!

Being debt-free and having money in the bank to cover emergencies gives you the foundation you need to start saving for retirement. Once you get to that point, invest 15% of your gross income into retirement accounts like a 401(k) and Roth IRA. When you do that month after month, decade after decade, you know what you’re going to have in your nest egg? Money! Lots of it!

5. Be Outrageously Generous

Don’t miss this, y’all. At the end of the day, true financial peace is having the freedom to live and give like no one else. When you write a plan for your money, get rid of debt, live on less than you make, and start investing for the future, you can be as generous as you want to be and help change the world around you.

But when you make giving a part of your life, it doesn’t just change those around you—it changes you. Studies have shown over and over again that generosity leads to more happiness, contentment and a better quality of life.3 You can’t put a price tag on that!

How to Build Wealth at Any Age

That’s some big-picture financial advice that works no matter how old you are or how much money you make. It’s also true that each decade of your life will have specific challenges and opportunities. So let’s break things down decade by decade to see what you can do to maximize your savings potential.

In fact, the majority of millionaires didn’t even grow up around a lot of money. According to the survey, eight out of 10 millionaires come from families at or below middle-income level. Only 2% of millionaires surveyed said they came from an upper-income family.

The National Study of Millionaires showed a dramatic difference between how Americans think wealthy people get their money and how they actually earn and spend their money.

The salaries wealthy people make is not as much as you might think. The majority of millionaires in the study didn’t have high-level, high-salary jobs. In fact, only 15% of millionaires were in senior leadership roles, such as vice president or C-suite roles (CEO, CFO, COO, etc.). Ninety-three percent (93%) of millionaires said they got their wealth because they worked hard, and saved for the future and invested for the long term, not because they had big salaries.

References:

  1. https://www.ramseysolutions.com/retirement/the-national-study-of-millionaires-research
  2. https://www.ramseysolutions.com/retirement/how-to-build-wealth
  3. https://www.ramseysolutions.com/retirement/the-national-study-of-millionaires-research