Background

The 2007 credit and loan crisis is often viewed as being the direct result of faulty consumer lending practices. Subsequently, many saw the need to have one centralized federal agency that focused on the protection of consumers regarding financial products and services, such as mortgages, credit cards, and student loans. In 2010, the CFPB was established by Congress through the Dodd-Frank Wall Street Reform and Consumer Protection Act.

What is the CFPB’s mission?

The CFPB is charged with protecting consumers from unfavorable financial industry practices through the enforcement of federal consumer protection laws. In addition, the CFPB:

• Supervises banks, credit unions, and other financial institutions
• Educates consumers on how to avoid deceptive and unfair lending practices 
• Monitors financial industry developments
• Issues regulations and guidelines for financial service providers
• Collects and tracks consumer complaints in one centralized database

Recent headlines

The CFPB has recently found itself in the news for taking action on a variety of consumer financial protection issues. Some of the more high-profile headlines include:

• Issuing a new mortgage rule that requires a lender to ensure a borrower’s ability to repay a mortgage loan
• Releasing a report aimed at developing more affordable student loan repayment options for private student loans
• Issuing a new rule that eases credit-card qualifications for stay-at-home spouses and partners

Where to get more information

For more information on how the CFPB works, visit the CFPB website at www.consumerfinance.gov.

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If Life is a Journey, Shouldn’t Financial Planning be a Process?

Prepared by Broadbridge Investor Communication Solutions, Inc. Copyright 2013

So, the question is: How can we work ON our business when we are so busy working IN our business? Well, it takes effort. It takes focus. It takes clarity.

A good place to start is with your vision. Why are you here in the first place? Are you making a widget just to make a widget? Likely not. So, take some time to dig deep and define your vision. When you know why you are in business it helps you identify what you need to do and how you’re going to get the results you want.

Once you establish or reconnect with your vision you are ready to sit down with a small group of 4 to 6 key people in your business to strategically set goals on a company-wide level. The Prosperity, INC Cascading Metrics Tool serves to guide your team through this process.

If you take a look at the tool, you will see five key areas across the company-wide level: 1) Key Initiatives, 2) Customers, 3) Sales and Gross Margin, 4) Financial Results and 5) Financial Strength. In each area you will set 1 to 3 specific goals you would like to accomplish in a rolling 12 months time frame.

If you are like me you have worked on a project before and ended up with some unexpected and unwelcomed results. Keep this in mind when you are setting your goals: the five key areas are interdependent and not setting goals in one or more of the areas could lead to unintended consequences!

Below are definitions and examples of each area. The examples may or may not apply to your specific business but I have included them to give you an idea of how this works. 

Key initiatives:
The key things that must happen to move forward in your business. You may identify them as weak links or constraints.

Examples:

1. Open Dayton office
2. Implement new HR Platform
3. Transfer Administration Department to document imaging

Customers:
Specific goals you need to set around your customers to reach your sales and Gross Margin goals.

Examples:

1. Build pipeline through client referrals
2. Cut ties with five unprofitable D clients
3. Close three $50,000 + contracts

Sales and GM:
The sales and gross margin results can you expect from your customer growth.

 Examples:

1. Annual revenue of $3.5 Million

Financial results:
Set specific goals around the weak links on your income statement.

Examples:

1. Net income before owner bonus is 15%
2. Production payroll at 35% or less

Financial strength:
Set specific goals around the weak links on your balance sheet.

Examples:

1. Working capital at 1.25 Million

At this point, you may be thinking to yourself, “why only 1 to 3 goals in each area?” Good question. The truth is, research shows that if a team sets out to accomplish 1 to 3 goals it will likely achieve 1 to 3 goals. However, if a team sets 4 -6 goals it will likely achieve 2 goals and if a team sets 10 or more goals it will likely achieve none of the goals.

If you are interested to learn more about the science behind this and how you can implement Cascading Metrics into your business feel free to join us on June 5 at our Stop Wishing, Start Creating workshop where Mackey will walk you through a case study of implementing 5 key metrics in her business.

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First things first: should you hire an attorney?

There’s no legal requirement that you hire an attorney when divorcing. In fact, going it alone may be a sensible option if you’re young and have been married only a short time, are childless, and have few assets. However, most divorcing couples hire attorneys to better protect their interests, even though doing so can be expensive. Divorce attorneys typically charge hourly rates and require you to submit retainers (lump sums) up front. The charges will depend on the complexity of the case, the reputation and experience of the divorce attorney, and your geographic location.

You should know that if you’re a homemaker or earn less income than your spouse, it’s still possible to obtain legal representation. You can submit a motion to the court, asking a judge to order your spouse to pay for your attorney’s fees.

If you and your spouse can agree on most issues, you may save time and money by filing an uncontested divorce. If you can’t agree on significant issues, you may want to meet with a divorce mediator, who can help you resolve issues that the two of you can’t resolve alone. To find a mediator, contact your local domestic relations court, ask friends for a referral, or look in the telephone book. Certain attorneys, members of the clergy, psychologists, social workers, marriage counselors, and financial professionals may offer their services as mediators.

Save time and money by doing your homework before meeting with a divorce professional

To save time and money, compile as much of the following information as you can before meeting with an attorney or other divorce professional:

• Each spouse’s date of birth
• Names and birthdates of children, if you have any
• Date and place of marriage and length of time in present state
• Existence of prenuptial agreement
• Information about parties’ prior marriages, children, etc.
• Date of separation and grounds for divorce
• Current occupation and name and address of employer for each spouse
• Social Security number for each spouse
• Income of each spouse
• Education, degrees, and training of each spouse
• Extent of employee benefits for each spouse
• Details of retirement plans for each spouse
• Joint assets of the parties
• Liabilities and debts of each spouse
• Life (and other) insurance of each spouse
• Separate or personal assets of each spouse, including trust funds and inheritances
• Financial records
• Family business records
• Collections, artwork, and antiques

If you’re uncertain about some of these areas, you can obtain the necessary information through your spouse’s financial affidavit and/or the discovery process, both of which are mandated by the court.

Consider the big questions, such as child custody and alimony

Although your divorce professional will help you work through the big issues, you might want to think about the following questions before meeting with him or her:

• If you have children, what are your wishes regarding custody, visitation, and child support?
• Whose health insurance plan should cover the children?
• Do you earn enough money to adequately support yourself, or should alimony be considered?
• Which assets do you really want, and which are you willing to let your spouse keep?
• How do you feel about the family home? Do you feel strongly about living there, or should it be sold or allotted to your spouse?
• Will you have enough money to pay the outstanding debt on whatever assets you keep?

In addition to an attorney, you may want to see a therapist to help you clarify your wishes, express yourself more clearly, and deal with any child-related issues. Such counseling is typically covered by health insurance.

Some dos and don’ts when divorcing

Keep the following tips in mind:

• Do prepare a budget and a financial plan to sustain you until your divorce is final. Get help if you don’t currently have the skills and energy to do this on your own.
• Do review monthly bank and financial statements and make copies for your attorney.
• Do review all tax returns that have been filed jointly or separately by your spouse.
• Do make sure all taxes have been paid to date.
• Do review the contents of any safe-deposit boxes.
• Do get emotional support for yourself–talk to friends, join a support group, or see a therapist.
• Don’t make large purchases or create additional debt that might later cause financial hardship.
• Don’t quit your job.
• Don’t move out of the house before consulting your attorney.
• Don’t transfer or give away assets that are owned jointly.
• Don’t sign a blank financial statement or any other document without reviewing it with your attorney.
  

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Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2013.

You won’t hear asset allocation discussed much on CNBC and you probably won’t find it to be the topic of a Yahoo! Finance article.  It’s not an exciting or “sexy” topic and therefore it doesn’t sell.  The latest hot stock, the end of Europe as we know it, and “What’s going on with Facebook?” are what sell news and drive many to make investment decisions.

Unfortunately asset allocation should be the cornerstone of any investment decision.  A proper strategy can help you meet your goals regardless of if a stock is hot or not.  The concept is very simple.  Just as the old saying goes, “Don’t put all your eggs in one basket”.  That’s what asset allocation is all about.

Say for instance you get a hot tip on a stock and place your retirement fund in it.  If the news turned out to be bad and the company went bankrupt, you lose – everything.  But, if you thought the hot tip had some validity to it, maybe you put 5% of your retirement in it.  Then if the news was bad, you may be behind, but you still have 95% of your retirement.

Asset allocation is about spreading out your investment portfolio amongst a number of different asset classes to create a managed and effective way to reach your goals for that portfolio.  Large cap stocks, small cap stocks, corporate bonds, commodities, and real estate are all examples of different asset classes.  Some move similarly to others, some move in completely different directions.  This concept is the “correlation” of the assets classes.  The idea here is that no one bet will sink your investment plan and it’s very likely that in almost any time period one of your asset classes will be performing positively, or at least helping maintain some stability.  A top performing asset class 1 quarter, might be at the bottom the near future as the following chart illustrates.

Mackey Advisors™ investment portfolios usually contain anywhere from 10 to 15 different asset classes.  The weighting put on each class is dependent on a variety of factors; expected short & long term performance, the global economy, historical sector movement, current phase of economic expansion or contraction, are just a few of the factors that might help determine if “large-cap growth” stocks are 5% or 15% of an investment portfolio.

Each asset class also has a certain amount to volatility associated with it.  If you are closer to reaching your goal for a specific portfolio, or just don’t like your investments changing rapidly, the basis for your asset allocation might be how much to have in stocks and how much to have in bonds.  If you are drawing income from the portfolio, this is also a factor.  Once you decide this split, then you can work and decide where in stocks and where in bonds you should be.

The chart below is a template some people will use to help understand what asset classes to consider and how to split things up.

Of course to be a successful “do it yourself-er”, it is important to stay on top of news and make changes to your model.  As time changes one asset class will go out of favor vs. another and will need to take up a lesser portfolio of your model.  As your portfolio moves, what you said should be a 5% exposure to real estate might become 10%.  Rebalancing will keep your desired model in balance and make sure you are buying and selling when you should and not when your emotions tell you.

So I hope that wasn’t too boring or too intense, and hopefully you will find it helpful as you work with your advisor or navigate the management of your own portfolio.  This one of our core competencies at Mackey Advisors™ and while we aren’t in the business of too much free advice, we would be more than happy to sit down with you, learn about you, and explore how portfolios can be built to achieve the dreams you always wanted.

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We had a classic big “brother”, little sister relationship. Mackey Advisors protected me, and sometimes I begrudgingly did my older sibling chores. I filed the files, made photocopies, and got a penny per envelope I stuffed when mailings had to go out. I also got jealous from time to time when I had to share my mother’s time with my sibling, or when I was dragged to business event after business event. But in the end, I love my older sibling.

I came back to work for Mackey Advisors in 2009. I was finally grown up enough to do “big kid stuff.” I took over the role of Operations and Communications Manager, and I am uniquely qualified for this role. I mean, OF COURSE I am! I grew up within the walls of Mackey Advisors. I have a connection to this company only bested by my Mother, who imagined my “sibling” into existence. I have an innate sense of what we do, why we do it, and I feel as if I can see into the “soul” of Mackey Advisors.  

So, how can this little tale of twins be beneficial to your family business? Simply put, your children have known (and will learn) more about your business that you may think. I am sure they can recount stories of your frustrations and triumphs told over the dinner table. Growing up so close to a business gives the 2nd generation an insight into the inner workings of a business that is invaluable. The business becomes a part of who you are, or at least it did for me. So the next time you are working on your messaging, thinking of launching a new product, or trying to streamline your processes, look to your children. They may surprise you!

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Here are some of the disturbing stats, and how we may be able to change them.

Overall Financial Literacy Stats

From 2012 NFCC Consumer Financial Literacy Survey:

• 56% of American adults do not have a budget, including 22% who say they don’t have a good idea of how much they spend on housing, food and entertainment.

• Two in five adults say they are now saving less than last year

• 39% do not have any non-retirement savings

• 42% of survey participants give themselves a grade of C, D or F on their knowledge of personal finance.

From Pew Research Center 2011:

• 74% of American workers have difficulty affording gasoline

• 65% are experiencing problems affording heat and electricity

• 50% are unsuccessfully grappling with increased grocery bills

• 32% have no retirement plan other than Social Security

• 62% of the self-described “working class” portray their incomes as falling behind the cost of living.

What you can do:

• Use free online tools like Mint.com to analyze your spending, and create a buget that works.

• Set Up a direct deposit to your savings account for every paycheck. It makes saving fast and easy, but remember to only put aside as much as you can afford. If you try to save too much you can make a habit of draining your savings.

• DivaCFO has free printable tools for everything from estate planning checklists to a garden budget planner.

• It takes 21 days to create a habit or break one. Do some research and find ways to keep yourself accountable to your budget.

• Take public transit, ride a bike, walk or carpool to cut down on rising gas prices.

• Buy whole foods instead of pre-made items at the grocery to cut down on grocery bills, and have cooking dinner parties with family or friends to eliminate some entertainment costs.

For couples

From the AICPA Harris Interactive survey, April 2012

• Financial matters are the most common source of marital discord; Couples average 3 arguments per month about financial matters- more than they argue about kids, chores, work or friends

• 55% do not set aside time on a regular basis to discuss financial issues

• 30% of adults who are married or living with a partner have engaged in at least one potentially deceitful behavior related to their finances.  Men and woman are equally likely to have engaged in potentially deceitful behavior

What you can do:

• Use the My Money Checklist to develop a regular communication rhythm and good money habits

• Develop a monthly and annual budget with your partner or spouse.  When you budget, you essentially agree in advance on your spending, replacing arguments with negotiation

• Develop personal goals and set up a savings plan for each major goal

• Hire a financial advisor to guide you through a comprehensive financial plan.  You could save your relationship and you’ll reduce unnecessary conflict

For Young Professionals

From the PNC financial independence survey March 2012

• Today’s twentysomethings hold an average debt of about $45,000, which includes everything from cars to credit cards to student loans to mortgages

• Unemployment for those 18-29 is 12.4%, well above the national rate of 8.2%

• Young people face an increasingly complex global economy that is credit driven and puts more responsibility on individuals to plan for and manage their retirement accounts

What you can do:

• Calculate ROI for college before choosing a degree program.  College is an investment and like any investment, making it wisely takes time and research

• As a parent, get into the habit of regularly saving for college.  Whether you can save all your children need or not, some if better than all

• As a student, start your own savings plan for college as soon as you can work.  Consider working part-time or summers while in  school to pay some of your expenses

• Get creative on ways to reduce college costs such as taking advance placement classes in high school, attending community college and living at home

• Seek out classes at your local school, library or not for profit on money basics  

• Find a mentor, someone you admire who manages their money well and ask them for their guidance

• Make savings a habit.  Start with your first paycheck.  Sign up for a 401(k) as soon as you are eligible.  Open an after tax account and save for vacations, emergencies and the unexpected that always happens!

For Children

From Harris Interactive’s July 2012 Survey for AICPA

• Parents are more likely to have talked with their children about the importance of good manners, 95%, the benefit of good eating habits, 87%, the importance of getting good grades, 87%, the dangers of drugs and alcohol, 84%, and the risks of smoking, 82%, than about the value of money and managing it wisely, 81%.

• Children, on average, are 10 years old when mom or dad – most often mom – has the first financial conversation with them about money, according to the survey.

What you can do:

• Use online tools like Bankaroo.com, Seasame Street’s For Me, For You, For Later, or FeedthePig.org to teach your children or grandchildren about money.

• Have open conversations with your children about the family finances and budget.

While all of these numbers and statistics may shock or even scare you they do not mean we are doomed. Money has always been a taboo subject, but for us to live in a financially literate society we need to start having these uncomfortable conversations. If we all do just a little bit to educate ourselves, our family, and our community about money we can make a huge difference!  

I am not an expert in creating a brand, but I do believe I am an expert in branding Mackey Advisors. With that being said, here is my branding toolkit for the do-it-yourself marketer.

1. LOGO – Our logo was already created when I came back to Mackey Advisors. A logo is the most important piece of branding for a business, but the logo must be meaningful to be effective. The Mackey Advisors logo is an abstraction of an advisor and his/her advisee sitting at a table. Our logo was built around the relationships we create and the comprehensive nature of our services.

2. TAGLINE – This is not your elevator pitch or your mission statement, but it must be an extrapolation of both. Our tagline is “Your Wealth Advocate”. It is simple, understandable, and opens the door to questions.

3. MISSION STATEMENT – One could argue that no brand can be created without having a solid mission statement. According to Entrepreneur.com, “a mission statement defines what an organization is, why it exists, and its reason for being”. Our mission statement is, “We are Wealth Advocates who empower confident action in our clients, our community, and ourselves”. It explains that we are in the financial industry, but that we are about more than just money and that we care about more than just ourselves.

4. CORE VALUES – These can seem simple, but even the Mackey Advisors team has a hard time putting what we intrinsically know about the company into words. This is why we currently have 10. We think this is too many, but it is a starting point. Having a set of core values isn’t just for show. The company must live these values. I find having a core set of values beneficial in so many ways, but the most beneficial, to me,  is when contemplating sponsorships, donations, or advertising. Most small businesses are bombarded with requests, and while we always want to help we can’t help everyone.  

5. COLOR PALETTE – An organization’s color palette can be an exceptionally effective way of standing out in a crowded marketplace. Wisdom Link chose two main colors for our brand. Our bold, yet not overpowering yellow and a silky, smooth grey (both colors are now so burned into my brain that they are popping up in my wardrobe, home, and other work outside of Mackey Advisors). Wisdom Link also chose 5 supporting colors to keep our visuals interesting. One thing to remember is that colors go in and out of fashion. All design firms have research on what is trending and/or what will be trending. My advice would be to leave the colors to the professionals, but of course make your opinions known.

6. FONT – Many small businesses rely on Microsoft Word to choose Times New Roman or Arial as their font. DON’T DO THIS! Why spend all that time and energy on creating a mission, values, logo, etc when you are just going to communicate with a “default” font. We use Century Gothic. It is clean, easily accessible, and fresh. Once you pick your primary font set everything to that font (Word, Excel, Powerpoint, Email, and hopefully your website). I would recommend choosing a secondary font just for marketing pieces that may have a lot of text and need some variety. A best practice for this would be to have a sans serif and serif font.

In my non-expert opinion if you have these 6 things in your branding toolkit you can create a meaningful brand and outstanding marketing materials to fill your pipeline to the brim.

I would like to hear from you! What do you love about your brand?

Happy Branding!

Grace

• Insurance policies must allow young adults up to age 26 to remain covered on their parent’s health insurance.
• Insurers cannot deny coverage to children due to their health status, nor can companies exclude children’s coverage for pre-existing conditions.
• Lifetime coverage limits have been eliminated from private insurance policies.
• State-based health insurance Exchanges intended to provide a marketplace for individuals and small businesses to compare and shop for affordable health insurance are scheduled to be implemented by October 1, 2013.
• Insurance policies must provide an easy-to-read description of plan benefits, including what’s covered, policy limits, coverage exclusions, and cost-sharing provisions.
• Medical loss ratio and rate review requirements mandate that insurers spend 80% to 85% of premiums on direct medical care instead of on profits, marketing, or administrative costs. Insurers failing to meet the loss ratio requirements must pay a rebate to consumers.
• The ACA provides federal funds for states to implement plans that expand Medicaid long-term care services to include home and community-based settings, instead of just institutions.
• The ACA provides funding to the National Health Service Corps, which provides loan repayments to medical students and others in exchange for service in low-income underserved communities.
• Medicare and private insurance plans that haven’t been grandfathered must provide certain preventive benefits with no patient cost-sharing, including immunizations and preventive tests.
• Through rebates, subsidies, and mandated manufacturers’ discounts, the ACA reduces the amount that Part D Medicare drug benefit enrollees are required to pay for prescriptions falling in the donut hole.

Major provisions coming in 2014

Several important provisions of the ACA are due to take effect in 2014, such as:

• U.S. citizens and legal residents must have qualifying health coverage (subject to certain exemptions) or face a penalty.
• Employers with more than 50 full-time equivalent employees are required to offer affordable coverage or pay a fee.
• Premium and cost-sharing subsidies that reduce the cost of insurance are available to individuals and families based on income.
• Policies (other than grandfathered individual plans) are prohibited from imposing pre-existing condition exclusions, and must guarantee issue of coverage to anyone who applies regardless of their health status. Also, health insurance can’t be rescinded due to a change in health status, but only for fraud or intentional misrepresentation.
• Policies (except grandfathered individual plans) cannot impose annual dollar limits on the value of coverage.
• Individual and small group plans (except grandfathered individual plans), including those offered inside and outside of insurance Exchanges, must offer a comprehensive package of items and services known as essential health benefits. Also, nongrandfathered plans in the individual and small business market must be categorized based on the percentage of the total average cost of benefits the insurance plan covers, so consumers can determine how much the plan covers and how much of the medical expense is the consumer’s responsibility. Bronze plans cover 60% of the covered expenses, Silver plans cover 70%, Gold plans cover 80%, and Platinum plans cover 90% of covered expenses.

Financial blunders are made all the time and everywhere – at the grocery store, at the bank, in the housing market, in the stock market, with your children’s allowance. Some stem from a lack of knowledge or awareness, while others are the result of human behavior that often works against our own best interests. The worst mistakes you can make, though, usually involve those that seem harmless but end up impacting your overall wealth.

Financial blunders are made all the time and everywhere – at the grocery store, at the bank, in the housing market, in the stock market, with your children’s allowance. Some stem from a lack of knowledge or awareness, while others are the result of human behavior that often works against our own best interests. The worst mistakes you can make, though, usually involve those that seem harmless but end up impacting your overall wealth.

1. Spending an unexpected windfall. All of it.

Two-thirds of baby boomer households will likely receive some inheritance, with a median amount of $64,000, for a total prospective inherited amount of $8.4 trillion, according to research published in 2011 by the Center for Retirement Research at Boston College. A big challenge for many inheritors, though, is that they can be completely inexperienced with money. And with inexperience and poor – or no – planning, comes the potential for squandering a windfall.

Americans spend their inheritance shockingly fast, says Mackey McNeill, a CPA in Bellevue, Ky. “When people get a big amount of money that they didn’t earn, they feel like it’s so much money, they’ll never run out,” she says.

McNeill recounted the story of a client whose mother had died and left her about $500,000. “By the time she walked in my door, she only had half of it left,” McNeill says. “She paid off some of her mortgage, bought a new car, donated some money and bought a big-screen TV for her son” while having the unrealistic expectation of being able to quit working and pay for her son’s college tuition. “You need to run the numbers before spending it,” adds McNeill. “If they keep that capital and invest it, they can generate income for the rest of their lives.”

2. Cashing out of your 401(k) when you leave your job

Among workers who left their jobs in 2012, 43% took a cash distribution, up slightly from 42% in 2010, according to yet-to-be-released data from Aon Hewitt, a human resources consultancy. And the smaller the balance in the plan, the more likely it is that participants will cash out when they leave. But taking money out of your plan before retirement is going to cost you; you’ll get hit with a 10% early-withdrawal penalty (if you’re younger than 59 ½) and get taxed on the sum. And possibly more serious, you lose the earnings that money could have generated.

Consider this example from Aon Hewitt of an employee who cashes out of three employer-sponsored 401(k)s over 30 years of working and retires at 65. Assume she saved 8% of her pay, got a 5% match per year, earned 3% annual salary increases on a starting salary of $50,000, and earned 7% in investment returns a year. After factoring in taxes, penalties and lost interest, she’d accumulate $189,000 in her account by age 65. If she didn’t touch the money at all, however, she’d have $872,000 – the cash-outs would have cost this saver almost 80% of her nest egg.

“I’d like to see folks roll over their 401(k) to an IRA upon leaving a job,” says Sheryl Garrett, a CFP and founder of the Garrett Planning Network, a nationwide organization of fee-only financial advisers. “Rarely does it make more sense to roll the funds over to the new employer’s plan, presuming there is one.”

3. Stopping contributions to your 401(k) plan when the market – or your account – drops

These plans are the main investment vehicle that will fund the bulk of many Americans’ retirements. There’s a reason your 401(k) automatically takes money out of your check each time you get paid – if it were up to you to set aside 5% of your pay, you’d never do it. Employee participation in 401(k) plans increased dramatically after the passage of the Pension Protection Act of 2006, which made it easier for companies to auto-enroll their employees, according to a paper published by the Center for Retirement Research at Boston College last year.

The only real reason you would shut down your contributions is if you’ve got enough retirement savings already. “I still have people telling me they’ll stop contributing to their 401(k) because it’s going down,” says Steve Burnett, CFP and financial adviser at Hanson McClain, a firm in Sacramento. “And the investments might be fine. You have to understand stock prices aren’t static; what you’re hoping for is over time, is that you acquire a mass of savings to live off.”

And you’ve heard it before – you’re giving up free money when you don’t contribute to your 401(k): the matching contribution from your company (if they offer it). Say you earn $60,000 a year and your company matches 50% of your contributions up to 6% of salary. Stop participating and you’re giving up $1,500 bonus (if you contributed 5% of your salary) or $3,000 (if you contributed 10% of your salary).

4. Succumbing to lifestyle inflation

A 10% salary bump shouldn’t always equate to a 10% increase in your shoe budget or upgrading to the pricier health club. Of course, a splurge is fine, but try to resist the temptation to adjust your lifestyle upwards – or succumb to what some pros call lifestyle inflation.

Taking a $2,000 vacation is a one-time expense. Moving into an apartment that costs $150 more per month is a new and “permanent” expense that becomes part of your lifestyle cost. If we’re not careful about raising the bar on lifestyle costs, we’re likely to ramp it up so high that eventually we’ll be unable to manage the occasional speed bumps that come our way, says Michael Kitces, a CFP and director of research at Pinnacle Advisory Group in Columbia, Md. “We also end up with a lifestyle that requires an extraordinary pile of money to afford in retirement,” he says.

5. Using home equity to invest in the stock market

If you’re a good way through paying down your home mortgage, and with rates so low (last week Freddie Mac said the average 30-year fixed rate fell to 3.43% from 3.54%), doesn’t it make sense to take some equity out of your house and sink it into the market? “I’m getting people who ask about this, saying ‘my home price is pretty stagnant – shouldn’t I take money out of my home and invest it?’” says Burnett.

The problem with this approach is that the stock market is at multi-year highs at the moment – exactly the wrong time to enter the market, as most pros will tell you. Homeowners should pay down the remaining mortgage so that, when they leave the workforce, they’re not burdened by it. “If you pay X amount on your mortgage for a certain number of months, you’ll get a certain outcome. If you invest in the market, it’s uncertain you’d make money,” says Burnett. “Most of our clients are retired, and the ones doing well are those who paid down their house and were debt free.”

To read the full article on Yahoo Finance please click here. 

That’s where financial planning comes in. Financial planning is a process that can help you reach your goals by evaluating your whole financial picture, then outlining strategies that are tailored to your individual needs and available resources.

Why is Financial Planning Important?

A comprehensive financial plan serves as a framework for organizing the pieces of your financial picture. With a financial plan in place, you’ll be better able to focus on your goals and understand what it will take to reach them.

One of the main benefits of having a financial plan is that it can help you balance competing financial priorities. A financial plan will clearly show you how your financial goals are related–for example, how saving for your children’s college education might impact your ability to save for retirement. Then you can use the information you’ve gleaned to decide how to prioritize your goals, implement specific strategies, and choose suitable products or services. Best of all, you’ll have the peace of mind that comes from knowing that your financial life is on track.

The Financial Planning Process

Creating and implementing a comprehensive financial plan generally involves working with financial professionals to:

• Develop a clear picture of your current financial situation by reviewing your income, assets, and liabilities, and evaluating your insurance coverage, your investment portfolio, your tax exposure, and your estate plan
• Establish and prioritize financial goals and time frames for achieving these goals
• Implement strategies that address your current financial weaknesses and build on your financial strengths
• Choose specific products and services that are tailored to meet your financial objectives
• Monitor your plan, making adjustments as your goals, time frames, or circumstances change

Some of Members of the Team

The financial planning process can involve a number of professionals.

Financial planners typically play a central role in the process, focusing on your overall financial plan, and often coordinating the activities of other professionals who have expertise in specific areas.

Accountants or tax attorneys provide advice on federal and state tax issues.

Estate planning attorneys help you plan your estate and give advice on transferring and managing your assets before and after your death.

Insurance professionals evaluate insurance needs and recommend appropriate products and strategies.

Investment advisors provide advice about investment options and asset allocation, and can help you plan a strategy to manage your investment portfolio.

The most important member of the team, however, is you. Your needs and objectives drive the team, and once you’ve carefully considered any recommendations, all decisions lie in your hands.

Why can’t I do it Myself? 

You can, if you have enough time and knowledge, but developing a comprehensive financial plan may require expertise in several areas. A financial professional can give you objective information and help you weigh your alternatives, saving you time and ensuring that all angles of your financial picture are covered.

Staying on Track

The financial planning process doesn’t end once your initial plan has been created. Your plan should generally be reviewed at least once a year to make sure that it’s up-to-date. It’s also possible that you’ll need to modify your plan due to changes in your personal circumstances or the economy. Here are some of the events that might trigger a review of your financial plan:

• Your goals or time horizons change
• You experience a life-changing event such as marriage, the birth of a child, health problems, or a job loss
• You have a specific or immediate financial planning need (e.g., drafting a will, managing a distribution from a retirement account, paying long-term care expenses)
• Your income or expenses substantially increase or decrease
• Your portfolio hasn’t performed as expected
• You’re affected by changes to the economy or tax laws

Common Questions about Financial Planning

What if I’m too busy?

Don’t wait until you’re in the midst of a financial crisis before beginning the planning process. The sooner you start, the more options you may have.

Is the financial planning process complicated?

Each financial plan is tailored to the needs of the individual, so how complicated the process will be depends on your individual circumstances. But no matter what type of help you need, a financial professional will work hard to make the process as easy as possible, and will gladly answer all of your questions.

What if my spouse and I disagree?

A financial professional is trained to listen to your concerns, identify any underlying issues, and help you find common ground.

Can I still control my own finances?

Financial planning professionals make recommendations, not decisions. You retain control over your finances. Recommendations will be based on your needs, values, goals, and time frames. You decide which recommendations to follow, then work with a financial professional to implement them.

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Prepared by Broadridge Investor Communications Solutions, Inc.