Ballin' on a Budget

Contributed by: Josh Bitel

When I was fresh out of college, one of the most important things for me to learn was how to budget properly. Considering I was taking on my first job with level, predictable income, I knew that it was critical for me to understand where my money goes each month. If I didn’t identify opportunities for savings, I knew I would blow through my money quickly, but I wasn’t sure where to start!

Identifying Financial Goals

Before I could create a budget, I had to identify some goals in order to give my budget a sense of direction. My goals were more short term in nature (pay down student loans, save for vacation, etc.), but long term goals are just as important. If you aim to retire someday, or a child’s education expenses are a concern, budgeting with these goals in mind is certainly a good idea. Once you have a clear picture of what you want to achieve with your budget, it can become much easier to accomplish these goals.

Understanding Monthly Income and Expenses

One of the more difficult, but most important, components of a budget is identifying monthly income and expenses. There is software available that you can leverage, or you can use the old school method and take pen to paper. Regardless of how you come to a conclusion, it is imperative to cover all the bases.

When considering income (outside of the obvious salary or wages), be sure to include any dividends or interest received. Alimony or child support expenses may also come into play depending on your situation. Expenses may be divided into two categories: fixed and discretionary. Fixed expenses are generally easier to document --  these will be your recurring bills or debt payments (Food and transportation can also be captured here). Discretionary expenses are generally more difficult to record (Entertainment expenses, or hobbies and miscellaneous shopping trips are common line items here). It’s also important to keep in mind any out of pattern expenses, like seasonal or holiday gifts, or car and home maintenance. Remember to always keep your goals in mind when crafting your budget!

Once you’ve gotten grasp on your monthly income and expenses, compare the two totals. If you are spending less than you earn, you’re on the right track and can explore ways to use the extra income (save!). Conversely, if you find that you are earning less than you spend, use your budget to identify ways to cut back your discretionary spending. With a little bit of discipline you can start finding capacity to save in no time!

Monitor your Budget & Stay on Track.

Be sure you keep an eye on your budget and make changes when necessary. This doesn’t mean you have to track every nickel you spend; you can be flexible and still be comfortable! It is important to stay disciplined with your budget however, and be aware that unexpected expenses may pop up. With proper cash management, these unexpected events can feel less crippling. To help stay on track, you may find a budgeting software that you like to use, do your research and find one that is suitable for you. A vital takeaway, and something that can go a long way to help increase savings, is being able to identify a need vs. a want. If you can limit your “want” spending, you may be surprised how quickly you can save!

Josh Bitel is a Client Service Associate at Center for Financial Planning, Inc.®

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The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Josh Bitel and not necessarily those of Raymond James.

Learning the Ropes: NextGen Gathering

Contributed by: Josh Bitel

In late June, I had the luxury of attending the FPA NexGen Gathering, held in Naperville, Illinois. This is a “conference” geared towards the ‘next generation’ of advisors in the financial planning profession, specifically young professionals under the age of 36. While most conferences are centered on a specific agenda, in which a presenter stands in front of a large group and speaks to participants about various topics of interest related to the profession, this conference is much more interactive with an open agenda format. With an open agenda, the participants drive the content and become the presenters and participants of the sessions. On the first day of the conference, any attendees that have burning topics they’d like to learn more about, or discuss with the group, they bring that idea to the table. If the topic resonates well with the group, that topic becomes a “breakout session” when those who are interested can discuss the topic and lead the conversation in any direction they desire. I learned valuable information from other participants on topics ranging from financial planning, to business development, career development, technology and more.

The FPA NexGen Gathering was not all about meetings.  Here are some additional highlights from my weekend:

• Networking with young financial planning professionals from all over the nations, serving in various roles in many different types of firms.

• Having individual and small group conversations with others outside of the formal sessions related to the financial planning profession and how different firms run their businesses and serve their clients.

• Participating in fun activities with others, meeting new people and making new friends.

One of our core values at The Center is to develop talent that anchors in intellectual curiosity. Continued learning is an important way to showcase this value. Attending the NexGen Gathering was a great way for me to expand my knowledge base and to crowd source new possibilities for our clients here at The Center. At the end of the day, attending these conferences are important ways for our staff to grow in our jobs in order to find new ways to best serve our clients. I’m grateful I was able to attend this year’s conference and I look forward to future opportunities to expand my knowledge!

Josh Bitel is a Client Service Associate at Center for Financial Planning, Inc.®

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Any opinions are those of Joshua Bitel and not necessarily those of Raymond James. Raymond James is not affiliated with the FPA NexGen.

The Potential Impacts of Student Loans on your Credit Score

Contributed by: Josh Bitel

For those of us lucky enough to have entered the work force in the past few years, student loan repayment can cause a significant impact, either positive or negative, on your credit score.

Getting Started

Beginning to repay these loans after the precious six to nine month grace period has expired can affect your ability to obtain other credit if not handled properly. One way to find out how you’re being affected is to pull a copy of your credit report. There are three major credit reporting agencies (Experian, Equifax, and Trans Union) and you should get a copy of your credit report from each one (click here to read our blog on how to get your free annual credit report. Student loan institutions aren’t required to report information to all three bureaus, although many do, which is important to keep in mind. If you're repaying your student loans on time, these disciplined repayments will actually help your credit score. Conversely, if you are delinquent on payments or worse, default on your loans, your credit report can take a beating, potentially crippling your chances of obtaining other credit.

Credit Score Factors

Many different factors are used to determine your credit score. Some of these factors are more crucial than others. Among these critical factors are:

• Your payment history. Meaning the consistency and punctuality of payments and how long your payment history is.

• Your outstanding debt and amounts you owe on these accounts. How close your account balances are to your defined limits is also taken into consideration.

• How long you've had credit. How long specific accounts have been open, and how long it has been since you've used each account

• New credit and new inquiries. This means outstanding applications for new credit as well as additional inquiries for your credit reports, whether by institutions or yourself, can impact your credit score.

• For a deeper look at your credit score composition, check out our blog from last year.

How Student Loans Can Affect your Credit Score

If you consistently make your student loan payments on time, your credit score should not be negatively affected. A nice tip to ensure consistency is to set up an auto-pay from a bank account. Most loan institutions will allow you to set up an automatic withdraw from your bank account, eliminating the need to remember to pay each month. As an added bonus, some institutions may even offer an interest rate discount for setting this up!

Prospective creditors may look at other factors when analyzing your debt, and student loans can make this tricky. One example of this may be if you are in a lower-paying job, this makes your debt-to-income ratio unfavorable for some creditors. Another example may be your principal balances being largely unchanged in the early stages of repayment, which is common with long term repayment schedules, and some lenders may view this as a lack of paying down debt.

It is important to monitor your credit history from all three bureaus regularly. If you find that your repayment history is not being reported correctly, contact your lender to make this correction.

Suggestions to Help Reduce the Burden

Being overburdened with debt can feel suffocating, here are some suggestions to take some weight off your shoulders:

• Pay off your student loan debt as fast as possible. Doing so will help reduce your debt-to-income ratio, even if your income doesn't increase, which can make your credit score more favorable to lenders.

• If you're struggling to repay your student loans and are considering asking for forbearance, ask your lender about any other options you may have. Interest-only payments are a cheaper alternative, although they may not reduce principal.

• Ask your lender about a graduated repayment option. This means making smaller payments in the early years of the loan, with larger payments coming in the later years.

• If you're really strapped, you can explore longer term options. Much like a home, when a longer repayment term is selected, you will likely be paying more in interest over the life of the loan, but the monthly payment can be significantly reduced.

• If all else fails, don’t ignore your student loans. Generally these loans won’t be discharged even in a bankruptcy situation. Talk to your lender about the options available for you, this can be crucial to maintaining a favorable credit history.

If you have any questions about refinancing your student loans or improving your credit score, please contact your Financial Planner here at The Center, we’re always happy to help!

Josh Bitel is a Client Service Associate at Center for Financial Planning, Inc.®

Full Service Network: Coordinating with Multiple Advisors

Contributed by: Josh Bitel

Here at The Center, we believe financial planning requires working as a team. Given the opportunity to work with you, we want you to have a quality relationship with not only you, but also other professionals you’ve hired to work with you to assure that you have the most efficient financial plan tailored specifically for you. This is why we believe that the best long-term relationships typically occur when each team member is working to serve you and your family.

In coordinating with other professionals, The Center can be more efficient and help your plan be as accurate as possible. One example that we run into frequently is the constant open communication with CPAs near tax deadlines; this allows us to make critical decisions and take advantage of opportunities before that mid-April cutoff date sneaks up! This type of communication also helps us to get a better view of your total financial picture. We currently have nine CERTIFIED FINANCIAL PLANNER™ certificate holders here at The Center, each with a wide variety of knowledge in many topics to allow us to leverage other advisors with specific expertise, such as attorneys or insurance agents.  This helps us uncover opportunities to better plan for your future. The availability of these additional resources is another way for us to make sure nothing slips through the cracks!

Another example where this coordination comes in handy is titling of assets. We can leverage estate planning attorneys to make sure assets are in the right hands even when a client may not be around to call the shots! This is especially important when adding beneficiaries to accounts and funding trusts.

Providing referrals to other professionals for clients is an often overlooked part of financial planning that The Center takes pride in offering to clients. Often times when attorneys, CPAs, or other professionals are needed for client cases, and they may not have worked with a professional in the past, this provides us with an opportunity to refer our clients to a professional we already have experience in working with.  In coordination with this, we are able to network with other professionals who have a hand in assisting clients with all aspects of their financial lives.

Coordinating with and leveraging other professionals is one of the many ways we make sure your plan is as personal and detailed as possible, which is what we strive for at The Center.

Josh Bitel is a Client Service Associate at Center for Financial Planning, Inc.®