Got Savings Bonds?

 Ahhh….savings bonds.  Throughout the years, savings bonds have been popular gifts. Grandma and grandpa have given their grandchildren savings bonds for birthdays to encourage saving for the future.  They were easily available savings vehicles that you could purchase at your local bank or, in some instances, through payroll deduction.  The paper certificates are those you might stumble across in a stack of old papers or locked away in your safety deposit box. 

What do you do if you find that you have savings bond certificates?

• Check the dates.  All savings bonds have a maturity date; a date at which they stop accruing interest (i.e. Series EE bonds accrue interest for 30 years).  You can use any number of online savings bond calculators to find out if your bonds have matured.
• Transition to Electronic Bonds.  The U.S. Treasury recently stopped issuing paper bonds to save costs.  If you own paper bonds that are still accruing interest, consider establishing a Treasury Direct account to convert your paper bonds to electronic bonds.  This helps eliminate the risk of loss or damage to the physical bond certificates.  If/when your bonds have matured, you can cash them in and have the proceeds deposited to your bank through Treasury Direct.
• Check the registration on the bonds.  Savings bonds seem to be easily forgotten.  It is not uncommon for a client to find a bond in the name a deceased relative, in a former/maiden name, or in custodial registration for a child who is now a well-established adult.  Updating the registration on active savings bonds now can prevent headaches later.  Registration changes can be handled through Treasury Direct.
• Last but not least, document that you own savings bonds.  List these holdings with your financial planner and on your Personal Record Keeping Document to ensure that these assets are not forgotten if something happens to you.

While savings bonds are not as en vogue today as they were in past decades, they can still be valuable assets.  It is worth taking the time to bring the old bonds into the current century with Treasury Direct.

Sandra Adams, CFP® is a Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012 and 2013, Sandy was named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

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Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.

Parents and Children Misaligned on Finances

 As the mother of a teen and a pre-teen, I can testify that parents and children often speak different languages. Like when my daughter says "I'm going to die," it doesn't generally mean she's seriously ill; it more likely means she got a hole in her favorite pants! I live for the promise of the day when my children are grown and we will be able to communicate on the same plane.  After reading the recent Intra-Family Generations Study conducted by Fidelity Investments, I’m not so sure that will ever happen…at least when it comes to finances.

The Intra Family Generations Study found that parents and their adult children are on different pages when it comes to several key family financial issues, including retirement planning, inheritance planning, and caring for elderly parents.  The study found that 97% of parents and children surveyed disagreed on whether adult children will care for their elderly parents if they need long term care assistance.  Children tend to overestimate the value of their parents’ assets (by an average of $100,000 or more) and parents are overly critical of their children’s financial decisions.  In addition, while 24% of adult children surveyed say they will need to help their parents in retirement, 97% of parents say they won’t need help.  Clearly, there are misunderstandings between the generations.

So why, you might ask, are adult children and parents so disconnected?  According to the study, (which I can vouch for in my personal experience) families simply don’t talk about financial issues.  Talking about things like investments, debts, savings shortfalls, income taxes, or estate planning is taboo in many families. 

Most interestingly, the study did find that 60% of adult children and 68% of parents indicated that they would be more comfortable discussing these important financial issues with a third party financial professional than with each other.  Financial planners are the ideal financial professionals to lead productive family meetings.

If you find yourself as either a parent who has not discussed future financial issues with your adult children or as an adult child who has not discussed long term care or financial issues with your parent, contact your financial planner to schedule your family meeting today.

Sandra Adams, CFP® is a Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012 and 2013, Sandy was named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

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Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.  Links are being provided for information purposes only.  Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any websites users and/or members.

Debt: Just Another Four-Letter Word

 Is DEBT a four-letter word? It doesn’t have to be – but managing (notice I didn’t say avoiding) credit and loans is an important component in building and maintaining wealth. Clients that have worked with us over the years know that as comprehensive planners, we are trained to view our clients’ entire balance sheet or net worth statement. A quick refresher: Your net worth consists of both assets (investments, savings, etc.,) AND liabilities/debts (home mortgage, auto loans, etc.). You can help improve your net worth or wealth by adding to investments and/or reducing liabilities. Therefore, we work closely with clients to track and analyze their net worth each year as one measurement of overall financial health.

Debt doesn’t have to be one of those bad, four-letter words if used and managed properly. Financing a house can be a good lifestyle decision as well as a smart financial transaction. Certainly today’s low interest rate environment makes it more compelling to wisely use debt or leverage.

For example, Sue and Steve are 45 years old and currently desire to retire in 15 years. “Retire” to them means working for a charitable organization that they are passionate about…perhaps earning some wages…perhaps not.  Essentially, they would like to be Financially Independent at the end of 15 years. Ideally, clients such as Sue and Steve plan to also retire their mortgage over the next 15 years. However...

Utilizing mortgage debt over the next 15 years can be a good financial strategy:

1. Interest rates are historically low, giving them a better opportunity (not guaranteed) to earn higher returns on their retirement savings.

2. There is an income tax benefit for mortgage interest paid.

3. The mortgage payments are a forced savings mechanism. 

Depending upon their overall situation, we might even suggest a 30-year mortgage and that they invest the difference between the 30 and 15-year payments for additional flexibility. As always, each situation is different and you should consult the appropriate professionals.

In summary, our experience suggests that clients’ eliminate debt, including home mortgage debt, at or near retirement.  At retirement, the name of the game becomes “cash flow” and not having to service debt payments goes a long way in living a successful retirement. 

Timothy Wyman, CFP®, JD is the Managing Partner and Financial Planner at Center for Financial Planning, Inc. and is a frequent contributor to national media including appearances on Good Morning America Weekend Edition and WDIV Channel 4 News and published articles including Forbes and The Wall Street Journal. A leader in his profession, Tim served on the National Board of Directors for the 28,000 member Financial Planning Association™ (FPA®), trained and mentored hundreds of CFP® practitioners and is a frequent speaker to organizations and businesses on various financial planning topics.

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Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.  Investing involves risk and investors may incur a profit or a loss.

Personal Emergency Reserve Savings

 The other day during my morning drive to work, I heard a rather startling statistic on our local news radio program – 40% of Michigan residents have NO (that means $0) savings!  Michigan is number 26 of the 50 states in savings rankings, which means that there are 24 states that are worse.  OUCH!

There is no doubt that with the market downturn of 2008 and the slow economic recovery in the last several years, many families had no choice but to dig into savings to survive. But that’s exactly one of the reasons that emergency reserve savings are so important!  Now that more people are back to work and are back to a more normal cash flow, it’s time to get back to business and build the reserves again.

How much emergency savings do you really need?   

Experts don’t always agree on an exact number, but many financial planners recommend having at least three to six months living expenses in an emergency fund, invested in cash or cash alternative investments.  For some, it is easier to pick a specific dollar amount as an achievable goal (say $10,000 or $20,000).  Clearly, the higher your monthly expenditures, the higher your reserve savings should be, especially if the majority of those monthly expenditures are non-discretionary.

Whether you are one of Michigan’s 40% with no savings, or are just someone who doesn’t have enough set aside for an emergency, start “reserving” some cash today. 

To get started, here are a few tips to consider:

• Save aggressively.  Use payroll deduction from your paycheck, if possible, or budget in savings (i.e. have an amount automatically moved from your checking to a savings or investment account on a monthly or bi-monthly basis).
• Reduce your discretionary spending.  Remind yourself that this is likely a temporary adjustment until your reserve savings reach an adequate level.
• Consider other resources until reserves are built.  Do you have cash value life insurance that you can borrow from if you have an urgent need?  Do you have other investments generating income that can be pulled off to build reserves? 

Hopefully, you’ll never have to tap into the funds you are committing to setting aside. But it is impossible to know what is around the next bend and it is always best to be prepared. The time to start (or continue) building your emergency reserves is now!  Consult a Certified Financial Planner™ for these and other ways to help save for your financial future.

Sandra Adams, CFP® is a Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012 and 2013, Sandy was named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

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Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

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 information is not a complete summary or statement of all available data necessary for making an investment decision.  Prior to making an investment decision, please consult with your financial advisor about your individual situation.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.

Tying the Knot: Have a Financially Harmonious Union

 Before all the wedding planning and guest lists and honeymoon booking there is one major decision … whether or not to tie the knot. Getting married is one of the “big” decisions in life.  Two people coming together with a host of unique characteristics and different life experiences as well as separate bank accounts and financial positions is expected. What isn’t always expected are money issues that can surface after the big day.  In a perfect world, both halves of a couple share the same values and goals when it comes to finances and money.  In real life, it doesn’t always work that way. 

To help smooth the way to a financially harmonious union, it is both practical and prudent to begin by pulling the individual areas of your finances together as one with transparency and disclosure.  This doesn’t necessarily mean a merger; however laying it all on the table prior to the wedding day provides the foundation to move forward with future financial decisions. 

Here are 5 Tips to help avoid post wedding day financial jitters:

1. Emphasize partnership and avoid the power struggle
2. Compare and contrast financial preferences focusing on understanding
3. Create a budget strategy together that prioritizes financial objectives
4. Dedicate resources to implement highest priority financial obligations, goals and dreams
5. Acknowledge the need to be flexible by balancing your deliberate strategy with emergent opportunities and challenges

While combining finances with a partner can be a touchy process, the tips provided are foundational for open communication. And they provide direction for those pursuing a transition from individual financial decision making to joint management of finances.

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Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.

Is It Time To Refinance Again?

*   Over the holidays I enjoyed some time off with my family.  This also meant I was able to do some deep thinking about my personal finances.  One question comes up every year, “Is it time to refinance my mortgage?” 

In my somewhat short adult life, depending on your perspective of course, I have asked myself this question many times.  Over my total of ten years of home ownership (two different homes), I am considering my fourth home refinance (not including financing upon purchasing the homes!) I know, I am getting tired of this process but you can’t ignore when there is a great opportunity to be had in the form of lower interest rates! 

Long-term interest rates and thus mortgage rates have continued their precipitous drop.   The chart below shows just how low our current rates are historically, a new all-time low in fact!

 Source: Ritholtz.com

*Federal Funds Rate used in chart above

But just because rates are super low, doesn’t mean a refi is right for you.  I’ll share with you my list of pros and cons that I use to help me make my refinance decision*:

Pros in Refinancing

• Lower the term of the loan
• Lower the amount of my monthly payment
• Reduce the amount of interest paid over the life of the loan
• Paying off my principal more quickly which will benefit me even if I sell the home five years from now

Cons in Refinancing

• Hassel of finding someone reputable to work with
• Seeking out competitive pricing for upfront costs as well as the long-term rates
• Taking time to sign the reams of paperwork required to refinance 

*Please keep in mind that this list is specific to my situation. Each individual's situation will vary. Please consult the appropriate professional before making a decision.

In my case the pros far outweigh the cons of refinancing.  So if you plan to stay in the home at least as long as it will take you to recoup the cost of refinancing (generally around 2 years) and prevailing rates are at least 1% lower than what you are currently paying it is worth a look.  Analyzing the amount of money I can save over the next 5-15 years was enough to inspire me to pick up the phone and get started.  I encourage you to get inspired as well if it has been a few years since your last refinance!  Take the first step and consult with a professional to determine if refinancing is the appropriate next step for you.

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The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material.  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 information is not a complete summary or statement of all available data necessary for making a decision and does not constitute a recommendation.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.

Plan to Save in 2013? Basics to Get Started

 It’s the start of a new year and we all have the best intentions. But it can be easy to let those intentions slip away by the end of January if you don’t have a plan.  

In my previous post, I addressed strategies for developing an action plan to keep your financial savings resolutions.  For even more ideas, Susan Tompor of the Detroit Free Press offers more than a dozen basic savings ideas in her recent article “13 Resolutions to Save in ’13.” All the ideas are helpful, but here is my Cliff Notes version of the top three simple strategies you can put to work:

1. Use What You’ve Got – How many of us run out and buy something new rather than take the time to look for and use what we might already have?  We tend to stash items in the pantry or in the back of the closet and then forget about it.  So, before you run out to the store to get something like a new tube of toothpaste, why not make sure you’ve used up the small tubes you’ve collected from your dental visits over the past year first?
2. Think “Just In Time” --  Our society is obsessed with stores like Costco and Sam’s Club that allow us to get tremendous “deals” by buying in bulk.  Unfortunately, this leads to overspending and overstocking our pantries with items that we then forget we have (see #1).
3. Go to Your Kids and Ask Them How to Save Money – Get the entire family involved in saving.  It’s never too early to get children involved in being fiscally responsible, and you might be surprised at the creative ideas that they come up with.

Making progress towards your larger financial goals starts with just a few small steps.  Start your steppin’ today.

Sandra Adams, CFP® is a Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012 and 2013, Sandy was named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

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Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

Financial Resolutions

 It’s that time of year again and you’ve likely made one or more New Year’s Resolutions.  If you’re like a majority of Americans, you made a resolution to achieve at least one of the following goals in 2013:

• Lose weight
• Get in better physical condition (exercise more)
• Get organized
• Get in better financial shape

A recent survey by Fidelity Investments, found that of those who made financial resolutions, over 50% set a goal of saving more money. 

Whether saving is for a short-term goal (like buying a new car) or a long-term goal (like saving for retirement), how do you avoid being one of the over 35% of Americans who have broken their resolution by the end of January?*

Try these ideas:

1. Write down the savings goals you’d like to accomplish by 12/31/2013.
2. Break your bigger goals into actionable and specific quarterly goals; assess your progress every 90 days.
3. Be accountable to a third party.  Your financial planner is the perfect person to work with to establish your annual goals and develop actionable steps to achieve those goals.  Schedule a quarterly check-in to report your progress.

Like any goal (or resolution) you make in life, putting it in writing and keeping yourself accountable is the best way to achieve success.  Make 2013 the year you keep your financial resolutions!  See my next blog for ideas on specific actionable goals for the year.

Sandra Adams, CFP® is a Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012 and 2013, Sandy was named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

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Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

*New York Times, January 2012

An Open Letter to The Big Lottery Winners

 Are you the winner (or do you just wish you were)? The recent Powerball jackpot was estimated to be about $550M.  That is $550 plus six zeros – that’s a big number!

Let’s take a look at the math and then a few suggestions on how your next steps:

If there had only been a single winning ticket, and assuming you receive your payout in 2012 and you elect the lump sum, you are looking at about $248M after federal income taxes.  Have you heard about the fiscal cliff?  Well, now that you won you might take notice.  Unless Congress elects to act and extends the Bush tax cuts, you are looking at potentially an extra $18M in federal income taxes next year – yikes!  Not that you can’t get by with only $230M – but you might race to pick up your check before 2013 hits just to be sure.  You see, the top tax rate is expected to increase to 39.6% and there is a new Medicare surtax which probably increases the tax bill by 5.5% or $18M in your case.

Some action steps you might consider:

• Get a good team on your side.  Work with a good financial planner, tax accountant, and estate planning attorney BEFORE you collect (so that means right away because the clock is ticking down to the end of the year.
• Tell your boss what you really think of him AFTER you have your money.
• Then, and this is important, give yourself a 6 month "No Decision Zone"!  That's right, hold off on making long term decisions and get your ducks, or bucks in this case, in a row.  There will be plenty of time to spend.
• Don't be a statistic!  The statistics are not on your side.  Unfortunately most lottery winners, regardless of the size of winnings, evaporate their winnings in just 2.5 years*  

 Congratulations on beating the odds.  It has been said that money is a means to an end.  With  smart decisions the means can be meaningful.  Good luck.

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*Source:  Ipsos MORI Market Research

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 Center for Financial Planning, Inc., and not necessarily of RJFS or Raymond James.  You should discuss any tax or legal matters with the appropriate professional.

What Better than the Gift of Financial Education and Support?

 I don’t know about you, but I can hardly believe that it is already time for the holidays.  It seems like just yesterday that I was racking my brain to come up with creative gift giving ideas for all of those people on my list.  I find that it is just as hard to find gifts for adults as it is for children.  But there is one gift I’ve found that transcends generations – the gift of financial education. 

I know, financial education does not sound as attractive or exciting as say, an iPad or a Wine of the Month Club membership, but it is a gift that can keep on giving for a lifetime.  What am I talking about when I suggest a gift of financial education?  Here are just a few ideas:

For Younger  Kids (elementary – high school):

• If you’re trying to stay away from more electronics, there are hundreds of books, workbooks and other resources available from Jump$tart Coalition (JumpStart.org)
• Games like Monopoly, The Game of Life, and PayDay are great (Most are available as both traditional board games or for the computer, Wii, etc.)
• Make a contribution to a 529 College Education fund to support the child’s future education.

For Older Kids (college - young adults):

• If your gift recipient has had earned income during the year, consider contributing to a ROTH IRA in their name. 
• Gift shares of a mutual fund or stock introduce them to investing and help them start an investment portfolio.
• Make a payment towards their outstanding student loan debt.

For Young Adults and Beyond:

• Fund a year of a credit monitoring service to protect their credit and financial identity from fraud.
• Purchase financial software to help them with budgeting and financial tracking (i.e. Quicken)
• Pay for a consultation with a Certified Financial Planner ™ (my personal favorite!).  This can help provide basic financial education and guidance for getting them set on the right financial path.

Giving a gift tied to financial education and support may not make you the hero of the holidays, but you can be certain that the gift will long be remembered as one that lasted long after the holiday decorations are put away for another year.

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Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.  Investments mentioned may not be suitable for all investors.