Investor Survey: Will The Covid Recession Make Me Run Out Of Money In Retirement? Could It Change Retirement Plans For Millions Of Americans?

July 23, 2020 by Leave a Comment

As the Covid-19 crisis has gripped the world, many Americans are wondering if their savings for retirement will be up to snuff. You may ask yourself, will you run out of money? Will you have a secure retirement that will last the rest of your life?  With the world economy facing the worst challenge since the  Great Recession or, or even the Great Depression, and stock markets looking more and more like they are in a destructive bubble, sorting out retirement planning, personal finance, Social Security, financial planners, and more can seem overwhelming.

Will things get better for you in the long run? Or will the coronavirus crisis put you down for the count? Do you know how your financial advisor has performed remotely?

Are you sitting trust fund pretty? OR worrying about money in retirement, the risk of running out, long term care risks, or even covering medical expenses and paying bills?

What’s your financial world look like in this new social distancing, work from home, toilet paper shortage world? Will the stimulus the Fed is cranking out drive mega-taxes and hyperinflation down the road? Will your Roth IRA stay tax free? What will the long term impact of higher payroll taxes on small business do to your wealth trajectory?

Can you count on your income streams? Is your guaranteed income really guaranteed? For instance, if you have annuities or life insurance, you may be surprised to find that the guarantees are only so strong as the insurance company your agent steered you to. Shakier companies tend to pay higher commissions to attract business, and the low interest rates and economic downturn may stress such companies like never before.

How shaky is your income in retirement? Will your nest egg suffice, or will you have to rely on a credit card?

I don’t care how rich or secure you are, these very human questions are sure to have crossed your mind lately.

Getting solid answers is very hard to do. As I have written on here in Forbes and in my academic research, the state of American financial advisor education is tragically poor. Most have no more training than what little basic government sales license require, and over 91% do not have to put their clients’ interests before their own at all times. This is not a profession. It’s a wild west nearly anything goes industry with a horribly slimy underbelly hidden by a pinstriped suit. Even the much ballyhooed CFP®/Certified Financial Planner credential really only represents beginning, undergraduate level training, far short of the graduate degrees characteristic of true professions.

As a research PhD specializing in the wealth management world, one of my passions is to help foster a true profession, and define curricula for practitioners’ graduate degrees like “Master of Wealth Management” and “Doctor of Wealth Management.” I’m exploring this with various universities across the country, but the reality is a long way off, to say nothing of the professional regulator structures that must be built.

So my more immediate passion is to make quality, objective, PhD-grade advanced wealth education widely available. To that end, my team and I have launched what we are calling the Family Wealth Education Institute. You can check out the developing course catalog below. There’s also a link to get on the list to be notified how to register or upcoming classes. These are free and I teach them monthly on different topics.

To develop this, my daughter J. Alexis was tasked with doing some blind market research to find out what folks cared about in wealth ed. What follows is an interview-format description of her findings. These are based on the responses of some two hundred folks over 40, having at least a 4 year and some graduate degrees, with household incomes of $150,000 minimum.

What advanced wealth topics are you most interest in learning?

The top five were:

1) Estate Planning – Wills, Trusts, Tax Control – 69.39%

2) Retirement Planning – 51.53%

3) Generating Retirement Income – 48.98%

4) Asset Protection Planning – 44.90%

5) Choosing Financial Advisors – Education, Skills, Fiduciary Test, Background Checks – 38.27%

When you think about Retirement, what is the #1 question or worry that comes to mind?

Summary: When it comes to retirement, our survey group is concerned with running out of money, maintaining their standard of living or living too long other than what they planned for (95). Others are concerned we are facing another Great Depression, and that given the economy’s sad state, that they won’t have time to replace earnings. Many expressed concerns over health/impairment problems they didn’t plan on financially. Some worried that the cost of assisted living/health care will be too high, and that the government will raise taxes and curtail their ability to afford retirement.  The high cost of medical insurance was mentioned by a few, and some doubted they would actually collect Social Security. Some wondered, “am I making the right choices and decisions now? 

Other notable comments: “Can I afford someone other than a family member to manage my finances if I cannot?” “ How can I protect my nest egg from all the thieves and liars in financial services?”  “Will this corona virus go away so when I retire I can do something and still be alive?”  “Will there be money left for my family legacy?”

When you think about Investing, what is the #1 question or worry that comes to mind?

Summary: Risk, safety, and preservation of capital/principal are at the forefront of this question’s respondent’s minds. They second guess themselves when it comes to choosing the right stocks. In an unstable/volatile stock market which many worry is on the precipice of another Great Depression due to coronavirus and government missteps.  Largescale risk and not knowing who to trust or where to find legitimate and unbiased financial information is overwhelming. They are untrusting of the financial advisor world at large, fearing non-fiduciary advisors, however they are open to finding the right advisor they can trust – if only they knew how.

Other notable comments: “Taxes are concerning!” “Are advisors investing ethically and responsibly in the right companies?”  “Where to find personalized planning I can trust?”  “How much will I pay for expert advice?” “Will I have enough to leave for the education of my grandchildren?”

When you think about your estate or leaving money to your heirs; what is the #1 question or worry that comes to mind? 185 responses

Summary: Death and Taxes is the first thing that comes to mind for our pool in this question. They worry when they pass, all they have saved/gained will be taken away by Uncle Sam. They want to know how to avoid high taxes so their heirs can enjoy their wealth. They question how they can live comfortably now in retirement without spending everything they have saved, so their heirs have an inheritance and be protected. They wonder if their executor will do it the way they envision, that it will be fair, so that their heirs will not fight. They wonder how a trust works and would like to learn more about trusts. Others want to verify their trust/will is in order, and it will be easy for their heirs to execute.  Legal morass/ probate court are a concern. Will my children become trust fund babies? I want to assist but not destroy them, wondering what is reasonable to give them compared to their success.

Other notable comments:

“How can I spread out the money over time to my heirs?” “Will there be enough for my spouse when I die?” “Will they be able to find where all my account information is?”  “The legal fees involved in probate”

When you think about taxes, what is the #1 question or worry that comes to mind? 187 responses

Summary: The number one issue raised how can I minimize or avoid taxes? They wonder why they are so high, how much they will go up, taxation of their income. They ask “How can I shelter more of my income?” They fear there will be high increases coming due to political favors, tax breaks and Covid relief.  Estate tax is a big concern.  They want to understand and learn more about tax shelters, and (egad!) they want the rich to pay more. They want to be able to live on their net income after taxes.  

There you have it! A somewhat choppy, mixed bag of opinion, but quite informative none-the-less.

If you are looking for solid, no-agenda wealth education, I encourage you to take me up on my free money classes. Just click on the link below to get on the list.

To get info on the author’s free monthly online advanced wealth classes, click here.

To read his tips on the dos and don’ts of financial advisor selection, click here.

A partial list of upcoming classes appears below:

1) Mastering Wealth Management

2) Estate Planning, Wills Trusts

3) Estate Tax Control

4) Advanced Estate Tax Control for Larger Estates

5) Mastering Taxes – Converting Tax Dollars into Personal Wealth

6) Mastering Estate Gift Taxes

7) Mastering Income Taxes

8) How to Cut Property Taxes Every Year

9) Avoiding Sales Taxes on Cars, Boats Planes

10) Disability Insurance

11) The Truth About Life Insurance

12) Real Estate Investing

13) Real Estate Investors’ Tax Magic

14) Business Owners’ Investors’ Tax Magic

15) Asset Protection Risk Management 101 – Getting your insurance portfolio right

16) Advanced Asset Protection Planning 1

17) Advanced Asset Protection Planning 2

18) Annuities Pros Cons

19) Annuity Rescue Planning

20) Retirement Planning

21) Generating Retirement Income

22) Not running out of money in retirement

23) Taxes Retirement

24) Social Security Secrets for Successful Investors

25) 401(k) Trustee Risk Control

26) Business Risk Management – Insurance

27) Business Risk Management – Asset Protection Structures

28) Family Risk Management – Insurance

29) Family Risk Management – Asset Protection Structures

30) Choosing Financial Advisors – Education, Skills, Fiduciary Test, Background Checks

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Smart Money: How To Manage Your Entertainment Budget

July 23, 2020 by Leave a Comment

Tips on saving money are always helpful, especially during a global pandemic that has closed much of the world. Staying entertained is a great way to bond with family, and also to stay sane. And there are several ways to stay on a budget while still keeping everyone in the family happy.

 

Rethink Your Television Watching Choices

Sure, there is Netflix, Disney+, Hulu, Amazon Prime, Peacock. Quibi, HBO Now, Hulu with Live Tv, YouTube TV, and WWE Network, and almost 200 other streaming services, but do you really need them all? Look at all services you are subscribed to, and determine if they are all essential to have.

According to the LA Times, many services have cheaper options if you are okay with a few commercials here and there. There are also services that are free. For example, Pluto TV is a great option that won’t cost a dime. Platforms like Hulu, IMDB TV, and CBS: All Access has cheaper, ad-supported versions of their service.

 

Think Outside Of The Box

There are a lot of fun activities that can be entertaining that you may not have considered. As Nerd Wallet points out, library cards are free. And libraries are full of hours and hours of entertainment from books and music to games and audiobooks, and often, DVDs and Blu-rays.

Another fun option to stay busy is searching for free activities in your city or county. Once they start opening, many local museums, zoos, and aquariums have occasional free events. If not free, sometimes they offer discounts for locals. Also, if you are up for leaving the house and braving the outdoors, look for fun, free activities at neighborhood bars, parks, coffee shops.

 

Find Fun Activities That Can Be Done At Home

Hands down, the best way to save is to stay home  — as long as you stay away from Amazon, of course (but if you do hit up Amazon, books are always a good option, and surely there’s a lot of books that you’ve been meaning to read that you haven’t gotten to yet). And there are a number of things you can do indoors to stay entertained. Many artists and organizations are having virtual events, concerts, and watch-parties during the pandemic. I know many of us miss happy hour, so why not do it virtually? Get a Zoom account, round up your friends, and takes shots in the comfort of your home.

As i Grad points out, many zoos and museums are currently offering virtual tours.  For example, San Diego’s Zoo and the Sistine Chapel are letting people explore their grounds for free.

It’s also a great time to take all the extra time you have to learn a new skill. There are online classes to learn how to cook, learn a new language, play instruments, etc. You never know, you may come out of quarantine with a new talent.

Audio On Demand

Listening to your radio is always free! You can stream WMMR right here on our site to hear everything that rocks 24/7, or download the MMR App for videos, contests and other goodies. If you’ve got a smart speaker, ask Alexa to “Open MMR” to rock out wherever you’re at.

There’s also podcasts. If you overslept and missed the Bizarre Files or want to hear that cool interview with Pierre again, we’ve got all that covered on our podcast page. Sick of scrolling through Instagram? Try something new with the Daily Rush or Rock Breakdown.

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4 ways I’m managing my money as a financial planner

July 23, 2020 by Leave a Comment

Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, like American Express, but our reporting and recommendations are always independent and objective.

  • I don’t typically share much about my personal finances with my financial planning clients — my role is to help them figure out what to do with their money.
  • But people are sometimes curious about how financial planners manage their money, so I’m sharing four strategies that are working for me right now.
  • My husband and I live off of one income and save the other toward our goals, and we focus on two to four money goals at a time. Right now, we’re focused on funding our retirement and saving to take a year off to travel in 2023.
  • Use Blooom to analyze your 401(k) today and see how you can grow your retirement savings »

As a financial planner, I typically don’t share much about my personal finances with clients because our work is about them, not about me. It’s kind of like therapy — you tell your therapist all kinds of stuff, but you don’t really learn much about them.

That said, if you happen to be curious, here’s exactly how my husband and I approach our finances, how we’re working toward our goals, and how things have evolved over the years.

We live off of one income

When I first became a parent eight years ago, I wanted the flexibility to work part-time, so we adjusted our budget to work within my husband’s income, which wasn’t easy. We bought our first home a couple years earlier, and it was tough to live on one income. I worked part-time, and we split my income (after taxes and childcare) between a Roth 401(k) and a 529 plan for our first son. 

Once I was a few years into being a working parent and realized just how much I wanted to continue working (I love what I do), we chose to continue budgeting on my husband’s income so that we could use my income to make faster progress on our goals. It gave me a ton of satisfaction knowing that my income was helping us save for retirement, send our kids to college, and save for a home after we relocated to Santa Barbara. 

Committing to living on one income meant that we had to make some tradeoffs. We waited seven years to buy the home we’re in now, and we opted for a townhome instead of a single-family home to keep our mortgage reasonable. But living below our means enables us to sock away a lot of money for our goals, like taking a year off in 2023 to travel the world with our kids, retiring at 60 with the hope of semi-retiring at 50, and sending our kids to college someday. And that all makes it worth it for us.

We focus on two to four goals at a time

We spent the last couple of years focused on maxing out my husband’s 401(k), buying a home, buying a minivan (I finally gave in), re-topping off our emergency fund (which we do periodically), funding a 529 plan for my younger son, and refinancing our mortgage. Like I tell clients, we try to focus on two to four goals at a time, and right now we’re focused on retirement and saving for our year off. 

We’re maxing out 401(k)s

I have a solo 401(k) for my business through Vanguard, and I save 25% of my income (after business expenses and saving for estimated quarterly taxes) into that account. Saving by percentage enables me to scale my contributions up and down as my business income fluctuates. I’ll make a profit-sharing contribution at the end of the year as well. 

My husband is max-funding his 401(k) at work as well. We’ve set up his contribution as a dollar amount ($812.50 twice per month) rather than a percentage so that he doesn’t accidentally max out his account early and miss out on matching contributions towards the end of the year. 

Some 401(k) plans offer the ability to make after-tax contributions above and beyond the $19,500 limit, which is especially useful if the plan also offers in-plan Roth conversions on those dollars. My husband’s plan doesn’t offer those features, but if it did, we’d be all over it. 

Although we’ve used Roth IRAs and Roth 401(k)s in the past, we now make traditional pre-tax 401(k) contributions for three reasons. First, our income is on the higher side and we could use the tax deduction. Second, we only live on about 60% of our net income, so we anticipate being in a lower tax bracket in retirement. Lastly, we anticipate doing some Roth IRA conversions during our year off in a few years when our income will be minimal and we’ll be in a lower tax bracket. 

We’re saving for a sabbatical in three years

Once I max out my 401(k) each year, I’ll save my remaining income into our year-off savings account (a high-yield savings account at Capital One). 

We’ll use my husband’s Restricted Stock Units (RSUs) to save for our year off as well, and his bonus for our fun account (guilt-free spending money). Once our year off is funded, we’ll incorporate extra mortgage payments to get our mortgage paid off by the time we’re 60, if not sooner. 

When we return from our year off, I anticipate we’ll add a non-qualified brokerage account into the mix that we can access prior to age 59 1/2 if we are indeed able to retire early, but I’d rather stack up savings in tax-advantaged accounts now so the funds can grow tax-deferred for as long as possible.

So there you have it, this is what our finances really look like! And although this works for us, I don’t necessarily recommend that my clients do things just like we do. Every client is different, and my job is to find what works best for them, which might be different than what works for me.

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Smart Money: How To Manage Your Entertainment Budget

July 22, 2020 by Leave a Comment

Tips on saving money are always helpful, especially during a global pandemic that has closed much of the world. Staying entertained is a great way to bond with family, and also to stay sane. And there are several ways to stay on a budget while still keeping everyone in the family happy.

Rethink Your Television Watching Choices

Sure, there is Netflix, Disney+, Hulu, Amazon Prime, Peacock. Quibi, HBO Now, Hulu with Live Tv, YouTube TV, and WWE Network, and almost 200 other streaming services, but do you really need them all? Look at all services you are subscribed to, and determine if they are all essential to have.

According to the LA Times, many services have cheaper options if you are okay with a few commercials here and there. There are also services that are free. For example, Pluto TV is a great option that won’t cost a dime. Platforms like Hulu, IMDB TV, and CBS: All Access has cheaper, ad-supported versions of their service.

Think Outside Of The Box

There are a lot of fun activities that can be entertaining that you may not have considered. As Nerd Wallet points out, library cards are free. And libraries are full of hours and hours of entertainment from books and music to games and audiobooks, and often, DVDs and Blu-rays.

Another fun option to stay busy is searching for free activities in your city or county. Once they start opening, many local museums, zoos, and aquariums have occasional free events. If not free, sometimes they offer discounts for locals. Also, if you are up for leaving the house and braving the outdoors, look for fun, free activities at neighborhood bars, parks, coffee shops.

Find Fun Activities That Can Be Done At Home

Hands down, the best way to save is to stay home  — as long as you stay away from Amazon, of course (but if you do hit up Amazon, books are always a good option, and surely there’s a lot of books that you’ve been meaning to read that you haven’t gotten to yet). And there are a number of things you can do indoors to stay entertained. Many artists and organizations are having virtual events, concerts, and watch-parties during the pandemic. I know many of us miss happy hour, so why not do it virtually? Get a Zoom account, round up your friends, and takes shots in the comfort of your home.

As i Grad points out, many zoos and museums are currently offering virtual tours.  For example, San Diego’s Zoo and the Sistine Chapel are letting people explore their grounds for free.

It’s also a great time to take all the extra time you have to learn a new skill. There are online classes to learn how to cook, learn a new language, play instruments, etc. You never know, you may come out of quarantine with a new talent.

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Kids, Educating, Saving And Investing by Alyce Phillips | Sponsored Insights

July 22, 2020 by Leave a Comment

Today in this world we are currently living in, we as parents worry about the Fall and if our kids are going back to school and what kind of education they will be receiving. Since that is still up in the air as to how, when, and where they will be learning, we as parents will be partnering with the teachers on how to educate our children. While some of us don’t have a teaching degree, we can teach them an invaluable lesson in life, budgeting, saving, and investing.
 
Parents worry about kids from the time they’re born whether they will be safe, will they be liked by peers, what college they’ll be accepted in to, and the list can go on and on. Do we worry about their value of money and how they will handle their finances as they get older? What about preparing them for the eventual transfer of wealth if we are all so lucky enough to leave a legacy to give to our children? It’s difficult to get children to spend time learning about money at a young age, but it’s important. The better money management skills they have by the time they graduate from high school, the better off they will probably handle it in college and down the road. 
 
First, it is never too young to begin wealth education with your children. The first time children learn to manage money is usually through an allowance. Once the amount is established for an allowance, talk about the goals that have been discussed and practice these skills with their allowance. They will learn how to save their money, budget it for things they may want, or give a portion to charity.

In terms of saving and investing, a very important concept for them to understand is the power of compounding and how that makes such a difference over time! The time value of money is an invaluable lesson. Just like trying to “catch up on sleep.” You can’t. The sleep you’ve lost is gone. No one can gain time back – for sleep or investing!

And surprisingly, items usually cost a lot more than children realize. A good practice may be to have your child guess what the bill is next time you visit a restaurant. Perhaps they will think harder about going out when they start becoming responsible for paying the bill! As the younger children become tweens and teenagers, have a discussion on taxes – items really cost about 30% more than what you pay for them because you are paying for them in after-tax dollars. When a child enters the work force and receives his or her first paycheck, it’s usually a rude awakening! 
 
The next step in the process of educating your children is to have a family meeting where all participants would be invited. This would be the opportunity to be completely open and honest and to discuss your family values about money, saving, and investing in the future. After defining your family values, develop a Family Mission Statement with input from all the family members that would be affected by the family wealth. (The suggested age for the youngest child to become involved in the family discussions would be between the ages of ten to twelve.)
 
There are three important goals to consider when discussing financial education with your children:
 
1. To help your children to lead a purposeful and fulfilling life
2. To give them the tools and skills to be knowledgeable
3. To help them practice and become involved in the family’s 100+ year plan
 
All parents want their children to be set for life once they are no longer able to financially care for them. However, we need to caution them on how to lead a purposeful satisfying life. To tell your children that they will never have to worry about money is setting them up to be uneducated about finances and potentially lazy. We want them to avoid the pitfalls that could come in the future in the way of manipulation from unwanted sources, which could be future spouses, friends that want to help, and business opportunists wanting to gamble with their inheritance.

If your children are educated early, they will be able to weed through and know who is looking out for their best interest. It is always good to surround yourself with trusted advisors. Once the family mission statement has been established, then it is time to develop the financial expectations for your children to realistically uphold, depending on their ages. These goals could range from how to talk about money, saving and investing money, what a budget is used for (short term and long term), retirement plans, and how to protect your financial investment.  Again, special emphasis should always be placed on your specific family values.
 
For those that have older children that are working and going to school, you can discuss the importance saving and putting away for retirement. Some of our young clients are still paying off school debt and ask if they should pay off loans before contributing to their company 401-k plan. We share the importance again of the time value of money so it’s important to do both; contribute as much to the 401-k as possible while chipping away at the debt. Many companies match contributions, and that is free money!  
 
Many kids are visual and especially when they are young, these concepts are foreign. David Bianchi, a Miami attorney, created a book “Blue Chip Kids: What Every Child (and Parent) Should Know about Money, Investing, and the Stock Market.” He and his wife wrote the book when they realized their 13-year-old was not learning anything about money and investing in school. Unfortunately, that is usually the case for most of us. So, that’s one resource that is not too textbook-like for a teen.

As parents, we somehow need to stress the importance and satisfaction of building up savings and investments so that they are financially comfortable later in life. Preparing children for the future should be a continuous endeavor. If you follow these steps, hopefully, they will become financially secure and be able to make good financial decisions.
 

Old North State Trust, LLC (ONST) periodically produces publications as a service to clients and friends.  The information contained in these publications is intended to provide general information about issues related to trust, investment and estate related topics.  Readers should be aware that the facts may vary depending upon individual circumstances. The information contained in these publications is intended solely for informational purposes, is proprietary to ONST and is not guaranteed to be accurate, complete or timely. 
 
As Marketing Director, Alyce works to develop, budget, and implement marketing plans, which include advertising, coordination of conferences, special events, and development and maintenance of marketing materials. She also oversees the company’s website, in-house articles, and fostering community initiatives within the organization. Alyce received a BS degree in Interior Design from East Carolina University with a concentration in Business Administration and obtained her teaching certification from UNCW. Old North State Trust professionals have many years of experience and for over a decade have assisted clients in identifying and reaching their financial goals. For more information, visit www.oldnorthstatetrust.com or call 910-399-5470.

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It’s Nine O’Clock: Do You Know Where Your Money Is?

July 22, 2020 by Leave a Comment

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How much money should I have in my savings account?

July 21, 2020 by Leave a Comment

Saving is one of the fundamentals of long-term financial success. The real question, though, is how much should you put into your savings account?

There’s no one right answer. How much you set aside depends on a number of factors, including your income, current expenses and other circumstances. As you try to figure out how much money you should have in your savings account, here are a few things to keep in mind.

Determine how much to put in savings

Figuring out what to set aside in savings starts with your goals. What are you saving for — and how do you know what the “right” number is?

Katie Brewer, CFP, and owner of the financial planning firm Your Richest Life, suggests having one account for an emergency fund and one for short-term goals, like a vacation or a new deck.

“Keep your long-term and short-term money separate so you have dedicated goals,” Brewer says. “This will help you focus more on what’s needed in each area.”

How much should be in your emergency savings?

First, Brewer says it’s important to start with an emergency fund and decide what amount you’re comfortable with putting in there. The well-known rule of thumb is to have three to six months’ worth of expenses set aside in an emergency fund.

Kevin L. Matthews II, an author and founder of financial education website Building Bread, says that you might need to modify the rule of thumb, depending on the situation.

“Really, now that we’ve seen how fragile the job market can be, padding out that emergency fund is even more important,” Matthews says. “I’d strongly consider building an emergency fund of nine months’ worth of expenses, or more.”

In order to come to that number, look at your current situation. To start, Matthews recommends looking through your past few months’ of expenses to get a feel for where the money is going and deciding how much you need. Brewer says a simpler method is to simply use your take-home pay as the yardstick. Either way, it’s important to come up with a goal you can begin working toward.

Be careful, though. Some experts warn that you don’t want to put too much into a savings account. Once you reach your goal, consider whether putting some money into a taxable investment account might help you earn a better return if you have the risk tolerance.

How much should you set aside for short-term goals?

One the other hand, deciding how much you need to set aside for your short-term goals might be a little more straightforward. Brewer suggests opening a separate account for those types of goals. If you’re saving up for a specific purchase, such as a car or a vacation, you can calculate how much to set aside each month based on when you want to make the purchase.

You can also set up a system where you just keep setting aside money for goals that are more nebulous but could require some larger outlay of cash in the months to come.

“If you’re meeting your emergency fund goals and other financial goals, consider setting aside money each month toward short-term goals in a fun fund,” Brewer says. “That way, you’re always prepared for something spontaneous, and it can be a backup emergency fund, just in case.”

Ideas to grow your savings

When growing your savings, the first thing to do is look for a high-yield savings account where you can keep the money.

“Rates are dropping everywhere because of the current situation,” Matthews says. “However, you can still get more for your money when you look for a high-yield account. Start there, earning more than you’d get at your more traditional bank.”

Set small goals

Next, figure out how you can set anything aside to make it manageable, Matthews recommends. He points out that many people look at the end goal of a savings account and become overwhelmed by the big number. Instead, just get in the habit of setting aside money and building toward your goal.

“It may take you some time, it could take you 12 months,” Matthews says. “The important thing is that you’re growing toward that point. Start small and as you get used to the habit, increase your regular contribution.”

Make savings transfers automatic

As Brewer sees it, the best way to grow your savings is to make it automatic. Figure out when you can have money automatically moved from your checking account to a savings account. For some people, it makes sense to have that transfer take place once a week, with smaller amounts of money. Others plan their transfer for payday so that it coincides with the way employers manage other withholdings from the paycheck.

“Just make sure you don’t have to think about it,” Brewer says. “The best way to grow your savings is to not have to remember to pay yourself. When it’s automatic, you don’t need to worry about whether there’s something left over.”

Plan for unexpected windfalls

Finally, create a plan to use unexpected windfalls to boost your savings accounts. You don’t have to put everything into reaching your savings goals, but you can put a portion of each work bonus, tax refund or inheritance into your account. Brewer suggests deciding on a percentage, such as saying 60 percent will go toward debt reduction, 25 percent toward savings and the remaining 15 percent to something more immediate. There’s no hard and fast rule, though. The important thing is to have some sort of plan that helps you prioritize building your savings.

How to choose the best savings account

Deciding where to put your money is the final hurdle. You know you need to save and you have a rough idea of how much you can set aside each month, but where do you stick your funds?

Brewer says one place to start is to put your money in an account that isn’t connected to your checking account.

“While it might seem convenient to open an account where you have your checking, it also makes it too easy to just get at the money,” Brewer says. “Consider opening an account, especially for your emergency fund, where there’s an extra step that forces you to think about it before you access the money.”

Matthews points out that getting too hung up with interest yields might not be the best approach. While you can open a high-yield account and ought to look for an account with a competitive rate, constantly switching things around can be counter-productive.

Other items to consider, Matthews suggests, include:

  • Fees: Look for accounts that don’t charge maintenance fees. Matthews also says that some accounts won’t charge ATM fees, and those can save you money.
  • Customer service: Consider opening an account with an institution with good customer service. If there’s a problem, can you talk to someone or at least get help with online chat?
  • A good mobile app: Find an institution with a good mobile app that is easy to use so you can manage your account.

“Customer service and a good app become really important right now,” Matthews says. “With the current pandemic, you can’t just walk into a bank and take care of business.”

In the end, putting money in your savings account is about making the most of your finances and using your resources to reach your goals. Figure out what makes sense for you and work out a plan to make it happen.

Featured image by Dean Drobot of Shutterstock.

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Plum raises $10M for its ‘smart’ money management app

July 21, 2020 by Leave a Comment

Plum, the London and Athens-based fintech that offers a ‘smart’ money management app to help you improve your “financial resilience,” has raised a further $10 million in funding, as it gears up for European expansion.

The new round is led by Japan’s Global Brain, and the European Bank for Reconstruction and Development, which has participated in previous Plum funding rounds.

In addition, the company has received further funding from early backer VentureFriends, matched by the U.K. taxpayer via the U.K. government’s Future Fund scheme. Plum has raised $19.3 million in total since being founded by Victor Trokoudes (an early TransferWise employee) and Alex Michael in 2016.

Launched in the U.K. the following year, Plum is one of a number of fintech startups that is vying to become a user’s financial hub or control centre, in a way that goes far beyond the first generation of personal finance manager apps and bank account aggregators.

You link the app to you bank account and gain access to a range of functionality including savings, investments and analysis of your utility bills to help you make better purchasing decisions. Like similar apps, Plum’s “artificial intelligence” also deems what you can afford to save by analysing your bank transactions. It then puts money away each month in the form of round-ups and/or regular savings.

You can open an ISA investment account and invest based on themes, such as only in “ethical companies” or technology. Another related feature is “Splitter,” which, as the name suggests, lets you split your automatic savings between Plum savings pots and investments, selecting the percentage amounts to go into each pot from 0-100%.

In a call with Trokoudes, he talked me through a few recent Plum updates that he says bring it much closer to fulfilling its financial control centre mission and being a candidate to replace your individual banking apps.

Crucially, you can now link all of your accounts to Plum, whereas previously Plum only let you access a single linked bank account. This gives you “full visibility” of your saving, spending and investments all in a single app.

One the roadmap is also the ability to make payments via Open Banking — and Trokoudes doesn’t rule out a Plum card in the future as a complimentary feature with additional benefits, not a core offering, unlike numerous competitors.

More immediately, Plum is launching interest for savers who use Plum to set money aside but don’t want to invest any or all of it. Paid users are being offered an interest rate of 0.6% for instant access savings and 0.75% for 95 days notice. Plum users on its free tier can earn 0.35% interest.

Trokoudes explained that there’s also the option to split a percentage of the money put aside automatically, allocating deposits between the new interest-bearing account and Plum-powered investments.

Meanwhile, armed with fresh capital, Plum plans to launch in Spain and France by the end of 2020. The company claims 1 million registered users in U.K., and now employs more than 60 people split across London, U.K. and Athens, Greece. Trokoudes tells me it will scale up further to 80 employees by the end of 2020 and is aiming for 5 million users across Europe by the end of 2021.

Adds Naoki Kamimaeda, partner and Europe office representative at Global Brain Corporation: “More users have started using fintech apps and personal financial management apps across the globe, to be more efficient and be better off. Among these fintech apps, Plum has a very unique position and very bold ambition to be a partner of individuals to save more money and manage their financial life in an easier and more effective manner”.

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How Robo-Advisors Manage Your Money In A Downturn

July 21, 2020 by Leave a Comment

Investing can often seem like an intimidating endeavor that’s pretty much out of reach for anyone who doesn’t have a cool $50,000 lying around somewhere. After all, most brokerages and financial advisors require pretty high initial investments that can be a deterrent for people who are short on extra cash and are just starting out in the job market. And while saving is a smart choice for building up an emergency fund or working toward a short- to medium-term goal like a vacation or a wedding, the sooner you can start investing for your long term future the better. If you’re asking yourself when you should start investing, the answer is: right now.

But of course, the whole process can seem pretty intimidating, and high fees and exorbitant initial investments may put off even the most enthusiastic but cash-strapped budding investor out there. Enter: the robo-advisors.

What Is A Robo-Advisor?

Automated investing is offered by firms sometimes called “robo-advisors.” While the term “robo-advisor” sounds very futuristic, like some kind of Terminator-style robot who follows you around and tells you when to buy or sell stock, the reality is actually a little bit more boring but way more helpful.

Let’s pull apart the term first: the term itself is actually quite misleading. Robo-advisors are actually just digital advisors. That means that you go online, you go through a risk survey, you get assigned a risk level, but with many robo-advisors you have access to financial advice or support. So while a lot of the process of signing up and developing a portfolio is automated by firms in the robo-advising sector, there are still live humans behind the whole operation who you can speak to in order to get real-life advice when it comes to your money.

No Terminator robots. No buying stocks by yourself on a trading platform. Best of all robo-advisors off the same tax-advantaged accounts as regular advisors from (401Ks, TFSAs RRSPs)

Where Robo-Advisors Invest Your Money

Another contributor to those low costs is the fact that automated investing services usually stock up their portfolios with ETFs (exchange-traded funds), which have low costs and help keep management fees nice and low—often at a fraction of what a traditional mutual fund would charge. ETFs also help ensure that your portfolio is nice and diversified, which is a “risk-reducing” strategy that helps ensure you’re not placing all of your eggs in one basket and are instead spreading your money out across the entire market. And since most ETFs are index funds, this means they include assets from established market indexes— clients are putting their money into a wide variety of investments.

Some automated investing services also perform automatic portfolio rebalancing for free, which can be tedious and pricey with professional investment advisors. Couple that with low-to-no minimum investments, and you’ve got yourself an investing opportunity that’s open to anyone, regardless of their budget and income.

What happens in a downturn or when the market moves?

I’s nonetheless understandable that people might still be hesitant about entrusting their money with an online service, especially something that has the name “robo” or “automated” in it. What happens when markets take a turn for the worse? How do robo-advisors react? The short answer is: Nothing. And while the thought of an online service that’s in charge of managing your money is going to do exactly nothing as markets suddenly take a turn for the worse, that’s actually the best financial strategy out there.

Most advisors will agree that market timing is not a good investment behavior. If you intend on having a passive investing style it’s always more important to focus on your time horizon and your risk tolerance, because if you’re investing for retirement, that’s 20-30 years away. What happens today and in the next three months doesn’t make a difference.

At the end of the day, there are still real-life humans—experts, actually—behind the algorithm who are well-versed in the ups and downs of the market and know that panicked behavior is the worst investment strategy there is. Historically, markets have always trended upwards. Especially if you’re investing for the long run, short-term market turns shouldn’t bother you at all. And while it may be scary to see your money suddenly take a dip, panic-selling would be even worse. After all, markets will rise again. Sticking with a well-diversified portfolio (which is what robo-advisors specialize in) will help you ride out the temporary highs and lows.

In the recent COVID-19 market dip many robo-advisors out-performed expensive mutual funds and major market indexes like the Dow Jones and the SP 500. This is probably due to the high level of diversification in their portfolios. While stocks dipped bonds generally did alright and so most robo-advisor portfolios didn’t see such a dramatic dip.

Also keep in mind that most robo-advisors are members of the Canadian Investor Protection Fund (CIPF), which covers accounts up to $1 million against bankruptcy. A robo-advisor is just as safe as any other brokerage, with the added bonus of lower fees and modern, convenient accessibility.

Who Do Robo-Advisors Work For?

Many robo-advisors have a client base that’s composed of young professionals. That’s because their accounts aren’t huge at the moment, and no one wants to service them.

Big advisors tend to take on minimum account sizes, so they don’t get access to it.” And while it makes sense that the primary demographic who uses robo-advisors are young professionals who are just starting out in their financial journey and don’t have a lot of disposable income lying around, the low fees, easy access, and professional experts behind the algorithm make robo-advisors an appealing choice for anyone looking to invest, whether it’s $500 or $50,000 or even a million.

The Advantage of Robo-Advisors: Low Fees, High Convenience

But how do automated investing services actually work? Well, like almost anything that’s online these days works: Through an algorithm.

When you sign up, you answer an in-depth survey that’s meant to calibrate your specific risk level, your financial goals, your income, and your spending habits. Based on those answers robo-advisors can tailor a portfolio to different risk levels, and the risk level will dictate how many long-term returns they can expect, but also how much losses they can see in the short term. That means you never need to learn how to buy stocks or figure out which ones to buy. Plus, the convenience of being able to do it all — signing up, checking your balance, deposit and withdraw funds, contact an advisor — from your phone or laptop, without ever even having to get off your sofa, is a big draw for a lot of us who are already accustomed to doing most of our shopping and banking online anyway.

Another big draw, especially for those on a bit of a budget? Significantly lower costs, especially when compared to other popular investment vehicles like managed mutual funds. The lower costs are due to a couple of factors: First off, by virtue of being completely online, automated investing services save a lot on expenses such as real estate. That means that those savings can be passed on to clients.

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How to Manage Your Personal Finances With Microsoft’s ‘Money in Excel’ Feature

July 20, 2020 by Leave a Comment
(Image: Microsoft)

If you want to manage your financial accounts without a full-featured and expensive program like Quicken, Microsoft has a solution called Money in Excel. This new option helps you integrate your bank accounts and other financial data so you can track your expenses, spending habits, investments, and more.

Access to your financial accounts is performed through a third-party plugin provided by Plaid, which handles permissions between you and Microsoft. You connect your financial data to Plaid, but Plaid does not share login credentials with Microsoft. (For more information about the security and privacy aspects of this feature, check out Microsoft’s Money in Excel FAQ.)

As a premium Excel template, Money in Excel is available to Microsoft 365 Personal and Family subscribers in the US only. The feature is also only on desktop; it won’t work on a mobile device. Here’s how to use Money in Excel to manage your personal finances right from a spreadsheet.

Get Money in Excel

Before you can start using Money in Excel, you must first add it to your instance of Excel. Grab the Money template by going to Microsoft’s Money in Excel page and signing in as a Microsoft 365 subscriber. Click Edit in Browser to add the template to the browser-based version of Excel or click Download to get it for the desktop version of the program. Both versions work the same way.

If you want to use Money in Excel anywhere from any computer, choose the browser-based version. If you want to restrict it to just specific computers on which Excel is installed locally, go with the download option.

After choosing the browser version, click the Continue button to add the template. With the download option, download and then open the downloaded XLTX file in Excel, then click Enable Editing to add the template. Once you have the template set up, click the Welcome and Instructions tabs at the bottom of the worksheet to learn more about Money in Excel.

In the right pane for New Office Add-in, click Trust this add-in, then click Get Started. Hit the Sign in button and log in with your Microsoft account.

Connect Your Financial Accounts

Now you must connect your financial accounts to Excel. The right pane will explain how Plaid will connect to your financial accounts and how Microsoft uses Plaid. Click Continue through each screen to proceed through the setup.

The next screen presents a list of banks. Choose the bank at which you have an account to incorporate your financial information. If you don’t see your bank listed, type its name in the Search field at the top and select it from the results.

Sign in with your bank account credentials and click Submit. Then choose how you want to receive a security code to authenticate your identity. You can select email, phone call, or text. Click Continue, then enter the code in the appropriate field and click Submit. 

If you have more than one account at the bank you chose, click the accounts you want to view in Excel. After the data has been accessed, review the listed accounts.

Click the three-dot icon and select Hide account for any accounts you don’t wish to incorporate. Otherwise, click Update Workbook.

View and Filter Data

Your transactions from the accessed accounts then appear in the workbook, specifically in the Transactions worksheet. Click the tab for Transactions and scroll through each transaction to view the date, merchant, category, amount, account, account number, and institution.

Note that the necessary header row and data filtering are automatically turned on in the worksheet, allowing you to change the sort order in each column. Click the down arrow next to a column heading to change the order between: oldest and newest or newest and oldest; A to Z or Z to A; and smallest to largest or largest to smallest.

You can also filter the results to see only certain transactions. For example, click the down arrow for the column heading for Account and change the filter to show only checking or only credit card transactions.

Next, you can filter the results to show only transactions in a certain range. As an example, click the down arrow for the column heading for Amount, move to Number Filters, then select a criteria, such as Greater Than.

Type a number to see only amounts greater than the number you entered. Click the down arrow for the column heading and choose Clear Filter to remove the filter.

Charts and Categories

Click the Snapshot tab to view charts and graphs showing your spending for a certain month compared to the previous month. To view a specific month, click the down arrow for the month listed at the top and change it to a different month. You can also see where and how you spend your money for the month.

You can add your own custom categories to track specific transactions by clicking the Categories tab. Go to the section for Custom categories. In the first field in the Category Name column, type the name of the new category. Then in the Category Type column, select the type for your new category, such as Income or Expense.

Then go to the Transactions sheet. Click the down arrow next to a transaction to which you want to apply one of the new custom categories and select that category from the list.

Update Data and Change Settings

If you ever want to add or change any information in the workbook, check out the right-hand pane. Click the Update button to update your spreadsheet with the latest transactions. New financial accounts can always be added by clicking the Accounts tab and selecting Add an account.

Add supplementary templates to calculate net worth and recurring expenses under the Templates tab. The For You tab shows you the top merchant on which you spent money, and the Settings tab allows you to view and modify key settings.

Finally, be sure to save your workbook before you close it so you can open and update it each time you want to review your financial accounts, transactions, and spending pattern.

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