Congratulations, You’ve made it! The countdown is over, the Times Square Ball has dropped and the sweet smell of black-eye peas are on the stove to remind you that a new year is here. Yes, you have been graced with another 365 days to try it again, get it right and excel.
During this time of the year many reflect back on unfinished business from years past to evaluate where they fell short or had personal challenges achieving success. Can I let you in on a little secret? Beating yourself up because you missed the mark on a goal or two is not going to get you on track faster. It will only prolong your progress and reduce your confidence. Now is the time to renew your passion, regain your strength and revitalize your plan.
I’m sure if you asked any of your closest friend’s what they plan to accomplish in 2016 they would probably utter one of the top 3 New Year’s Resolutions most people adopt: lose weight, become a better money manager or try something new. Unfortunately, the reason why many New Year’s resolutions are dismantled by Valentine’s Day is because they either failed to put a plan in place that would account for any of life’s mishaps. Or they lacked a support system that would help keep them accountable and on track with their goals.
Improving your financial health is no different than improving your physical health when it comes to identifying the problem, developing a plan and monitoring your status to check for improvements over time. Sure, when dealing with money you’ll find the terminology may be different in addition to understanding the technical aspects of how money works. But if you can follow a treatment plan you’re already 10 steps ahead in the game. Now, let’s take a look and examine Six Remedies for Improving Your Financial Health in 2016.
#1: Examine Your Thought-Life
When I was first introduced to the idea of the Vision Board by Life Coach, Tony Robbins I thought to myself what a fun idea. It seemed simple enough. All you needed was a few magazines, scissors, glue, a poster board and most importantly a big imagination. But soon after that thought, my memories took me back to when I was a little girl driving in the car with my mom in neighborhoods we didn’t live in. She’d say to me, “one day our house is going to be there.” And I’d say, “where in the forest?” And she’d say, “yes smart aleck in the forest.” Before you knew it the forest was cleared and contractors would be breaking ground to build our new house. I must admit, as a youngster I thought my mother was crazy. But as I matured into a woman, I realized my mother gave me the freedom to dream big. It didn’t matter to her what I or anyone else thought. When she was determined to do something, she did it.
Have you given yourself the freedom to think big? If so, what are you doing with those thoughts? I encourage you to put those thoughts to paper in 2016 and create a plan for what you want. Yes, you can get what you want regardless of who’s in office or what your current situation looks like. Is your goal to be debt-free this year? Do you see yourself better educated on your retirement or stock portfolio? Do you want to start a business or increase your savings or investing goals? Whatever you want you can have. But in order to get it you need to make sure you’re surrounded by positive people who will inspire and support you to become your best. I’m personally challenging you to stretch yourself beyond your comfort zone. See yourself in places you never thought you would be or affiliated with people you thought were beyond your reach. Yes, it can be a little intimidating at first, but you have to tell yourself you belong there just as much as they do. And when you get there you can say, it all began with just a thought.
#2: Analyze Your Cash Flow & Debt Management Habits
Shortly after graduating college I learned very early on the better you manage what you earn and spend the more opportunities you make available to yourself. What do I mean by that? The Holy Bible says it best, “the rich rule over the poor and the borrower is a slave to the lender? If you don’t manage your money well, it will manage you. Cash Flow & Debt Management is not an area that can be ignored. It is the foundation of sound financial planning and will indicate how successful you will be in your overall planning. Most find this area difficult to master because it connects more so to our emotions. This is exactly why companies pay millions of dollars to advertise during the Super bowl. They know if you can see yourself in that New 2016 Mercedes Benz, you’ll eventually make it down to the dealer just to take a look and before you know it you’re signing a $72,000 contract. Of course they knew your student loans were in forbearance and that you had major credit card debt. But you told yourself you deserved it. Now your emergency fund, disability coverage and life insurance is all wrapped up in your car note or forced to be put on a credit card that is accumulating more debt. My only prescription for this debilitating financial disease is “discipline.” It’s certainly o.k. to reward yourself for your hard work and sacrifice. But to the extent that it cripples your financial future is dangerous. Having a detailed spending plan will allow your financial professional to identify opportunities for improving your cash flow. This could include debt management solutions such as refinancing, debt consolidation or assessing your tax withholding. By creating a spending plan and curbing your emotions you may find areas where you can trim the fat and discover that you had more money than you originally thought.
#3: Perform A Tri-Annual Credit Check
We live in a nation that treats credit like cash. But let’s be real, there are distinct differences between the two. Yes, cash still rules the world, but its fraternal twin credit only has access and that’s based on several conditions. In order to maintain a good credit history, you should stay below 50% of your credit limit and maintain a good payment history. These two factors alone account for the largest scoring component of your score. Lenders also want to see that you have a good mix of credit which includes home loans, car loans and student loans. Solely having charge cards and credit cards with no assets can affect 15% of your score. The length of your credit history is also as equally important as establishing new credit. If you have a long credit history, it is essential that you do not delete lenders that you were in good standing with. Doing so could decrease your score. The scenario would be no different if you worked for a former employer for 10 years and left on good terms with positive feedback from management and your co-workers. If you knew you could count on them to say wonderful things about you, why would you leave them off of your application as a reference? You wouldn’t, so treat your good credit history the same.
During 2007-2010 we saw a major correction in the stock market as it reacted to the subprime mortgages crisis which triggered millions of delinquencies, foreclosures and an unprecedented number of job losses. Although the economy has improved since then, let’s not forget that an over extension of credit got us in over our heads. Remember to manage your credit limits and incorporate those expenses within your budget. And don’t forget to check your credit reports through Experian, Equifax & Trans Union annually through www.annualcreditreport.com. It’s best to order your reports every 4 months rather than simultaneously. This way you will be a to identify any fraudulent activity that didn’t appear in the previous months. If you’re not proactive with managing your credit, you may find financial freedom maybe further away than you desired.
#4 Take Preventive Measures & Plan for The “What If’s” in Life
When it comes to planning for the “what if’s” in life some people say I don’t know where to start, but I’m going to start soon. Then “going to” from one year goes to “going to” the next year. And in the meantime and in between time you’ve stood in the Starbucks line or bought that expensive purse and gave away your “what if” money. Then “life happens” and the proactive plan that you were “going to” put in place is now a reactive response to a death, an unforeseen illness or unexpected lay-off.
Yes, planning for the what if’s in life can be a bit overwhelming, but it is necessary. If you want to become a better money manager this year you must make up in your mind what you value and create beliefs and habits that support sound financial practices. When we discuss life insurance we know that our loved ones are irreplaceable. But when they get sick or pass away we not only bear the emotional burden of them not being here, but also the financial burden from the loss of their income. I’m sure you may have known someone who had no medical power of attorney or will and saw firsthand how much chaos and confused followed because there was no financial plan in place. If you don’t currently have life or disability insurance outside of work or a financial plan in place that brings it all together, what is preventing you from being in the same situation? During the next several weeks I will be hosting several webinars addressing various financial topics that will help motivate you to plan for the what if’s in life. These webinars are free to paid members and require registration in advance.
#5 The Remedy for Overcoming Investing Fears is Education
A few weeks ago, I presented a retirement seminar to millenniums at their employer and posed the question, when you think of the word RETIRE what does it mean to you? Initially, their responses started off with being old, not having to deal with traffic when going to work and of course spending more time with family and friends. Then I restated the question and made it more personal by putting an emphasis on the word YOU. This time their responses were much different. Before you knew it they began to paint a more colorful picture of how they would live in retirement. Someone shouted Jamaica, another said I want to pursue my passions and purpose and finally I heard someone say I don’t want to be too old, I’d like to retire at 50. I too feel that when, where and how you decide to live in retirement is personal. After all you’re the one who has made the sacrifice, so it should be up to you to retire on your own terms. But too many of us fail to answer the question that we must all answer one day and that is how will you replace the money you receive from our paycheck today to pay for the cost of goods and services 10, 20 or even 40 years from now. Experts say that you need to be saving an average of 10% -15% of today’s income to replace 75% to 85% of your paycheck to live in retirement. And women should be more aggressive savers since we live an average of 5 years longer than men.
However, knowing the facts is not enough. Too often I hear investing is too complex and I don’t want to lose money. But that same person will load up on lottery tickets to try to win their way to retirement while losing in the process. Let’s be honest, we live in a time where information is accessible by a click of a button. Google and Siri will deliver what you need if you just ask. There are also plenty of other resources such as Yahoo Finance, Morningstar.com and CNN Money that will help increase your understanding on the technical aspects of money. But you have to change your mindset and be willing to invest in learning something new. Yes, investing does have a downside. Securities can lose value due to market performance. But the fact still remains that stocks have always out performed cash and bonds. If investing is a topic that you would like to learn more about check out our website for our recommended readings or contact us for a free portfolio analysis at www.impactfulsolutionsgroup.com.
#6 A Healthy Dose of Tax Tips
With a new year comes new tax laws and regulations set forth by the IRS. This ever-changing landscape of taxes is growing increasingly difficult to understand how legislation affects clients and could possibly impact their financial future. That’s why I am constantly seeking ways to share the latest knowledge I acquire with you regarding every aspect of financial planning including taxes.
Usually during this time of year, I get particularly concerned for those who are seeking a big return at any cost. Be careful in choosing a tax professional who only promises you a high return, but does not educate you on how they arrived at those numbers. Take your time in seeking sound financial professionals who have your best interest at hand.
As a full-service financial planner I believe it’s imperative to work in collaboration with other professionals such as your CPA and Attorney. If you are in need of a Tax Professional, you may contact my office and I will be happy to service all of your financial planning needs.
Here are a few tax tips you can use as you prepare to file your return for 2015. 1. If you bought a house in 2015 make sure you provide your tax professional with all of your closing documents. You will be able to write off any points you’ve paid at closing in addition to any mortgage interest you’ve paid throughout the year. 2. If you’re a business owner you still have until April 15 to establish and fund a SEP IRA. As the employer, you can contribute up to 25% of the participant’s compensation or a maximum of $53,000 (for the 2015 and 2016 tax years), whichever is less.* Contributions are deductible as a business expense and are not required every year. Employees who are in the plan can also make personal contributions. 3. Anyone can open and contribute to an IRA even if they contributed to the 401(k) or 403(b) plan at work. If neither you nor your spouse is covered by a retirement plan at work, your deduction is allowed in full. The contribution limit for 2015 and 2016 is $5,500, or $6,500 if you’re age 50 or older. 4. If you have started to pay back your student loans, you may be able to reduce your taxable income by up to $2,500 of the student loan interest you have paid for you, your spouse, or your dependent. This also includes the one-time “loan origination fee” charged by your lender. To qualify for the deduction, the student loan on which you paid interest must be a commercial loan taken out exclusively for the purposes of paying for education. The loan may only apply to a student who is enrolled at least half-time in a degree program. The student must be you, your spouse, or your dependent. 5. The annual fee for not having insurance in 2015 is $325 per adult and $162.50 per child (up to $975 for a family), or it’s 2% of your household income above the tax return filing threshold for your filing status – whichever is greater. If you did have health insurance in 2015 be sure to submit your 1095A along with your W2 or 1099 to your tax professional so you will avoid those penalties.
It is my hope that these “Six Remedies for Improving Your Financial Health in 2016” has motivated you to examine the way you think about money and eradicate any bad money habits that may have adopted over the years. If you feel that you are on the right path to financial success, but there’s still room for improvement, I invite you to activate you BNR membership and gain access to all of the financial benefits that are available to members. Once you receive access you will be able to join our financial webinars at no cost in January & February and receive my Wealthy Living Financial Journal for only $10.00 in addition to other discounted benefits. I salute you for the courage to renew your passion, regain your strength and revitalize your plan. Remember to surround yourself with people who are committed to helping you become your best. And before you know it you’ll be helping someone else maximize their goals and improve their life.
Happy New Year!