Your Financial Life Planner

Real Estate can be a great investment that can provide both short and long-term income and growth. It is one of the easiest things to get capital (a loan) for and has numerous tax advantages. So where is the downside? Just like with anything, there are pros and cons with any investment.  Here a handful of things to think about when considering real estate as an investment.  At the end of the day, all investments need to make financial sense. No matter how much you like a property, make sure the numbers work. If you are looking to flip a property, are you confident in what you can sell it for when you are done? Are you confident that the repairs won't cost more time and money than you think? You will always want to have a healthy margin of safety between what you have into it and what you think you can sell it for. This way, when you learn you have to replace the roof as well, you still can make money.  If you are looking to rent a property, you will want to look at the spread between your monthly expenses (mortgage, insurance, repairs, ect) and rent income. Is the spread wide enough to be worth your time? Does it provide enough income to make up for the times that you don't have tenants or the hot water heater goes out? Do you want to manage the property yourself or hire a manager? A property manager generally costs right around 10% of rental income. Again, you will want a margin of safety so that you have some wiggle room on the deal. A huge part of making the numbers work is buying the property at a good price. If you get a deal on a property, the odds of making money are so much higher. This way, even if you decide you don't want to be involved in real estate any more, you can sell the property and at least get what you paid if not make a little money. Obviously, it is not always easy to know when you are getting a good deal. Make sure you are very familiar with the real estate prices and trends in your area. This will make it much easier to recognize a deal when you see one.  Despite what you can read on the internet, real estate is not a passive investment. It takes tremendous effort and due diligence when finding good properties, not to mention all the work to maintain the property and find and keep good tenants. With any investment, there is a risk that the property values will go down and that you won't be able to find good tenants. Real estate can become somewhat passive if you hire a property manager but you will probably want to be involved in the bigger decisions. On the upside, real estate can provide larger returns than you can typically find elsewhere if you are good at it. Because you can often use a mortgage to finance a deal, it can amplify your returns. For example, let's say you buy a property for $90,000 with cash. You put $10,000 into it to fix it up and you sell it for $120,000. You just made $20,000 on your $100,000 which is a 20% return. Now let's use the same deal but say you only put $20,000 down and financed the other $70,000. You still use $10,000 to fix it up and sell it for $120,000. Now you just made $20,000 on the $30,000 you invested which is a 66% return. The use of debt allows people to do more deals and make more off the money they invest. The downside of using debt is that you are on the hook to pay it back no matter how well the deal plays out for you.    For all these reasons, real estate can be an attractive option if someone is willing to put the time and energy into becoming an expert in their local market. Real estate is unique in the fact that varies dramatically by location. The Sierra Vista market is going to vary dramatically from other places and sometimes even within neighborhoods. This gives local real estate investors an advantage because they can become more familiar with the local nuances of the market.  Real estate as an investment is not better or worse than other investments. But there are unique...

I am a very frugal person. It is almost exhilarating for me to find a great deal on something.  But sometimes I get so focused on the lowest price that I forget the big picture. For example, sometimes I would buy the cheapest shoes but they would only last 8 months. I did not realize the worth of investing a bit more in shoes that would last for years. It not only would have saved me money over the long run but a lot of time and energy that I spent buying multiple pairs of shoes. I was penny wise but pound foolish. I was so focused on the little things that I didn't think about the big picture.  Here are a few examples of how we can all worry more about our pounds (or dollars on this side of the atlantic) and less about our short term pennies. One of the biggest issues that people run into is when they focus on their small bills (which is not a bad thing) but they rush their large ones. You can save a few hundred dollars a month by packing a lunch to work but you could save thousands by making educated decisions when buying a home or vehicles. Obviously, every dollar can make an impact, just make sure to give the large dollar item decisions the time and attention they deserve. Those decisions will affect your financial life again and again for years to come.  It may save you a lot of money in the short term to skip regular car maintenance but it is never fun to be hit with large repairs. Take the time to properly maintain and take care of your vehicles now so that you not only save yourself from big unexpected problems but your cars will last longer and have higher resale values as well.  No one likes going to the doctor but regular check ups can save a lot of money as well as health issues down the road. If you notice a small problem creep up, take care of it early. Your pocketbook and wellbeing will thank you that you did. It can be tempting to drive all over town to get the best deal on produce or gas. While not always a bad idea, we have to make sure that we aren't spending more in time and gas than what we are saving. Now, I am not saying that we should ignore the small details. The details matter and really add up over time. All I am saying is that we have to get out of the weeds and look at the big picture sometimes. This will help us stay focused on what is really important and what will make the biggest impact over a lifetime.

As the costs of a college education continues to rise, it may be tempting to ask if it is still worth it to get a degree. We all have heard stories of those that get a degree yet still struggle in the job market with their newly acquired student loans in tow.  A college degree is obviously valuable but very few things are worth an infinite price. The question is now, where is that break even point and have we reached it yet?  Let's start with the cost of a college degree. Over the last few years, the average cost of a year of in-state college, including room and board, was about $24,000.  That number is about $48,000 for a private university. And for the average University student, it takes four and a half to five years to graduate with a bachelor's degree.  That puts the average cost of a bachelor's degree well above $100,000, not to mention the lost income during that time, as well as the interest they will owe on their student loans. Now let's talk about what college provides. After graduating, the average worker with a bachelor's degree makes $30,000 more than their counterparts with only a high school diploma. Those with a masters make another $20,000 above that on average. Employment rates are significantly higher for college grads as well, not to mention all of the non-financial benefits that they get from their education. According to these numbers, even with the rising costs of education, this is still a great return on investment. The problem however, is that all majors are not created equal. Some majors, such as engineering and data analytics, skew all the results with their high salaries after graduation. Other majors, such as some liberal arts degrees, struggle to find employment that requires their specific degree and skills. Obviously there is much more to picking a major then the potential salary but it can be helpful to know that all degrees are not created equal. It is also important to note that while student loans can be a helpful tool to get through school, there are many opportunities to reduce the cost of education and reduce the need for loans. Scholarships and grants can make a huge difference especially due to the fact that you don't have to pay these back. Every year the government pays out 500 billion in federal grants to college students. Oftentimes, these grants are needs based for those with lower incomes.  Community college can be a great option as well to keep the costs of college down. It is possible to attain a bachelors from a regular 4-year institution by taking the first two years at a community college and then transferring those credits. Depending on the specific schools, community college can be less than ⅓ of the cost of a University. While college still makes a lot of sense financially, we have to remember that it is not the only option available. Trade schools are becoming an increasingly more attractive option. Especially in the recent years, we are seeing the demand for the trades increase which means that the salaries are following suit. Picking a degree or a trade and subsequently a career is definitely not just about the money, but it is one piece of the puzzle. It is important to weigh all the costs and benefits of every route to see what makes sense for you and your situation. Your job often takes up a huge portion of your life so making an informed decision today will really pay off down the road.   

Starting a family can be an exciting yet daunting thing. There are many things to think about such as the name, the nursery, and the changes to your routine that will surely come. Not to mention the unknown financial needs that it will bring as well. Especially for new parents, it can be hard to know what to expect at a time when medical expenses are climbing rapidly.  And while it is impossible to know exactly what it will cost, there are some things that every prospective parent should plan for so they can spend less time worrying about the money and more time enjoying their new addition. One of the biggest unknowns in medical bills. These vary greatly depending on the type of pregnancy and birth as well as if there are complications. It can be broken down into 3 sections. Prenatal (before birth) This will include all the ultrasounds, doctors visits, and miscellaneous things such as new clothes and supplies for the mom.  Birth A huge difference in cost will depend on whether the birth is vaginal or a C-section. The average vaginal birth averages between $5,000-$11,000 while the average C-section is between $7,500-$14,500. The price will vary as well if there are any complications. Postnatal (after birth) This will include any follow-up appointments, immunizations, and all the baby  clothes and gear that you'll need. Child care can also be a big expense if the  parents are going to be working. The average cost of childcare can range between $800-$1,300 per month.  Health Insurance Health insurance can cover many of your medical expenses depending on your plan. You will want to check with your insurance company to see what they cover and what you'll have to cover. If you are unhappy with your coverage, you may want to explore what other options are available to you.  Consider adding another layer to your emergency fund to cover any unexpected surprises that insurance doesn't cover that might come up at any point in the process.  Life/Disability Insurance Because there will be an extra bundle of joy relying on you, it often makes sense to think about extra life and/or disability insurance. That way, you can be certain that your family will be taken care of regardless of what happens. Oftentimes, this can be relatively inexpensive especially for younger parents. Overall, starting a family can be an incredible thing. There are many joys that only can be experienced as a parent. Preparing now for the financial aspect of parenthood will help you feel ready to welcome your new addition into your life.

Getting a large sum of money can be exciting and stressful at the same time. Most people have never dealt with huge sums of money and not making mistakes can be challenging. And while others believe that a bunch of money will solve all their problems, the lottery has shown that that simply isn't the case. Studies show that 33% of all those that have won the lottery end up going bankrupt. A windfall is far from a fix-all but can be a huge help in our financial life. Here are a couple of things to think about if you have a large sum coming your way. Take a Step Back These sort of life events can be very emotional, especially if they are accompanied with a loved one passing away. It often makes sense to wait for things to settle down before you make any big decisions. This will give you the time needed to think clearly about what to do next.  Get Out of Debt A windfall can be a great way to pay off your debt. Start with your highest interest rates and go from there. It is important to remember however, that your financial habits up to this point are what have gotten you to where you are today. Even with a bunch of new cash, if we don't change our underlying habits, we will end up in the exact same place that we were before. If you weren't in a good financial place previously, figure out what you have to do to not fall back to where you were.  Plan for the Future The joy from a windfall will be short-lived if we don't save any of it for the future.  Think about your goals with regards to retirement, children's schooling, vacations, charitable giving, or anything else that is important to you. Think about what is necessary to fund these goals and how you can save and invest now to get there.  Get Help Depending on where you are receiving the money, a windfall can put you in a much higher tax bracket. A pro would be able to walk you through the strategies to save a potentially large amount of money in taxes. Some windfalls (such as life insurance proceeds) are generally received tax-free, but it never hurts to talk to someone to make sure.  Especially if managing your finances isn't your strong suit, it may make a lot of sense to get help from a professional. They'd be able to help you make the decisions to not only enjoy your new wealth in the present but also to make sure you are ready for the future.  Conclusion: A windfall can improve your financial life in many ways but only if you are mentally prepared to be smart and manage it wisely. Doing so can not only bless your life but the lives' of those around you as well.   

A few months ago I wrote an article about maintaining your home to protect what is the biggest asset for most Americans. While our homes may be our biggest asset, I would argue that they aren't our most valuable one. Our most valuable asset not only affects our financial lives but every other aspect as well. It is our health.  Our bodies are the vehicle through which we experience life. It allows us to move and take in the world through our senses. When we are young, we often take our health for granted, almost assuming we'll be young forever. And then age creeps in. We are then reminded that we are all mortal and our health can and will affect our ability to think, work, and do the things we like to do. It is in our best interest to take care of our bodies the very best we can to maximise our ability to enjoy life.  We are a few reminders for all of us to improve our health. Move What we don't use, we often lose. If we don't regularly exercise and move our bodies, it grows weak and stiff. Not only will you look and feel better, your body will be far less likely to have issues if you exercise on a regular basis. This could be anything from a morning walk, 30 minutes in the gym, or 1 hours of tennis. Find something that works for you and stick to it. Protect Your Senses A huge portion of our perception of the world is almost entirely experienced through our eyes and ears. Unfortunately, these are some of the things that we start to lose as we age. We can protect our eyes by taking regular breaks from screen time and by wearing sunglasses that block UV rays. We can protect our ears by wearing ear plugs in loud environments and not listening to music too loud. These tips may seem like a hassle but you will thank yourself over and over again as you continue to enjoy your senses.  Sleep As life gets busy, it is easy to cut away at our sleep time to get another thing checked off the to-do list or to finish that Netflix show. Even though sleep can often be ignored, it is just as important as good eating and exercise. Good sleep will not only allow you to have better productivity and concentration but allows your body to recover from the days work. It plays a vital part in fighting disease and keeping our bodies healthy.  I am sure you have heard all these tips before but I think we all know that information is not what we lack to improve our health.  As Derek Sivers said, “If more information was the answer, then we'd all be billionaires with perfect abs.” If you are already a billionaire with perfect abs, feel free to ignore all 3 of my tips. But for the rest of us, we better try to do something today to improve our health. Remember, health is wealth. 

What is money? A currency? A means to exchange goods and services? Yes and Yes. But, is that all it is?  We make trades with and for money all the time. When we want goods or services, we exchange our money for it. When we need money, we generally exchange our time and energy for it. Or, our life energy. We all need money to live and we all exchange at least a portion of our life energy for it.  When we see our money as our time and energy and not just a currency, it changes how we view our purchases. When buying a new car, the question is no longer if the car is worth the $25,000 price tag, but am I willing to exchange 6 full months of my life energy for this (if you made 50k/year)?. Now, it will take the average Joe longer than 6 months to pay off a new car, but it can be helpful to remember how much life energy your purchases can represent. Are you willing to sign over 6 full years of your life energy for that house? Now, I am not saying no one should buy nice things. Some things can bring tremendous value into our lives and are completely worth the price tag. But it is important to remember what we are actually exchanging.  Money is made and lost all the time. But we never get our time back. No matter how much money you have, you can't buy a second of more time. Be intentional about how you choose to spend your life energy so that you have some left for the things that you truly care about. 

This is a crazy time for the world. A time that no one has predicted or lived through before. The global spread of the coronavirus as well as the economic consequences that are following are unprecedented. In response to these events, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was just passed into law on March 27th. This has now become the largest stimulus package of all time with provisions to pour more than 2 trillion dollars into the economy.  Here are some of the highlights. Rebate Checks Understandably, one of the most popular and already well-known parts of the act is the Recovery Rebates For Individuals. If you haven't heard, that is the portion about Uncle Sam writing checks to 80% of the taxpayers.  Here's how it works. Individuals will be eligible for a refundable tax credit of up to $1,200 while couples will be eligible for up to $2,400. That credit will be increased by $500 for every child they have that is under age 17. For example, if a couple files jointly and they have three kids. They'd be eligible for up to $3,900 ($2,400+500+500+500).  But if you noticed I did say they'd be eligible for “up to” those amounts. That is because over certain income levels, this credit will be phased out. More specifically, for every $100 a taxpayer's income these thresholds, their potential Recovery Rebate will be reduced by $5.  The thresholds where the credit will start to be phased is:  -Married Joint: $150,000 -Head of Household: $112,500 -All Other Filers: $75,000 It is important to know that the credit will be based on either 2018 or 2019 tax returns (Which ever is the most recent that the IRS has on file). If someone had income that was too high for the credit in 2018 and 2019 but were eligible based on their 2020 income, they will be eligible for the credit when they file their 2020 tax return in the spring of 2021. Individuals who have banking information on file with the IRS should only have to wait a few weeks to receive their funds while those that don't may have to wait a few months to get a check mailed.  Coronavirus Distributions This portion of the act allows individuals to distribute up to $100,000 from their retirement accounts such as IRAs and employer sponsored retirement plans such as 401(k)s. To be eligible someone would have to have been adversely affected by the virus in some way. This may include getting the virus or experiencing financial difficulty from things like being quarantined, reduced hours, or being laid off.  Normally, there are numerous rules around how individuals can access their retirement accounts before age 59 and ½. For those that qualify, the following will apply: No 10% penalty for removing funds before age 59 and ½. No 20% withholding for taxes. Whenever you take money out of pre-tax accounts, taxes will become due. Those that are eligible would be able to spread out that income between the next three years.  They would have 3 years to replace the funds they took out without penalty. No Required Minimum Distributions in 2020 For those that have retirement accounts and are over age 70 and ½ (now age 72 after the Secure act passed in 2019), you are already familiar with RMD's or required minimum distributions. This is where the government requires you to take a portion of your money out of your retirement accounts so that they can collect their portion of taxes on that money.  The CARES act completely waives the requirement for RMD's in 2020 so the individuals that this applies to will be able to keep more money in their retirement accounts for longer.  Student Loans This act also provides relief for those with student loans. It allows student loan payments to be deferred until September 30, 2020 with no pinterest interest accruing during that time. This can be a great reprieve for those that need it or a chance to get ahead of their loan while 0%...

You have worked hard your whole career looking forward to a comfortable retirement. You have patiently invested and planned diligently. You are excited to start drawing social security to reap the benefits of years of hard work. But did you know that a huge portion of your social security benefits will most likely be counted as taxable income? This is a common mistake that we see people make all the time in their retirement planning.  Because of all the misconceptions that exist about social security, here are few things that we all need to keep in mind.  It Matters When You Start Drawing It This may seem like a no-brainer but deciding when to start Social Security can make a huge difference on your benefits over a lifetime. The earliest you can start drawing is age 62, but your benefits will be reduced by every month that you begin benefits before you FRA (Full Retirement Age). Your FRA will range from age 65-67 depending on when you were born. The Social Security estimate that you can get online is your estimated monthly benefits if you start drawing at your FRA. So if you choose to delay starting your benefits until after your FRA, your benefits will increase by 8% every year up until age 70.  Some might ask, “Why doesn't everyone just wait until they are 70 to start drawing Social Security to get the highest monthly amount?” There are a couple of things to consider. Need and longevity. Some people can't afford to delay starting their benefits so they start right at age 62. This may make sense for some but they will see up to a 30% decrease in their monthly benefits because of the early start. Now, if someone starts benefits at age 70 and they pass away within a one or two years, they did not benefit much from their increased monthly amount. It is important to find a balance between your financial need and lifespan in order to maximise your benefits.  Taxes, Reductions, and More Taxes If someone takes Social Security early (before their FRA) and they continue to work, their benefits will be reduced for every dollar they make in their jobs over certain limits. In this case, their benefits would be reduced for taking them early and reduced again for earning over certain amounts. Sometimes it still makes sense to continue to work in retirement just make sure you understand these limits. Once you reach your FRA, your benefits will not be reduced because of your income.   Like I mentioned in the intro paragraph, Social Security can in fact be taxable. The equation can get complicated but for simplicity's sake, if you have income over certain thresholds, up to 85% of your benefits can be taxable. For this calculation, money that is taken out of certain retirement accounts (401(K), TSP, IRA) may be counted to push your benefits into taxable zones. When you are planning for retirement, make sure you run your numbers with taxes in mind.  Conclusion: The rules can be a bit confusing at times but please don't let this scare you into making an uninformed decision. This is a decision that can make a huge difference in your life. Because people are living longer, retirement is making up a larger percentage of our lives. It might take a little time and energy to navigate the Social Security system, but it will be one of the best investments you make as you reap the rewards of an informed decision for years to come. 

Whether we realize it or not, we all have a relationship with money. Just like food, your possessions, and the people in your life, there are certain feelings and attitudes that you associate with money. These feelings can be vastly different from person to person. Most people never stop to think about what their relationship with money looks like. Or at least never in those terms.  Some people grew up with nothing. Others had plenty plus some. Some see money as a means of survival. Others see it as a means to gauge success. Some see it as a necessary evil. Others see it as a blessing in their lives. Some see it as the reason they have to go through the 9 to 5 grind every week. Others see it as a tool to lift those around them. But if we stop and think for a moment, we might remember that money is nothing but a tool meant to ease the buying and selling of goods. It is inherently 100% neutral. Neither good nor bad. Then why do we all have vastly different experiences and feelings about money?  Everyone on earth grows up with a certain view on the world. Even the most neutral things, such as money, are seen through the lense that we have formed over our lifetime.  We all have heard the saying that money is the root of all evil. While this may be popular, I don't agree. I have seen how powerful money can be for the good. Money can change lives. It can get people proper medical treatment. It can give someone the opportunity for education. It can give the freedom of time to do things that we are passionate about. It can give security that our future will be bright. It can truly change lives. I subscribe to the adjusted version that the love of money is the root of all evil. When we obsess over money itself, we will always come away wanting, no matter how much we have. Money doesn't have the ability to fulfill or bring true joy. Don't get me wrong, money can provide a lot of comfort and opportunities, but at the end of the day, it can't and won't make you happy.  It is completely up to you what your relationship with money will look like. Define what you want your life to be and what role you want money to play. Just remember that you are the star of your life's show and don't ever let money replace what you really want out of life. Money should not be the goal. It should be a tool that can help you get to your goals. 

Popularized by the well-renowned author David Bach, the latte factor has become a big talking point over the last few years. So what is the latte factor? David Bach explains that the latte factor can be small financial decisions, like buying a latte every day, that can have a big effect over the long haul. Let's take a 19 year-old guy that just started college. He loves his Starbucks and starts every day with a latte. After reading this article, he decides to put his coffee aside and save and invest that $5.50 every day. To some, this might seem like a small change, but the results can be dramatic. Let's assume he saved  the $5.50 every day until he was 26 and then he went back to his coffee. During those 7 years, he would have saved about $14,000. That may seem like a good chunk of money but let's take this one step further. Let's say he took that $14,000, invested it, and didn't think about it again until he was 65 and ready to retire. Assuming an 8% return, his $14,000 would have grown to more than $250,000!  Now imagine if he would have saved a little bit more than $5.50 per day or would have continued to save after age 26! The results would have been even more impressive. Now, I am sure some of you are thinking, “Really, you want to take away coffee? It's the best part of my day!” For you, the latte factor may have nothing to do with coffee.  It is only an example of how powerful small changes can be. Find your latte factor. Maybe it's eating out for lunch every day, shopping online, or overpriced food at convenience stores. And again, this is not about cutting out things that you are really passionate about. Most often, it is about becoming exceptionally clear about what is truly important to you and cutting out the rest.  So many people believe that getting ahead only happens once you win the lottery or get a big inheritance windfall. This simply isn't the case for the vast majority of millionaires. Wealth is built one good decision at a time. And these decisions tend to be small decisions that compound into large differences. It is easy to look at big events in successful people's lives and to assume that one or two big things catapulted them to success. While sometimes this is true, most often big successes are preceded by decades of hard work.   My goal isn't to make life less enjoyable through cheap living, but to show you how simple it can be to get ahead and change your financial future. It just takes consistent good decisions that compound over a lifetime. Start today!

Fico released a new credit scoring system, and they claim is more accurate than ever. For us, the real question is, what has changed and how does it affect us? Let's dig into it. Credit companies are constantly trying to improve their system to better predict credit worthiness. This allows them to predict more accurately who will default on their loans and who will not.   Their new score, FICO 10, doesn't introduce any new elements but it does change the impact that certain actions can have on your score. The top three things that you need to watch out for with this new system are the following: 1. Late Payments- An occasional late payment is still not the end of the world for your credit, but now they will have a slightly bigger impact than they did before. 2.  Credit Cards- With this new system, you could be penalized at a bigger rate by not paying off your credit cards in full every month. 3.  Personal Loans- Personal loans bear a much higher weight in this new system especially if you use them to consolidate but then continue to rack up more debt afterward. It is important to note that all lenders don't use the same credit system, and even the early adopters won't be using this new system for some time. Especially with larger lenders, it often takes them years to transition into new systems. So in reality, there is no need to get stressed out about this new score. As long as you are doing the simple things we all know we should be doing to build good credit, then this new system will only help you. Having good credit can save you tons of money when making big purchases but also when applying for insurance. Nowadays, more than 90% of all auto insurance companies use credit as a factor when determining your premiums.  Especially with credit, it is easy to get overwhelmed by all the details.  Just remember, even with all these changes, having good credit comes down to three basic things. 1. Paying your bills on time every time. 2. Keeping your balances as low as possible. 3. Not applying for too much credit too often.   Wherever you are at in your credit journey, just remember that if you can consistently do these 3 things, you are on the right track to getting where you need to be. 

The Setting Every Community Up for Retirement Enhancement Act of 2019, also known as the SECURE Act, which originally passed the House in July, was approved by the Senate on Dec.19, 2019, and signed into law on Dec. 20 by President Donald Trump.  I am not going to dig too deep into the knitty gritty of this bill but I will hit some of the main points that will affect most people. The good news is that almost all the provisions of this bill are meant to make retiring easier for the general public. It has been commonly known for sometime now that many Americans are simply not  prepared for retirement. According to Vanguard, the 2019 median 401(k) balance for those ages 65 and older was just $58,035. This amount doesn't go very far, especially with the rising costs of healthcare and other expenses that become relevant in retirement. This bill should make it a little easier to make our money last. This is becoming even more important as people are starting to live longer.  One of the main highlights is that this bill will move RMD's (Required Minimum Distributions) to age 72 instead of 70 and ½. Let me translate that for you. For most retirement accounts (401(k)'s, IRA's, TSP, ect), you don't pay any taxes until you take money out during retirement. So the longer you keep your money in these accounts, the longer your money can grow without paying taxes. Once you hit the age when RMD's are required, the government requires that you take out a portion of your retirement account balance. They do this to make sure they get their piece of the pie in the form of taxes. This change allows individuals to wait until 72 before taking distributions. This gives people another year and a half to grow their money before paying taxes on any of it.  Another provision of this bill makes  it easier for businesses to offer 401(k)'s to their employees. The government now offers certain tax credits to those businesses that offer a 401(k) or SIMPLE IRA with automatic enrollment. They also made it easier for employers to allow part-time employees to participate in these plans.  The bill touches on many more areas of retirement that I won't mention here. This article is less about explaining every detail and more about introducing you to the main points. There are great online resources for those that would like to dig a little deeper.  This bill is far from a fix-all for all of America's retirement problems,  but it is a step in the right direction. Regardless of what the government does, it is important to remember that it is our responsibility to ensure our success in retirement. There are many great tools that aid in retirement planning, but it is up to us to take advantage of what is available and plan for success. 

Retirement can be an exciting but scary time. It is often difficult to know if you are ready to retire, but the sooner you start thinking about it, the easier it is to make adjustments if needed.  Here are some of the things that you should be thinking about when making this decision. The first thing to think about is if you can afford to retire. The easiest place to start is with your fixed income that you'll have in retirement. For most people, this would be a pension from their job and/or social security. Some people may want to retire before they can/should start drawing social security, so make sure you have the funds to close that gap if needed.  Maximising your social security is an entirely different topic that we'll cover in future articles. Once you know how much you'll automatically receive from these sources every month, you have to decide what amount you need/want in retirement. You'll want to think about what kind of lifestyle you'll want to live. Will you travel? Will you want to live near the ocean? What activities do you want to fill your days with? Once you know how you'd like to live, find out what amount of money it would take to make it happen. Some big things to consider are housing costs (if a home isn't paid off yet) and health care costs (especially before age 65, when you'd be eligible for Medicare).  Now that you know how much you need and how much fixed income you'll have, what will it take to fill that discrepancy? If your fixed income already covers all your retirement expenses, you are in great shape. If not, how much income per month do you need from other sources? The most common way people fill this monthly gap is through their retirement savings or investments. This could be their 401(k), TSP, IRA, or any other savings vehicle. Now the question is, can you make enough money from these investments to bridge your monthly pitfall? If yes, great! If not, how much longer would you have to work to save the appropriate amount of money?  Now, I am fully aware that I am not even addressing some huge variables such as inflation, taxes in retirement, and how you are investing your savings. These are things that you definitely want to consider but in efforts to not make this article a mile long, I am simplifying things as much as possible.    After you've run your retirement numbers, the next question is do you really want to stop working? I have seen many people retire, travel for a year, get bored, and then go back to work. Some people get bored with the stereotypical retired lifestyle and fill their time with a new hobby, working part time, or playing a sport. How do you really want to spend your time? There is nothing wrong with continuing to work or just or reading books all day in your recliner. It comes down to what fulfills you and what you'd like to fill your days with.  At this point, I am sure you are thinking, “Wow, this is a lot of work and things to think about  when it comes to retirement”. And you'd be right. It does require work and planning. But if you put in the effort now, you can enjoy an incredibly happy and comfortable retirement. Especially now as life expectancies continue to lengthen, retirement is becoming an even larger percentage of people's lives. You can reap the benefits of an incredible retirement tomorrow by putting in the effort and planning today.

How is the Roth IRA different from the regular IRA, and how can it change the game in retirement? Many people have heard of a Roth IRA but how is it different from the regular IRA? Let's get into it.  The main difference between a regular IRA and a Roth IRA is when you pay taxes. For a regular IRA, your contributions are tax deductible and you don't pay any taxes until you pull the money out (usually during retirement). For Roth IRA, your contributions are not tax-deductible when you put it in but you will never pay taxes on that money (or the money that money makes you).  For example, if you invest $100 into your normal IRA, the $100 would be tax deductible. But come retirement time, let's say that $100 has turned to $300 because it was invested. You would pay taxes on the the full $300.  Let's use the same example but with a Roth TSP. You would pay taxes on the $100 in the year that you made it. But come retirement, you would be able to take out the entire $300 without paying a penny in taxes.  Now, the million dollar question. Which is better?!? Like always, It depends. Most people believe that they will be in a lower tax bracket while in retirement so they'd like to push their taxes (using a regular IRA) until they pull their money out. What I have seen is that many people are not in a lower tax bracket because nearly all of their income in retirement (even a good portion of their social security if they make over certain amounts) counts as taxable income. Some of the only ways to ensure that you will be in a lower tax bracket in retirement is by living on less (which can be no fun for obvious reasons) or by having savings in a Roth account. Because distributions from a Roth IRA are completely tax free in retirement, you can take out as much as you'd like and it won't affect your tax bracket.   For most people it makes sense to use both a regular IRA and  Roth IRA. Let me explain why. It is almost impossible to predict what taxes will be like in retirement. Tax rates can change and your personal situation can change from year to year. Having both a regular IRA and Roth IRA gives you the flexibility to adjust where you take your money from year by year. If you have a year with higher income than expected, you can withdraw from the Roth IRA to limit your taxable income that year. Furthermore, if taxes decrease or you have less income one year, you can withdraw from the regular IRA.  Obviously there are many rules for how these accounts can and can not be used. Make sure to educate yourself on the pros and cons of each so that you can make an informed decision for your personal situation.  There are also Roth 401(k), Roth 403(b), and Roth TSP options for those that have retirement plans through their employers. These plans work in a similar way as Roth IRA's but with small variations depending on the type of plan.  Having both a regular IRA and a Roth IRA gives you the ability to be flexible in retirement and  to take advantage of opportunities that might arise along the way. And when it comes to retirement, having options can make a huge difference in what kind of life-style you are able to lead. 

 The Truth About Credit Cards Dave Ramsey is famous for telling everyone to cut up their credit cards. Is this really the best advice? Well, that depends.  I don't envy Dave Ramsey. He has a rough job. When he speaks, millions of people  are listening. Out of those millions, there are bound to be some that Dave's advice doesn't apply to perfectly. There are generally financial principles that apply to everyone, but the moment you go any deeper, the best financial decisions start to depend on individual circumstances.  Credit cards are a tool. They are not inherently good or bad. Credit cards can be a great way to build credit, get rewards, and earn cash back. In my business and personal life, we try to put as much of our expenses on a credit card to get the most from our 2%-3% cash back rewards as possible.   Another huge advantage of credit cards is the added protection. For example, if someone steals your credit card and charges $1,000,000 worth of purchases before you cancel your card, how much of that are you liable for? Federal law limits your liability to only $50 and some credit companies take that down to $0.  Now, if someone steals your debit cards and does the same thing, there are more rules for how much you are responsible for, depending on how fast you report it. Not to mention, the thief could drain your checking account, leaving you without cash to meet your short term needs. Your stolen funds will be replaced, but this process can take weeks or months.  For these reasons, I love credit cards! I encourage my wife to only use a debit card when she absolutely has to.  All this being said, there is a reason that credit card companies make hundreds of billions of dollars every year. Not everyone pays off their cards before interest starts to accrue. This is where using credit cards can become dangerous. Credit cards give us the potential power to spend beyond our means. If unchecked, this can wreak havoc on our financial lives.  Telling everyone that credit cards are bad is definitely a financially safer story. I don't blame Dave Ramsey at all for this position. I might say the same thing if I had to come up with blanket statements for millions of people.  Regardless of what anyone's opinion might be, the most important question is what is right for you? We all have to answer this for ourselves because we are 100% responsible for our own financial lives.  Just like anything in life, credit cards are merely a tool and it is up to us to decide if we are going to use that tool to bring us closer to our goals or further away.