David Hemler, CFP®
Another year is quickly coming to a close and with it the opportunity to tackle some financial tasks you may be pretending do not need your immediate attention or you may be ignoring all together. While the New Year signifies the opportune time to tackle the things we don’t want to face, I challenge you NOT to wait. Seize the day so you aren’t faced with any of these realities in 2017, which are often the byproduct of denial and procrastination.
- Credit card debt after the holidays. – If you ignore your budget this holiday season, you will likely face the reality of increased debt come January. 52% of debt holders used a bank or credit union credit card to finance their holiday debt, while another 30% used store cards to finance, which often carry rates of 20% or more. 55% plan to take more than 5 months or just make the minimum payments, which could extend the debt to 10 years or more.1 Don’t bury your head in the sand when it comes to figuring out a holiday budget. Before you shop, have a clear plan of what you want to buy and how much you are going to spend, then stick to it!
- No will or estate plan when a loved one passes. – No one likes to think about death, though it is inevitable for all of us. Planning ahead isn’t really for us but for the ones we love. Without a will or estate plan, our loved ones can face significant challenges while grieving. Wills are not just for the wealthy. 45% of Americans with annual household incomes greater than $75,000 do not have a will.2
- Inadequate or non-existent disability insurance after an illness. Do you know if you have disability insurance and how much it covers? If you don’t, it’s important to find out today. Determining your coverage and benefit amount after a sudden illness is not a challenge you want to face.
Social Security disability payments are extremely modest with the average monthly disability benefit being $1,165.3 Most working Americans have financial commitments that account for 65% to 75% of their cash flow.4 If $1,165 does not represent 65 % to 75 % of your cash flow, you are likely in need of some additional coverage. If you think you have adequate savings to get you through, keep in mind that if you saved 10% of your income each year for 10 years, one year on disability could eliminate your savings. Don’t wait any longer to figure this out.
- Inadequate retirement savings at retirement age. While there is really no single number for everyone to aspire to, there are benchmarks to help gauge the amount of savings one would need to continue to maintain their standard of living in retirement.One rule of thumb is to assume you will need about 80% of your current annual salary each year and pursue an average of at least 4% return. The average sixty year old has an estimated median of $172,000 saved.5 Assuming one retires at age 65 and lives another 20 years in retirement, this amount would be significantly inadequate for most Americans.
I was once offered this piece of advice by a peer and it stuck with me for all the years since hearing her utter these words, she said, “When it comes to your need to save toward retirement David, you can choose the pain of discipline or you can experience the pain of regret”. Well said! Let’s make a plan for you!
- Not being invested in stocks during a bull market. – Less than half, or 48%, of American adults are invested in stocks, according to Bankrate’s Money Pulse survey. This figure includes those that have money invested in pension funds, 401(k) retirement plans, IRAs, and those owning individual stocks.6 No one has a crystal ball. If you are waiting for the opportune time to invest, you may be missing the opportune time to invest.
Our firm has the benefit of four CFP® professionals practicing as a team. As financial planners, we advocate every investor situation is unique and requires more than a cookie cutter approach. There are many strategies that can be evaluated for a given objective and desired outcome.
Obviously, one of the most important things is to gain insight on what you have been ignoring and to plan well in advance to mitigate your risk and strive to keep more of what you have. There are many things in life you can’t control, but one thing you can control is taking some time to develop a plan. A plan conceived from your goals and framed in circumstances unique to you and realistic to your financial condition is an intelligent starting point. Face what you don’t want to face today!
Sources: 1 http://www.magnifymoney.com/blog/pay-down-my-debt/holiday-debt-survey 2 http://www.gallup.com/poll/191651/majority-not.aspx 3 https://www.ssa.gov/disabilityfacts/facts.html 4 http://www.affordableinsuranceprotection.com/disability_facts 5 http://www.investopedia.com/articles/personal-finance/011216/average-retirement-savings-age-2016.asp 6 http://money.cnn.com/2015/04/10/investing/investing-52-percent-americans-have-no-money-in-stocks/
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
Stock investing involves risk including loss of principal.