Archive for Family Finances

Designing Your Own Financial Plan by Paul Ferraresi

Some people feel compelled to draft their own lifetime financial plan rather than using a professional planner.

I found a link that will walk you through some of the steps that should be considered in your planning.

This is a great tool for the “Do-It-Yourself” planners. Good luck!

http://www.aarp.org/retirement/retirement-savings/info-2017/decision-tree-a-secure-retirement-essential.html

FINANCIAL EDUCATION FOR YOUNG ADULTS by Paul Ferraresi

This is a great online program to help young adults master the basics of finance.

CashCourse (www.cashcourse.org) is a free online resource that helps young people to track spending, create budgets and, most importantly, understand how their current decisions will affect their future financial well-being.

In addition to a Budget Wizard, calculators, worksheets and the Financial Experts Wall, where students can get answers to their real-world financial questions, CashCourse has articles on everything from repaying student loans and living with roommates to choosing a career and making sense of workplace benefits.

About CashCourse

Launched in 2007 by the National Endowment for Financial Education® (NEFE®), CashCourse is non profit and non commercial – the program never charges for resources. The sole purpose of CashCourse is to give young adults the information they need to make informed, thoughtful and beneficial financial decisions aligned with their values.

CashCourse is used in more than 1,000 schools – including small private colleges, large public universities, and both two-year and four-year programs – in all 50 states. About 40 percent of CashCourse schools are community colleges.

Many schools use CashCourse in freshman orientation sessions to help new students think about how they will manage their money during their college years.

HOW TO MAKE YOUR TEEN A MILLIONAIRE Recommended by Paul Ferraresi

Washington – How To Make Your Teen A Millionaire This Summer

Published on July 31, 2017 04:29 PM; http://www.vosizneias.com

Washington – Gary Sidder set up Roth IRAs for his sons when they turned 13. Each year, the Littleton, Colorado, certified financial planner and his wife, Francie Steinzeig, a school psychologist, contributed an amount equal to whatever the two boys earned cutting lawns, shoveling snow and doing odd jobs. As the sons’ earnings increased, so did the parental contributions.

“Initially we started with $400, and now we do $5,500 for each,” the annual maximum allowable contribution, says Sidder, whose sons are 32 and 27. “Now that their accounts are worth more than $100,000 and $65,000, respectively, they do see the value of saving and starting early.”

Even if no further contributions are made, both sons could see their accounts top $1 million by retirement age, assuming conservative 7 percent average annual returns.

Financial planners know that Roth IRAs can set kids up for sound financial futures. Since children have decades ahead for money to compound, even relatively small contributions can grow large. The catches:

The kids must have earned income from real work. That includes reasonable wages or income from self-employment. The Roth contribution can’t be more than their total earnings for the year, up to $5,500.

Kids under 18 need a custodial Roth. Not all brokerages have attractive options for small accounts. Fidelity and Schwab, however, offer custodial retirement accounts with no opening or maintenance fees. Fidelity has no minimum, while Schwab requires at least $100 to open the account, and both offer commission-free trades on certain mutual funds and exchange-traded funds.

Why a Roth rather than a traditional IRA? Low-wage workers pay little if any income tax, so they don’t get much value from tax deductions, including deductible contributions to a traditional IRA. When a big upfront tax break isn’t available, it makes sense to contribute instead to a Roth. Contributions aren’t deductible, but withdrawals in retirement are tax-free.

Another important note: Retirement accounts aren’t included in federal financial aid formulas, so a child’s Roth won’t affect financial aid offers from most schools. Some private schools, however, do consider custodial Roths when calculating their offers, says college financing expert Lynn O’Shaughnessy, author of “The College Solution.” Also, withdrawals from Roths during college years would be considered income to the child and count heavily against her, O’Shaughnessy says.

HOW ROTH IRAS WORK
The ability to contribute to a Roth starts to phase out above certain modified adjusted gross income levels. For 2017, the phase-out begins at $118,000 for singles and $186,000 for married couples filing jointly.

That’s not an issue most kids have to worry about. Let’s say your daughter works 30 hours a week for the federal minimum wage of $7.25 per hour this summer and earns about $2,600 over 12 weeks.

Obviously, she won’t net $2,600 from her job. She’ll lose 7.65% to payroll taxes and want to spend some of the money she earns. But you can contribute $2,600 for her, or offer matching funds for whatever she contributes. If she continues those $2,600 contributions for the next 50 years, her Roth can grow to $1 million, assuming 7 percent average annual returns.

That far in the future, $1 million will be worth the equivalent of about $230,000 today, assuming 2.9 percent inflation. Once she’s in the working world full time, encourage her to contribute at least 15 percent of her income toward her retirement and keep doing so throughout her career.

You can talk about that with her as you’re setting up her Roth. Together you should also:

—Review her investment options. Fees can devastate small accounts and dramatically lower the amount she can accumulate over decades, so low-cost index funds or exchange-traded funds might be a good choice.

—Discuss the temptations for tapping the money. Technically, she can withdraw an amount equal to the contributions at any time without paying taxes or penalties. She also can withdraw up to $10,000 for a first-time home purchase, or money to pay college expenses, without taxes and penalties after the account has been open five years.

—Underline the payoff for leaving the money alone to grow. The best use of retirement money is for retirement, and it can grow to seven figures only if she keeps her mitts off it.

“Parents could use this to teach a valuable lesson in delaying gratification and building investments over time,” says John Gugle, a certified financial planner in Charlotte, North Carolina. “This is a marathon, not a sprint.”

GREAT WAYS TO SAVE MONEY – Recommended by Paul Ferraresi

I came across ways to save money.

Remember, if you do not physically take the savings and invest it, instead spending the savings, then, you didn’t actually “save” the money.

Today we examine 99 GREAT WAYS TO SAVE

http://www.aarp.org/money/budgeting-saving/info-2017/great-money-saving-tips.html

Insurance You Should Have by Paul Ferraresi

Most people try to buy the least amount of insurance in all areas hoping to save on premiums. But penny wise may be pound foolish…

Here is a short article written by Russell Hall. I suggest you share this with friends and family.

Most discussions of insurance and estate planning focus on the value of life insurance to your heirs. Not this one. Instead, let’s consider insurance to protect your income and assets now, and to shield your executor later.

What happens if you’re in a car accident with serious injuries or death – and it’s your fault? Expect to be sued, and to pay a large judgment. Every driver is at risk of losing bank accounts, stocks, bonds, mutual funds, rental property, and other non-exempt assets to a lawsuit.

In Texas, you may keep your homestead, pension, retirement accounts, annuities, and life insurance. However, cash distributions are not exempt, and may go to the alert creditor. You may have substantial non-exempt assets, but what good are they if you cannot spend them?

As a rule of thumb, carry liability insurance equal to your non-exempt assets plus five to ten years of income. Suppose you have a home, an IRA, a modest checking account, and $300,000 in CDs. The home and IRA are exempt from creditors’ claims. The CDs are not. That suggests at least $300,000 in liability insurance. If Social Security and IRA income total $50,000 a year, another $250,000 to $500,000 in liability insurance is indicated. Even someone of modest means may want $500,000 to $1 million in liability insurance.

The typical automobile or homeowners’ policy offers no more than $500,000 in coverage. However, our agent can often provide an inexpensive umbrella policy from the same carrier with limits of $1 to $5 million, which is more than enough for most people.

Suppose you stop driving, pay off the mortgage, and die, judgment-free, without any liability insurance. Who cares at that point? Your executor should. An executor is a fiduciary with the most dangerous, thankless task known to law. They must collect all your assets, pay all your debts, distribute the remainder to your beneficiaries and make no mistakes. As one summarized it, “Whatever happens, it’s the executor’s fault.”

Both liability and property insurance will go a long way to protect the executor, and, ultimately, your heirs. New executors should review the estate with an insurance agent. Existing policies may be adequate. If not, the executor may obtain insurance at the estate’s expense. Better though, that you yourself review your insurance, and develop a plan to protect yourself in retirement. Doing so minimizes everyone’s risk, and leaves one less task to be done when you’re gone.