What to do when you lose your income

Publicado por sam - 19/10/07 a las 01:10:15 pm

Well, it happened.  I can’t say it was a surprise.  Sales were down, and my husband was the new man on the totem pole.  He lost his job yesterday.  At this point we are officially without an income, and we have about one month’s worth of expenses left in our emergency fund before we have to break open our retirement savings.

So how are we handling this?  There are several things we’re doing to make our way through this financial mess.   First, we realize that we are on the same team.  It won’t do any good for me to blame my husband.  And it’s not any good if he blames himself.  The situation is what it is, and we need to work together if we hope to get through this without hurting our marriage.  We’re off to a good start.   Seguir leyendo What to do when you lose your income…

income job loss

The 4% Rule in Retirement Planning

Publicado por sam - 19/10/07 a las 08:10:59 am

I saw this very informative article from FinancialDominance.com. In a nut shell, the rule states that you should withdraw 4% of your nest egg in your first year of retirement and increase it annually for inflation.

If you have spent a lot of time reading about retirement planning or discussing it with your financial advisor, you have probably heard of the 4% rule. This rule causes a lot of confusion when I discuss it with family and friends. The rule itself is not complicated, but it seems that everybody has their own version of what it means and its use. I’ll try to use this post to clarify the rule and hopefully give a better understanding of its application in retirement planning.

What exactly is the 4% rule?
The 4% rule is a rule of thumb that says you should withdraw 4% of your nest egg in your first year of retirement and increase it annually for inflation. That’s it.

Where did it come from?
The 4% number is a result of a bunch of very smart people modeling how long a nest egg would last given certain withdrawal rates. From my understanding, they used a type of Monte Carlo simulation. They determined that, given a 4% initial withdrawal rate increased annually for inflation, a nest egg could last around 30 years with a decent probability. Seguir leyendo The 4% Rule in Retirement Planning…

Retirement Planning

Buy term, invest the difference?

Publicado por sam - 19/10/07 a las 12:10:59 am

By Carlos Gonzales
MoneySense
Last updated 12:13pm (Mla time) 10/15/2007

 

You often hear the phrase “buy term, invest the difference” when it comes to the debate on term versus permanent life insurance. It does make a lot of sense, but you have to remember these important points:

Buy when you’re young
Jerry Miraflor, Cocolife first vice president, gives this warning about this strategy: “I’d say, ‘be very careful’. There are a lot of very big ‘ifs’ for that statement to work. You must be young enough and healthy enough to qualify for term insurance.” Once you hit middle age, premiums for term insurance can be expensive.

Have the discipline
Saying “invest the difference” is easy; actually doing it regularly is another matter altogether. Carl Gustini, president and CEO of Manulife says, “This advice may not be generally applicable to all. If a person knows how to save regularly, buying a term insurance policy can be a good strategy, yet it boils down to the fact whether or not he or she really needs term insurance. Furthermore, most people who have this mentality neglect to invest the difference and use it for additional living expenses. This advice can be applicable for as long as the person knows how to invest the difference into another investment vehicle.” Seguir leyendo Buy term, invest the difference?…

Should you buy insurance for your child?

Publicado por sam - 18/10/07 a las 12:10:57 am

From Inquirer Money

Question: My wife and I just welcomed our first baby - and from the hospital all the way to our home, we kept getting propositioned on getting an insurance policy for our son. I have to admit it looks attractive because the premium is small. Is this a good idea? Or should I be increasing my insurance coverage instead? - Livius S.

Answer: Life insurance was designed to provide protection from financial burden when the head of the family passes away. It is said to have started in ancient Rome, when people formed burial clubs to help meet the funeral expenses of members and help the family with other payments to be made. The concept has been refined over the years into life insurance as we know it today.

Still, it is primarily for the benefit of those left behind, that they will be able to meet expenses. Children do not need life insurance. You are not dependent on your child for your income. If your child passes away, you can still continue to work and earn, and life will still go on for you.

Premiums are really low since children are young, and the risk of them passing away soon is not high. But parents don’t really need to take out life insurance in the name of their children. Seguir leyendo Should you buy insurance for your child?…

Get on track for retirement-Dump that high-fee fund

Publicado por sam - 17/10/07 a las 12:10:30 am

CNN Money offer’s a nice article about planning your retirement.

NEW YORK (Money) — Question: An adviser helped us set up an IRA account and on his recommendation we began investing in a target-date retirement fund that charges a 6.5 percent sales fee. We’ve asked him to switch us to another target-date fund that has no sales fee and invests in low-cost index funds, but he says the fund we’re in now has a shot at better returns because it’s actively managed. Do you think we should stay with the fund our adviser recommended? - Dinh Ho

Answer: The short answer: No, you shouldn’t stick with the fund your adviser recommended. I think you ought to switch to the no-load (i.e., no sales fee) target-date fund that invests in index funds immediately, if not sooner.

But I want to explain why I come to this conclusion, so that you understand I’m not just reacting out of some reflexive anti-sales fee or anti-adviser bias. I have no problem with investors like yourself paying an adviser for competent advice. Seguir leyendo Get on track for retirement-Dump that high-fee fund…

retirement

MAKING YOUR BUDGET WORK

Publicado por sam - 11/10/07 a las 02:10:24 am

Here are some tips that should make budgeting easier:

• Invest “extra” paychecks.  If you budget on four weekly paychecks per month, every thirteenth paycheck is an extra.  If you are paid biweekly, there’s an extra check every quarter.  But do not treat this “extra” money as a windfall; either include it in your regular budget or invest it.
• Make impulse buying difficult.  Start leaving your checkbook or credit cards at home.  Deposit savings in a bank that’s hard to reach.
• Pay bills when due—not before.  To make the most of a minimum balance, write out the bill as soon as it comes in, but don’t mail it until its due.
• Treat “windfalls” with care.  Don’t trust unexpected amounts such as bonuses, tax refund, and dividends as windfalls to be spending rather than impulse purchases.
• Make savings a regular “ expense”
• Allow some expenditure that require no accounting for “fun” money or personal allowance.
• Don’t try to keep track of every penny.
• Don’t try to divide a couples paychecks functionally, with one paying the mortgage and the other the auto, and so forth.  Instead, pool the funds and set up a separate expense payment account and an investment account.

KEEPING YOUR DOCUMENTS

Publicado por sam - 10/10/07 a las 02:10:35 am

As you budget, you keep better records.  Your current financial papers should all be in one place, easy to get to and easy to use.  When records are no longer current, you can remove them to a dead storage file in a closet or the attic.  You also need a safe place to keep important papers—a safe deposit box or at least a fireproof of strong box.  A master file showing how you have arranged your records can also be useful.

Many records eventually can be thrown away—Internal Revenue Service rules will often determine when.  Only the previous three years records can be requested by the IRS for routine audits; six years if income was significantly underreported; indefinitely if fraud is involved.

The more complex your financial affairs, the longer you should keep records.  And any records related to capital improvements on your home should be saved indefinitely.  You’ll need them to establish how much, if anything, you owe in capital gains tax when you sell the house (If you move into a house of equal, or higher, value, the tax is deferred.)

Web-based Personal Finance Tool

Publicado por sam - 09/10/07 a las 08:10:33 am

I’ve found a nice tool that would allow you to simplify the way you manage your finances. From their website “Financify will track everything and give you basic reports and tracking tools to help you improve on your finance tracking habits and as a end result – you will improve on your spending habits and also plan better for the future. As a user all you have to do is enter your transactions, Financify does the rest. Financify will track bank transactions, credit cards, cash transactions, people that owe you or you owe and more, an email and a password is all it takes to get started ”

Get the tool here–> Financify