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The saving versus paying off debt is an age-old quandary that has plagued people since the advent of consumer debt. Pose this question to a group of financial planners and the responses will be split, roughly down the middle. While there might be as many advocates for savings as there would be for paying down debt, the broad consensus will likely be that it really depends on the situation. Much of the debt reduction argument stems from simple math. If you hold consumer debt that costs you 15% and the only available savings instruments yields 1%, then it would seem to be a no-brainer to pay the higher cost debt down. For as much as you can set aside in savings, the net effect is that you would be losing 14% on the money saved. So, the sooner you could pay the expensive debt off, the sooner you can be applying your cash flow to savings. Makes sense, right? Most planners would agree that paying off high interest consumer debt should be a primary objective for all households, especially in today’s economic environment. The yields on savings accounts are stuck at historic lows and consumer debt interest rates and fees continue to rise for most people. There are two instances, however, where accelerating debt reduction should not come at the expense of savings. Saving for an Emergency Fund One lesson most people can take from this economy is that nothing is certain, especially when it comes to employment. And that

This isn’t our parents’ or grandparents’ retirement anymore. Just a few decades ago, many retirees enjoyed the full benefits of the “three-legged stool” of retirement provide by guaranteed pension payments, savings, and Social Security. In addition, they didn’t have to be very concerned with how much of their income translated into actual purchasing power because, except for the mid to late seventies, inflation was not a big factor for several reasons. Today, the three-legged stool is barely standing on two legs and inflation, even at the lowest levels, can wreak havoc on our lifestyles due to the fact we are living 12 to 15 years longer. Financial Challenges Then and Now The first reason why past generations were largely immune from inflation creep on their lifestyles was due to shorter life spans. A male retiring at age 65 in 1970 was expected to live 10 years into retirement – a female 12 years, so there was less time for inflation to have an impact. Secondly, nearly 75 percent of retirees received a guaranteed lifetime income from pension plans and many plans included a cost-of-living adjustment. For them, any retirement savings could be used as surplus. Third, back then the yield on savings vehicles were more closely linked to the rate of inflation so their future purchasing power was not impacted as much. When we fast forward to the year 2013 we find that most people have never even heard of pension plans, and the vast majority of retirees have only

The decision to go forward with your plans to start a family is a joyous one, but it can also lead to increased stress especially if your financial house has not been child-proofed. Considering that, on average, the cost of raising a child now exceeds $300,000, there’s little margin for error for most young families that have other important financial goals to achieve. There’s no reason why you should get caught off guard or caught in cash crunch as long as you plan ahead. The following family planning checklist contains what is deemed by most new parents as being the most essential steps in preparing for a new arrival: On the plus side, you will earn yourself a $3,950 dependent exemption which reduces your Adjusted Gross Income by that amount. To have that translate into extra monthly income you can use, you will need to adjust your W-4 withholding with your employer. Also, depending on your income, you may qualify for a Dependent Care Tax Credit. It would be worthwhile to check with a tax professional to determine what tax savings you might be able to realize once your child is born. A Family Emergency Fund is Your Top Savings Priority When considering all of these new family essentials, it’s easy to see how a family’s budget can increase by over $1,000 a month, and doesn’t include anything unexpected, like a medical emergency. If you’re planning to start a family you need to determine the incremental increase in your budget;

The need for retirement planning didn’t really exist until well into the 1970s. Up to that point, people worked until age 65, spent a few years in leisure through their life expectancy which was about 69. Many retirees of that era were able to coast into retirement with a cushy pension plan. Over the next few decades, as life expectancy continued to expand, as did the number of years in retirement, financial planners came up with simple rules of thumb for determining how much a person would need at retirement in order to maintain his or her lifestyle. That’s where the 70 percent rule came from. People were told that they would only need 70 to 80 percent of their pre-retirement income to preserve their lifestyle throughout their golden years. While that may have worked for retirees back in the 1970s and 80s, it could spell disaster for today’s retirees. It’s not your Grandfather’s Retirement Anymore Today’s retirees face a whole new set of financial challenges. Many are carrying mortgages and other debt into retirement. Health costs have increased nearly ten-fold. And, because we are living longer these days, health care costs will consume an increasing piece of the retirement budget. About 50 percent of today’s retirees find themselves sandwiched between their own kids, who may still be in college, or struggling to break free of the nest – and their aging parents who may require assistance in their daily living. Some retirees are actually finding that their retirement income

If you listen to any of the world’s leading investors they will tell you that nothing is more important to long-term investment success than a clear investment philosophy. More important than a sound investment strategy? Yes, they will tell you, because strategy, while important, is nothing more than a manifestation of an investment philosophy. Strategy can evolve as circumstances might warrant; however, an investment philosophy is based on the intractable belief you have in the principles and practices that guide your decision-making. In times of market upheaval and through the dark of uncertainty, your investment philosophy enables you to control your emotions, shut out the noise and focus on the things that really matter over the long term. Too often investors want to focus on the short-term outcome of their decisions when, in reality, it has very little impact on the long-term results of a well-conceived investment strategy. A random 300 point drop in the market in reaction to the news of some calamitous event, while entertaining and maybe a little disconcerting, will be nothing more than a microscopic blip along the way in a long-term time horizon. Your investment philosophy is in place to remind you of that. It can also remind you that short-term results are random and fleeting, which means you have absolutely no control over them. Instead, your investment philosophy keeps you focused on the process which is your investment strategy. If mistakes are made, you have a rational process for uncovering and learning by them.

Perhaps the most important factor in formulating your investment plan is your risk tolerance; that is, the amount of risk you’re willing to assume in order to achieve your most important objectives. More precisely, your risk tolerance is based on the your financial and emotional ability to withstand negative returns on your investment portfolio.  Before embarking on any investment strategy it is important to know your risk tolerance to ensure that you select the right kind of investments and you are able to set clear objectives. More importantly, when your investments are aligned with the proper risk-reward continuum, you’re assured of many more restful nights.  So, how do you go about determining your risk tolerance? Look at Your Time Horizon The most important determinant is time; that is, how much time you have before you will need to access the money being invested. Younger people, those with more than 30 years before retirement, are more able to withstand the swings and the cycles of the stock market because of the tendency for the market to increase over time. When the stock market declines by 20% or more in one year, as it has a few times over the last couple of decades, a younger investor has the time to allow the market to recoup its losses and forge ahead for a couple of years. Therefore, they could take a more aggressive posture towards investing by increasing their exposure to stocks. An older investor with less than 15 years before retirement

It’s tax season again, and a question we get from a number of clients after receiving their yearend statements is, “Are my investment advisory fees tax deductible?” And the answer is an equivocal, “It depends.” Congress did grant a tax deduction for certain investment expenses, but with anything to do with the tax code, the devil’s is in the details. Not to worry though, we’ll use this opportunity to settle the issue no matter your situation. In general, the tax code allows for the deduction of expenses incurred in the production of income. With regards to investment income expenses, there are essentially two types: Contrary to what may be advertised, the cost of attending seminars, on land or on water, is not deductible. Also, expenses incurred in the production of income through tax exempt investments (municipal bonds) are not deductible. There are two main requirements for taking a deduction for taking a tax deduction for investment expenses: For many investors, investment advisory fees represent their biggest deductible investment expense, but all expenses related to generating investment income can quickly add up. So it would be important to ensure you realize the full benefit of all eligible deductions. Our services include an audit of your investment expenses and we can help you maximize your deductions. However, it is always advisable to seek the guidance of a qualified tax professional for final determination of what is and what isn’t tax deductible. *This content is developed from sources believed to be providing accurate

A will is the foundation of your estate plan and it is essential if your financial affairs are to be settled in accordance with your wishes. If you die without a will, or “intestate” as the law refers to it, essentially the state becomes your executor and your property will be distributed according to its laws. Drawing up a will has become so easy, and it is relatively inexpensive, leaving very little reason why everyone shouldn’t have one. The question becomes whether you should have a living trust in addition to your will. What is a Living Trust? A living trust, or “inter-vivos” trust, is an estate planning mechanism that enables you to have your property transferred to, and managed by a trust during your lifetime. And, because it is revocable, you can change it at any time depending you’re your circumstance. After your death, the trust becomes irrevocable and all of its provisions must be carried out by a trustee who is designated by you. The key advantages of a revocable living trust: Keeps your assets out of probate: The assets owned by your trust are passed directly to your family, thereby avoiding the delays and costs of probate court. Keeps your affairs private: What goes into your trust stays with your trust, at least as far as your private financial matters. Your will is a matter of public record, but a trust is not. Keeps things running smoothly: You can arrange for a trustee to manage its assets

The current economic environment has caused most everyone to reconsider their personal finances with many people having to drastically change their spending and savings habits. Out of this economic malaise may come an opportunity to finally instill the right habits in your teens that can carry them into adulthood on the right financial footing. Just as our parents and grandparents of the Great Depression era developed deeply ingrained attitudes about finances from their experience, our teens can share in the lessons of today’s “great recession” generation. The first step is to make your teen a partner with a stake in the family financial enterprise. For most teens, it’s not about the money. Not yet anyway. It’s more about what the money can get them – weekend entertainment, clothes, toys, cars. Money, no matter its source, is simply the means for what is important to them. When the family goes through a “belt tightening” it may be an opportunity to turn these teen expenditures into teen motivators for learning about budgeting, savings and smart financial management. Get Them on Board Teens have a stake in the family’s financial picture so it is important to communicate to them the family’s goals (especially as they relate to the teen), the current situation, what has changed and why, and their role in the new financial plan. It doesn’t necessarily mean that what they have been enjoying will suddenly stop. Rather, they need to become more accountable for their expenditures and begin to gain a

As anyone would have expected, the extraordinary convergence of extreme stock market volatility, low interest rates, declining home values, diminished retirement savings accounts, and chronic economic sluggishness has taken a severe toll on the American psyche. For many investors, it may have forever altered the way in which risk is perceived and managed.Understanding your risk tolerance is one of the most important elements of investing; knowing how your risk tolerance effects your investment decisions is vital to the health of your portfolio. Risk tolerance is most prevalently understood as a measure of one’s financial ability to withstand losses. On the risk-reward continuum, the more risk one takes, the greater the reward should be expected, and vice versa. For example, an investor who can withstand a 25 percent loss in his portfolio value without it affecting his ability to meet his long-term goals may be able to invest more aggressively in order to achieve potentially higher returns than someone who couldn’t afford to lose more than 10 percent. The financial measure of risk tolerance is a function of several factors including time horizon, income, liquidity, and net worth. Generally, the more of each an investor has the more risk he may be able to assume because of the greater capacity to recoup losses. Know Your Emotional Risk Tolerance Less understood is the emotional component of risk tolerance, yet it can have far more influence over investment decisions than the financial ability component. Emotions are far more powerful than logic and can