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5 Warning Signals that Signal Future Financial Woes

Red-FlagMy last blog discussed why you should have open and honest discussions about money and how it will be handled before you enter into a new life together. Here are my top 5 red flags for potential future financial trouble. Read carefully and discuss with your partner.

1. You discover your fiancé’s credit card debt is more than 10% of his income. If you ask your fiancé how much he/she pays monthly and the answer is “the minimum”, watch out. You could be paying off debt for the next 10 to 20 years of your marriage.

2. Your fiancé uses the cash advance feature on his credit cards. There is never a good reason to do this. You pay higher interest starting at day one, even if you pay your bill each month or not. This demonstrates impulsive behavior.

3. Your fiancé puts everything on a credit card and does not pay off the balance each month. He uses the excuse that he will pay it off when his bonus comes in. In the meantime, he is paying 12 to 24% interest. As the old saying goes, patience is a virtue. The new couch can be ordered, (or whatever the purchase may be) after the bonus is paid. Impulse buying gets a lot of people into trouble.

4. No savings account. If your fiancé has no savings account, no matter what their job is, that should be a red flag. It indicates they spend all (or likely more) than they earn. That habit is difficult to break and can cause major problems in the future, especially if you are a saver.

5. Refusal to make a budget, or what I like to call a “spending plan” – this goes back to #4. My number one rule is pay yourself first. My number 2 rule is don’t spend more than you earn. Some people stick their heads in the sand because they don’t want to know how deeply in debt they are!
If you have observed any of the behaviors listed below, be aware. These can be red flag indications for future financial woes!

Securities and Investment Advisory Services offered through NFP Advisor Services, LLC (NFPAS), member FINRA/SIPC. NFPAS is not affiliated with Fish and Associates. NFPAS does not provide tax or legal advice.

Know Your Fiance’s Financials

Woman Holding A Coin Bank In Each HandI was reading an article in a financial planning journal, titled “Couples Choose Love, Despite Financial Woes”[1]. In the article, 32% of people surveyed by TD Ameritrade said they would call off the wedding if their partner declared bankruptcy, while 27% said they would hesitate or postpone the wedding, and 41% said they would do neither. In other words, they would go ahead and get married. Ladies, if you fell into the 41% who would do nothing, please read on.

One of the first steps you should take before you move in with or decide to marry someone, is to discuss and be open and honest about your financial situation.470_2504872If your partner is evasive, or not willing to share financial information, this should be considered a warning signal. I’ve said this before in my blog, but it is worth repeating, “Many people are more willing to discuss their sex life than discuss their current financial situation”. Please note, just because someone is in what you perceive as a high paying position, or earns a big salary, does NOT mean they are a good stewards of money. You have to delve in deeper to understand your partner’s money personality.

In our court system, there is a process called VOIR DIRE, which means “to speak the truth”. Schedule a time to have an open discussion about both your current situations. It is imperative you share any financial baggage you have, and uncover any financial issues your partner may have. This will allow you to have a full understanding of what you are getting into from a financial perspective. Why, you may ask? Once married, your spouse’s credit rating can have a negative impact on your credit rating. You may not be able to quality for a home loan, a car loan, or a new credit card. A person with a bad driving record can cause your insurance to be cancelled. These are just a few of the consequences of being involved with a partner who does not manage their finances properly.

How do I know this? From personal experience. When I was divorced 23 years ago, my husband had charged our credit cards to the max and was not paying the bills on time. Once we were separated and ultimately divorced that became my responsibility, but the damage was already done! I was embarrassed when I could not qualify for a car loan, and when I could not refinance a 12% mortgage because of my tarnished credit history.
mzmi36oahlv8otpx9mp3I managed to pay everything off, but not without irrevocable damage (temporary, but 7 years is a long time!). This often happens post-marriage, as it did for me. You can avoid further problems with your fiancé or partner in advance by open honest discussions. This is the only way to make an informed decision if your partner’s money history is less than squeaky clean.

It is better to know and work through this on the front end then to regret it and suffer from the consequences. This is serious business and it is your financial future. Don’t take it lightly!
Check back for next week to read about the red flags to be aware of.
Securities and Investment Advisory Services offered through NFP Advisor Services, LLC (NFPAS), member FINRA/SIPC. NFPAS is not affiliated with Fish and Associates. NFPAS does not provide tax or legal advice.

[1] Couples Choose Love, Despite Financial Woes, Financial Planning;June2012, Vol. 42 Issue 6, p26, Author, Braswell, Mason

No Investment is Risk Free

I’m often asked for the secret formula to successful investing. I think Peter Lynch said it best when posted the question: “How do I make money in the stock market?” His answer was, “The key to making money in stocks is not to get scared out of them.” In addition to not being scared out of the market, you can be rewarded for buying more shares when other investors are selling. Another key to investing is understanding all the different types of investment risks. Even guaranteed investments like CDs that are FDIC insured carry risk. CDs are subject to inflation risk. If you earn 1%, inflation is 2% and you are in the 30% tax bracket. Your CDs have a negative 1.3% rate of return. That’s what we call in the investment business “going broke safely.” The moral of this story is that if you are looking for an investment without any risk, stop looking. You won’t find one.

All investments have risks – just different kinds and degrees. So it’s important to know what the specific risks are and how they can affect your portfolio.**

Market Risk: Stock market ups and downs are unpredictable. So market risk – the possibility that investments will lose value because of a decline in the securities markets – may be the risk you think about first. Choosing an appropriate investment strategy and sticking with it may help your portfolio survive a volatile market.

Interest Rate Risk: You may think you can avoid the uncertainty of the stock market by investing in bonds. But bond investments have their own risks. Changes in interest rates affect bond prices. When rates rise, prices of existing bonds fall because older bonds are paying less interest than newly issued bonds. Holding a variety of bonds having different maturity dates may reduce interest rate risk.

Default Risk: Bonds are subject to another type of risk – the risk that the bond issuer won’t have money to make principal and interest payments to bondholders. Generally, investors who buy lower rated “junk” bonds are more at risk from default than investors who hold investment grade bonds. Check an issuer’s credit rating with a bond-rating agency, such as Moody’s or Standard & Poor’s, to minimize default risk.

Inflation Risk: Over the years, the rising costs of goods and services can reduce the purchasing power of your savings. If you invest the bulk of your money in fixed income investments, you may be at risk of not earning enough to reach your long-term goals. Consider investing a portion of your money in investments, such as stocks, with the potential for earning higher returns to help reduce inflation risk.

Currency Risk: Adding international investments to your portfolio may provide diversification.* But be aware that currency exchange rates, foreign taxation issues, and differences in auditing and financial standards, among other things, can affect the value of foreign investments.

Play a role: You can’t prevent investment risk, but you can take steps to moderate it. By diversifying your portfolio, you improve your chances that gains in one asset class may offset losses in another. And, when you invest for the long term, you’ll have more time to recoup any losses.

*Diversification does not ensure a profit or protect against loss in a declining market.
**Content written by Newkirk, as distributed to Symmetry Partners, LLC.

Securities and Investment Advisory Services offered through NFP Advisor Services, LLC (NFPAS), member FINRA/SIPC. NFPAS is not affiliated with Fish and Associates. NFPAS does not provide tax or legal advice.

16 Financial Resolutions for 2016

2016-new-yearAs the end of 2015 approaches, it’s time to start thinking about how to make 2016 a success for you and your loved ones. Though there’s little consensus about their origins, we know that Americans have been making New Year’s resolutions since at least the 1770s.1 In 2015, 31% of Americans made financial resolutions.2

Here are 16 financial resolutions to help make 2016 healthy, happy, and successful:

1. Create emergency savings
Life is full of unexpected emergencies, and some extra cash can help a serious illness, home repair, or other sudden financial need from derailing your finances. Prepare for unpredictable expenses by putting aside six to eight months of expenses in an easily accessible cash-equivalent account.

2. Make a monthly budget and stick to it
Budgets may sound like a lot of unnecessary work, especially if you’re financially comfortable, but it’s quite easy to let your spending go off the rails if you’re not tracking it in some way. Set a budget and work on sticking to it for a couple of months. Don’t aim for perfection; instead, try for incremental improvement.

3. Save more for the future
Are you on track for retirement and other goals? Most Americans could stand to put more money away for the future. We recommend keeping separate “buckets” of savings for short-, medium-, and long-term goals and leveraging tax-advantaged accounts where possible. Let us know if you’d like help saving for specific goals so that we can help ensure you have the right strategy for your needs and timeline.

4. Make retirement plan contributions regularly (instead of all at once)
We believe that “time in the market” is critical to long-term investing success. Instead of waiting until the last minute to make your annual contributions, give your money more time to grow by making automatic contributions to your accounts every month.
5. Maximize your retirement plan contributions
Tax-managed retirement accounts are one the most powerful ways to save for a more comfortable retirement. Make the most of them by contributing as much as you can each tax year. We usually recommend maxing out employer-sponsored plans first to take advantage of any matching contributions your employer may offer. Give us a call if you need help understanding your retirement account options.

6. Pay down high-interest debt
High-interest debt can make it very hard to get ahead financially. If you’re carrying a lot of debt, make paying it down a priority. Contact us for help managing expenses and getting on top of your debt.

7. Set goals for the future and work with a professional to help you achieve them
In our experience, people who set goals for themselves and create strategies to pursue them are much more likely to see success.3 One study found that investors who leveraged specific financial strategies saw greater long-term financial success. Sit down with your loved ones to discuss your financial goals; when you’re ready to discuss your thoughts, call our office to schedule a no-obligation consultation.

8. Create a powerful legacy for the world
We believe that a rich life is about more than financial success and a comfortable lifestyle. Whether you want to leave something to your loved ones, or contribute to causes close to your heart, take some time to think about the legacy you will leave for the future.

9. Review your estate planning and legal documents
Your core legal documents should be regularly reviewed to make sure that they keep up with your life. If it’s been a few years since you took a look at your documents, dust them off and make sure that they still represent your wishes.

10. Review the beneficiaries of your financial accounts and insurance policies
When is the last time you updated your beneficiaries? Since beneficiary provisions are independent of your will or other estate provisions, it’s critical to keep them current. Contact us for assistance with gathering account documents and making needed updates.

11. Stay on top of your health
Healthcare is a major expense for most Americans, especially when serious illness strikes. Take steps to protect your health (and your wallet) by building a healthy lifestyle and being proactive about preventative care.

12. Protect your credit and identity
Identity theft and financial fraud are serious threats that can compromise your financial wellbeing. Protect yourself by reviewing financial statements and bills carefully for unauthorized activity. Check your credit report for free each year at www.annualcreditreport.com.

13. Review your tax strategies for potential savings
Recent changes to tax laws mean that your tax burden may have increased. Give us a call to discuss tax strategies that may help you reduce your tax burden.

14. Involve your loved ones in your finances
If you (or your spouse) don’t get involved in the family finances, it’s time to start. Work together to make financial decisions and make sure that each of you understands the overall game plan for your finances. At minimum, make sure that your loved ones know how to access financial accounts and understand your wishes.

15. Identify your goals for 2016
What do you want to accomplish in 2016? Whether you want to get a raise, go on a wonderful vacation, or spend more time with your family, take a moment now to write them down.

16. Keep your resolutions!
One study found that people keep just 8% of the New Year’s resolutions they make.4 Improve the chances that you will keep your resolutions by making your goals simple, concrete, and actionable. Instead of saying: “I will save more for the future in 2016,” say: “I will contribute $4,500 to my retirement accounts by December 31, 2016” or “I will pay off $2,000 of credit card debt by April 15.”

As 2015 draws to a close, we would like to extend our thanks for the trust and confidence you’ve placed in our firm. You’ve made this year one to remember and we are sincerely grateful for the privilege and opportunity to serve. We look forward to serving you and yours for many years to come.

If you have questions about your future or would like some support in keeping your financial resolutions, please give us a call. Together, let’s make 2016 a success.

Kind Regards,

Kathy Fish, CFP®, President


Footnotes, disclosures, and sources:
These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named representative, Broker dealer or Investment Advisor, and should not be construed as investment advice. Neither the named representative nor the named Broker dealer or Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

We have not independently verified the information available through the following links. The links are provided to you as a matter of interest. We make no claim as to their accuracy or reliability.

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

[1] http://articles.courant.com/2013-11-19/community/hcrs-82240-wethersfield-20131115_1_christmas-open-house-christmas-traditions-santa-claus

[2] https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/2015-new-year-resolutions-fact-sheet.pdf

[3] http://corporate.morningstar.com/ib/documents/PublishedResearch/AlphaBetaandNowGamma.pdf

[4] http://www.forbes.com/sites/dandiamond/2013/01/01/just-8-of-people-achieve-their-new-years-resolutions-heres-how-they-did-it/

2016 Tax Planning

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Note: Due to industry regulations on communication, we are unable to allow for public comments on this blog. Please feel free to email me your questions and/or comments to kathy@fishandassociates.com. Thank you. Securities and Investment Advisory Services offered through NFP Securities, Inc., Member FINRA/SIPC. NFP Securities, Inc. is not affiliated with Fish & Associates.

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