Healthy Resolutions Can Pay Off (Literally)

If you made a New Year’s Resolution to get healthy, you may get more bang for your resolution buck than you bargained for. That’s because healthy habits can benefit your wallet as well as your body.

grandparentsbeachsq99763666The link between health and money
According to the Centers for Disease Control and Prevention (CDC), chronic conditions–including diabetes, heart disease, and cancer–account for more than 75% of all health-care costs nationwide.

Nearly half of all Americans have a chronic disease, which can lead to other problems that are devastating not just to health but also to a family’s finances. People with a chronic condition pay five times more for health care each year, on average, as those without a chronic disease.*

Many chronic diseases can be linked to four behaviors: tobacco use, excessive alcohol consumption, poor eating habits, and inactivity.* A closer look at each of these behaviors demonstrates the health-money connection.

Tobacco and alcohol
The American Cancer Society (ACS) reports that the average price of a pack of cigarettes in the United States is $6.36. That means the average annual cost for a pack-a-day smoker is more than $2,300. However, the average health-related cost to a smoker, says the ACS, is $35 per pack–or $12,775 per year for someone who smokes a pack a day.

The National Institute on Alcohol Abuse and Alcoholism defines moderate drinking as one drink per day for women and two for men. Drinking more than that can lead to health problems, including various forms of cancer as well as impairment of your brain, heart, liver, and pancreas.

Such outcomes have economic costs. The CDC reports that in 2006, the national cost of excessive alcohol consumption was $223.5 billion, 42% of which was shouldered by excessive drinkers and their families.

SONY DSCEating habits and activity level
Proper nutrition and regular exercise are vital to staying healthy, but they can also save you money. For example, reducing the amount of high-in-saturated-fat products, processed foods, and red meat in your diet can result in benefits to your heart and wallet.

Replacing high-fat ingredients in some recipes with healthier, low-cost options–such as using beans instead of ground beef–can help trim your grocery bills. And replacing high-calorie meals eaten at restaurants with meals made at home using fresh, in-season ingredients can benefit both body and bank account.

Current guidelines from the U.S. Department of Health and Human Services recommend at least 2½ hours of moderate physical activity per week. Many opportunities exist in everyday life to both accumulate active minutes and save money. Instead of driving to your destination, walk or ride a bike.

Do your own yard work or house cleaning instead of hiring help. Go for a hike or play ball with your kids rather than going to the movies or visiting an amusement park.

Long-term considerations

Chronic disease also has indirect long-term costs. Leaving the workforce for extended periods–or having to retire early–means fewer paychecks, less chance to benefit from workplace-provided retirement plans and health-care benefits, and lower earnings to apply toward Social Security benefits.

In addition, chronic diseases often necessitate home renovations, the hiring of specialized care providers, or even permanent nursing care. When viewed over the long term, taking steps today to reduce your risks of getting sick down the road may make good health and financial sense.

*Sources: Centers for Disease Control and Prevention, the Department of Health and Human Services, and the Partnership to Fight Chronic Disease

What Baseball Can Teach You about Financial Planning

Spring training is a tradition that baseball teams and baseball fans look forward to every year. No matter how they did last year, teams in spring training are full of hope that a new season will bring a fresh start. As this year’s baseball season gets under way, here are a few lessons from America’s pastime that might help you reevaluate your finances.

Sometimes you need to proceed one base at a time
NFP-Baseball0314_02There’s nothing like seeing a home run light up the scoreboard, but games are often won by singles and doubles that get runners in scoring position through a series of base hits. The one base at a time approach takes discipline, something that you can apply to your finances by putting together a financial plan.

What are your financial goals? Do you know how much money comes in, and how much goes out? Are you saving regularly for retirement or for a child’s college education? A financial plan will help you understand where you are now and help you decide where you want to go.

It’s a good idea to cover your bases
Baseball players minimize the odds that a runner will safely reach a base by standing close to the base to protect it. What can you do to help protect your financial future? Try to prepare for life’s “what-ifs.” For example, buy the insurance coverage you need to make sure you and your family are protected–this could be life, health, disability, long-term care, or property and casualty insurance. And set up an emergency account that you can tap instead of dipping into your retirement funds or using a credit card when an unexpected expense arises.

You can strike out looking, or strike out swinging
file3151239849849Fans may have trouble seeing strikeouts in a positive light, but every baseball player knows that striking out is a big part of the game. In fact, striking out is much more common than getting hits. The record for the highest career batting average record is .366, held by Ty Cobb. Or, as Ted Williams once said, “Baseball is the only field of endeavor where a man can succeed three times out of ten and be considered a good performer.”

In baseball, there’s even more than one way to strike out. A batter can strike out looking by not swinging at a pitch, or strike out swinging by attempting, but failing, to hit a pitch. In both cases, the batter likely waited for the right pitch, which is sometimes the best course of action, even if it means striking out occasionally.

So how does this apply to your finances? First, accept the fact that you’re going to have hits and misses, but that doesn’t mean you should stop looking for financial opportunities. For example, when investing, you have no control over how the market is going to perform, but you can decide what to invest in and when to buy and sell, according to your investment goals and tolerance for risk.

Warren Buffett, who is a big fan of Ted Williams, strongly believes in waiting for the right pitch. “What’s nice about investing is you don’t have to swing at pitches,” Buffett said. “You can watch pitches come in one inch above or one inch below your navel, and you don’t have to swing. No umpire is going to call you out. You can wait for the pitch you want.”

Note: All investing involves risk, including the possible loss of principal.

Every day is a brand-new ball game
When the trailing team ties the score (often unexpectedly), the announcer shouts, “It’s a whole new ball game!” Or, as Yogi Berra famously put it, “It ain’t over ’til it’s over.” Whether your investments haven’t performed as expected, or you’ve spent too much money, or you haven’t saved enough, there’s always hope if you’re willing to learn both from what you’ve done right and from what you’ve done wrong.

Pitcher and hall-of-famer Bob Feller may have said it best. “Every day is a new opportunity. You can build on yesterday’s success or put its failures behind and start over again. That’s the way life is, with a new game every day, and that’s the way baseball is.”

It’s December 31: Do You Know Where Your Money Is?

NFP-YrMoney1213_02December and January are the perfect months to look back at what you earned, saved, and spent during the past year, as W-2s, account statements, and other year-end financial summaries roll in. So before Punxsutawney Phil comes out of his burrow to predict when spring is coming, take some time to get your financial house in order.

How much have you saved?
Whether you simply resolved last year to save more or you set a specific financial goal (for example, saving 15% of your income for retirement), it’s time to find out how you did. Start by taking a look at your account balances. How much did you save for college or retirement? Were you able to increase your emergency fund? If you were saving for a large purchase, did you save as much as you expected? Challenge yourself in the new year to save a little bit more so that you can make steady financial progress.

How did your investments perform?
Review any investment statements you’ve received. How have your investments performed in comparison to general market conditions, against industry benchmarks, and in relationship to your expectations and needs? Do you need to make any adjustments based on your own circumstances, your tolerance for risk, or because of market conditions?

Did you reduce debt?
file0001117539012Tracking your spending is just as important as tracking your savings, but it’s hard to do when you’re caught up in an endless cycle of paying down your debt and then borrowing more money, over and over again. Fortunately, end of year mortgage statements, credit card statements, and vehicle financing statements will all spell out the amount of debt you still owe and how much you’ve really been able to pay off. You may even find that you’re making more progress than you think. Keep these statements so that you have an easy way to track your progress next year.

Where did your employment taxes go?
If you’re covered by Social Security, the W-2 you receive from your employer by the end of January will show how much you paid into the Social Security system via payroll taxes collected. If you’re self-employed, you report and pay these taxes (called self-employment taxes) yourself. These taxes help fund future Social Security benefits, but many people have no idea what they can expect to receive from Social Security in the future. This year, get in the habit of checking your Social Security statement annually to find out how much you’ve been contributing to the Social Security system and what future benefits you might expect, based on current law. To access your statement, sign up for a mySocialSecurity account at the Social Security Administration’s website,

Has your financial outlook changed during the past year?
Once you’ve reviewed your account balances and financial statements, your next step is to look at your whole financial picture. Taking into account your income, your savings and investments, and your debt load, did your finances improve over the course of the year? If not, why not?

Then it’s time to think about the changes you would like to make for next year. Start by considering the following questions:

1) What are your greatest financial concerns?
2) Do you need help or advice in certain areas?
3) Are your financial goals the same as they were last year?
4) Do you need to revise your budget now that you’ve reviewed what you’ve earned, saved, and spent?

Using what you’ve learned about your finances–good and bad–to set your course for next year can help you ensure that your financial position in the new year is stronger than ever.

What Can You Do to Protect Your Online Credentials from Computer Hackers?

At one time, computer hackers were viewed as a few rogue individuals who mainly worked alone. Today, many hackers are part of highly sophisticated networks that carry out well-organized cyber attacks. Unfortunately, these online security breaches can result in your username and password information being compromised.

13600012536ygwbWhenever you enter your personal information online, you’ll want to make sure that you create a strong password to protect that information. Some tips for creating a strong password include:

1) Avoid creating simple passwords that have a connection to your personal identity (e.g., date of birth, address) or that can be found in the dictionary

2) Create a password that uses a nonsense word/random alphanumeric combination or an arbitrary, easy to remember phrase with mixed-up character types (e.g., upper/lower case, punctuation)

3) Don’t use the same password for multiple websites

4) Use an online tool that allows you to test the strength of a password

If you have trouble keeping track of all of your password information or if you want an extra level of password protection, you may want to use some type of password management software. There are a variety of password managers on the market. Password managers typically work by using high-level encryption methods to store all of your online usernames and passwords on one secure server, using a single master password.

There are a few things you should consider when choosing a password manager. First, if you plan on needing your password information for use on various devices (e.g., tablet, smartphone), you will want to choose a password manager that has mobility features.

In addition, some password managers offer added benefits such as web form fillers, which can come in handy if you do a lot of online shopping. Other features to look for include automatic log in and password generator capability.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Buckets of Money: A Retirement Income Strategy

Some retirees are able to live solely on the earnings that their investment portfolios produce, but most also have to figure out how to draw down their principal over time. Even if you’ve calculated how much you can withdraw from your savings each year, market volatility can present a special challenge when you know you’ll need that nest egg to supply income for many years to come.

10106-21876When you were saving for retirement, you may have pursued an asset allocation strategy that balanced your needs for growth, income, and safety. You can take a similar multi-pronged approach to turning your nest egg into ongoing income. One way to do this is sometimes called the “bucket” strategy. This involves creating multiple pools of money; each pool, or “bucket,” is invested depending on when you’ll need the money, and may have its own asset allocation.

Buckets for your “bucket list”
When you’re retired, your top priority is to make sure you have enough money to pay your bills, including a few unexpected expenses. That’s money you need to be able to access easily and reliably, without worrying about whether the money will be there when you need it. Estimate your expenses over the next one to five years and set aside that total amount as your first “bucket.”

Safety is your priority for this money, so it would generally be invested in extremely conservative investments, such as bank certificates of deposit, Treasury bills, a money market fund, or maybe even a short-term bond fund. You won’t earn much if any income on this money.

But you’re unlikely to suffer much loss, either, and earnings aren’t the purpose of your first bucket. Your circumstances will determine the investment mix and the number of years it’s designed to supply; for example, some people prefer to set aside only two or three years of living expenses.

This bucket can give you some peace of mind during periods of market volatility, since it might help reduce the need to sell investments at an inopportune time. However, remember that unlike a bank account or Treasury bill, a money market fund is neither insured nor guaranteed by the Federal Deposit Insurance Corp.

A money market attempts to maintain a stable $1 per share price, but there is no guarantee it will always do so. And though a short-term bond fund’s value is relatively stable compared to many other funds, it may still fluctuate.

Refilling the bucket
buckets-of-change-1024x545As this first bucket is depleted over time, it must be replenished. This is the purpose of your second bucket, which is designed to produce income that can replace what you take from the first. This bucket has a longer time horizon than your first bucket, which may allow you to take on somewhat more risk in pursuing the potential for higher returns.

With interest rates at historic lows, you might need some combination of fixed-income investments, such as intermediate-term bonds or an income annuity, and other instruments that also offer income potential, such as dividend-paying stocks.

With your first bucket, the damage inflation can do is limited, since your time frame is fairly short. However, your second bucket must take inflation into account. It has to be able to replace the money you take out of your first bucket, plus cover any cost increases caused by inflation.

To do that, you may need to take on somewhat more risk. The value of this bucket is likely to fluctuate more than that of the first bucket, but since it has a longer time horizon, you may have more flexibility to adjust to any market surprises.

Going back to the well
The primary function of your third bucket is to provide long-term growth that will enable you to keep refilling the first two. The longer you expect to live, the more you need to think about inflation; without a growth component in your portfolio, you may be shortening your nest egg’s life span.

BucketTo fight the long-term effects of inflation, you’ll need investments that may see price swings but that offer the most potential to increase the value of your overall portfolio. You’ll want this money to grow enough to not only combat inflation but also to increase your portfolio’s chances of lasting as long as you need it to. And if you hope to leave an estate for your heirs, this bucket could help you provide it.

How many buckets do I need?
This is only one example of a bucket strategy. You might prefer to have only two buckets–one for living expenses, the other to replenish it–or other buckets to address specific goals. Can you accomplish the same results without designating buckets? Probably. But a bucket approach helps clarify the various needs that your retirement portfolio must fill, and how various specific investments can address them.

Note: Before investing in a mutual fund, carefully consider its investment objectives, risks, fees, and expenses, which can be found in the prospectus available from the fund. Read it carefully before investing.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. The tax information provided is not intended to be a substitute for specific individualized tax planning advice. I suggest that you consult with a qualified tax advisor.

The Financial Realities of Relocating

NSS-jobrelocationQ313_02With the housing market and overall economy starting to improve, more Americans are packing up and relocating. According to the U.S. Census Bureau, the number of people moving for a new job or transfer numbered 3.5 million in 2011-2012, up from 2.8 million the previous year.

Whether you’re planning to move for a new job or transfer, or you’re accompanying a spouse or partner who has accepted a new position, it’s important to consider how your new location will impact your bottom line.

Comparing costs
There are many costs that can vary from one geographic location to the next. Depending on where you’re moving to, you may be in for a pleasant surprise or a financial shock. Here are some things to consider:

Housing: The cost of housing is a significant financial factor in your move. Relocating from a high-cost area like New York City to a lower-cost area like San Antonio might translate into several thousand dollars’ worth of annual savings on housing costs. Also, keep in mind that if you’re buying property, higher housing costs will most likely mean higher real estate taxes.

General cost of living: Aside from housing, will other items like groceries, transportation, utilities (e.g., heating/cooling, electricity, water, cable/phone/Internet), health care, and child care cost more or less in your new location?

Juma-2_-Three-Main-State-Taxes-You-Must-Know-AboutState and local income taxes: Seven states have no income tax–Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. Other states have a variety of state and local income taxes. You can use an online paycheck calculator to get an estimate of what your net income will be in different states.

Bottom line–will your new location cost more or less? If you haven’t already negotiated your new salary, you can investigate the salary you would need to earn at your new location to maintain your current standard of living. Many online job boards have cost-of-living comparison tools where you can compare the costs of different locations.

Other considerations
You may also have other considerations that partly involve costs, for example:

Commuting time: Will your new commute be longer than your current one? In addition to costing more, a longer commute will mean less time for you to spend at home or on personal endeavors.

Family and friends: Will you be moving far away from family and/or friends? If so, there might be airfare and/or other travel costs in your future. Unfortunately, airfares at peak travel times like holidays and school vacations are typically the most expensive. You may also find yourself allocating more of your vacation time for visits with family.

Keeping up with the Joneses: No one wants to admit this is even a factor, but you might be surprised at the subtle influence this dynamic can have on your bottom line. For example, does everyone in your new neighborhood drive a certain kind of car, hire professional landscapers, or send their children to camp all summer?

Your spouse’s job prospects: Has your spouse/partner been able to find a job in your new location? If not, are there ample job opportunities for someone with his/her experience and skills?

Relocation expenses
As for how you’ll pay for the move, some employers offer relocation packages that cover the costs associated with selling your house, hiring a moving company, transporting your belongings and vehicles, finding a new house, and paying for food, fuel, and lodging along the way. If not, you’ll be on the hook. But you may be able to deduct some of your moving expenses; for more information, see IRS Publication 521, Moving Expenses.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. The tax information provided is not intended to be a substitute for specific individualized tax planning advice. We suggest that you consult with a qualified tax advisor.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2013

Do You Need a Financial New Year’s Resolution?

Welcome to my very first blog posting! Since I am launching this site at the beginning of the year, it seems fitting to post my recommendations for New Year’s resolutions. Of our many cultural traditions, the annual writing down of our self-imposed vows to improve or completely overhaul our lives is one of the most fascinating of our national past times!

I have to admit that I have never been a person too enamored with the “resolution” tradition. My lack of enthusiasm especially applies to recommendations commonly suggested by many financial websites. Much of this advice, while perfectly sound, could be offered and implemented at any time of the year and will likely not inspire you to really keep those promises during the upcoming year!

For this first blog, I found myself faced with a decision: Do I join the Financial “New Year’s Resolution” party and offer my own “top ten” (or whatever number of tips) for financial success to start 2012? Or do I become a financial “party pooper” and skip it all together? Fortunately, the choice turned out not to be that stark!

Do You Need a Financial New Year’s Resolution?It seems to me that the start of a New Year provides a chance to look at things from a broader perspective. I recommend an introspective approach to the New Year by looking at various parts of your life. Get out a pen and paper, ask yourself the following questions, and write out your answers:

  • Am I happier now than I was this time last year?
  • What goals did I achieve in the last 12 months?
  • Which goals did I fail to achieve?
  • How does my financial situation look compared to last year?
  • How satisfied am I with my career and my income?
  • What progress have I made in my career?
  • How good are my relationships with my people in my company? Business partners? Coworkers? Customers?
  • How fulfilled do I feel?
  • How is my relationship with my spouse/partner? With my children? With my friends?

Answering these questions will give you the chance to figure out where you stand and where you want to go. The purpose of the exercise is to not beat yourself up about what you didn’t accomplish, but to non-judgmentally understand what is working well and what could change in various aspects of your life.

After you write down your answers, think about and then document your personal, professional and financial goals for 2012. This process is especially important for people going through some sort of change because what you want may have changed.

You should separately write down your specific financial goals for the year, but I think you will find this process easier when they are created against the backdrop of other things that you want in life.

Think about this activity as your “resolution” for what you will do in 2012! This will be far more beneficial than if I were to advise you open an IRA account or to avoid spending $1,000 on buying Cafe Latte’s at Starbuck’s. Besides, if the Latte’s make you happy, I say drink ‘em (unless you are putting yourself in financial peril)!

Now about that IRA account……