Steps to get your credit rating back toward 720.  

We all know the value of a good credit score. We all try to maintain one. Sometimes, though, life throws us a financial curve and that score declines. What steps can we take to repair it?

Reduce your credit utilization ratio (CUR). CUR is credit industry jargon, an arcane way of referring to how much of a credit card’s debt limit a borrower has used up. Simply stated, if you have a credit card with a limit of $1,500 and you have $1,300 borrowed on it right now, the CUR for that card is 13:2, you have used up 87% of the available credit.1

Carrying lower balances on your credit cards tilts the CUR in your favor and promotes a better credit score. If you borrow less than 30% of a card’s debt limit per month, it will help you. If you borrow less than 10% of the debt limit on a card per month, it will help you even more.

Review your credit reports for errors. You probably know that you are entitled to receive one free credit report per year from each of the three major U.S. credit reporting agencies – Equifax, Experian, and TransUnion. You might as well request a report from all three at once. About 20% of credit reports contain mistakes. Upon review, some borrowers spot credit card fraud committed against them; some notice botched account details or identity errors. Mistakes are best noted via postal mail with a request for a return receipt (send the agency the report, the evidence and a letter explaining the error).1,2

If you have been doing the right things, tell your creditors to report them. If you fail to pay your bills, your creditors will let the major reporting firms know. What if you unfailingly pay the bills on time for a year – will they tell the major reporting firms about that?

Quite often, “good behavior” goes unrecognized by certain creditors while “bad behavior” gets a quick red flag. Urging a creditor to report the things you are doing right to the credit reporting firms can aid the comeback of your credit score.1

Think about getting another credit card or two (but not too many). Your CUR is calculated across all your credit card accounts, in respect to your total monthly borrowing limit. So if you have a $1,200 balance on a card with a $1,500 monthly limit and you open two more credit card accounts with $1,500 monthly limits, you will markedly lower your CUR in the process. Alternately, you could lower your CUR a bit by keeping just one credit card, but asking that card issuer to raise your debt limit. Refrain from trying to open several new lines of credit at once – that could actually harm your score more than help it.1

Think twice about closing out credit cards you rarely use. When you realize that your CUR takes all the credit cards you have into account, you see why this may end up being a bad move. If you have $5,500 in consumer debt among five credit cards and you close out three of them accounting for $1,300 of that revolving debt, you now have $4,200 among three credit cards. In terms of CUR, you are now using a third of your available credit card balance whereas you once used a fifth.1

Beyond that, a portion of your credit score is based on account longevity. This represents another downside to closing out older, little used credit cards.1

New FICO scoring may also help you out if you have problem credit. The FICO XD score – a rating recently launched in a Fair Isaac Co. pilot program with a dozen credit card companies – could open doors for you if you have been rejected by certain credit card issuers. On-time bill paying is a big component in the FICO XD score calculation.3

Roughly 15 million consumers now have XD scores, including 55% to 60% of recent credit card applicants. Between 35-50% of those applicants are estimated to have XD scores above 620, which can be the make-or-break point for getting a credit card.3

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Citations.
1 – gobankingrates.com/personal-finance/video5-quick-ways-raise-credit-score/ [1/27/15]
2 – money.usnews.com/money/blogs/my-money/2014/07/10/how-to-dispute-credit-report-errors [7/10/14]
3 – blogs.wsj.com/moneybeat/2015/10/08/new-fico-score-may-have-wider-impact-than-first-thought/ [10/8/15]

From one perspective, the answer is yes; from another, no.

 

When you buy a home, are you investing? If you buy it to flip it or buy it as a rental property, the answer is yes. If you buy a home simply to live in it, the answer may be no.

Your home is an expression of your lifestyle, a wonderful setting for your life, and a place you can enjoy in privacy and comfort. As an investment, though, it is essentially illiquid, and its rate of return is no sure thing.

Home values do not automatically increase with time. Buyers learned that lesson in the Great Recession. Simply using the S&P/Case-Shiller home price index as a barometer, house prices today are roughly where they were in 2007 – it has taken the residential real estate market that long to recover from the mortgage meltdown.1

Through the decades, real estate values have risen, and they will probably keep rising for the near term – but perhaps, not as quickly as some buyers hope. Why, exactly?

Home prices are inexorably linked to wages. Over the past year, hourly earnings have grown 2.5%. This has mystified many economists and frustrated others. Normally, when the jobless rate is below 5%, you have much greater wage growth. Six months before the start of the Great Recession (March 2007), the unemployment rate was 4.4% (right where it is now), and wages were growing at 4.2% a year.2,3

Ideally, wage growth keeps pace with rising real estate values. That is not happening now. Across the past year, the 20-city S&P/Case-Shiller home price index has shown home values appreciating at a rate of between 5.5-6% annually. If real estate values continue to climb 6% per year and wages rise just 2.5%, you will soon see buyers priced out of the market – unless, of course, home prices drop because sellers can no longer get the prices they want. That is something prospective sellers (and buyers) ought to keep in mind, plus some other truths.4

The fact is, stocks have appreciated more than real estate in the long run. Through the decades, home values have increased about 4% annually and stocks have increased about 10% annually (albeit with some remarkable year-to-year volatility).1 

Stocks do not need upkeep. You will never need to tear out, reroof, or repaint a portfolio. Houses need all kind of repairs with time, and repair costs can eat into your gains. You must also pay property taxes. If you envision your home as an income-producing asset, that means playing landlord on some level. Many homeowners are not ready to take that step.

Remember that home values tend to rise gradually. If you see your home as an investment, see it as a long-term one. Staying put ten years or more before selling or trading up could help you realize the kind of financial outcome you want.  

 

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Citations.
1 – businessinsider.com/buying-your-home-as-an-investment-is-a-1990s-mentality-2017-8 [8/9/17]
2 – epi.org/nominal-wage-tracker/ [9/5/17]
3 – bls.gov/opub/ted/2007/apr/wk2/art01.htm [4/9/07]
4 – ycharts.com/indicators/case_shiller_home_price_index_composite_20 [9/5/17]

 

What might you think of doing when? 

 

If you had a timeline of the financial steps you should probably take in life, what would it look like? Answers to that question will vary, but certain times of life do call for certain financial moves. Some should be made out of caution, others out of opportunity.

What might you want to do in your twenties? First and foremost, you should start saving for retirement – preferably using tax-advantaged retirement accounts that let you direct money into equities. Through equity investing, your money may grow and compound profoundly with time – and you have time on your side.

As a hypothetical example, suppose you are 25 and direct $5,000 annually for 10 years into a retirement account earning a consistent 7%. You stop contributing to the account at age 35 – in fact, you never contribute a dollar to it again. Under such conditions, that $50,000 you have directed into that account over ten years grows to $562,683 by the time you are age 65 with no further action from you. If you contribute $5,000 annually to the account for 40 years starting at 25, you end up with $1,068,048 at 65.1

Aside from equity investment, you will want to try and build your savings – an emergency fund equal to six months of salary. That may seem unnecessarily large, or just too grand a goal, but it is worth pursuing, particularly if you are married or a parent. You could suffer a disability – not necessarily a permanent one, but an illness or injury that might prevent you from earning income. About 25% of people will contend with such an episode during their working lives, the Council for Disability Awareness notes, and less than 5% of disabling illnesses and accidents are job-related, so workers’ comp will not cover them. As Money notes, just 13% of millennials have disability insurance.2,3

What moves make sense in your thirties? You may have married and started a family at this point, so your spending has probably increased quite a bit from when you were single. As you save and invest in pursuit of long-range financial objectives, remember also to play a little defense.

You should think about creating a will and a financial power of attorney in case something unforeseen happens. Another estate planning/asset protection move that becomes essential at this point is life insurance. Right now a 20-year, $250,000 term life policy for a 35-year-old can cost less than $30 a month. It will not build cash value like a permanent life policy, but it can easily be renewed (and in some cases, converted into permanent life insurance).4

What considerations emerge between 40 and 50? This is where you may be “sandwiched” between taking care of your kids and your elderly parents or relatives. Your spending may reach a new peak; hopefully, your salary is rising as well.

Try to maintain your retirement planning effort in the face of these financial stresses – your pace and level of retirement account contributions. You may have teens or pre-teens at home, and if you have not yet considered creating a college fund that can grow and compound over time, now is the right time. You should not dip into your retirement fund to pay for their college educations, no matter how onerous college loans may seem.

You may want to look into long term care insurance. If you are wealthy, or soon will be, it may not be worth buying; you may have the money on hand to pay for years of nursing home care (or other forms of eldercare) that might be needed as you age. If you find yourself in the middle class, LTC insurance may be worth the expense depending on your health history and health outlook. Buying it before age 50 and while you are in good health is a wise move, if you are interested in such coverage.

Between 50 and 60, you are in the “red zone” before retirement. If you can, accelerate your retirement saving through greater contribution levels and/or the catch-up contributions allowed for many retirement accounts after age 50. You may want to tolerate less risk in your portfolio as retirement nears; you may not. Some investment professionals contend that in this era of low interest rates and low inflation, it makes much more sense to tilt a portfolio toward equities than toward fixed-income investments – provided you can put up with the inevitable volatility. Other investment professionals feel that is simply too risky a decision, even with some boomers needing much larger retirement nest eggs.

If possible, think about (and plan for) an approximate retirement date. Aim to reduce your debt as much as possible by that time or earlier. Retiring with multiple major debts can be stressful to say the least..

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Citations.
1 – businessinsider.com/compound-interest-and-retirement-savings-2015-3 [3/12/15]
2 – disabilitycanhappen.org/chances_disability/disability_stats.asp [7/3/13]
3 – time.com/money/3178364/millennials-insurance-why-resist-coverage/ [8/27/14]|
4 – valuepenguin.com/average-cost-life-insurance [12/23/15]

A year? Seven years? It depends.

 

“You should retain copies of your federal tax returns for 7 years.” Is that true, or a myth? How long should you keep those quarterly and annual statements you get about your investment accounts? And how long should you keep bank statements before throwing them away?

Your age, wealth & health might shape your answer. If you are not yet retired, then you may wish to follow the general “rules of thumb” presented across the rest of this article.

On the other hand, if you are retired and there is any chance that you might need to apply for Medicaid, then you should keep at least five years of all financial records on hand (including credit card statements).

Why? Medicaid has a five-year “lookback” period in many states. To be approved for benefits in those states, you have to prove that you didn’t give away funds during that five-year period. To prove this, you must produce complete records from every bank and brokerage account to which you have access, including those held jointly.1

Another special circumstance: if someone you love ends up under court supervision via guardianship or conservatorship, all financial records must be kept from the date of that guardian’s or conservator’s appointment until the court gives final approval to the fiduciary’s financial account. For more information on guardianships and conservatorships, visit: caregiver.org/protective-proceedings-guardianships-and-conservatorships

All that said, many people do not need to retain all financial statements “forever.” Here are some suggestions on what to keep and when to purge.

Tax returns? The Internal Revenue Service urges you to keep federal tax returns until the period of limitations runs out. The period of limitations = the time frame you have to claim a credit or refund, or the time frame in which the IRS can levy additional taxes on you. (This is a good guideline for state returns as well.)2

If you file a claim for a credit or refund after you file your tax return, the IRS would like you to keep the relevant tax records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later. If you claim a loss from worthless securities or bad debt deduction, you are advised to hang onto those records for 7 years. The IRS also advises you to retain employment tax records for at least 4 years after the date that the tax becomes due or is paid – again, whichever is later. The exception is if you filed a fraudulent return or no return, in which case you should keep related/relevant documents “indefinitely.”2

Some tax and financial professionals advise people to keep their tax returns forever, but concede that canceled checks, receipts and other documents supplemental to returns can usually be safely discarded after 3 years.2

Tax records relating to real property or “real assets” should be kept for as long as you hold the asset (and for at least 7 years after you sell, exchange or liquidate the asset). These records can help you figure appreciation, depreciation, amortization, or depletion of assets with regard to the property. You also might want to keep receipts and tax records related to major home improvements – if you sell your home, you can show tomorrow’s buyer how much you put into the house.2

Mutual fund statements? The annual statement is the one that counts. When you get your yearly statement, you can toss quarterly or monthly statements (unless you really want to keep them). You might want to quickly glance and make sure your annual statement truly reflects changes of the past four quarters.

You want to keep any records showing your original investment in a fund or a stock, for capital gain or loss purposes. Your annual statement will tell you the dividend or capital gains distribution from your fund or stock; as you may be reinvesting that money, you have a good reason to keep that statement.3

IRA & 401(k) statements? You get a new one each month or quarter; how many do you really need? The annual statement is the most relevant. Additionally, you want to hang onto your Form 8606, your Form 5498, and your Form 1099-R.4

Form 8606 is the one you use to report nondeductible contributions to traditional IRAs. Form 5498 is the one your IRA custodian sends to you – it is sometimes called the “IRA Contribution Information” or “Fair Market Value Information” form, and it usually arrives in May. It details a) contributions to your traditional or Roth IRA and b) the fair-market value of that IRA at the end of the previous year. Form 1099-R, of course, is the one you get from your IRA custodian showing your withdrawals (income distributions).4

If you are 59½ or older and have owned a Roth IRA for 5 years or more, the assets in your account become tax-free, lessening your need to save these forms. However, you will want to keep a paper trail before then – if you somehow need to make early or tax-free withdrawals or write off a loss, you need the documentation.2,3

Bank statements? The rule of thumb for most people is 3 years, just in case you are audited. Some people shred bank statements after a year, or immediately, fearing that such information could be stolen.

In some cases, it is wise to hang onto bank statements longer. If you are going through a divorce, if someone tries to take you to court in the future, or if a creditor comes knocking, you may want to refer to them. Your bank may provide you with archived statements online or on paper (but it may charge you a fee for hard copies).

Payroll documents? Many financial and tax professionals advise you to retain these for 7 years or longer if you are a small business owner or sole proprietor. The IRS would like you to keep them around at least that long. Again, should there be a lawsuit or a divorce or any kind of potential legal dispute involving your company or one of its employees, a detailed financial history can prove very useful.2

Credit card statements? You don’t need each and every monthly statement, but you may want to keep credit card statements that contain tax-related purchases for up to 7 years.

Mortgage statements? The really crucial records are most likely on file at the County Recorder’s office, but it is recommended that you retain your statements for up to 7 years after you sell or pay off the mortgaged property.2

Life insurance? Keep policy information for the life of the policy plus 3 years.

Medical records & medical insurance? The consensus is 5 years from the time treatment ends (or from the time medical services are rendered, with regards to insurance). Retain records for 7 years following the end of the year in which they are claimed.

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Citations.
1 – forbes.com/sites/markeghrari/2014/08/01/the-medicaid-look-back-period-explained/ [8/1/14]
2 – irs.gov/Businesses/Small-Businesses-&-Self-Employed/How-long-should-I-keep-records [1/27/15]
3 – forbes.com/sites/davidmarotta/2014/01/26/how-long-should-i-keep-financial-and-tax-records/ [1/26/14]
4 – http://budgeting.thenest.com/should-keep-retirement-statements-23027.html [2014]

 

Actually, there is! But what is it?

I won’t lie … having a never-ending supply of cash that would allow me to buy whatever I wanted to would be lovely. It would definitely be better than incurring debt. But until and unless you find a way to have a never-ending supply of cash, debt is likely a part of your life. So how can you tell “good debt” from “bad debt”?

To put it simply, bad debt is any debt you incur when buying something that will lose value. Worse debt (or really bad debt) is debt incurred when purchasing something consumable (meaning it will have NO further value). This seems logical, right? You with me?

If bad debt is buying something that loses value, then it stands to reason that good debt involves purchasing something that will gain, retain, or create value. A home mortgage is a prime example of good debt.

Many people assume bad debts because “that’s just how it is”. But that’s not necessarily how it has to be. For example … vehicles. Many Americans buy cars via automobile loans. But a new or late-model car loses value the moment you drive it off the lot, and it continues to lose value with every mile it travels. So why incur bad debt for this? Well, for many a vehicle is simply a necessity and a loan is the only means they have available to obtain it. But a large percentage of Americans purchase more car then they really need or can afford. It’s important, when facing bad debt, to keep that debt in check. Purchase what you need, with a plan to pay it off as quickly as you can.

Can bad debt turn into good debt? Yes! Let’s say you purchase a vehicle by taking out a loan for a portion of the cost – that’s bad debt. But if the vehicle is a hybrid or electric vehicle that typically has a high resale value and saves you a substantial amount of money on gasoline, your bad debt could turn into good debt.

There are exceptions. For example … what about student loans? Your education is only used by YOU and cannot be re-sold. So is that bad debt? Not exactly. As I mentioned before, if a debt creates value, then it can be considered good debt. A student loan definitely falls into this category, as higher education creates increased earning potential.

We all want to be debt-free. That takes time. Until that time, try to get a handle on which kind of debt you are incurring.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

How to potentially increase your savings, without significantly lowering your quality of life.

What’s the problem? In general, when it comes to a lack of savings, it is often not a question of low income, but a matter of high spending. While it’s very true that often we’re put into situations where we must spend money (due to loss of employment, health care bills, home repairs, etc.), for many of us our excessive spending is merely a habit we must learn to break … or at least control.

But … where do we begin? Many people would like to reduce their spending and increase their savings, but it seems like such a monumental task that they simply don’t take any steps in the right direction. Sound familiar? If so, don’t shrug it off any longer. Saving money can begin right now, and you can start in small ways. Here are several easy ways to increase your savings …

Secret #1: “Put it on the mantle”

My grandmother used to use that phrase when I was making a major decision, generally related to a purchase. She would say “put it on the mantle”, meaning that I should set it aside and think on it. That’s great advice, Gram! When you’re considering a large purchase (like a car) or even small (like a pair of designer shoes), try putting it aside, even for just a week or two. Allow yourself time to think it through. If, after that time, you still feel it’s a good idea, proceed … knowing it’s not just an impulse buy. If not, don’t. Most of us have made at least one (and probably more) purchases of this nature that we have later regretted. What if you had the money back for every such purchase? What if that money was collecting interest in your savings account? It could really add up.

Secret #2: Pay yourself first

When you get a paycheck, you likely pay your rent first, your car payment second, your insurance third, and so on and so on. Somewhere at the VERY BOTTOM of your list is YOU. Why are you at the bottom? Probably because you know YOU won’t penalize YOU if YOU don’t make a payment to YOU. My point is this … hold yourself accountable. Start by putting money into your savings account FIRST. Take care of YOU before anyone else, so there are no excuses at the end of the month. Unless your monthly bills are higher than your monthly income, you should be able to determine a set, comfortable amount that goes into savings every month … no ifs, ands, or buts. Stick to it!

Secret #3: Shop smarter
We are all in a hurry, so it’s easy to grab items like snacks or coffee when convenient. But think about it … if you stop at a convenience store for a 12 oz. coffee every morning, that’s probably about $1.75 you’re spending every day … that adds up to over $600 every year! What if, instead, you bought a $10 coffee maker for your office and bought your coffee grounds in bulk? How much money could you save? And how could interest affect what you’re saving? If you saved just $600 per year in a basic savings account with a 5% rate of return, after 30 years you could potentially have more than $30,000 … and that’s after taxes! Start paying more attention to those “little” expenditures. They can really add up!

Secret #4: See your destination

They say that hindsight is 20/20. Think about this: if 10 years ago you began saving just $200 per month in a shoe box under your bed, then today that shoe box would have $24,000 in it! Unfortunately, you can’t go back in time. But you CAN look ahead. Use a financial calculator (there are free calculators available online) and start plugging in numbers … calculate where you could be in 20-30 years depending on how much you’re willing to save today. Once you know what you COULD achieve, saving money could become your favorite pastime. A competition (with yourself) to see how much you can increase your future net worth. Have fun with it!

Secret #5: Ditch the shoebox

Speaking of that hypothetical shoebox under your bed … the money in that box might collect dust, but it won’t collect interest. And while I seriously doubt that you keep money in a shoebox, take a moment to consider WHERE and HOW you save your money. While a traditional savings account can earn you interest, there are other options available to you that could potentially earn you more. Perhaps you’ve heard people speak about money market accounts or CDs, but you’re not sure what they are or if they’re right for you. It’s a good idea to learn all you can and make informed decisions about your money.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Six signs that you are in good shape.

How well off do you think you are financially? If your career or life takes an unexpected turn, would your finances hold up? What do you think will become of the money you’ve made and saved when you are gone?

These are major questions, and most people can’t answer them as quickly as they would like. It might help to think about six factors in your financial life. Here is a six-point test you can take to gauge your financial well-being.

Are you saving about 15% of your salary for retirement? That’s a nice target. If you’re earning good money, that will probably amount to $10-20,000 per year. You are probably already saving that much annually without any strain to your lifestyle. Annual IRA contributions and incremental salary deferrals into a workplace retirement plan will likely put you in that ballpark. As those dollars are being invested as well as saved, they have the potential to grow with tax deferral – and if your employer is making matching contributions to your retirement account along the way, you have another reason to smile.

Do you have an emergency fund? Sadly, most Americans don’t. In June, Bankrate polled U.S. households and found that 26% of them were living paycheck-to-paycheck, with no emergency fund at all.1

A strong emergency fund contains enough money to cover six months of expenses for the individual who maintains it. (Just 23% of respondents in the Bankrate survey reported having a fund that sizable.) If you head up a family, the fund should ideally be larger – large enough to address a year of expenses. At first thought, building a cash reserve that big may seem daunting, or even impossible – but households have done it, especially households that have jettisoned or whittled down debt. If you have done it, give yourself a hand with the knowledge that you have prepared well for uncertainty.1

Are you insured? As U.S. News & World Report mentioned this summer, about 30% of U.S. households don’t have life insurance. Why? They can’t afford it. That’s the perception.2

In reality, life insurance is much less expensive now than it was decades ago. As the CEO of insurance industry group LIMRA commented to USN&WR, most people think it is about three times as expensive as it really is. How much do you need? A quick rule of thumb is ten times your income. Hopefully, you have decent or better insurance coverage in place.2

Do you have a will or an estate plan? Dying intestate (without a will) can leave your heirs with financial headaches at an already depressing time. Having a will is basic, yet many Americans don’t create one. In its annual survey this spring, the budget legal service website RocketLawyer found that only 51% of Americans aged 55-64 have drawn up a will. Just 38% of Americans aged 45-54 have drafted one.3

Why don’t more of us have wills? A lack of will, apparently. RocketLawyer asked respondents without wills to check off why they hadn’t created one, and the top reason (57%) was “just haven’t gotten around to making one.” A living will, a healthcare power of attorney and a double-check on the beneficiary designations on your investment accounts is also wise.3

Not everyone needs an estate plan, but if you’re reading this article, chances are you might. If you have significant wealth, a complex financial life, or some long-range financial directives you would like your heirs to carry out or abide by, it is a good idea. Congratulate yourself if you have a will, as many people don’t; if you have taken further estate planning steps, bravo.

Is your credit score 700 or better? Today, 685 is considered an average FICO score. If you go below 650, life can get more expensive for you. Hopefully you pay your bills consistently and unfailingly and your score is in the 700s. You can request your FICO score while signing up for a trial period with a service such as TransUnion or GoFreeCredit.4

Are you worth much more than you owe? This is the #1 objective. You want your major debts gone, and you want enough money for a lifetime. You will probably always carry some debt, and you can’t rule out risks to your net worth tomorrow – but if you are getting further and further ahead financially and your bottom line shows it, you are making progress in your pursuit of financial independence.

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Citations.
1 – dailyfinance.com/2014/09/03/why-american-wages-arent-rising/ [9/3/14]
2 – money.usnews.com/money/personal-finance/articles/2014/07/16/do-you-have-enough-life-insurance [7/16/14]
3 – forbes.com/sites/nextavenue/2014/04/09/americans-ostrich-approach-to-estate-planning/ [4/9/14]
4 – nerdwallet.com/blog/credit-score/credit-score-range-bad-to-excellent/ [9/4/14]