We have all suffered through (and many are still suffering through) the second worst economic downturn in our country’s history. “I Was There” and no one is even handing out the proverbial free tee-shirt. But there have been signs of hope, as the stock market has rebounded well off its 2009 lows, corporations are in much better financial shape, investors have delevered, and many economic indicators are still moving in the right direction (albeit at a much slower pace than most would like to see). The most stubborn areas can still be seen today in the housing market and the elevated levels continuing in unemployment. Add to that the US debt debacle, as well as European debt woes, slowing growth in the emerging markets, an S&P US rating downgrade and the media is once again having a feeding frenzy.
We are once again starting to hear the rumblings of the most overused financial term in the last decade … the infamous “Double-Dip”. Yet for the longest time, one would only associate that phrase with a trip to Dairy Queen, Baskin Robins, or maybe even these days Ben & Jerry’s or some newly launched frozen yogurt chain.
What’s the chance of a “double dip” recession? Statistically very slim, as it has only happened two other times in the last one-hundred years (and in both cases the circumstances were very different). But don’t pop the cork yet. As any sports affectionado would well acknowledge, stats and records are broken regularly … think Rory McIlroy in this year’s US Open, tying or beating twelve records. When it comes to managing one’s finances, it’s wise to follow the golden rule of the beloved Boy Scouts and “be prepared” (rather than unprepared for the unexpected).
If one is struggling financially, improvement can only come with change – and it starts with doing a little financial check-up from the neck up. There are really only three ways to live one’s “Financial Life” – one can live above their means and go deeper and deeper into debt; live at their means – spending what they want, when they want, and saving very little; or (drum roll please) … one can live below their means … saving regularly and thereby creating a safety net that can be relied upon when times get tough.
Of course it’s easier to preach being financially prudent, than to practice it. As well, all circumstances are different and there are some very heart-wrenching personal situations out there – such as dual-income households dealing with one or both being unemployed – single parent households where the provider is unemployed – or major decreases in the income potential from retirement accounts and investment accounts that lost value just prior to retirement. It’s clear, these are … tough times.
Getting one’s financial life back starts with what’s upstairs. No, not by selling a stamp collection handed down by one’s grandfather or pawning a collection of baseball cards that are stashed away in boxes up in the attic, or even by sending a spouses jewelry to the latest “We Buy Gold” infomercial. It starts with one setting aside some time to take a hard look at how they lead their own personal financial life. It’s a holier than holy “come-to-terms-with-your-spending-habits-mental-time-out”.
First, one needs to look at what they earn each month (even if, for now, it’s unemployment income). The next step would be to determine where that money goes each month. Money in vs. money out. Simple math. Start by keeping a log – an honest log – of monthly bill payments, cash purchases, and debit card receipts. Keep in mind, a credit card purchase is borrowing … and that’s debt … and a good indication (in most cases) that one is living above their means.
This spending log should be kept for 60-90 days. Yes, 60-90 days, because there’s a lot of 30-day diets that are proof that thirty-days doesn’t cut it. At this point, it should become pretty clear where unneeded spending is taking place, and where one can make adjustments. The goal is to replace that spending with saving. This is a great exercise for everyone – low income earners and high income earners alike. Whether one earns $50,000 a year or $500,000, spending vs. saving as a percentage of what one earns is all relative. Even Mr. “Your Fired” had to file for bankruptcy one time.
There’s no silver bullet for turning one’s financial situation around easily … if there was, no one would be concerned about their own financial future. Getting back on the road to a great financial life starts with one’s own admission of what takes them off that road. This finding is then followed by the determination to get back on that road, and having the discipline to stay on it … and not pull over to buy more frozen yogurt.
Be sincere in this effort, because if one can’t control the money coming in, the only thing one can control is the money going out.
The Setting Every Community Up for Retirement Enhancement (SECURE) Act is now law. With it, comes some of the biggest changes to retirement savings law in recent years. While the new rules don’t appear to amount to a massive upheaval, the SECURE Act will require a change in strategy for many Americans. For others, it … Continue reading “The Secure Act”
For most, creating an estate strategy is important to make sure your loved ones are taken care of after you’re gone. But it may be just as important to have an estate strategy for your business. Whether you’re a sole proprietor who will be passing on your business to your heirs or your business partners … Continue reading “Buy Sell Agreements for Businesses”
Financially, many of us associate April with taxes – but we should also associate April with important IRA deadlines. April 1, 2020 is the deadline to take your Required Minimum Distribution (RMD) from certain individual retirement accounts. April 15, 2020 is the deadline for making annual contributions to a traditional IRA, Roth IRA, and certain … Continue reading “2019 IRA Deadlines Are Approaching”
You may have seen this statistic before or one resembling it: the average 65-year-old retiring couple can now expect to pay more than $250,000 in healthcare costs during the rest of their lives. In fact, Fidelity Investments now projects this cost at $285,000. The effort to prepare for these potential expenses is changing the … Continue reading “Healthcare Costs are Cutting into Retirement Preparations”
If you ever have the inkling to manage your investments on your own, that inkling is worth reconsidering. Do-it-yourself investment management can be a bad idea for the retail investor for myriad reasons. Getting caught up in the moment.When you are watching your investments day to day, you can lose a sense of historical perspective. … Continue reading “Why DIY Investment Management Is Such a Risk”
Epic Capital provides the following comprehensive financial planning and investment management services: Learn More >