Five Ways to Become More Financially Engaged

Five Ways to Become More Financially Engaged

Becoming more engaged with your finances can be a daunting task — the decisions you make are important and the amount of information can be overwhelming. In this video, however, Katie Keary shares five ways you can become more involved with your money. The best news is you can start at your own pace, and you don’t have to go it alone. By clicking on any of the links above, you acknowledge that they are solely for your convenience, and do not necessarily imply any affiliations, sponsorships, endorsements or representations whatsoever by us regarding third-party Web sites. We are not responsible for the content, availability or privacy policies of these sites, and shall not be responsible or liable for any information, opinions, advice, products or services available on or through them. The opinions expressed by myself and other featured authors are their own and may not accurately reflect those of Lifeguard Wealth. This article is for general information only and is not intended to serve as specific financial, accounting or tax advice. © 2018, Lifeguard Wealth As always, if you have any questions please contact Lifeguard...
The Mathematics of Asset Location

The Mathematics of Asset Location

By Kevin Grogan Our recommendation on asset location is to prefer holding tax-inefficient assets in tax-advantaged accounts. In our view, the expected return of an asset is close to irrelevant when determining where to locate it. This guidance applies to Roth as well as to traditional IRAs. For many, this can seem counterintuitive, given that much of what investors find in the financial media generally discusses locating the highest-expected-return asset classes in the Roth account. This article is broken into two sections. First, we will discuss how a security’s expected return and risk characteristics can change based on where the asset is located. Second, we will walk through a Roth-versus-taxable-account asset location decision using after-tax asset allocation. Section One: Asset Location’s Effect on Expected Return and Risk The following table indicates the principal effectively owned by, return received by, and risk borne by individual investors in each savings vehicle. As shown, in contrast to bonds and stocks held in a Roth IRA, for bonds and stocks held in a tax-deferred account, the investor effectively owns each dollar of principal multiplied by one minus the tax rate on it but receives 100 percent of the returns and bears 100 percent of the risk. Savings Vehicle Principal Return Risk Roth IRA 100% 100% 100% Tax-deferred account 1 – tax rate 100% 100% Taxable account  Bonds 100% 1 – tax rate 1 – tax rate  Stocks 100% 1 – tax drag 1 – tax drag To illustrate the risk and return sharing of bonds held in taxable accounts, we assume bonds have a 3 percent expected return and a 4 percent standard deviation...
Dealing With an Investing Blind Spot

Dealing With an Investing Blind Spot

By Carl Richards Psst. Excuse me. I’ve got a secret. I feel like I should be talking really quietly right now, but first I need to warn you. This secret is going to seem incredibly obvious. You may even wonder why I’m going to tell you about it at all. The secret comes in two parts: 1. We all have blind spots. 2. By definition, we can’t see them. See what I mean about being obvious? They’re called blind spots for a reason, because you can’t see them. But here’s the real tragedy: We’re often totally uncoachable when it comes to dealing with this secret. I know this is true because I’ve experienced it myself. For months, my trainer was trying to help me solve a stomach issue. He suggested I keep a food journal to see if my symptoms pointed to an allergy. For months, I refused. I already know what I’m eating. I don’t need to write it down in a journal. Sound familiar? Trust me. You have blind spots, and it’s really hard to be objective about our own behavior. But there is hope, and the solution is simple, if not easy to do. We need to be coachable. We need to find, and then listen to, other people who can see our blind spots. A friend of mine, a retired investment banker, did just that himself. This guy knew his way around money and definitely knows how to invest. But he was looking for help with his money. I said to him once, “Of all the people I know, you’re in the best position to...
Important To-Do’s Before Sending Your Child Off to College

Important To-Do’s Before Sending Your Child Off to College

By Ken Rosenbaum The day has come. Your little baby has grown up and is now ready to leave the nest. He or she has graduated high school and the next big step is awaiting. Whether it’s college, a gap year, a year abroad or any other life adventure lies ahead, this time can be filled with much emotion for you and your child. As departure day gets closer, you’re probably focusing on last-minute shopping lists and feeling overwhelmed with trying to get everything done in time. Of course, you have already visited Walmart, Target and IKEA for the dorm room basics, purchased the new computer (yes, that is a 529 College Savings Plan qualified expense), figured out the move-in logistics, and coordinated with the roommate about who will bring what. Congratulations, you are well on your way. However, you might not be finished just yet. The following are six important tasks you may have overlooked. Make an appointment with your attorney to create a durable power of attorney document for financial matters and a health-care proxy. Without them, in most states, you, as a parent, don’t have authority to make health-care decisions or manage money for your children once they turn 18. That’s true even if you are paying the tuition, have your child on your health insurance plans, or claim your child as a dependent on your tax returns. Without such documents in place, if your child is in an accident and/or becomes disabled, even if only temporarily, you might need court approval to act on your child’s behalf. Establish a monthly budget for your child. The precise...
The Top 10 Places Your Next Dollar Should Go

The Top 10 Places Your Next Dollar Should Go

By Tim Maurer There is no shortage of receptacles clamoring for your money each day. No matter how much money you have or make, it could never keep up with all the seemingly urgent invitations to part with it. Separating true financial priorities from flash impulses is an increasing challenge, even when you’re trying to do the right thing with your moola — like saving for the future, insuring against catastrophic risks and otherwise improving your financial standing. And while every individual and household is in some way unique, the following list of financial priorities for your next available dollar is a reliable guide for most. Once you’ve spent the money necessary to cover your fixed and variable living expenses (and yes, I realize that’s no easy task for many) consider spending your additional dollars in this order: 1. Create (or update) your estate planning documents. Your estate planning, or lack thereof, is unlikely to make headlines like that of the rich and famous. But the frightening implications of not planning for your inevitable demise lands it in the top financial priority slot, especially for parents of minor children. With extremely rare exceptions, every independent adult should have the following three documents drafted, preferably, by an estate planning attorney: a will, durable powers of attorney and advance directives (health care power of attorney and a living will). 2. Ensure that insurance needs are met. Don’t become the next heart-wrenching 20/20 segment because your family was left destitute after you died or became disabled without adequate insurance for such catastrophic events. Please note, however, the difference between insurance needs and wants. Surprisingly, most insurance needs — especially regarding life insurance— are sufficiently covered...
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