General Financial Planning

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Joint Planning Doesn’t Replace Individual Financial Planning

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Are you a casual observer or a committed participant when it comes to mapping out a strategy for your financial future?    Maybe you are already a planner and organizer, or perhaps a visionary that lives in the future, or maybe you are happy to be working on one thing at a time.  Regardless of your starting point managing your finances is like managing your health --- you have to be involved. 

A question that women often ask me is, “Should I be thinking about my financial future separately from my spouse or partner?”  My answer is an unequivocal yes.  This doesn’t mean to disregard your partner or forego joint financial planning.  What it does mean is this:

  1. You will be better prepared if you are on your own at some point in your life

  2. Financial health and well-being is not a “one-size-fits-all” prescription

  3. Involvement provides the opportunity to step back and really ask yourself, “Are we on the right track?”

  4. Looking at individual planning and then coordinating with your spouse can be a way to ensure you both are planning for financial independence when partners handle money matters differently. 

It would be simple if we could decide exactly where we want to go and chart a course accordingly, but remember, life is no ordinary journey. It all starts with the commitment to pull together the different aspects of your individual financial picture and collaborate with a spouse or partner.  Ultimately, the goal is to commit to a game plan because standing on the sidelines is for spectators.

Laurie Renchik, CFP®, MBA is a Partner and Senior Financial Planner at Center for Financial Planning, Inc. In addition to working with women who are in the midst of a transition (career change, receiving an inheritance, losing a life partner, divorce or remarriage), Laurie works with clients who are planning for retirement. Laurie was named to the 2013 Five Star Wealth Managers list in Detroit Hour magazine, is a member of the Leadership Oakland Alumni Association and in addition to her frequent contributions to Money Centered, she manages and is a frequent contributor to Center Connections at The Center.

Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served. C14-011216

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Real Estate Rebound: Time to Buy a Home?

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As the real estate market starts to climb out of the doldrums and consumer demand begins to increase, you may be thinking of buying. Before you start a house hunt, let’s take a look at some general financial planning rules with regards to what could be the biggest purchase of your life.

Picking Your Price Point

Probably the most important rule to keep in mind when you are deciding which house is right for you is determining what you can afford.   The general rule of thumb is that your principal, interest, taxes, and insurance (commonly referred to as PITI) should not exceed 28% of your gross income.  So to put that into perspective, if your total household income is $100,000 ($8,333/month), you should try to keep the PITI to no greater then $2,333 (28% of $8,333).   Please keep in mind this is a general rule and not an absolute truth.  To make a truly responsible financial decision, you should have a good understanding of your monthly cash flow and determine how much of that $2,333 you can take on without being “house poor”. 

Unless It’s Long Term, Rent

Length of time you plan to be in the home is also a big consideration.  In fact, if you plan on being in the home less then 5 years it’s probably better just to rent. The reason for this is in the first 5 years of a typical amortization schedule, you hardly pay down the principal.  The majority of your monthly payment is going to interest and, unless there is substantial appreciation in the real estate market over that 5-year period, you probably won’t have much equity in the home when you try to sell it.

Prepare for PMI

If you aren’t putting 20% down, then you’re probably going to be subject to private mortgage insurance (PMI), which will increase your monthly payment.  Once you have 20% equity in the home, and a period of two years has passed since the initial purchase date, you can apply to have PMI removed from the loan.  Until that time, you need to be prepared for the additional burden on cash flow.

Moving isn’t cheap! 

The average moving company charges between $1,000 and $5,000 for transporting all your precious possessions from one house to the next so plan on setting aside a little cash for this expense.

Most Common Questions

Purchasing a new home can be fun, but it can also be very stressful. Some common questions that we get a lot from our clients at The Center are:

  • Where do I take the money from for the down payment?

  • Should I do a 15 or 30-year loan?

  • How much should I put down on this house?

Whether this is your first house or your tenth, take a deep breath and be sure to consult with trusted advisors. When you talk through all of these issues, it’s easier to decide if it really is your time to start shopping for a new home sweet home.

Matthew Trujillo is a Registered Support Associate at Center for Financial Planning, Inc. Matt currently assists Center planners and clients, and is a contributor to Money Centered.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of Raymond James. C14-009197

Winning Strategies Borrowed from the Game of Chess

 I learned to play chess when I was 8 years old.  The game always appealed to me because of the complex strategy and tactics involved.  Although I always enjoyed the game I never took it seriously until I was a little older.  After I graduated college and had a little money in my pocket, I decided to start competing in major tournaments and was very proud to win the state of Michigan Chess Championship in 2009 and 2011.  With this strong love and passion for the game of chess, it’s no coincidence that I ended up in finance.  There are several parallels between chess and finance, but here are a few of the most noteworthy.

Coordination of Pieces

In chess utilizing your pieces in a coordinated approach is one of the biggest keys to success.  To the amateur chess player this can be a very daunting task.  How could a knight, queen, bishop, pawn, and rook, which all move differently, be used in a coordinated, synchronized attack?  The exact answer to that could fill a whole book, but suffice to say it can be done. Similarly, in finance, think of all the moving parts to your personal situation and think of all the relevant questions that might stem from the various personal financial decisions.  Am I saving enough for retirement? When can I retire? What are the tax implications of my investments? Do I have enough Life Insurance? Do I have the right type of Insurances? Do I need a will and a trust? Should I have an emergency savings account and how much should be in it?  Am I maximizing my benefits at work?  These are just a few of the hundreds of potential questions that we at The Center answer on a daily basis. In chess terms we would say don’t consider moving one piece without considering what effect it will have on the rest of the army.

Patience and Discipline

Playing competitive chess at a high level you have to be very patient and disciplined.  If you’re too hasty you could easily squander your advantage.  It’s best to slowly improve your position until your army is as efficiently placed as possible.  In finance, especially with retirement investing, you have to be very disciplined to stick to your asset allocation in good times and in bad. 

Controlling Emotions

Let’s face it, money can be a very emotional subject.  However, making emotional decisions when it comes to money is seldom a good idea.  The same is true for chess.  It’s not unusual to find yourself in a difficult position where your opponent is throwing everything but the kitchen sink at you.  The emotional response is to give up and throw in the towel, but the true chess masters are able to control that natural human response and fight on.  I have had many beautiful games where I was dead lost, but I refused to give up, and ultimately was able to pull through. Many investors probably felt the same way in 2008 when it might have seemed the entire stock market was going to implode.  A lot of people couldn’t handle the emotions involved, and unfortunately moved to cash at the worst possible time. Those able to overcome the natural human response to flee to cash were probably in a better position when the market rebounded.

Team Game

Chess is a team sport.  Well not really…but I’ve found the biggest improvements I’ve made as a player have come when other professional chess players critique my games.  No matter how good you are, there is always room for improvement and ways to look at the same old positions in a different light.  The same is true in finance.  At The Center, each of our clients has a dedicated team of professionals to service their personal financial situation.  The lead financial planner, the support planner, and the client service associate are always making sure we are working as diligently as possible to help clients improve their overall financial position. 

You should never feel like a pawn when it comes to your financial plan. You are in control and with coordination, patience, control, and helpful advisors you can find a suitable strategy.

Matthew Trujillo is a Registered Support Associate at Center for Financial Planning, Inc. Matt currently assists Center planners and clients, and is a contributor to Money Centered.

Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of Raymond James. Investing involves risk and investors may incur a profit or a loss regardless of strategy selected. C14-009192

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Taking Charge: Why Every Woman Should Get Involved in Financial Planning

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You may have spent decades building a life with a significant other or spouse, perhaps even leaving the important questions about assets and investments up to them. In fact, it is not uncommon for couples to pick and choose household responsibilities and slide into a routine to divide and conquer.  All the ducks are in a row so what is missing?  Some things like picking up the laundry, getting your oil changed or planning that much-needed vacation can easily be delegated.  But a mistake I see women making is delegating away personal financial planning.  You can leverage your time by letting others take on this task, but there are some pitfalls that come with this strategy. 

Risks of Delegating Financial Decisions

  • If you are suddenly put in a position where there is no one but you to make the decisions, you may be unprepared.

  • Others may not fully understand the vision you have for your future. If you aren’t actively involved, you risk losing your say.

  • You may be delegating to save yourself time, but playing catch-up when the duties fall on you can be very time-consuming.

Making Yourself a Priority

If properly planning for the future of your design has been shuffled to the bottom of your inbox, it is time to reprioritize and here is why:

  1. Your vision is like a best friend.  It reminds you of what is most important in your life.

  2. Putting your vision in the context of a financial plan helps connect values and money.

  3. Financial planning doesn’t mean planning for the day your health begins to fail, it means asking, “Where do I want to be in 3 years?”

  4. For those who are more risk-averse, having a plan can change unknowns into quantifiable nuggets of information to reflect upon and serves as the basis for decision making.

  5. While it might seem ok now to let a spouse or someone you trust steer your financial plan, if you don’t have an active role or solid understanding of desired goals you may be disappointed at the end result.

Here’s my challenge to women of all ages and stages of life:  Let’s not kid ourselves – things get missed.  Think of yourself first and give your personal financial life the kind of attention it deserves!

Laurie Renchik, CFP®, MBA is a Senior Financial Planner at Center for Financial Planning, Inc. In addition to working with women who are in the midst of a transition (career change, receiving an inheritance, losing a life partner, divorce or remarriage), Laurie works with clients who are planning for retirement. Laurie was named to the 2013 Five Star Wealth Managers list in Detroit Hour magazine, is a member of the Leadership Oakland Alumni Association and in addition to her frequent contributions to Money Centered, she manages and is a frequent contributor to Center Connections at The Center.

Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

Any opinions of Center for Financial Planning, Inc. are not necessarily those of Raymond James C14-004276

Losing a Spouse: When to Tackle the Financial Details

 There are few times in life that are worse to make financial decisions than immediately following the death of a spouse. Whether sudden and unexpected or the result of a longtime illness, the loss can be overwhelming. Unfortunately, even during this time of grief, some financial issues need to be addressed. But our advice is to avoid making any major financial decisions right away. Big decisions may be left for weeks or months down the road, once you have had time to deal with your grief and can make rational decisions about your future.

So, what's most important to do right away?

Find Help: Identify a family member or close friend who can help you keep track of things that need to get done.

Make Copies: Get 10 - 20 copies of the certified death certificate to use in settling financial matters.

Call List: 

  • The Office: If your spouse was still working, notify his/her employer and get information on health insurance, any life insurance survivor benefits, and retirement benefits.
  • Financial Advisor: Contact your financial advisor for help in making sure needed cash is available for immediate expenses. Also, contact your financial advisor and financial institutions where you and your spouse have bank or investment accounts.
  • Claims Calls: Contact life insurance and/or annuity companies to notify them for claim purposes. Also contact the Social Security Administration and, if your spouse was a veteran, contact Veteran's Affairs.

While making these contacts is necessary to make sure your financial affairs will be handled going forward, it does not mean that decisions need to be made right away. There will be a lot of forms to be completed and, in some cases, decisions that need to be made about benefits to be paid to you, titling of assets, and beneficiaries to be updated. Your financial planner can be invaluable in helping you navigate this unchartered territory -- from assisting with paperwork to helping you make the most appropriate benefits choices. And most important of all, working with your financial planner will help you determine WHEN it is the right time to make the bigger financial decisions, helping you avoid making mistakes based on emotion and grief.

Sandra Adams, CFP® is a Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012 and 2013, Sandy was named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of Raymond James. C14-003511

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The Business Cycle: A Corporate Checklist

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Making a list and checking it twice … Have you ever stopped to make a checklist just to be able to check things off you’ve already done?  I will admit I have done that on more than one occasion.  I love checklists, they keep me focused throughout the day at work and at home.  While corporations utilize checklists, they go by different names like agendas, goals or even vision statements.  Coming out of 2008, many corporations didn’t have a choice as to the items on their checklists.  They had to get financially healthier and fast because they were in the worst spot of the business cycle!  Following are some of the steps many corporations had to follow.

✔ Improve balance sheets by reducing the amount of outstanding debt

You can see the ratio of debt to equity is now below even long term averages.

Source: Standard & Poor’s Compustat, JP Morgan Asset Management

✔ Horde cash to be ready for the unexpected

Companies have nearly doubled the amount of cash on hand over the past decade.

Source: Standard & Poor’s Factset and JP Morgan Asset Management

✔ Buyback stock and increase dividends

Dividends paid are reaching record levels for the past decade and stock buybacks are getting close.

Source: S&P Dow Jones Indices

❍ Increase capital spending

Notice the final item on the checklist has yet to be checked.

Our economy is nearing the expansion/growth phase and this capital spending by companies is usually one of the later occurrences in the business cycle.  So, while I would love to check off the last item on the checklist (almost nothing makes me feel better) doing so could bring us closer to the next stage in the business cycle and closer to possible recession.

Angela Palacios, CFP®is the Portfolio Manager at Center for Financial Planning, Inc. Angela specializes in Investment and Macro economic research. She is a frequent contributor to Money Centered as well asinvestment updates at The Center.

The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material, is not a complete summary or statement of all available data necessary for making an investment decision, and does not constitute a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of RJFS or Raymond James. Past performance may not be indicative of future results. Dividends are not guaranteed and must be authorized by the company’s board of directors. C14-002179

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Protecting Yourself Against Identity Theft in 4 Easy Steps

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 Who hasn’t heard about the Target stores’ security breach that occurred during the recent holiday season? I am sure we all know someone who was affected by this security scare as they routinely used their store credit card to pay for holiday purchases. While the victims of this breach could not control their circumstances, incidents like these are a friendly (or not so friendly) reminder that credit card security and identity theft are a fact of our everyday lives. So what can you do to make sure that your own actions don’t lead to an identity theft nightmare?

  1. Routinely check your Credit Report. Go to www.annualcreditreport.com, where you can access a free report from each of the credit reporting agencies once per year. Consider requesting one report every four months to keep an eye on your credit activity.
  2. Limit the number of cards you own and monitor them actively. Review your account activity at least monthly when you receive your statement to make sure that all charges are legitimate.
  3. Do not give identifying numbers or financial information over the phone, by e-mail, or in person unless you are sure of the person you providing information to. Be careful not to e-mail important numbers – Social Security Numbers, credit card numbers, etc.
  4. Shred documents with personal information or store them in a locked cabinet or safety deposit box. Prevent easy access to your personal information.

Taking these simple steps does not guarantee that you won’t be a victim, but can go a long way towards preventing the opportunity for fraud, or catching it early in the process.

Contact your financial planner about this and other credit and identity theft issues.

Sandra Adams, CFP® is a Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012 and 2013, Sandy was named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members. C14-001633

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Ways to Maximize Social Security Benefits

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 Recently I had the privilege of presenting at the Michigan Association of CPA’s continuing education conference on the topic of Maximizing Social Security benefits.  Social security is an important source of income for most of the estimated 58 million people who receive benefits.  Over my 22 years as a practitioner, I have tried to counsel clients to be sure to coordinate social security retirement benefits with their overall retirement plan.  As pensions (not just the City of Detroit) continue to become more obsolete, social security remains one of the few, if not only, guaranteed income sources for future retirees.

Following Ida Mae Fuller’s Lead

Before getting to how to maximize social security retirement benefits – how about a little fun social security history?  Do you know Ida Mae Fuller?  She is the first reported person to receive social security retirement benefits.  Apparently Ida went into the SS office after contributing a total of $24.75 over three years in payroll taxes and told the staff that she was retiring and didn’t expect to receive anything – but thought she might as well check. She ended up collecting $22.54/month and lived to age 100 – not a bad return on her contributions!

When to Begin Collecting Benefits

A traditional breakeven analysis works pretty well for single folks.  One of the best research articles that I have come across was in the Journal for Financial Planning and written by Doug Lemons.  Mr. Lemons outlined three main variables in the breakeven analysis: inflation/cost of living, income taxes, and time value of money. Mr. Lemons’ research addressed multiple variations and combinations.  The general rule based on his research is:

  • The breakeven between taking at age 62 and 66 (assume full retirement age) is roughly age 78.  Meaning, you need to live past age 78 to be better off by waiting until age 66.
  • The breakeven between taking at age 66 and 70 is roughly age 83.  Meaning, you need to live past age 83 to be better off. 

Social Security Analysis for Couples

The breakeven analysis breaks down a bit for couples (two life expectancies vs one). I have written about spousal benefits in the past.  In this post I’d like to provide two strategies for couples to consider.

File & Suspend Strategy

June Cleaver:  As you may know, June Cleaver of the “Leave it to Beaver” show was the classic stay-at-home mom.  Her husband Ward, who sometimes was known to be a “bit too hard” on their son the Beaver, was the sole income earner. If June and Ward were close to retirement today, their respective social security benefits at full retirement age might be $2,000/month for Ward and $0 for June.  How can they maximize benefits?  At full retirement age (assume 66) Ward files for social security retirement benefits but then immediately suspends.  This allows June to begin receiving a spousal benefit (assuming she is at full retirement age) which is $1,000/month or 50% of Ward’s benefit. Then, when Ward turns age 70, Ward may elect to begin receiving his own benefit ($2,640 in this example) that has increased 8% per year from age 66-70 thanks to “Delayed Retirement Credits”. Assuming average life expectancy, this combination will provide June and Ward the maximum benefit.  What if Ward passes away at age 75? June will receive the higher of her benefit or Ward’s as a survivorship benefit - $2,640 in this example.

Claim Now, Claim More Later

Elyse Keaton: Elyse Keaton of “Family Ties” was played by Meredith Baxter (and mother of Michael J. Fox in the show).  Elyse, unlike June Cleaver, had income of her own as an architect. Elyse and her husband Steven Keaton had similar earnings. If Elyse and Steven were close to retirement today, both of their social security benefits at full retirement age might be $2,000/month. Rather than “filing & suspending” like June and Ward, the Keatons might consider another strategy to maximize their total benefits.  At full retirement age Elyse should consider taking her own benefit or $2,000/month.  Steven, at full retirement age, may choose to restrict his benefit to a spousal benefit only (50% of Elyse’s benefit) or $1,000/month.  This allows Steven to collect some benefits now while allowing his own benefit to grow at 8% until age 70.  At age 70, Steven may elect to begin receiving benefits based on his own earnings – or $2,640/month.  Note that the survivor benefit for each of them now becomes $2,640.  The election to “restrict” to a spousal benefit can only be done at full retirement age or later. 

So, are you more like June or Elyse?  If your situation is more like June’s then consider the “File & Suspend” strategy.  If your circumstances are more like Elyse’s then consider the “Claim Now, Claim More Later” strategy. Do you have a social security question? Let us know – we love to research and help you maximize the benefits. 

Timothy Wyman, CFP®, JD is the Managing Partner and Financial Planner at Center for Financial Planning, Inc. and is a frequent contributor to national media including appearances on Good Morning America Weekend Edition and WDIV Channel 4 News and published articles including Forbes and The Wall Street Journal. A leader in his profession, Tim served on the National Board of Directors for the 28,000 member Financial Planning Association™ (FPA®), trained and mentored hundreds of CFP® practitioners and is a frequent speaker to organizations and businesses on various financial planning topics.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing information is accurate or complete. Any information is not a complete summary or statement of al available data necessary for making a decision and does not constitute a recommendation. Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of Raymond James. The examples provided are for illustrative purposes only. Every individual’s situation is unique and you should consult with the appropriate professional regarding your individual situation.  Every individual’s situation is unique and you should consult with the appropriate professional regarding your individual situation. Guarantees are based on the paying ability of the issuer. #C14-000038

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Three Steps to Curing a Holiday Spending Hangover

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 You enjoyed your holiday season to the fullest – great gifts for everyone, parties and evenings out with family and friends.  But now the credit card bills are arriving, and you are feeling the pain and misery of your holiday spending hangover.  

3 steps to help you recover and get yourself back on track:

  1. Take a Break:  From the plastic, that is.  No need to abstain from all spending, but moving to a “pay cash” system and avoiding the use of credit cards, at least until the holiday bills are paid in full, will help to get your responsible spending back on track.
  2. Replenish:  With a traditional party hangover, it is important to replenish your body with water and healthy foods.  Similarly, with a spending hangover, it is important to replenish your bank account.  Rebuild your savings to get your New Year off to a solid start.
  3. Exercise:  Set a spending plan and stick to it to get your finances off to a healthy start.  Map out your monthly spending and monitor.  Just like a healthy exercise plan, tracking is the best way to ensure success.

Enjoying the holidays and special times with family and friends is important to your overall enjoyment of life.  If you occasionally go a little bit overboard, simply follow these steps to get yourself back on track and on your way to fulfilling your longer-term financial goals.

Sandra Adams, CFP® is a Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012 and 2013, Sandy was named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of Raymond James. #C13-002512

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