Category: Financial Education

Due to the current financial landscape, new financial issues are arising every day. For years, government-issued bonds were considered super safe. However, in recent weeks there have been various reports that have highlighted the skepticism surrounding the bond market. Experts frequently advise that investors need to diversify their assets. When it comes to long-term personal financial goals, there are several potential pitfalls that one should be aware of. Here are some valuable tips to consider when you are planning your finances for the long-term.

  1. 1.     Inflation

One of the most important things to remember when it comes to long-term financial planning is to account for inflation. Failure to do so will mean that you don’t have enough money for retirement. Annual inflation has been around 2.55 percent for the past two decades. One should note that safe investments like bonds and savings accounts offer returns lower than inflation. Therefore, modest risks are needed to make sure you save enough money for the future.

  1. 2.     Recalibrating Investments

The market is always changing. Just because your portfolio looked good ten years ago doesn’t mean that it will continue providing great returns without being recalibrated with today’s market. One should meet with a financial planner to update their portfolio regularly to make sure that their investment strategy matches their long-term goals.

  1. 3.     Plan for Long-Term Care Costs

The old adage goes, “hope for the best, but prepare for the worst.” Most people need to plan for long term care. Studies show that most senior citizens will eventually reach a point where they cannot take care of themselves. That is why it is important to plan for long-term care.

  1. 4.     Avoid Heavy Reliance on Social Security

Social security, which was signed into law by FDR helps to keep seniors from poverty. One should not expect their social security benefits to provide for an extravagant retirement. The average social security payment is around $1,200. However, a one bedroom apartment at an assisted living community can cost well over $3,000.

  1. 5.     Updating an Estate Plan

Many people draft a will and then don’t think twice about it. As a result, the estate doesn’t go to who they really want. It is essential to look at your will every year and make any necessary changes. Updating your estate plan is especially important if beneficiaries have passed on. Furthermore, if the estate’s executor is no longer living, changes to the will are necessary.

Financial planning is an increasingly important topic for women. The Pew Research center announced this week that in a record 40 percent of households with kids, women are the breadwinners. Unique financial planning is needed by women since they often make decisions differently than men. The following are financial planning issues that women need to consider to be able to earn more than they spend.

Saving and Investing

Women tend to approach financial investments differently. Often, they research and ask for advice before making an investment decision. Today, with more women as the main earners of households, it is essential for women to save for retirement. They need to budget for retirement savings. Even in a household where the man is the breadwinner, women need to carefully plan for their future, since the rate of divorce is extremely high today. Not to mention that on average, women live longer than men. Most women will have to support themselves sometime during their lifetime.

Examine expenses

A woman can ensure that she earns more than she spends by controlling expenses. Most people will find that they’re buying things they don’t need. For example, do you really need that new dress when you have three in the closet? We all like to buy nice things, which is why financial planning is essential. The one way to ensure a secure financial future is to earn more than you spend and put away the extra money in savings.

Nowadays, many software programs and mobile applications are available that will allow individuals to examine and control their cash flow. Women should take advantage of such software to plan their expenses, so they can get the things they need and yet have enough saved for that rainy day.

Reduce Debt

Monthly credit card bills can really eat into your budget. One important aspect of financial planning is to develop a sound plan to pay off debt. The sooner debt is paid off the easier it will be to earn more than you spend.

Take a Vacation and Have Fun

You probably already know the importance of financial planning, but who likes all work and no play. After a woman has examined her expenses and allocated money for retirement savings, she can think about taking a vacation.

Examining expenses and cutting needless spending allows a woman to put the money in her savings account. After she has accumulated enough money, a vacation is in order. No matter your final destination, a vacation is the perfect reward for your prudent financial planning.

It is often said that the best way to learn a new language is to learn it at an early age. This is also true of understanding finances. The Cheraw Chronicle recently discussed how classes that teach kids about economic and financial principals are on the rise in South Carolina. Teaching children about finances in school is a very important tool for their future, but to truly reach them, parents need to take an active role in providing educating and guidance outside of the classroom.

Parents are sometimes averse to sharing information about household finances with their children. They often mistakenly believe that kids will be bored with the process, will not understand it, or that it is none of their business. However, bringing children into the financial conversation can help them understand the household budget, develop an early grasp of mathematics, and understand the basic fundamentals of economics that more money must come in than goes out.

The best way to teach children proper financial habits is for parents to have proper financial habits of their own. Parents need to be careful that their spending habits are not setting a bad example for their children. For example, kids can understand when their parents are running up debt in order to obtain luxury items. If they see you buying a 3D internet television when the previous TV works just fine and paying for it with that “magic little card” in daddy’s wallet, it can be very harmful. They could think the magic little card is the master key to life.

Emphasize the importance of saving rather than amassing credit card debt. Explain that by using that “magic little card” it costs more money in the long run. If that new TV is truly desired, set up a savings account and use a colorful wall chart to show the price of the TV, how much is put into the account each month, and how much more needs to be saved. This will make saving a fun, family-bonding experience, and possibly provide a life lesson.

By showing your children that you keep a proper household budget, it will create a level of understanding that could last into adulthood. A parent may realize that they are getting through to their first, second or third-grader when they graciously offer up their piggy bank savings to help make ends meet. Hopefully a family’s budget will never be stretched that thin, and a parent should never accept that offer, but the fact that they are suggesting it means that they are learning their first lessons on proper financial management. The best Mother’s Day and Father’s Day present a parent can receive is to know their child is poised for a healthy financial future.