Whew!  
Everyone was expecting an interest rate increase… but it didn’t happen.
Now what?

For Banks:
They can’t raise the rates on those variable rate mortgages and other loans

For consumers:
You continue to get low interest rates

Considering that consumers are saving more and have more in the bank (or credit unions) than ever before. Why save?

You save to get ahead of taxes and inflation, but you also save to have emergency cash when:

• Your roof starts leaking
• You get laid off
• Your car breaks down
• And any other times when you need cash fast and don’t want to sell an investment to pay for it.

So what’s enough?

For pre-retirees, 2 years cash in the bank to draw from right after retirement reduces their need to get cash from investments and let’s the investments start to grow.

For Self- Employed folks, about 1 year gross income in cash (just in case there is a downturn in business).

For Most of Us- 6 months gross income in cash reserves is good.

But what about those dismal returns?

• Shop around at places like BankRate to get the highest interest on your savings
• Ask- that’s right – ask your bank for a higher interest rate-  (after all, you are a good customer).
• Shop right- get compounding daily and high APR and withdrawal flexibility. Trade off features to get what you want at the maximum rate.

How much should you be getting to get ahead of taxes and inflation?

Read this excellent article by Barbara O’Neill, Extension Specialist in Financial Resource Management,Rutgers Cooperative Extension, to do the simple math which is inflation over 100 minus your tax bracket.

Breaking even with taxes and inflation rates are the starting point from which you invest. Try to get your cash savings close to that break even point.

The post Interest Rate Scare! first appeared on Whole Hearted Way.

I received this reader question recently and wanted to respond publicly:

“I would like to no more about this programs and does it really works? I have made a few investments on the stock exchange through information that i got from Penny Stocks newsletters but was unsuccessful. I want  more wealth but dont no how to start or what to begin with.”

This program is not something I made up or just discovered on my own. It is a well researched and verified process that Certified Financial Planner Licensees use if they practice comprehensive financial planning (which many do not). I have used it personally and in my financial planning practice and found that it works ALL the time if followed correctly. The problem is that many of you will not follow it. Why? Because it isn’t fast, it isn’t sexy, there are NO get rich quick schemes and NO, your life is going to change forever moments.  What it does is give you a road map to arrange your finances to support your current lifestyle and your projected lifestyle (and that means different things to different people). It means taking into consideration how you live, play, what your risk tolerance is, what your tax bracket is and a host of other details.

Where do you start? You start with a strong money foundation and that is following Step 1. to Step 3.

Step 1. Cash and Credit. Cash flow and credit is the life blood of your financial plan. Understanding how much you take in and how much you spend shouldn’t be a painful exercise but a motivator to work with what you got in the best way possible.

Step 2. Risk Management. Everything you acquire can be taken away in one full sweep (and I know you have seen it happen) without the proper insurance.  Getting the right insurance that fits your needs and your budget is a strong step in preserving what you are building on.

Step 3. Estate Planning. You are not building wealth just for you but for your family. A few easy legal documents can insure that they get what you have worked so hard to build and get it easily and without taxation. I have seen so much grief and family burden due to lack of a few simple estate planning documents.

Step 4 is Identify Goals. There is a saying that if you reach for nothing, that is what you will get. What does the future hold for you? Do you see yourself working part-time at age 50? Or would you like to not work at all at age 60? Or maybe you want to change careers or open up a small business? Maybe you would like to send your kids to a private college? Maybe you want to go back to school to learn a new trade? Perhaps you just want to get out of debt and start an investment plan? Whatever you want, that will cost money and you can figure out how to afford those things by goal setting. Unfortunately, it isn’t going to just happen one day. You are going to make it happen by planning for it. Now that you have a solid wealth foundation, you can begin to invest.

Step 5 Investment Planning.  There is nothing complex here.  You pick out (a process called asset allocation)  no-load mutual funds with a variety of asset classes and asset styles based on the return you want, the risk you are willing to take, and the taxes you are willing to pay. Once you have your allocation, it is set it and forget it time. Sorry, I just haven’t seen the research that market timing (darting in and out of investments) works but asset allocation does. You revisit this asset allocation once a year.

Step 6 Retirement Planning. Retirement planning is all about using  these wonderful tax deferred retirement plans (401K,403b,457,etc.) to help us build wealth to meet our goals. Let’s face reality folks. Even if you loved your job and will work everyday until you drop, there will be days,  months, or years during your lifetime that you cannot work. Then you should have your investments replace your earned income.

Step 7 Tax Planning.  I am all for getting the most bang for your buck and tax planning provides that in your wealth building program. For every dollar that you invest, if you can get ten cents to fifty cents back from the government, well why not do that?  That is why so many deferred compensation plans, IRAs, SEPS , etc.  are so popular. They provide a lot of bang for the buck. Don’t get greedy by wanting tax free everything but do take tax implications into every investment decision you do. The difference between 5% taxable and 5% tax free is huge if you are in a high tax bracket.

Those are the 7 steps to build wealth and I go into detail for each one. I have also given you  resources that I value to help you even more. There are links to get a free credit report, and links to fee-only Financial Advisors, and links to financial calculators.  If you aren’t the do-it-yourself type, I am always available to help mentor you through the steps. What is different about me, Wealth Coach Fern, is that I empower you with the information and the tools to build your own wealth program.

Why is that so important? Because studies have shown that most of you will follow through on a comprehensive financial plan if you “own” it. That is what attracted me so much to the coaching model. I want you to be successful and I can coach you through a complete personal financial plan. I have 30 years (gulp! I am old) experience in this field and very passionate about it. If there is any way I can make it easy or if you need more info on a topic, let me know. I want you to build wealth and wealth beyond money!

The post Does this Wealth Program Really Work? first appeared on Whole Hearted Way.

It’s summer time and people are going places. The kids are out of school and many vacation plans are laid out. It’s also a time when people reflect on their personal development. There are lots of programs to inspire and motivate you to build wealth – there is the book called the Secret, and there is Oprah’s the Power of Now program, and there are many others. But to truly make a change in your life that is sustainable -you must take action. As the famous Zen Master, Suzuki Roshi once said, “You can keep reading the menu, but sooner or later you must eat.“. A lot of wealth coaches work with your money personality or the fears, guilt or shame that surround financial issues and that’s fine, however I am quite different. I acknowledge what has happened in the past but I work with how you are now and where you want to go. In that respect I am very much like a travel agent.

“Hello, my name is Fern. Where would you like to go in the next year, ten years, or even 20?”  We will talk about the barriers to build wealth and the support you have and what you will need to make that happen (skills, contacts, etc.).  Above all, what action are you willing to take today to progress to where you want to be? I have  my bags packed  to go along with you and it is filled with tools and resources (from my 27 years in the financial industry) to help make your journey easier. As a Wealth Coach, I am prepared to support you in any way so when we hit turbulence you will not panic and go off course. I will hold you accountable and I will sometimes challenge you within your boundaries. Along the way, we will make lots of friends and these friends will elevate your financial self-esteem even more and serve as your R&D team long after I am gone.

If you think you can do this yourself, then think about why it hasn’t happened so far. There are lots of excuses why you haven’t started and lots of reasons why you may want to put it off. As we get older, we have a finite number of years left to build wealth and make our dreams a reality. Don’t wait! Would you choose to…

• Launch a new business or product

• Double your income

• Retire early

• Buy a home or rental property

• Transition to a new career

• Work part-time

What’s the cost? Click here for my fee schedule to build wealth. My average engagement is 6 months and I promise to inspire, challenge, enlighten and empower the best out of you, to help you to realize your goals in 2010 and beyond. To see results quickly, e-mail me at fern@wholeheartedway.com to set up a date and time for a complimentary first session to see if we are good travel mates. I’ll’ take you there!

The post A Wealth Coach Will Take You There first appeared on Whole Hearted Way.

Most people don’t move until the last minute to finish their NUTS especially when they come to see me, a Wealth Coach. Time and money are the biggest obstacles that keep people from getting their finances in order. But not addressing your NUTS can drive you into the poor house.

Take for example, Mr A & Mrs. B, they couldn’t agree on what to do with their money and so did nothing . Mrs. B is worried that that they won’t have enough for retirement and Mr. A might lose his job and both worry about the rising costs of college tuition. They worried about their assets declining in value and talked about it and still did nothing. . Both have no idea of how much they spend annually and both haven’t had decent raises in years . They came to me wanting to fix their Nagging, Unfinished, Tasks. It took hourly phone calls every other week for nearly a year at a cost of $6,500 to take eliminate their financial N.U.T.s.. What happened over that time?

I started with a financial foundation-I got them an emergency savings account, updated estate plan, and a detailed review of all of their insurance. I taught them how to continually get the ideal rates on their cash and even with the cost of an estate planning attorney, they saved over $1500 .

I got them to blend their accounts together and specify them for goals; IRAs,  Roth IRAs, pensions, 529 college plans, 401ks,  brokerage statement, etc. I helped them prioritize their goals and agree on what they wanted to do with their money as far as inheritances. Aligning money with values and goals is just as important as investing. They now know how to manage their own portfolio as a unit for the purposes they intended. They also agreed on what they strategy they would use when things go south.

Mr. A understood that he couldn’t contribute to retirement and college education if he was out of a job for a long time and Mrs. B understood that she would need to cut back on expenses if she still wanted the family to take vacations every year. Both knew what each had to do to meet their goals.

How much did they save? Hard to say,  but at least $15,000, and the peace of mind- priceless.  But both are extremely pleased that they have a plan and they know how to implement it on their own . Waiting so long to fix their Nagging Unfinished Tasks is their only regret .

If this couple went to a financial advisor, they would have easily paid $10,000 or more and had ongoing fees and expenses and still worried about if they were doing the right thing. Now they are armed with the education, tools, and resources to stay on track. They took the time and actually saved money,saved on taxes, and decreased their stress. Can you place a price on that?

The post Have You Fixed Your Nagging, Unfinished Tasks (NUTS)? first appeared on Whole Hearted Way.

I have been a big fan of these 7 steps to build wealth since I have been a Certified Financial Planner for over 26 years and have used them successfully with clients. You won’t find any get rich quick to make up your losses fast schemes here. You will find common sense, everyday action items that you can take to make a wealth building strategy for yourself and your family. Remember, it isn’t how much you earn but how much you keep. These steps will start with strong foundations which are steps 1 though step 3. Ignore these and you risk messing up the rest of your efforts. Like building a house, you need a strong financial foundation that will lay the groundwork for attracting and building wealth over a lifetime. Here are the 7 steps:

1. Get an estate plan. Okay you may be single with no family and you say you don’t need an estate plan. Not true. Make a holographic will and just give everything to your favorite charity. Do you have kids and an extended family? This is all the more reason to have a good estate plan. The basics would be a will, power of attorney for health care (or medical directive), and a power of attorney for financial care. Have a large estate? Then you can add things like a revocable living trust, charitable trusts, etc.

Don’t get an estate plan and then don’t be surprised when the ex-wife inherits everything because your spouse didn’t change the beneficiary designations or the will. I have seen it happen too many times.

2. Manage Your Cash Flow. I don’t care if it is just a checkbook. You need to know how much is coming in and how much is going out before you can save or even think about investing. Pretending you know or just ball parking numbers doesn’t work. You can add and subtract -so figure it out. Why? Because you can’t save, invest for your future, or try to reduce your taxes if you don’t know where your money is going. With all the great tools out there such as Mint, and Quicken, there is no excuse not to be tracking your cash flow.

3. Risk Management. This means that as you grow your net worth, you also manage the risks that can destroy it along the way.  That means health, life, auto, home insurance and so on. Think you can’t afford it? Think again. What would happen if you got cancer and didn’t have health insurance?  It wouldn’t be pretty when all that you have worked hard for is wiped out because you didn’t want to pay health insurance premiums.

Of course, we all can’t afford to insure against everything so you pick and choose your battles. This means managing your risks with a combination of self insuring (no insurance and high risk), or partial insuring (small amount of insurance and high deductible), or being fully insured (100% coverage by insurance). Pick a plan that is suited to you, what risk you are willing to take and what you can afford.

Now that you have the top 3 covered, it’s time for the fun stuff.

4. Financial Goals. That’s right you need a goal. Without one you are shooting in the dark and that is scary in these economic times. Remember that these goals are just a starting point. They aren’t set in stone. It could be to retire at 50 or to fund the kids’ college education or to make that trip around the world. Whatever it is, make sure it is SMART- specific, measurable, attainable, realistic, and timely. Setting up goals like to quit work at 55 when you are 40 and only have $100,000 saved would not make the cut.

5. Invest. For those who want to invest but aren’t willing to budget, I say take the first 20% of all of your income and invest it before it hits your checking account. That is an easy and painless way to pay yourself  first which is the first tenet of building wealth. After you make this leap, you won’t even notice that money. Meanwhile it wasn’t spent on stuff, it was spent on you- and that’s a good investment. Investing isn’t about trading in and out of mutual funds or real estate. It is about sticking with an investment over a full market cycle of ups and downs. If you panic easy when the markets goes down, then fine, just stuff your money into cash and cash equivalents, like treasury bills and bonds and such. But it will take you a lot longer to meet your goals than a good mix of cash, bonds, and equities (stocks, mutual funds, etc.)

6. Retirement. So you are never going to retire? Don’t bet on it. Even if you wanted to, your mind and body will one day say no more.  When that time comes, what will replace your paycheck? It isn’t going to fall from the sky. You have to have a bankroll to replace a minimum of 25% of your salary to survive. Remember, social security wasn’t meant to be your sole source of retirement income. It was meant to be supplemental to your own savings account. Don’t say that time will never come, because it does and you better be ready or it won’t be pretty. Have you known someone whose sole source of income is a social security check?  Enough said.

7. Tax Plan. Tax planning is all about keeping more of what you earn. It is an easy way to keep your cash flow up. It means taking all the legal deductions that are due you. But you can’t do that if you keep sloppy records or refuse to manage your cash flow as in number one. It pays big time to keep good records not just in getting a bigger tax refund or more monthly cash but in having more to invest for your future. Tax preparation is not an easy task for anyone even if you own the software. I have had people pay me my full fee just to review their entries into the tax preparation software. That’s not a wise use of your money.  Get a good tax preparer and keep good records.

Make these 7 steps to build wealth your new year’s resolution.  Check in with a fee-only Financial Advisor or a Wealth Coach to review what you have done.  Then you will have a wealth building strategy that you can refer to every year.

The post The 7 Steps to Build Wealth in 2012 first appeared on Whole Hearted Way.

do some of these easy tax saving tips for cash in your pocket in new year

(Note: I personally have done 3 of these and expect an extra $1,000 in my tax refund in April -WOO-HOO!)

Top 7 Year End Tax Saving Tips

The post Tax Savings means Extra Cash Flow in the New Year first appeared on Whole Hearted Way.

• Candy and magazines near the grocery checkout – These little items like mints, candy bars, and the latest celeb news all beg for you to just take some and put in your cart. When you consider that one magazine now is close to $10 and a year’s subscription is only a little more than that, it smells rip off —but we do it anyway.
• Water bottles and chocolates near the Macys clothing checkout- How observant of them! Of course a couple of hours of trying on clothes can make you thirsty and tired.  Nowadays, we all don’t travel with water bottles in our purses so at $2 a bottle, that’s over 50% of what you can buy it for in the grocery store, we add it to our clothing purchase.

I could go on and on, but you get the picture. It is easy to say, “Oh, it is only a dollar extra”. But those dollars add up to maybe $50 or more a year.  Over 5 years, you could have accumulated $310 even if you put it in the bank at 1%- not bad.  That’s called compound interest and it is one of the secrets of building wealth. So don’t be tempted by all those overpriced extras that are so easy to buy. Pay yourself first and bank that for your future. Your secure financial future starts with paying yourself first right now.  

The post You Deserve to Be Paid first appeared on Whole Hearted Way.

I have met lots of folks who believe that to build wealth they need to make a big salary- then it’s all good. Well, wake up, because it ain’t . Inflation and taxes are lurking and munching down on that salary each year so your whole net worth (meaning what you own) has to be going up to keep up. Some reasons it won’t:

You continue to spend more than you take in

You continue to pay interest only on your mortgage

You continue to not participate in deferred compensation plans

You continue to “play” the stock market and never make any real after tax after expenses profit.

You continue to plan vacations instead of planning to stop work or work part-time

You continue to support family members to the demise of your retirement plan or your children’s education.

You continue to borrow for cars, boats, etc.  that depreciate in value.

Your net worth which is everything you own minus your debt is what matters.  If you have no clue as to where the money is going –do this little exercise to find out. It isn’t super accurate but it will give you an idea of where the money is going.

Look at your form 1040 Line 7 –that is the amount of income that you earned for the year. Now subtract the number from line 61 which is the amount of tax withheld. That is the net amount that you lived on and then divide by 12 for the monthly amount that came into your household.

Now take the amount that you saved during the year and divide that by the net amount that you lived on for a percentage of the amount saved. That percentage should be 10-25%. If it is a negative then you are spending more than you are taking in and your net worth will go down.

Okay now for the positive. Keeping track of spending actually helps you build wealth but also grows how happy you are. When we track our spending and then spend it, we can develop a habit of gratitude (thankful for be able to take the family on a cruise) for what we have and also for what we accomplished (saving for a vacation or a child’s education). New studies are coming out that show being grateful forces people to overcome what psychologists call the negativity bias – the innate tendency to dwell on problems, annoyances, and injustices rather than upbeat events. Focusing on our blessings can help ward off depression and build resilience in times of stress, grief or disasters.

So as you take this journey to build wealth, take action to increase your net worth and consider what you have and be grateful for it.

The post Build Wealth By Increasing Your Happiness and Your Net Worth first appeared on Whole Hearted Way.

You walk into a hospital and can work with one of doctors. Each is given a few minutes to speak with you and explain how they offer their medical services, after which you have to choose whom to work with. Each doctor attended the same medical school, completed residency at the same hospital and seems nearly identical to the other in training and skill. The only difference you can discern from the conversation is how you will have to pay each doctor.

The first doctor discusses that he will charge you an appointment fee each time you meet. The only services included with that fee are his diagnostic services, physical examinations and treatment recommendations based on these examinations. The fee does not include any laboratory services or medication prescriptions under the treatment recommendations. All expenses beyond the appointment with the doctor will require additional payment by you. To fill medication prescriptions, you will have to select a pharmacy and pay for the drugs at that pharmacy.

Then you meet with the second doctor to discuss his services and fees. The doctor explains that you will be able to meet with him any time you wish with no cost to you. He will provide diagnostic services, examinations and laboratory services as required without any cost to you. Come for a cold, come for a broken bone…you will never be charged a penny for diagnostic work and treatment recommendations. All this doctor asks in return for his service is that if he prescribes you a treatment plan that includes medication, you visit with him in his pharmacy and purchase medication prescribed to you from him. Next he discloses that, while he is able to sell drugs from most major pharmaceutical brands, he gets paid a significantly larger commission by some brands than others. He goes on to tell you he is actually employed by one pharmaceutical company as a salesperson. He makes it clear that you are under no requirement to use his pharmacy, but that it is extremely convenient for you to do so. As you mull over your choice, you may begin to think that the first doctor sounds like he could become very expensive. After all, you have to pay for his services and then pay for any other services as well. The second doctor does not ask for a penny, but would like you to buy your medication from him. Is there a problem with this?

That free financial plan you have been offered is very similar to the free medical advice the second doctor offered. The deal sounds pretty nice and it sure is easy to say yes to free. That free financial plan being offered is not in reality quite so free, however. As might be the case with doctor number two when providing medication treatments, a financial advisor offering a free plan will be inclined to recommend financial products for you to purchase. This is, after all, how he gets paid. If you do not purchase products, you do get a free financial plan (albeit one with recommendations that may be questionable or skewed toward a product sale.) Moreover, the products recommended under the free financial plan may end up costing you more than it would have cost to pay for planning services and products separately!  You have been told that the commissions by some brands are higher than others…which do you think the financial advisor is likely to recommend? And you pay that commission. It may not be outright in the form of a check directly to the financial advisor, but it comes out of your premium payments or money being invested. It is NOT free.
Assume now you meet with two financial advisors. One works for a large investment brokerage, and the second for an independent fee-only financial planning firm. The following comparison is simplified, but offers a representative model of the type of fees you might pay.

Assume the first financial advisor recommends a mutual fund with a 3% commission and a 1.5% annual expense. You could invest $100,000 dollars with this advisor, who then receives $3,000 of your money from the mutual fund company. Additionally, you pay an expense to the mutual fund company of $1,500 every year. If the value of your investment goes up, this figure will rise. So, the total expense for the advice the financial advisor provides and his treatment plan recommended is $4,500. If your advisor recommends changing your investment in the future, he could receive another commission at that point, as well.

Compare this to the second financial advisor who charges you a fee for his financial plan. He charges you $1,500 for the financial planning work and 1% annually to provide ongoing financial advice and manage your investments. Then he recommends you invest in several no-load (no commission) index funds with an average annual expense of .6%.  Again you invest $100,000 with this advisor. Now your total out of pocket expense is $3,100. The financial advisor receives $2,500 total and the fund companies receive $600. AND in future years, you only pay the advisor $1,000 for ongoing financial advice and financial planning services plus the $600 mutual fund company fees (which could increase or decrease depending on how your investments perform.) There are no future commissions charged to you and the advisor is under no compulsion to recommend you change your investment plan in order for him to get paid again.

Think twice about that free financial plan. It’s really not so free and it carries with it a lot of conflicted advice. Would you choose the pharmaceutical representative who is also a doctor? Do you think the treatment plans this doctor offers might be a bit skewed? That free financial plan is very similar. I know I do not want my medication advice coming from a pharmaceutical representative and equally do not want my financial advice coming from a financial product salesperson. How about you?

Nathaniel G. Gehring CFP® –Living Financially Aware

The post About That Free Financial Plan first appeared on Whole Hearted Way.

Cash flow is where you start. You may not think that you have cash flow but if you are earning money either through a job or investments, then money is coming into your bank account and that is cash flow. But wait! – Before you start paying the bills- start by paying yourself FIRST- not after all the bills are paid, but before. Start with taking 10% of your salary and divide by 12 months.  That is the monthly amount you should save. Open up a savings account and request a direct deposit from your paycheck to your savings account. That is automatic savings and a smart way to start paying yourself first every month.

Congratulations! You have made the first step in creating wealth- saving. A savings account will give you a cushion. Don’t worry if you are only getting a small amount of interest on the money. The point is to have some funds to rely on when the roof needs repair or the car breaks down. That’s what this money is for- short term expenditures and surprises that come up in life.

Also a good savings account will prevent you from dipping into investment funds which should be held for the long term for maximum value. Many good investment plans go sour when they are dipped into for emergency cash. Keep them separated, and you will keep your investments intact and you are on your way to real wealth.

I have written some posts also about having and maintaining good credit, too. After you have money going monthly into a savings account and your credit score is 720 or better, then you are ready for step #2.

Congratulations! You have made the first step in creating wealth- a savings account and good credit.

The post Do-It-Yourself Financial Plan Step #1 -Cash & Credit first appeared on Whole Hearted Way.