Please keep in mind that these are simple estimations and are not to be treated as precise technical calculations. They can be influenced by a number of factors and don’t take any personal information into account. The formulas help call attention to parts of your budget, but do not calculate exactly what you should expect.

The easiest and best place to start. Your cash flow is the total surplus or deficit you have each month after paying your expenses. If you find you are running a deficit most months, you need to cut your expenses down or find a way to boost your income.

Another easy formula, calculating how much a monthly (or weekly) expense will cost you over a whole year is an important insight for a budget. Paying \$8 a month for a subscription may seem cheap, but you should realize it’s costing you \$96 over the course of a year.

The EPA estimates that the average car owner uses about 500 gallons of gas a year (almost 700 if you drive a truck or SUV). While volatile gas prices make it impossible to project your exact gas expenses for a year, this formula makes it easy to understand how much a change in gas prices is worth: for every \$0.01 gas drops, you could expect to save \$5 annually.

Have you ever wanted a quick estimate of how long it takes for money to double? Try the “Rule of 72.” Just divide 72 by the annual growth rate of your account and you get an approximation of how many years it takes to double. (Example: 6 percent growth would be 72/6 = 12 years to double). If using this formula for investment account, remember that the market is unpredictable and average market performance does not guarantee future returns. Investments can be subject to losses, which will greatly change their nominal rate of return.

Although there are some major outliers, most new cars depreciate around 10% when driven off the lot and another 10% each year they are driven (for the first 5 years). So when looking at new cars, remember that most lose their value fast. Without a down payment, you’ll likely be underwater on the loan for the first year or two.

This equation is a bit more complex, but it’s pretty handy for people wondering how their rent cost compares to a 30‐year mortgage. Take 75 percent of the expected mortgage interest rate and add 3 percent to get the annualized rate of repayment. If you multiply this number by the initial mortgage amount, you get the annual cost. (Example: A 30‐year mortgage issued at 4 percent would have an annual repayment rate of (3+4×.75) = 6%. If the mortgage was for \$200,000, you’d pay (\$200,000×6%) = \$12,000 a year (\$1,000 a month) to stay on the 30 year schedule.) Keep in mind that this is an estimation of the mortgage costs only and does not include home insurance, mortgage insurance, property expenses or any of the other various costs of owning a home.

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Remember that past performance may not indicate future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, strategy, or product referenced directly or indirectly in this newsletter will be profitable, equal any corresponding historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. You should not assume that any information contained in this newsletter serves as the receipt of personalized investment advice. If a reader has questions regarding the applicability of any specific issue discussed to their individual situation, they are encouraged to consult with a professional adviser.

## For Today’s Children, Retirement Planning Starts Young

We all hope for a long, healthy life, but—from a financial standpoint—the length of our lives may be starting to get out of hand. One projection from the U.K.’s Office of National Statistics estimates that more than 30 percent of the nation’s children born after 2011 will reach age 100. That means that for every couple that reaches age 65, more than half will have least one partner live another 35 years.

If today’s children continue to retire at what we currently consider a “normal” age, many could spend almost as much of their life in retirement as they spend working. Since a majority of U.S. citizens already face insecure retirements with current financial planning norms, extended longevity may become an overwhelming monetary challenge.

One solution to the problem may lie in changing when people begin to plan for retirement. A few extra years of growth can have a massive impact on the value of a retirement account. If we can train today’s children to make good financial decisions earlier in life than most adults do now, they’ll be better able to handle the cost of an extremely long retirement.

But it’s today’s adults who will need to teach them.

In general, adults usually impart their financial habits to children—whether they mean to or not. Kids are observant, and adults’ financial decisions can imprint upon them easily. However, retirement planning, though essential, is an obscure subject. Children get to see how adults spend their money, but they don’t often see how they save it.

Obviously, trying to lecture a young child about 401(k)s and investment strategies won’t be helpful to anyone, so adults will need to take a more basic approach. By teaching children the underlying principles of saving, planning and money growth, you can turn their future financial decisions into a matter of obvious choices.

Getting Kids to Learn
Though teaching financial habits takes more than a piggybank, it’s still a great place to start. Providing a younger child with both an allowance and savings goals is a great way for them to practice budgeting. Help the child set goals that are simple and attainable; if they set an ambitious goal, offer to help them by covering the difference if they reach a significant percentage of the total value.

But saving alone isn’t enough: children need to understand that value can grow over time. This can be taught by providing them with interest: offer a small amount of money for each dollar they saved from their last allowance. They’ll quickly learn that by forgoing some immediate gratification, they can reach their savings goals even faster.

Later on, you can reverse this process to teach a child about debt. Allow them to borrow money from you for a small purchase, but plainly explain that they’ll have to pay the money back with interest. When they hand their money over to you later, it becomes a golden opportunity to explain how debt means paying extra.

If you prefer a more direct route of education, there are numerous online resources to help teach kids about money and smart planning—one of the most interesting examples being Warren Buffett’s own online cartoon series “Secret Millionaires Club” (www.smckids.org).
As a child grows, help them get the ball rolling on retirement planning. Our team at GuideStream Financial would be glad to help them take some first steps. We can help you explain the importance of planning ahead for retirement and avoiding heavy credit debt (especially during college). Financial maturity doesn’t happen overnight, so stay patient and don’t try to cover everything all at once.
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Remember that past performance may not indicate future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, strategy, or product referenced directly or indirectly in this newsletter will be profitable, equal any corresponding historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. You should not assume that any information contained in this newsletter serves as the receipt of personalized investment advice. If a reader has questions regarding the applicability of any specific issue discussed to their individual situation, they are encouraged to consult with a professional adviser.

## Financial Planning – 30 & Under

-By Caitlin Koppelman
While I was in college, people told me I had fewer obligations and more financial flexibility than I’d have in my entire life. I could not comprehend that at the time. In retrospect, I can see it now:  No mortgage, no kids, and those blessed student loans were still in deferment!  Life was so simple: almost no liabilities and a high percentage of discretionary income. Now, I have to remind myself that I’m in the “accumulation phase” of life. I’m accumulating valuable assets for the future: an education, our first home and starting a retirement savings plan. Those assets aren’t cheap, but I’m making an investment for the future. Every mortgage payment and every retirement contribution is like money in a future bank account.

Even though it’s natural to want to pay more attention to your present bank account, now is the time to make deposits for that far off phase of life. Do it now, while it’s easier than ever. Notice I said, “easier” not “easy”. It is never easy to delay gratification, but if we want to reap the benefits at harvest time, we have to sow and tend the garden along the way. With 35+ years on your side, a little bit now can multiply if handled wisely.

Who has time to tend that financial garden? There are only so many hours in the week and who wants to spend their down time planning a future retirement that they can barely imagine?  As a 28-year-old, I can’t blame you for being skeptical. You’re probably a little jaded by the whole idea of savings, debt, and retirement. It comes down to risk and reward. If a Traverse City cherry farmer is hopeful for a good crop, he faces the risk of frost, pests and drought, head on. It’s worth the risk for him because of the potential reward. His potential reward is higher because he took the risk and planted the trees. For me, I’m not willing to live a life of limited influence in the future because of financial constraints. So, I plant now and plan for a harvest.

Here are a few simple steps to get you started:

1. Many employers offer 401(k) matching programs. Take full advantage of that by deferring at least the percentage at which the company will match your contribution. That’s free money! If your employer doesn’t offer a match, at least do your own contributing.
2. Connect with a financial adviser you trust. Be brave and share your goals. Take advantage of their expertise. You’re a professional with your own expertise in a specific area. Let them use their wisdom and experience to set you free to focus on the things you care about.
3. After you’ve made a trustworthy connection, make a plan and stick to it! Come flood or draught; keep your eye on the prize!

Remember, delayed gratification is not natural. When something threatens your cherry trees, you’ll be tempted to give up. Stay the course! The harvest is coming!

## Financial Planning

-By Scott Blakemore
What comes to mind when you think of “Financial Planning”?

When asked what I do for a living, my response, “I’m a financial planner” is usually met with blank stares and the sound of crickets.  Now and then I get a response, “Oh, I’ve done that”, “I have an annuity,” or “I have an IRA”.  If only that was all it takes.

In the next few paragraphs, we’ll address three common perspectives regarding “Financial Planning” that many people share and how it affects their planning decisions.

I don’t understand enough to know where to begin.  We hear this one often (both from clients and potential clients).  They apologize for not knowing enough about their investments, pension plans, social security, health or insurance benefits.

Here is the good news: planners realize you have likely never been taught, nor do you probably want to learn about all the components of your financial situation.  I don’t want to be a nurse or doctor, and when I go to the doctor, I don’t apologize for not knowing how to take my blood pressure.  I am not trained in this, and they don’t expect me to know.  I just want to know if my blood pressure is good or bad, and what to do to correct the problem.  The same is true for a financial planner – you don’t have to know it all, but you do need to know who can help.

Financial planning is inflexible and limiting.  Rarely does someone verbalize this concern, but when asked if they perceive this to be true, their eyes get wide and they nod their head in agreement.

How many Fortune 500 companies have business or marketing plans, sales forecasts, or budgets?  Probably all of them.  How many change their plans the following year?  Probably all of them.  Maybe they aren’t big wholesale changes, but as information comes in and circumstances change, they change.  The same is true for your financial plan – a good plan is flexible and changes over time as you do.

I have a 401k, IRA or Roth IRA.  I own an annuity, stock or bond.  I’m all set.  While various products and retirement plans are definitely components to be used appropriately when constructing a plan, they are not a financial plan in and of themselves.  Does owning a bat make you a baseball player or owning golf clubs make you a golfer?  Having the right equipment is important, but if you want to be successful, you need a coach – someone to teach you and help develop your skills.  The same is true for a financial planner, we will help you learn the game, coach you and use the appropriate tools.

At its root, financial planning is mostly about trust in the person helping you.  Remember, you aren’t required to understand everything, your plan can flex with you, and there’s much more to a financial plan than the components you use.  Find someone who will listen to you and help you ask the right questions … that is the best, first step toward a more solid financial future.

## How much money should I save for retirement?

The obvious answer is, as much as you can. You’ll probably need to build a fund that you can draw on for much of your retirement income. This may be possible to do if you start early and make smart choices.

Contribute as much as you can to tax-advantaged savings vehicles (e.g., 401(k)s, IRAs, annuities). Make sure to contribute as much as necessary to get any employer matching contribution–it’s essentially free money. Then round out your retirement portfolio with other taxable investments (e.g., stocks, bonds, mutual funds*). As you’re planning and saving, keep in mind that you may have 30 or more years of retirement to fund. So, you may need an even bigger nest egg than you think.

*Note:   All investing involves risk, including the possible loss of principal. Before investing in a mutual fund, carefully consider its investment objectives, risks, fees, and expenses, which can be found in the prospectus available from the fund. Read it carefully before investing.

Your particular circumstances will determine how much money you should save for retirement. Maybe you have a pension plan, or your Social Security benefits will be large enough to tide you over. If so, you may not need to save as much as other people. But other personal factors will enter the picture, too. If you plan to retire early (e.g., age 50 or 55), you’ll have even more retirement years to fund and may need more retirement assets than someone who plans to work until age 65 or 70. Conversely, you may need fewer assets if you plan on working part-time during retirement.

Your projected expenses during retirement will also help determine how much money you’ll need and how much you need to save to get there. Certain costs (e.g., food, utilities, insurance) will be shared by almost all retirees. But you may still be saddled with retirement expenses that many retirees no longer have (e.g., mortgage payments or a child’s tuition).

Expenses will also depend on the type of retirement lifestyle you want. How many nights a week will you dine out? How much traveling will you do? These kinds of questions will give you a better idea of how much money you’ll be spending once you retire. In general, the greater your anticipated retirement expenses, the more you need to save each year to meet those expenses.