Budget Is Not A Swear Word!

Just like you know how to put gas in your car, where your air pods are, and how to work your Keurig, you should know how to control your money! Money is a tool.  A budget is a plan for your money. Without a plan, your money controls you instead of you controlling it. Here are some steps to get you started: 

  1. Track your expenses for 3 months. No rules, just keep track. 
  2. Sort those expenses into categories. Things like: Eating Out, Groceries, Pet Care, etc. 
  3. Figure out your average monthly expense in each category.
  4. Now label each category as one of the following:
    1. Obligations (things you must pay, like debt or tuition), 
    1. Needs (stuff you need, like electricity, groceries, or internet if you work from home), and 
    1. Wants (all the other stuff). 
  5. Add up all the averages. Is that more than your net income? If it is, then it’s time to downsize. Start with things labeled “wants”. Can you downsize those to fit the whole picture into your income? If you still need more, move on to “needs”. You might try shopping for new car insurance, getting on a budget plan with your utility company, or buying a gift card to the grocery store you prefer. When it’s empty, time to get creative with what’s left in the pantry!

A word of encouragement related to Step #5: Think about the kind of life you want to have. Don’t restrict yourself in certain areas because you feel like you should. If you want to spend $300 a month on clothes, that’s okay, but recognize that you may have to give up money in other categories to make that a reality. Ask yourself what you really want and arrange the maximum amount in each category accordingly. 

  • Once you’ve whittled down your wants and needs so all expenses fit within your income, that’s your budget! Continue keeping track of your expenses. There are many apps and software programs that can help with this (like, Mint.com or EveryDollar). You could also build a good old-fashioned spreadsheet. 
  • Review the averages every 2-3 months. Maybe you’re consistently overspending in 1 or 2 areas? Then see what you could wiggle around in your other categories to make more room in the ones where you spend more. Maybe it would be helpful to be more specific in certain categories, so you can more easily expose overspending. Remember that 2-3 months is a long time in budget world. So, keep an eye on things and don’t be afraid to rework it if it’s not working for you. 
  • Don’t forget to factor in savings. If you have goals you’d like to save towards – either short-term or long-term – fit those into the budget. Then you’re managing your present and making steps toward the future! 

Remember that your budget is YOURS. Don’t let outside influences pressure you into making it look a certain way. You do need to pay your bills, but even those can be different from household to household. Your budget is a tool, not a millstone around your neck or a cage for your spending. It’s a way for you to get in control of your money and get some financial freedom!   

Summer Savings


This is an opportune time for many homeowners to tackle different remodeling projects around the house. Before the season officially begins on June 21, here are some tips for saving on these new additions.

Use longer light hours for landscaping needs

Graduation parties, barbecues, and holidays add up to a higher likelihood of hosting family and friends in the summer months. Early summer is a great time to get a head start on landscaping projects that will bring your yard to life. Although retail sales may be tough to find, opting to complete yard work on your own can bring sizable savings compared to hiring a landscaping company.

According to improvenet.com, the median cost for yard maintenance services in the U.S. is $226 per month but can cost up to $700 per month on the top end.

Exterior painting on a budget

With college students home for the summer, homeowners may look to student-run painting services for exterior paint jobs. While the quality might not reach the level of expensive professionals, serious savings can be had for a decent paint job.

Homeadvisor.com reports that the average homeowner spends between $1,714 and $3,682 to paint their house. Student-run services will often be in the lower price range and able to beat other professional quotes.

Rack up savings on an early-summer roof replacement

According to Angie’s List, late summer and early fall are the busiest times of the year for roofing contractors, giving homeowners an opportunity to rack up savings by scheduling their project for early summer. Unpredictable spring weather in the previous months makes June an ideal time to contact a roofing company and get the project underway.

Expect to pay between $3 and $7 per square foot, with the average total cost ranging from $4,900 to $14,100.

Save by strengthening home security

Though many summer projects can include a great deal of labor, one way to save without breaking a sweat is installing a home security system. The cost of installation can vary, with a DIY project ranging from $50 to $300, while a professional system can range $300 to $1,500.

Savings then come via reductions in your home insurance rates, with some insurance providers offering reductions of up to 25 percent for those with installed security systems. Before moving forward and counting on these savings, check with your current insurance provider on the discount offered and if only specific systems qualify.

Hot deals on cold weather needs

Products that are intended for winter use can have substantial savings in the summer months. One of the best areas for savings is in furnace inspections and replacement. By scheduling a furnace inspection in the summer, you will ensure that everything is running properly and may be able to score a discount on the inspection cost with lower seasonal demand for technicians.

In the event that a replacement is needed, many installation companies will have unsold inventory from the previous winter available at a fraction of the price. According to Angie’s List, inspections cost as little as $60 to $85 while a new replacement gas furnace ranges from $2,250 to $3,800.

Also, look to score a deal on a snowblower in the coming months. While most consumers are shopping at the local power equipment store for lawn mowers and weedwhackers, you can often pick up last year’s models on sale. Already in recent weeks, both Home Depot and Walmart have run sales of 30 percent off or more and expect these discounts to pop up throughout the summer.

Cost & Timing of Home Remodeling


As with many large purchases, timing matters when remodeling a home. Each season holds advantages for different types of projects based on price and availability.  Consider these tips to take advantage of potential savings:

Fall: Pools, kitchens, and appliances
Though pools and summer are tightly linked, waiting until fall for installation can bring worthwhile savings. With the average cost of installing an in-ground pool at $49,224, those savings may be worth the wait.

Kitchen remodeling is among the most popular renovation projects and can be done at any time of the year. Scheduling this project for the fall capitalizes on a slower season for contractors, which can result in lower labor prices. Also, in terms of convenience, tearing apart the kitchen might be easier once children are back in school. While some kitchen renovations can fall in the $10,000 to $15,000 range, expect closer to the average of $22,530.

Fall can also be an ideal time for purchasing new appliances. In preparation for the holiday shopping season, most manufacturers will introduce their new models in the fall, resulting in sales on previous models.

Winter: Decks, bathrooms, and air conditioning
Ideally, you’ll want a new deck ready to go once the weather warms up but winter is actually the best time to schedule the preliminary planning and design process. This is a dead season for deck contractors and allows your project to be their top priority once the ground softens in the spring. While the cost of building a new deck varies with size, expect anywhere from $2,000 to $7,000.

Competing with the kitchen for the most popular home renovation is the bathroom. Again, indoor work such as this can be completed at any time of the year, but lower rates are more likely during contractors’ slow winters. This should make it easier to schedule the contractor and may lead to a quicker completion. Homeowners tend to spend an average of $10,167 on a new-look bathroom.

While air conditioning is likely the last thought on most consumers’ minds during the winter, this is the time for big savings on both repairs and replacements. Once spring and summer heatwaves kick in, rates will jump back up. The average cost for an A/C repair is $342, while a replacement is $5,465.

Spring: Windows and flooring
Window replacements become common in summer once homeowners start running the A/C, but getting ahead of the curve will help score a deal on installation. Be on the lookout for window companies offering sales to kick off the season and ideally schedule installation once it warms up to over 50 degrees. Prices vary widely based on home size, amount of windows, and type of windows. The average cost for a single-story home with 10 windows is between $3,000 and $7,000.

Late spring is also a great time to pull the trigger on flooring. Early spring can be busy for flooring companies as homeowners begin spending their tax returns, causing tighter scheduling. May is the sweet spot, being right in between this tax-return season and summer’s peak home buying season. Hardwood flooring averages between eight and $10 per square foot with installation while carpeting averages around $3.50 per square foot with installation.

Summer: Paint, landscaping, and furnaces
Demand for almost every renovation project increases during the summer, but there are still deals to be scored. As high school and college students take a break from the classroom, many of them will look towards the popular student painting services for employment. Student-operated painting crews boast substantial savings compared to the labor of professional crews, which should help trim down the $4,000 average cost of an exterior paint job.

Additionally, landscaping and yard work make the most sense to be completed during the summer when the work will be most visible. Though it may be tough to find any deals with the high demand, long summer days allow for more DIY opportunities to cut costs.

Lastly, like air conditioning in the winter, savings can be found on furnace repair and replacement in the summer. Average furnace repair costs are a little less than A/C, coming in at $287, while replacement costs an average of $4,237.

How money affects couples

It is no secret that money is a hot-button issue for most couples. Discussing finances can be uncomfortable, and some couples may avoid these conversations altogether. Financial issues may also cause some to avoid marriage entirely as individuals may be worried about sharing debts and assets or justifying their ingrained spending habits to each other. 

Whether you are recently married, celebrating an anniversary, or simply thinking about taking the next step in your romantic (and financial) life, consider these suggestions to the common financial challenges that most couples face.

If you marry your financial opposite
While most people say they want to find a mate that has similar spending habits to their own, what we want and what we choose may be vastly different. Some research suggests that when it comes to spenders and savers, opposites attract. This could be attributed to the fact that we sometimes seek out those who have opposite characteristics of what we find unappealing about ourselves. Regardless of the reason, if you find yourself a spender married to a saver, it can quickly lead to conflict.

On a positive note, compromising on personal spending habits can lead to healthy, moderate spending habits as a couple. By setting common spending goals together and establishing a system for working toward those goals, you can focus on something beyond the everyday sacrifices or splurges you try to avoid. The important thing is to set a clear budget that keeps both of you accountable to something other than each other.

If one of you makes more money 
It would be rare to meet a couple who made the same amount of money; chances are, either you or your spouse are pulling in the larger income. Whether the discrepancy is small or large, a difference in pay could cause tensions in how money is saved, spent, and earned.

It is important to remember, however, that whether you are the higher earning spouse or not, you both ultimately share responsibility for your family. 
Your importance to your family and the role you play in your loved ones’ lives is not completely tethered to your paycheck.

If you enter marriage with a hefty combined debt 
For Millennials, this is becoming more and more common. According to a Federal Reserve Report, approximately 40 percent of adults under the age of 30 have student loan debt, averaging $32,731 per borrower. That means that Millennials may be starting their marriages with about $65,000 in debt, and with the average cost of a wedding exceeding $35,000 in 2016, getting married may put you even further in the hole. 

Unfortunately, this debt burden may be scaring Millennials off from marriage altogether. According to a 2013 survey by the American Student Assistance, 29 percent of Millennials said they have postponed marriage to deal with their student debt. Conversations about debt may range from whether you will pay off your debt separately or together to how much should be spent on a fancy ceremony or new home. By establishing “debt goals,” you can make sure both you and your future spouse are on the same page and that you start your life together with a plan to reduce your loans in the future. 

If your marriage is the victim of financial infidelity
One in three adults who have combined their finances in a relationship admitted to lying about a financial issue, according to the National Endowment for Financial Education. 
While lying about money may be relatively common, these “little” money lies truly do matter; 76 percent of those who lied about a financial issue said that it affected their relationship. To avoid letting financial infidelity get the best of your relationship, it is important to talk with your spouse about what each of you considers financial infidelity. Something that one of you sees as a minor financial setback may sound like a financial disaster to the other. Establishing financial thresholds from the beginning can keep you both aligned on budgeting goals and foster better transparency when setbacks do occur.

If you are reluctant to combine finances 
If your spouse does not want to combine your finances right after your wedding, it may make you feel like they do not trust you. Try to remember that there is no unilateral approach to finances, and there may be practical reasons for keeping your finances separated. If this is the case, one option is to have both joint and separate accounts until you find out which works better in your marriage. If you are hesitant to merge finances, you may find comfort in the fact that there are certain aspects of your financial life that will not merge when you get married. For example, your credit report is yours and yours alone (although if you apply for a home loan or a joint account, both of your scores will be considered).

The most important thing to realize is that disagreements over money are often manifestations of deeper communication struggles. Money represents complex feelings for a lot of people — feelings about power, trust, or self-esteem that may be masked in a fight over your shopping budget for the month. Just recognizing which of these common issues may be causing friction is a key first step in resolving these common interpersonal challenges. The positives of transparent financial communication can impact far more than just your new joint checking account.

Keeping Up With the Joneses

People like to fit in; it’s one of the simplest laws of human nature. Although we value the things that make us unique, most of us are careful to not let them make us social outsiders. There is strength in numbers, and conformity reassures us that we are making the right decisions.

Unfortunately, comparing ourselves to others can lead to real problems. Our egos can become sensitive—even irrational—when trying to protect the public image of our wealth and status. If left unchecked, the fear of falling behind our peers can destroy our financial security. 

Meet the Neighbors
In a paper published by the Federal Reserve Bank of Philadelphia, economists tested and analyzed the social behavior of “keeping up with the Joneses” and the impact it could have on personal finances.

In their study, economists used six-digit postal codes to divide Canadian cities into micro-neighborhoods (13 households on average). They then observed financial changes in the neighborhoods after one of the households had won a lottery prize.

Whereas many researchers have documented the Sudden Wealth Syndrome of lottery winners (many of whom end up in financial ruin), this study instead focused on the winners’ closest neighbors. The researchers wanted to know how people responded when someone else suddenly had more money to spend. 

The results were clear: for every 1,000 Canadian dollar increase in the size of the lottery prize, the number of bankruptcy filings among close neighbors increased 2.4 percent in the three years following the lottery win (the base rate was .46 bankruptcies per neighborhood). This effect was greater in low-income neighborhoods where prize values were higher relative to average incomes.

What happened? When the asset sheets of the bankrupt neighbors were reviewed, researchers found that the houses had increased their “conspicuous consumption,” 

spending more of their money on visible signs of wealth (rather than investments that go unseen). Accordingly, the ratio of visible to invisible assets rose with the size of the lottery winnings, suggesting that individuals were willing to spend more when their “Joneses” had won more.

Irrational Groupthink

While the study may simply confirm what many might have suspected, the irrationality of the situation is striking. Winning a lottery is not a reward or promotion—it says nothing about a person’s value or rank. Why would neighbors, who know the wealth was won by luck, compare themselves to a situation they can’t possibly copy? Furthermore, why try to emulate the neighborhood’s one winner, when “fitting in” should mean behaving like all the other non-winning households?

The problem is that wealth and status are relative each person. Everyone has his or her own “Joneses.” When one house receives a windfall of cash and begins spending, it can set off a chain reaction. Our egos would rather let us spend too much than risk falling behind.

This arms race mentality is why the housing bubble of the last decade became so severe. It wasn’t just the opportunity to make money off real estate; it was the visibility of the changing wealth. Every day, people watched their neighbors buy and improve properties, knowing that they would have to do the same just to maintain the status quo.

Forgetting About the Joneses

A little social pressure isn’t necessarily a bad thing. It often provides a nudge towards positive action and helps us make good choices. But when it comes to money habits, trying to match (or exceed) those around you can lead to serious problems. Everyone’s financial situation is unique, and each person defines success differently. As difficult as it is, you need to shut out the social noise and ignore what others do with their money. After all, you’re trying to accomplish your financial goals—not theirs.


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. 

This article was written by Advicent Solutions, an entity unrelated to Guidestream Financial, Inc.. The information contained in this article is not intended to be tax, investment, or legal advice, and it may not be relied on for the purpose of avoiding any tax penalties. Guidestream Financial, Inc. does not provide tax or legal advice. You are encouraged to consult with your tax advisor or attorney regarding specific tax issues. © 2014 Advicent Solutions. All rights reserved.

“Phishing” Fraud: How to Avoid Getting Fried by Phoney Phishermen

“Phishing” involves the use of fraudulent emails and copy-cat websites to trick you into revealing valuable personal information — such as account numbers for banking, securities, mortgage, or credit accounts, your social security numbers, and the login IDs and passwords you use when accessing online financial services providers. The fraudsters who collect this information then use it to steal your money or your identity or both. 

When fraudsters go on “phishing” expeditions, they lure their targets into a false sense of security by hijacking the familiar, trusted logos of established, legitimate companies. A typical phishing scam starts with a fraudster sending out millions of emails that appear to come from a high-profile financial services provider or a respected Internet auction house. 

The email will usually ask you to provide valuable information about yourself or to “verify” information that you previously provided when you established your online account. To maximize the chances that a recipient will respond, the fraudster might employ any or all of the following tactics:

How to Protect Yourself from Phishing

The best way you can protect yourself from phony phishers is to understand what legitimate financial service providers and respectable online auction houses will and will not do. Most importantly, legitimate entities will not ask you to provide or verify sensitive information through a non-secure means, such as email. 

Follow these five simple steps to protect yourself from phishers:

What to Do if You Run into Trouble

Always act quickly when you come face to face with a potential fraud, especially if you’ve lost money or believe your identity has been stolen.

  • Names of Real Companies — Rather than create from scratch a phony company, the fraudster might use a legitimate company’s name and incorporate the look and feel of its website (including the color scheme and graphics) into the phishy email.
  • “From” an Actual Employee — The “from” line or the text of the message (or both) might contain the names of real people who actually work for the company. That way, if you contacted the company to confirm whether “Jane Doe” truly is “VP of Client Services,” you’d get a positive response and feel assured.
  • URLs that “Look Right” — The email might include a convenient link to a seemingly legitimate website where you can enter the information the fraudster wants to steal. But in reality the website will be a quickly cobbled copy-cat — a “spoofed” website that looks for all the world like the real thing. In some cases, the link might lead to select pages of a legitimate website — such as the real company’s actual privacy policy or legal disclaimer.
  • Urgent Messages — Many fraudsters use fear to trigger a response, and phishers are no different. In common phishing scams, the emails warn that failure to respond will result in your no longer having access to your account. Other emails might claim that the company has detected suspicious activity in your account or that it is implementing new privacy software or identity theft solutions.
  • Pick Up the Phone to Verify — Do not respond to any emails that request personal or financial information, especially ones that use pressure tactics or prey on fear. If you have reason to believe that a financial institution actually does need personal information from you, pick up the phone and call the company yourself — using the number in your rolodex, not the one the email provides!
  • Do Your Own Typing — Rather than merely clicking on the link provided in the email, type the URL into your web browser yourself (or use a bookmark you previously created). Even though a URL in an email may look like the real deal, fraudsters can mask the true destination.
  • Beef Up Your Security — Personal firewalls and security software packages (with anti-virus, anti-spam, and spyware detection features) are a must-have for those who engage in online financial transactions. Make sure your computer has the latest security patches, and make sure that you conduct your financial transactions only on a secure web page using encryption. You can tell if a page is secure in a couple of ways. Look for a closed padlock in the status bar, and see that the URL starts with “https” instead of just “http.”
  • Read Your Statements — Don’t toss aside your monthly account statements! Read them thoroughly as soon as they arrive to make sure that all transactions shown are ones that you actually made, and check to see whether all of the transactions that you thought you made appear as well. Be sure that the company has current contact information for you, including your mailing address and email address.
  • Spot the Sharks — Visit the website of the Anti-Phishing Working Group atwww.antiphishing.org for a list of current phishing attacks and the latest news in the fight to prevent phishing. There you’ll find more information about phishing and links to helpful resources.
  • Phishy Emails — If a phishing scam rolls into your email box, be sure to tell the company right away. You can also report the scam to the FBI’s Internet Fraud Complaint Center at www.ic3.gov. If the email purports to come from the Securities and Exchange Commission, alert the SEC by submitting a tip online at https://denebleo.sec.gov/TCRExternal/disclaimer.xhtml.
  • Identity Theft — If you think that your personal information has been stolen, visit the Federal Trade Commission’s feature on Identity Theft at www.consumer.ftc.gov/features/feature-0014-identity-theft for information on how to control the damage.
  • Securities Scams — Before you do business with any investment-related firm or individual, do your own independent research to check out their background and confirm whether they are legitimate. For step-by-step tips and links to helpful websites, please read Check Out Brokers and Advisers and SIPC Exposes Phony “Look-Alike” Web Site. Report investment-related scams to the SEC using our online Complaint Center.

    Article from U.S. Securities and Exchange Commission

Saving Money On Home Ownership

Last month, we looked at ways tenants could save money and combat rising rent prices. But if you’re one of the millions of Americans that owns a home, saving money on rent may feel like an irrelevant skill. Fortunately, there are plenty of ways for you to save on homeownership.

Saving During the Buy
Right House, Right Neighborhood – Any realtor will tell you that location plays a huge role in determining home value. However, a good location can have costs beyond the home price. Property taxes can vary wildly between suburbs. Saving hundreds or thousands a year could be as easy as looking just a few blocks from your target neighborhood.

Keep an Eye out for Easy Fixes – An overgrown yard, dirty basement or tacky wall colors can drive down the cost of a house even though yardwork, cleaning and restyling were things you were likely to do anyway. If you’re willing to do a bit of work, you can get a good house below its asking price while picky buyers are looking elsewhere.

Check Your Taxes – Buying a new home can come with new tax opportunities—especially if it’s your first home or you plan to make major improvements. When tax season comes around, be sure you’re getting your maximum benefits, even if it means seeking professional tax advice.

Saving While Owning
Get it Green – If you haven’t considered energy efficient appliances, improved windows or better insulation, you need to review your utilities budget and find out how much you could save each year. If saving energy isn’t enough, you could make your own by buying or leasing solar panels. Green homes save money and have higher property values.

Refinancing – An obvious option to most homeowners, refinancing a mortgage provides a way to save on interest or restructure repayments. Refinancing isn’t always a good option, though; a refinanced mortgage needs to provide savings large enough to offset the costs it incurs.

Early Repayment – In most cases, mortgages allow you to repay the principal early without penalty. If you have extra money from a bonus or tax refund, consider putting it towards paying off your mortgage. For a mortgage charging 4.5 percent interest, every $1,000 paid early will save you $550 in interest over the next 10 years.

Light Right – Old incandescent and halogen bulbs use up lots of energy, most of which becomes heat. Using energy efficient LED lightbulbs and/or installing skylights (window or tube) will reduce the electricity needed to light a room while also cutting down on your air conditioning costs.

Saving When Selling
Only Stage the Key Rooms – Improvements can greatly improve resale value, but there is no need to spend big on every room. The kitchen, main living room and largest bedroom are the areas that tend to convince people of a home’s value. Focus your upgrades on those spaces; not every room of a house needs to dazzle prospective buyers.

Be Patient – If you are certain of your home’s value, don’t feel pressured by a realtor to offer a discount. Realtors are there to help you, but they also work on a commission system that rewards high turnover. Dropping $10,000 from a list price barely affects their cut and allows them to move on to selling a different house. Be sure that any discounts are justified by market demands.

Get Friends to Help Move – Hiring a moving service can be much faster and more convenient than moving yourself, but it will cost you thousands. For the price of providing lunch, you may be able to convince friends and family to help you load or unload a moving truck you rented yourself.

Lifetime Debt

Debt is not a bad thing. Credit is not a bad thing. Mortgages are not bad things. Student loans are not bad things.

But they sure can cost you a lot of money, both now and in the future.

Paying to Pay
Debt, in whichever form, means paying extra for immediate access to money. Debt is said to be “efficient” if the benefit the money provides is greater than the extra cost of borrowing it.

In the United States, we love debt. At the end of 2014, America’s total household indebtedness was $11.83 trillion. Major sections of consumer debt include:

• $8.68 trillion in housing loans
• $1.16 trillion in student debt
• $950 billion in auto loans
• $700 billion in credit card debt

(Figures taken from the Federal Reserve Bank of New York’s “Household Debt and Credit Report” Q4-2014)

While using debt is routine for most people who need to buy homes and cars, go to college and cover major expenses, it is still extremely important to consider its cost. The website www.credit.com estimates that the average American surrenders $279,000 in debt interest over the course of his or her lifetime (not including student loan interest). What’s more, household debt is trending up; it has risen 43 percent since 2004. Student loans have grown particularly fast, climbing over 300 percent over that same time.

This is cause for concern among some economists and financial news pundits. The fear is that loans (particularly student loans) are siphoning off wealth people traditionally would have saved. Though broad loan usage helps stimulate the economy, high debt among individuals could stunt their financial growth.

A major part of the problem is that debt is self-sustaining. It not only grows on its own, but also puts people in a position to need more debt. A single event (e.g. medical cost) can trigger interest payments that ruin a family’s cash flow and send them into a debt spiral.

To the Limit
But does debt need to cost us anything? Many people successfully avoid, or even invert, debt costs by being careful. The classic example of this is using a credit card to accumulate rewards while religiously paying off the monthly balance. Unfortunately, this may still lead to losses; your spending habits are much harder to outwit than a credit card company.

As it turns out, debt causes us to spend more money—even if interest is avoided. Debt psychologically enables extra spending, giving us immediate gratification while delaying the pain of cost. The result is a mental lapse in valuation that makes us comfortable with paying higher prices or buying on impulse.

This distortion of debt value is particularly bad when buying high-priced items. We may labor over spending an extra $20 at a grocery store, but when buying a car or house, our reasoning is skewed by big numbers and long timeframes. Hundreds or thousands of dollars seem trivial when we already have to take out a huge loan with decades on the term.

What Can You Do?
Although it comes at a price, debt is still an important tool that can give people amazing opportunities. The good news is that you can do several things to reduce the cost of debt in your life:

• Improve your credit score – The difference between a “Fair” and a “Good” credit score can easily translate into tens of thousands of dollars in interest payments over your life.

• Pay with cash when possible – This might seem like an unrealistic or outdated idea, but it limits your ability to buy impulsively and reduces bloated credit spending.

• Fight for each dollar – Remember that $100 saved when buying a car is worth the same as $100 saved while shopping. Don’t let a loan inflate your target price for a big purchase.

• Consolidate – If you have numerous debts, consolidate them under a single bank loan. Interest rates are very low right now and a consolidation can save you thousands.

Know Your Financial Math

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.

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. 

This article was written by Advicent Solutions, an entity unrelated to Guidestream Financial, Inc.. The information contained in this article is not intended to be tax, investment, or legal advice, and it may not be relied on for the purpose of avoiding any tax penalties. Guidestream Financial, Inc. does not provide tax or legal advice. You are encouraged to consult with your tax advisor or attorney regarding specific tax issues. © 2014 Advicent Solutions. All rights reserved.

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!

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