Category: Smart Money Tips

Understanding Your Emotional Relationship with Money

Posted on January 5, 2017 by - Smart Money Tips

f you’ve ever experienced buyer’s remorse after making a big purchase or felt embarrassed about the state of your financial affairs, you know that there’s way more to money than the number in your bank account. This highlights the importance of understanding your emotional relationship with money.

Have you ever let fear of failure keep you from investing, or even creating a budget? If you have, you know firsthand how much of a role emotions play in our financial lives. Psychologists refer to these emotions and beliefs we hold about money as “money scripts.” (1) Addressing your emotional relationship with money can help you make more rational financial decisions.

What Drives Our Money Habits?

No matter how hard we try to make only rational and well-thought-out financial decisions, we just can’t seem to do it. This is most likely due to the emotional and psychological baggage we carry around relating to our money, otherwise known as our money scripts. Before you beat yourself up about this, understand that these scripts start forming at a very young age, influencing our emotional relationship with money.

Even if we aren’t aware of it, we spend our childhood watching our parents handle money, both positively and negatively. Over time our brains are unconsciously trained to respond in similar ways. If your parents were confident and wise investors, you will likely face investing with confidence. If your parents scrimped and saved and constantly fought over expenses, you may have strong feelings of guilt when making large purchases.

The seeds of money scripts are planted in childhood and grow to influence your financial behavior as an adult. For this reason, it is incredibly important to talk to your kids about money and model healthy financial behaviors. It is also vital for you to take the time to explore and understand your money scripts and how they influence your emotional relationship with money.

The Bad News

While some money scripts are beneficial to financial health, others, like money avoidance, money status, and money worship, can be detrimental. Unhealthy emotions and belief patterns can lead to all kinds of financial problems, such as financial infidelity, compulsive buying, pathological gambling, and financial dependence. Certain money scripts have been tied to lower levels of net worth, lower income, and higher amounts of revolving credit. These issues often stem from a negative emotional relationship with money.

Those may sound extreme, but have you ever let panic during down markets or overconfidence when they rally veer you from your long-term investing plan? Have you ever been unable to make a decision because you were paralyzed with worry and anxiety about the future? Have you ever put off something you know is important out of embarrassment or discomfort? Have you ever wreaked havoc on your budget for the momentary high of acquiring something you really wanted? All of these responses point back to your emotional relationship with money and your underlying money script.

The Good News

We often think that if we had more money, we wouldn’t have any problems. But we have money problems because of how we approach money, not because we don’t have enough. This is good news! We might not be able to drastically increase our income, but we can learn to control our attitudes and perceptions. Our money scripts may be ingrained from childhood, but they are not permanent. With a focused and concerted effort, they can be changed. A positive shift in your emotional relationship with money can lead to healthier financial behaviors.

Do you know what the biggest indicator of success is? Emotional intelligence, or self-awareness and self-management. (2) Before you can take charge of your money scripts, you first have to identify them. One way to do this is to be aware of your emotional responses to common financial situations. How do the following things make you feel?

  • Earning money
  • Buying things
  • Saving for the future
  • Budgeting and tracking expenses
  • Making financial decisions
  • Volatile markets
  • Healthy markets
  • Meeting with a financial professional
  • Thinking about your financial future

Anything that elicits strong emotions warrants further reflection. Obviously, negative emotions are not the only ones that can harm your financial life. Some positive emotions, like optimism and self-confidence, can bring about negative results if left unchecked. Recognizing and adjusting your emotional relationship with money is key to financial success.

How to Manage Emotional Money Decisions

Learning to control your emotions is the key to changing your money scripts and developing healthier money habits. You can also build habits into your life that protect you financially, such as taking advantage of automatic saving and investing through your bank or employer’s retirement plan. You can schedule regular family budget meetings and enlist a friend or loved one for accountability. You can learn how you respond to emotional triggers and mandate a “cooling off” period for yourself before making any decisions. Managing your emotional relationship with money requires intentional effort and practice.

Finally, you need to be willing to forgive yourself when you make mistakes. Leave the past in the past and move forward with the new knowledge you have gained. With discipline, self-reflection, and the help of those around you, you can reverse the money scripts that have plagued you and change the financial path for your future! Understanding your emotional relationship with money and managing emotional decisions are essential steps toward financial well-being.

Your Financial Partner

An important resource to utilize on your journey of taking control of your finances is your financial professional, someone who can look at your situation from the outside in and help you navigate your finances without the emotional attachment you bring to the table. At Archer Investment Management, we provide comprehensive financial strategies through a highly tailored and hands-on approach. Our goal is to gain insight into your financial situation and empower you to make informed decisions. If you want the help of a professional to guide you through your financial life and overcome your money scripts, book an appointment now! 

About Richard

Richard Archer is a financial advisor and the President of Archer Investment Management with more than eighteen years of industry experience. Largely working with successful individuals and couples, he specializes in providing comprehensive investment guidance and personalized care and attention to each client. Along with holding a Bachelor of Science in Economics and a MBA, he is a CERTIFIED FINANCIAL PLANNER™ certificant and a Chartered Financial Analyst®. He combines his advanced industry education and knowledge with his genuine care for people to provide clients with an exceptional experience. To learn more about Richard, connect with him on LinkedIn or visit www.archerim.com. 

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(1) Money Scripts Predict Financial Behaviors

(2) Indicator of Success and Developing It

Spring Cleaning: Getting Your Finances in Order

Posted on January 5, 2017 by - Smart Money Tips

Ah…spring is in the air. The days are getting longer, the birds are chirping, the lawn mowers are busy, and many of us are getting out the cleaning supplies to make our houses sparkle. But it might be the case that more than just your home needs to be decluttered, cleaned, and organized. Do your finances need some spring cleaning? Getting your financial life in order may seem daunting, but think of it as a way to contribute to your own financial success. Consider the following tips to get started on the path of financial organization.

1. PASSWORD MANAGEMENT

Do you have a system for keeping track of your countless usernames and passwords? You’ll save yourself some headaches if you can find a method to keep all your information in one place. Plus, you’ll have the bonus peace of mind that your information will be safeguarded. There are plenty of online password managers to choose from, but however you decide to organize your login details, be sure to regularly update your passwords to protect yourself from hackers.

2. PROTECT YOUR IDENTITY

You don’t want to mess with identity theft. Not only can it cost you financially, but it causes undue stress, affects your credit, and could take years to resolve. Other than changing your passwords frequently, being cautious about releasing your personal information, and screening your emails, consider investing in an identity protection plan or credit monitoring service. If you experience the unthinkable, the professionals can take care of all the legwork and be your advocate.

3. GO GREEN!

Are you sick of all the paper that keeps piling up on your counters? Save a tree and get rid of clutter by enrolling in paperless document delivery for all your bills and financial services. Since you’re planning to create a password management strategy, the only thing you’ll need to do to access account details is find your login information and be on your way.

4. SCAN YOUR HEART OUT

Another way to prevent the mountains of paper is to scan all your paperwork to a digital folder. This allows you to clear the files out of your home but still do your due diligence and have copies of pertinent information. If you aren’t using a cloud storage program, be sure to have a backup plan for your computer.

5. REVIEW AND REVIEW AGAIN

Do you like the idea of simplifying? Your finances might benefit from this approach. Do you have multiple bank accounts that you could consolidate? What about extra cash lying around that could be invested? Do you have rarely used credit cards? All of these things can be streamlined. Also, take a second look at your spending habits and create a budget that will help you stay on top of your finances.

6. DIG INTO YOUR ESTATE PLAN

If you’ve done all the work to create an estate plan, it would be beneficial for you to review it every 3-5 years. This will keep it up-to-date with any changes, such as divorce, beneficiary adjustments, change in trustee, or a modified financial situation.

7. SEEK PROFESSIONAL ADVICE

A financial advisor is there to be on your side, helping you find ways to maximize your finances and meet your goals. If you don’t already have a financial plan, meet with your advisor to create one that is customized to your situation. This will allow you to map out when you want to retire, how you will pay for college, what socially-responsible investments are right for you, and how to fully fund your retirement and health savings accounts. If you are ready to streamline your finances and create comprehensive financial strategies for a secure future, schedule a phone call with us today!

About Richard

Richard Archer is a financial advisor and the President of Archer Investment Management with more than eighteen years of industry experience. Largely working with successful individuals and couples, he specializes in providing comprehensive investment guidance and personalized care and attention to each client. Along with holding a Bachelor of Science in Economics and a MBA, he is a CERTIFIED FINANCIAL PLANNER™ certificant and a Chartered Financial Analyst®. He combines his advanced industry education and knowledge with his genuine care for people to provide clients with an exceptional experience. To learn more about Richard, connect with him on LinkedIn or visit www.archerim.com. 

What Is a Financial Plan?

Posted on January 3, 2017 by - Smart Money Tips

what is a financial plan

Chances are your morning routine involved checking the news for the weather and traffic reports to plan your morning commute. You probably looked at your inbox and calendar to think through the workflow of meetings and tasks that are on your plate for the day. It’s likely that you will coordinate plans for this weekend, getting dinner with some friends or catching a game of your favorite sports team.

We often strategically plan every aspect of our daily lives, but what about the bigger picture? Do you have an updated and well-thought-out plan for your finances? A 2013 US Trust survey revealed that over 70% of investors don’t. As an advisor, I see the tragic effects of this negligence often.

WHY DO YOU NEED A FINANCIAL PLAN?

What’s the point of creating strategies and plans for our lives? Because without a plan, we are shooting at a target blindfolded. Do you really want your financial life going astray because you didn’t have goals to aim for?

Creating a financial plan incorporates short-term and long-term goals to transition you from where you are today to where you want to be in the days to come. Having a plan will help you get on track for your retirement so you can focus on today instead of worrying about tomorrow.

A Plan To Increase Wealth

Did you know that while approximately 96% of pre-retirees and 89% of retirees are concerned about their financial future, only 50% meet with a financial advisor to discuss their situation? Meeting with an advisor doesn’t only give you confidence and peace of mind, it provides real results! The data presented in an HSBC study on the future of retirement shows us that those who created a financial plan amassed nearly 250% more retirement savings than those without a plan. Are you convinced yet?

A Plan To Take Care Of The Details

Furthermore, having a comprehensive financial plan means that you have thought through the nitty-gritty details that are often overlooked, such as tax issues, health care, or estate planning. You may think that financial planning is something you can put off for the future or hold off on until you have more money, but those who plan for their financial future are more prepared for their retirement, and this is true regardless of what you make.

YOUR FINANCIAL PLAN

Financial plans can address a myriad of concerns and goals, from college planning to retirement income strategizing. Depending on your needs, your plan may focus on one overarching element or multiple goals you’d like to achieve over time. Whatever you choose to focus on, your financial plan will provide a sense of understanding of where you stand financially and where you need to go in order to meet your goals.

When we sit down to assess your individual needs, here are some questions we will answer:

Take a look at this sample financial plan to get a better idea of what your financial plan could look like.

TAKE THE PLUNGE

Don’t be part of the majority who worries about their financial future, but instead, take the first step to a secure financial future and make a plan. If I told you that just fifteen minutes could make a significant impact on your financial future, would you take the plunge? You can conveniently schedule a complimentary fifteen-minute “Get Acquainted” phone call with me here and check out the stories of three clients we’ve helped! You won’t regret making a plan to set your finances on the right track.

About Richard

Richard Archer is a financial advisor and the President of Archer Investment Management with more than eighteen years of industry experience. Largely working with successful individuals and couples, he specializes in providing comprehensive investment guidance and personalized care and attention to each client. Along with holding a Bachelor of Science in Economics and a MBA, he is a CERTIFIED FINANCIAL PLANNER™ certificant and a Chartered Financial Analyst®. He combines his advanced industry education and knowledge with his genuine care for people to provide clients with an exceptional experience. To learn more about Richard, connect with him on LinkedIn or visit www.archerim.com. 

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(1) http://doingmorethatmatters.com/wp-content/uploads/2013/09/2013-UST-Insights-Wealth-and-Worth-Full-Report.pdf

(2) https://www.soa.org/Files/Research/research-2014-retire-survey-findings.pdf

(3) http://www.hsbc.com/~/media/HSBC-com/about-hsbc/structure-and-network/retirement/pdfs/130905-life-after-work.ashx?WT.ac=HGHQ_FR_nr1.2_On

(4) https://www.cfp.net/docs/news-events—research-facts-figures/2012_household_financial_planning_survey.pdf?sfvrsn=2

Why I Volunteer on the YMCA Board

Posted on January 1, 2017 by - Smart Money Tips

I like being useful to others. It’s one of the reasons I became a financial advisor. And beyond my career, I am always seeking the opportunity to give back or serve others, especially in the Austin, Texas community that I love and call home.

Last year, one such opportunity to presented itself when I was invited to serve with the Metro Board of the YMCA, which provides direction for all the YMCAs in Central Texas. My initial thought was, “Do I want to serve on the board of a gym?” My free time was limited and I wanted to make sure I was giving back in the best way possible.

HOW THE YMCA HELPS AUSTIN

I soon discovered that I had no idea how much the YMCA actually accomplishes. While I could fill page after page listing all that the YMCA does, instead I’ll highlight a few of their initiatives I think make them stand out as an incredible organization.

  • They’re building a new full-service, 85-acre campground, Camp Cypress, which will provide families with everything they need, including the tent, food, activities, and fun. Camp Cypress will be an amazing place for Austin families to visit for turn-key camping in nature within just 15 minutes of Austin.
  • Through Project S.A.F.E., they aim to provide all area pre-k and first graders with education on safety, aquatics, and fitness activity. This is designed to help prevent drowning incidents as well as combat obesity among children. Since its launch in 2009, more than 11,000 children have gone through the program, saving countless lives!
  • They offer a 12-week LiveSTRONG program and cancer support network. Survivors participate in free or low-cost customized exercise regimens catered to their individual needs from certified fitness instructors. The instructors are all trained in cancer survivorship, post-rehabilitation exercise, and supportive cancer care.
  • Among the numerous programs they offer for young children, they provide early learning readiness for at-risk toddlers, year-round meals and sports for underprivileged and special needs Austin kids, and more.

I was blown away by how much the YMCA is able to accomplish and how many Austin community members they serve. In the midst of all the YMCA accomplishes every day, I needed to find where I best fit as a volunteer.

FINDING MY PLACE AT THE YMCA

The YMCA’s area of greatest need was on the Board Education and Policy committee, which was certainly a new experience for me since I’m usually quickly ushered to the Finance Committee. However, I was excited for the new experience.

After extensive board development training, I’m already helping this committee break new ground. We’re investigating partnerships with the New Philanthropists and two Univ. Of Texas MBA Fellows to help our boards become more economically and racially inclusive and representative of the vibrant and diverse Austin community.  

This project has turned out to be more involved and intricate than I expected. Identifying and cultivating new, high-performing board members and providing them an environment where they feel invited and will thrive alongside the YMCA is going to be a big job.

Despite feeling overwhelmed at times, over these last few months I have been on an unexpected journey as a volunteer that has me accomplishing important things that make me feel like I’m doing my part to make Austin better. I’m a proud Austin resident and I love that I have an opportunity to help my community thrive and serve those in need.

INTERESTED IN HELPING?

I’ve always found asking for donations to be awkward and uncomfortable, but I’ve learned that many of my clients who live in Austin and surrounding communities want to give back just as much as I do.

I encourage you to visit the YMCA of Austin’s website where you can learn about volunteer opportunities. Or, if you’re stretched for time but want to offer support, I have a personal fundraising website for the YMCA Annual Giving Campaign where you can donate a cash gift. Your funds will directly benefit one of the YMCA’s many programs. You can learn more and donate here.

About Richard

Richard Archer is a financial advisor and the President of Archer Investment Management with more than eighteen years of industry experience. Largely working with successful individuals and couples, he specializes in providing comprehensive investment guidance and personalized care and attention to each client. Along with holding a Bachelor of Science in Economics and a MBA, he is a CERTIFIED FINANCIAL PLANNER™ certificant and a Chartered Financial Analyst®. He combines his advanced industry education and knowledge with his genuine care for people to provide clients with an exceptional experience. To learn more about Richard, connect with him on LinkedIn or visit www.archerim.com. 

Case Studies: How We Helped Three Clients Finance College

Posted on December 31, 2016 by - Smart Money Tips

At Archer Investment Management, I’ve spent a number of years working closely with families who seek to send their children to college. In the past few decades, tuition costs have skyrocketed. When the average annual tuition for an in-state public college is $24,610, and $49,320 for a private college, planning far in advance is just as essential as it is for retirement, purchasing a home, and other significant financial goals.

I work with a number of families, many of whom are concerned about the nearly $100,000 price tag that comes with a four-year education. I’ve incorporated various services to help families plan for college. Here are three recent client case studies:

CASE STUDY #1: LONG-TERM COLLEGE SAVINGS

There’s never a bad time to start saving for college, and one couple I worked with started when their child was a newborn. This couple had high-paying careers and the means to save early. The husband Brian was a tech executive at Apple and the wife Betsy was a doctor who owned her own practice. They were concerned about their own graduate school debts and wanted to make sure their child didn’t have a burdensome amount of student loan debt as well. Additionally, the couple’s parents were eager to contribute to the college fund for their new grandchild.

Together, we first projected college costs at various public and private schools, with and without graduate school. This allowed us to set a reasonable range of possible future college expenses they would need to cover. We then incorporated these costs into their comprehensive financial plan to see how they impacted their current lifestyle.

From there, we helped them build a budget to see what they could reasonably afford to save.  For Brian and Betsy, it meant we also had to assess the best way for them to pay off their own graduate school debts while still being able to enjoy life and afford necessities. When you have multiple other bills, adding in a new savings goal can be tricky and requires careful planning to balance paying off debt while also maintaining liquidity.

Once we evaluated how much they could save each month for their child’s college tuition, we evaluated appropriate college savings vehicles. We also discussed how they can obtain life insurance at a low cost to protect their child financially and ensure her college is funded should the unexpected happen. Beyond college expenses, since Brian and Betsy were starting their saving early, we discussed the potential for saving tax-efficiently for the primary private school costs they expect once their child is in elementary school.

We also looked at opportunities for the grandparents to help. We encouraged one set of grandparents to make direct contributions to the college fund in lieu of physical presents for the child. For the other grandparents, we suggested accelerated gifting strategies. This was designed to work in their favor as they sought to lower their estate valuation to minimize future estate taxes and to take advantage of potential long-term tax-deferred growth.

By proactively tackling future college expenses, we were able to help this couple seamlessly integrate a new financial goal with their other goals and expenses.

CASE STUDY #2: PREPARING FOR APPROACHING COLLEGE COSTS

Often, parents start seriously considering college expenses when their child enters high school, and this case was no exception. This divorced couple shared a daughter Alexa who was a sophomore at a private high school when they realized it was time for college funding planning. They wanted to make sure to allow enough opportunity to implement their strategies before it became time to apply for financial aid through FAFSA.

This couple had a unique situation. They were divorced and had very different incomes, as the husband Eric was a self-employed artistic consultant while the mother Alana worked for a nonprofit. Our first step was to discuss the rules around determining the custodial parent and how it would affect Alexa’s projected financial aid. We also reviewed how a high-income family such as theirs can reduce their out-of-pocket tuition costs.

Next, we identified all the information the family would need to collect to complete their FAFSA paperwork and calculate their EFC (Expected Family Contribution).  They already had an idea of what kind of college Alexa would attend: an Ivy League to study Environmental Science, so we knew we needed to project costs for a private college with high tuition costs.

To do this, we reviewed their total expected cost of attendance at the five top schools they were considering. Next, we identified scholarships Alexa may be eligible to apply for at each of these schools. Through this process, we discovered she may be eligible for several significant merit scholarships if she could raise her GPA by just two-tenths of a point by the time she graduated high school. This gave her two years to work on boosting her GPA.

And although this family already had schools in mind, we helped them review several other schools they hadn’t previously considered that may fit Alexa’s goals better and offer them more financial aid. By reviewing these options, it helped the family potentially avoid the costs of transferring schools, changing majors, needless college visits, or attending a school that wouldn’t provide enough financial aid.

In looking at these new schools alongside their desired Ivy Leagues, we projected the various projected graduation debt levels and offered guidance on where they may qualify for more financial aid.

Beyond addressing savings needs and scholarships, we also evaluated student loans. We identified ongoing loans and tax credits they may be eligible for while Alexa is in school, and then estimated her starting salary at graduation (based on major and desired career) and the time required to pay off student loans.

To provide a more visual illustration, we set up a tool for them to track their ongoing student loan debt and repayment schedule as Alexa progresses through college. The system we use combines all of the loans into one place and helps them stay organized. By having this information, the family can more clearly see their projected loan repayment options and timeline.

This family intends on meeting with us again when Alexa is a senior in high school, as we can help them complete their FAFSA form, navigate financial aid roadblocks, complete and file the major forms on their behalf, and determine the fairness of the offers they receive. With this family, we are establishing an ongoing relationship where we can serve as their go-to guide for answers to their college planning questions.

CASE STUDY #3: TACKLING STUDENT LOAN DEBT AFTER COLLEGE

College planning doesn’t necessarily stop when college starts. Many people don’t realize the importance of college planning ahead of time, or simply were unable to do so. This means many must plan to pay off their college expenses after they graduate.

One client we worked with named Aaron was in this very situation. A recent graduate, he had just accepted a good technology job and it was time for him to start paying off his student loans. Like many graduates, he had a significant student debt load. It can be particularly difficult to make the required payments when you’re new to the workforce and just starting your career.

To start, we used our student loan calculator for Aaron. This tool organizes all of the loan information, calculates the loan repayment options, generates a personalized living expense analysis based on the individual’s income, and helps them start their financial future with greater clarity and knowledge.

We first calculated all eight federal loan repayment options and discovered that consolidating and refinancing his loans with a private lender would save him hundreds of dollars each month and allow him to fully pay off his loans within 10 years.

From there, we built a custom financial plan. The first component of this plan was a budget that factored in his expenses, including his car purchase, rent, travel plans, and loan repayment.

Next, we reviewed the best employer-sponsored benefits he was eligible for at his new job. We showed him how a high deductible health insurance plan for a young person can be a substantial long-term savings opportunity. We also looked at his 401(k) options, and found enough low-cost investment options in his plan to build an appropriate portfolio for his long-term retirement savings.

Lastly, we integrated this comprehensive plan online through a program that digitally links all of his student loans, bank accounts, and bills so he can track everything in one place. Aaron loves using the app on his phone so he can track his progress while on the go. In the end, he has greater confidence and visibility into his financial future and how to tackle his bills while embarking on his new tech career.

HELPING YOU

I work with a broad range of clients facing unique needs and circumstances. Whatever the situation, I strive to address them through a proactive process that focuses on understanding your personal situation, addressing your concerns, and creating strategies that help you work toward your goals.

If you’re experiencing a situation similar to one of these case studies or face an entirely different need, I encourage you to reach out to me. I can evaluate your situation and share how I can help. You can easily book an appointment with me online here. I look forward to speaking with you.

About Richard

Richard Archer is a financial advisor and the President of Archer Investment Management with more than eighteen years of industry experience. Largely working with successful individuals and couples, he specializes in providing comprehensive investment guidance and personalized care and attention to each client. Along with holding a Bachelor of Science in Economics and an MBA, he is a CERTIFIED FINANCIAL PLANNER™ and CFA® charterholder. He combines his advanced industry education and knowledge with his genuine care for people to provide clients with an exceptional experience. To learn more about Richard, connect with him on LinkedIn or visit www.archerim.com.

Become a Financial Aid Genius: Part 2

Posted on December 30, 2016 by - Smart Money Tips

If the thought of sending your child to college is making you sweat, don’t fear! While it is a major endeavor to get all the details in place, from choosing schools, navigating the application process, and planning for the transition, don’t let the worry about how to pay for all of it keep you up at night. In our last post, we provided an overview of the financial aid process and gave you ways to conquer the FAFSA. Now we are going to let you in on even more tips and tricks to maximize the financial aid your child could receive.

1. VERIFY HOUSEHOLD SIZE

The more people in your household, the better aid you will receive. If you have grandparents, nieces, nephews, or other family members living with you and relying on you for more than 50% of their support, you can include them in your household number. If you are expecting another child in the next school year, you can also include your unborn baby in the household size! Finally, if you have children who do not live with you but still rely on you for more than half of their support, they are also considered part of your household.

2. CORRECTLY REPORT YOUR BUSINESS

If you own your own business, be careful not to overvalue it on your application. Not all businesses are treated the same by FAFSA and the valuation could be quite low based on their criteria. For example, if you have small business with 100 or fewer full-time employees, you may not need to report your business at all!

3. CHOOSE WHO FILES

If you are divorced or legally separated, only one parent will file for financial aid. Since it can make a major difference in the aid received, make sure the right parent files. According to FAFSA, the custodial parent is the one who should apply, and that is the parent with whom your child has lived the most for the past 12 months. Ideally, the parent who makes the least money and has the lowest amount of assets is the custodial parent for financial aid purposes.

4. IGNORE COLLEGE LIFE INSURANCE

Many people aren’t even aware of college-oriented life insurance policies, but a salesperson may approach with this option. These policies often have high and unnecessary commissions and fees and have the potential to hurt your aid chances down the road, since utilizing these policies to pay expenses could increase your overall taxable income.

5. WATCH THE MARKETS

If you have a considerable amount of non-retirement investments, make sure you pay attention to the markets and file your aid application on a bad market day. This will lower the value of your assets and give you a chance to receive a better aid offer.

6. UNDERSTAND INCOME CATEGORIES

If your adjusted gross income is less than $50,000 and certain other criteria are met, (1) you do not have to share your non-retirement assets on the FAFSA. If you have found yourself without a job or underemployed, this can be a huge help in getting aid so your child can attend college.

7. STRATEGIZE GRANDPARENT CONTRIBUTIONS

If you are lucky enough to have parents who want to assist your kids with college, make sure you are smart about how you use that money. If a grandparent started a 529 account for their grandchild, that money will count as untaxed income for the student as soon as they take the money as a distribution. That amount could be assessed up to 50% in the aid formulas. Instead, grandparents can transfer ownership to parents where the amount will be assessed at the lower parent rate of 5.64%, or they can take a distribution in the child’s last year of school when the student will no longer be applying for aid.

8. COMPARE OFFERS

When you’ve completed the long, drawn-out application process and financial aid award letters start to roll in from your selected colleges, analyze the numbers. Your expected family contribution (EFC) should be listed on the letter, which will help you compare offers between the schools. If the award is much lower than the EFC suggests it should be, then it’s likely an inferior offer.

GET THE HELP YOU NEED

Applying for financial aid is not a simple process, but don’t let the stress and confusion stop you from making the wisest decisions and strategizing your application answers. Did you know that Archer Investment Management offers services to help you pay for college, including a specific Fafsassist package that will help you navigate financial aid roadblocks, complete and file major forms on your behalf, and help you determine which offer is best? We want to help you send your child to college with the best financial aid situation possible. Click here to schedule a phone call to get started!

About Richard

Richard Archer is a financial advisor and the President of Archer Investment Management with more than eighteen years of industry experience. Largely working with successful individuals and couples, he specializes in providing comprehensive investment guidance and personalized care and attention to each client. Along with holding a Bachelor of Science in Economics and a MBA, he is a CERTIFIED FINANCIAL PLANNER™ certificant and a Chartered Financial Analyst®. He combines his advanced industry education and knowledge with his genuine care for people to provide clients with an exceptional experience. To learn more about Richard, connect with him on LinkedIn or visit www.archerim.com. 

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(1) https://www.edvisors.com/fafsa/secrets/reduce-adjusted-gross-income/

What Does Trump’s New Tax Plan Mean for You?

Posted on December 29, 2016 by - Smart Money Tips

On Wednesday, December 20, 2017, Congress passed the final version of their new tax bill. Since the campaign trail, President Trump has spoken of sweeping tax reform and this bill entails a number of changes to the U.S. tax code that will impact both corporations and individuals.

Many economists and experts believe this tax bill will provide a short-term boost to the economy, but by how much we don’t know. The Joint Committee on Taxation believes the bill will boost growth the total size of the US GDP by 0.8 percentage points over the first decade, while Goldman Sachs is estimating GDP growth will increase 0.3 percentage points above their baseline over the next two years.

Regardless of how much or how little economic growth we can expect in the coming years, the big question is, what exactly does this bill mean for you and your investments? In a nutshell, it lowers tax rates for individuals and corporations, increases the child tax credit, doubles the standard deduction, and caps or eliminates several deductions. Here’s what we can expect from this bill.

WHAT DOES IT MEAN FOR HOUSEHOLDS?

It’s estimated that around 80% of people will see a tax cut in the first year of the legislation, and the Tax Policy Center estimates that the average person will see a tax cut of $1,610 in 2018. However, the amount will vary based on income bracket. In general, the tax bill favors wealthier Americans, offering more tax breaks the more you earn, with fewer benefits to lower and middle class Americans. The TPC estimates that 65.8% of the total federal tax benefit will go to the top 20% of earners.

As a result of an increased after-tax income, some economists believe this may boost consumer confidence. However, the after-tax income increase may not be enough to see an economic change.

WILL BUSINESSES BENEFIT?

Big businesses will significantly benefit from the tax bill, namely with the federal corporate tax rate dropping from 35% to 21%. Companies will likely see a serious boost in their profits, with JPMorgan estimating that this bill could boost the earnings per share of S&P 500 companies by $10 per share in 2018. 

Additionally, some experts estimate that giant companies like Google will save several billion dollars in 2018 due to the new tax code. With these tax cuts, businesses could use these savings to increase wages, pay down debt, invest, or pay for capital expenditures.

HOW MAY THE STOCK MARKET REACT?

Small and mid-cap stocks, consumer staples, telecoms, financials, and industrials pay the highest tax rate, so with the new tax cuts, values of these companies could go up in the short term. Many experts believe that stocks will rise as a result of the news, with the markets already seeing much activity. Experts at JPMorgan believe stocks could even rise 5% after the bill officially passes. However, they also anticipate volatility in the new year.

REMEMBER THE HISTORICAL CONTEXT

It’s important to remember that the stock market is already at an all-time high and values have been increasing for years. This current rally is just months away from being the longest rally in history, close to surpassing the dot-com rally of the 90s. How much higher can stocks go without a major correction? No one knows for sure. But history does tell us that markets do not go up forever and this bull market is no different.

With much uncertainty in the future including global political instability, natural disasters, and a growing federal deficit, it’s important to make sure your portfolio is prepared for temporary and long-term market corrections. Any major unexpected shock to the economy could cause a significant correction in the stock market. Especially for investors approaching or in retirement, now is not the time to gamble on predicted short-term market gains.

WHAT SHOULD YOU DO?

This tax bill is brand new, so there is still much to learn and understand to see how it will impact households and businesses in the near and far future. No one is sure exactly how the economy will behave in the coming months or years. If you are one of our clients, your portfolio has been built with tax reform in mind and we are continually monitoring the markets so we can make appropriate changes if needed. If you have any questions, call or email our office.

If your friends or family are concerned with so many potential swings in the markets, now is a good time for them to review their financial plan to see how their strategies may be impacted by this tax bill and whether or not it’s appropriate to make adjustments. We’re never too busy to help someone you care about, so feel free to put them in touch with our office.

Become A Financial Aid Genius: Part 1

Posted on December 28, 2016 by - Smart Money Tips

Regardless of whether your child is two or twelve, the thought of college has probably crossed your mind. In the business of life and never-ending financial pressures, it is all too easy to ignore impending college years. But, your child’s education is one of the most important investments you can make, and, with today’s costs, it pays to have a plan in place.

These days, a high school graduate can expect to pay upwards of $200,000 for an undergraduate degree at a top school (1) and over $10,000 each year for in-state tuition alone at a public institution. (2) Thankfully, there are some genius ways you can maximize the financial aid your child receives to pay for their education.

FINANCIAL AID BASICS

Before we get into the tips and tricks to get as much money as possible, let’s look at how financial aid is determined. Here are the five factors that the federal student aid board takes into consideration:

  • Parental income
  • Number of children in college simultaneously
  • Marital status of parents
  • Assets in your child’s name
  • Schools on your child’s list

Keep in mind that these factors are not all weighted equally. For example, income has a much greater impact than assets.

Expected Family Contribution

The FAFSA, or Free Application for Federal Student Aid, is the method used to potentially qualify for financial aid at your child’s college of choice. When you fill out this application, you will be asked to provide your financial information, which will then be calculated as your Expected Family Contribution, or ‘EFC’.

There are two types of aid available:

  • Need-Based Aid: Colleges will offer need-based aid if a student can demonstrate their family has limited resources to provide for their education costs.
  • Merit-Based Aid: To qualify for merit aid, students must show academic achievement, high test scores, and/or above average talents or accomplishments.

The College Factor

One of the main determinants of financial aid is the college choices on your child’s financial aid application. As an example, state universities rarely give nonresidents need-based financial aid, and many high-end colleges don’t offer merit scholarships to high-income families. For private institutions, much of the aid is in the form of loans, which only leads to a heavy debt load after graduation.

HOW TO CONQUER THE FAFSA

If you have a high-income or plenty of assets, you are not out of luck. Use these five tips to maximize the amount of financial aid your child might receive:

1. Exclude Retirement Accounts

Retirement accounts such as IRAs, 401(k)s, 403(b)s, etc. are exempt from your application. Your best bet to get the most money possible is to save as much as you can in these accounts before the college aid application base years. Also, avoid withdrawing money from retirement accounts in financial aid application years since the funds will be treated as taxable income.

2. File Early

Apply for aid as soon as possible after January 1st. Some schools and states award aid on a first-come-first-served basis until it runs out.

3. Move Assets

Your child’s individual assets will count for 20% for aid purposes, but yours will only count for 5.64%. (3) Take a look at your child’s assets and, if possible, move money out of their name and into yours. This step alone can affect your child’s eligibility by thousands of dollars in aid.

If your children have assets that can’t be moved or that you decide against transferring, make sure you use those assets first when paying for college expenses. This will increase financial aid opportunities in their subsequent college years.

4. Pay Down Debt

Your debt doesn’t affect your financial aid eligibility, but your cash reserves will. Consider using your excess cash to pay off debt, therefore reducing the amount of savings you have to declare on your FAFSA.

5. Double Up On College Enrollment

The more kids you have in college at the same time, the better. Having two children enrolled in college simultaneously can decrease your EFC  by 40% – 50%. (4)  If your children are close in age, think about delaying college for the eldest so they can overlap.

Hopefully this overview gives you both confidence and peace of mind as you draw closer to your children’s college years. In our next post, we’ll be discussing even more tips to help you become a genius about financial aid so you can both preserve your wealth and protect your children’s financial future. If you want to discuss your options with someone who knows the ins and outs of college planning, schedule a phone call today!

About Richard

Richard Archer is a financial advisor and the President of Archer Investment Management with more than eighteen years of industry experience. Largely working with successful individuals and couples, he specializes in providing comprehensive investment guidance and personalized care and attention to each client. Along with holding a Bachelor of Science in Economics and a MBA, he is a CERTIFIED FINANCIAL PLANNER™ certificant and a Chartered Financial Analyst®. He combines his advanced industry education and knowledge with his genuine care for people to provide clients with an exceptional experience. To learn more about Richard, connect with him on LinkedIn or visit www.archerim.com. 

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(1) http://blog.collegetuitioncompare.com/2015/05/ivy-league-2015-2016-estimated-tuition.html

(2) https://trends.collegeboard.org/sites/default/files/2017-trends-in-college-pricing_1.pdf

(3) https://www.collegedata.com/cs/content/content_payarticle_tmpl.jhtml?articleId=10089

(4) https://www.usnews.com/education/best-colleges/paying-for-college/articles/2017-08-02/explore-how-multiple-children-in-college-affects-financial-aid

Should I Get a Reverse Mortgage?

Posted on December 26, 2016 by - Smart Money Tips

Imagine this: you are nearing retirement and worried about whether your savings will last you through your golden years. Then your neighbor mentions a reverse mortgage. They tell you that you can get cash payments from your home’s equity and live off that money. It sounds like the answer to your problems, but like many financial products out there, it may just be too good to be true.

Before making a rash financial decision, arm yourself with some valuable reverse mortgage information.

REVERSE MORTGAGE BASICS

Here’s a quick primer on reverse mortgages. A reverse mortgage is a type of home equity loan, created specifically for those 62 and older who own their home outright or have small mortgages. Instead of making your normal monthly mortgage payment with the goal of paying off your home, you essentially give the equity you’ve built back to the bank and they pay you monthly, as a lump sum, or as a line of credit.

Reverse mortgages don’t require payments until you sell your house, die, or permanently move out. You are still required to pay property taxes and homeowner’s insurance and your home must be your primary residence. How much you receive through a reverse mortgage will depend on your age, the value of your home, and current loan interest rates.

RISKS

Now that you know the bare minimum about reverse mortgages, let’s look into why you might want to avoid them.

They Aren’t Cheap

You might obtain a reverse mortgage to create some money to live on, but your upfront costs will be hefty, up to 3-5% of the loan amount. (1) This includes an origination fee, appraisal fee, closing costs, and a required mortgage insurance premium.

When you invest your money, compound interest is on your side, but with reverse mortgages it works against you in a major way. The more the bank pays you, the more the interest grows. As its name implies, it’s the reverse of a regular mortgage where your interest payments decrease as you pay off more of the principal. For example, let’s say you have a $100,000 reverse mortgage that you decide to take as a lump sum at a 5% interest rate. After your first year, your loan balance will be $105,116. But after ten years, it will be sitting at $164,701. (2) The interest eats away at your equity, meaning you own less of your home as time goes on.

They Hurt Your Heirs

If you were planning to leave your home as an inheritance for your children or grandchildren, a reverse mortgage will make that impossible. If the interest has racked up enough by the time you die, every penny from the sale of the home could go to the reverse mortgage lender. If your heirs decide to keep the home, they will be responsible for paying off the full value of the loan, even if it’s higher than the sale value of the home.

You Could Outlive Your Mortgage

Just as there is a very real chance you could outlive your retirement savings, you could also outlive your reverse mortgage. What happens when you have borrowed the maximum amount and no longer have money coming in? Other living expenses aside, you will still need to pay for taxes, insurance, and utilities. If you default on those payments, you risk foreclosure. This leaves you with nowhere to live and no money to live on, not something any retiree dreams of.

ALTERNATIVE OPTIONS

It’s not all doom and gloom. If you feel like a reverse mortgage is your only way to fund retirement, here are some other options to consider.

Downsize

If you are willing to make some changes, downsizing your home or moving to a cheaper area could drastically decrease your living expenses and stretch out your retirement savings. When you sell, you capitalize on the equity you’ve built and can stash away the profit to live off of. A smaller home will also have lower maintenance costs, property taxes, and utility bills. You could also rent instead of buying another house and have extra money to invest or spend.

Investigate Other Assets

Even if your retirement savings seem meager, you might be able to maximize what you have by making a few wise decisions. For example, if you work a few years longer and max out your employer-sponsored plan and IRAs, how much would that give you over the long-term? Is there an option to work part-time after retirement? Have you determined the most beneficial time for you to claim your Social Security benefits? Making small tweaks to your financial plan can make a significant difference in the long-term.

Rely On A Professional

A financial advisor has the knowledge and experience to walk you through your worries, reexamine your goals, and provide you with multiple retirement scenarios. A reverse mortgage should be avoided unless you have experienced a financial emergency and no other assets are available for you to tap into. If you want the advice of a professional to help you make the best decisions for your money and find creative ways to reach your goals, click here to schedule a phone call. I would love to help you feel more confident in your financial future.

About Richard

Richard Archer is a financial advisor and the President of Archer Investment Management with more than eighteen years of industry experience. Largely working with successful individuals and couples, he specializes in providing comprehensive investment guidance and personalized care and attention to each client. Along with holding a Bachelor of Science in Economics and a MBA, he is a CERTIFIED FINANCIAL PLANNER™ certificant and a Chartered Financial Analyst®. He combines his advanced industry education and knowledge with his genuine care for people to provide clients with an exceptional experience. To learn more about Richard, connect with him on LinkedIn or visit www.archerim.com. 

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(1) https://reversemortgagealert.org/reverse-mortgage-rates/

(2) https://www.mortgagecalculator.org/calcs/ReverseMortgage.html

LGBTQ Financial Challenges: 4 Important Considerations for LGBT Couples

Posted on December 24, 2016 by - Smart Money Tips

It’s important for all couples in long-term relationships to talk about finances, what they want to accomplish, and how they want to handle certain financial decisions. But it’s even more important for LGBT couples to be proactive with financial considerations because of ever-changing and complex laws. Whether or not you’re married or plan to marry, LGBT couples should address these important financial considerations to navigate LGBTQ financial challenges effectively:

Retirement Savings

How LGBT spouses are treated through corporate benefit plans varies by state and company, and they may not always be able to receive Social Security survivor or Medicaid spousal protections, especially in non-recognition states. This can present significant LGBTQ financial challenges when planning for retirement.

It’s important to speak with your HR department to determine if your employer recognizes LGBT partnerships and whether or not you can name your partner as a beneficiary. Additionally, update beneficiary designations on all 401(k)s, 403(b)s, IRAs, etc., to make sure your partner receives their proper inheritance. Proactively addressing these LGBTQ financial challenges ensures that your loved ones are protected.

Life and Long-Term Care Insurance

Two of the most appropriate ways for LGBT couples to protect each other is with life and long-term care insurance. As LGBT couples may miss out on a number of spousal benefits for which heterosexual couples are eligible, life and long-term care insurance can replace lost earnings, pay for the college educations of children, and cover ongoing custodial expenses to ensure families have enough income to last throughout retirement. These tools are critical for managing LGBTQ financial challenges.

When evaluating your insurance options, you may consider taking out larger policies to make up for potentially lower spousal and tax benefits than heterosexual couples receive. It’s also critical to name your spouse as the beneficiary to ensure he or she receives the policy benefits. This helps address LGBTQ financial challenges by providing financial security and protection.

Health Benefits

LGBT couples may not both be eligible to receive health benefits from their employers, which can be a significant LGBTQ financial challenge. This is another instance where it’s important to have a detailed discussion with your company’s HR department regarding health benefits available to your partner.

Additionally, if a partner in an LGBT relationship falls ill, the other may not be legally allowed to make important health decisions on his or her behalf. This is where an advanced medical directive can help. A medical directive defines your wishes for health care if you become too injured or ill to make decisions for yourself. With a directive, you can ensure your partner is allowed to make decisions for you. Having these directives in place helps manage LGBTQ financial challenges related to health care and decision-making rights.

Estate Planning

If you were to die, your closest living relative, such as your spouse, has legal rights to your inheritance. But if your marriage isn’t recognized in your state, that may not be the case. This presents a significant LGBTQ financial challenge. LGBT couples need to make sure they include their partners in their wills to ensure they receive an inheritance.

Beyond creating or updating a will, make sure you acknowledge your partner in other essential documents, including durable powers of attorney, healthcare powers of attorney, letters of intent, living wills, and advanced medical directives. This can help provide your partner with more power when it comes to decision-making should you be unable to make decisions yourself. Proper estate planning is crucial for addressing LGBTQ financial challenges.

You may also consider setting up a trust, especially if you’re concerned that another family member may contest your will. You and your partner could contribute assets to the trust. When one partner dies, the trust likely won’t go through probate and there will be less of an opportunity for anyone to contest it. Trusts can be an effective way to mitigate LGBTQ financial challenges related to inheritance and probate.

Next Steps

It’s unfortunate that LGBT couples face so many additional financial hurdles that can make financial planning complex and overwhelming. But you don’t have to go it alone.

As an advisor who frequently works with LGBT couples, I understand the common questions and concerns you face. I’d be happy to meet with you to discuss your situation and how I may be able to help. You can easily book an appointment with me online here. I look forward to speaking with you.

About Richard

Richard Archer is a financial advisor and the President of Archer Investment Management with more than eighteen years of industry experience. With a focus on understanding and addressing LGBTQ financial challenges, he provides tailored advice to ensure that his clients can secure their financial future and protect their loved ones. Largely working with successful individuals and couples, he specializes in providing comprehensive investment guidance and personalized care and attention to each client.

Along with holding a Bachelor of Science in Economics and a MBA, he is a CERTIFIED FINANCIAL PLANNER™ certificant and a Chartered Financial Analyst®. He combines his advanced industry education and knowledge with his genuine care for people to provide clients with an exceptional experience. To learn more about Richard, connect with him on LinkedIn or visit www.archerim.com.