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Category: Financial Planning
Benefits of a 529 Savings Plan for Education
As the cost of education in the United States continues to rise, it’s becoming more and more important for parents to plan ahead. Fortunately, a 529 savings plan offers a solution to help alleviate the financial burden of education. The 529 savings plan is designed to help families save for education expenses by providing tax benefits and flexible investment options.
What is a 529 plan?
A 529 plan, named after section 529 of the federal tax code, is a way to save for college in a tax-advantaged way. Plans are offered by states, and you can choose to participate in any state’s plan. It’s important to compare benefits to pick which plan best suits your needs.
There are two types of 529 plans—savings plans and prepaid tuition plans.
- With a 529 college savings plan, your investments grow in an individual investment account (tax-free).
- With a 529 prepaid plan, you lock in a tuition payment at the current rates. The amount then goes into a general fund (rather than an individual investment account).
Between these two plan types, 592 savings plans are more common, as they have notable benefits.
Tax-free Growth and Withdrawals
A 529 savings plan works similarly to a Roth 401(k) or Roth IRA. You select the investment option you want, deposit money, and your funds build over time in the account. Your investment grows on a tax-free basis. Money can also be withdrawn tax-free if used to pay for qualified higher education expenses.
Anyone Can Contribute
According to Education Data Initiative, Americans on average aim to save $55,342 for their child’s college expenses. With a 529 savings plan, a parent isn’t the only one who can contribute. Any friend or family member can make gift contributions to a beneficiary’s account. For birthdays and holidays, loved ones can make a lasting impact on the beneficiary’s future, cutting down on future student loans. The funds can be used to cover the beneficiary’s education costs, which are more than just tuition; these also cover textbooks, room and board, and other academic expenses.
529 Savings Plans Can Be Used for More Than College Costs
Besides college expenses, the funds can also cover expenses for K-12 education. You can apply $10,000 per year toward private elementary or secondary school tuition expenses.
Flexibility to Change the Beneficiary
If your child chooses not to attend college or receives a scholarship, all is not lost. You can change the beneficiary to any other qualifying family member. This option helps families avoid paying taxes and fees on unused funds.
A Little Goes a Long Way
Small amounts truly add up over time and make a significant difference. Outstanding U.S. student loan debt reached $1.7 trillion at the end of 2020, according to the Federal Reserve. A 529 savings plan allows you to make a considerable dent in college costs, even if you start while the child is in high school. It is never too late—every penny counts.
The fees, expenses, and features of 529 plans can vary from state to state. 529 plans involve investment risk, including the possible loss of funds. There is no guarantee that an education-funding goal will be met. In order to be federally tax-free, earnings must be used to pay for qualified education expenses. The earnings portion of a nonqualified withdrawal will be subject to ordinary income tax at the recipient’s marginal rate and subject to a 10 percent penalty. By investing in a plan outside your state of residence, you may lose any state tax benefits. 529 plans are subject to enrollment, maintenance, and administration/management fees and expenses.
Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals. Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other financial tips we can provide towards your financial well-being.
Commonwealth Financial Network® or Blakely Financial does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.
Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser.
How to Evaluate Your Financial Health
As we approach the midpoint of the year, it’s the perfect time to check in on your financial health. To help you assess your financial health, we’ve compiled a list of key indicators to gauge your financial well-being. By reviewing these indicators, you can make informed decisions toward achieving your financial goals.
1. Do you stick to a budget?
A budget is an integral part of your financial plan. A budget can keep you from overspending and help you stay on track with saving. If you don’t have a budget yet, it’s not too late to create one. Alternatively, if you have a budget but it doesn’t seem to be working, you can change tactics.
There are several budgeting methods you can use, some of which include:
- The 50/30/20 budgeting rule: With the 50/30/20 budget, you allocate your income into three main categories according to percentages. 50% goes to “needs” (such as groceries, housing, and utilities), 30% goes to “wants” (such as entertainment, shopping, and takeout), and 20% goes to savings (towards an emergency fund, retirement, or long-term goals).
- Zero-based budgeting: The zero-based budgeting method (also known as the zero-sum budget) encourages you to give every cent a purpose. When you’re done allocating where your income goes, there shouldn’t be any money left without a plan for it.
- Cash envelope budgeting: The envelope system (also known as cash stuffing) allows you to physically portion out your monthly income in specific categories and sort them into envelopes. Similar to the zero-based budgeting method, you would make a plan for every penny.
2. How much do you spend?
The aim is to live below your means. If you spend less than you make, then you’re off to a good start.
Tracking expenses is a helpful way to determine if you’re living below your means. You can use a spreadsheet, write each expense down in a notebook, or use a budgeting app. After you have tracked your expenses for at least one month, you will have a realistic idea of how much you spend.
3. Are you saving?
Setting up direct deposit or automatic transfers into your savings from your checking account each payday are great ways to ensure that you are saving a set amount of money, rather than spending it.
4. Are you prepared for unexpected expenses?
Having an emergency fund for unexpected bills, emergencies, or major life events/changes is a necessary piece of your financial health. Ideally, you should have enough in your savings to cover 3-6 months of expenses.
5. Are you set to reach your financial goals?
In order to ensure you will reach your financial goals, it’s important to identify what your goals are. Write down your short-term and long-term savings goals, and be sure to make these goals measurable with deadlines. If you need a more sustainable approach to your finances, working with a financial advisor can make all the difference.
When you are financially secure, life feels more manageable. If your plan needs some tweaking, consult with your trusted financial advisor today to stay financially healthy.
Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals. Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other financial tips we can provide towards your financial well-being.
Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser.
March Market Update 2023
Join Steve LaFrance, CFP® with Blakely Financial as he updates you on the last 3 months in 3 minutes.
Books to Help You Improve Your Financial Literacy
Financial literacy is an essential skill that can always be improved, regardless of your previous knowledge. Understanding how money works, how to manage it, and how to make it work for you are key to being financially literate. Luckily, there are plenty of resources to help improve your proficiency with personal finance. Below are a few of the Blakely Financial Team’s favorite books to improve your financial literacy.
Mind Gym: An Athlete’s Guide to Inner Excellence by Gary Mack and David Casstevens
Although Mind Gym is not specifically about finance, it offers valuable insights into the mindset and attitudes required for success in any field. This book explores the psychology of winning, and how an athlete’s mindset can impact their performance. The lessons in this book can be applied to all aspects of life, including financial success. Mind Gym emphasizes the importance of focus, confidence, and visualization in achieving success, all of which can help you achieve fiscal success.
Think and Grow Rich by Napoleon Hill
Think and Grow Rich is a classic book on personal finance and self-improvement. Published in 1937, it has sold millions of copies worldwide and is a source of inspiration for many successful individuals. This book discusses the importance of mindset, persistence, and goal setting in achieving financial success. The book emphasizes the importance of having a clear financial goal and a plan for achieving that goal. It also discusses the power of positive thinking, visualization, and affirmations in achieving financial success. By applying the principles outlined in this book, readers can improve their understanding of finances and make more confident choices with their portfolio.
Freakonomics by Steven Levitt and Stephen Dubner
Freakonomics explores the intersection of economics and everyday life. It presents a unique and unconventional perspective on a range of topics, including incentives, risk, and decision-making. This book challenges readers to think critically about the economics that influence their lives, and encourages readers to question common assumptions about personal finance.
Improving your financial literacy and your attitude towards money is essential for achieving financial success. Reading is a great way to familiarize yourself with personal finance, and to feel more confident about the choices you make with your own investments. These three books, Mind Gym: An Athlete’s Guide to Inner Excellence, Think and Grow Rich, and Freakonomics, can provide valuable insights into the mindset required for financial success. By reading and applying the principles outlined in these books, you can develop the skills and knowledge necessary to achieve your financial goals.
The views and opinions expressed in these books are for general informational purposes only and are not intended to provide or be a substitute for specific professional financial, tax or legal advice or recommendations for any individuals. They should not be construed directly or indirectly, as an offer to buy or sell any securities that may be mentioned in these publications.
Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals. Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other financial tips we can provide towards your financial well-being.
Commonwealth Financial Network® or Blakely Financial does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.
Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser.
Financial Spring Cleaning Tips
Spring cleaning isn’t just for your home; it’s also an excellent time to give your finances a refresh. Whether you’re looking to get a better handle on your budget, pay off debt, or build your savings, taking some time to review your financial situation and make some changes can have a big impact.
Review Your Budget
Perhaps you started the year off strong by staying true to your budget, but you’ve fallen behind in recent months. Does your budget need a refresh? Look at the areas in which you are overspending, and make a plan to correct them in the future. Having too strict of a budget can set you up for failure and stress, so it’s important to make an accurate assessment of your spending habits rather than attempting to meet an unattainable goal. If your previously determined budget is no longer feasible, now is the time to make adjustments.
Pay Off Debts
If you have been avoiding debt, spring is the perfect time to sit down and get a full sense of what you owe. Ignoring your debt will only make it grow larger! Take inventory of your debt and decide what needs the most immediate attention. Prioritize payments according to billing due dates and interest rates. Create a timeline for yourself for exactly when you would like the debt to be paid by, and how much you need to contribute over time to reach that goal.
Organize Documents
If your important documents are not in order you may find yourself frantic when you need to access them in the future. Prevent these issues by arranging your physical papers in a safe and secure spot, and digitizing wherever possible – this way, they are searchable! Prepare yourself by keeping your birth, marriage, and death certificates, social security cards, passports, and documentation of major loans and insurance policies in a firebox. Securely dispose of documents that are no longer necessary, such as paid utility bills or pay stubs from previous years.
Check Your Savings
Whether your main priority is your retirement fund, your kid’s college fund, or planning a major life event, take the time to check in on all of your different savings accounts. If you notice some are not on track with your goals, plan how you will bolster these funds over the course of the year. One of the most important, but easily forgotten, aspects of a sound financial plan is an emergency fund. This money should be easily accessible, and significant enough to protect you from unexpected crises. Medical emergencies, car problems, and home repairs can severely affect your budget. Having cash set aside for such events will prepare you for the worst possible scenario and decrease your stress level, as you will be confident in your ability to handle anything life throws your way.
Look at the Big Picture
Once you have taken inventory of your progress so far this year, think broadly about how you are progressing in your long term financial plan. Some years are better than others, so it is okay if you are not exactly where you hoped to be by this point. The most important thing is to maintain a sound plan that will guide you on your path to financial freedom. Checking in with your overall progress in relation to your goals is a great way to round up a financial spring cleaning, and ensure that you are on the right track!
Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals. Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other financial tips we can provide towards your financial well-being.
Commonwealth Financial Network® or Blakely Financial does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.
Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser.
5 Staggering Stats About Women & Finance
As we celebrate Women’s History Month, it is important to look into the ways in which women differ from men in the financial world. Though women have been greatly increasing their stake in global finances in recent years, they still have fewer advantages than men. You may be surprised to learn just how large the gender gap is when it comes to high-power positions, investing, savings, and marital finances.
Only 19% of women are confident they’re on track to retire without running out of money
The fact that only 19% of women are confident they are on track to retire without running out of money, compared to 35% of men, implies a significant gender gap in savings plans. Women are more likely to face financial insecurity in retirement due to various factors such as the gender pay gap, caregiving responsibilities, and longer life expectancies. Women tend to have lower lifetime earnings and savings than men, which makes it challenging to achieve their retirement goals and can lead to a lower quality of life in later years.
This gender gap in retirement savings highlights the need for greater financial education and support for women, including increasing access to retirement savings plans and financial advisors who can help women navigate the complexities of retirement planning. Additionally, policymakers and employers must address the systemic barriers contributing to the gender gap in savings, such as the gender pay gap and lack of paid leave for caregiving responsibilities.
40% of men have invested money in the stock market compared to just 22% of women
There are nearly twice as many men invested in the stock market than women. This difference could be incredibly costly. Though the cause of this discrepancy cannot be determined with certainty, it is likely rooted in social and cultural norms which discourage women from taking an active role in financial decision-making. Additionally, the lack of representation of women in the financial industry can also create a barrier to entry for women, as they may not see themselves represented in the industry and may not have access to female financial advisors or mentors.
Addressing the gender gap in stock market participation requires a multi-faceted approach which includes increasing financial education for women, addressing systemic barriers limiting women’s financial opportunities, and promoting greater gender diversity in the financial industry. By creating a more inclusive and equitable financial system, we can help ensure all individuals, regardless of gender, have the opportunity to achieve financial security and prosperity.
If given an extra $1,000 men are 35% more likely to invest it
There’s an investing gap between men and women. And for women who earn six figures, this gap could cost them as much as $1 million over a 30-year period.The disparity in investment behavior may be attributed to differences in financial literacy, risk tolerance, and cultural and societal norms between men and women. Men may be more likely to invest an extra $1,000 due to greater exposure to financial education and encouragement to take financial risks, whereas women may be more risk-averse and may prioritize more conservative investment strategies.
58% of women married to men leave financial planning and investment decisions to their husbands
Every couple is different in their ideas about financial responsibility, but most women leave the long-term planning and investing decisions up to their husbands. When wives are not involved in the financial planning, they could potentially be blindsided by the adverse effects of failed investments or lack of saving by their husbands. Though many relationships are successful under this planning system, it can leave women at a disadvantage by limiting their control over the long-term financial decisions for the marriage.
Only 10% of Fortune 500 Company CEOs are Women
This statistic has remained around 8% for many years, so the increase is certainly a good sign of the increased power of women in the business world. However, 10% is still a shockingly small number considering the overall contribution of women to the workforce. This underrepresentation of women in top-level positions not only limits their opportunities for professional growth and economic advancement but also reinforces the systemic barriers preventing women from achieving their full potential in the workplace. Additionally, the lack of diverse perspectives in corporate leadership can lead to a lack of understanding of the needs and experiences of women, which can negatively impact company culture, policies, and decision-making.
Moreover, women’s underrepresentation in top corporate positions also contributes to their overall financial power. When women are excluded from the highest echelons of corporate leadership, it can exacerbate gender inequalities in wealth and income, perpetuating a cycle of economic disadvantage for women.
The Bright Side & Next Steps
Thankfully, plenty of progress has been made, and there is more to come. According to Fidelity’s 2021 Women & Investing Study of over 5 million investors in the last 10 years, on average, women outperformed their male counterparts by 40 basis points. The study goes on to share more women are investing than ever before.
Here are a few steps women can take toward financial freedom:
- Seek the advice of a trusted advisor (like Blakely Financial). Investing can be intimidating, but working with an expert is the best way to make sure you’re getting the most out of your money.
- Improve your financial savvy, you can improve your financial savvy by speaking with your financial advisor, referencing trusted online resources, and attending financial webinars.
- Get a clear image of your financial situation, analyze your monthly expenses, and divide them into your needs, wants, and wishes. This will help you identify any extra income you can use towards investing.
- Take advantage of all employer-offered benefits, for example: your employer may offer a 401k match. Make sure you are utilizing every financial opportunity your employer has to offer.
We believe strong representation of women in the financial field can encourage and inspire other women to make the most of their wealth. With an experienced financial advisor, successful women can take full control of their money and build a strong long-term financial plan.
Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals. Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other financial tips we can provide towards your financial well-being.
Commonwealth Financial Network® or Blakely Financial does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.
Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser.
Helping Your Child Build Credit
If you are the parent of a teenager or a child who will soon become one, you should consider helping them build credit from a young age. Teaching your children how credit cards work can help them integrate sound spending habits and a strong understanding of money. As a parent, setting your kids up for success is probably one of your top priorities, and helping them build credit is a great way to do this!
Why Should You Help Your Child Build Credit?
There are huge benefits to having a good credit score, and it can be difficult to build credit from scratch. When your child reaches the age to start making major purchases or applying for loans, a strong credit score will help them significantly. Starting your child off with healthy spending habits and a strong understanding of credit will help them immensely down the line; it is better for them to make small mistakes at a young age than potentially drastic ones later in life! Giving your teen a credit card can also be an opportunity to teach them about managing money and making responsible financial decisions. You can help them set a budget, keep track of their spending, and understand how interest and fees work.
When Should Your Child Have Their First Credit Card?
Because children cannot open a credit card until they are 18, you may consider adding them as an authorized user on your account before then. Doing so could help them establish credit history, ensuring they will be better qualified to open a good credit card when they are old enough. Regardless of the reasons you choose to give your child a credit card, most parents agree it is a good idea for teens to have one in case of an emergency. Ultimately, when your child first gets a credit card is up to you, but they should be prepared to have a credit card by age 18 or before going to college.
How Do You Teach Your Children to be Responsible?
Ideally, your child should have a strong sense of financial responsibility before they are old enough to open a credit card. Teaching your child about money can begin at a very young age, even through abstract methods. If you are going to be responsible for paying your child’s credit card bill, sit down with them each month and review their spending habits to assess whether or not they are using the card responsibly. Setting limits and establishing the difference between wants and needs will help your child make smart decisions, and also help them down the line when using money of their own. Make sure they understand why you have given them a credit card – it’s not a gift of unlimited spending. If your child opts to spend their allowed funds on a purchase you do not agree with- let them! As long as they are spending within their limits, they should have to learn for themselves which purchases are going to satisfy them in the long run.
What Type of Card Should They Have?
There are many different options for credit cards- and your child should understand the difference between them before they look into opening one for themselves. If you are choosing their first card, you would most likely want to open one that offers low-interest rates, low fees, and a manageable credit limit. This type of card is great for a teenager’s first experience using credit, as it will not cost you very much and lowers the risk of your child overspending.
Setting your child up for a successful future is an admirable feat, and teaching them proper money management skills can go a long way! No matter how you decide to help them build credit, your child will thank you down the line for the smart decision-making skills you have imparted to them.
Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals. Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other financial tips we can provide towards your financial well-being.
Commonwealth Financial Network® or Blakely Financial does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.
Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser
January Market Update 2023
Join Steve LaFrance, CFP® with Blakely Financial as he updates you on the last month in 3 minutes.
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Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals.
Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other financial tips we can provide towards your financial well-being.
Commonwealth Financial Network® or Blakely Financial does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser.
Financial Wellness Month – Time to Review, Learn & Plan
Financial wellness month is the perfect time to take a look at your savings plans and learn new ways to be financially independent. Even if you are satisfied with your current level of financial knowledge, there is always more to learn! Take some time this month to look into a certain aspect of financial wellness you are curious about or think you could improve upon. Here are some of our top tips to help you on your path to financial freedom!
Improve Your Knowledge
If you have been curious about certain aspects of financial wellness, there are hundreds of great books out there that can answer all your questions. Freakonomics takes a sociological approach to financial thinking and examines the ways in which you can apply economic rationale to your everyday life. Though this book does not provide specific tips for saving and spending, it may change the way you think about wealth and the economy overall. Think and Grow Rich is perhaps the single most popular piece of motivational literature there is. This book examines the most successful people of all time in an attempt to answer the question “what makes a winner?”. Though the title “Think and Grow Rich” may imply that it is all about money, the book instead focuses on the self-confidence required to be successful, and how it can be learned and taught.
In addition to reading books, there are also a myriad of online resources that can assist you in your research. The Blakely Financial blogs and newsletters contain tips on personal finance and investments to help you increase your financial savvy. Simply reading an article or two a day can increase your financial knowledge throughout the course of the month!
Small Changes Add Up
Small changes can make a big impact on your finances! If attaining your goals feels like an impossible task, start small. Over time, your smart habits will become routine, and your ambitions will no longer feel out of reach. This can be done by limiting your takeout meals, canceling unused subscriptions, or even just buying generic brand items at the grocery store. These types of changes may feel overly frugal, but they can quickly add up to significant savings you can use on more important purchases and adventures later.
Emergency Fund
One of the most important, but easily forgotten, aspects of a sound financial plan is an emergency fund. This money should be easily accessible, and significant enough to protect you from unexpected crises. Medical emergencies, car problems, and home repairs can severely affect your budget. Having cash set aside for such events will not only prepare you for the worst but decrease your stress level as you will be confident in your ability to handle anything life throws your way.
Work with a Financial Advisor
Perhaps the best thing you can do for yourself this financial wellness month is to seek the advice of a professional. A trained financial advisor can build you a custom plan to guide you to your long-term financial goals. Please feel free to contact our team at Blakely Financial today to help get you started.