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Author: Emily Promise

Understanding Your 401(k) - Key Terms to Know

Understanding Your 401(k) – Key Terms to Know

Posted on by Emily Promise

Planning for retirement is a key point of financial wellness- but how can you make the most of your 401(k) plan without understanding all of the vocabulary? We’ve compiled a list of the most common terms used in employer-sponsored retirement plans to help you invest with confidence. 

Types of Retirement Plans

401(k): A 401(k) plan is a company-sponsored retirement plan that eligible employees can contribute a portion of their salary into through a variety of investment options. In some instances, employers may also offer to make matching contributions. Many people find success in using both a 401(k) and a Roth IRA to fund their retirement. 

IRAs: IRAs are a type of savings account designed to help you put money away for retirement in a tax-advantaged way. Two of the most common types are traditional and Roth IRAs. Though they are quite similar, the key differences lie in the tax restrictions and in the fact that traditional IRA’s require minimum distributions starting at age 72. 

Types of 401(k) Contributions

By employees

401(k) contributions are typically ‘before tax’ money. The amount you choose to contribute is deducted from your paycheck before taxes are taken out. This means you are paying taxes on a smaller portion of your salary. There are limits each year on just how much you can put in your 401(k).  In 2021, the maximum amount one can contribute was $19,500. If you are 50 or older, you can make a catch-up contribution of $6,500 in addition to the $19,500 for a total of $26,000.

Roth contributions: Many plans also offer options for employees to make post-tax ROTH 401(k) contributions from their paychecks. Post-tax ROTH contributions do not lower an employee’s taxable income, but they do grow tax free and aren’t taxed upon withdrawal.

Rollovers: After a job change, you have a few options for how to proceed with moving your retirement funds. This is a personal decision that depends on the employee offerings, read our blog to learn more about this transition! 

By employers

Matching: Many employers offer matching contributions. For example, your employer may offer a 4 percent match. This means they will contribute the same amount that you do, up to 4 percent. Of course, you can personally contribute more, but the company will match only 4 percent. If you are not contributing to your company’s 401(k) plan and they have a match, you are leaving money on the table! 

Profit sharing contributions: Your employer may choose to make a voluntary contribution to your 401(k) plan called a profit share. This contribution is not based on how much you contribute and is completely voluntary on the part of your employer, meaning it can vary one year to the next. 

Investment Options

Most employer-sponsored plans give you a selection of mutual funds or other investments to choose from. Make your choices carefully. The right investment mix for your employer’s plan could be one of your keys to a comfortable retirement. That’s because over the long term, varying rates of return can make a big difference in the size of your balance.

If you have questions, it is always a great idea to call your financial advisor for guidance. But no matter what, please take advantage of any type of savings plan your current employer offers as the earlier and more aggressive you are, the closer you will come to achieving your 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.

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.

Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.

Planning for Financials around Divorce

Financial Planning After a Divorce: What Women Should Know

Posted on by Emily Promise

The truth is, after a divorce, women tend to be hit harder financially than men. And, given that women experienced the highest rates of job losses in 2020, divorce in the current environment is even more likely to disrupt their financial stability. For women who find themselves experiencing the increasingly common  “gray” or late-life divorce, the financial consequences may be even more acute. The decision to end a  marriage after age 50 could mean unraveling assets and finances that have been shared for decades. 

If you’re facing financial challenges or decisions after divorce, how can you better understand and take control of your financial future? To start, consider seeking guidance on some of the planning issues discussed below. 

Splitting Marital Assets 

This topic can become highly complicated. Assets acquired during the marriage are split according to your state’s law. Generally speaking, most states follow equitable distribution rules that will consider all marital assets, and a court will determine their distribution between you and your former spouse. There are nine states that have community property laws, which means each spouse owns 50 percent of the assets acquired during their marriage (with certain exceptions). When it comes to debts, in community property states the same approach holds. Debts acquired during the marriage are generally attributable to both spouses. In noncommunity property states, however, debts usually stay with the spouse who incurred the debt, unless the other spouse cosigned or otherwise guaranteed it. 

Retirement savings

The contributions you or your former spouse make to employer-sponsored retirement plans and IRAs during the marriage are generally considered marital property, with some exceptions. Contributions made outside of the marriage, for example, can be considered separate property. Pay particular attention to any qualified plans you may have, such as pensions or 401(k)s, as these should be divided according to a qualified domestic relations order (QDRO). 

A QDRO allows for a tax and penalty-free transfer to a nonowner ex-spouse. Neither the original owner nor the divorcing nonowner should be taxed or penalized if the nonowner rolls the assets directly into a  qualified plan or an IRA. Keep in mind, if the nonowner spouse receiving the distribution uses the funds in any other fashion, a tax will be imposed on that distribution—but only to that spouse. 

We can discuss the QDRO with you in greater detail, as options can vary from plan to plan. Pensions, for example, will generally not pay a lump sum but will make payments to the ex-spouse the same way they would be made to the employee-owner. The sooner a QDRO is presented to a plan administrator, the clearer the understanding you’ll have about your options. 

Creditor protection is another consideration. Keep in mind that 401(k) plans are covered by the Employee  Retirement Income Security Act (ERISA), so they have creditor protection. If the 401(k) is rolled into an  IRA, it will continue to be protected from bankruptcy creditors, but it will only receive general creditor protection as provided by state law. 

Dividing an IRA is different, though. ERISA does not cover IRAs, and the division of an IRA does not require a QDRO. For federal tax purposes, if the division follows a court-issued divorce decree and is made as a trustee-to-trustee transfer as opposed to an outright distribution, an IRA owner can avoid tax and penalties. Once the asset is transferred, each spouse becomes solely responsible for tax and penalties of any future distributions. 

Family Home

If you or your ex-spouse want to hold on to the home, the marital estate can be equalized from other assets, if necessary. Current circumstances related to the pandemic may complicate the equalization, though. Because inventories and interest rates remain low, demand exceeds the supply of homes for sale. In this seller’s market, we’re seeing homes sold immediately after the Coming Soon sign is posted. Plus, the rise in home values across the U.S. increases the likelihood that the equalization may involve the exchange of additional liquid assets to keep the house. 

If you’re interested in keeping the family home, we can help you factor ongoing mortgage payments,  property taxes, and maintenance expenses into your current cash flow and long-term financial plan to see whether it’s feasible. If not, there are other alternatives we can look at, including refinancing or downsizing. 

Life insurance.

The accumulated cash value of a life insurance policy is subject to division—much like any other marital asset. If it’s necessary to divide the cash value, transferring a policy’s ownership can be included as part of your divorce decree. If you are transferring a policy, be sure to update beneficiary designations before doing so. 

Considering Income and Cash Flow 

If you or your spouse was the breadwinner, income may need to be equalized in the division of assets.  State family laws determine any alimony amounts. Whether you’re paying or receiving alimony payments,  we can help factor the effect into your monthly or annual cash flow plan. 

Alimony

Under the Tax Cuts and Jobs Act of 2017, alimony payments are no longer deductible by the payer, and, consequently, the payee can’t include the money as taxable income. This change applies to divorce settlements made after December 31, 2018. It can also apply to existing agreements that are modified after that date, but only if the modification explicitly states that the new rule applies. 

Social security

You may be able to collect social security income on your ex-spouse’s working record  (even if your ex-spouse remarries) as long as you have not remarried, your marriage lasted more than 10  years, and you have been divorced for more than two years. To qualify, you and your former spouse must be 62 or older. If you were born before December 31, 1953, you can file a restricted application allowing you to receive up to 50 percent of your ex-spouse’s full retirement age benefit amount, and your own benefit can grow with delayed retirement credits. Your ex-spouse will not be aware of or involved in your claim. 

If you’re caring for a child younger than 16 and you’re not remarried, children’s social security benefits may be available to you, regardless of your age.  

Child support

Based on their sensitive nature, child support issues, including financial support and physical care, are usually resolved in court. The divorce decree should specify the amounts, if any, of child support paid from one spouse to the other, as well as who will be entitled to claim the children as dependents for tax purposes. Although the pandemic’s impact on women has been largely disproportionate, one positive outgrowth is a growing consensus that childcare is, in fact, infrastructure.  This focus may ease the childcare burden if you are the custodial parent. 

Estate Planning 

Following your divorce, it’s important to update your estate plan to accommodate any adjustments.  Although most state laws nullify a beneficiary or fiduciary designation of an ex-spouse, you may need to amend or get new trusts, wills, and powers of attorney, as well as change beneficiary designations. If you named your former spouse as your trusted person or beneficiary in documents or on accounts, these designations should be changed as soon as possible. And, if you retain custody—even partial custody— of a minor, your estate planning documents should address the issue of guardianship for your child and the child’s estate.  

Taking the Long-Term View 

If you feel financially unprepared for the breakup of your marriage, you’re not alone. Only about one-third of divorcées have a comprehensive plan in place (see chart below), according to a 2017 Fidelity  Investments survey. That’s one reason it’s critical to get the guidance you need to help you navigate the financial challenges of a divorce. 

Need Additional Information? 

As a Certified Divorce Financial Analyst (CDFA®) I am able to guide women through all of the financial implications of a divorce. Join me on Wednesday, August 31st at 12pm for a Live Webinar: Financial Independence: A Divorced Woman’s Guide. REGISTER TODAY!

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful,  we recommend you consult a tax preparer, professional tax advisor, or lawyer. 

Blakely Financial Inflation Update June 2022

High Inflation: How Long Will It Last?

Posted on by Emily Promise

In March 2022, the Consumer Price Index for All Urban Consumers (CPI-U), the most common measure of inflation, rose at an annual rate of 8.5%, the highest level since December 1981.1 It’s not surprising that a Gallup poll at the end of March found that one out of six Americans considers inflation to be the most important problem facing the United States.2

When inflation began rising in the spring of 2021, many economists, including policymakers at the Federal Reserve, believed the increase would be transitory and subside over a period of months. One year later, inflation has proven to be more stubborn than expected. It may be helpful to look at some of the forces behind rising prices, the Fed’s plan to combat them, and early signs that inflation may be easing.

 

Hot Economy Meets Russia and China

The fundamental cause of rising inflation continues to be the growing pains of a rapidly opening economy — a combination of pent-up consumer demand, supply-chain slowdowns, and not enough workers to fill open jobs. Loose Federal Reserve monetary policies and billions of dollars in government stimulus helped prevent a deeper recession but added fuel to the fire when the economy reopened.

More recently, the Russian invasion of Ukraine has placed upward pressure on already high global fuel and food prices.3 At the same time, a COVID resurgence in China led to strict lockdowns that have closed factories and tightened already struggling supply chains for Chinese goods. The volume of cargo handled by the port of Shanghai, the world’s busiest port, dropped by an estimated 40% in early April.4

 

Behind the Headlines

Although the 8.5% year-over-year “headline” inflation in March is a daunting number to consider, monthly numbers provide a clearer picture of the current trend. The month-over-month increase of 1.2% was extremely high, but more than half of it was due to gasoline prices, which rose 18.3% in March alone.5 Despite the Russia-Ukraine conflict and increased seasonal demand, U.S. gas prices dropped in April, but the trend was moving upward by the end of the month.6 The federal government’s decision to release one million barrels of oil per day from the Strategic Petroleum Reserve for the next six months and allow summer sales of higher-ethanol gasoline may help moderate prices.7

Core inflation, which strips out volatile food and energy prices, rose 6.5% year-over-year in March, the highest rate since 1982. However, the month-over-month increase from February to March was just 0.3%, the slowest pace in six months. Another positive sign was the price of used cars and trucks, which rose more than 35% over the last 12 months (a prime driver of general inflation) but dropped 3.8% in March.8

Slower at the Core Inflation Graphic

Wages and Consumer Demand

For the 12 months ended in March, average hourly earnings increased 5.6% — not enough to keep up with inflation but enough to blunt some of the effects. Lower-paid service workers received higher increases, with wages jumping by almost 15% for nonmanagement employees in the leisure and hospitality industry. Although inflation has cut deeply into wage gains over the last year, wages have increased at about the same rate as inflation over the two-year period of the pandemic.9

One of the big questions going forward is whether rising wages will enable consumers to continue to pay higher prices, which can lead to an inflationary spiral of ever-increasing wages and prices. Recent signals are mixed. The official measure of consumer spending increased 1.1% in March, but an early April poll found that two out of three Americans had cut back on spending due to inflation.10-11

 

Soft or Hard Landing?

The Federal Open Market Committee (FOMC) of the Federal Reserve has laid out a plan to fight inflation by raising interest rates and tightening the money supply. After dropping the benchmark federal funds rate to near zero in order to stimulate the economy at the onset of the pandemic, the FOMC raised the rate by 0.25% at its March 2022 meeting and projected the equivalent of six more quarter-percent increases by the end of the year and three or four more in 2024.12 This would bring the rate to around 2.75%, just above what the FOMC considers a “neutral rate” that will neither stimulate nor restrain the economy.13

These moves were projected to bring the Fed’s preferred measure of inflation, the Personal Consumption Expenditures (PCE) Price Index, down to 4.3% by the end of 2022, 2.7% by the end of 2023, and 2.3% by the end of 2024.14 PCE inflation — which was 6.6% in March — tends to run below CPI, so even if the Fed achieves these goals, CPI inflation will likely remain somewhat higher.15

Fed policymakers have signaled a willingness to be more aggressive, if necessary, and the FOMC raised the funds rate by 0.5% at its May meeting, as opposed to the more common 0.25% increase. This was the first half-percent increase since May 2000, and there may be more to come. The FOMC also began reducing the Fed’s bond holdings to tighten the money supply. New projections to be released in June will provide an updated picture of the Fed’s intentions for the federal funds rate.16

The question facing the FOMC is how fast it can raise interest rates and tighten the money supply while maintaining optimal employment and economic growth. The ideal is a “soft landing,” similar to what occurred in the 1990s, when inflation was tamed without damaging the economy. At the other extreme is the “hard landing” of the early 1980s, when the Fed raised the funds rate to almost 20% in order to control runaway double-digit inflation, throwing the economy into a recession.18

Fed Chair Jerome Powell acknowledges that a soft landing will be difficult to achieve, but he believes the strong job market may help the economy withstand aggressive monetary policies. Supply chains are expected to improve over time, and workers who have not yet returned to the labor force might fill open jobs without increasing wage and price pressures.19

The next few months will be a key period to reveal the future direction of inflation and monetary policy. The hope is that March represented the peak and inflation will begin to trend downward. But even if that proves to be true, it could be a painfully slow descent.

Projections are based on current conditions, are subject to change, and may not come to pass.

 

1, 5, 8-9) U.S. Bureau of Labor Statistics, 2022
2) Gallup, March 29, 2022
3, 7) The New York Times, April 12, 2022
4) CNBC, April 7, 2022
6) AAA, April 25 & 29, 2022
10, 15) U.S. Bureau of Economic Analysis, 2022
11) CBS News, April 11, 2022
12, 14, 16) Federal Reserve, 2022
13, 17) The Wall Street Journal, April 18, 2022
18) The New York Times, March 21, 2022

##

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to ensure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

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.

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.

Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser

Food Inflation: What is Behind It and How to Cope

Posted on by Emily Promise

As measured by the Consumer Price Index for food at home, grocery prices increased 3.4% in 2020, a faster rate than the 20-year historical average of 2.4%.1 More recently, food inflation accelerated by 6.5% during the 12 months ending in December 2021, while prices for the category that includes meat, poultry, fish, and eggs spiked 12.5%.2

Food prices have long been prone to volatility, in part because the crops grown to feed people and livestock are vulnerable to pests and extreme weather. But in 2021, U.S. food prices were hit hard by many of the same global supply-chain woes that drove up broader inflation.

The pandemic spurred shifts in consumer demand, slowed factory production in the United States and overseas, and caused disruptions in domestic commerce and international trade that worsened as economic activity picked up steam. A shortage of metal containers and backups at busy ports and railways caused long shipping delays and drove up costs. Severe labor shortages, and the resulting wage hikes, have made it more difficult and costly to manufacture and transport many types of unfinished and finished goods.3

As long as businesses must pay more for the raw ingredients, packaging materials, labor, transportation, and fuel needed to produce, process, and distribute food products to grocery stores, some portion of these additional costs will be passed on to consumers. And any lasting strain on household budgets could prompt consumers to rethink their meal choices and shopping behavior.

Seven Ways to Master the Supermarket

The U.S. Department of Agriculture expects food inflation to moderate in 2022, but no one knows for certain how long prices might stay elevated.4 In the meantime, it may take more effort and some planning to control your family’s grocery bills.

 

Annual Change in Consumer Price Indexes for Food (through December 2021)

Source: U.S. Bureau of Labor Statistics, 2022

 

  • Set a budget for spending on groceries and do your best not to exceed it. In 2021, a typical family of four with a modest grocery budget spent about $1,150 per month on meals and snacks prepared at home. Your spending limit could be higher or lower depending on your household income, family size, where you live, and food preferences.5
  • To avoid wasting food, be aware that food date labels such as “sell by,” “use by,” and “best before” are not based on safety, but rather on the manufacturer’s guess of when the food will reach peak quality. With fresh foods like meat and dairy products, you can usually add five to seven days to the “sell by” date. The look and smell can help you determine whether food is still fresh, and freezing can extend the shelf life of many foods.
  • Grocery stores often rotate advertised specials for beef, chicken, and pork, so you may want to plan meals around sale-priced cuts and buy extra to freeze for later. With meat prices soaring, it may be a good time to experiment with “meatless” meals that substitute plant-based proteins such as beans, lentils, chickpeas, or tofu.
  • Stock up on affordable and nonperishable food such as rice, pasta, dried beans, canned goods, and frozen fruits and vegetables when they are on sale.
  • Select fresh produce in season and forgo more expensive pre-cut and pre-washed options.
  • Keep in mind that a store’s private-label brands may offer similar quality at a significant discount from national brands.
  • Consider joining store loyalty programs that offer weekly promotions and personalized deals.

1, 4–5) U.S. Department of Agriculture, 2021
2) U.S. Bureau of Labor Statistics, 2022
3) Bloomberg Businessweek, September 15, 2021

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to ensure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

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.

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.

Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.

Life Insurance at Various Life Stages

Posted on by Emily Promise

Your need for life insurance changes as your life changes. When you are young, you typically have less need for life insurance. However, that changes as you take on more responsibility and your family grows. Later in life, your need for life insurance may begin to decrease. Let’s look at how your life insurance needs change throughout your lifetime.

Footloose and fancy-free

As a young adult, you become more independent and self-sufficient. You no longer depend on others for your financial well-being. But in most cases, your death would still not create a financial hardship for others. For most young singles, life insurance is not a priority.

Some would argue that you should buy life insurance now, while you’re healthy and the rates are low. This may be a valid argument if you are at high risk for developing a medical condition (such as diabetes) later in life. But you should also consider the earnings you could realize by investing the money now instead of spending it on insurance premiums.

If you have a mortgage or other loans that are jointly held with a cosigner, your death would leave the cosigner responsible for the entire debt. You might consider purchasing enough life insurance to cover these debts in the event of your death. Funeral expenses are also a concern for young singles, but it is typically not advisable to purchase a life insurance policy just for this purpose. Instead, consider investing the money you would have spent on life insurance premiums.

Your life insurance needs to increase significantly if you are supporting a parent or grandparent, or if you have a child before marriage. In these situations, life insurance could provide continued support for your dependent(s) if you were to die.

Going to the chapel

Married couples without children typically still have little need for life insurance. If both spouses contribute equally to household finances and do not yet own a home, the death of one spouse will usually not be financially catastrophic for the other.

Once you buy a house, the situation begins to change. Even if both spouses have well-paying jobs, the burden of a mortgage may be more than the surviving spouse can afford. Credit card debt and other debts can also contribute to the financial strain.

To make sure either spouse could carry on financially after the death of the other, both of you should probably purchase a modest amount of life insurance. At a minimum, it will provide peace of mind knowing that both you and your spouse are protected.

Again, your life insurance needs to increase significantly if you are caring for an aging parent, or if you have children before marriage. Life insurance becomes extremely important in these situations.

Your growing family

When you have young children, your life insurance needs reach a climax. In most situations, life insurance for both parents is appropriate.

Single-income families are completely dependent on the income of the breadwinner. If he or she dies without life insurance, the consequences could be disastrous. The death of the stay-at-home spouse would necessitate costly day-care and housekeeping expenses. Both spouses should carry enough life insurance to cover the lost income or the economic value of lost services that would result from their deaths.

Dual-income families need life insurance, too. If one spouse dies, it is unlikely that the surviving spouse will be able to keep up with the household expenses and pay for child care with the remaining income.

Moving up the ladder

For many people, career advancement means starting a new job with a new company. At some point, you might even decide to be your own boss and start your own business. It’s important to review your life insurance coverage any time you leave an employer.

Keep in mind that when you leave your job, your employer-sponsored group life insurance coverage will usually end.  Find out if you will be eligible for group coverage through your new employer, or look into purchasing life insurance coverage on your own. You may also have the option of converting your group coverage to an individual policy. This may cost significantly more but may be wise if you have a pre-existing medical condition that may prevent you from buying life insurance coverage elsewhere.

Make sure that the amount of your coverage is up-to-date, as well. The policy you purchased right after you got married might not be adequate anymore, especially if you have kids, a mortgage, and college expenses to consider. Business owners may also have business debt to consider. If your business is not incorporated, your family could be responsible for those bills if you die.

Single again

If you and your spouse divorce, you’ll have to decide what to do about your life insurance. Divorce raises both beneficiary issues and coverage issues. And if you have children, these issues become even more complex.

If you and your spouse have no children, it may be as simple as changing the beneficiary on your policy and adjusting your coverage to reflect your newly single status. However, if you have kids, you’ll want to make sure that they, and not your former spouse, are provided for in the event of your death. This may involve purchasing a new policy if your spouse owns the existing policy, or simply changing the beneficiary from your spouse to your children. The custodial and noncustodial parent will need to work out the details of this complicated situation. If you can’t come to terms, the court will make the decisions for you.

Your retirement years

Once you retire, and your priorities shift, your life insurance needs may change. If fewer people are depending on you financially, your mortgage and other debts have been repaid, and you have substantial financial assets, you may need less life insurance protection than before. But it’s also possible that your need for life insurance will remain strong even after you retire. For example, the proceeds of a life insurance policy can be used to pay your final expenses or to replace any income lost to your spouse as a result of your death (e.g., from a pension or Social Security). Life insurance can be used to pay estate taxes or leave money to charity.

No matter your stage in life, remember that the best thing you can do for yourself and your loved ones is be prepared for anything life throws at you.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to ensure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other financial tips we can provide for your financial well-being.

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.

Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.

 

Tidy Up Your Financial Clutter

Tidy Up Financial Clutter

Posted on by Emily Promise

Presented by Emily Promise

Each year, people embark on the journey of tidying up their homes. They break out the gloves and the lemon-scented cleaners and begin emptying their refrigerators, clearing out their closets, and scrubbing their baseboards. But, they often skip some of the essential items – their financial clutter. 

It’s time to do some spring cleaning for your finances. Not sure where to start? Here are three quick tips to eliminate and organize your financial clutter:

Throw out old paperwork, statements, etc.

We all think that someday we will need all the documents we have shoved into a filing cabinet. But how many times have you ever returned those documents? I’ll venture a guess that you haven’t. Some items, such as tax documents, are essential to hold onto for a given time, but many others can be safely discarded. We have a helpful resource to reference what to keep and what to shred. 

Make a list of your financial accounts – all assets and liabilities.

Take time to review this list, cancel unused membership/subscriptions, close out old credit cards, and consolidate any old 401(k)s or investment accounts. Having less to keep track of will give you more energy and time to devote to what’s left, and you may even be able to set aside the savings into your investment accounts or emergency funds! 

Create a central location for all items you truly need to keep

If documents, such as Social Security cards, marriage certificates, etc., are essential to keep, it is vital to know where they can be located when the time comes to access these items. Therefore, identify or create one safe location where all these critical documents are stored. Then, you and anyone else who may need to access them in an emergency know how to locate and identify them readily. 

While we all have some degree of financial clutter, these steps should set you up for success in avoiding and alleviating some in your own home.  

 

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to ensure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

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.

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.

Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.

Women in Motion 2022 Summit

Posted on by Emily Promise

DONNA BLAKELY & SHAYLEN BROWN had the honor of attending the WOMEN IN MOTION 2022 Summit, which empowers women to elevate to the next level in their personal and professional lives. The day-long event focused on wellness and featured some fantastic speakers, including TANYA DALTON, author of The Joy of Missing Out and On Purpose. Dynamic women gathered together, elevating themselves and uplifting each other – what a wonderful day!

The 2022 summit focused on dimensions of wellness that will help women in leadership positions—and those who will soon be in leadership positions — navigate a variety of situations and expectations.

And just in case you are wondering, Donna & Shaylen did not plan the matching wardrobe!

Raising Money-Smart Teens

Posted on by Emily Promise

As teens look forward to summer activities, especially those that cost money, the next few months might present an ideal opportunity to help them learn about earning, spending, and saving. Here are a few age-based tips.

Younger Teens

Recently, apps have proliferated to help parents teach tweens and teens basic money management skills. For example, some money apps allow parents to provide an allowance or pay their children for completing chores by transferring money to companion debit cards. Many offer education on the basics of investing. Others allow children to choose from a selection of charities for donations. Some even allow parents to track when and where debit-card transactions are processed and block specific retailers or types of businesses.

Most apps typically charge either a monthly or an annual fee (although some offer limited services for free), so it’s best to shop around and check reviews.

Older Teens

Many teens get their first real-life work experience during the summer months, presenting a variety of teachable moments.

Review payroll deductions together. A quick review can be an eye-opening education in deductions for federal and state income taxes and Social Security and Medicare taxes.

Open checking and savings accounts. Many banks allow teens to open a checking account with a parent co-signer. Encouraging teens to have a portion of their earnings automatically transferred to a companion savings account helps them learn the importance of “paying yourself first.” They might even be encouraged to write a small check or two to help cover the expenses they help incur, such as the Internet, cell phone, food, gas, or auto insurance.

Consider opening a Roth account. A teen with earned income could be eligible to contribute to a Roth IRA set up by a parent — a great way to introduce the concept of retirement saving. Because Roth contributions are made on an after-tax basis, they can be withdrawn at any time, for any reason.

Roth IRA earnings can be withdrawn free of taxes as long as the distribution is “qualified”; it occurs after a five-year holding period and the account holder reaches age 59½, dies, or becomes disabled. Nonqualified earnings distributions are taxed as ordinary income and subject to a 10% early-withdrawal penalty; however, if the account is held for at least five years, penalty-free distributions can be taken for a first-time home purchase and to help pay for college expenses, which may be helpful in young adulthood. (Regular income taxes will still apply.)

 

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other specialized advice we can provide towards your financial well-being.

EMILY PROMISE is a financial advisor with BLAKELY FINANCIAL, INC. located at 1022 Hutton Ln., Suite 109, High Point, NC 27262 and can be reached at (336) 885-2530.

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.

Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.

Prepared by Commonwealth Financial Network®

The Truth About Buy Now Pay Later BNPL Blakely Financial

When Buying Is Easy, Paying Later Can Be a Problem

Posted on by Emily Promise

Presented by Emily Promise

If you shop online, you might have noticed a growing number of buy now, pay later (BNPL) services that offer the option to spread out the payments on your purchases. For example, buyers who make one partial payment upfront and agree to several additional interest-free installments can receive their orders immediately. This is a crucial difference from the layaway plans of the past in which shoppers had to wait until they paid the balance in full to take their goods home. Many stores discontinued layaway plans in the 1980s when credit cards became widespread.

BNPL plans are more popular with younger consumers trying to stretch their paychecks, partly because they are more comfortable shopping online (and particularly on smartphones). At first glance, it may seem like a worthwhile convenience, but there are good reasons to think twice before committing to installment purchases.

Credit Is Credit

BNPL plans are essentially point-of-sale loans; applying for financing is quick and easy, which seems like a plus when time is tight.

However, speedy access to credit also provides instant gratification and allows for more impulse buying. As a result, it might tempt you to overspend on things you don’t need and probably wouldn’t buy if you had to save up and/or pay 100% of the cost upfront. And if you make a lot of smaller purchases across multiple services, it may be harder to keep track of how much you are spending.

Too Good To Be True?

One criticism of BNPL services is that they make it easier for consumers to fall into debt. As with credit cards, you would face financial consequences such as late fees and/or high-interest rates if you encounter a financial setback and can’t pay the installments on schedule.

Another point to consider is that credit-card companies report on-time payments to the credit bureaus, so using credit cards responsibly can help you build a positive credit history. In contrast, some BNPL lenders may not bother to report on-time payments — though they will indeed report missed payments and collections. So before you use any BNPL service, read the fine print carefully to make sure you understand the terms and conditions and the company’s credit reporting policies.

 

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to ensure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

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.

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.

Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.