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Financial Planning

  • Financial Planning, Investing, Personal Growth

    Financial Freedom: Learning What You Never Learned in School

    “Knowledge is Power.”

    I’m sure you’ve heard that phrase many times in life.

    But is knowledge power or is the right knowledge power?

    I won’t go as far as saying that what you learned in school was wrong or a waste of time, but honestly, school did not prepare us for the “real world,” especially the world of finances.

    That is why Jim Rohn said, “formal education will make you a living, [but] self-education will make you a fortune.”

    So, the question is what type of self-education should one get? What should millennials learn about finances in order to become successful in this area? There are 5 very important areas of finances that should be part of your self-education.

    1. General Personal Finance

    This is an absolute necessity. It is essential that we learn the general financial concepts such as budgeting, money management, debt, credit and savings. These everyday aspects of finances can overwhelm us unless we get the proper foundational education in this area.  Having a good handle on your personal finances (your personal economy) is essential if you want to gain an form of financial success.

    2. Mindset

    One of the most important aspects of our financial success is the way we think, especially with regards to money. Resources that delve into “millionaire minds” and “how the wealthy think” are important to reprogramming our minds for success. Regardless of what we do externally, success will elude us unless we set our internal compasses for success.

    3. Accounting and Financial Statements

    “You have to understand accounting. It’s the language of business. Unless you are willing to put in the effort to learn accounting – how to read and interpret financial statements – you really shouldn’t select stocks yourself.” – Warren Buffet

    1 plus 1 is 3


    Ultimately, you will want to stop having to work for your money and will want your money to work for you. That is investing. However, you have to crawl before you walk. This step is basically a preparatory step for point #5 below. You don’t have to become a CPA, but if you want to eventually become financially fit, it is important to develop a general understanding of accounting and of how financial statements work.

    4. Markets and Economics

    Once you understand accounting, there is still one more preparatory step you will want to take before delving into investing. You will want to develop a solid understanding of how the general market works. You will want to learn economics.

    Again, you don’t have to “master” this and get an MBA or degree in economics.  You need to understand how markets affect investments and what impact certain changes in the market should and should not have on your investment decisions.

    5. Investing

    Now comes the fun part! You’ve laid the foundation and are ready to learn how to make your money work for you. Starting with a few resources that will give you a general understanding of investing as a whole. In other words, some straight-forward materials on stocks, bonds, real estate, etc.

    Now you specialize. Pick the type of investing that best aligns with your goals, style, and preferences. Become a master in that field. Learn whatever you can about your area and begin to prepare for investment success.


    So, is education important? Absolutely. But the education we got in school is not enough. To be financially independent, it is important that millennials learn the areas of finance that will have the biggest impact on their financial futures. Personal finance and mindset education will lay the foundation for general success. Accounting and economics will prepare the way for future planning and investing. Finally, education on investment will help you achieve success in this area and will help to minimize your losses. Overall, education is essential. And the right kind of education is necessary for future financial success.



  • College Financing, Financial Planning

    College Savings Tips: Your 529 Plan Questions Answered

    Many parents want what’s best for their child–and for many, that means having the funds available to send their children to college when the time comes. Saving for college, especially as the cost of tuition increases, is a great way to help your child stay out of debt in those immediate post-high school years and give them the best possible start in their new careers. Figuring out how to do that effectively, however, can turn into a headache for many parents. 529 savings plans and other strategies can help pave the way for your child’s successful future.

    What is a 529 plan?

    A 529 plan is much like a 401(k) in that it’s a specific savings account for a specific purpose. You’re able to save money for your child’s college without being taxed on the income from those savings, which allows your principal to grow faster. It’s also a highly protected savings account, since there are fees associated with removing funds for any other purpose.

    Do you have to pay taxes when you withdraw 529 plan savings?

    If you withdraw money from your child’s 529 plan to pay for college tuition or qualified expenses–books, room and board, etc–you won’t have to pay taxes. If you use the money for other expenses, however, you will be expected to pay both taxes and a 10% penalty on the money used.

    What can 529 plans be used for?

    529 plans can be used for any post-high school education expenses. This includes trade schools, vocational schools, and four-year colleges and universities as well as master’s programs and graduate school. These plans can also be used to pay for room and board while your child is in school, as well as paying for books and materials that are necessary for the college experience.

    Does a 529 plan belong to me or my child?

    The 529 plan belongs to you, not to your child. That means that it has several advantages:

    • Your child won’t be able to withdraw funds on their own and use them irresponsibly.
    • You can continue putting money back with the expectation that your child will attend college later, even if they choose not to attend immediately after high school.
    • You can change the beneficiary of the fund, which means that if one child doesn’t use all of their savings, it can be shifted to another child.

    When should I start saving for my child’s college?

    You’re probably not thinking about your child’s college savings plan when they’re in diapers–but maybe you should be! As tuition costs rise, it’s more critical than ever that you begin putting money aside for your child’s college education as early as possible. Remember that the sooner you start saving, the longer the money has to accrue interest–and the less you’ll have to set aside each month in order to have a solid nest egg to provide for your child.

    I want my child to help contribute to their college savings. How can they participate in this process?

    Your child can start contributing to their college savings as early as they like–though it’s certainly easier when they’re old enough to have income of their own! Birthday and holiday gifts from well-meaning relatives can be placed in their college savings account from the time they’re young, especially if your child has no other use for the money. Once they’re old enough to start working, your child should be encouraged to use the money they make to contribute to their college savings plan.

    Is a 529 plan my only option for college savings?

    No! You have plenty of options for saving for college. A Roth IRA is another great plan that will allow you to set aside money specifically for education. You can also opt for a prepaid tuition plan with participating colleges and universities, though that may limit where your child is able to attend school when they’re ready.

    College is a major milestone in your child’s life. You want to offer them the best possible chance to succeed, and setting aside money for college expenses now is one of the best ways to make that happen. By opening a 529 plan or other college savings account for your child, you give them a great start in their college planning and make it possible for them to accomplish their dreams and goals without going deeply into debt.

  • Financial Planning, Investing

    Saving Versus Investing

    Time Horizon?

    As you start to earn money and set it aside, it’s important to understand the difference between “saving” and “investing” and what sorts of vehicles are most appropriate to each. You can think of saving as putting your money aside for short or medium-range goals–goals you will mostly be funding with your own cash. If you wish to buy a car, take a vacation, or scrape together the down payment on a home within a one to five-year time-frame, you have a savings objective. “Investing” on the other hand means putting money aside for long-term goals–your child’s college education, for instance, or your own retirement. Long-term investing means committing your own cash as well, but it relies most heavily on the principle of compound interest–the idea that the money you make on your money (interest) gets reinvested and continues to grow or compound over time.

    Risk Tolerance?

    When you have a shorter time horizon, you can’t afford to take as many risks with your money or you may lose part or all of your principal. This is why many people choose to stash their savings in a brick-and-mortar bank or online savings account, a money market fund, a CD, Treasury bills, or bonds. Whatever interest you earn through these vehicles will make little difference in reaching your goal–what’s important is that you are setting money aside regularly and matching or beating inflation with the interest that you do earn.

    When you have a longer time horizon, you can afford to take more risks–and potentially enjoy greater rewards–with your investments. Greater risks are incurred because the value of your investment vehicles will fluctuate more than with traditional savings vehicles. The greater time horizon of your investments, however, should protect you from short-term fluctuations in their value, which should (theoretically) rise over time. Investment vehicles typically include things like stocks, bonds, and mutual funds. Stocks, or equities, basically represent a share in the ownership of a company and a claim on the company’s assets and earnings. This doesn’t mean you’ll rate a corner office or parking space at that company–you’ll simply be one of many shareholders who own a stake or share in that business–shares that the company issues in return for capital to grow or invest in itself. A company can also raise money by borrowing it, either directly from a bank or by issuing bonds. Bonds differ from stocks in that bondholders act as creditors or lenders to companies and are therefore entitled to interest on their loan as well as repayment of their principal. Creditors or bondholders typically receive legal precedent over other stakeholders if a company files for bankruptcy, while shareholders are usually the last in line to be repaid. Bonds are often considered safer because they involve less risk, though bondholders are only entitled to receive returns based on an agreed upon interest rate. Stocks are considered riskier because their value can fluctuate much more, though shareholders can enjoy greater returns as a company’s profits soar. Historical annualized returns for stocks have averaged 8-10% while bonds have averaged 5-7% or less.

    You can buy individual bonds or shares of stock, but researching individual companies can take a lot of time and effort. An easier route is to invest in a mutual fund. A mutual fund pools the resources of many investors to collectively purchase stocks, bonds, or other assets. For instance, you can purchase a mutual fund that invests in small, medium, or large companies (also known as small, medium, or large-cap funds), a fund that invests overseas, or a fund of short or long-term bonds. This allows you to assemble a portfolio geared towards meeting your investment objectives and your tolerance for risk. A portfolio can be actively managed by fund managers (a load fund) or it can simply be a pool of assets or other funds that belong to a certain index or fund class (like the  S&P 500). This later type of “index fund” typically features lower fees. Regardless of where or how you begin to save and invest, it’s important to distinguish between your short-term and long-term goals and the best means of achieving both.

  • Financial Planning, Taxes

    Understanding What a Tax Refund Really Is

    Each year millions of individuals and families go through the ritual of filing their taxes and waiting anxiously for their refund. But do they really understand that getting a big refund means they’re “doing it wrong”, as the Wall Street Journal’s Carolyn T. Geer puts it? And she’s absolutely right about that.

    Here’s what a tax refund really is!


    Millions of Americans appear to have no understanding of what a tax refund actually is. Receiving a refund means one thing and one thing only — that you overpaid your taxes little by little over the course of the last year. And the government doesn’t have to pay the overage back until you file your taxes sometime in the first 3-1/2 months of the next year. They got to use your money for a whole year for free! It’s like a friend asking you for $50, and you insist he take $100 instead. “You can pay me back next year, Sammy”! And did the government pay you back with interest? Nope. The loan was just a nice gift from you — an interest-free loan to Uncle Sam! You think they would let you owe them for a year with no interest, like when you underpaid your taxes? Right. They’ll not only charge you interest, but penalties as well.


    Even worse, here’s what happens when you finally get your money back …

    • You’ll lose a little more due to inflation because a dollar today will be worth a little less than a dollar next year.
    • Face it — you’re probably going to spend your refund. Most retailers are counting on just that and start offering all kinds of deals on “stuff” as soon as tax season begins. They’re just dying to get some of those dollars coming back to you and millions just like you!


    Don’t be a tax season baller! Check out these 5 Ways to Put Your Refund to Better Use.


    Here are a couple of very good reasons to try to make your taxes balance out during the course of the year:

    • It’s your money! Why should you wait for it? You could be putting the overage you’re paying to the IRS into a savings account, were you could be earning interest.
    • You probably need the money in your paycheck, especially if you’re living paycheck-to-paycheck, as many Americans do. The extra money in your weekly or bi-weekly paycheck can really help make ends meet all through the year!


    If you’re getting a big refund year after year, it’s time to adjust the withholding on your W-4 form to pay less in taxes and get more in your paycheck. Your goal is to get as close to zero as possible. You don’t owe the IRS anything and they don’t owe you either!


  • Budgeting, Financial Planning, Investing, Retirement, Taxes

    5 Ways to Put Your Tax Refund to Better Use

    Expecting a tax refund?  You need a good plan on how to spend the money. Of course, you may want to treating yourself “as you deserve,” but remember that the refund is not a bonus check.  Give the check a purpose by considering your financial situation and determining your top development needs. Below are five priorities to help you put your tax refund to better use and build towards greater financial security in future.

    1. Finance your emergency fund

    If you do not have an emergency fund, you need just one major expense to send you down to financial disaster. A good emergency fund is one that contains three or more months of savings in a readily available interest bearing account. Saving such an amount requires months or years of sacrifice, but a refund check can boost the fund, giving you a bit of financial security.

    2. Pay off a high-interest debt

    You can use your tax refund to pay off a high-interest debt. For instance, pay down that credit card balance. Depending on the interest rate, you can save up to 20% every year in interest on any balance that you clear. Use your refund check to create a debt elimination program that tackles those payday loans, title loans, high-interest student loans, and credit cards.

    3. Save for retirement

    You can use your refund to strengthen your financial position further by putting your check into an IRA or investment account. If you do not have one established, start on! Many institutions today may it a simple process and can all be done online.  You may be eligible for a Roth IRA if you meet certain income requirements defined by the IRS and do not have an employer-sponsored retirement plan.

    4. Invest in Real Estate

    If one of your goals is to own your home imagine how far a tax refund check would go towards a down payment.  Already purchased your home?  Consider paying down your mortgage early.  Use your tax refund to pay down the principle on your mortgage. You will save on interest payments and pay off your mortgage earlier.  Your tax refund can also go towards purchasing a second property that you can use to generate rental income.

    5. Refinance your mortgage or make home improvements

    If you already own your home you may want to look into refinancing your current mortgage to get a more favorable interest rate.  Consider using the tax refund check to pay the closing cost on the new mortgage and you will save on interest.  If you are comfortable with your mortgage rate, consider upgrades like a new roof, kitchen or bathroom upgrades, or new energy-efficient appliances to lower your electricity bills. Some of these improvement projects will not just make your home more comfortable but can also increase your home’s value.



    Remember, planning for your financial future does not have to be an all or nothing game.  You don’t have to be completely dedicated to debt elimination that you neglect your emergency fund or retirement.  Working with a financial consultant can help you balance your goals.  If you need help planning and managing your finances Schedule a Free Consultation with Abena today.

  • Financial Planning

    Personal Finance Tip for Millenials: Consider Life Insurance

    By the time most people reach their thirties, they’re beginning to pay more attention to their financial health. Unfortunately, for most, that financial health self-checkup doesn’t include any thoughts of life insurance – – It should!  We tend to think of life insurance in a morbid way because you might feel like you’re planning your death.  I get it! You’re young have no plans to go anywhere at the moment.

    Here’s why you should consider life insurance, regardless of your age..

    Think about a life insurance policy that pays the beneficiary say, half a million dollars upon your death.  You might be thinking about how they’ll be able to buy their dream house, and put their dream car in the garage.  Right after they take an epic vacation.  That’s not what life insurance should be used for.

    Life insurance should be used to enable your beneficiaries (presumably your dependent family) to replace your income.  In the event of your death they can continue to have the lifestyle you worked so hard for them to have. So that half a million dollars, or whatever amount it happens to be, gets invested in a vehicle that earns enough to do that without immediately depleting the principal on frivolous purchases.

    A life insurance policy can also help you while you’re still alive.
    Permanent life insurance policies include a tax-advantaged investment component enabling you to have a separate death benefit, plus investment accounts that you can grow and use for a variety of things in your own life. Some even enable you to pay the monthly premium out of the investment earnings. One such insurance product is the VUL (Variable Universal Life) policy, but there are others that are similar.  While more expensive than term insurance, permanent life insurance can include many options that benefit the insured in life as well as beneficiaries in the event of death.

    So, even if you don’t have a dependent family yet, life insurance is something you should strongly consider. Of course, everyone’s situation is different, so you’ll need to get some qualified professional advice on your specific insurance needs.

  • Financial Planning

    Marriage vs Cohabitation: A Financial and Legal Quick Look

    Financially speaking, there are some benefits to getting married as opposed to just cohabitating.  That’s not to say that one should get married only to take advantage of certain financial perks.  When it comes to perks, there are some things that are good to know before you decide to take the plunge (or not). Let’s take a look at some examples and compare marriage vs cohabitation.


    Auto Insurance
    When it comes to different types of insurance, there are a few benefits to being married. In the case of auto insurance, you may find (depending on the driving records of you and your spouse) that your rates are cheaper together than they are compared to keeping separate policies. Insurance companies hire actuaries that study risk and rate policies based on assumed risk. In a study done in 2004 by the National Institutes of Health, a test group of over 10 thousand subjects revealed that never-married single drivers had twice the risk of injuries from car accidents than married drivers did. According to personal finance expert Laura Adams, a married 20-year-old pays 21 percent less than a single 20-year-old for the same policy.
    Having more than one vehicle can also benefit a couple when it comes to auto insurance rates. Many auto insurance companies offer a multi-car discount. Combining policies with more than one vehicle can mean a discounted rate on each vehicle added to the policy. While you can also take advantage of the discount if you are single and are the registered owner of multiple vehicles, you will need to check with your insurance company to see if you are allowed to add a significant other’s vehicle to your policy if it is only registered to them.  If you are not a co-owner listed on the registration of your partner’s vehicle, you may not be able to insure it under your policy.


    Health Insurance
    When you are living together and one partner needs health insurance, they cannot be added to the other’s health insurance. When couples marry and one is without health insurance, they can be added to their spouse’s policy. This can be particularly beneficial to couples where one does not have insurance through their employer or one partner is a stay-at-home parent.


    When filing taxes, sometimes it is beneficial to file jointly. This can only be done if a couple is married. If both parties make the same amount of money or close to the same, then they may be in a higher tax bracket and end up paying more. If one partner makes significantly less or is not employed, it is more beneficial to file together because they will get more of a tax break.



    With IRA accounts, if a married couple files jointly and one of them dies, the surviving spouse can claim the deceased spouse’s IRA and roll it into their own. A spouse that is unemployed and has an IRA can accept money from an employed spouse’s IRA.


    In legal matters, spouses can take advantage of marital privilege, communications privilege, and crime victim’s recovery benefits. If one spouse is the defendant in a criminal case, the other spouse can refuse to testify against their partner. With communications privilege, communications between spouses are considered private and can be protected by law. This means they cannot be entered into testimony in a court of law.
    Crime victims recovery benefits can be collected by the spouses of crime victims. If someone is the victim of a crime, their spouse can apply for financial benefits to help with the medical costs, funeral, or other such related costs.