Can You Afford a Second Home?

Posted On August 22, 2016 By Scott Stratton, CFP(R), CFA In Financial Planning /

When asked to describe their idea of living The Good Life, many investors tell me that they have a special place – a lake, mountain, beach, or city – that is near and dear to their heart. Their dream is to have a get away, not at retirement, but now to spend with their families and build the memories that will last a lifetime. If you find yourself constantly dreaming about that perfect Florida beach or the stillness of a snow-capped Colorado peak, it won’t be long before you find yourself Googling home prices in your favorite vacation town and thinking about the possibilities.

Having a second home is a wonderful thing, when done properly. It can also be stressful, time-consuming, and an enormous financial drain which can impact your financial stability and even your solvency. When the financial crisis hit, buyers of vacation properties disappeared, leaving cash-strapped owners in a tragic process of liquidating properties at enormous losses.

Today, prices have recovered and in many areas are back to fresh highs. Not only have bargains largely disappeared, prices have been driven up in popular locations by foreign investors who want to get money out of their own country and into the stability of US dollars. For many international investors, it is easier to buy US real estate than it would be to open a brokerage account in the US.

If you are contemplating buying a second home, be smart and make sure your decisions are based on a thorough and comprehensive examination of the financial details involved. For our financial planning process, that would mean adding in the realistic costs of a second home into our software and examining the results. Would the drain of a second home crowd out other cash flow goals such as retirement? Would you have to delay retirement by several years to keep your retirement success above 80 or 90 percent?

I own a second home, and have spoken with dozens of clients about their experiences over the years. Here’s my advice if you’re thinking of taking the plunge:

1) A second home is not an investment. It’s great if your Uncle made millions off the property he bought in Beaver Creek in 1976, but this is 2016. Very few people make money off their vacation properties, and even fewer actually consider their total costs of interest, taxes, insurance, upkeep, and utilities, when making a profit calculation. In other words, buying a condo for $400,000 and selling it for $450,000 five years later means you probably lost money. A 6% real estate commission would immediately reduce your proceeds from $450,000 to $423,000. Take out your other costs and you almost certainly have a negative return, even if you have a capital gain for tax purposes.

When we want something, our mind will go to great lengths to rationalize why it is a good idea. I once had a client bring me a spreadsheet showing the value of a condo in Hawaii increasing by 9% a year for the next 40 years. Why? Because he said it was a fact that condos in Hawaii increase by 9% every year.

I’m not saying a second home is a bad idea, but it’s best to not start with rose-colored glasses thinking that it will be a killer investment. Instead, examine the costs of a second home and calculate if you can afford this expense as part of your lifestyle. If, after many years of enjoyment, you were to turn an actual profit, consider yourself fortunate to have had such good luck.

2) If you are only going to be there two weeks a year, you will probably be better off staying at a hotel or rental rather than buying a property. This is not only likely to be the less expensive route, it also frees you from the mental and emotional drain of having a second home. Besides paying more bills, you have the difficulty and hassle of maintaining a property that is hundreds or thousands of miles away.

Don’t worry, there are management companies to look after your property, right? Yes, for a cost. Thinking that you can effortlessly rent out your vacation property when you are not there and it will pay for itself? While you may be able to offset your management fees and some other expenses, I have yet to meet anyone who actually pays their whole mortgage through renting. Instead, many drop out of the rental process altogether, citing time, added stress, damages, and wear and tear on their property, with minimal rent to show for it.

You should budget 1-2% of the purchase price per year to spend on repairs and maintenance. Some years you will spend less, but in other years, you may need to replace a roof, furnace, or other major item. Is your emergency fund big enough to cover two homes? There will be days when having two homes feels like you are trying to prove Murphy’s Law – if something can go wrong, it will!

If you want to save yourself the headache of getting that 11 pm call in December that the hot water heater is out, don’t be an absentee owner. Just take vacations. If after five years at the same beach, you decide you’d rather go to Europe next summer, you can change your plans and not feel like you are obligated to go to your second home year after year. In fact, behavioral finance suggests that you may have more memories and find more fulfillment from taking 10 different vacations rather than going to the same place for 10 summers in a row.

3) On taxes and finances, a few points to consider:

You can deduct mortgage interest and property taxes on a second home. These are itemized deductions.
Only your primary residence is eligible for a capital gains exclusion of $250,000 ($500,000 if married). For a second home, keep records of any capital improvements which would increase your cost basis. If you have a very large potential capital gain, you can receive the primary residence capital gains exclusion by making the property your primary residence for two years. As long as a property was your primary residence for two of the past five years, you are eligible. Keep capital gains records until seven years after the sale.
You can rent out a primary or second home for 14 days a year tax-free. You don’t even have to report this income!
If you use the property personally for more than 14 days or more than 10% of the total rental days per year, it is considered a personal residence and you can only deduct rental expenses up to the amount of rental income.
If your personal use of the property is less than 14 days AND less than 10% of the total rental days, the property is considered a rental property (a business), and not a second home. You can deduct losses and may depreciate the property. Note that days you spend full-time on repairs and maintenance (but not improvements) are not considered personal use days, even if the rest of your family is enjoying recreation that day.
If you let others stay for free, or below fair rental price, or give away days (even to a charity auction), those are considered personal use days.
Before you rent, make sure your insurance covers renting. Talk with owners of similar properties if you want a realistic idea of how many days of your property might be rented each season. Do your homework before you buy.
In Texas, primary residences are creditor protected, 1 acre in town or 100 acres rural, with no limit on value. These are doubled for married couples. Second homes are not creditor protected. Which mortgage should you pay off first? Probably your primary residence.

Link: IRS Publication 527, Residential Rental Property Including Rental of Vacation Homes.

If all this makes your head hurt, you may be happier keeping your life simple and just enjoying your vacations without owning a second home. You cannot ask your accountant to sort this all out at the end of the year if you haven’t kept complete records of use/rental days and expenses.

4) When it comes to affordability, don’t let a mortgage broker tell you how much you can afford. They calculate the maximum the bank is willing to lend you; they don’t care about your other priorities like contributing to your 401(k) or paying for your kid’s college. If you want to know what you can afford and still accomplish your other goals, you need to do a financial plan. That’s where I can help.

5) Not surprisingly, the vast majority of people I have met who purchased a timeshare have been frustrated and regretted the decision. Similarly, friends who purchase property together often find things become less than cordial when disagreements arise over use, expenses, or maintenance.

Link: HGTV Top 10 Things to Know About Buying a Second Home

Don’t Forget Your Umbrella!

Posted On August 15, 2016 By Scott Stratton, CFP(R), CFA In Financial Planning / 1 Comment

For successful individuals, an Umbrella Policy is a smart idea and a cost-effective tool to protect your life savings from a liability suit. An Umbrella policy covers you if you exceed the liability coverage limits on your home and auto insurance. For around $200 to $300 a year, you could be covered for another $1 million, and have the option to increase this up to $5 million.

The liability limits on home and auto policies are typically much too low to insulate you from the potential costs you could face today. While the state may only require $50,000 in auto liability, this is not going to cover the cost of hitting a fancy car or worse, if you were to injure or kill people on the road. If the injured person has costs greater than your liability coverage, their next step: sue you. Even if they don’t do it, their insurance company will to recover their damages.

Your first and best line of defense is an Umbrella Policy. If a claim (or lawsuit) were to exceed your liability limits, the umbrella coverage will kick in so that you would not have to pay out of pocket or have a judgement that could take years to pay.

Your liability for vehicle damage would be limited to the value of another vehicle. I recently saw a Porsche 918 on the road, which has a base price of $847,000. There are tons of very expensive cars on the road in Dallas. But vehicle damage is easily quantifiable. What is scarier is injury liability. Besides the fact that hospitalization and surgery can costs tens of thousands of dollars, you could also be held liable for physical therapy, loss of income, and intangibles such as reduction in quality of life or pain and suffering. Is that something you would want to leave in the hands of a sympathetic Jury?

Even if you increase the liability limits on your home and auto policies to the maximum, that may still only be $250,000, $300,000, or $500,000. Attorneys and insurance companies have decades of research and experience in determining who would be worth their time suing. So even though your net worth is not public knowledge, if you have wealth, you are a likely candidate.

I’ve primarily described auto accidents, but you could also be held liable for a visitor who was injured in your pool or hurt anywhere on your property, even if uninvited. An umbrella policy could also cover liability if you have a motorcycle, RV, ATV, or boat. It can protect you from liability for libel, slander or defamation. Umbrella policies cover the same individuals as your home and auto, which is typically your whole household. And it covers them anywhere they go, even if on vacation, or in a rental car.

What does an umbrella policy not cover? It does not cover your personal property, contract disputes, business activities, or intentional / criminal activities. Be very careful about saying you are driving for business, because this could negate coverage under your personal and umbrella policies. These policies cover commuting – driving to your place of work, which is not the same as business travel. This is especially vital if you are self-employed. If you use your home for a business, such as a day care, that would not be covered by an umbrella policy.

We spend years planning and carefully growing your nest egg, all of which could be destroyed in a moment because someone got hurt in your house, or because your teenager was distracted for a moment while driving. It’s not worth risking everything when an umbrella policy only costs a few hundred dollars a year.

To get an umbrella policy, you typically will need to have your home and auto policies with the same insurer and have your liability limits at the highest levels. If this makes your insurance too expensive, consider increasing your deductible, especially if it is just $250 or $500. Instead aim for $1000. When you buy an umbrella policy, this may also be a good time to shop your policies to multiple carriers, as you will likely coordinate your home, auto, and umbrella policies with one company.

This information is for educational purposes only and not a guarantee of benefits. Always read your policy fully to understand your coverage and all exclusions.

Is Your Car Eligible for a $7,500 Tax Credit?

Posted On July 18, 2016 By Scott Stratton, CFP(R), CFA In Financial Planning /

If you are in the market for a new vehicle, you may want to know about a tax credit available for the purchase an electric or plug-in hybrid vehicle. Worth up to $7,500, the credit is not a tax deduction from your income, but a dollar for dollar reduction in your federal income tax liability. In other words, if your tax bill was $19,000 and you have a $7,500 credit, you will pay only $11,500 and get the rest back.

This credit has been available since 2010, but in the last two years a significant number of new car models have become eligible for the tax credit. If you drive a lot of miles, these cars may be worth a look.

The credit includes 100% electric vehicles like the Tesla Model S or the Nissan Leaf, and it applies to the newer plug-in hybrid models, including the BMW i3, Chevrolet Volt, Ford C-Max Energi, Hyundai Sonata Plug-In Hybrid, and others. The credit does not apply to all hybrid vehicles, only those with plug-in technology. While the plug-in cars may be more expensive than regular hybrids, they are often less expensive once you factor in the tax credit.

The amount of the credit varies depending on the battery in the car, and may be less than $7,500. The credit is phased out for each manufacturer after they hit 200,000 eligible vehicles sold, with the credit falling to 50% and then to 25%. So, for those 400,000 people who put down a deposit on the Tesla Model 3, most will not be getting the full $7,500 tax credit. Only purchases of new vehicles – not used – are eligible for the credit.

The program is under Internal Revenue Code 30D; you can find full information on the IRS website here. An easier-to-read primer on the program is available at www.fueleconomy.gov.

Some states also offer tax credits or vouchers for the purchase of a plug-in hybrid or electric vehicle. Unfortunately, Texas is not one of those states! You can search for your state’s programs on the US Department of Energy website, the Alternative Fuels Data Center.

Do you have a plug-in hybrid or electric vehicle? Send me a note and tell me how you like it.

Do You Know Your Spouse’s Beneficiary Designations?

Posted On June 20, 2016 By Scott Stratton, CFP(R), CFA In Financial Planning /

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Beneficiary designations are important. The people you list on your IRAs, retirement plans, and life insurance policies will receive those monies regardless of the instructions in your will. What happens when you don’t indicate a beneficiary or if the beneficiary has predeceased you? In that case, the estate is named as the beneficiary of the account.

It is usually much better if you have a person indicated as the beneficiary rather than the estate, for the following reasons:

If a person is the beneficiary, they can receive the assets very quickly by completing a distribution form and providing a copy of the death certificate. When the estate is the beneficiary, you may tie up the assets in probate court for months, or even years.
A person can roll an inherited IRA into a Stretch IRA and keep the account tax-deferred. The beneficiary is required to continue taking Required Minimum Distributions, but even doing so, the IRA can last for many years. When a spouse is the beneficiary of an IRA, he or she can roll the assets into their own IRA and treat it as their own. By spreading distributions over many years, taxes may be lower than if you took a large distribution all in one year and are pushed into a higher tax bracket.
When the estate is the beneficiary, they do not have the option for a Stretch IRA. They can either distribute the IRA immediately or over 5 years. Either way, the estate will be paying taxes sooner than if the beneficiary was a person.
The tax rate on estates can be much higher than for individuals. An estate or trust will pay the maximum rate of 39.6% on income over $12,400 whereas a married couple would hit this tax rate only on taxable income that exceeds $466,950 (2016 rates).

For many individuals, a substantial portion of their estate may be in IRAs, retirement plans, life insurance and annuities, where the beneficiary designation is vitally important. In the last two months, the IRS has issued two Private Letter Rulings (PLR) specifically on beneficiary designations and the rights of surviving spouses. A PLR is official guidance from the IRS on how they interpret and enforce tax law, based on specific cases which are brought to the IRS.

In PLR 201618011, a spouse did not indicate any beneficiaries on her IRA. When she passed away, the absence of a beneficiary designation meant that the estate would be the beneficiary of the IRA. The husband was the sole beneficiary and executor of the estate under her will. The IRS ruled that in this scenario, the surviving spouse has the right to rollover the inherited IRA and treat it as his own, even though the decedent failed to designate a beneficiary. This exception is granted only for surviving spouses and does not apply to other beneficiaries, such as children.

On June 3, the IRS issued PLR 201623001, which is of particular interest to Texas residents as it deals with community property issues for married couples. (Texas is one of nine states with Community Property laws.) A man listed his son as the sole beneficiary of his three IRAs. He passed away and his wife claimed that she should be entitled to one-half of the IRA assets because they were community property of the marriage. The IRS ruled that Federal Law takes precedence over state law and rejected her claim.

Both of these rulings show how important it is to know your spouse’s beneficiary designations on all of their accounts. Even if you have a will that is up to date and perfectly legal, it won’t help you if you don’t indicate a beneficiary, or indicate the wrong person. Review your beneficiary designations every couple of years and especially if you have gotten married, divorced, or had births or deaths in your family.

Beneficiary designations are not exciting or complicated. However, a big part of financial planning is getting organized and taking care of these small details. If your beneficiary designations are wrong, it could have a major impact on your heirs and cost thousands in additional, unnecessary taxes.

Should You Get a New Car to Save Gas?

Posted On June 13, 2016 By Scott Stratton, CFP(R), CFA In Financial Planning /

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I applaud frugality and will be the first to tell you that it doesn’t matter how much you make, but how much you spend. Wealth is created by the surplus between those two numbers. So, it would definitely make sense to get a more fuel efficient car, and save money at the gas pump, right? Let’s find out.

Cars are much more fuel efficient today. Electric cars and hybrids are at the forefront of this improvement, but so are diesel engines and small turbo engines. Many car makers now offer a 2.0 liter turbocharged four cylinder engine as their base engine. And this isn’t just for economy cars – the base engine for the BMW 5 series, Mercedes E Class, Jaguar XF, and other midsize luxury cars are all 2.0L turbos.

Coincidence? Not a chance! The world’s largest auto market – six years running – is China, at 23 million vehicles a year. To try to slow the growth of greenhouse gases, China imposes an excise tax on the sale of all cars, based on the size of the engine. At 2.0L, the tax is 5%, but if the car had a 2.1L engine, the tax would be 9%. For an engine over 4 liters, like many V-8s, the tax is 40%. This is a significant incentive for car makers to create small engines that offer more power and improve fuel efficiency.

Given the nice gains in fuel economy for today’s cars, does it make sense to trade in your current vehicle for a less thirsty model? Let’s run the numbers for a couple of different scenarios.

1) According to the US Department of Transportation, the average American driver logs 13,476 miles per year. Let’s consider a significant improvement in fuel economy, from 20 to 30 mpg.

At $2.25 a gallon for gas, the 20 mpg vehicle would consume $1,516.05 in gas per year. The 30 mpg vehicle would require $1,010.70 in fuel, a savings of $505.35. That sounds pretty good! Who wouldn’t like to save over $500 a year?

The problem is how much did it cost to save that $505? If you spent $25,000, it would take you 50 years to make back your “investment” in the new car. The gas savings is a 2% return on your money. In terms of opportunity cost, it seems like a very poor return to spend that money rather than keeping it invested. If you could make just 6% on your $25,000, you’d receive $1,500 in annual gains. With compounding at 6%, your $25,000 would become $50,000 in 12 years, $100,000 in 24 years, and $200,000 in 36 years.

So while it is alluring to “save” $500 a year on gas, you are likely to be better off by keeping your current vehicle and keeping your cash invested. Most people don’t think this way, because they don’t pay cash for their cars. If you start to pay cash for your cars, as I do, it will definitely change your perspective. However, don’t think that just because you take a loan or lease a vehicle that this math doesn’t apply to you. Instead of having an opportunity cost on your cash, you are paying interest on a loan or a lease. Either way, there is a decrease in the future value of your wealth, and whether we look at opportunity cost or interest expense, the decrease in wealth is going to be larger than just the $25,000 price tag on the car.

People are not logical about their car purchases. Cars may be a necessity for most of us, but they are a poor use of money. Most vehicles lose 50% of their value in the first five years. People decide they want a new car and then create a rationalization as to why they “need” it. It’s okay to buy nice stuff you want, especially if you have met your savings and investing goals. But let’s not fool ourselves into thinking that spending $25,000 on a new car is a way to “save money”.

Let’s consider a more extreme example of high mpg, using actual car models:
2) What if you drive a lot of miles, say 20,000 highway miles per year. And let’s say you are thinking about trading in your 2011 Toyota Camry for a hybrid, a 2016 Toyota Prius.

The Prius is estimated to get 50 mpg on the highway, versus 33 for the 2011 Camry. At $2.25 for gas, the cost savings is only $463.64 a year. Surprised it isn’t more? Our intuition fools us here – even though the difference in fuel economy is 17 mpg and we are driving more miles than in example #1, the actual cost saving is less. The difference in fuel consumption in this example is 206 gallons: 606 gallons for the Camry versus 400 gallons for the new Prius.

For a base 2011 Camry in clean condition and 100,000 miles (20,000 per year for 5 years), your trade in value would be only $5,744 according to Edmunds.com. For the 2016 base Prius, the MSRP is $25,095. Is it worth spending $19,351 (plus tax) to save $463 a year? No, it is not!

My recommendation: if you are genuinely interested in maximizing the utility of your hard earned dollars, drive your current car into the ground. If you have a 2011 Toyota with 100,000 miles, you’ve already experienced most of the car’s depreciation. Try to keep it for another 100,000 miles. Keeping one car for 200,000 miles will save you a ton of money versus having two cars for 100,000 miles, or worse, four cars for their first 50,000 miles.

The fuel economy question is a distraction. Looking at the total cost of a new vehicle, depreciation is your largest expense. Don’t get a new car to try to save money at the pump. Get a new car – or better yet a used car – when your current car is all used up. When it is time to get your next vehicle, by all means, consider fuel economy along with the other costs of ownership. Until you have to get another vehicle, it is likely going to be more cost effective to stick with your current car, even if it means spending more money at the pump.

Are Investment Advisory Fees Tax Deductible?

Posted On April 25, 2016 By Admin In Financial Planning / 1 Comment

It surprises me how few questions I receive about the tax deductibility of Investment Advisory fees. I hope that your CPA asks this question as they prepare your tax return, but I fear that some people miss this potential tax deduction. As with many tax rules, this one has quite a number of caveats. Here are three things you need to know:

1. First, we need to distinguish between Investment Advisory Fees (also called Investment Management Fees), Financial Planning Fees, and Commissions. Only Investment Advisory Fees are tax deductible. If you are a client, note that the fees charged by Good Life Wealth Management are Investment Advisory Fees.

Can You Trust Your Financial Advisor?

Posted On March 14, 2016 By Admin In Financial Planning /

Trust is earned and not given. While there’s no shortcut to years of working together and getting to know each other, there is one question that every client should ask their advisor: Are you a Fiduciary?

A Fiduciary has a legal obligation to place your interests ahead of their own. The alternative, of course is a salesperson whose purpose is self-serving: to represent their company and maximize profits. Which would you trust for objective, unbiased advice?

Five Ways To Invest Tax-Free

Posted On February 29, 2016 By Admin In Financial Planning /

“It doesn’t matter how much you make, but how much you keep.” Over time, taxes can be a significant drag on returns, especially for those who are in the higher tax brackets. Today, many families are also hit with the 3.8% Medicare surtax on investment income. If you are in the top tax bracket, you could be paying as much as 43.4% (39.6% plus the 3.8% Medicare surtax) for interest income or short-term capital gains.

Should You Invest Or Pay Off Student Loans First?

Posted On February 22, 2016 By Admin In Financial Planning /

One of the most frequent questions I hear from younger investors is whether they should hold off on investing until they pay off their student loans. College tuition has been growing at a rate much higher than inflation for several decades, and for many students, these costs are financed. It’s not uncommon for a student to graduate with six-figures in debt today.

For many, they view their college loans as the monkey on their back and want nothing more that to get rid of this debt as soon as possible. This intense dislike of debt is probably a good thing, especially if it encourages frugal decision making and a focus on financial responsibility. With retirement being 40 years away, investing doesn’t seem to offer the same immediate benefit as plowing as much cash as possible into eliminating student loans.

The problem with waiting to invest is that you miss out on the benefits of compounding. Let’s say Eager Eddie saves $5,000 a year starting at age 30. Earning 8%, Eddie will have $861,584 in his retirement account at age 65. Waiting Walter delays until age 40 to get started, but then invests double of what Eddie saved, $10,000 a year. Believe it or not, at age 65, Walter will still have less than Eddie, only $731,059. Waiting those ten years cost Walter $130,000, even though he contributed twice as much per year once he got started. When it comes to retirement saving, there truly is no making up for lost time.

By contributing to your retirement plan at work, you may be eligible for a company match. But even if there is not a company match, being able to make a tax deductible contribution will provide an immediate benefit of 25%, 28% or more, depending on your tax bracket.

Some will point out that with interest rates of 6% or higher, that there is no guarantee that their investment return will exceed the rate they would save on paying down their loan. Wouldn’t it be better to take the “sure thing” of saving 6% rather than the venturing into the unknowns of the investment world? The problem with this line of thinking is that your debt will decrease each year, so a 6% interest rate will cost fewer and fewer dollars each year. However, as your investment portfolio grows through contributions and compounding, a 6% return will equate to larger dollar growth rates. In other words, a 6% return on a $500,000 portfolio is ten times more than a 6% cost on a $50,000 loan.

My advice is don’t wait to get started investing. It’s not a choice of either-or; you have to find a way to do both investing and paying off your student loans.

A couple of additional considerations:

If you ever needed money, you could access your investments (with possible penalties and taxes for retirement accounts), but if you put extra towards your loans, you cannot access that money later.
You may be able to deduct student loan interest paid, up to $2,500 per year. This is subject to a phaseout if your income exceeds $65,000 (single) or $130,000 (married). See IRS Publication 970 for details.
If you have Federal loans, make sure you read my article on Four Student Loan Forgiveness Programs, which also explains Income Based Repayment plans.

How to Succeed at Financial Resolutions

Posted On December 28, 2015 By Admin In Financial Planning /

I know that New Year’s Resolutions are often lampooned as pointless and misguided, but I, for one, love the idea that people can change and take steps to improve their life. To me, a resolution is the wonderful intersection of optimism to motivate you and realism to recognize that it takes hard work to accomplish worthwhile goals.

Fidelity Investments has undertaken a New Year Financial Resolutions Study for seven years and found that individuals who started 2015 with a financial resolution feel more optimistic, are more debt-free, and feel more financially secure than individuals who did not make a resolution. The key to succeeding with a resolution, in my experience, is having the ability to translate a desire into a clear objective, determining how to accomplish that goal, and then having the discipline to stick to your plan.

In other words, a New Year’s Resolution is just a small scale financial plan. Here are three categories of financial resolutions and how to best achieve those objectives:

1) That one thing you’ve been putting off. A lot of times, people have something they know they should be doing, but haven’t started. Maybe they don’t know where to begin, are overwhelmed by the number of decisions they will have to make, or maybe there just never is enough time.

Here are some classic examples of financial needs that many organized, otherwise responsible people have not “gotten around to”:

Starting a college fund for children or grandchildren.
Securing a term life insurance policy to protect your spouse or loved ones.
Establishing your will and estate planning documents.

If these are on your “keeps me up at night” list, give me a call and we will accomplish these in no time. You haven’t done this before, but we do this all the time. Start now and you could have these New Year’s Resolutions wrapped up before the end of January!

2) Save more. Many families worry they are not saving as much as they should. For some, it may be setting up an emergency fund; for others it may be saving for retirement, college, or other long-term goals.

Whatever your investment need, you are more likely to be successful when you put your saving on auto-pilot with electronic monthly contributions. When you pay yourself first every month, most people find they don’t even miss the money. Spending often takes up whatever amount we don’t save; if we recognize this, then we can also understand that it is usually very easy to adjust our discretionary expenses when our saving is automatic.

While the 401(k) is the classic example of automatic investing, we can just as easily use the same approach for an IRA, taxable joint account, 529 college savings plan, or any other type of investment vehicle. Saving more doesn’t happen by accident. You can’t wait until next December to do something if you expect to be a good saver in 2016.

3) Reduce Debt. If you are looking to reduce your spending to get out of debt, you can follow the same advice of making automatic monthly payments. Focus on paying down your highest interest rates loans first.

If you’re not sure where your money goes every month, your first step is to get better organized. Technology can be a big help; consider an app like Mint or Quicken to track your spending. Increasing your self-awareness is an essential step towards changing behavior.

A financial planner can help you with all of your financial questions and goals. Besides bringing expertise, training, and real world experience, a planner can also offer two of the most important elements of success: a concrete plan and accountability to stay on course.

If you are thinking about including financial goals in your New Year’s Resolutions, don’t go it alone, give me a call! I’m here to help.