July 20, 2012

Rule of 72

"The Rule of 72 is a mental shortcut to estimate the effect of compound interest. Simply, by dividing 72 by an interest rate, you can estimate how long it will take for your funds to double. In formula form:
Years to Double = 72 / Interest Rate
For example, if an investor currently has their nest egg invested in certificates of deposit (CDs) yielding 2%, it will take that individual 36 years (72 / 2) to double their retirement account. By comparison, if the person invested in a diversified portfolio earning 8% over time, their funds would double in 9 years (72 / 8)."  But don't forget that inflation also eats away at purchasing power; you can estimate the impact of inflation with the same rule.  Thanks to the Networth Advisory Group for this info. Read more examples at: http://networthadvice.com/2012/06/28/the-rule-of-72/

Investing Truths

Thanks to the Networth Advisory Group (fee-only financial planners) for this list of investing truisms which includes:
Time is the most important factor relating to an investment plan’s success.  There is no substitute for starting early and maintaining regular contributions to your investment accounts. 
Individuals saving 10% of their gross income are often on the bubble when it comes to meeting their retirement goals. People saving 15% are almost always on track.
Choosing the right allocation between stocks, bonds, and cash is the most important investment decision you can make.
Diversification among asset classes is the second most important factor leading to investment success.  Don’t put too many eggs in one basket. Remember, you can also be diversified from a tax perspective by having taxable accounts, tax-deferred accounts (IRAs and 401Ks), and tax-free accounts (Roth IRAs, Roth 401Ks).

Power (or burst) Saving

We're not talking about turning off the lights when you leave a room. Power or "burst" saving refers to saving or investing a lump sum such as a tax refund, raise, or other windfall.
"Part of a special report on How to reach $1 million, this story explains how saving aggressively for a decade can help you reach millionaire status by the time you retire." Read more at:

Don't wire money!

Being asked to wire money for a consumer transaction is almost always a sign of a scam. The old email notices that you've inherited money or won a foreign lottery ask the recipient to wire funds. Grandparents receiving phone calls from "grandchildren" in trouble are asked to wire money. Now the latest scam asks potential renters to wire funds to obtain a key to a property. The Utah Division of Real Estate and Division of Consumer Protection report a scam that uses online ads to direct the potential renter to wire funds to obtain the key to a property which is not a legitimate rental. The funds end up in the hands of the fraudster who is located outside the country. Don't fall for this scam and remember: be ultra skeptical when asked to wire funds! The UT Division of Consumer Protection advises against sending money to unknown persons through a wire transfer service. Thanks to a Herald Journal staff report (7/18/12, A3) for this info.

July 18, 2012

6 Strategies for Increasing Financial Fitness

Follow these 6 simple research-based strategies to improve your financial fitness.
1: Talk about it
2: Ask your employer
3: Work out what you’ll need
4: Forecast what you’ll have
5: Maximize saving and earning interest
6: Minimize debt and paying interest
Based on research by David Eccles, Elizabeth Goldsmith, and Paul Ward of the Florida State University (funded by FINRA).

July 17, 2012

How to raise financially savvy girls

"Girls can be bombarded with pressure to spend rather than to save in ways that boys are not, Chelsea Emery writes. Parents can help their daughters learn to be financially savvy by encouraging entrepreneurial activities, signing them up for Girl Scouts and teaching them about needs versus wants." read more at: http://www.reuters.com/article/2012/07/10/moneypack-women-daughters-idUSL1E8GLGSC20120710

Retiree Health Care Costs

One more reason to plan and invest for your future: 
CHICAGO, July 11 (UPI) -- "Middle-income retirees say healthcare expenses are one of the biggest overall financial surprises they encounter in retirement, a U.S. survey indicates.
The survey, conducted by Bankers Life and Casualty Company Center for a Secure Retirement, asked 300 retirees ages 55-75 with an annual household income between $25,000 and $75,000 what challenged them most in retirement.
Many retirees said their health itself had become a challenge. Some said their health improved since retiring, but 18 percent said they had dealt with unexpected health issues.
Fifty-five percent indicated healthcare was costing them more than anticipated and if given the opportunity to go back in time, many said they would made saving for their healthcare costs a bigger priority.

Financial Fraud: How to Avoid the Grandparent Scam

"Scam artists have a new method: pose as a youngster in trouble in a foreign country and get Grandma to wire money. You'd be surprised how often it works." Although it is hard to believe that people will fall for this scam without checking first with the parents of the grandchild, millions of dollars are lost to this scam. Talk with your elder friends and relatives to be sure they are aware of this scam; being forewarned is one way to cut down on the problem.

Financial experience and behaviors among women

"Prudential's 2012-13 study found that women are increasingly the primary breadwinners of many households. They are more likely to be single than a generation ago, either as a result of being widowed or the decision to remain single, marry later or divorce. This is increasingly the case for women in their 50s or later. Our data confirms the long-term trend we have seen of women playing a key role in making financial decisions, but notes that increasingly this is not a matter of choice." Learn more at www.prudential.com/women
Friends and family continue to be the main sources of financial planning information, which is scary considering the well-documented widespread lack of financial literacy in the US.
The 2010 study provides guidance and suggestions for how women can improve their financial security. See how you compare and learn about strategies for improving your financial security: http://www.prudential.com/media/managed/Womens_Study_Final.pdf
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