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Category Archives: Business Tips

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Procrastination…the CFP® Exam is coming!

Procrastination….the ramifications and some study solutions…the CFP® Exam is coming!

 

We all procrastinate about something.  It may be scheduling a dentist appointment, getting our oil changed or cleaning the fridge.  It gets us nowhere.  Whatever we procrastinate needs to eventually get done, though now with the added stress of being immediate!

 

When it comes to studying for an exam, that very easily gets put on the back burner to accommodate work and family responsibilities.  What we don’t take into consideration is that procrastinating on the next big exam will add MORE stress to the family and work.  By starting early, you can spend an hour or two a day and take a day off each week to spend with family and friends.  Waiting until 6 weeks before the CFP® exam will not work.  Let’s look at a breakdown of the hours.

 

Suggested study time dedicated to CFP® Exam review: 200-300 hours

 

Time before the exam:            12 weeks                             10 weeks                             6 weeks

 

Studying 6 days per week:   2 ½ – 4 hours per day,  3 – 5 hours per day,  5 ½ – 8 hours per day

 

How can we help you keep your work/life/study time in balance so you don’t need to procrastinate?  Use MP3 files while working out, running, cleaning, driving…..great way to multitask.   Flashcards can be thrown in your purse, or briefcase, to use when you are between meetings or waiting at the doctor’s office.  Have your kids quiz you with the flashcards.  Study when they are studying, setting a good example for them!  Our Key Concepts Infographics can be downloaded to your iPad and viewed at any time!   It may not be easy, but you won’t beat the feeling of seeing a “pass” on your exam!

 

Keir Educational Resources          •             800-795-5347     •             www.KeirSuccess.com

Strategies and Rules for Successful Budgeting

Budgeting concept.

 

Successful budgeting can help an individual anticipate future financial needs and prevent financial problems like those that arise from taking on too many financial obligations and incurring too much debt. A budget is useful in helping an individual to achieve financial goals and can also be a tool for increasing net worth or for achieving financial security.

 

The Basics of Budgeting

 

The stages of the budgeting process are estimating income, estimating spending and planning for savings. Income can be estimated using gross income or net income after deduction of items regularly withheld from a paycheck. For a client on a salary or receiving a regular wage, estimating income probably won’t present much of a problem. But for a self-employed person, the fluctuation may require a low estimate of income for budgeting purposes.

 

Estimating spending is complicated somewhat by certain large expenditures that arise annually or semiannually. Regular deductions or contributions to a savings account may be required to pay for items such as an annual insurance premium or annual assessment of real estate taxes. In budgeting expenditures, some payments like rent or the mortgage are not subject to much immediate reduction. Other items like clothing, recreation and entertainment may be readily controlled. Additionally, one must always take into account the effects of inflation.

 

Savings should be planned as part of the budget and not considered a residual that will simply materialize if expenditures are controlled. Conscious effort is required to save. Financial planners often recommend saving 5% to 10% of income annually. The exact amount of savings needed to reach goals will be determined as part of the planning process. Arrangements can be made with a bank to transfer a specific amount each month from a checking to a savings account.

 

9 Rules for Budgets

 

The following rules can be helpful in preparing budgets:

 

1. Be reasonable in establishing goals.

 

2. Budget for fixed expenses like a mortgage payment or rent first.

 

3. Make saving a priority.

 

4. Necessities like food, clothing and transportation may be variable expenses but a high priority.

 

5. Set aside money over many income periods to spread out payment for large annual expenses.

 

6. Large expenses are not necessarily the easiest to cut.

 

7. Develop priorities for general categories of expenses and don’t try to account for every penny.

 

8. Records should be kept of expenditures after the budget is established.

 

9. Use it to measure and understand actual versus planned results.

If the estimated expenditures and planned savings exceed income, the financial planner and client should review expenditures to see where the expenses can be reduced. The budget should balance. Moreover, the budget will work only if the estimates have been realistic.

The Top 5 Factors That Affect FICO Scores

Credit information form

One way for planners to help clients access credit at lower interest rates is to teach them how to manage their FICO scores. This score can range from 330 to 850. The higher the score, the better. To get the best interest rates, clients should try to keep their FICO scores at 760 or higher. The score value is based on information from credit reports. Understanding how this information affects the score can provide an opportunity for planners to help clients make the right decisions to increase their FICO scores.

 

Payment History, Amount Owed and Length of Credit History

 

Payment history is the largest factor in the score. Planners should make sure clients understand the importance of making payments on time. When students enter college, they will typically apply for their first credit card. Students should do so with the understanding that failing to make timely payments can impact their ability to qualify for other types of credit like auto and home loans. This impact can continue well into the future.

 

The second major factor affecting the FICO score is the amount that’s owed. It’s an assessment of whether or not a borrower might already be overextended on credit. Being overextended means the borrower may have borrowed so much that he or she is unable to make the payments required on this amount of debt. Utilization affects the score positively if credit cards are used periodically and paid on time, but there is no effect on the score if someone has a credit card available but never uses it.

 

The longer the credit history, the better the score. In the example of the college student getting his first credit card and making timely payments, he’s also increasing his credit score for buying a home in the future by having a longer credit history from the credit card account.

 

Types of Credit and New Credit

 

Ten percent of the FICO score comes from looking at the types of credit that are used. These types include credit cards, retail cards, installment loans, finance company accounts and mortgage loans. Having a credit card and using it responsibly provides a higher score than not having any credit cards at all.

 

The final category that affects the FICO score is new credit. Opening several accounts in a short period of time can indicate a higher credit risk and will lower the score.

 

Checking a Credit Score

 

When a consumer checks his or her own credit score, there is no impact on the score, and it is recommended that clients check credit reports on a regular basis to identify and correct any errors and to ensure that there has not been an identity theft situation. Every individual is entitled to one free copy of the credit report from each of the three credit bureaus each year. A good practice to monitor activity throughout the year by requesting a report from a different company every four months.

Why Keeping a Will Updated is Just As Important As Having One

Notary officer helping mature client

According to recent studies, more than half of all Americans are likely to die without a will. In this event, applicable state laws will dictate what happens to the assets of the estate. The decedent will have no say in the disposition, nor will the surviving family.

 

In general, state laws will direct the assets to spouse and children, or parents and other family members if the decedent was not married and had no descendants. There is no provision for bequests to friends, benefactors or charities. But even those who have a valid will might not have the distribution go entirely according to their wishes.

 

When a Valid Will Isn’t Enough

 

There are several reasons for this disparity. First of all, many assets do not pass through probate and thus are not subject to will provisions. Most people are aware that any insurance proceeds will go to the named beneficiary, but there are also other items to consider. Retirement accounts, annuities, transfer on death (TOD) and joint accounts will pass outside the will, as will any property held in joint tenancy with rights of survivorship.

 

Another consideration is that a person’s circumstances may have changed. Change is an unavoidable part of life, as we all know. Some of the major changes one might experience include marriage, divorce, the death of a loved one or the birth/adoption of a child or grandchild. Whether planned or unexpected, every change requires some adjustments, but often people overlook the less obvious items. For this reason, clients should be reminded to review their wills on a regular basis and update them as necessary.

 

How Planners Can Help Clients Manage Their Wills and Related Documents

 

Just as important, though, is to review the beneficiary designations (both primary and contingent) on all retirement plans, insurance policies, annuities and such.  Many a court battle has developed when an individual neglected this important detail. For instance, if a person fails to change the beneficiary after a divorce, insurance proceeds could be paid to an ex-spouse rather than the children or current spouse. Some states have laws that invalidate ex-spouse beneficiary designations after a divorce, but these laws don’t necessarily apply in every case, and can be superseded by any applicable federal statutes.

 

For retirement accounts covered by ERISA, a spouse automatically has rights to the account unless he or she has signed a waiver. So if, after a divorce, you name your children as beneficiaries of your 401(k) and subsequently remarry, your new spouse will get the assets absent a valid waiver. Any other beneficiary designation will be disregarded.

 

Every change in circumstance should prompt a review. An unmarried person may have designated parents or a sibling as beneficiary of an insurance policy and then married but never updated the beneficiary. Perhaps the original beneficiary of a plan or policy has passed away, in which case the choice of contingent beneficiaries comes into play. Should they be moved up to primary, or is there reason to make a different choice? Maybe there’s a new child in the family who needs to be provided for, or donating to a charity becomes a better option.

Given the certainty of change, a planner should not only exhort clients to execute their wills, it’s important for the planner to also remind them to review and update all of their documents and designations regularly.