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Keeping up with the Jones

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April 17  |  budgeting, home page news, saving money  |   Lisa Hatcher Byles

Or, how does lifestyle affect our finances?  Musings of things swirling in my head today…

1.   Take charge of your finances: 

Watch your income and expenses, take time to learn about the components of a financial life: budgeting, saving, investing, insurance, taxes, retirement, and estate planning.

2.   Understand the concept of opportunity cost: 

If you spend money on one thing you don’t have it to spend on something else.  You are making a choice every time you spend money; it is a vote for rent, student loan, car payment, entertainment, clothes, et cetera.

3.   Be aware of the lifestyle you choose, as it will have long term financial consequences:

How much you pay for big budget items like housing, transportation, food, and health care is going to affect what is left over for other items like travel, entertainment, clothes, donations, savings, and investments.  This may seem obvious, but it can be overlooked.  In the book, The Millionaire Next Door,  the authors cite examples of doctors and lawyers who drive fancy cars and live in big homes, but have low net worth, they don’t have much in the way of financial assets versus the janitorial business owner who drives a 2008 Honda Accord and lives in a comfortable, but not extravagant house, and has a high net worth of stocks, bonds, and cash.  The business owner has not had the trappings of an affluent lifestyle and has amassed wealth.

So, your lifestyle consists of the neighborhood you live in, the size of your house or apartment, the kind of car you drive, the type of clothes you wear, the style of vacations you take, and the kind of food you eat (prepared at home or eaten out).  Your lifestyle will depend on if you are married or single, have kids or don’t have kids, and your health.  Do you exercise, eat healthfully, manage your stress, see a doctor for checkups?  All of these areas are going to impact your spending, either in the short run or long run.

For young adults just starting out, I like to recommend that they keep living the student lifestyle once they start working….keep driving the old car, scout around for free things to do and find free food for Happy Hour.  Do that for the first couple of years and they should be able to start that emergency fund and pay down some student debt.

For those contemplating retirement, if money looks tight, think about where you can move to that will reduce your housing costs.  Can you manage on one car versus two?

For those in the middle of your spending years, if you know you are on track for your goals – great job!  If you know you need to be saving more or paying off debt, look at the various aspects of your lifestyle that may be tweaked or overhauled to free up more cash.  As always, if you need some help to get on track, please give us a call!

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A gift for your loved ones

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March 26  |  goals  |   Lisa Hatcher Byles

There are certain important documents that every family needs.   Too often, these are not created and there is a significant hardship for the loved ones in the event of dealing with a loss.  Three main documents are invaluable in handling your affairs, and along with properly completed beneficiary forms, comprise an Estate Plan, which can prevent additional angst during an already stressful time.

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An Estate Plan

An Estate Plan is nothing more than a plan that shows how you want your assets to be managed or dispersed if you become incapacitated or when you die. Without a comprehensive estate plan, a significant portion of your assets can be lost or given to unintended  beneficiaries.  It can be a hardship for someone else to manage your assets if you are unable to without having these documents in place while you are healthy.  Anyone with assets and/or children needs an estate plan, not just the wealthy!

1. An Advance Medical Directive

You should have an advance medical directive if you’re 18 years old or older. You don’t need an attorney to set this up.  An advance medical directive is two parts:  Part 1 is the designation of a Health Care Agent, someone who is authorized by you to make health care decisions on your behalf only if you are unable to do so yourself.   Part 2 is designed to outline your preferences in regards to medical treatments and interventions, commonly referred to as a Living Will.  See the resources available through the Virginia Bar Association if you are a Virginia Resident:  http://www.vsb.org/site/public/healthcare-decisions-day/ 

2. A Will

Having a will is important because it provides you with the opportunity to control how your property and assets will be distributed upon your death. Without one, they will generally be distributed according to state laws. If you have minor children, it’s even more important to have a will so that you can nominate a guardian for them.

3. A Trust

As with wills, the main concerns with creating a trust are control over your property and assets. Trusts appoint people to hold an individual’s property to use and protect it for the benefits of  others. These can be used to appoint trustees to look after charitable trusts as well as trusts for surviving heirs who are minors.

These three documents are crucial for ensuring that your affairs are in order.  Having an Estate Plan is part of a Financial Plan.

For a terrific website that gives much more information, see http://getyourshittogether.org/.  Pardon her French, but I am impressed by it!

If you are not sure where to start with your financial plan, give us a call, 804-330-PLAN.

Tis better to give than to receive

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February 21  |  budgeting, goals, home page news, taxes  |   Lisa Hatcher Byles

charitable giving blogA research study by Cornell University documents health benefits to giving – reduced stress, less depression, more social interaction, and even a longer life!

As you are doing your taxes this year, many of us will take a charitable deduction.  Here are some things to think about for charitable giving in the upcoming year:

  1. Have a plan!  Just like a foundation that doles out money based on their endowment and their mission, think of your total budget and how much money you want to donate this year.  Is it a percentage or flat amount?
  2. Review the causes you have supported in the past (See Schedule A of your taxes if you itemize) and make a conscious choice to continue or not.  Are there new needs in your community that interest you?
  3. Check out the organizations by a neutral third party to see how well they manage their donations.   http://www.charitynavigator.org
  4. Write down the list of non-profits you want to support and the amount to give.  Will it be just financial donations, or do you plan to volunteer your time as well (keep track of your mileage for tax purposes).

For most people, we are asked to donate to many worthy causes, but the reality of our personal budgets requires us to make choices and donate to a just few.  When you have a plan already in place, you can confidently say “no” to requests that don’t fit your personal giving mission or budget for that year.

As with any spending decision, we encourage you to examine your goals, values, and priorities, and make sure your actions with your money are in alignment with these three areas.

Get back to basics if you need to, i.e. if you don’t have a spending plan, you don’t know how much you can afford to give.  Know your income and expenses!

At Hatcher Byles Financial Planning, we give time, talent, and treasure by promoting Financial Literacy and preventing Domestic Violence, mainly through the Virginia Council on Economic Education, Junior Achievement of Central Virginia, Safe Harbor Shelter, and the Virginia Sexual and Domestic Violence Action Alliance.

The Power of Three: Set your sights on just 3 goals

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January 16  |  budgeting, goals, home page news, saving money, taxes  |   Lisa Hatcher Byles

OverwhelmedIt’s mid-January – are you overwhelmed already?

I admit it.  I am a self-help junkie.  I like to sign up for free stuff on the internet that promises to motivate me to be my best self, find balance, be authentic, and get strong.   On Facebook, I click on the “lists”:  10 ways to de-stress, 5 tips to work your glutes, 3 strategies to save more money (I like to see what others have to say about that!).  Phew, I am overwhelmed already!  It seems too complicated to do everything  and I don’t know where to begin or where to focus.

I know it can be the same way with our finances.  There are so many facets to our financial life: spending, saving, investing, taxes, retirement, insurance, paying for college, credit scores…

So, my suggestion to you, and to myself, is to choose three areas to focus on.  Write down all the things that are bothering you about your finances, what worries you, what concerns you, and then pick the three topics that would give you the greatest feeling of accomplishment if you got them done or made it a habit to do.  Don’t forget to give yourself a deadline for each item – and a reward once they are completed!  For ongoing goals, reward your progress.

Your list may look like this:

  1. Spending  – you don’t track it and you are not sure how much you are spending
  2. Debt –you don’t have a real plan on how to get rid of it
  3. Retirement – you haven’t signed up for your 401(k) at work and not sure how much to contribute

For each of these items, write down the steps needed to complete.  In this example, it might look like this:

Spending

  • Add up all my income sources
  • Track my expenses for a month to see where the money is going (high tech or low tech, use a system that works for you)
  • Figure out if I am spending more or less than I earn

Debt

  • Make a list of all my credit cards and other loans
  • Include the interest rate, payment, and balance
  • Figure out how much in total you can pay towards debt
  • Decide how much to pay toward each loan/credit card
  • Use a debt repayment calculator to see how long it will take to get debt free

Retirement

  • Go to HR office at work, get the paperwork (or it may be online)
  • Find out if there is a match, try to at least contribute enough to get the match
  • A good rule of thumb is to contribute 10%.  If you can’t do that much, start smaller and try to increase in the future

My list looks like this – I will have to be accountable now!

  1. Categorize my Mint.com transactions on a daily basis– even I get lazy about splitting my Target receipt, for instance
  2. Start working on my taxes – will need the info for filling out the FAFSA form.
  3. Update my financial notebook – my list of all my accounts and advisors.  With my life changing from married to single, lots of that information is now out of date.

Remember to start small and build on your success.  If you want some guidance along the way, we are happy to help you as well!

Identity Theft: what it is and how to protect yourself

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December 13  |  home page news  |   Lisa Hatcher Byles

Identity theft, one of the fastest growing crimes in the US, is a crime in which an unauthorized individual obtains key pieces of personal identifying information and uses them for personal gain. Theft can start with lost or stolen personal effects, mail, a computer virus, phishing scams, or paper documents that have not been properly disposed. There are several fairly simple ways you can protect against this crime, but first let’s briefly go over some of the different types of identity theft.

Financial identity theft – The most commonly known form of identity theft, this involves check, debit, or credit card fraud.

Criminal identity theft – This is when someone uses your identity when charged with committing a crime, and a warrant is put out for your arrest rather than theirs.

Governmental identity theft – Governmental identity theft typically happens if a thief uses your personal information to obtain employment, in which case the money they make will appear on your taxes.

Medical identity theft – This involves the misuse of your medical records and is often used by thieves to access medical insurance.

Child identity theft – Child identity theft involves the use of a child’s Social Security number to commit fraud.

At this point, you may be asking, what’s the good news? There are plenty of free services that can help protect you from, or at least alert you to, suspicious activity on your account. Nearly every state allows you to freeze and unfreeze your credit report. Freezing your credit report stops potential identity thieves from activities like opening a credit card in your name or taking out a car loan because the credit will be denied when a vendor is unable to access your credit report.

Many banks offer services that can alert you to suspicious activity. Some send alerts every time a “card not present” purchase is made via phone or internet. Others offer free (or with minimal fee) services like alerts to cash withdrawal, charges over a stipulated amount, and change in information on your account. The drawback is that most of these alerts come through after fraud has already been committed. While new technology is coming out that alerts the account holder in the middle of a transaction, it is not commonly available at this time.

If you’re interested in paying for added protection, it’s important to be an informed an active consumer. Read the fine print so you know what type of protection you’re signing up for; you don’t want to be lulled into a false sense of security.

To help protect yourself from identity theft, you can also check your credit report free once a year. By staggering reports with the three major credit bureaus, you can receive a free report once four months (www.annualcreditreport.com).

Of course, never forget the old constant: shred all documents that have bank, Social security, credit card, or insurance identification numbers.

 

 

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Smart Holiday Shopping: where to find the best deals

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December 11  |  home page news, saving money  |   Lisa Hatcher Byles

It’s that time of year again: the Holidays have arrived!

This season, everyone is looking for the best deals. But where can we find them?

Stores like Toys R Us, Sears, WalMart, and Kmart are offering fee-free layaway. Layaway is a great way to spread out Christmas shopping payments.

The downside of layaway is that, even if the item goes on sale later, you are purchasing it for the original price. Still, if you’re looking for a very specific item, layaway is a good way to ensure that you aren’t stuck on Christmas Eve, searching futilely for that present when everyone is “sold out.”

To find the best deals, use your search engines! Websites like Overstock.com, Amazon, and others consistently offer discounted prices. Websites like FreeShipping.org can help you find deals on shipping, reducing or eliminating the costly side of online shopping.

Looking for deals online can become a little time consuming, but it’s a great alternative to fighting through the seasonal crowds. You’re also able to tailor your searches to fit your Christmas list, and get the shopping done in the comfort of your own home (maybe even with your pajamas on).

With all these different ways to find Holiday shopping deals, we hope that you find an option that fits your needs perfectly!

 

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Hit or Miss? You decide!

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November 5  |  home page news, saving money  |   Lisa Hatcher Byles

I recently signed up for a Target debit REDcard. I was enticed by the idea of saving 5% on every purchase and free shipping from Target.com. I knew, though, there must be a catch, as every card-carrying economist knows, there is no free lunch. (I did get a master’s in econ a long, long time ago, lol.)

So, the cost of that 5% savings appears to be the ability for Target to take a microscopic look at my buying habits and share that information with others. Here is the fine print on their website: http://www.target.com/redcard/privacy-policy.

I decided that I was okay with that and proceeded to apply for the debit card. When I decided to write about this decision, I Googled Target REDcard to see what other people were saying on financial blogs.

One well-known columnist, Gerri Detweiler, http://money.msn.com/credit-cards/is-target-5-percent-discount-card-worth-it-credit.aspx came to a similar conclusion as me. Another blogger, though, reminded me of the perils of paying with debit and credit cards – we tend to spend more. Target is most likely hoping that you will spend more than you otherwise would (http://www.pennypinchinmom.com/target-red-card-a-good-thing-or-not/). When you spend cash, you feel it more emotionally and you tend to spend less.

So, to decide if this is a good idea for you, you have to know yourself. If you go into Target with a list and leave with several items NOT on your list, then maybe it is not a good idea. If you are fairly disciplined and the extra savings and the feel of plastic rather than cash won’t tempt you to spend more, then it can be an easy way to save some money.

I would love to hear your thoughts. Do you have one, are you going to get one, or is it not worth it to you?

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Needs, Wants, and Savings: the 50-30-20 rule

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September 19  |  budgeting, goals, home page news, saving money  |   Lisa Hatcher Byles

If you are like most Americans, you have a vague idea of what you are spending, but you are not quite sure. If you came into my office, you may give me a sheepish grin when I ask you how do you track your expenses. No worries, you are not alone! But, there is a better way, and here are guidelines and tools to help you gain control over your finances.

How much is prudent to spend, save, and invest? Here is an easy to remember guideline recommended by Harvard professor Elizabeth Warren: 50/30/20 – using your net, after taxes monthly income:

• 50% goes to NEEDS
• 30% goes to WANTS
• 20% goes to SAVINGS/DEBT

NEEDS are must-pay living expenses such as housing, transportation, food, utilities (for heating, cooling, water, basic phone), insurance (health, home/renter, auto), basic clothes, and child care. It is also bills you have to pay such as the minimum payment on any debts.

WANTS are eating out, clothes beyond basics, entertainment, your morning Starbucks fix, cable, data plans on cell phones, gifts, travel, books, things that are nice to have but not essential.

SAVINGS includes saving for an emergency fund (6 to 9 months of basic expenses), retirement savings, and debt repayment beyond the minimum required.

If you find it difficult to keep your Needs to 50%, then you may want to reconsider how much you are spending on the big ticket items such as housing and transportation.

Here is an example. Say your monthly after tax income is $4,000. Here is how your budget may look:

• $2,000 NEEDS
• $1,200 WANTS
• $800 SAVINGS/DEBT Paydown

Here is an easy tool to check out how your spending compares to this guideline. It is an interactive tool, so it is easy to make changes to see what needs to be done to make your spending plan balanced. This tool comes from the Center for Retirement Research at Boston College. It is a Beta tool, meaning they are looking for feedback! Try it out and let us know what you think and if you found it helpful. Here is the link:

http://squaredaway.bc.edu/calculators/make-a-budget-in-3-min

Creating a spending plan/budget doesn’t have to be difficult and the payoff is huge – gain control over your finances, peace of mind, and reach your goals. If you are not sure if you are on track, give us a call for a Get Acquainted meeting. We have several tiers of services to best meet your individual needs.

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Refinancing in an upside down world

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June 19  |  home page news  |   Lisa Hatcher Byles

By Kirsten Graham, guest blog

~Is refinancing my mortgage loan the right thing to do?
~Will refinancing save me money, interest or years of payments?
~Can I refinance my mortgage if I am upside down (owe more in my mortgage than my home will appraise for)?

These are the questions I am asked every day. Unfortunately there is no one-size-fits-all answer, everyone’s situation is different. However, there is currently a great loan program that can help you take advantage of low rates even if you owe more on your home than it is worth.

Two Options

Here are 2 mortgage refinance loans to consider;

1) HARP – Home Affordable Refinance Program
HARP stands for Home Affordable Refinance Program. It is a conventional mortgage refinance program specifically designed for people who are upside down on their mortgage.

In order to qualify for this program:
~ Your loan must be backed by Fannie Mae or Freddie Mac.
~ Your current mortgage must have a securitization date prior to June 1, 2009.
~ Contact us today to see if you qualify to take advantage of the lower rates.

 

 

2) FHA (Federal Housing Administration)

This loan is perfect for those who are in an FHA loan now and want to lower their interest rate and save money on their monthly payments!

FHA accepts:

~ Less than perfect credit
~ No appraisal
~ Limited documentation

 

 

 

 

 Decide on Your Goal

For some their goal is saving money each month to offset a job loss or hours being cut back. For others their goal is to shave a few years off of the mortgage they have and pay for their home by the time they retire. Others want to save money on the interest to help pay for college or add to their retirement account.

Don’t Go It Alone

If you are considering refinancing please call a mortgage professional. You should never have to pay any fees to find out if a refinance is right for you. In most cases you will not need an appraisal so be very cautious of lenders asking you for upfront fees.

About the Author

Kirsten Graham is the broker/owner of Creative Mortgage LLC a locally owned and established mortgage company serving residents of Virginia. For more information and to sign up to receive f.r.e.e homeowner tips and local housing information, visit us at www.creativemortgage.cc or contact us at 804-965-0333. And be sure to check out our You Tube channel: www.youtube.com/user/creativemortgageva

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