Many small employers offer 401-k retirement plans as an employee benefit.  These plans offer a method for individuals to save and invest for their own retirement security and reward them with tax benefits and often some form of employer contribution.  For most employees, their 401-k plan is the most effective wealth building and retirement planning tool in their financial planning toolkit.  For the employer, it is a tool to recruit, reward, and retain the best employees and to be competitive in the labor marketplace. However, the owners of small firms are usually employees too.  They have their own unique set of retirement, tax, and investment goals.  In the financial planning/investment management world, we often speak of proper diversification as a tool to reduce risk when managing a portfolio.  But the prototypical highly-focused and hardworking entrepreneur often concentrates the majority of their resources (time, effort, and money) into one asset; their business...

In this final segment on Cash Management and Budgeting, lets connect all the dots from the previous four segments to construct one comprehensive easy to use system that helps you create the following: A forward-looking budget that accurately reflects the reality of your life and tells each dollar of income where to go. It gives the highest priority to the amount of savings, investment and debt reduction necessary to build wealth each month according to your unique financial goals, objectives and life values. A turnkey system that automates savings, investments, bill paying and record keeping each month simplifying your life and minimizing ongoing financial decision making and the time you spend worrying about money issues. There is an initial process required to create your budget and solve any deficits as outlined in parts three and four of this series.  If done well, it should function pretty much automatically thereafter with simple routine oversight. ...

In Part III of our continuing series on cash management and budgeting, we discussed the importance of identifying your highest financial priorities like retirement, children’s education, or buying a home when preparing your budget. Your savings for these priorities should be the first items in your budget.  Once these objectives are identified and quantified, then you should fill in all the remaining spending that takes place in your household.  Not surprisingly, most households find themselves in the red.  There just isn’t enough income to cover the savings needed to fund your life’s goals and continue your current spending patterns.  Learning to pay yourself first and then live on what is left takes some thoughtfulness and some time. There are three things you can do to balance your budget deficit over time; reduce your current spending, liquidate your debt, and automatically allocate future income growth to debt reduction or savings.  Obviously, debt reduction and...

The following is Part III of a four-part series from Senior Financial Advisor Winfred Jacob, CFP®

The following is Part II of a four-part series from Senior Financial Advisor Winfred Jacob, CFP®

The following is Part I of a four-part series from Senior Financial Advisor Winfred Jacob, CFP®

Over the course of our lifetime, we will accumulate various forms of “property”.   One of the decisions we need to make about our property is how we want it distributed at our death someday.  This may seem fairly straight forward, yet the concept of transferring property to heirs is a bit more complicated than people often assume.   In reality it’s easy to make some common errors that lead to unintended and unfortunate results.   Here are some of the issues or misconceptions that may cause us problems: Property transfers to heirs in different ways.  A will is an important tool in transferring property to our heirs, but it’s important to understand that some of our property may transfer via a different route entirely, not controlled by our will. For instance, life insurance policies, IRAs and employer sponsored retirement plans like 401k plans transfer via their beneficiary designations.  They will distribute the proceeds accordingly,...

For many individuals, the family home is both a significant asset and a major expense item.  But it may also provide an emotional connection to important interpersonal relationships.  And lastly, where we live in our older years has a practical side based upon our physical limitations and preferences.  How do you go about making the decision to downsize?  Here are some of the factors to consider. Lower housing expenses could put more cash in your pocket. If your home isn’t paid off yet, have you considered how much money is going toward the home loan?  What percentage of your gross income are you devoting to your mortgage payments today? Even if your home loan is 15 or 20 years old, you still may be devoting a significant part of your gross income to it. When you move to a smaller home, your mortgage expenses may decrease (or disappear) and your cash...

When pondering retirement during our working careers, it’s common to assume that our spouse or life partner will decide to retire at the same time.  In reality, that is often not the case and for any number of reasons, you might consider retiring years before your spouse or partner.  And while it’s important to model the financial complications and crunch the numbers carefully, it’s also important to consider the emotional and interpersonal dynamics.  Here are some common issues to think about and discuss with the important people in your life before pulling the trigger on this life-changing event. How will retiring affect your identity? If you are one of those people who derive a great deal of pride and sense of self from your profession, leaving that career for life around the house may feel odd.  Hopefully, your spouse recognizes that you will experience some adjustments and soul-searching, even enough to...

There are two important discussions most parents and children would like to avoid.  To everyone’s relief, one of them can be delegated to our children’s health class teacher.  So let’s talk about the other one: The financial independence discussion that parents and children should have as parents age and become concerned about things like custodial care, competency, and control. This is a difficult and emotional discussion at many levels.  My parents were first generation German immigrants.  Being stoic was a way of life and money was private.  Discussing their finances with children (at any age) broke with cultural norms.   It was an admission that we might be vulnerable and no longer in control.  However, for all of us, it is an inevitable reality. It’s no mystery that as we age, we increase the possibility of suffering an episode of incapacity.  It may be for a specific time period followed by recovery or...