Road to Financial Success 2019 by Bozeman Daily Chronicle

the 2019 road to

Financial Success

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Matthew Goldberg: 6 Ways To Save More This Year

Millienial Money: Quick ways to boost your savings in 2019

Kids & Money: Bonds can be safe choice for college savers

Invest in the Change You Wish to See

Whatâ&#x20AC;&#x2122;s an index fund?

10 Financial Planning Tips from the AICPA to Start 2019 Off Right

ROAD TO FINANCIAL SUCCESS // 2019

Matthew Goldberg: 6 Ways to Save More This Year By Matthew Goldberg, Bankrate.com (TNS)

mproving your diet and health are common New Year’s resolutions. But improving your financial health needs to be a priority, too. “What people don’t realize is your finances really affect every part of your life – your relationships, how you feel about yourself,” says Crystal Rau, certified financial planner at Beyond Balanced Financial Planning. “And so, just like going to the gym and feeling better about yourself, focusing on your finances can really do a lot to have a better year.”

Make 2019 the year you take your savings to the next level. Here are six ways to save more this year. 1. Automate everything You can’t forget to save if it’s automated. Whether it’s your 401(k) contribution taken pretax from your salary, or automatic transfers from your checking account into a savings account or money market account, automating will help you save without even thinking about it. Lauren Zangardi Haynes, CIMA, certified financial planner at Spark Financial Advisors, says your employer may be able to also split your paycheck so it goes into both your checking account and a savings account. “And then you can automatically transfer that money to an investment account, or to an IRA, or to a Roth IRA,” Zangardi Haynes says. 2. Evaluate your banking Take a look at your savings account to make sure that you’re earning a competitive annual percentage yield (APY). Yields have climbed in the past year, and a number of savings accounts are offering more than 2 percent APY. If you’re not earning this, you’re missing out on real earnings. Also, take a look at your checking account. If you’re incurring a monthly maintenance fee

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for going under a required minimum balance, you should be able to find a way to avoid that – whether through a low minimum balance checking account or by having a recurring direct deposit. Compare savings accounts and checking accounts to make sure you’re maximizing yields and minimizing fees. 3. Attack your debt If you have any debt, make paying this off a priority. The interest you’re paying on a credit card is likely a lot more than what you’re earning on a savings account. (A balance transfer cards or ones with zero percent introductory periods are exceptions.) “If you have any credit card debt, you need to pay that off immediately without even considering anything else,” says Amy Hubble, Ph.D., CFA, certified financial planner at Radix Financial LLC. There were four Federal Reserve rate increases in 2018. Each of those increased the Wall Street Journal Prime Rate, which directly impacts most variable credit card annual percentage rates (APRs). These increased the amount of interest paid on credit cards, if you have an outstanding balance. 4. Maximize your cash back When you make your purchases in 2019, make sure you’re maximizing your savings and cash back. Weigh whether you’d be better off earning more cash back with a credit card that has an annual fee but higher cash-back rewards, or a no-annual fee card that has a lower cash-back percentage. Credit card shopping portals are also places where you can potentially maximize your cash back. By going through your credit card’s website or through a site such as Ebates, you can potentially earn more than your usual cash back. On a site like Ebates, you’re earning cash back in addition to what you earn on your cash-back credit card. 5. Evaluate your budget The new year is a great time to make sure you’re not overpaying or paying for monthly items that aren’t being used. Go through your budget – or monthly expenses if you don’t have a budget. It’s easy to start a budget — and it can help you maximize your savings. See if there are areas of opportunity, such as cutting back on dining out or on coffee or other spending, that adds up over time. Also, go through your budget and try to renegotiate items, Rau says. “I check our insurance just to make sure we’re still getting the best rate for the coverages that we’re carrying,” Rau says. “It’s just about doing a reset every year, just to make sure you’re getting the best deal and you’re taking advantage of all those things that are offered to you.” 6. Review your employee benefits Even though open enrollment likely already happened for 2019, you may be able to adjust some options – such as how much you contribute to your employer-sponsored retirement plan, like a 401(k). Adjusting your withholding for taxes or how much you’re putting away for retirement – which may reduce your taxable income – is a way to potentially save money, Rau says. Consult with a tax adviser to make sure that your strategy makes sense to save money on taxes. ——— Visit Bankrate online at http://www.bankrate.com. ——— ©2018 Bankrate.com Distributed by Tribune Content Agency, LLC.

ROAD TO FINANCIAL SUCCESS // 2019

Invest in the Change You Wish to See

“Y

ou must be the change you wish to see in the world.” Easier said than done, Gandhi. And it’s especially difficult if the change you wish to see is a cleaner environment or more corporate accountability. The problems we face on a societal level can feel hopelessly complicated and intertwined. Cowed by their scope, it’s easy to retreat to a more manageable level of impact: your personal relationships, your day-to-day attitude, your health habits. Taking special care to mind you and yours is challenging and rewarding in its own right. But it should not absolve us from facing and tackling the planet’s larger problems. When it comes to doing just that, your money might be the sharpest tool in your toolkit. If you’re like many of us, your retirement accounts likely make up the bulk of your net worth. And, like most of us, your accounts are probably made up of a mix of stocks and bonds packaged in mutual funds that are managed by far-away Wall Street institutions. It can be difficult to know exactly what you own and sometimes even more difficult to take control of your holdings. Your savings could be going toward tobacco companies you’d rather not support or invested in big banks you don’t trust. There are other options. And, no, you don’t need to be a multi-millionaire to take part in them. Nor do you need to sacrifice returns in order to be a responsible and socially-minded investor. Here are just a few ideas:

• Community Development Financial Institutions (CDFIs): earn rates comparable to a CD by investing in a note from a CDFI that focuses on funding small business or providing clean energy loans.

PLANNING

INVESTMENTS

Environmental, Social, Governance (ESG) mutual funds: ESG-focused mutual funds provide investment products that factor issues like carbon emissions, working conditions, diversity efforts and executive pay into their security selection process, so you can feel confident your money is supporting responsible companies. The number of available ESG funds has grown in recent years, providing an array of risk and return options. • Sustainability-minded Real Estate Investment Trusts (REITs): you can help preserve farmland and spur sustainable agriculture by investing with REITs that buy and lease farmland back to organic farmers. Your retirement savings don’t have to be funneled to faceless institutions with no connection to your community or values. Instead, utilize them in ways that comport with the legacy you desire to create. Donating to nonprofits, recycling religiously, and volunteering your time for worthy causes are all admirable. Perhaps it’s time to consider how to creatively put your investment dollars to good work, too. ——— The NorthFork Financial Team: Bill, Camy, Lydia, Wes, and Austin info@northforkfinancial.com www.northforkfinancial.com Nothing in the article above is intended or should be construed as specific investment advice. ———

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ROAD TO FINANCIAL SUCCESS // 2019

Millienial Money: Quick Ways to Boost Your Savings in 2019 By Kelsey Sheehy, Nerdwallet

heers, friends! It’s a new year. Time to set some well-intentioned — but typically doomed — resolutions. Lose 20 pounds. Read 50 books. Save $5,000.

Those big resolutions are sexy. They sound impressive when you tell friends. They’re also unlikely to last past Groundhog Day.

UP YOUR APY Do you have money saved at a brick-and-mortar bank? Move it to an online savings account. Your annual percentage yield, or APY — the money your money earns — will increase from 0.09 percent (the national average at traditional banks) to over 2 percent. Here’s what that looks like:

This year, ditch the lofty goals and focus on simple money-saving moves you can handle while nursing last night’s hangover. These quick changes take less than 30 minutes each and can help you hit your goal without cramping your style.

The more money you set aside, the more interest you could earn.

SAVE THE CHANGE, AUTOMATICALLY

INCREASE YOUR 401(K) CONTRIBUTION

Connect your bank account to an app like Qapital or Acorns to round up each transaction. Spend $12.50 on an Uber ride, for example, and the app rounds up to $13, putting the extra 50 cents into a savings or investment account. The change adds up quickly, says Tim Kenney, founder and financial adviser at TK Pacific Wealth Inc. in Del Mar, California. “I have a client who started this in the middle of (2018) and has almost $2,000 saved already,” he says. You can also tell Qapital to save a set amount every time you spend on a splurge, like Postmates delivery.

- $1,000 saved in a traditional account earning 0.09 percent will earn $1 a year. - $1,000 saved in a high-yield savings account earning 2 percent will earn $21 a year.

A small bump in your contribution can have a sizable impact on your eventual nest egg. Don’t see how? Let’s break it down. Say you’re 25, earning $30,000 a year and contributing 5 percent to a 401(k). Stay steady at that rate and you would have $285,451 in your account by the time you turn 67 (assuming a 6 percent return). But up your contribution to 6 percent and you’ll have $342,541 when you retire. That’s $25 more from your paycheck each month, but it turns into an extra $57,000 to live on in retirement — and this doesn’t factor in the inevitable raises you’ll receive, ‘cause you’re a boss. Trust me, your future self will thank you for this. Don’t have a 401(k)? Set up a low-fee individual retirement account, an IRA, through an online automated investment management service like Betterment or Wealthfront and build up your contributions annually. GET CASH BACK Sign up for a credit card that pays you back. Pick one that gives you cash back for specific purchases (gas and groceries, anyone?) or a general card that rewards you for all your purchases.

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Don’t want a credit card (or can’t qualify for a rewards card)? Try an app that gives you cash back at specific merchants. Honey, a browser extension, finds coupon codes and on some purchases, you can earn rewards, which can be redeemed for gift cards to retailers like Amazon, Target and Sephora. CANCEL DORMANT SUBSCRIPTIONS Netflix. Hulu. HBO Go. Spotify. ESPN Plus. Birchbox. Stitch Fix. Blue Apron. Those monthly fees add up — big time. Do an audit of your subscriptions, cancel the ones you forgot you had, keep the ones you can’t live without and consolidate with a roommate/partner/family member where you can. Save $120 in 2019 by canceling your Spotify subscription and going with the free version. Save an additional $60 by ditching ESPN Plus, because your fantasy football team tanked in the playoffs — again. “The amount can seem very little, but the amount isn’t the point,” says Miguel Gomez, a financial adviser at Lauterbach Financial Advisors in El Paso, Texas. “The point is being mindful about what you’re spending.” And that builds good habits that will help you save even more money over time. ———

Reduce or even eliminate your electricity bill by producing clean, renewable energy on site.

This column was provided to The Associated Press by the personal finance website NerdWallet. ———

ROAD TO FINANCIAL SUCCESS // 2019

What’s an Index Fund? By Jordan Schoenfeld, Georgetown University

he creation of the index fund in 1975 revolutionized investing, lowering costs for millions of ordinary investors. Their inventor John Bogle died on Jan. 16 at the age of 89.

Bogle took a complex universe of thousands of stocks and reduced it to a simple, singular entity, the index fund. Through index funds, investing in the stock market became easy, and one could do so at low cost while minimizing risk. Practitioners and academics have researched the drivers and consequences of index fund investing – myself included. Here is some of what we know. INVESTING BEFORE INDEX FUNDS In the 1970s, academics and others began finding that many highly paid stock pickers do not outperform broad market indices. That is, investors could earn higher returns by simply holding a diversified portfolio of stocks and avoiding speculation altogether. But at the time, the average investor didn’t have an easy way to this because an investment vehicle for such diversification did not yet exist. So Bogle stepped in and created the index fund. AN EASY WAY TO DIVERSIFY In a nutshell, index funds are designed to give investors exposure to a diversified set of stocks at a very low cost. The name “index” reflects the idea that by buying the fund an investor in effect immediately owns a broad index of the underlying stocks. All you must do is pay an intermediary – like Vanguard, the investment company Bogle founded, which now manages US$5.1 trillion in assets – a small, built-in fee in exchange for spreading your money out across the market. In part, that’s because index funds are bought and sold just like individual stocks and many even have their own stock symbols. For example, if you want exposure to a mix of all the companies in the S&P 500 index, you can buy the stock VOO, and your money will automatically be invested in a value-weighted portfolio of the S&P 500 companies. If you want to divest, simply sell your shares of VOO. WHY THEY’RE SO POPULAR? The underlying logic of index funds still prevails today. Academics regularly find that stock pickers – who continue to be highly paid – do not outperform the market, on average. It should thus not be surprising that, according to Moody’s, nearly one-third of all investments in the U.S., or almost $6 trillion, are now in index funds or other passive investments. Analysts expect this amount to increase further over the next decade.

Economies of scale resulting from their popularity have caused the fees for some index funds to hit zero. And by one estimate, Bogle’s creation is saving investors $100 billion every year. Bogle’s innovative investment philosophy overturned an industry, which in my view makes him one of Wall Street’s superstar investors. ——— This article is republished from The Conversation under a Creative Commons license. The Conversation is an independent and nonprofit source of news, analysis and commentary from academic experts. ———

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ROAD TO FINANCIAL SUCCESS // 2019

Kids & Money: Bonds Can be Safe Choice for College Savers By Steve Rosen, Tribune News Service (Tns)

you’re looking for a safe place to stash college money for a newborn or a young child, U.S. savings bonds are a good choice. With the stock market turmoil wiping out paper gains that many families were counting on to cover college tuition, the returns on series EE and I bonds by comparison don’t look so meager anymore. And the bonds, which earn interest for up to 30 years, have always presented virtually risk-free long-term alternatives compared to state-sponsored 529 college savings accounts or shares in Apple or Facebook.

Moreover, savings bonds offer tax benefits for higher education if owners meet certain requirements. Don’t worry, I would never recommend relying solely on savings bonds to cover college bills. The returns just don’t provide enough of a punch over a 20-year period to keep up with rising tuition costs. However, savings bonds can be one great element of a college savings strategy, a good foundation to accompany 529 plans and other investments. When it comes to savings bonds, buyers have two choices: Series EE bonds and Series I bonds. Newly issued Series EE bonds carry a fixed rate, which the Treasury Department resets for new bonds every May 1 and November 1. The current rate on an EE bond is a miniscule 0.1 percent, which hasn’t budged since November 2015. Series I bonds carry a composite rate — a fixed rate and an inflation rate that adjusts semiannually as measured by the Consumer Price Index.

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A new I bond currently carries a composite rate of 2.83 percent through April 30. Unlike the colorful old paper bonds that families purchased years ago as a gift for the holidays or for a newborn child, bonds must now be purchased on the Treasury Direct website for as little as $25 but not to exceed $10,000 per year. For details on how to open an account, go to treasurydirect.gov. If you want to buy a savings bond as a gift for a new baby in the family, some experts recommend the EE bond as the best choice. If accumulated interest doesn’t double the value of the EE bond you buy now after 20 years, the Treasury Department will make a one-time adjustment up to the face value of the bond to get you back on track. For example, a $10,000 bond bought today would be worth $20,000 if the owner held it until 2039, for a guaranteed return of about 3.5 percent. OTHER KEY ISSUES: • All or a portion of the interest earned on savings bonds may be tax-free if used for qualified education expenses, which include tuition and fees but not books and room and board. However, there are income caps in which the interest exclusion is gradually phased out. • When using bonds for a child’s education, the bonds must be registered in your name (and or your spouse), according to the Treasury Department. Your child can be listed as a beneficiary but not a co-owner. • The Treasury Department said there is another way to use savings bonds to pay for your child’s education expenses. Interest income on bonds purchased in your child’s name or with a parent as a beneficiary (but no co-owner) can be included in the child’s income each year as it accrues, or can be deferred until the bonds are redeemed. Either way, the child will be subject to federal income tax on the interest. ——— ABOUT THE WRITER Questions, comments, column ideas? Send an email to sbrosen1030@gmail.com. ——— ©2019 Tribune Content Agency, LLC Visit Tribune Content Agency, LLC at www.kansascity.com Distributed by Tribune Content Agency, LLC. ———

ROAD TO FINANCIAL SUCCESS // 2019

10 Financial Planning Tips from the AICPA to Start 2019 Off Right By Kelsey Sheehy, NerdWallet

he first few weeks of the new year are a perfect time for Americans to ensure their financial house is in good order and set themselves up to achieve their monetary goals. To help Americans best position themselves for the year ahead, members of the American Institute of CPAs (AICPA) share the following planning tips so the new year can bring a ‘new financial you.’

1. New Year, New Plan Quote: “One of my favorite tips is to begin the year with a fresh plan. First you have to update your balance sheet, so you know your starting point. Then set goals - reduce debt or increase investments or something else - and attach a dollar amount. Then, create the plan that will achieve the goals. It’s that simple, but you have to know where you are now in order to determine where you want to be.” - Lisa Featherngill, CPA/PFS member of the AICPA PFP Executive Committee 2. Review 2018 Spending in Conjunction with 2019 Budgeting Quote: “Early January provides an ideal window for reviewing prior year expenses and developing a reasonable budget for the current year. Be sure to strip out one-time nonrecurring expenses (i.e. emergency room visit or housing repairs) and plot a course for 2019 spending that includes a buffer for future unforeseen expenses.” - Michael Landsberg, CPA/PFS member of the AICPA PFP Executive Committee 3. Review Automatic Payment Subscriptions and Renewals Quote: “The start of the new year is the perfect time to review all the various automatic payments and subscriptions set up in the past. Some expenses, such as entertainment streaming services, a gym membership or an old magazine subscription may no longer fit into your budget, lifestyle, or new year priorities. It’s easy for money to slip away by losing track of all the small payments scheduled through automatic payment methods. A review of these payments can be part of your general new year clean-up which feels so good and refreshing!” – Brooke Salvini, CPA/PFS member of the AICPA PFP Executive Committee 4. Update Your Form W-4 for Withholding Quote: “2018 saw major changes to individual taxes. The IRS substantially revised the withholding tables in early 2018. Now that 2019 has begun, make sure you have checked your withholding to see if you need more or less withheld in 2019. Use Form W-4 and the related instructions to estimate how much withholding you need. Also, you can use the IRS’s withholding calculator at https://www.irs.gov/payments/tax-withholding or contact your CPA or financial advisor for guidance.” – Julie Welch, CPA/PFS member of the AICPA PFP Executive Committee 5. Make an Early Calculation of Your 2018 Taxes Quote: “The new tax bill has likely made significant changes to your tax opportunities. Don’t wait until April to understand what those opportunities are for you. You may need to adjust your withholding, change your charitable giving strategy, take advantage of new tax brackets or depreciation rules among many other strategies. The sooner you know your opportunities, the more impact they will have on your finances.” – David Stolz, CPA/PFS member of the AICPA PFS Credential Committee

6. Revisit Workplace Retirement Plan Contributions Quote: “The beginning of the year is a great time to review your workplace retirement plan contributions. Employees should strive to increase their retirement plan contribution percentage from 2018. Pairing the deferral increase with a salary raise is a painless way to boost retirement savings. For example, if you received a 4% raise in salary and increased your contribution rate by 2% your net paycheck and savings will both be higher.” - Robert Westley, CPA/PFS member of the AICPA PFS Credential Committee 7. Make a 2018 IRA and HSA Contribution (if you haven’t already) Quote: “You have until April 15, 2019 to make eligible IRA and HSA contributions for 2018. The combined traditional and Roth IRA contribution limit is the lesser of $5,500 or your taxable compensation. If you’re filing a joint return but don’t have any taxable compensation of your own, you may still be able to contribute under the Spousal IRA provisions. For an HSA, the contribution limit is $6,900 if you have a family high deductible health plan (HDHP) or $3,450 for self-only HDHP coverage.” – David Oransky, CPA/PFS member of the AICPA PFP Executive Committee 8. Don’t Wait, Contribute to Your IRA Now Quote: “For married couples with Modified Adjusted Gross Income over $203,000, you cannot make direct ROTH contributions. However, there are no income limitations on doing a ROTH conversion or nondeductible IRA contribution. So, you can make a nondeductible IRA contribution and immediately roll it over into a ROTH. I just got back from my local investment management branch and made my wife’s and my $6,000 IRA contributions (up from $5,500 last year). As soon as the check clears, I will roll the funds into our ROTH IRAs (called a “backdoor ROTH contribution”). The reason why you roll it over immediately is if there are no earnings in the IRA before it is rolled into a ROTH, there is no income to pick up on the conversion. This doesn’t work if you have other traditional IRAs that have untaxed earnings (whether it be from unrealized gains or prior deductible IRA contributions), because you have to aggregate all of the IRAs when determining the amount of the taxable conversion.” – David Desmarais, CPA/PFS member of the AICPA PFP Executive Committee 9. Take a Look at Your Current Allocation Quote: “With increased market volatility during 2018, your various asset classes may have drifted out of balance. Use the beginning of January to analyze any material shifts that may have occurred due to 2018 performance. Diversification is important for managing portfolio risk, so rebalancing may be necessary.” - Michael Landsberg, CPA/PFS member of the AICPA PFP Executive Committee 10. Make Annual Exclusion Gifts to Heirs Now Quote: “Consider making gifts to beneficiaries at the beginning of the year. For those looking to reduce their estate tax exposure, individuals can give up to $15,000 to an unlimited number of beneficiaries per year without utilizing their lifetime estate tax exclusion amount or paying a gift tax. Completing these gifts at the beginning of the year allows your beneficiaries to receive a few additional months of potential appreciation.” - Robert Westley, CPA/ PFS member of the AICPA PFS Credential Committee ——— Source: Business Wire ———

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