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Great Books and Articles!
An IRA Owner's Manual, 2nd Ed.
by Jim Blankenship
People kick around the terms “IRA” and “401(k)” as casually as they talk about ketchup and mustard. And, just like most of us have both those condiments in our refrigerators, a good many of us have an IRA or 401(k). But the nitty-gritty details of IRAs can be elusive, and unlike a 401(k) where your employer sets the rules and advises you on tax and other consequences, you are on your own with your IRA.
Jim Blankenship’s book, An IRA Owners Manual, is a readable, helpful book that tells you what to do when with your IRA. Jim’s an expert on financial planning and taxes and holds both the CFP® certification and the IRS Enrolled Agent (EA) designation. Couple that with over 25 years of experience with real people and their real problems, and you’ve got a book that will guide you through every aspect of IRA use and management.
The book is organized in a very user-friendly, intuitive way. Jim starts out with general info on IRAs, moves into a discussion of rollovers, and presents information on Roth IRA conversions, taxes, distributions, RMDs, and other tips for managing your IRA to your best advantage. The Table of Contents clearly lays out each section, and the topics are numbered for easy reading.
One of the most helpful sections is the explanation on whether or not it might be worth it for you to convert your Traditional IRA to a Roth IRA. Few people truly understand the ramifications of the move, which can be a great idea in some circumstances, with regard to taxes. Another great part is the discussion of the one-rollover-a-year rule, which is another IRA regulation that can trip people up and cost them money.
This is a great book for anyone with an IRA to read. Think about it this way: just because you have a teenager doesn’t mean you understand that teenager! Your IRA could well be the same…you have it, but you’re kind of clueless and you feel like you are in murky waters. If you buy this book, it will provide a simple and pleasant way to gain full knowledge of how to maximize gains and minimize problems. If only a book on parenting teenagers could work as well!
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Check out Jim's great articles on his website Financial Ducks in a Row!
By Colin Lalley of PolicyGenius
Millennials don’t really get enough credit for how hard they have it, financially speaking.
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When it comes to millennial challenges, most “experts” flippantly equate Snapchat and participation trophies with laziness, unrealistic expectations of job fulfillment, and procrastination when it comes to milestones like buying a house or having kids.
But that’s overlooking all of the challenges that young people face. Some were becoming independent in the middle of a historical economic crisis. Some narrowly missed the Great Recession but were (and are still) saddled with record student loan debt. And still other millennials are facing stagnant wages and improving-but-stale job prospects. It can be difficult for them to even look at their financial situation holistically.
Financial challenges can be a huge burden to millennials, especially when those challenges are beyond their control. But that doesn’t mean millennials have to fall victim to every hurdle that comes their way.
We asked two millennial personal finance experts – Stefanie O’Connell, author of The Broke and Beautiful Life, and Chelsea Fagan of The Financial Diet – about the biggest financial challenges faced by millennials today, and what tools they can use to avoid them.
Parents just don’t understand (the financial challenges millennials contend with)
This isn’t your father’s economic climate. It’s easy to get advice from your elders, but it doesn’t always help if they don’t know what exactly their children are going through. Stefanie describes the perfect storm of rising student debt and cost of living, declining earnings, and a reliance on an unstable gig economy:
First and foremost, student loan debt, millennials are contending with record student loan debt averaging over $37,000 for graduates of the class of 2016 – a rise of nearly $19,000 in just the past fourteen years.
Meanwhile, average earnings are in decline. In 1970, 92 percent of U.S. 30-year-olds earned more than their parents earned at age 30. Today, that number is around 50 percent adjusted for inflation.
All the while, costs of living continue to rise. 1970 the average American home could be purchased for about $150,000 in today’s dollars. Today, that same average American home costs about $384,000.
And in the aftermath of the recession, with the rise of the gig economy, millennials increasingly lack access to long-term financial infrastructure. Forty-one percent of millennials who are at least 22 years old have no access to either a defined contribution plan or a traditional defined benefit plan through their employers, compared with just 35 percent of Gen Xers and 30 percent of baby boomers.
Today’s financial climate can be overwhelming
All of those mounting challenges work together to do one thing: make millennials apprehensive of making any first step, in case it’s the wrong one. Chelsea sees this as one of the biggest mistakes visitors of The Financial Diet make:
By far the most common financial pitfall we’ve seen them make at The Financial Diet is putting their head in the sand, about their credit score, their debt, their net worth — basically anything that scares them, they often choose to avoid.
No one wants to see that their credit score isn’t what it could be, or open yet another letter or email from a collections agency. Out of sight, out of mind, right?
But not tackling these issues head-on can make things worse. Chelsea also notes that one of the most popular topics among the people she advises is emergency funds. If millennials don’t take account of their debts, goals, and struggles (and who can blame them for not wanting to dwell on that?) then it’s harder to put safety nets like emergency funds and insurance in place to protect themselves.
What tools can millennials use to help them navigate their finances?
Luckily, millennials don’t have to face these pitfalls alone. There are a number of apps and tools available to help no matter the financial situation. We’ve written about apps for budgeting, banking, retirement planning, investing, tracking receipts, taking notes, and more; you can find them here.
One app that Stefanie finds personally beneficial is Personal Capital, a tool we’ve talked about in the past. Here’s what Stefanie has to say about the retirement planning app:
A lot of the financial anxiety experienced by millennials isn’t a result of bad money behaviors so much as it is a result of fearing the unknown.
To combat this, we can help millennials reframe their approach to their finances and come to see money as a tool for grounding their aspirations in tangible, measurable terms – rather than a limitation.
To get to where they want to go and draw the roadmap for getting there, they have to take stock of where they are in the present. An app that tracks their spending and net worth over time like Personal Capital is a great tool. Once they have a comprehensive understanding of where they’re starting from financially, they can identify what they need to tackle first to get to where they want to go, and track their progress along the way.
Automate everything
Not dealing with money challenges is a surefire way to exacerbating them. But automating your finances is different. It takes some of the manual work out of investing, saving, and paying off debt, but rather than hiding from them you’re making them easier to handle.
Automating your finances and paying yourself first are crucial steps to taking control of your financial future. Knowing that your financial obligations are taken care of – without having to do it yourself every time – can relieve a lot of stress, as Chelsea explains:
Automating all savings and bill payment. Automate whatever you want taken out of your check before you see the money, and automate the bills that must be paid each month (ideally through your credit card, which you automate paying off, building credit & points). Setting financial obligations on auto-pilot makes it less a source of stress, and less likely to bite you in the ass when you inevitably forget something.
Financial pitfalls don’t have to be dead ends
Managing money can be hard when it seems like the deck is stacked against you. But even though millennials might have to work a little harder and a little smaller to plan their financial foundation, that doesn’t mean it can’t be done. By being aware of the challenges you face, knowing how to face them, and having the appropriate tools to manage and automate your finances, you’ll have the peace of mind to make the most out of any financial situation.
Most of us don’t feel the requirement of a fully structured out budget, when it comes to securing our finances.
But, without a budget our finance can turn into a wasteland within a little time, independent of how much we earn.
It’s not that you can’t work without a budget, it’s just that reducing the money mess, and tightening our financial security, is the concern. And, a well organized finance does require a budget to function. It’s like the Random Access Memory (RAM) of finances.
More RAM means more power, it’s just that simple a fact.
However, most of us remain ignorant of personal financial security, and can never realize how essential a budget is for protecting our finances.
Money is all about calculations, and budget will give a nice infrastructure to hold enough room for fitting in all the numbers with proper detail and predictions.
Welcome to the world of Budgeting. Here is a budget guide that will indulge you to go for at least one of the few budgeting strategies, discussed here.
Make sure, you are not neglecting the little pain you might have to take, so as to reap real profits in the future.
You deserve this little brain work and a slight struggle, if you are aiming to achieve financial happiness. Let’s get that slight sweat running then, to gain some huge benefits with the effects of budgeting, for financial protection.
Your income influences your budget to a great extent-
Form your budget accordingly:
Your income restricts spending.
But, if you have the mentality to rely on debts, every time you run out of debit cash, then that’s a very bad habit, and you need to get rid of such a mindset, as soon as possible.
So, if your income is low, then you are better off working out a Bare-Bones-Budget, or a Lite Budget.
In such a budget, you won’t be including much of luxury expenses, rather you will be concentrating only on normal day to day expenses, and take care of other basic monthly necessities, or financial responsibilities.
That’s what a Bare Bones Budget sounds like. And, it’s a common sense that you can’t have all the joy in life if your income is low. Under those conditions, a lite budget experience might be the most appropriate one for you.
Not only this, but also you can use this budget type for staying debt free forever. In this post I will be taking the majority of consumers into account, and will hence plan out a budget that will keep us more secure financially, rather than meeting luxury requirements.
Get yourself the Zero-Based-Budget, or the big view Budget:
This is more of a customized form of budgeting, than just following a fixed budget format blindly.
Financial stability or security is brought by debt-less-ness, and an ever growing savings profile. This customized budgeting strategy, the so called Zero Based budget, helps you achieve these major goals, by limiting your ‘out of hand’ expenses, or other luxury purchases and decisions.
First thing to do here, is take a look at your last month’s finance list. See your expense list, and your spending profile overall.
Based on the past month’s review, you will be making a predicted expense list for this month.
Each and every expense should be listed one by one, as per their level of priority.
Those expenses, that you can’t neglect or omit at any cost, will be at the top of the list.
These include mortgage payments, debt payments, day care cost, other fees regarding subscriptions, penalties, or anything whose number you can’t change as per your want.
Those that are discretionary and flexible will usually take up the middle part of the list. Such expenses are indicated by utility bills, grocery and food costs, transportation costs, and anything else that can be manipulated a bit, whenever you want.
At the last, appears miscellaneous and/or luxury expenses, triggered by your wishes or impulsive spending behaviour.
It is mandatory to keep a check on this part, and avoid these expenses as much as you can, for improving your financial security.
And finally, there comes savings. In this whole list of expenses, don’t forget to include your monthly savings number. This should appear at the top with the priority expenses. Each month, you should at least try to save a minimum amount, if not something huge.
Once the list is complete, write dedicated dollar values beside each of the expenses, and add up the total expenditure amount for the month.
Zero Based Budget is interested in bringing your total income minus total expense to zero. If your total expense amount cancels out your total income, by giving you a neutral zero, after taking care of all the expenses, then you have successfully accomplished the budget.
Else, check your budget list multiple times, add or subtract expenses sensibly, and equal it out.
Clear your debts, to give your financial security the final touch:
All is well, if you don’t have debts.
Financial security is not solely about monetary freedom, it also ensures mental peace. Trust me you definitely want a good credit score, a nice net worth, relief from debt collectors, and a happy retirement portfolio.
And, if you are not having debt riddance in your mind, then all these struggles for financial security will mean nothing.
Hence, in your budget, make space for the debt payments, and if possible, cut down on other discretionary expenses, and focus on hyper debt payments.
Now, that’s all I could include over here. To take this conversation a bit further, leave your response down below, and start the discussion!
All the luck for a financially secured future, up ahead!
WRITTEN BY