How to Choose What Financial Goals are Worth Setting

save-saving-housing-house-money-cash-e1394569718602Everyone needs financial goals in order to be efficient and successful, but determining which goals to prioritize can be difficult. If you don’t set enough goals, you may not save enough money. However, if you set too many goals it can be difficult to achieve all of them, and repeated failure can get you off track.

It’s best to prioritize how important different goals are in terms of the immediate future, as well as your long-term hopes and dreams. Once you know what is the most important to you, you can figure out which goals you should focus on. Survival should be your first priority; you need to pay for your basic needs first. After that, you can focus on longer-term goals. Consider these five questions as you set your next financial goals.

1. Do I need it to survive?

Obviously, you need food and shelter to survive. Your necessities have to come first. This means that you will need to have enough money to pay your rent and utilities, purchase groceries, and receive medical care when you need it. There are other things that may be necessary depending on your personal circumstances. You will probably require a job, and you might need a car to get there. You also will need clothing, so your first goal should be to afford basic necessities. If you can’t do that yet, then your other financial goals need to wait.

2. Is the goal too big or too small?

Setting goals that you can’t possibly achieve will only bring failure, and can potentially make you depressed or frustrated. If you can barely afford rent for your current one-bedroom apartment, you probably shouldn’t make a goal to purchase a four-bedroom home this year. But you can make long-term goals that include purchases you couldn’t possibly make now. Your income should increase as you become more experienced in your job field, and you can certainly make long-term goals that factor in your anticipated income.

You also shouldn’t spend too much time on goals that are really small. While setting some small goals may build your confidence (such as saving for a new dress or suit), setting too many small goals will pull your priority away from bigger goals.

3. How can I achieve my goal?

You can increase your chances of achieving your goal by taking extra steps to make it happen (outside of just making the goal itself). If you want to purchase a house, but you need to save for a down payment, start small. It’s good to start off by setting up a savings plan, finding out if you qualify for assistance, and cutting back on expenses. You don’t have to purchase a home (or a new car, or whatever else your big goal entails) right now. Make a plan for just how you can obtain your goal.

This is also true of other financial goals, such as moving up at work and making more money. If you want to move up, focus on the ways that you can improve your work performance and set yourself up for a promotion. Consider educational classes if necessary. You also might consider relocating if it will help you advance in your career. Taking proactive steps to achieve your dream will help you get there, and also may make you feel more accomplished and on-task.

4. Am I thinking about the future?

Vacations and fancy clothes can be wonderful, but you need to think about your future, too. Besides basic necessities, you should also prioritize your retirement savings. According to the United States Department of Labor, knowing your retirement needs, contributing to your employer’s retirement savings plan, learning about investment principles, considering using an IRA, and knowing about your social security benefits, can all help you plan for retirement.

Complete the necessary research in order to determine how much you might need to retire, and also to determine where you might want to live, which will affect how much money you need. You also need to consider your future health, and how it might impact your finances.

To get more information on planning for your retirement and schedule your complimentary appointment, contact First Financial’s Investment & Retirement Center at 732.312.1564 or email samantha.schertz@cunamutual.com.

5. How much time do I need?

This question factors into many of the other questions on this list. One of the best ways to achieve your goals is to set realistic ones, and to figure out when and how you will achieve them. Determine how many years you think it will take you to save enough for the type of home you want, or how much you need to save each year (and for how many years) to be comfortable in retirement. If you want to save for a vacation, consider how you will have to alter your current spending, and for how many months you will have to do so.

Short-term goals often take less planning, but it will still help you to determine how much time you need to achieve those goals. It’s easy to tell yourself that you can save enough for a trip in a few months, but actually sitting down and determining how much you need to save each month, and for how long, will help prevent overspending.

Here at First Financial, our first priority is helping you achieve your financial dreams by defining your dream goals and lifestyle, empowering you through financial education, building your wealth, planning your retirement, and managing your risk. Establishing financial goals is an important part of saving enough money, and being ready for the future and we are here for you! Stop into any one of our branches and sit with a representative to have an annual financial check-up for a review of your finances and portfolio. 

Representatives are registered, securities are sold, and investment advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free 800-369-2862. Nondeposit investment and insurance products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the financial institution. CBSI is under contract with the financial institution, through the financial services program, to make securities available to members. CUNA Brokerage Services, Inc., is a registered broker/dealer in all fifty states of the United States of America.

Article source courtesy of Sienna Beard of Cheatsheet.com.

Don’t Eat the Marshmallow! 4 Tips for Financial Self-Control

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The “Marshmallow Theory,” based on a landmark Stanford University experiment, has been used countless times to demonstrate the power of self-control in your financial and personal life.

The experiment followed children who were left alone with a marshmallow and told that if they didn’t eat it they would get a second one 15 minutes later. Some of the kids waited the full 15 minutes, some ate the marshmallow immediately, and others waited for a short period of time before eating it.

Years later, researchers tracked down the children and found that those with the willpower to wait to eat the marshmallow — 1 in 3 of the test subjects — grew up to become more successful adults than those who ate the marshmallow immediately.

Temptation Never Goes Away

Joachim de Posada, an author, motivational speaker, and adjunct professor at the University of Miami, has gotten a lot of mileage out of the marshmallow experiment. He’s written three books based on the theory.

His latest — “Keep Your Eye on the Marshmallow” — teaches readers how to take responsibility for their own financial, career and personal success by keeping their attention focused on long-term goals rather than instant rewards.

“One of the lessons we can learn from the marshmallow experiment is that among the 1 out of 3 kids that didn’t eat the marshmallow, some already had willpower and some understood they needed to use different techniques to avoid eating it,” says de Posada. “Leadership, like willpower, can be inherited, but it can also be learned through emotional intelligence.”

While the children in the Stanford experiment resisted eating the marshmallow by turning their backs on it or distracting themselves by drawing on the walls, de Posada suggests that adults can use similar techniques (defacing property notwithstanding) to avoid the allure of instant gratification.

4 Ways to Artificially Boost Your Willpower

If you lack financial willpower (e.g., the wherewithal to save your paycheck instead of spending it right away), de Posada recommends the following workarounds to help you delay gratification:

1. Choose an accomplice. Let’s say you have a goal of saving 10 percent of your paycheck until you have enough to cover six months of living expenses to stash into an emergency fund. If you can’t do this on your own, de Posada suggests you identify someone whose willpower is stronger than yours either to keep your money for you or be the person to whom you are accountable.

“If you trust them, send them the money and tell them they can’t give it back until you’ve reached a certain goal,” says de Posada. “Or have your mother or your brother or a close friend call you every 15 days and ask you how much you saved or what you spent your money on during the previous two weeks.”

2. Have your boss hide away part of your paycheck. If you work for a larger company, de Posada says you should have at least 10 percent of your income transferred into a 401(k) or other financial instrument before you ever see it. Just like the kids who looked away from the marshmallow, your money will be out of sight and out of reach.

The Investment & Retirement Center located at First Financial can assist members with saving, investing, and planning for retirement. Set up an appointment with the Financial Advisor by calling 732.312.1565 or stop into any branch and ask a representative to schedule an appointment for you.*

3. Use a money planner. “You schedule your time with your iPad or your calendar, so schedule your money in the same way,” says de Posada. “Give yourself orders that you need to follow in your planner, such as saving a specific amount each week.”

Committing these money appointments to your calendar makes them more concrete, as opposed to vague, far-off goals.

De Posada suggests establishing your financial priorities as you would other activities, with the “A” level urgent actions that must be done today, such as paying a bill on the due date; “B” level tasks that are important but can be accomplished by a future deadline, such as reducing your debt by a particular amount; and “C” level long-term goals such as funding your retirement. He recommends checking your money planner weekly rather than daily.

4. Take action now for future rewards. Overcoming a bit of discomfort in the short term often accompanies actions that pay off in the long term. Investing in the stock market requires weathering the inevitable short-term gyrations and reminding yourself that over the long term the market has steadily risen.

“You need to understand who you are and your appetite for risk, but be aware that when you’re younger you can be more aggressive in your investments,” says de Posada.

De Posada says the most important part of the marshmallow theory is to understand how you would react to the experiment.

“If you know intrinsically that you’re a marshmallow eater, then find a technique to overcome that character trait,” he says. “Recruit someone to help you or put systems in place that will force you to wait for that second marshmallow.”

Click here to view the article source.

*Non-deposit investment and insurance products are not federally insured, involve investment risk, may lose value, and are not obligations of or guaranteed by the Credit Union.Representatives are registered, securities are sold, and investment advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free 800-369-2862. CBSI is under contract with the financial institution, through the financial services program, to make securities available to members.

How to Talk to Your Aging Parents About Money

adult online educationAre bills piling up on Mom’s kitchen table? Are you worried that Dad might fall prey to a scam?

If so, it’s time to discuss if they need help with their finances. Proceed carefully though, because they may not see things as you do: A 2012 study found that while 24% of adult children think their parents will need a hand with money, 97% of the parents do not.

“Conversations about money with your elderly parents are really about control — something they don’t want to lose,” says David Solie, author of How to Say It to Seniors.

Try these tips:

THE GROUND RULES:

Drop the attitude. An “I-know-better” air isn’t the best approach. “Take care your concern doesn’t come across as if you think their intelligence is diminished,” says Solie.

Avoid saying “you should…” Those two little words are sure to put them on the defensive.

Bring in a third party. “To your Mom and Dad, you will always be a kid — which is why the talk may go better if you deliver it alongside an outside expert,” says Paula Span, author of When the Time Comes.

WHEN YOU’RE FACE TO FACE:

1. Opening line. “Mom, I just read an article with great tips about how to simplify managing your money as you get older. Can I share a few of them?”

The strategy: “Bring yourself into the equation as a helper, not an overseer,” Span says. Framing the advice as someone else’s ideas may make your parents more open to accepting them.

2. Dangle a carrot. “I think we can save you some money on your cable bill, Dad. How about we take a look?”

The strategy: Suggest a small, concrete action with a clear payoff to start. An Allianz survey reveals that 61% of older Americans worry about outliving their money, so helping your parents cut costs is a good first move.

Seeing how beneficial your suggestions can be is likely to make them more receptive to other, more serious forms of help.

3. Keep your warnings indirect. “I know you’re too smart for this, but I want to tell you about this scam I heard about so you can warn your friends.”

The strategy: Being straightforward — “Mom, Dad, you need to watch out for people who ask for your bank account online” — may feel patronizing to your parents. Instead, plant a seed that doesn’t reflect on their competence to manage their affairs, says Colorado elder-law attorney, Catherine Seal.

4. Ask if you can tag along. “My friend’s Dad keeps getting invited to free-lunch retirement seminars. Do you? I’d love to go if you go.”

The strategy: Instead of trying to put the kibosh on a move you know is not smart, stand beside them during the sales pitch, suggests Kim Linder, a caregiver consultant. Then ask tough questions that will push your parents to think before they leap.

5. Use metaphors. “You wouldn’t buy a used car without a mechanic checking under the hood. Same goes for your investments. Let’s have a financial advisor look into this.”

The strategy: “In the second half of life, the right brain becomes the gatekeeper for information,” says Solie. “We respond better to stories and metaphors — the stuff that gives meaning to facts and linear data.”

You may also want to talk to the financial experts available to the members of First Financial Federal Credit Union. To set-up a no-cost consultation with the Investment & Retirement Center located at First Financial, call 732.312.1500.*

*Representatives are registered, securities are sold, and investment advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free 800-369-2862. Nondeposit investment and insurance products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the financial institution. CBSI is under contract with the financial institution, through the financial services program, to make securities available to members. CUNA Brokerage Services, Inc., is a registered broker/dealer in all fifty states of the United States of America.

Article Source: http://money.cnn.com/2013/04/01/retirement/parents-money.moneymag/index.html?iid=SF_PF_Lead

10 IRA Tax Tips

Knowing these 10 IRA tax tips can help you when saving for retirement. When preparing taxes and setting up retirement accounts, it’s important to know how your IRA or individual retirement arrangement affects your tax return. Being knowledgeable will allow you to make smart decisions when contributing to an IRA and how to handle the account in the future until you request disbursement at retirement.

Use these ten IRA tax tips to make smart decisions regarding your retirement future:

  1. Money contributed to a traditional IRA is not taxed until disbursement. Not including Roth IRAs, the person who owns a traditional IRA is not taxed until they request money from the IRA during retirement. Usually, the person’s tax bracket is lower during retirement, saving the person money by waiting to pay taxes until they are retired.
  2. IRAs can only be owned by one person. When the person owning the IRA dies, a beneficiary can be awarded any portion of the monies in an IRA that remains.
  3. Use the correct form. When making nondeductible contributions to a traditional IRA, the taxpayer has to use Form 8606, Nondeductible IRA’s.
  4. Know if you are eligible for a tax credit. Use form 8880, Credit for Qualified Retirement Savings Contributions to find out whether you qualify for a tax credit.
  5. Persons can contribute to a traditional IRA up to the age of 70 years old.  If you are 70 1/2 years or more old at the end of a tax year, you may not contribute to a traditional IRA that year.
  6. To be eligible to contribute to a traditional IRA, the person who takes out the IRA or their spouse must have taxable income from specific sources. Income can come from a salary, wages, self-employment income, tips, commissions, or bonuses. Also included are taxable alimony and maintenance payments that the owner of the IRA received during the tax year. Income that does qualify includes deferred compensation, rental property income, pension or annuity compensation, and dividend and interest income.
  7. Contributions to an IRA can be made up till the tax filing date. You can contribute for the applicable tax year (the previous year) until April 15.
  8. Funds withdrawn from an IRA are taxable the same year they are withdrawn. Withdrawals of only deductible contributions are fully taxable.
  9. Early withdrawal may be taxable. Owners of traditional IRAs who withdraw monies before they are 59-1/2 years old may have to pay an additional ten percent tax.
  10. Late withdrawal may be taxable. Owners of traditional IRAs who do not withdraw the minimum amount after they turn 70-1/2 may owe an excise tax.

Contact the First Financial’s Investment and Retirement Center to set up a no-cost consultation at 732.312.1500 or visit our website for more information.

Article Source: Made Manual, Instructions for Life http://www.mademan.com/mm/10-ira-tax-tips.html#vply=0

A CD or a CD-Type Annuity? How they Compare and Why Annuities are so Attractive

If you’re a conservative investor, you may be wondering what fixed-rate alternatives you have to certificates of deposit. Have you ever looked at fixed annuities? Specifically, fixed “CD type” annuities? Right now, they look a lot better than CDs do.

Yes, CDs are FDIC-insured. But fixed annuities come with a guarantee as well, and often a better rate of return – plus the opportunity for tax-deferred growth and compounding.

The drawbacks of CDs. The interest rate on CDs today is often disappointingly low – often well below 5%. Besides the pitiful return, you have another disadvantage: the interest your CD earns is fully taxable.1 (And FDIC or no FDIC, do you really want your money in a bank right now with the hassles bank customers are going through?)

But you have an alternative.

The appeal of the “CD type” fixed annuity. Just like a CD, a “CD type” fixed annuity is designed to grow your money over a specified term until maturity – usually five or ten years. Right now, some of these annuities are earning well over 5% interest.2 (The interest rate is locked in for the whole term of the annuity, unlike some fixed annuities where the interest rate is only guaranteed for one year.)

Unlike a CD, a “CD type” fixed annuity gives you tax-deferred growth. The earnings aren’t taxed until withdrawal.3

With five- and ten-year terms, these annuities are particularly appealing to people in their fifties who are seeking a conservative retirement savings vehicle.

Learn more. If you think of yourself as a risk-averse investor, you might want to examine the range of options in fixed “CD style” annuities. Before you make a decision, make sure you talk to a qualified insurance agent or financial advisor who can explain the terms and conditions of these annuity contracts.

If you would like to set up a no-cost consultation with the Investment & Retirement Center located at First Financial, contact them at 732.312.1500 or visit our website for more information.

Representatives are registered, securities are sold, and investment advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free 800-369-2862. Nondeposit investment and insurance products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the financial institution. CBSI is under contract with the financial institution, through the financial services program, to make securities available to members.

Citations.

1 streetauthority.com/terms/c/cd.asp [8/08]

2 annuityadvantage.com/annuitydata.htm [8/22/08]

3 investopedia.com/terms/d/deferredannuity.asp [8/08]

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What You Should Save By 35, 45, and 55 To Be On Target

Getting started is half the battle when it comes to building retirement security. Setting near term goals are important too. Here’s how to do both.

Financial rules of thumb are just that. If you follow them, you have the satisfaction of knowing that you’ve taken action — but they do not guarantee you’ll get the results you desire. Still, in the savings game guideposts can be especially useful. A near-term target will help you get started, and that’s half the battle.

Here is a recently put together, age-based savings guideline with a range of savings goals that can be applicable to anyone.

Here are the guideposts:

  • At age 35, you should have saved an amount equal to your annual salary.
  • At age 45, you should have saved three times your annual salary.
  • At 55, you should have five times your salary.
  • When you retire at age 67, you should have eight times your annual pay.

There are benchmarks to hit along the way. Having near-term targets helps you stay on track—and take the necessary steps to catch up while time is on your side. But there is nothing easy about hitting these targets. It is assumed that:

  • You begin saving in a workplace retirement plan, such as a 401(k), at age 25. You save continuously and without interruption until age 67.
  • You start by making an annual salary contribution equal to 6% of pay, and raise the figure by one percentage point each year until you are saving 12% of your pay.
  • Your employer matches you at 50 cents on the dollar up to 6% of your pay and your portfolio grows 5.5% a year.
  • Social Security is factored in.
  • Your income grows 1.5 percentage points faster than inflation each year.

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These assumptions are reasonable in terms of building an illustrative savings model. But consider that almost no one starts saving at 25 and millions suffer some sort of job interruption over an approximate 42-year career. This model also has you saving 12% of your pay by age 32. A common rule of thumb is 10% and again, most folks don’t get serious about saving until they are in their 40s and 50s.

Meanwhile, you will need a healthy slug of stocks to earn 5.5% a year. Yet individuals have been net sellers of stock mutual funds for at least half a decade. Whether Social Security will be available when you retire is an open question. In some cases many people are not earning as much as they used to earn, and not keeping up with the rate of inflation.

Of course, it would be a mistake to extrapolate the experience of the crisis years indefinitely into the future. Still, this exercise points up the difficulty of reaching retirement security without an early start, or hyper-aggressive saving at midlife. No matter your age, at least now you can see where you stand – and what to do about it.

Contact the First Financial’s Investment and Retirement Center if you would like to set up a no-cost consultation at 732.312.1500 or visit our website for more information.

Representatives are registered, securities are sold, and investment advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free 800-369-2862. Nondeposit investment and insurance products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the financial institution. CBSI is under contract with the financial institution, through the financial services program, to make securities available to members. CUNA Brokerage Services, Inc., is a registered broker/dealer in all fifty states of the United States of America.

Article Source: http://moneyland.time.com/2012/09/21/what-you-should-save-by-35-45-and-55-to-be-on-target/#ixzz29fOYAuY7