Financial Planner Q&A: How Do I Maximize My Employee Benefits?

A commenter asked what financial planning questions you wanted to see answered. This week I answered the question, "How do I maximize my employee benefits?"

I love this question, because we would never say we want a salary cut, but if we don't take full advantage of our employee benefits, it's as if we're doing just that. To get the most out of what your employer offers, start by asking human resources for a benefit plan summary. They usually have a document they can email you or can provide you a company benefits website with personal login information. The benefit plan summary gives you an overview of what is offered.

Here are some of the more common benefits that might be available to you.

Health and Dental Insurance - This is a benefit most of us are familiar with. Many companies have healthcare optimizer quizzes. It asks you questions about your health, the medications you take, number of doctor visits a year etc., and matches you with a plan. Be aware of open enrollment periods (often in the fall). If you anticipate an elective medical procedure, plan ahead and pick the insurance coverage that is most beneficial to you.

Sick Days, Short-term Disability, Vacation Days and Other Paid Time Off - You want to have an understanding of when you'll be compensated even when you can't be at work, and how these days accrue. Be aware of whether or not vacation days are "use it or lose it" so you don't miss out.

Life Insurance - Many employers offer a minimum amount of life insurance. Make sure to choose a beneficiary. This will ensure the policy is properly paid out if something were to happen to you.

Retirement Plan - Most commonly, this is a 401(k). In most cases you will be required to contribute your own funds. However, if you leave the company, you can roll that money over into an IRA; in other words, take it with you! If a company offers a match to your retirement account, make sure to contribute the necessary amount in order to receive the full match. You'll also want to choose the appropriate investments within your 401(k) as well as the percent of your salary that you'll contribute each pay check. Be aware of IRS contribution limits. Although it's becoming less and less common, you might also be offered a pension. Be sure you know the qualifications and payout as they can be detailed and restrictive.

Stock Options - These give you the opportunity to purchase company stock. They are often misunderstood or valued incorrectly. There are a number of important considerations to take into account, including risk vs. reward, time value, diversification and taxes. If you don't feel you have the resources or time, work with a financial professional who can help create a strategy that is effective for you.

Sometimes even the benefit plan summary can be a long and intimidating document. I've reviewed summaries for clients that stretch over 100 pages. Ask HR to clarify how benefits work and if there are additional costs for those benefits. There are many other benefits that could be offered to you.

Here are some examples:

You might get a gym membership (or discount on one). A flexible spending account (FSA) is another one to look out for. Remember you need to spend the funds on qualifying expense within a specific time period. Some companies offer long-term care and/or disability insurance or additional life insurance at a discount. Free or discounted psychological and other counseling services or legal aid are other possibilities. You might find that some education expenses are covered, like continuing education in your field or even tuition assistance for the children of employees. Industry-specific benefits are another potential perk. Be aware of discounts on products or services offered by your company.

Benefit plans can vary widely, so be sure to request information on the specifics of what is offered to you.

Good Places for Seniors to Get Financial Planning Advice

Seniors as much or more than anyone can benefit from assistance with their personal finances. With age can come a slowing down, a greater forgetfulness, and a general lowering of capacities in certain areas, including those relevant to making sound decisions about one's finances.

There are certain signs that one who cares about an elderly person-or a self-aware elderly person himself or herself-might spot that indicate a reason to consider seeking assistance with personal finance matters.

Are things being left undone? Unpaid bill notices, letters from the Internal Revenue Service (IRS), etc. could mean the person is having a problem keeping up with their financial responsibilities. It could be forgetfulness, a tendency to make mathematical errors, vision problems, physical difficulties writing checks, or other issues.

Is there evidence of financial scams? If a person receives way more than usual junk mail or telemarketing calls, it could be an indication they're on a "suckers" list because they've responded to such scams in the past. If a person has written checks to unrecognizable companies and individuals out of state or worse yet out of the country, if they speak favorably about supposed investment opportunities that earlier in their life they surely would have been wary of as too good to be true, there's a good chance their judgment is impaired and they're being taken.

Is there a new "friend" on the scene, a little too eager to "help" an elderly person with financial matters? Very few elderly folks are lucky enough to have an Anna Nicole Smith to enjoy for a few years in exchange for a chunk of their money-more often it's a garden variety con artist who's insinuated himself or herself into their life and gradually gained more and more influence over them and their financial affairs.

There are a number of steps that can be taken to safeguard an elderly person's personal finances.
Many processes can be automated, such as bill paying directly from one's bank account, or having Social Security and pension checks direct deposited. The "no-call" telemarketing list, caller ID, and a good e-mail junk mail filter are among the measures that can cut down on scam solicitations. If you care about an elderly person, you can stay on the alert about newcomers to their lives (or even less than scrupulous family members and such) who are showing just a little too much interest in their finances, and you can warn the person early before the newcomer fully has their hooks in them.
However, though of course an elderly person should be protected from turning their financial affairs over to a con artist, at the same time it may indeed be advisable for an elderly person to turn over some or all of their financial affairs to someone more appropriate as they become less able to handle them themselves. Or if not to turn over the actual decision making, at least to seek financial guidance and advice from someone knowledgeable about their situation.

One option is to rely on a family member or friend. This should only be done with great caution. The person relied on should have proven over the course of a long relationship to be trustworthy and to be knowledgeable and responsible about money matters. It should also be someone who will handle the affairs in as open as possible a manner, so that other friends and family members are always aware what's being done and thus can provide an additional safety check.

But depending on one's circumstances, the better option could be to hire an actual financial planner.
If you go this route, however, it's important to hire a reputable, licensed individual or firm. Don't respond to slick marketing from people calling themselves "financial planners" who may have no credentials and who may indeed have far greater skills at marketing than financial planning.
It is advisable instead to find a financial planner through a professional association or regulatory body. Good places to start are the Certified Financial Planner Board of Standards, Inc., the Financial Planning Association, and the National Association of Personal Financial Advisors.

Any of these can help connect an elderly person with an appropriate financial planner, rather than someone who will take advantage of them.

Personal Financial Planning: Excellent Tool for Individual Money Management

Personal financial planning is a part of managing your income according to your financial management. Nowadays, it is one of the most important aspects of any individual's life. Everyone positively thinks about personal financial planning directly or indirectly.

Personal financial planning is an instrument to carry out some principles of finance regarding money matters of an individual or family. It positively assists you in keeping all records of your earning, spending and saving. It requires a little sensible approach from your side to be successful in your money management. It will not happen overnight. Because individual financial planning is a continuous process. It has flexibility to change with time.

Personal financial planning is in contrast with hiring a financial advisor -- with personal financial planning, you do it yourself.

To be good in your financial management, you need to know basic information about it. Planing is the key factor of your financial management. It requires daily observation and reassessment of your income, spending and savings. Below are few points which can be useful for your financial planning.

1. Current financial position - Know your current financial position. Consider you're all income sources, spending and savings. This includes calculation of your income sources and expenses. Calculation of income sources includes your post tax income, spouse's income, investment income and any other. Calculation of expense includes spending on grocery, medical, laundry, house, lifestyle etc. Thus, you should consider fixed expenses which are house rent, children's fees, loan repayment, insurance premium, etc. It will assist you in drawing out an outline of your money management planning.
2. Setting financial goals - After reviewing your financial position, figure out your financial goals. Remember, you should draw out goals within your income limits. Your goals should be achievable. Consider how much you are going to earn in the period of completing your goals. This will aid you not to fix your financial goals blindly.
3. Action plan - Create an action plan to achieve your goals. Brainstorm possible ways which are suitable to your plan. While making an action plan, you should not neglect above two points. Make more than one action plans. Those should be drawn out with the help of your financial facts. Choose that action plan which will positively help to your success.
4. Plan implementation - Now it is working time on your action plan. You have selected the best plan which guarantees your maximum success. Be flexible about your plan. You may be required to make slightly changes if there is any necessary demand of time. Carefully made a plan should be carefully followed.
5. Progress observation - Keep daily observation on your plan's progress. Because, times and circumstances change. That time you may not be able to work on your action plan. Review your progress and do adjustment as well as changes. If the action plan is doing considerable progress you want, then go ahead with it.

Personal financial planing is an excellent tool to control on your financial life. However, it needs to bring it in reality with true commitment. Then you will get true results of personal financial planning.

Making Up for Gaps in My Financial Planning

I am behind when it comes to saving for retirement. Paying for my student loans in my 20s put me behind on saving for my children's college. According to a recent article by Manilla.com, there different stages of financial planning by age. At age 40-something, I've missed at least half of financial milestones I should have met. I don't think life is a competition to see who dies with the most money in the bank. Still, I would like to plan for my family's financial future, making up for many of the gaps in my financial planning through the years.

Working as soon as possible

One of the best things I did was start working at the age of 16 and never stop. I was able to pay part of the cost of my private college tuition, which reduced the amount of money I owed in student loans. I'm going to try to improve my financial situation by working until my full retirement age of 67 or even beyond. Unlike in my teens and 20s, I can save a portion of my earned income for retirement.

Staying out of credit card debt

According to the Manilla.com article, by age 25 a person should have good credit by establishing low-interest credit cards and making regular payments. I ran up credit cards in college, which left me with tens of thousands of dollars of consumer debt in my 20s. I can't turn back the hands of time, but I can stay out of debt by making micro payments on my credit card throughout the month with my online banking. Even if I only spent $7 on my credit card, I go online and transfer money from my checking to my credit card.

Contributing to my retirement

The article suggests people contribute to a 401(k) in their 30s if they have not started doing so already. I didn't have a full-time job in my 20s, but still contributed to a Roth IRA when it was introduced. I saved as much as I could to my 401(k) in my 30s, but made the mistake of taking out 401(k) loans. I'm hoping to make it up by making catch-up contributions when I become eligible to do so. My goal is to max out my Roth IRA each year.

Retiring in place

At age 70, the article recommends people downsize their home or move to a less expensive area. By paying down my mortgage in my 40s, I'll be able to retire in place in my Florida home. Most of the people I know who are struggling on a fixed income in retirement have to juggle the costs of their medications and food costs with mortgage payments. Without a mortgage, I'll be able to compensate for the nest egg I could have built in my 20s if I wasn't bogged down with student loan and credit card debt.

In a perfect world, people could save for retirement, their children's college and emergencies while simultaneously paying off their mortgages. In the real world, it's hard to stick to a financial planning timeline. I learned from my financial mistakes at earlier stages of my life, which I'm hoping will afford me a second chance at financial security if not prosperity and abundance.

5 Habits for Achieving Personal Financial Success

With the right spending and savings habits, it is possible to achieve personal financial success regardless of your income level. Careful planning and self-control are essential, and a few tried-and-true habits:

1. Pay yourself first. Financial gurus across the board say that, no matter what your income level, your first priority should always be to save a portion of every paycheck. 10% of your income is the recommended minimum, but if putting away this portion will leave you short on bills, then determine what you can afford to put away and commit to it. Whether you save five, ten, or fifteen percent, or just $50 from every paycheck, make sure you do this on-time, without fail. Make this money work for you by investing it in a high-yield savings account or certificates of deposit.

2. Set financial goals. One of the most important aspects of achieving financial success is goal-setting. Without financial goals, it will be pointless to make decisions on savings and investments, and to use your money to take you where you want to go. When setting financial goals, think about what you want in the short term and long term. Sit down (with a spouse/partner if you have one) and think about where you want to be financially in the next year, five years, ten years, and so on. What are you saving for? Retirement, a family vacation, buying a home, starting a small business? Write these goals down and keep them with your budget so you can periodically evaluate your progress towards achieving them.

3. Make and keep a budget. Only those who know exactly where their money goes will achieve financial success. Live within your means and keep detailed records of your expenditures, from rent/mortgage payments to snacks in the checkout line. Keeping these kinds of records will show you what your spending habits are, so that you can plug any leaks and be more responsible with your money. Budgets can be kept in a checkbook, a spreadsheet on your computer, a ledger, or even with budgeting software such as Quicken, PearBudget, or GnuCash.

4. Plan for emergencies. Anything can happen at any time, whether it be a layoff, medical emergencies, auto accidents, or natural disasters, and it's always better to be prepared than not. So you won't be forced to depend on credit cards, loans, or government assistance, stash away money in an emergency fund separate from your savings account. It should be at least three months' worth of income and go untouched unless it's an absolute emergency. You can start an emergency fund by saving as little as $10 from every paycheck and increase as you're able to.

5. Don't buy on impulse. Impulse buying is the quickest way to blow your budget. If you aren't able to control what you spend, you will remain in debt and not achieve financial success. For grocery and household shopping, make a list and stick to it. Don't be tempted to grab extra or pick up something else because it's on sale. If you really need it, you can go back for it. Don't keep cash - bills, credit/debit cards, or checks - with you during the day so you aren't tempted to spend on unnecessary items. Plan for every expenditure, even the little things. Don't browse for the sake of it - buy what you need and leave the store.

You can achieve financial success with the right habits. There are no hard rules and your situation and abilities may change over time, but always keep these paradigms in mind to live with financial freedom.

Finding Inspiration in Your Personal Finances

Finding inspiration in your personal finances these days might seem like searching for a needle in a haystack. You can read all the articles you want to about what others do to motivate and inspire themselves when it comes to money management, but really, it all comes down to finding what truly works for you. Without that proper motivation, you might just feel like there's no reason to start saving in the first place.

If lack of willpower or just lack of interest is what's currently holding you back from getting a firm grip on your personal finances, here are a few tips that might help you take that first step toward organizing your finances.

Goals

Setting goals can be a great way to motivate yourself to rein in your spending and begin organizing your personal finances. Whether they are big or small, short term or long term, goals can act as guides to assist you in building or modifying your personal financial situation. Goals can be as small as building a $500 emergency fund in the next several months or as large as creating a million dollar retirement portfolio.

One of the most important things to remember when it comes to goals however, is that goals often work much better when they mean something to you and are achievable. This is why it is important to realize that when reading articles regarding personal finance, you might want to take what the author has to say with a grain of salt. Since each of us has his or her unique financial situation, goals and their associated effects can vary widely. A $500 emergency to one person might seem like a lot, while that same amount to another might be insignificant and provide little or no inspiration.

Financial Planning

Setting goals to achieve with your personal finances is one thing, but actually planning out routes to reach those goals is another. It's easy to say that you want to build a million dollar retirement fund, but how exactly do you plan to do that? It's much the same, although on a much smaller scale, with building a $500 emergency fund. Goals without plans are like cars without gas -- they may be pretty to look at but probably won't do you much good in getting where you need to go. To build that emergency fund, are you going to stick $20 bucks a week into a jar on your dresser, pull $100 from your paycheck for the next two months or are you going to yank the band-aid off all at once and just stick $500 bucks in your savings account? Having a plan can make your financial goals easier to achieve and with attainable goals often comes the inspiration to fulfill your personal financial dreams.

Step-by-step

Still, even by setting goals and with steady preparation and planning, it might take some time to ease into organizing your personal finances. You likely won't want to step headlong into the fray without some careful consideration. Jumping the gun could leave you disoriented, unmotivated, and unwilling to continue working toward your goals. Easing into the re-organization or creation of your personal finances can make the transition easier and more successful. While you may be excited to get started working toward your financial goals, moving too quickly can lead to missed details, lack of planning, poor investment or savings choices, and frustration when you find you aren't moving as quickly or successfully as you had hoped. As the saying goes, "You must learn to walk before you learn to run".

Finding That 'Warm and Fuzzy' Feeling

Finally, it is important that when looking for inspiration within your personal finances that you find aspects of your money and investment strategy that appeal to you and make you feel good about your financial decisions. Whether investments vehicles such as savings accounts and savings bonds make you feel safe and secure or the stock market provides a sense of excitement and intrigue, finding inspiration in your personal finances often hinges on finding enjoyment in and being comfortable with the investment decisions you make.

Disclaimer:

The author is not a licensed financial professional. The information provided in this article is for informational purposes only and does not constitute legal or financial advice. For financial advice, readers should consult a licensed financial advisor. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.

Using Financial Planning to Reach Retirement Goals

Today's economy requires careful financial planning in order to achieve retirement goals. The weakened economy and increased cost of living has left most people with less money to contribute for their future. However, strategies exist to help Americans build personal wealth and save for their golden years.

Many misconceptions surround financial planning. People often believe creating a financial plan is reserved for the wealthy. Others believe they do not have sufficient income to save for the future. Some believe financial planning is too difficult and requires the services of a professional financial planner. These false beliefs prevent people from reaching their financial goals and oftentimes leave them living paycheck to paycheck.

The truth of the matter is financial planning is available to anyone, regardless of income. With determination and a commitment to trim expenses, most people can save at least $50 per month. Over the course of time, minimal savings can add up to a substantial nest egg.

Several options exist to help individuals engage in financial planning. A good place to start is opening a high yield savings account. Another is to purchase a few stocks and bonds or mutual funds. As savings grow, many people turn to real estate investing and buy houses for use as rental properties.
Individuals living on a tight budget should take time to review expenses and determine where to cut costs. Financial expert, Suze Orman, recommends paying yourself first. This is the opposite of what most people are taught, but if you want to get ahead in life you must learn how to effectively budget money and set aside funds for the future.

Most Americans have more money than they realize, but waste it purchasing items they don't need. One of the most effective ways to determine how much money is being wasted is to track expenses daily for a month. Most people are astounded to discover how quickly little items such as morning lattes and fast food lunches eat up their household budget. The average American can easily save $100 per month by budgeting finances and avoiding impulse buys.

One of the most trusted sources for obtaining accurate budgeting information and financial planning tools is Dave Ramsey. Ramsey is known for his no-nonsense approach to overcoming debt and achieving financial freedom regardless of income. His infamous Gazelle Budget™ Lite online budgeting software helps consumers develop a financial plan based on a zero-budget.
Ramsey's website provides visitors with a wealth of financial planning articles, budgeting forms, personal finance and money management books, investing guides, financial classes, and personal wealth coaching from Ramsey's Financial Peace University. Visitors can participate in Ramsey's community forum at DaveRamsey.com to learn and share financial planning strategies.
Another good source for learning financial strategies is certified financial planners. These professionals can help individuals achieve long- and short-term investment goals. They are trained to help consumers recognize destructive spending habits and learn how to implement strategies to get out of debt through the development of solid financial plans.

One of the best places to locate professional financial planners is through the Financial Planning Association website at FPAforFinancialPlanning.org. FPA provides a variety of financial tools to help educate consumers about retirement planning, estate planning probate, saving for college education and buying a home.

It is never too early or too late to begin financial planning. In fact, the sooner you start, the easier it is to build wealth. Begin your wealth-building journey by taking time to conduct research and determine which type of investments will help you reach your goals. Then, create an action plan and make a commitment to stick to it!