The “Sandwich Generation” and the Changing Family Dynamic

The “Sandwich Generation” is becoming a more commonly used term as more and more individuals begin caring for not only their aging parents, but their children as well, all the while planning for their own personal retirement.  According to an April 2010 Merrill Lynch Affluent Insights Quarterly survey, more than one-third of affluent Americans financially support their children and parents while trying to maintain and build upon what they have set aside for retirement.  According to the Pew Research Center, 1 of every 8 Americans aged 40 to 60 is both raising a child and caring for a parent, in addition to between 7 to 10 million adults caring for their aging parents from a long distance.  The US Census Bureau statistics indicate that the number of older Americans aged 65 or older will double by the year 2030, to over 70 million.

With the complex equation of most individuals within the sandwich generation being baby boomers, added to the intricate family dynamics, financial advisors are finding themselves advising over three generations.  What is the family dynamic like?  Many boomers work full time jobs while raising a family or supporting children in college, in addition to serving as the primary caregiver to one or both parents.  How do these families cope with the changing dynamic?  Most consider trade-offs, such as significantly cutting back on personal luxuries, making lifestyle sacrifices to support their family’s needs, and even cutting back on their own personal retirement.

So, what kind of help can advisors give to those facing the pending or already existent sandwich generation?  First and foremost, ease the stress of competing demands by identifying core values and priorities to find balance in life.  Always keep open lines of communication – of course it’s difficult to discuss the financial impact of diminishing health and the eventual loss of a loved one, but putting off that conversation can leave you unprepared for the consequences.  Implementing a plan of affairs for aging parents can off-set the negative consequences of a life-changing event.  Be sure to know where your family members keep important financial and medical documents, as well as the contact information of doctors, lawyers and advisors.  Always know the type of long term care, and how much it will cost.

When it comes to financing children’s education, only 12% of the sandwich generation said they were cutting back on contributions.  What’s the biggest tip for parents?  Start saving early.  Teach your children early on the skills necessary to embrace financial independence, budgeting, and the importance of credit and planning for retirement.  You can even bring your kids with you to an advisor meeting to discuss all these great education finance tips.

I’m sure you’re thinking: but what about me?  Get with an advisor and review your investment strategy, as well as home financing, asset allocation, insurance, securities, your portfolio, and your general retirement strategy in general.  This way, advisors can help shift financial securities based on the family’s specific dynamic.  According to the survey, 54% of the members of the sandwich generation work with an adviser, and among them, 32% wish that they had started working with one sooner.  Among the remaining 46% who don’t work with an adviser, 83% think that they would benefit from such a relationship.


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Solutions to Your Biggest Money Problems

No two individuals have the same financial woes.  Not only do financial situations vary in income, debt, spending and saving habits, but they also vary in the perspectives of those individuals and how they rank their specific money problems.  After researching a few polls on the most popular money problems, we’ve created a list of what financial issues most individuals worry about the most and what you can do about it.

I spend too much.  Without a doubt, the most worrisome financial problem people dwell over is the act of spending too much money, but why?  While credit cards play a big factor in their ease and accessibility of use, scientists have actually proven that spending money makes us happy.  Surprise?  Probably not.  Much like chocolate cake or kissing a loved one, the idea of spending money can release a feel-good chemical in our brains called dopamine.  Overspending can also stem from poor planning or lack of time.  So, how do you stop spending?  It’s not easy but doing things like changing your daily habits, only having one credit card and using more cash, unsubscribing from catalogs and finding other inexpensive ways to be happy will help you curb your spending problems.

I save too little.  You’re not alone!  According to the U.S. Department of Commerce, the average American household saves 0.4 percent of its disposable income, down from 2.4 percent in 1999. Some blame low interest rates; if you’re making very little in your savings account you have less incentive save.  Others blame spending too much.  It’s obvious – when you spend too much you can’t save what you should.  One nice way to make yourself save is to detail out a clear goal.  Additionally, you can set up automatic deductions from your paycheck, open a 401(k), and start an immediate savings account.

Gas prices are absurd.  Energy prices, in general, are on the rise, but gas prices specifically are up one-third in the past year.  And with our economy depending heavily on other world markets, it is clear that gas prices are not going to drop any time soon.  There are several alternatives to driving, like taking metro transit, walking, biking and carpooling.  But if you must drive, check out the cheapest gas prices online, remove heavy junk from your car, and be sure to check the oil, air filter and tire pressure on a regular basis.  If you can, investing in energy efficient will save you money in the long run.

I’m not sure how much to save for retirement.  The standard number for your retirement planning is 15% of your income each year.  However, each person’s financial picture is different, and there are many variables that need to be factored in.  You can either contact a retirement specialist, or check out the countless online calculators that will do the math for you.  Some tips for retirement planning include 401(k)’s, IRA’s, pension plans, investments and annuities.

I need a budget.  Are you constantly finding yourself out of cash?  Is your monthly cash cycle consistently inconsistent?  A budget is simply a plan on how to appropriately spend your money.  In order for it to work, though, you must realistic and stick to your plan.  Budgets are relatively easy to calculate.  Simply sit down and create a map of your monthly spending and saving habits.  Follow it accordingly and revisit it at the end of the month to determine what’s worked and what hasn’t.  Another tip is to sign up for an online money-tracking program.  You can even link your bank accounts and bills for deductions itemizations.

I need a financial plan.  Wait, didn’t we just talk about budgets?  A financial plan is much broader than a budget.  It’s a track to help you achieve those big things in life, like a house, vacation home or your child’s education.  It encompasses your savings, investments and even your insurance.  Creating a financial plan is much more complex than creating a budget.  Do some research and hire a financial planner.  The peace of mind in knowing your financial future is secure and protected is worth the time and effort in hiring and educator to coach you through your big life decisions.


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3 Simple Steps to Create a Seriously Savvy Budget

No, budgets are not attractive, fun or exciting in any way shape or form.  They are, however, the necessary evil that can assist in getting you and your family’s spending and saving habits back on track.  It’s difficult to understand why more individuals don’t already adhere to a budget, what with the economic crisis and unemployment still looming above us.  It would seem that the majority of individuals without a budget either don’t think they need one, are unaware of its benefits, or simply don’t like discussing or even thinking about their financial situation.  The unfortunate part about that last point is the fact that implementing a personal or family budget can help dig those individuals out of the financial holes they’ve already put themselves in.  And the best part?  It’s ridiculously easy to do.  From writing everything down on your own to downloading or purchasing budget software, technology has made it extremely simple to execute.

The first step in creating a budget (and all these tips go for individuals to families alike) is gathering every financial statement you can find.  Examples include bank statements, credit card statements, investment accounts, utility bills, and income information.  The idea is to gather any piece of information regarding an expense or income for you or your family in order to process the information into a monthly average.  Record all your sources of income – any type of cash flow that’s coming to you needs to be recorded.  Next, create a list of monthly expenses.  Examples include the mortgage payment, car payments, auto insurance, groceries, utilities, entertainment, dry cleaning, auto insurance, retirement or college savings – essentially everything you spend money on (even that daily latte from Starbucks!).

After you’ve created your list of expenses, you’ll want to break it up into two different categories – fixed and variable.  Fixed expenses are those that stay relatively the same each month and are essential parts of your way of living.  Examples of fixed expenses include your mortgage or rent, car payments, cable and/or internet service, trash pickup, credit card payments and so on.  For the most part, these expenses are essential yet not likely to change in the budget.  Variable expenses are those that will change from month to month and include items such as groceries, gasoline, entertainment, eating out and gifts, for example.  This category will be important when making adjustments.

The last steps include totaling both lists of expenses and income.  This is where you’ll need to make adjustments and determine what types of changes you’ll want to make to your spending and saving.  If your end result shows that your income outweighs your expenses, you can start prioritizing the excess to areas of your budget such as retirement savings or paying more on credit cards to eliminate that debt faster.  If you are in a situation where expenses are higher than income you should look at your variable expenses to find areas to cut.  Since these expenses are typically adjustable, it should be easy to shave a few dollars in a few areas to bring you closer to your income.  Once you’ve made your adjustments and have a reasonable budget to stick to, make sure you review it regularly to determine whether you are staying on track and all your numbers are up-to-date.

In addition to the steps I’ve mapped out, I’ve also put together a list of snapshot tips to help you in your budget creation and execution:

  • Be honest!
  • Track your spending to make sure it stays within your guidelines.
  • Use software to save grief – personal finance programs have built-in budget-making tools that can create your budget for you.
  • Don’t drive yourself crazy, or stop buying groceries!  Monitoring your spending can sometimes lead to overly-attentive detail – don’t go overboard.
  • Monitor your cash flow – it’s much more difficult to track where your cash is going, so keep those ATM receipts and watch your cash flow with more scrutiny.
  • Beware of expenses that may seem fixed – do you really need that $50 bottle of wine?
  • Aim to save at least 10% of your income for your future, such as investments and retirement planning.

Budgets aren’t easy to create, let alone stick to, but they are essential in getting a grip on your financial situation.  Looking over this list of tips, I’m sure you’re thinking, “okay, easy enough.”  But it’s not.  It takes time, effort and active dedication to continually be aware of your saving and spending habits.  The best part?  You won’t regret it; it is guaranteed to pay off in the end. Think of your personal budget like your map and journey to financial peace of mind.

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How Is Your Financial Adviser Paid?

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Why should you care how your adviser is paid? Because his/her compensation can impact the choice of the products recommended to you and your return from those products. Moreover, the adviser’s compensation structure can create a conflict of interest between what is best for you the client and what is best for the adviser’s wallet.

While there are many fine financial advisers who receive all or part of their compensation from the sale of financial products, a client can never be fully sure that the adviser’s recommendations are fully made with the client’s best interests at heart. Will the adviser suggest a mutual fund that does not pay a commission even if that fund is the best one for the client?

Fee-only advisers do not have this conflict of interest because they are paid by the client, not the financial product provider. They are free to suggest the best investment vehicles and financial products for each client’s individual situation. Full disclosure: I am a fee-only adviser, and I absolutely feel this is the best compensation method for clients.

When selecting a financial adviser, be sure to understand how he or she will be paid from working with you. Compensation structure should clearly not be the only metric used when choosing an adviser. There are many questions to ask a perspective adviser. Most of all, be sure that the person that you choose to work with is competent and that he or she fully understands your situation, your goals, and your expectations from the relationship.

Conflicts of interest when dealing with a financial adviser can be minimized. Fees and risk level are two thing an investor can control. Working with a fee only adviser can help control both.

Please comment or call to discuss how this affects you and your financial future.

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89% of 401(k) Investors Want Allocation Help

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The other 11% do not want to admit that a professionally managed portfolio is really what they want. Many believe they can substitute stock trading for a disciplined savings strategy. This strategy is ok for spare funds but is imprudent for a retirement plan.

Eighty-nine percent of the 2,600 401(k) investors surveyed would like help with asset allocation, 84% want solutions for calculating and creating retirement income, and 79% would like an annual financialcheckup to set and measure their progress. Less than half, 48%, feel that they are in consult of their retirement plan investments.“Most Americans are busy with their jobs, their families and their personal pursuits, and say that they don’t have the time or interest to become experts in retirement planning,” said Lynne Ford, CEO of ING Individual Retirement. “The results from our study were clear: Americans want a roadmap to help them navigate to and through retirement.”

Ford added: “As a whole, consumers highly value choice, yet too much can be overwhelming. Consumers also value the control to make their own retirement-planning decisions but want detailed instructions on how to accomplish their financial objectives.”

There is a clear advantage to offering a negative election to professionally managed accounts rather than a positive election.

Please comment or call to discuss how this would affect you and your employees.

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Tune Out Negative News, Consumer Advocate Says

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Treat your 401(k) plan like people who have pension funds and forget it. Make your contributions every pay period and believe free markets work. Remember your retirement account is like a bar of soap the more you touch it the smaller it gets. You should allow professionals to manage your account and take emotions out of the picture.

“Our national problem is really a lack of confidence and certainty,” Blayney said. “We are becoming fixated on negative information, and it’s clouding our judgment about the future. People have stopped spending on critical goods meant to replace old or worn-out products—spending that is crucial to an economic recovery.”Indeed, in an economic outlook report this week, Mark Luschini, chief investment strategist at Janney Montgomery Scott, said that consumer spending is one-third of what it was before the financial crisis hit in 2008.

Thus, Blayney spells out eight steps that investors can take to improve their outlook and take control of their financial future, starting with:

Disconnecting from the negativity. Unplug the TV and turn off the news. “Just because you’ve heard the negative news about economic growth four times from different sources does not mean that it is four times as bad,” Blayney said.

Start from a new foundation. Accept the current value of your home, your 401(k), your savings and your brokerage accounts—and start from there to build a fresh start, Blayney said. “It is much easier to remain confident if you see yourself making a fresh start toward building your financial security, rather than waiting for the good times to return.”

Weather-proof your portfolio by revisiting your risk tolerance. Blayney recommends a well-diversified portfolio centered around high-quality investments.

Live within your means. That means saving money. Immediately, that will improve your outlook, Blayney says.

Educate a child. “Just spending time with a child—observing their energy, curiosity, sense of wonder and imagination—inspires hope for a better future,” she says.

Learn a new skill. Take a class, read a book, explore a new place, focus on boosting your career.

Be charitable. Make a contribution to someone less fortunate. If you don’t have the money, give your time. “The sense of connection to others, and being able to help, usually puts our own financial difficulties in perspective,” Blayney says.

Draw up a financial plan—ideally with a professional.

“It’s not a matter of whistling in the economic dark, but actually taking concrete steps to illuminate the course forward,” Blayney says. “Confidence that you are on the right path is the first, most important step toward financial security.”

Great message.

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