Over the course of the past couple weeks, I’ve come across some interesting topics that I’d like to share and discuss:
Time to Give Your 401(k) a Checkup (by Penelope Wong, Consumer Reports)
One important change to the retirement account landscape was that the 401k contribution increased for all eligible employees to $19k. While not earth-shattering, if you want to maximize your retirement account you should probably revisit your contribution level. You probably have it set to save a certain percentage of your income, and maybe you haven’t adjusted it for years. Now would be a good time to examine that, or you may fall risk to saving less than you are allowed to.
Another thing to consider when looking at your 401k is the current investment allocation. Fund balances change over time, as does your age (and maybe risk tolerance), so pay attention to the risk you are taking and adjust accordingly. There may even be some new fund choices that have been added which you hadn’t considered previously.
One other thing I like to look for are the opportunities to add to the Roth – either within the plan itself, or using the plan rules to execute a backdoor Roth strategy. 401k plans are moving more to allowing Roth as an option, in addition to the tried-and-true pre-tax contributions. And a whole new realm of strategy may become available if there is an “after-tax” 401k option. Talk to a retirement plan specialist (like yours truly) about the possibilities in your plan!
4 Ways to Track Your Net Worth in 2019 (by Deacon Hayes, Well Kept Wallet)
I recently posted about some concrete ways to get your financial house in order, and establishing a plan is part of that. But within the “plan” is a critical component – calculating your net worth. I bet that if I asked you what your net worth is, your response would be “what is net worth” or “how do I calculate that”? Since I consider this to be a measure of your financial health, I would not only figure out what it is and how to calculate it – but start tracking it ASAP!
In short, net worth is everything you own minus everything that you owe. In other words, if you died today and everything was liquidated and paid off…your net worth is the value of what is left.
This article provides some helpful tools to help you track it. There are some good websites out there available for use, and I also use one not listed that I invite my clients to (only available through professional advisors). If you are an excel spreadsheet person – you can tackle it that way too. No matter your preference for tracking it, go through the exercise and track everything you own and everything you owe. Use this as a starting point, and track it yearly at a minimum. You might find yourself inspired to move that number higher each and every year.
In the end, you won’t know how to get where you are going unless you know where you are at. So assess your current situation, track your net worth, and set goals for where you would like that number to be at various points in the future.
Why We Give (by Lauren Greutman, www.laurengreutman.com)
Think you are charitable? Ha. Me too! Well, that was until I listened to a recent podcast based around giving. The guest on this personal finance podcast was talking about her annual habit of giving 10% of her disposable income to charitable causes. It was educational and inspiring, but I’ve got to believe that in practice this is hard for most people to achieve. I wanted to share some thoughts here, maybe it will get your wheels churning. But have in your mind: what percentage of your income do you give away each year?
First, a couple of points. One, you don’t have to be “rich” to give. Anyone can qualify. Second, it’s not about the dollar figure you give, it’s all about percentages. Third, there are some religious requirements that preach giving back 10% to the church and what-have-you, but this is not a religious endeavor. Finally, giving 10% away may be a lot for most people – so feel free to use a smaller percentage, such as 5% or 1%. Are you giving 1% of your money away now? Let’s crunch some numbers, and tell me if you think it’s do-able.
Using an example of a household that makes $120k a year, giving 1% of gross income away implies $1,200 a year. Seems like a huge number, but it’s “only” 1% of your income. An alternative way to look at this is using 1% of your “disposable” income, in other words whatever is left after paying for basic necessities (food & housing) but before you spend on your own lifestyle (entertainment & travel). So maybe after taxes, this $120k income household spends half of that on mortgage payments, utilities, and groceries. Of the $60k left, you’ve determined that you want to give 1% of that – or $600 a year ($50/month). Does that sound achievable?
How to give? Whether $50 is a lot or a little, this still requires some thought in advance. Are you going to hand a homeless person a NutriGrain bar and some change on the way to work every day? Are you going to write a $50 check each month to different charities, or make an auto-payment to the same charity each month? Perhaps you want to randomly give to some of your friends Susan Koman walks, or bike rides for autism, and keep a tally of giving over time?
The point is you should really have a plan for giving, if you really want to do what you say you are going to do.
The unanswered question here is WHY. Why give? The link above gives some nice talking points, and is worth reading because you are probably thinking “I can’t afford to give”, or something similar. Just remember that no matter how tough a situation you are in now, it could always be worse. And there are people out there much less fortunate than you who can really use some help. You may not cure cancer nor feed every person on the planet, but your generosity will stretch much further in other situations. Studies have also proven that giving has psychological benefits as well. People feel good giving and it’s linked to increased overall happiness! And as the old adage goes “what goes around, comes around”!
One other reason to give – it helps you focus on spending money on things that you truly value. Do you really need that expensive steak dinner? That extra 5 inches of TV screen? The monthly car detail? Or could you make adjustments in your life, and really make in impact in someone else’s?
I hope you enjoyed the reading!