managing your family’s finances - midwestone bank€¦ · managing family finances can be a...

Managing your

MidWestOne.com/FinancialResources

family’s finances

®

Member FDIC

FINANCIAL RESOURCES

FINANCIAL RESOURCES

ADVICE FOR YOUR STAGE IN LIFE.

Managing family finances can be a juggling act that is often confusing and overwhelming.

Is it better to pay down debts, or save for college? Is now the time to refinance a home? What’s the best way to plan for retirement?

In this booklet you’ll find a collection of our favorite family money management articles from the Hands On Financial Advice website. These simple and actionable articles are designed to help you make more informed decisions about your family’s finances.

Happy reading!

Managing your family’s f inances

Member FDICMidWestOne.com/FinancialResources

FINANCIAL RESOURCES


Member FDIC

How to select a financial planner

How to set a budget for your family and stick to it

5 common budget busters and how to overcome them

6 tips for college savings

College prep – have you studied up on 529 plans

How to save money on back-to-school shopping

Are you financially prepared for the unexpected

Pay off debt now, or save for the future

Does it make sense to refinance your home

Midlife investing – make the most of your asset-building years

Table of contents3

4

5

6

7

8

9

11

12

13

MidWestOne.com/FinancialResources

FINANCIAL RESOURCES


Working with a financial planner can be a helpful step in securing your financial future.

This is especially true because the financial world can quickly become overwhelming – especially for individuals who don’t work in the financial sector and aren’t familiar with some of the complexities. Why not take the help from someone who has the expertise needed to tackle those challenges?

We’ve put together a checklist of important things you should consider before selecting the financial planner that’s right for you:

Determine your financial goals. Before you meet with a potential financial planner it’s important to determine what your financial goals are. Are you trying to find the best life insurance for you and your family? Are you saving for a new home? Do you want to take your dream vacation? Identifying your specific goals will help your financial planner better help you.

Ask your friends and family. Use your networks of friends, family and acquaintances to get suggestions on who they recommend for financial planners. Have they had good experiences with certain individuals?

Do your homework. Another important step in finding the right financial planner is to ensure they are properly licensed. Do they have the advisor designation? Are they recognized as a CERTIFIED FINANCIAL PLANNER™ professional or CFP® practitioner, a Certified Public Accountant-Personal Financial Specialist (CPA-PFS), or a Chartered Financial Consultant (ChFC). Look for a planner who has proven experience in financial planning topics such as insurance, tax planning, investments, estate planning or retirement planning. It’s also a good idea to determine what steps the planner takes to stay current with changes and developments in the financial planning field.

Ask about their “typical” clients. When you meet with a potential financial advisor ask them about the “average” client they work with. Do they tend to work with higher incomes? Or do they have clients with more of an average income?

This will give you a good idea of who you are working with. Needs vary based on income, so you will want to make sure they work with individuals who are in the same income-range as you are.

Consider how the planner will be paid. There are many different ways financial planners can get paid. Some earn commissions, others are fee-based, and others charge an hourly rate. There are advantages and disadvantages to all three.

A planner who earns money based on commission rather than a flat, hourly rate may have less altruistic incentives for certain recommendations. On the other hand, advisors who are earning a certain percentage of your annual assets might be less inclined to recommend you liquidate your investments or buy a new home, even if that might be the right move for you at that time. Hourly planners are best when your needs are fairly simple. Typically, hourly planners are just starting to build their practice.

Ask the tough questions. Take the time to interview the planner before you begin working together. Here are some questions I recommend:

Are you a financial planner on the side, or is this your full-time career?

Does anyone beside me benefit from the recommendations you make?

What is your background? How long have you been doing this?

What is your approach to financial planning?

Make sure they look at the big picture. Financial planners should pull together all of your financial information so they can put the best plan in place for your unique situation. If they just look at one element – like an inheritance – you’re not getting as much value out of their service as you should be. Make sure they look at the aggregate financial picture – from assets to obligations and long and short-term goals.

How to select a financial planner

MidWestOne.com/FinancialResources | 3 Member FDIC

FINANCIAL RESOURCES


Managing money isn’t always easy – especially when you have a family and it doesn’t seem like there’s enough money to go around. The mortgage, bills, groceries, insurances payments and gas can all make it seem like your hard-earned money has vanished into thin air.

That’s where a family budget can be a lifesaver.

A budget allows you to better see where your money is going – and where it needs to go. By controlling your family spending you will be able to save more effectively for vacations, retirement and your children’s education.

When setting up your household budget, you should keep the following things in mind:

• Analyze your three most recent bank statements to determine what you have been spending money on. Try to group together expenditures into overarching categories, such as groceries, gas, entertainment, utilities, child care, etc.

• Determine what your monthly fixed living expenses are. Fixed living expenses include rent or mortgage, utilities, phone, car payments, insurance and any loan payments you may have. These are expenditures that will remain the same on a month-to-month basis.

• Do a similar analysis for your income. Take into account your paychecks, bonuses, interest income and tax refunds.

• Compare total income to total expenses. The most important thing to keep in mind when you’re developing a budget is to make sure your income is greater than your expenses. The more you can lower expenses the more you’ll be able to save.

• Evaluate your expenses and develop a budget for each category.

• Set up a savings plan, such as a certificate of deposit, IRA or savings account, and begin making regular deposits.

• Develop a system to track your monthly expenses. This will help you evaluate if your plan is working and allow you to fine-tune it, if needed. There are many tools available online for these purposes, both free and for a fee.

• Identify opportunities to save and develop a plan to cut back spending in specific categories.

Once you’ve established a family budget, don’t allow yourself to slack off. Implement strategies that will help you stick to the budget. Some of our favorites include:

• When you’re making a purchase, stop yourself and determine whether it’s a need or a want. Analyzing your purchases in this manner will help you cut down on unnecessary spending.

• Instead of using a credit or debit card when you’re purchasing groceries (or other items within a category) force yourself to pay with cash instead. This will force you to stick to your monthly budget since you won’t be able to pay for additional items once you reach your limit.

• Establish a purchase limit with your partner for discretionary expenses at which a joint decision has to be made before the item is purchased. For example, if your purchase limit is $200, you would have to consult with your partner on any purchase above $200. This will help curb impulse spending and force you to consciously determine whether the item is truly a need versus a want.

How to set a budget for your family and stick to it


FINANCIAL RESOURCES


Many families make sincere attempts to set a household budget to more successfully manage their personal finances. Unfortunately, often times these attempts fail.

If you feel like there’s always something that ruins your budget, you may be making one or more of these common budget busting mistakes:

Budget buster #1: You fail to plan for an emergency.In most instances, it’s the unexpected expenses that break a family budget. Financial emergencies can come in the form of a job loss, significant medical expenses, home or auto repairs or something you’ve never dreamed of. Having an emergency fund will help you weather these challenges. Make it a goal to build up cash reserves to cover between 3 and 6 months’ worth of living expenses for your emergency fund.

Budget buster #2: You fail to recognize your spending habits. Have you ever bought a pair of shoes to make yourself feel better? Many people shop as a hobby or spend money when they are feeling depressed or lonely. This is a sure-fire way to ruin your budget. If you find yourself spending money to meet some kind of other need, force yourself to pause before every purchase to determine whether you are buying the item out of need or another reason.

Budget buster #3: You fail to be a conscious consumer. It’s the little things that can often pile up and cause a lot of damage to your budget. For example – if you’re not aware of your cell phone provider’s rules for overage charges, you may have to end up paying a hefty fee. Take the time to truly understand the financial products you use, including your credit cards, bank products, retirement plan and others. Also, become a more conscious consumer – for example, if you’re purchasing an item that’s on sale, pay attention at the cash register to make sure you’re actually getting charged the sale price.

Budget buster #4: You fail to recognize your monthly expenditures. Most people can tell you how much their rent or mortgage is, and perhaps even their insurance costs, but they have no idea how much they are spending on groceries or utilities every month. Often times, money slips out of our fingers without us even noticing where it went. Track your monthly expenditures so you have a better handle on them and can set aside money for them. If your income won’t cover your monthly expenses, then it’s time to figure out how to decrease your expenses and increase your income.

Budget buster #5: You fail to take action. When it comes to money management, it’s critical that you don’t avoid addressing the situation you’re in. This is particularly important when you are dealing with debt or other major expenses. Frequently, people will feel ashamed of their situation and choose to simply ignore it. This will only make matters worse. If you are faced with a money issue, take action immediately. This will allow you to take control of the situation instead of letting the situation control you…and your budget.

Although sticking to a budget can be challenging at times, it’s an important tool for your family’s finances. A budget allows you to better see where your money is going – and where it needs to go. Most importantly – it will allow you to live your life the way you want and it will help you get there at lot faster!

5 common budget busters and how to overcome them

MidWestOne.com/FinancialResources | 5

Mike Roozeboom is a LPL Financial Advisor for MidWestOne Investment Services. He specializes in investments and retirement planning. Securities offered through LPL

Financial, Member FINRA/SIPC. Insurance products offered through LPL Financial or its licensed affiliates. MidWestOne Bank and MidWestOne Investment Services are not

registered broker/dealers and are not affiliated with LPL Financial.

Not FDIC Insured No Bank Guarantee May Lose Value

Not a Deposit Not Insured by any Federal Government Agency

Member FDIC

HandsOnAdvice.com | 6

FINANCIAL RESOURCES


Saving for your children’s college education can be a daunting and challenging prospect. After all – kids grow up fast, and college is expensive.

Your children’s college tuition could be one of the largest expenditures you ever make. And, if you have more than one child, the commitment is even greater.

Fortunately, families who want to save for future college expenses now have more options than ever before. You can choose from traditional investment options such as savings accounts, taxable investment accounts, annuities and bonds and powerful new tools, such as Section 529 college savings programs and education savings accounts.

One of the first steps to successful college savings is to create a plan. Here are a few tips to get you started:

1. Don’t wait too long to get started. Given a choice, it is better to start saving for college when your child is five instead of 18. Try and think about it this way: Every dollar you save could mean one less dollar you have to borrow. This will save you additional money in interest payments.

2. Take a good look at your budget. If you don’t have a budget yet, now’s the time to start. A budget will show you how much you are currently spending and how much you can carve out for savings based on that.

3. Establish a system for saving that is automatic.Instead of waiting for a time when you have “a little more money,” an automatic system will help you stay consistent and amass more savings. Talk to your financial professional about how to have money automatically deducted and deposited into a college savings account.

4. Set up a 529 state-sponsored savings plan, Coverdell ESA or other similar savings account. These types of plans offer attractive potential for federal tax-deferred earnings growth and federal tax-free qualified withdrawals. With a 529 plan, for example, you can contribute up to $13,000 (or $26,000 if you and your spouse give and file jointly) each year without owing federal gift taxes, provided you haven’t made other financial gifts to the plan beneficiary in the same year. In addition, you can elect to make a lump-sum contribution of up to $65,000 ($130,000 for married couples filing jointly) in the first year of a five-year period, provided you don’t give the beneficiary additional taxable gifts during the five-year period. These types of plans also make it very easy for grandparents or other supportive family members to contribute to savings.*

5. Save the “extras.” When you or your partner receive an unexpected bonus, commission or tax refund, make it a habit to put it toward your children’s college education.

6. Encourage your child to take Advanced Placement (AP) tests while they are in high school.When your student takes and scores high enough on an AP test they can get college credit for free. Meet with your high school advisors to learn more about this option.

You’ll be most successful saving money for your children’s college education if you take a proactive approach. Nonetheless, this doesn’t mean it will happen magically. Saving for your child’s education means making sacrifices. Whether it’s putting off a purchase or living more frugally, you and your family will need to make sacrifices along the way.

6 tips for college savings


*Prior to investing investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other benefits that are only available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax-free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any

individual. To determine which investment(s) may be appropriate to you, consult your financial advisor prior to investing. Securities and Insurance products offered through LPL Financial and its affiliates member FINRA/SIPC. MidWestOne Bank is not a registered broker/dealer and is not affiliated with LPL Financial.



Member FDIC


FINANCIAL RESOURCES


Millions of families turn to 529 college savings plans to strive to meet the mounting costs of college.

For most investors, the plans’ main attractions are the potential for federal tax-deferred earnings growth and federal tax-free qualified withdrawals.1 The plans’ aggregate asset limits, which often exceed $200,000, also appeal to many concerned about the potential for a six-figure price tag on a four-year degree.

But a closer look at the rules governing 529 plans reveal other attractive reasons to consider this investment tool in your child’s or grandchild’s future. Benefits include:

Avoid federal gift taxes and accelerate giving — You can contribute up to $13,000 (or $26,000 if you and your spouse give and file jointly) to a 529 plan each year without owing federal gift taxes, provided you haven’t made other financial gifts to the plan beneficiary in the same year. In addition, you can elect to make a lump-sum contribution of up to $65,000 ($130,000 for married couples filing jointly) in the first year of a five-year period, provided you don’t give the beneficiary additional taxable gifts during the five-year period.2

Create an educational funding legacy — A 529 plan gives the owner control over the plan, including flexibility in naming and changing the beneficiary. The beneficiary can be any age and generally can be changed to a qualified relative when needed. For example, if the original beneficiary decides not to attend college, you can designate a new beneficiary. This flexibility may enable you to establish a college funding legacy for current and future generations. For example, you could open a 529 plan account to pay your child’s college bills. Then, if there’s money left over after he or she finishes college, you can change the beneficiary to another qualified family member and perhaps later to a grandchild.

Consolidate assets — The ability to consolidate college funding assets for one beneficiary in a single 529 plan can make management much easier. Depending on plan rules, you may be able to arrange transfers from a Coverdell Education Savings Account, a custodial account or another 529 plan without triggering federal income taxes. Be sure to review the tax implications with a tax professional, however. Transfers of assets from Series EE and I bonds may also be allowed under certain conditions.

Maximize financial aid eligibility — Money in a 529 account is usually considered by colleges to be the account owner’s asset, which often means the parents’ asset. As a result, a maximum of 5.6 percent of the balance is generally assumed to be available for college annually, compared with 35 percent if the assets were the student’s. With a custodial account, on the other hand, the assets are considered the student’s. And according to the Department of Education, qualified distributions from a 529 plan are not counted as parent or student income and therefore do not affect aid eligibility.

Look into state tax savings — State tax savings are another potential benefit of a 529 plan. In Iowa, for example, earnings are fully exempt from Iowa state income tax. In addition, withdrawals are exempt from Iowa state income tax when used for qualified higher education expenses.

There may be other advantages of 529 plans to consider, as well. Be sure to talk with your financial advisor and tax professional for help assessing how a 529 plan may affect your tax situation.

College prep – have you studied up on 529 plans?


1The earnings portion of nonqualified withdrawals is subject to federal income taxes, a 10% federal tax penalty and possible state taxes and penalties. 2If you die before the end of the five-year period, a prorated portion of the contribution will be considered part of your taxable estate. Section 529 plans are established and maintained by state governments or agencies or eligible educational institutions. Contributions must be kept in a qualified trust in order to be treated as a qualified tuition program. You should

consider a 529 Plan’s fees and expenses such as administrative fees, enrollment fees, annual maintenance fees, sales charges, and underlying fund expenses, which will fluctuate depending on the 529 Plan invested in the investments chosen within the plan. Securities offered through LPL Financial, Member FINRA/SIPC. Insurance products offered through

LPL Financial or its licensed affiliates. MidWestOne Bank and MidWestOne Investment Services are not registered broker/dealers and are not affiliated with LPL Financial.



Member FDIC


FINANCIAL RESOURCES


To your kids, shopping for new clothes, gear and school supplies may be the only good thing about going back to school, but that doesn’t mean you have to spend a fortune every year. Start your back-to-school shopping with a game plan to save money and make your life easier. Here are 9 tips to help you get started.

Make a list. Use the list of recommended supplies from your child’s school as a starting point. If you don’t have a list yet, check with parents at your school who have older kids. Sit down with your child to go over the list together and organize items according to importance. You’ll be teaching your child how to get organized, set priorities, manage money and start saving for items your budget won’t allow.

Reuse items from last year. Once your list is complete, take some time to search your home office for items you already have. If you dig deep enough in your closets, you may find plenty of school supplies left over from last year. Take an inventory of the supplies you have on hand and plan to reuse items that are still in good condition. Check those items off your list.

Determine your budget. Decide how much you plan to spend for back-to-school shopping this year. As you do your shopping, keep a record of your purchases and be aware of how these purchases fit into your overall budget.

Stick to the list. Don’t waste time and money on unlisted items. Also, hold off on buying trendier gear such as lunch boxes and pencil cases. Kids may love the extra supplies they see in the store, but once they start school and see that their friends are all using something else, those extras will probably go unused.

Comparison shop. Scour the weekly ads to find the best prices on supplies and back-to-school basics. Keep a list of these prices with you so you can easily compare prices and find the best value.

Shop end-of-summer sales. Kids wear some clothes, such as short-sleeve polo shirts, all year long, so hit the big summer sales and snap up discounted items that can be worn well into fall.

Buy basics in bulk. Basic items such as paper, pencils, glue sticks and notebooks are often sold in bulk at discounted prices. Consider going in with a group of other parents to split the cost and divide up the items. Or, if you have items left over, set up a supply shelf or storage container at home that can be used all year to avoid late-night shopping trips to buy notebook paper when your child runs out. Plus, you’ll know where to find unused items when it comes time to shop for supplies next year.

Search for quality used items. You may be able to find great deals on clothing items, backpacks and other supplies at consignment stores or garage sales. Taking time to find quality used items can pay off when you find the items you need at a fraction of the price.

Involve your children in the process. Parents and mentors can use the back-to-school shopping experience as an opportunity to explain the difference between “wants” and “needs.” For example, your child may want to purchase a box of pencils featuring his or her favorite cartoon character or superhero, but at $3 per package, the pencils are a luxury compared to a standard box of pencils that may cost $0.50. Discuss the difference between “wants” and “needs” and explain how this has an impact on your family’s back-to-school shopping budget.

How to save money on back-to-school shopping



FINANCIAL RESOURCES


Emergencies can happen at any time – there’s simply no way around it. You lose your job. Your spouse falls ill. Or a loved one passes away. And while disasters – thankfully – don’t occur very frequently, it’s critical to make it a priority to prepare for the unexpected. After all, it could be the difference between a sound financial future and tremendous financial strain.

We’ve put together 3 simple tips to help you prepare your finances so you can face unexpected challenges with confidence and resolve.

Tip #1 – Establish an emergency fund. An emergency fund is an easily-accessible chunk of money that you can withdraw when a financial emergency occurs. Also known as a safety net or rainy day fund, it’s something that you can fall back on when you are faced with an unexpected expenditure, such as medical costs, a new roof, car repairs or the loss of a salary.

At MidWestOne we recommend establishing a fund that contains roughly 3-6 months’ worth of your living expenses. In most cases, this will give you enough money to address the issue and develop a new long term financial plan.

Since you will need to access your emergency fund on short notice, it’s critical that you allocate the money where you are able to withdraw it without facing any penalties. Many people will set up a separate savings or higher-earning checking account for their emergency fund. With some added planning you could also allocate it in a series of 3-, 6-, 9- and 12-month CDs. This would likely give you a higher interest rate and allow you to have access to the funds every three months.

Tip #2 – Set up a life insurance policy. If you or your spouse were to pass away unexpectedly, how would you overcome the resulting financial challenges? If you have not yet set up a life insurance policy, please do so right away. It will protect both you and your family in the case of death of a wage earner.

While there are many types of life insurance policies available, most boil down to term, permanent or combination of both.

Term life insurance policies offer death benefits only. You pay a monthly premium and they provide a stated benefit upon the death of the policy owner, provided that the death occurs within a specific time period. If you live past the length of the policy, you (or, more specifically, your family members) get no money back.

Permanent life policies offer death benefits and a “savings account” (also called “cash value”) so that if you live, you get back at least some of, and often much more than, the amount you spent on your premium. You get this money back either by cashing in the policy or by borrowing against it.

As most permanent life insurance policies are much more expensive than term life policies, many financial advisors recommend clients opt for a term policy so they can invest the difference.

In addition to choosing your policy, you will also have to determine how much you want to insure. The answer to this will be based on what you want to do with the money. While this is different for everyone, a good rule of thumb is to plan for around 8-10 times your salary.

Tip #3 – Talk to others about your money matters.One of the simplest and most important things you can do to prepare for the unexpected is talk to your family or friends about your money matters. Imagine, for example, that your partner is the one who typically pays the bills. If something were to happen to him or her, would you know the passwords to your accounts? Or, what if your parents pass away – do you know where they keep their financial documents? Do they have a life insurance policy? A will? What did they do with their retirement savings? What bank were they with?

While these details may seem mundane to you now, they will make things much, much easier if something were to happen.

It’s up to you to make sure that someone else knows where you have stored all your financial documents. Many families set up a safe deposit box that contains important documents and provide access to another family member or friend in the case of an emergency. Sit down with your family to discuss what makes most sense for your situation.

Are you financially prepared for the unexpected – three tips you can’t afford to live without



FINANCIAL RESOURCES


At one point or another, families all across the country will ask themselves: shall we pay off debt or save for the future?

The answer to this question boils down to simple math.

Let’s say, for example, that you have saved $10,000 and deposited the money in a CD or money market fund at your bank. Given the current low-rate savings environment, you are probably earning around 1% to 1.25% of interest on your investment. That means that over a 12-month period you would earn $120 to $130 dollars in interest.

On the other hand, let’s assume you are carrying a total of $10,000 of unsecured credit card debt. Your interest rate for this type of debt is more than likely in the double digits. If we assume that the debt carries a 15% interest rate (which is average) you would accrue around $1,500 in interest on an annual basis.

Looking at the numbers in this scenario, it quickly becomes clear what to focus on. If you opted to save and only pay the minimum payment on your credit card debt, you would not make enough money to offset your debt. Instead you should have focused on paying off the debt first.

Despite this simple analysis, many people ignore the math and instead opt for a false sense of security that can result from having a large savings account.

Keep the following things in mind when you’re asking yourself the best way to move forward:

• Analyze your debt closely and determine where your dollars are best utilized. Go through the process of calculating your annual interest on all your debts and then determine how to best move forward. For example, it makes sense for many to focus on paying off your high-interest debt, such as credit cards, before repaying “cheaper money” like car loans or mortgages.

• Understand the consequences of either paying debt first or saving first. For example, if you opt to save and consistently only make the minimum payment on your debt you will make very little progress on actually paying anything off. This can quickly turn into a vicious cycle that can have drastic consequences.

• Don’t make it an emotional decision by tricking yourself into saving just so you have a larger bank account. Study your situation. Make an educated decision.

• If you elect to focus on your debt payments, don’t completely ignore your savings. It’s important to have at least a little bit of money stashed away for emergencies.

• Always opt to participate in your company’s retirement plan, especially if your employer matches funds. Not doing so means that you are leaving “free money” on the table.

Personal finance decisions are rarely so simple that there is a quick and easy answer for everyone. Take the time to analyze your situation and determine what’s best for you and your family. It will be well worth it in the long run.

Pay off debt now or save for the future?



FINANCIAL RESOURCES


As a homeowner, there will more than likely come a time when you will feel like it is a good idea to refinance your home. However, it’s important to keep in mind that refinancing a home isn’t a decision that should be taken lightly.

There are costs involved with refinancing a home, and it’s important to consider your long-term plans for the house before you embark on the refinancing process.

Determining the best time to refinance your home mortgage can take some time and effort, but if you educate yourself on market trends, your research might help you save a lot of money on your mortgage. We’ve put together some things to consider:

Determine why you want to refinance. Do you currently have a variable interest rate, and you’d prefer a fixed interest rate? Do you want to switch from a 30-year mortgage to one that is shorter? Or do you want to refinance so you can take out equity to pay off debts? Understanding your end goal is important to determine if it makes financial sense. Remember – refinancing doesn’t eliminate debts – it simply restructures them.

Educate yourself. Educate yourself about the different types of mortgage loans that are available. Different loans are used for different purposes, such as repaying your mortgage faster, flexibility, etc.

Seek out a mortgage lender. Find a reliable mortgage lender who you trust and has your best interest at heart. Your lender should spend time with you discussing your long-term plans and determining the best financing options based on those plans. For example, one of the things to think about is how long you will be staying in the property.

Check your credit. Seek out your credit report from the three main credit reporting agencies and check it for accuracy. If you find inaccuracies, immediately begin the process to correct them. Your credit report impacts your credit score, which in turn will influence your refinancing.

Stop applying for credit. If you plan on refinancing your home don’t open new credit cards or department store cards. New lines of credit can drive down your credit score and negatively impact your interest rates.

Crunch the numbers. Determine if refinancing is really going to benefit you. If you’re switching from a variable rate loan to a fixed loan, estimate how much you will likely save. Do the same thing if you’re opting for a shorter-term loan. Talk to your lender, discuss your options and calculate whether the numbers will result in an honest benefit. Not a numbers person? Let us do those calculations for you!

Refinancing a home is a big decision. While it takes time to determine the best options for you, it can be well worth the effort.

Does it make sense to refinance your home?



FINANCIAL RESOURCES


As you move through your peak earning years, you’ll probably see your net worth steadily rise. At the same time, you’ll still have some work to do before you realize your financial goals. That’s why it’s important to have a solid plan in place.

We’ve put together some tips to help keep your portfolio on track.

Organize your portfolio. Asset allocation is an effective strategic approach whereby you divide your portfolio among the major asset classes of equities, fixed-income securities and cash equivalents.

You should divide your assets based on your goals, your tolerance for risk and your time horizons.

Generally speaking, the larger the equity portion of your portfolio, the greater the potential for growth and the greater amount of risk. On the other hand, the more fixed-income securities you include, the greater the potential for income and preservation of principal.

There are also risks associated with fixed-income investments; however, generally speaking, they incur less risk than equities. You may need to periodically rebalance your portfolio – to remain consistent with your original allocation – or modify it as you come closer to realizing your goals.

Don’t overlook tax planning. Chances are your income tax bracket is higher now than it was during your early years and when you retire. Consider maximizing pretax contributions to your employer-sponsored retirement plan or making deductible contributions to an IRA (if you’re eligible) to help reduce current income while providing tax-deferred savings opportunities.

Also, keep in mind that short-term capital gains are taxed as income, while long-term capital gains and dividends are taxed at lower rates. Finally, explore the potential benefit of including tax-exempt bonds in your portfolio.*

Protect what you’ve accomplished. As your wealth continues to increase, it’s important to preserve what you’ve accumulated and safeguard your future. That’s why estate planning and life insurance are two of the cornerstones of a sound financial plan.

A qualified legal professional can help you implement an estate plan that is best for your situation or review an existing plan to ensure it is still consistent with your goals. Also, be sure you have enough life insurance in place to help cover any liabilities – such as your mortgage – and to protect your family’s financial future.

Financially speaking, midlife shouldn’t be a time of crisis. Instead, it’s a time to take advantage of some of your most productive years. In the long run, you may be in a better position to enjoy the fruits of your labor.

Midlife investing – make the most of your asset-building years


*Some tax-exempt investments may be subject to the federal alternative minimum tax as well as federal or state capital gains taxes. The opinions voiced in this material are for general information

only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate to you, consult your financial advisor prior

to investing. Securities offered through LPL Financial, Member FINRA/SIPC. Insurance products offered through LPL Financial or its licensed affiliates.



Member FDIC

managing your family’s finances - midwestone bank€¦ · managing family finances can be a...

Documents