Money Management 101 for Single Parents Going it Alone

1. Determine What You Owe

As the head of the household, it’s up to you to make sure that your entire family’s needs are being met. In order to do that, you need to be extremely diligent when it comes to money management basics. This is not something that will happen by accident. Instead, you must plan for it and work toward it.

The first step is to set up your “office.” Gather all of your bills, a calculator, a pencil, and your checkbook.

I would also recommend that you grab an old binder that you can use to keep track of your financial data and a shoebox for storing paid bills.

Now you’re ready to begin:

  • Go through all of your bills, and pay anything that is due within the next week.
  • If you have bills coming due that you cannot pay, notify the company and ask them to set up a payment plan with you.
  • Print a copy of the chart “Paying Down My Debts” or make your own.
  • On the chart, list all of your debts, including any car loans, student loans, and credit card debt.
  • In addition, list the total balance left to be paid on all of these debts, and the percentage rate you are paying.
  • For now, leave the fourth column of the chart blank, and store it in your “Financial Data” binder.

    149272148-56a871795f9b58b7d0f29f00

2. Eliminate Joint Debt

Before we create a plan for paying down your debt, it’s important to consider some special circumstances that may apply to you as a single parent. I asked LaToya Irby, Credit/Debt Management Expert, to share her expertise on handling joint debt:

Wolf: Let’s say a single mom still shares a credit card with her ex. What should she do?

Irby: Ideally, she would want her ex to transfer his portion of any joint balances onto his own credit card. That way, everyone is paying for their own debt.

Wolf: What about leaving both names on the account, and agreeing to pay part of the amount due? Is that ever advisable?

Irby: No. If you’ve made an agreement with your ex to split the debt payments on accounts that include your name, and your ex-misses a payment, it’s going to hurt your credit. If the ex-fails to pay altogether, the creditors and collectors will come after you. Not even a divorce decree can change the terms of a joint credit card agreement. In the credit card issuer’s eyes, you’re just as much responsible for post-divorce accounts as before.

Wolf: What about situations when a couple’s divorce decree mandates that one individual must pay off the joint credit card debt, but that person fails to do it?

Irby: You can always file contempt of court papers against him/her, but in the meantime, your credit score suffers. So I suggest paying off the debt to save your credit. If you can’t afford to pay the debt, at least make minimum payments to keep a positive payment history on your credit report.

Wolf: What about other accounts, such as utilities and cell phones?

Irby: The safest thing to do, if you have a service in your ex’s name, is to turn off the account and reestablish service in your name.

 

172075308-56a871795f9b58b7d0f29f03

3. Find Money to Pay Down Debt

Another thing we have to do before creating a plan to pay down your existing debt is to find money in your budget each month. To assist in this step, I contacted Erin Huffstetler, Frugal Living Expert.

Wolf: How much money do you think the average person can uncover just by being more intentional about spending and budgeting?

Huffstetler: The average person could easily uncover an extra $250 a month—and probably much more.

Wolf: What are the top 5 areas that you think people should look to first when they’re trying to cut their expenses?

Huffstetler:

  • Food spending (both groceries and eating out)
  • TV-related expenses (cable/satellite services, certainly; but also movie subscriptions and rentals)
  • Phone services (particularly extras like call waiting, caller id, long distance, and cell phones)
  • Insurance premiums
  • Miscellaneous spending (all those small amounts spent on coffee, vending machine snacks, and other indulgences)

Wolf: How can single parents, specifically, stretch their child support dollars and reduce child-related expenses?

Huffstetler: For single parents looking to stretch their child support dollars, creativity is the key. Look to children’s consignment shops and thrift stores to buy your kids’ clothes instead of department stores; sign them up for Parks and Rec-run activities instead of privately-run activities (which will always cost more); and don’t feel like you have to make up for being a single parent by buying them extra things—it’s you they need, not stuff.

 

471002109-56a8717a3df78cf7729e1bd7

4. Pay Off Your Debt

The next step is creating a schedule for paying down your debt:

  1. Pay off the debts that charge you the highest interest first.Bob Hammond, author of Life Without Debt, recommends that you pay off the debts that are charging you the highest interest first since borrowing from those creditors is costing you the most money. “Concentrate on paying off the high-cost debts as soon as possible,” Hammond advises. LaToya Irby, Credit/Debt Management Expert, agrees. “Highest interest rate debts cost the most money, especially when those debts have high balances. So you’ll save money on interest charges when you pay off those high-interest rate debts first.”However, there are exceptions to this general rule. Irby notes, “If you’re likely to get discouraged because it’s taking a long time to pay off that high-interest rate debt, you can start with the lowest balance debt. Getting some small debts paid off will motivate you to keep going.”
  2. Pay more than the minimum payment. Aim for paying more than the suggested minimum payment, in order to pay off your debts as quickly as possible.Miriam Caldwell, Money in Your 20’s Expert, shares this advice:
    • Choose one debt to focus on.
    • Increase your payment on that debt by as much as you can.
    • Once you have paid off that debt, move all that you are paying on it to the next debt you want to pay off.
    • You’ll be surprised at how quickly you can get out of debt with this plan!
  3. Meanwhile, continue to pay the minimum balance due on all of your other debts.Record what you intend to pay toward each debt on the debt chart you made in Step 1.

 

184644720-56a8717b5f9b58b7d0f29f06

5. Budget Your Monthly Expenses

Now that you know where you stand financially, and you’ve created a plan for paying down your debts, it’s time to make sure that you’re making any other necessary adjustments so that you can keep up with your plan. And this means creating a budget.

I know this can be intimidating, but I’m going to make a suggestion for you: Sign up for Mint.com. It’s a free financial software program available on the Internet, and it will basically do your budgeting for you. It will create a visual pie chart showing how much you’re spending each month on housing, gas, food, entertainment, and more. This way, if it turns out that you’re spending a lot more on food than you really should, you can begin to make the necessary adjustments to get your spending under control.

If you would prefer to create your budget the traditional way, allotting a certain amount of money to each spending category, I’ve created an online budget calculator you can use, which includes categories for child support and other details specific to your life as a single parent.

Finally, in taking a look at where your money really goes each month, it’s important to know approximately how much money you “should” be spending in each category. Generally speaking, your net spendable income (after taxes) should be allocated as follows*:

  • Housing: 30%
  • Food: 12%
  • Auto: 14%
  • Insurance: 5%
  • Debt: 5%
  • Entertainment: 7%
  • Clothing: 6%
  • Savings: 5%
  • Medical/Dental: 4%
  • Miscellaneous: 7%
  • Child Care: 5%
  • Investments: 5%

 

169260106-56a8717c3df78cf7729e1bda

6. Set Financial Goals

Now that you’ve worked out a plan to pay down your debt, and you’ve created a budget, it’s time to determine your needs moving forward.

Specifically, as a single parent, you need to ask yourself some questions, such as:

  • Do you need to file for child support?
  • Do you need to get a higher-paying job?
  • Is it time to think about going back to school?
  • Do you need to consider moving into a home/rental that would reduce your overall monthly payments?
  • Are there alternatives, such as taking on another job or splitting expenses with another single parent family, that you need to consider at this point?

One of the things that I want you to know is that the ball is in your court. You determine where this goes from here on out. But unfortunately, you can’t do that if you’re ignoring your financial health, right?

So the fact that you’ve come this far in the process of getting a handle on your finances tells me that you’re determined to make the changes you need to make in order to provide for your family’s future.

So go ahead and ask yourself these questions. So much of single parenting is learning to roll with the punches and be creative in the face of adversity. If, indeed, you need to make some pretty major changes, now is the time to do it. Don’t incur any more debt where you are. Be resourceful, follow through, and do what you need to do to turn your financial situation around.

172167002-56a8717d5f9b58b7d0f29f09

7. Increase Your Net Worth

The next step is to determine your net worth and begin adding to it.

Determine Your Net Worth:

Your net worth is what you own minus what you owe. Programs such as Mint.com, Quicken, and Microsoft Money will calculate your net worth for you, automatically.

You can also determine your net worth simply by adding up all that you own, including all of your investments, the equity you may have paid into your home, the value of your car, and any other assets you possess; and subtracting what you owe in remaining debts.

Set Up a Savings Account:

Once you know where you stand, you’ll be ready to set up a savings account. You can do this through your regular bank, or begin investing in a mutual fund that pays interest.

Even if you can only afford to set aside $25 or $50 per month, it will begin to add up.

Before you know it, you’ll have an emergency savings plan in place, to protect you in the event that your car breaks down, or your home needs a major repair.

In addition, this regular savings will help you increase your net worth over time.

176643490-56a8717e5f9b58b7d0f29f0c

8. Become Even More Frugal

Unfortunately, all of the work you’ve already done in steps 1-7 will have little lasting value if you don’t change your attitude toward money. Now is the time to become even more frugal and learn to live within your means.

Practice Discipline:

Stop imagining that more money is going to pour in tomorrow—through finally collecting on unpaid child support, winning the lottery, or getting a promotion. If those things happen, great! You’ll be even better off. But living as if they’re going to happen is causing you to spend money you don’t have.

Instead, force yourself to make purchases with cash only. Do not continue to pay outrageous interest payments toward credit cards for purchases you don’t absolutely need. You can get by without that new furniture, right? What else could you skip, in the interest of spending only what you have right now in the bank?

Try These Ideas:

  • Check Freecycle before you make another major purchase. Someone else may be giving away the very thing you’d like to buy!
  • When you’re getting ready to buy something specific, look for it on eBay first. I buy a lot of my clothes, new-with-tags, through online auctions!
  • Forget trying to keep up with “The Jones’s.” You already know your value; don’t get caught up trying to “prove” your worth to others by having “just the right” house, car, or appearance.
  • Do not use shopping, ever, to appease your emotions.
  • Finally, when you do go to make a big purchase, step back and give yourself a few days–or even a week–to think about it. There’s no reason to suffer through buyer’s remorse and try to justify to yourself purchases that you really can’t afford. Think it over carefully and make those purchases, when necessary, with cash.

483612623-56a8717f3df78cf7729e1be0

9. Schedule Your Own Weekly Financial Check-In

Grab your calendar and schedule a weekly financial update meeting with yourself. This is an extremely important step in managing your personal finances, and it’s one that you need to continue each and every week. During your “meeting” time:

  • Pay any bills that are due.
  • If your bank statement has arrived, take the time to balance your checkbook.
  • Check the balances of your checking and savings accounts.
  • Update your debt list to incorporate any recent payments.
  • This is also a good time to write out your grocery shopping list and check what’s on sale at your local grocery store this week (either using the store’s Web site or the sales circular that comes in the newspaper).
  • Finally, also make note of any upcoming expenses you need to anticipate and plan for.

An attitude of gratitude and finances.

 

 

References:
Irby, LaToya. Email interview. 24 Oct. 2008, 
Huffstetler, Erin. Email interview. 24 Oct. 2008. 
Sources:
Caldwell, Miriam. Email interview. 27 Oct. 2008, Hammond, Bob. “Debt Free Key: 10 Steps for Coping With Credit Problems.” Life Without Debt. Franklin Lakes, NJ: Career Press, 1995. 31-32, Irby, LaToya. Email interview. 24 Oct. 2008. 
“Spending Plan Online Calculator.” Crown Financial Ministries. 11 Oct. 2008.

Written By: Jennifer Wolf

Source: thebalance

 

 

 

Nine Characteristics of Successful Entrepreneurs

Have you ever thought about striking out on your own? After all, being your own boss can be an exciting prospect. However, owning a business isn’t for everyone. To be a successful entrepreneur, you must have — or develop — certain personality traits. Here are nine characteristics you should ideally possess to start and run your own business:

1. Motivation

Entrepreneurs are enthusiastic, optimistic and future-oriented. They believe they’ll be successful and are willing to risk their resources in pursuit of profit. They have high energy levels and are sometimes impatient. They are always thinking about their business and how to increase their market share. Are you self-motivated enough to do this, and can you stay motivated for extended periods of time? Can you bounce back in the face of challenges?

2. Creativity and Persuasiveness

Successful entrepreneurs have the creative capacity to recognize and pursue opportunities. They possess strong selling skills and are both persuasive and persistent. Are you willing to promote your business tirelessly and look for new ways to get the word out about your product or service?

3. Versatility 

Company workers can usually rely on a staff or colleagues to provide service or support. As an entrepreneur, you’ll typically start out as a “solopreneur,” meaning you will be on your own for a while. You may not have the luxury of hiring a support staff initially. Therefore, you will end up wearing several different hats, including secretary, bookkeeper and so on. You need to be mentally prepared to take on all these tasks at the beginning. Can you do that?

4. Superb Business Skills 

Entrepreneurs are naturally capable of setting up the internal systems, procedures and processes necessary to operate a business. They are focused on cash flow, sales and revenue at all times. Successful entrepreneurs rely on their business skills, know-how and contacts. Evaluate your current talents and professional network. Will your skills, contacts and experience readily transfer to the business idea you want to pursue?

5. Risk Tolerance

Launching any entrepreneurial venture is risky. Are you willing to assume that risk? You can reduce your risk by thoroughly researching your business concept, industry and market. You can also test your concept on a small scale. Can you get a letter of intent from prospective customers to purchase? If so, do you think customers would actually go through with their transaction?

6. Drive 

As an entrepreneur, you are in the driver’s seat, so you must be proactive in your approaches to everything. Are you a doer — someone willing to take the reins — or would you rather someone else do things for you?

7. Vision

One of your responsibilities as founder and head of your company is deciding where your business should go. That requires vision. Without it, your boat will be lost at sea. Are you the type of person who looks ahead and can see the big picture?

8. Flexibility and Open-Mindedness

While entrepreneurs need a steadfast vision and direction, they will face a lot of unknowns. You will need to be ready to tweak any initial plans and strategies. New and better ways of doing things may come along as well. Can you be open-minded and flexible in the face of change?

9. Decisiveness

As an entrepreneur, you won’t have room for procrastination or indecision. Not only will these traits stall progress, but they can also cause you to miss crucial opportunities that could move you toward success. Can you make decisions quickly and seize the moment?

 

 

 

Written By: Ruchira Agrawal
Source: Monster

Market Update: May 8, 2017

MarketUpdate_header

  • Stocks in Asia were mostly higher with Nikkei & South Korea’s KOSPI surging +2.0% on positive vibes carrying over from U.S. jobs growth and Emmanuel Macron victory. South Korea’s election tomorrow looks to end a nine-year run for the ruling conservative party, which has been caught up in scandal. Hang Seng +0.4% while the Shanghai Composite slipped 0.8% to the lowest levels in more than six months amid Beijing’s efforts to rein in financial leverage.
  • European stocks are holding steady after opening down slightly and two strong weekly gains that essentially priced in the Macron victory. The broader Euro Stoxx 600 is up ~+9.0% YTD. The euro slipped -0.5% to 1.09, but note that the common currency has climbed in five of the past six days and has been trading near its highest levels of the past six months.
  • U.S. markets are slightly lower after the S&P 500 and Nasdaq closed Friday at record levels. The dollar is up +0.3% after four consecutive weekly declines. The 10-year yield is higher at 2.37%. Oil is holding on to $46/barrel and COMEX gold is up 0.3% after dropping more than 3% last week.

MacroView_header

French Elections

  • Macron victory essentially eliminates fears of worst-case scenarios: wave of populist victories threatening viability of currency and European Union (EU).
  • First election without either of two leading parties in Fifth Republic.
  • Still plenty of challenges–Macron must form alliances with Socialists, the party he left, to offset alt-right anger, potential lack of cooperation heading into parliamentary elections in June.
  • Euro-Stoxx 600 +2.0% last week and flat/down today.
  • Euro (~1.09) down 50 basis points today but stronger vs. dollar and other currencies past month.
  • Eurozone gross domestic product (GDP) and inflation both approaching +2.0% annual growth and this vote suggests trajectory can be maintained, accelerated with economic reforms in France.
  • European Central Bank (ECB) must remain accommodative near term, though, because Italy is the next challenge.

 Oil Prices

  • WTI fell -0.6% last week to $46/barrel as increased shale production in U.S. offsets Organization of the Petroleum Exporting Countries (OPEC) production cuts. To be sure, the announcement in November helped drive oil to ~$55, yet the increased profitability for higher cost producers in North America was evidently too good to pass up.
  • We expect OPEC to extend their production cuts at the next meeting in Vienna on May 25. Wall Street consensus is still bullish, projecting a range of $50-55/barrel over the next twelve months.
  • Recent sell-off largely technical in nature over supply concerns. WTI broke through 200-day moving average and failed to hold the new low for the year ($45) and a key Fibonacci retracement level. Frenzied trading in Asian markets ensued on Thursday, yet oil volatility was at its highest level in six months and relative strength (RSI) indicates oversold position.
  • “It’s different this time” – the U.S., not Saudi Arabia, is now the world’s swing producer and although OPEC has largely held on production cuts, U.S. rig counts are up.
  • We remain neutral on the energy sector as supply-demand adjustments still point toward a range of $50-$55 for WTI as OPEC cuts likely persist.

Earnings

  • Strong earnings season got even better last week. S&P 500 earnings for the first quarter rose more than 1% over the past week and are now tracking to a 14.7% year-over-year increase, compared with the 10.2% increase reflected in consensus estimates on April 1 (Thomson Reuters data). Both the earnings growth and beat rates (75%) are the best in more than five years. Excluding the rebounding energy sector, earnings are still on pace to grow a solid 10.5% year over year. About 40 S&P 500 companies will report results this week as earnings season winds down.

 

050817_earningsdashboard-01

  • Companies have delivered mostly upbeat guidance. Forward estimates inched fractionally higher last week and are down just 0.2% since earnings season began. Although the timetable for policy, particularly corporate tax reform, has been pushed out, we still see potential policy upside in 2018. The relatively bright outlook is helping support elevated valuations at an S&P 500 price-to-earnings ratio of 17.5 times.

Sell in May

  • Time to go away? The well-known “Sell in May and go away” period is upon us. Although this is one of the most widely known investment clichés out there, since 1950[1], historically the next six months are indeed the worst six months of the year for the S&P 500. So should you sell and wait to buy in November? We take a closer look at this cliché and show why it doesn’t always work and might not work this year.

Winning Streak

  • Up three weeks in a row. On Friday, the S&P 500 closed at its first all-time high since March 1 and in the process rose for the third consecutive week. It was also the first green Friday for the S&P 500 in nearly two months (March 10). This was the second three-week win streak of the year, with the earlier streak making it all the way to six weeks in a row (ending in early March). There hasn’t been a year with two separate six-week win streaks since 2013.

MonitoringWeek_header

Monday

  • Eurozone: Sentix Investor Confidence (May)
  • China: Foreign Direct Investment (Apr)
  • China: Trade Balance (Apr)

Tuesday

  • NFIB Small Business Optimism (Apr)
  • Germany: Industrial Production (Mar)
  • BOJ: Summary of Opinions at Apr 26-27 Meeting
  • China: New Loan Growth & Money Supply
  • China: Consumer Price Index (CPI) & Producer Price Index (PPI) (Apr)

Wednesday

  • Monthly Budget Statement (Apr)
  • ECB: Draghi Speaks

Thursday

  • Initial Jobless Claims (May 6)
  • PPI (Apr)
  • Eurozone: European Commission Economic Forecasts
  • UK: Bank of England Rate & Inflation Report
  • ECB: Publishes Economic Bulletin

Friday

  • CPI (Apr)
  • Retail Sales (Apr)
  • Germany: GDP (Q1 Prelim.)
  • Germany: CPI & PPI (Apr)
  • Eurozone: Industrial Production (Mar)

 

 

 

[1] Please note: The modern design of the S&P 500 stock index was first launched in 1957. Performance back to 1950 incorporates the performance of predecessor index, the S&P 90.  

Past performance is no guarantee of future results. The economic forecasts set forth in the presentation may not develop as predicted. The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Stock investing involves risk including loss of principal. Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, political risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks. Treasury Inflation-Protected Securities (TIPS) are subject to interest rate risk and opportunity risk. If interest rates rise, the value of your bond on the secondary market will likely fall. In periods of no or low inflation, other investments, including other Treasury bonds, may perform better. Bank loans are loans issued by below investment-grade companies for short-term funding purposes with higher yield than short-term debt and involve risk. Because of its narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies. Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments. Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate. Investing in foreign and emerging markets debt securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical and regulatory risk, and risk associated with varying settlement standards. High-yield/junk bonds are not investment-grade securities, involve substantial risks, and generally should be part of the diversified portfolio of sophisticated investors. Municipal bonds are subject to availability, price, and to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rate rise. Interest income may be subject to the alternative minimum tax. Federally tax-free but other state and local taxes may apply. Investing in real estate/REITs involves special risks such as potential illiquidity and may not be suitable for all investors. There is no assurance that the investment objectives of this program will be attained. Currency risk is a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged. This research material has been prepared by LPL Financial LLC.

Here’s Why Tony Robbins Tells Millennials to Buy a House, Not a Home

© Credit.com Blog

For generations past, home ownership was a significant rite of passage that signaled stability, commitment, and, often, prosperity.

But, in this as in so many other cases, millennials are different.

As of 2015, adults under age 35 made up 19 percent of U.S. households but less than 10 percent of homeowners, according to a report released by Harvard University’s Joint Center for Housing Studies. In fact, in 2015 home ownership for that group fell to a historic low of 31 percent.

Entrepreneur and bestselling author Tony Robbins says that, while millennials might be missing out on the social upsides of home ownership, real estate is not the best investment they could be making

104353097-tony_robbins_painting.600x400

“One of the weakest performers [is] your own personal real estate, because it doesn’t provide much income,” Robbins says. “It’s an inflation hedge. You do a little better than inflation, and you can have your own home, so there’s a psychological, emotional benefit.”

Instead, millennials in a position to buy property should be considering how to do so in a way that will provide them additional cash flow, he says.

“If you can own real estate, real estate with an income is the one [form of] real estate that’s more valuable,” says Robbins.

104362668-home_owner.600x400.jpg

Opinions on the imperative of millennial home ownership vary.

Self-made millionaire Grant Cardone tells CNBC that home owners are forced to continue to spend unceasingly, and that he regrets buying a house at age 30.

“Unless you have 20 million bucks in the bank, in cash, you have no business buying a house,” says Cardone.

In personal finance classic “Rich Dad Poor Dad,” author Robert Kiyosaki notes that houses should be viewed as a liability, as opposed to an asset, and points out that it’s not a given that a home will appreciate in value.

“I am not saying don’t buy a house. What I am saying is that you should understand the difference between an asset and a liability,” Kiyosaki writes. “When I want a bigger house, I first buy assets that will generate the cash flow to pay for the house.”

Robbins emphasizes that real estate investing doesn’t need to entail keys and a welcome mat.

“You can [invest] through a REIT. You don’t have to buy everything, you get a piece of all these things,” Robbins says.

But whether millennials choose to spend their nest egg on a nest, or begin focusing on a portfolio instead, Robbins says the worst mistake is making no investment at all: “The most important thing, I think, for millennials, is to get in the game.”

 

 

Written By: Kathryn Dill
Source: CNBC

 

Market Update: April 24, 2017

MarketUpdate_header

  • U.S. up, Europe surging in wake of French vote. U.S. equities are tracking global markets higher this morning following yesterday’s first round of the French presidential elections in which Emmanuel Macron and Marine Le Pen finished in the top spots, triggering a run-off vote set for May 7. Friday’s session concluded with the major indexes posting modest losses ahead of the vote, as the S&P 500 (-0.3%) was led lower by the telecom (-1.6%) and financials (-0.9%) sectors, with only utilities (+0.5%) and industrials (+0.1%) finishing positive. Overseas, Asian indexes reacted positively to the French election as the Nikkei (+1.4%) and Hang Seng (+0.4%) gapped higher; the notable exception was the Shanghai Composite (-1.4%), which fell amidst a government crackdown on leverage. European indexes are spiking as the STOXX 600 (+1.8%) benefits from investors betting on the pro-E.U. candidate Macron; Frances’s CAC is up more than 4% to its highest level in nine years. Finally, the yield on the 10-year Treasury has jumped to 2.30%, WTI crude oil (-0.5%) is just below $50/barrel, and COMEX gold ($1271/oz.) has dropped 1.4%.

MacroView_header

  • Solid start to Q1 earnings season. With 95 S&P 500 companies having reported, Thomson-tracked S&P 500 earnings for first quarter 2017 point to an 11.2% year-over-year increase, compared with consensus estimates of +10.2% as of quarter end on April 1, 2017. The early upside has been driven largely by financials, which are tracking to a 19.0% year-over-year increase, more than 4% above quarter-end estimates. Industrials have also surprised to the upside thus far. Conversely, since earnings season began, first quarter earnings estimates have been cut for the consumer discretionary, energy, and telecom sectors, though it is probably too early to call any of these sectors “earnings season losers.” This week (4/24/17-4/28/17) is the busiest week of earnings season with 194 S&P 500 companies slated to report. All of the widely-held sectors are well represented on the earnings calendar, led by industrials.

4-24-17-earnings-dashboard

  • Leading indicators rise for seventh consecutive month. The Conference Board’s Leading Economic Index (LEI) pushed 0.4% higher in March, ahead of expectations but decelerating from a downwardly revised 0.5% increase in February. Eight of 10 indicators increased in March, led by contributions from the yield curve and strong new manufacturing orders survey data. The LEI has climbed 3.5% year over year, a rate that has historically been associated with low odds of a recession occurring within the next year.
  • The latest Beige Book suggests a steady economy with modest wage pressure. The Federal Reserve (Fed) released its April Beige Book last week ahead of the May 2-3, 2017 Federal Open Market Committee (FOMC) meeting. Our Beige Book Barometer (strong words minus weak words) rose to +77 in April, its highest level since +84 in January 2016, indicating continued steady economic growth in early 2017 with some signs of potential acceleration. Words related to wage pressure have held steady over the last six months at levels above the 2015-2016 average, indicating the appearance of modest but still manageable wage pressure.
  • Important period for European markets. This week, we examine the importance of European market earnings, particularly in important sectors like energy and banking. Expectations remain high for earnings growth throughout 2017, which has kept us cautious on investing in European markets. Political risks also remain, but seem to be abating as we get past the first round of French Presidential elections.

MonitoringWeek_header

Monday

  • Germany: Ifo (Apr)

Tuesday

  • New Home Sales (Mar)

Wednesday

  • BOJ Outlook Report & Monetary Policy Statement
  • BOJ Interest Rate Decision

Thursday

  • Durable Goods Orders (Mar)
  • Eurozone: Consumer Confidence (Apr)
  • ECB Interest Rate Decision
  • Japan: CPI (Mar)

Friday

  • GDP (Q1)
  • UK: GDP (Q1)
  • Eurozone: CPI (Apr)

Saturday

  • EU Leaders Summit
  • China: Mfg. & Non-Mfg. PMI (Apr)

 

 

 

 

 

 

Past performance is no guarantee of future results. The economic forecasts set forth in the presentation may not develop as predicted. The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Stock investing involves risk including loss of principal. Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, political risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks. Treasury Inflation-Protected Securities (TIPS) are subject to interest rate risk and opportunity risk. If interest rates rise, the value of your bond on the secondary market will likely fall. In periods of no or low inflation, other investments, including other Treasury bonds, may perform better. Bank loans are loans issued by below investment-grade companies for short-term funding purposes with higher yield than short-term debt and involve risk. Because of its narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies. Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments. Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate. Investing in foreign and emerging markets debt securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical and regulatory risk, and risk associated with varying settlement standards. High-yield/junk bonds are not investment-grade securities, involve substantial risks, and generally should be part of the diversified portfolio of sophisticated investors. Municipal bonds are subject to availability, price, and to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rate rise. Interest income may be subject to the alternative minimum tax. Federally tax-free but other state and local taxes may apply. Investing in real estate/REITs involves special risks such as potential illiquidity and may not be suitable for all investors. There is no assurance that the investment objectives of this program will be attained. Currency risk is a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged. This research material has been prepared by LPL Financial LLC.

Market Update: April 17, 2017

MarketUpdate_header

  • Stocks tick higher to begin week. U.S. equities are slightly higher this morning as earnings season ramps up this week with 63 S&P 500 components set to report. Markets moved lower the final three sessions of the last week’s shortened trading week, concluding with a 0.7% loss for the S&P 500 on Thursday which was led lower by energy (-1.9%) and financials (-1.7%). Asian indexes closed mixed overnight, with the Nikkei gaining 0.1%, while China’s Shanghai Composite slipped 0.7% as a request from the country’s top securities regulator to tighten controls overshadowed an upside surprise to Gross Domestic Product (GDP); European markets are closed for Easter Monday. Meanwhile COMEX gold ($1291/oz.) is near flat, WTI crude oil ($53.03/barrel) is dropping 0.3%, and the yield on the 10-year Note little changed at 2.23%.

MacroView_header

  • First big earnings week on tap. This week 16% of the S&P 500’s market cap will report first quarter 2017 results, highlighted by the financials and industrials sectors. Banks got the season off to a good start late last week, pushing the financials earnings growth rate to near 18% from an estimated 15.6% over the past week. Overall, Thomson-tracked consensus for S&P 500 earnings is calling for a 10.4% year-over-year increase in the quarter; a strong 76% earnings beat rate thus far has lifted overall earnings growth by 0.2% (though just 6% of the S&P 500’s market cap reported last week). Look for our earnings dashboard here on April 24.
  • Consumer prices fell in March. The consumer price index (CPI) fell 0.3% month over month in March, below consensus expectations for a flat reading. Core prices, excluding food and energy, slipped 0.1% month over month, the first sequential decline since January of 2010 and well below consensus estimates of +0.2%. The drop pushed the year-over-year changes in headline and core prices to 2.4% (down from 2.7% in February) and 2.0% (down from 2.2% in February), respectively. The drop in prices was broad based, driven by a combination of wireless phone services, apparel, autos, and housing. We continue to expect two more rate hikes from the Federal Reserve (Fed) in 2017, but the soft data in March may cause markets to at least partially discount the probability of a June hike, which is currently about a coin flip based on fed funds futures markets.
  • Retail sales fell for the second straight month. Following a downward revision to February, retail sales fell for the second straight month in March, slipping 0.2% (vs. consensus of -0.1%), though sales increased by a respectable 5.2% on a year-over-year basis. Core retail sales (excluding autos, gasoline, building materials and food services), rose 0.5% month over month, above expectations, after a downwardly revised 0.2% decline in February. Consumer spending clearly slowed in the first quarter after a strong finish to 2016, but weather, delayed tax refunds, and seasonal quirks in first quarter data in recent years suggest a rebound in the second quarter is likely. Still, first quarter gross domestic product, based on available data to date, is tracking to only about 1%.
  • Upside surprise to Chinese GDP. The Chinese government released its official Q1 GDP report overnight, up 6.9%, better than expectations which generally were in the 6.5%-6.7% range. Economic indicators were up across the board, including growth in Fixed Asset Investment (infrastructure and real estate spending), which is often heavily influenced by government policy, and retail sales. Consumer spending is key to the Chinese government, as it is trying to manage its economy away from infrastructure and heavy industry and toward consumer spending and the service sector.
  • Though many are skeptical regarding Chinese GDP growth figures, what may matter most is how China responds to them. Because the government is signaling that the economic situation is strong, it gives it room to be more aggressive on important issues, primarily the debt problem. Chinese shares were down slightly despite the positive data. Why? Perhaps because of the government’s signal that policy will shift away from supporting the economy (which officially no longer needs the support) and toward dealing with these longer term imbalances.
  • Checking in on technicals, sentiment, and uncertainty. This week we will take a look at market technicals, sentiment, and the ever increasing uncertainty. The good news is market breadth remains strong and globally we are seeing many major markets in uptrends as well. Still, sentiment is a mixed picture and the level of uncertainty remains high. All of this, coupled with the historically low level of market volatility during the first-quarter, makes the potential for higher volatility very likely.

MonitoringWeek_header

Monday

  • BOJ: Kuroda Speaks to Trust Companies Association

Wednesday

  • Beige Book
  • Eurozone: Trade Balance (Feb)
  • Eurozone: CPI (Mar)

Thursday

  • Initial Jobless Claims (Apr 15)
  • Conference Board US Leading Index (Mar)
  • Eurozone: Consumer Confidence (Apr)

Friday

  • Existing Home Sales (Mar)
  • Eurozone: Markit Mfg. & Services PMI (Apr)
  • CAD: CPI (Mar)
  • ECB: Current Account (Feb)

 

 

 

 

 

 

Past performance is no guarantee of future results. The economic forecasts set forth in the presentation may not develop as predicted. The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Stock investing involves risk including loss of principal. Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, political risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks. Treasury Inflation-Protected Securities (TIPS) are subject to interest rate risk and opportunity risk. If interest rates rise, the value of your bond on the secondary market will likely fall. In periods of no or low inflation, other investments, including other Treasury bonds, may perform better. Bank loans are loans issued by below investment-grade companies for short-term funding purposes with higher yield than short-term debt and involve risk. Because of its narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies. Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments. Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate. Investing in foreign and emerging markets debt securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical and regulatory risk, and risk associated with varying settlement standards. High-yield/junk bonds are not investment-grade securities, involve substantial risks, and generally should be part of the diversified portfolio of sophisticated investors. Municipal bonds are subject to availability, price, and to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rate rise. Interest income may be subject to the alternative minimum tax. Federally tax-free but other state and local taxes may apply. Investing in real estate/REITs involves special risks such as potential illiquidity and may not be suitable for all investors. There is no assurance that the investment objectives of this program will be attained. Currency risk is a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged. This research material has been prepared by LPL Financial LLC.

Market Update: February 13, 2017

© Spencer Platt/Getty Images

MarketUpdate_header

  • U.S. indexes aim for fresh record highs on global strength. Domestic markets look to add to last week’s gains after the S&P 500 rose 0.4% Friday with all but one sector finishing in the green; materials (+0.9%), energy (+0.8%), and industrials (+0.8%) led the way while consumer staples (-0.1%) lost ground. Overseas, stocks in Asia began the week higher as traders evaluated Japanese GDP data and a generally positive outcome of the U.S.-Japan summit over the weekend; the Shanghai Composite (+0.6%) and Hang Seng (+0.6%) led major indexes in the region, while the Nikkei gained 0.4%. European markets are also moving up as the STOXX 600 is heading for its fifth consecutive gain. Elsewhere, the dollar touched a two-week high, WTI crude oil ($53.07/barrel) is pulling back after three days of gains, COMEX gold ($1227/oz.) is modestly lower, and the yield on 10-year Treasuries is up 3 basis points (0.03%) to 2.44%.

MacroView_header

  • Earnings update: strong growth, decent upside. With 71% of S&P 500 companies having reported, S&P 500 earnings are tracking to an 8.4% year-over-year increase, 2.3% above estimates on January 1, 2017 (Thomson Reuters data). Financials, materials, and technology have produced the most upside (all 3% or more) and financials the most growth (+20.8%), followed by technology at 10.9%. An earnings gain for all 11 S&P sectors remains possible with no sector down more than 1.5%. Revenue growth ticked up to 4.4%, led by consumer discretionary, healthcare and technology. This week is another busy one with 55 S&P 500 companies slated to report results.

021317_earningsdashboard-01

  • Supportive guidance. S&P 500 earnings estimates for 2017 are down by a below-average 1.1% since earnings season began (the average decline is 2.5%). Industrials, financials and energy estimates have held up best, with energy actually seeing estimates rise. We continue to expect mid- to high-single-digit earnings growth for the S&P 500 overall in 2017, and have seen nothing from corporate America during earnings season that would cause us to lose confidence in that forecast. The possibility exists that this forecast might prove too low given the potential for a policy boost later this year
  • Real estate by cycles. Evaluating real estate investments depends on three cycles: the economic cycle, the building cycle, and the interest rate cycle. We believe we are in a good spot in the economic cycle for attractive real estate returns, with steady job gains and an improving domestic economic growth outlook. The building cycle for real estate shows little sign of the type of overbuilding that has ended previous cycles. Finally, although we expect interest rates to rise, we expect increases to be modest and driven by improving economic growth and a gradual pickup in inflation, conditions historically favorable for real estate. Based on these metrics, our real estate outlook, including REITs, is favorable while a spike in interest rates remains a key risk.
  • Japan releases Q4 and 2016 gross domestic product (GDP) data overnight. The results were modestly disappointing as Q4 growth was 0.2% vs. an estimated 0.3%; for calendar year 2016, GDP growth was 1.0%, vs. consensus expectations of 1.1%. More telling than the narrow miss itself is the source of Japanese growth: mostly exports. Domestic consumption was flat for Q4 and represented about one half of the total economic growth in 2016. This may encourage Japanese authorities to weaken the yen further, though doing so may ire the Trump administration, which had previously labeled Japan’s trade surplus as unfair. Japanese stocks were stronger overnight, while the yen weakened 0.4%.
  • Busy calendar this week includes Yellen testimony. Fed Chair Yellen’s semiannual monetary policy testimony to Congress highlights this week’s very busy economic and event calendar. In addition to Yellen, a half dozen other Fed officials are on the docket as markets gauge whether or not the Fed will raise rates at its March 2017 meeting. The data due out this week on January CPI, retail sales, leading indicators, housing starts and industrial production, along with February reports on Empire State and Philadelphia Fed manufacturing and housing market sentiment, will weigh on the Fed’s decision. Overseas, Q4 GDP reports are due out in the Eurozone, Poland, and Malaysia, along with the always timely ZEW report (February) in Germany. There are no major central bank meetings this week.
  • Happy Anniversary. The S&P 500 hit last year’s low on February 11 and has since gained more than 26%. Over the past year we’ve seen a massive global stock market rally, with financials, energy, and materials leading in the U.S. A year ago there were calls to “sell everything” and many high-profile cuts of year-end equity targets.

MonitoringWeek_header

Sunday

  • Japan: GDP (Q4)

Monday

  • China: CPI (Jan)

Tuesday

  • NFIB Small Business Optimism Index (Jan)
  • Fed Chair Yellen’s Semiannual Monetary Policy Testimony to Congress-Senate
  • Kaplan (Hawk*)
  • Eurozone: GDP (Q4)
  • Germany: ZEW (Feb)

Wednesday

  • CPI (Jan)
  • Retail Sales (Jan)
  • NAHB Housing Market Index (Feb)
  • Fed Chair Yellen’s Semiannual Monetary Policy Testimony to Congress-House

Thursday

  • Housing Starts (Jan)
  • Philadelphia Fed Mfg. Report (Feb)
  • G-20 Foreign Ministers meeting
  • Eurozonee: Account of the 01/19/17 European Central Bank meeting released

Friday

  • Leading Indicators (Jan)

 

 

 

 

 

 

 

Important Disclosures: Past performance is no guarantee of future results. The economic forecasts set forth in the presentation may not develop as predicted. The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Stock investing involves risk including loss of principal. Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, political risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks. Treasury Inflation-Protected Securities (TIPS) are subject to interest rate risk and opportunity risk. If interest rates rise, the value of your bond on the secondary market will likely fall. In periods of no or low inflation, other investments, including other Treasury bonds, may perform better. Bank loans are loans issued by below investment-grade companies for short-term funding purposes with higher yield than short-term debt and involve risk. Because of its narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies. Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments. Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate. Investing in foreign and emerging markets debt securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical and regulatory risk, and risk associated with varying settlement standards. High-yield/junk bonds are not investment-grade securities, involve substantial risks, and generally should be part of the diversified portfolio of sophisticated investors. Municipal bonds are subject to availability, price, and to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rate rise. Interest income may be subject to the alternative minimum tax. Federally tax-free but other state and local taxes may apply. Investing in real estate/REITs involves special risks such as potential illiquidity and may not be suitable for all investors. There is no assurance that the investment objectives of this program will be attained. Currency risk is a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged. This research material has been prepared by LPL Financial LLC.

6 Ways to Nail Your Resolution This Year

Cheers to the New Year! And the new you. It’s one thing to make a resolution, but it’s another thing to actually keep it, right? To keep you on track, here are some foolproof ways to help keep you from falling off the wagon this year. Let’s do this New Year’s thing right!

1. Make it to March 7th and Your Golden

Not like gold rush golden, but you’re in pretty good shape. It takes march-7two months for a habit to stick—66 days if you’re really counting. So write down March 7th on the back of your hand or your calendar or somewhere. Because you’re 80% more likely to keep with it after that day.

2. Dig Deep – Like Real Deep

Basically, try not to generalize. Yeah, that shovel
means “I want to save more money” isn’t cutting it this year. Figure out what you’re saving for, what the goal is, when you want it saved by, and set mini targets along the way.

3. Two’s Better Than One… Kinda Like Chopsticks

Yeah, it’s like teamwork–try eating rice with one chopstick. No, chopsticksactually, don’t. Just take our word for it. Same with resolutions. It’s way easier to keep one if you’ve got a buddy to keep you accountable–then you guys can guide each other.

4. Get Up When You Slip Up

Falling hurts. It hurts a lot. But you don’t let a slip-up banana-pkeep you down. Get back up and keep going–it builds character. And the more times you pick yourself up, the more likely you are to keep with it.

5. Get Your Tape Out – It’ll Help

No, not that kind of tape. Something that measures. Doesn’t matter if duct
you’re using centimeters, inches, marbles, or whatever–if you can measure it, you have a better chance of making it. So track your progress.

6. One Word… Megaphone

Ok, fine, so one word wasn’t quite enough. What we mean is, tell people.Megaphone Show off your resolution. Be proud of it. And one way you can do that is by taking The Relentless Resolutions Challenge. Take it and share your progress along the way.

 

 

 

 

 

 

 

Source: Ally Bank

Welcome To The Strongest Month Of The Year For Equities Historically

The month of November is in the books. We came into the month with the longest Dow losing streak in 35 years and many concerns over the U.S. presidential election. In the end, the fears didn’t materialize and equities had a big move higher.

Here is a summary of what happened last month:

• November was a great month for equities, as the S&P 500 gained 3.4%—its best monthly gain since a 6.6% gain in March. It was the best return in November since a 5.7% bounce in 2009.
• As good as the month was for equities, it was that bad for bonds as rates spiked. The Barclays Global Aggregate Total Return Index was down 4% for the worst month on record going back to 1990.
• The S&P 500 went the entire month without a 1% drop, only the third time that has happened the past 20 years during November.
• Small caps had a huge month, as the Russell 2000 gained 11.0% for the largest monthly gain since a 15.0% jump in October 2011.
• During the month, the Russell 2000 (RUT) gained 15 consecutive days for only the fifth time since 1979, but the record of 21 straight green closes from 1988 remains safe.
• Turning to sectors*, financials gained 14.0%, for their best monthly gain since a 14.3% advance in October 2011. Industrials, energy, and materials all led as well. Utilities and real estate lagged as higher rates lowered demand for higher yielding assets. Consumer staples also lagged, as money rotated away from more defensive sectors.
• All four days of Thanksgiving week were green, something that interestingly has now happened in three consecutive election years.

December is known for many things, but from a financial point of view, the best thing might be that it has been a historically strong month for stocks. Per Ryan Detrick, Senior Market Strategist at LPL Financial, “December is the feel-good time of the year and Santa tends to come for equities as well, as no month is higher more often or up more on average. Not to mention the Dow has been lower each of the past two Decembers, and since 1896, it has never been lower three years in a row.”

12-01-16_blog_fig1

Here are some points to remember:

• December has been historically one of the strongest months for equities. Going back to 1950**, the S&P 500 has averaged a gain of 1.6% and been higher 76% of the time; both are the best out of all 12 months.
• When the S&P 500 has been up for the year heading into December, the average return in the month jumped to 2%. When the year has been down heading into the month, the average return dropped to 0.8%.
• The catch is the S&P 500 has been lower in December during the past two years for only the sixth time in history (going back to 1928). It has never been lower for three consecutive years.
• It is rare to see a large pullback during this month as well, as since 1950, the average return when the month is negative has been only -2.1%, the smallest loss out of all 12 months.
• Incredibly, since 1950, only once has the S&P 500 closed the month of December beneath the low close from the month of November.
• Going back to 1950, the S&P 500 has never had its weakest month of the year during the month of December. In fact, it has only had the 11th and 10th worst months of the year seven times.
• The last time December was the worst month of the year for the Dow was in 1916, when it dropped more than 10% during World War I.

 

 

 

 

IMPORTANT DISCLOSURES

Past performance is no guarantee of future results. The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. The economic forecasts set forth in the presentation may not develop as predicted. *As measured by S&P 500 sub-indexes. **The modern design of the S&P 500 stock index was first launched in 1957. Performance back to 1928 incorporates the performance of predecessor index, the S&P 90. Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a nondiversified portfolio. Diversification does not ensure against market risk. Because of their narrow focus, specialty sector investing, such as healthcare, financials, or energy, will be subject to greater volatility than investing more broadly across many sectors and companies. The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment-grade, U.S. dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS, and CMBS (agency and non-agency). The Dow Jones Industrial Average Index is comprised of U.S.-listed stocks of companies that produce other (non-transportation and nonutility) goods and services. The Dow Jones Industrial Averages are maintained by editors of The Wall Street Journal. While the stock selection process is somewhat subjective, a stock typically is added only if the company has an excellent reputation, demonstrates sustained growth, is of interest to a large number of investors, and accurately represents the market sectors covered by the average. The Dow Jones averages are unique in that they are price weighted; therefore, their component weightings are affected only by changes in the stocks’ prices. The Russell 2000 Index measures the performance of the small cap segment of the U.S. equity universe. The Russell 2000 Index is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index. This research material has been prepared by LPL Financial LLC. 

 

 

Self-Employed? Here’s How to Save for Retirement

  
Zigy Kaluzny/Getty Images

Working for yourself comes with lots of perks: setting your own hours, your own dress code and your own workload. That’s probably part of the reason nearly a quarter of workers freelance, either full- or part-time. They make good money, too. Almost half earn six figures.

The downside is making up for all the benefits that employers typically provide. That means figuring out health care coverage (which at least is now easier — if not cheaper — than it was before Obamacare) and setting up retirement accounts.

“When you have a workplace 401(k), a lot of the heavy lifting for retirement planning is already done for you,” says Christine Benz, director of personal finance at Morningstar. “That makes it easier to overcome some of the barriers around getting started with retirement planning.”

That’s not the case for self-employed workers. More than three out of 10 freelancers said they were anxious about saving money for retirement, and more than half reported being behind, according to a November study by TD Ameritrade. By contrast, Americans with access to a workplace retirement plan were more than twice as likely to be very confident about having enough money to retire, according to a separate study by the Employee Benefit Research Institute.

The good news is that saving for retirement is not impossible when you’re working on your own, though it may require more effort. Here’s what you need to know:

You’ll need to put away even more. Financialadvisers recommend that savers stash away at least 15 percent of their income for retirement, including their own money as well as any employer match. Freelancers have to sock away even more income to make up for not getting an employer match. That’s on top of building an emergency fund with at least six months’ worth of expenses that can help weather a dry spell.

It’s important for freelancers to factor the cost of those savings into their business budget, says Randi Merel, a financial advisor for Merrill Lynch. “You have to make sure that you’re earning enough money to cover your benefits,” she says.

You’ve got several options.
There are several ways freelancers can save money for retirement. Here are three to consider:

1) A traditional or Roth IRA: If you already have one of these accounts and aren’t making a ton of money, you can just continue putting aside retirement income there. With a traditional IRA, any withdrawals will be taxed, but you can deduct your contributions.

With a Roth (you’re eligible if your income is less than $120,000), you pay taxes now on your contributions, but the money grows tax-free. You also can make tax-free withdrawals on the principal, so it can double as an emergency fund for new freelancers, although you’ll want to keep the investments fairly conservative. “Then when you start taking on more projects and making more money, you can have a dedicated retirement fund,” says Randall Greene, CEO of Greene Financial Management in Altadena, Calif.

Annual contribution limits for both accounts are $5,500 for younger savers and $6,500 for those over 65.

2) SEP IRA: The most common plan for freelancers and sole proprietors, SEP IRAs allow contributions up to about 20 percent of your compensation, or $53,000, that grow tax-free.  There’s a complex formula to determine your contribution based on your compensation as a self-employed person.

A nice benefit of SEP IRAs is that the deadline for contributions is either Tax Day or when you file your taxes. So, you could put away just 5 percent of your income all year, but decide in February to put another 20 percent in because you find that you have the extra income. That can help you make up for any leaner years when you couldn’t contribute as much. (The same benefit applies to IRAs and Roths, but at much lower limits.)

You can set up a SEP IRA with almost any bank or brokerage, and fees tend to be minimal. “It’s a very cost-effective option,” says Douglas Boneparth, a financial advisor and partner with Longwave Financial.

3) Solo 401(k): Also known as an individual 401(k), these accounts let you put away $18,000 as an employee. Additionally you can contribute about 20 percent of your compensation (again, use the above calculator to determine the exact amount) or $53,000, whichever is less, as your own boss. Those over age 50 can put in an extra $6,000, and spouses who work together can both put in $53,000.

A Solo 401(k) may cost more to set up and require additional paperwork at tax time, but its assets are protected from creditors under the Employee Retirement Income Security Act. Contributions must be made before the end of the calendar year.

Many Solo 401(k)s also offer the option to borrow against your retirement savings, although experts say that doing so is rarely the best financial move.

Skip automation. Most retirement accounts offer an auto-fund option allowing you to set aside a predetermined amount of money each month. That can be more difficult for freelancers, since your income fluctuates. Instead, consider making contributions a few times a year, recommends Gage DeYoung, a certified financial planner and founder of Prudent Wealthcare in Aurora, Colorado. “Plan on doing it at the same time that you pay your estimated quarterly taxes,” he says.

Plan to work longer. Since freelancers control their schedules and how much work they take on, they’re ideally situated to ease into retirement. If you plan to continue working (even if you’ve scaled back) to delay drawing down your retirement funds, then you can retire more securely on a relatively smaller nest egg.

Written by Beth Braverman of Fiscal Times

(Source: Fiscal Times)

%d bloggers like this: