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This question was submitted by a reader! Do you have a money question you’d like Gen Y Planning to answer in a future blog post? Submit it to genyplanning.com/askgyp.

What do I need to know about the new Trump tax plan? How can I best prepare myself for the change? (My husband and I both work full time and have two kids; we own a duplex that we rent out and live in, but we’re thinking of buying a house next year…I realize this scenario won’t apply to all your readers but wanted to provide background.) I’m wondering what to take into consideration with the tax law changing.

Great question! Many of my clients have been wondering the positive and negative ways they’ll be affected by the new tax plan.

Obviously, different types of households are affected in different ways. Since you’re parents and homeowners, I’ll focus on some provisions of the tax bill that you’re sure to notice. Keep in mind that provisions affecting individual taxpayers will expire at the end of 2025, and what happens after that depends on what Congress votes into the tax code in several years.

Tax Changes for Everyone
  • New tax brackets: All taxpayers are bound to notice the shift: 10%, 12%, 22%, 24%, 32%, and 35%. Here’s a breakdown of the new 2018 tax brackets.
Tax Changes for Parents
  • Child tax credit: This was doubled to $2,000, with a $400,000 income phaseout for married filers. Parents will receive one credit per child.
  • Personal exemption: There is no longer a $4,050 personal exemption, which for a family of 4 was a $16,200 deduction (you used to get one exemption per member of your household).
  • Standard deduction: This was doubled to $24,000, so more taxpayers will elect to take the standard deduction instead of itemizing. Unfortunately, this is a lower deduction that you would have gotten before with the personal exemption plus standard deduction for a family of four (that would have been $28,200).
Tax Changes for Homeowners
  • Home equity loan deduction: You used to be able to deduct the interest for a home equity loan of $100,000 or less. If you planned to borrow against the equity in your home this year, you won’t get a tax break as a result.
  • Mortgage interest deduction cap: You used to be able to deduct the interest for a mortgage of up to $1 million, and now that deduction has been capped at a $750,000 mortgage. This especially affects homeowners in cities with expensive real estate.
  • State and local tax cap: You can now only deduct up to $10,000 of property and state and local income taxes. This is something to keep in mind if you’re moving to a high cost-of-living area.
  • Alternative Minimum Tax: AMT is imposed on a taxpayer or corporation if it is higher than their regular income tax. The income threshold is increasing to $70,300 for singles, up from $54,300, and to $109,400 for married couples, up from $84,500. This means that fewer people will be subject to AMT.

Here are some helpful articles that explain the new tax bill in more detail:

The post Ask Gen Y Planning: What Do I Need to Know About the New Tax Bill? appeared first on Gen Y Planning.

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This question was submitted by a reader! Do you have a money question you’d like Gen Y Planning to answer in a future blog post? Submit it to genyplanning.com/askgyp.

What do I need to know about the new Trump tax plan? How can I best prepare myself for the change? (My husband and I both work full time and have two kids; we own a duplex that we rent out and live in, but we’re thinking of buying a house next year…I realize this scenario won’t apply to all your readers but wanted to provide background.) I’m wondering what to take into consideration with the tax law changing.

Great question! Many of my clients have been wondering the positive and negative ways they’ll be affected by the new tax plan.

Obviously, different types of households are affected in different ways. Since you’re parents and homeowners, I’ll focus on some provisions of the tax bill that you’re sure to notice. Keep in mind that provisions affecting individual taxpayers will expire at the end of 2025, and what happens after that depends on what Congress votes into the tax code in several years.

Tax Changes for Everyone
  • New tax brackets: All taxpayers are bound to notice the shift: 10%, 12%, 22%, 24%, 32%, and 35%. Here’s a breakdown of the new 2018 tax brackets.
Tax Changes for Parents
  • Child tax credit: This was doubled to $2,000, with a $400,000 income phaseout for married filers. Parents will receive one credit per child.
  • Personal exemption: There is no longer a $4,050 personal exemption, which for a family of 4 was a $16,200 deduction (you used to get one exemption per member of your household).
  • Standard deduction: This was doubled to $24,000, so more taxpayers will elect to take the standard deduction instead of itemizing. Unfortunately, this is a lower deduction that you would have gotten before with the personal exemption plus standard deduction for a family of four (that would have been $28,200).
Tax Changes for Homeowners
  • Home equity loan deduction: You used to be able to deduct the interest for a home equity loan of $100,000 or less. If you planned to borrow against the equity in your home this year, you won’t get a tax break as a result.
  • Mortgage interest deduction cap: You used to be able to deduct the interest for a mortgage of up to $1 million, and now that deduction has been capped at a $750,000 mortgage. This especially affects homeowners in cities with expensive real estate.
  • State and local tax cap: You can now only deduct up to $10,000 of property and state and local income taxes. This is something to keep in mind if you’re moving to a high cost-of-living area.
  • Alternative Minimum Tax: AMT is imposed on a taxpayer or corporation if it is higher than their regular income tax. The income threshold is increasing to $70,300 for singles, up from $54,300, and to $109,400 for married couples, up from $84,500. This means that fewer people will be subject to AMT.

Here are some helpful articles that explain the new tax bill in more detail:

The post Ask Gen Y Planning: What Do I Need to Know About the New Tax Bill? appeared first on Gen Y Planning.

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With the new year around the corner, many of you are setting financial goals for 2018. You’re paying off the last of your student loans, switching jobs, starting that Roth IRA, or getting ready to buy a home.

You might also be in the middle of some major life changes — getting engaged or married, having a baby, or quitting your full-time job to start your own business. Or maybe you decided that you want to retire at 50, and you want to put a plan in place that will allow you to do that.

These are all ideal times to work with a financial planner.

But how do you even find one? What is working with a financial planner like? Shouldn’t you be able to handle this money stuff yourself?  

It’s never been easier to search for, talk to, and work with a financial planner (thanks to Google and video chats!). While it’s possible to handle your finances yourself, we could all benefit from the guidance of a pro. After all, even financial planners have financial planners!

Why Is Working With a Financial Planner Helpful?

What a therapist does for your mental health, or a personal trainer does for your physical health, a financial planner does for your financial health. We take a wide view of your financial values and goals to help you create the life you want and put your money to work for you. We’re part coach, part teacher, part project manager, and part accountability buddy.

We also connect you to other professionals, like accountants if you need tax prep help, estate planning attorneys if you need to draft a will, or insurance agents if you need coverage beyond what your employer provides.

While traditionally, financial planners and advisors pretty much stuck to helping clients with their investments and retirement planning, younger planners like me prefer to look at a client’s situation more holistically.

We ask you about your career goals. We discuss the money lessons you learned from your family when you were growing up. We help couples reconcile their different attitudes toward money. We walk clients through evaluating a job offer or selecting their company benefits during open enrollment.

These are all things that affect your finances, and we keep them in mind as we help clients figure out how their money should be allocated.

One of the biggest benefits I provide is tax planning: helping you lower your tax bill in high income tax years by maximizing your company benefits while taking advantage of Roth conversions in lower tax years.

How Do I Find a Financial Planner I Can Trust?

I highly recommend looking for a fee-only CERTIFIED FINANCIAL PLANNER who is a fiduciary. We don’t make commissions by selling you services you don’t need, so our advice has your best interest in mind. You’ll be charged a clearly-explained fee for our services.

You can easily find financial planners online! All of these networks are for fee-only financial planners. Check out:

It’s common to interview a few planners until you find one that’s a good fit for you. I don’t take offense if you do this! What I want more than anything is for you to find the perfect planner for you!

What Is the Process Like?

At most traditional financial planning firms, you have to meet high asset minimums of $500,000-$1M before a planner will meet with you. Then you’d have to take half a day off of work to drive to their office, look for parking, and then sit in front of the mahogany desk of a man your dad’s age.

From Gen Y Planning’s beginning, I wanted to turn this model upside down! You meet with us on a video call from the comfort of your own home. I offer evening appointments a few days a week so you don’t have to use up vacation time or figure out child care (I love meeting clients’ kids and pets on our calls). And, most importantly, you don’t need to be worth $500,000!

How Is Gen Y Planning Different?

While every financial planning firm has a slightly different process, this is our process at Gen Y Planning:

You begin by filling out an application or prospective client questionnaire. The questions may seem a bit personal, but we take your security very seriously and only use that information to determine if we’re a good fit for each other and what your main financial concerns may be.

The information you provide is the foundation for our initial call. This call is free, and in it you can discuss the reasons you’re looking for a financial planner. We’ll will walk you through the financial planning process and answer your questions.

If you decide to work with Gen Y Planning, you’ll sign an electronic contract that details the work we’ll will do with you and pay an online invoice. From there, you’ll upload recent statements for all your accounts and debts to a secure folder — checking, savings, retirement accounts, investment accounts, mortgage, student loan, and more. We will comb through all of these documents to prepare for our initial client meeting with you. We also send you additional questionnaires to get to know your situation even better.

In our Discovery meeting, you get down to the details. What are your goals and values? What are your concerns? What major financial choices will you be making in the next few years?

We use all the financial data you provided, plus what we learned from you in your meeting, to put together our initial financial planning recommendations. We’re also happy to help you complete tasks on our video call like setting up new accounts, rebalancing your 401(k), and setting up automatic contributions to a new online savings account.

Going forward, we check in with you a few times a year, or more often if your life situation changes. If you have questions that pop up, Gen Y Planning offers clients unlimited email support, so we are here when you need us.

When Should I Fire My Financial Planner?

If you ever worry that your planner or advisor doesn’t have your best interest in mind or you feel like he or she is  trying to sell you insurance products or investments that you don’t need, you don’t have to continue working with them. If your money is invested in a way that makes you feel uncomfortable, then you can (and should) fire your financial planner and find a planner who will listen to you. No one cares more about your money than you do.

If you in inherited assets, you don’t have to work with the same planner or advisor who your family member worked with. Sometimes people feel bad leaving an advisor or financial planner, but this is your money now and you have a duty and an obligation to honor this money in the best way for you and your family. That might mean using a portion of this inheritance to pay down debt or build your emergency savings, rather than aggressively investing it in the stock market like your mom did. (Keep in mind, that there are tax implications to selling investments.)

You should fire any financial planner who is judgmental or condescending toward you. Women and young clients should be especially aware of planners who don’t take them seriously. Sadly, it’s still common for some planners to assume that men control the finances in a couple, or they feel that younger clients with lower net worths don’t need financial planning. Start interviewing other financial planners and find someone who treats you with the respect you deserve.

Looking for a Financial Planner in 2018?

The Gen Y Planning team would love to hear from you! We work with Gen Y and Gen X clients who want to align their money with their values so they can live their best lives. Fill out an application and a member of the team will be in touch.

All of us at Gen Y Planning wish you a happy, healthy, and magical holiday season!

The post Should I Hire a Financial Planner? appeared first on Gen Y Planning.

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Your 20s were all about setting up your financial foundation and establishing good habits. Your 30s were about life changes like getting married, having kids, and building your career.

In your 40s, everything is amplified even more. You’ve got growing kids and aging parents — and what you don’t have is a ton of spare time.

There’s a lot you can do in your 40s to protect your money and care for your family before you begin thinking about retirement in your 50s or 60s. Here’s what you should avoid:

1. Buying More House Than You Can Afford

With your growing family, that starter home in a bad school district isn’t meeting your family’s needs anymore. Suddenly, you want more space for your kids to run around, and you want them to grow up in a neighborhood with lots of friends their age.

It’s tempting to opt for more square footage, a larger yard, and an upscale neighborhood. But this means a bigger home loan, increased maintenance costs, and high property taxes.

After spending the first two decades of adulthood in rental apartments or condos (possibly with roommates!), it’s natural to want a big, beautiful home to hopefully live in for the rest of your life. But beware of buying more home than you can handle. Houses aren’t great investments, so you should be realistic about your budget and avoid tying up all your savings in your home.

2. Not Having the Right Mortgage

Mortgage rates remain quite low (often under 4%, depending on your credit score, loan terms, and other factors). Consider refinancing if you intend to remain in your home for at least a few more years.

I’m a fan of refinancing to a 15-year mortgage. While a 30-year mortgage offers a lower monthly payment, it means you’ll have a mortgage well into your 60s or 70s, which isn’t helpful in retirement. Plus, you’ll pay a lot more in interest.

How much more? Let’s say you have a $250,000 loan. You can get a 15-year mortgage with a 3.14% interest rate and a monthly payment of $1,743. A 30-year mortgage would have a 3.81% rate and a $1,166 monthly payment. Spending nearly $600 less per month is appealing, but you’ll actually spend $106,073 more on interest payments over the life of the 30-year loan!

As your cash flow situation changes, make sure you have the right mortgage for you. You can compare 15- and 30-year mortgages side by side using this calculator.

3. Overspending on Your Kids

A big way to keep up with the Joneses in your 40s is to pour your resources into your kids: tutors, travel sports teams, competitive dance troupes, private school tuition, summer camp … the list is endless!

It hard to say no to everything your kids’ hearts desire and you really do want to provide those things — not just because you love your kids, but because their friends’ parents are your friends and neighbors, and there’s pressure for you to fit in.

This is a good time to reassess your money values and teach your kids about creating their own value system. That way, the whole family is spending money and time on what really matters to each of you, instead of what your neighbors are doing.

4. Not Saving for Retirement Because You’re Saving for College

Many parents I work with want to prioritize funding their kids’ college savings accounts. It’s natural to put your kids first, before yourself. That’s good parenting!

However, I get concerned when parents forgo saving for their own retirement in favor of contributing to a college savings account for their kids. The reality is that your kids can borrow money for college, but you can’t borrow money for retirement. You’re setting your kids up to have to support you in your old age, right when they have young children of their own.

This can become a huge burden for them in the future. A true gift to your kids is to prepare adequately for your own retirement first, and then save for their college educations second.

Once you’re in a financial position to contribute to college savings, consider a 529 Plan, which offers multiple tax benefits. Some plans give you a state tax deduction or credit, your contributions will grow tax-free in the account, and withdrawals for qualified educational expenses are also tax-free.

If your state of residence doesn’t offer a tax deduction or credit, you can choose a plan from a state that does. You can research different 529 Plans available at savingforcollege.com.

5. Not Having a Big Enough Emergency Fund

That $1,000 you stashed away at 22 might have cut it when you were only supporting yourself, but now you’ve got a family. The potential for unexpected expenses is high.

The stakes are higher, too. For example, when you’re young and lose your job, you can float by for a few months by breaking your lease and moving back home. Imagine losing your job when you have a $3,500 monthly mortgage payment, two car payments, grad school debt, a stay-at-home spouse, and three kids!

Give yourself peace of mind. Keep 3-6 months of living expenses in your emergency fund and invest the excess in a taxable brokerage account which you could pull from if you were out of work for an extended period of time.

6. Not Maximizing Credit Card Rewards

If you use credit responsibly (meaning you have an excellent credit score and pay your credit card bills in full and on time every month), you’re missing out if you have a no-frills credit card that doesn’t come with rewards.

A bigger family comes with increased spending, so make that spending work in your favor. Rewards cards can earn you cashback or points that you can use for free or discounted travel. Some cards even include perks like statement credits for airline purchases or the fee for Global Entry.

7. Not Doing Estate Planning

I’ve witnessed friends have to wade through their parents’ complicated estates while grieving their loss. It’s essential to create a plan for supporting your family if you pass away or are incapacitated and can no longer work.

Doing the work now will spare your spouse and children a lot of pain. Work with an estate attorney to create a will, and consider the best ways to leave money to your heirs or charitable organizations to minimize the tax burden on your estate. A financial planner is a great ally to have on your side as you work through this.

8. Not Protecting Your Money in the Event of Divorce

Unfortunately, divorce is a reality for many families, and it can be financially devastating, especially for women. This is why I think it’s important for both spouses to be active participants in their family’s financial planning. Too often, one spouse handles all the money — and the other spouse is in for some nasty surprises if the marriage ends.

If your marriage is at risk, keep a detailed inventory of your family’s assets and hire a lawyer to help you understand how state laws can affect which assets you’d be entitled to.

There are financial planners out there who specialize in working with clients who are going through a divorce, such as CDFAs (Certified Divorce Financial Analysts). They can help you navigate through this tricky time.

9. Not Talking With Your Parents About Their Finances

Just like it’s important for you to set up your estate for the benefit of your children, it’s essential to talk to your parents about their own estate.

The elderly are vulnerable to financial scams because they have the confidence of having managed their money for years, but don’t necessarily understand modern money management. They also might be experiencing some cognitive decline, so it helps to have you on their side as they make financial choices.

Some parents tell their adult children too late that they don’t have enough saved for retirement, or that they expect their kids to support them. I work with a number of clients who help their parents financially, but it takes some planning and budgeting to be able to do this without sacrificing your own goals.

Take Advantage of Your 40s

A lot happens in this decade, but with solid financial and estate planning, and lots of conversations with your family about money, you can maintain a comfortable money cushion for your household while creating the lifestyle you want.

Here’s your checklist for money management in your 40s:

  • Build adequate emergency savings
  • Max out your retirement accounts
  • Fund 529 Plans for your kids
  • Get a life insurance policy to protect your family in case you pass away
  • Get your estate plan in order

The post 9 Money Mistakes to Avoid in Your 40s appeared first on Gen Y Planning.

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“It’s complicated” is a great way to describe life in your 30s. You’ve been working for a while, so you might finally feel more financially stable than ever before. But on the other hand, you often have competing financial priorities. Career growth, serious relationships, family, and major life purchases tend to make this a very busy decade.

Also, tiny wrinkles start showing up where you didn’t have tiny wrinkles before. If you skipped sunscreen in your 20s, start wearing it now!

You hopefully spent your 20s building a solid financial foundation for yourself. You began to save for retirement and emergencies, you established good credit habits, and you made decent progress on paying down your student loans. (Or you might have some catching up to do…)

Here are eight money mistakes to avoid in your 30s and beyond.

1. Not Saving As Aggressively As You Can

The suggestions that you save at least 10% of your income, or contribute enough to your 401(k) to get an employer match, is just a starting point. You should aim to save more aggressively as your income increases. What would saving 20-30% of your income look like?

That means working toward maxing out your 401(k) (you can contribute up to $18,000 in 2017 and $18,500 in 2018). Earning more (and getting married and therefore doubling your annual household income) means you’ll owe more in taxes. Taking advantage of pre-tax retirement accounts is essential in your 30s and beyond, as it allows you to lower your taxable income and hold onto more of your money.

If you’re self-employed, you have a number of tax-advantaged retirement accounts available to you, like SEP-IRAs or Solo 401(k)s.

2. Waiting to Start an Investing Account

A big part of saving more is making your money work harder for you. Even a high-interest savings account doesn’t yield enough in the long term to protect your savings from inflation.

First, max out your retirement accounts (both employer-sponsored accounts and IRAs). If you have money left over after saving for retirement and paying your bills, you can use it to fund a brokerage account.

Investing small sums on a regular basis when you’re young is how you’ll end up with a nice cash cushion when you’re older. But don’t wait too long to begin! I know it’s tempting to focus on your short-term financial needs and tell yourself you’ll start investing later, but time and compound interest are on your side now. You don’t have to spend hours poring over stock tickers, either. Start with an ETF or index fund through Betterment, Vanguard, Fidelity, or Schwab.

Dollar cost averaging into a taxable brokerage account is one of the best ways to set your life up for options and flexibility. You can access this money at any time, so you might use it to buy your dream home, launch your own business, or help your family in the future.

3. Not Talking About Finances With Your Significant Other

As your relationship gets more serious and you begin to talk about moving in together or getting married, you need to have money conversations with your significant other.

Money is one of the top issues couples fight about, and while you may never match each other’s spending and saving styles, you can create a mutually agreeable system for handling your household finances.

Don’t assume that “everything will just work out on its own” if you begin combining your finances without talking about money first. Once you have joint assets, your financial decisions affect each other in a big way.

4. Not Protecting Yourself With Disability and Life Insurance

Disability insurance will help keep you financially afloat if you’re sick or injured and can’t work for a time. Life insurance will provide much-needed money to your spouse or dependents if you die.

One of your biggest assets when you’re young is your ability to earn an income, and this helps protect that asset. You may get disability and life insurance through your employer, but if not, you can purchase individual policies.

Check with any alumni associations or groups that you’re a part of to see if you can get a group long-term disability policy, which is often more affordable than an individual policy.

I’m not a fan of whole life insurance because it’s expensive and doesn’t offer enough coverage that people would need if someone passed away.

Stick to an individual term life policy for 20 or 30 years and consider obtaining 7-10 times your salary. Life insurance quotes are easy to obtain online but depending on the size of the policy you may have to go through medical underwriting. It’s good to do this while you’re young and lock in the premiums for a few decades.

5. Not Being Thoughtful About Your Career

With 10-plus years of working under your belt, you’re likely no longer an entry-level employee. You’re also likely no longer working in the career field you majored in in college.

This isn’t the time to get complacent in your career. Keep learning new skills, keep looking for growth opportunities, and if your current job offers neither of those things, find a new job yesterday. Switching jobs is a great opportunity to negotiate a significantly higher salary for significantly more responsibilities.

As you weigh job offers, look at the benefits companies offer as well. Benefits like health insurance, disability insurance, life insurance, 401(k) matches, and commuter discounts make up a large part of your overall compensation. Consider work/life balance and commuting distance, too.

6. Taking on More Student Loan Debt

For a number of professions, you absolutely have to go to grad school. But if you’re working in a field where a masters or PhD is more of a “nice to have,” think long and hard before you sign up for 10-plus years of paying for that degree, plus interest — especially if you’re already paying back your loans from undergrad.

Grad school may not be worth it if all you’d get out of it is a nice line item on your resume, but not a higher salary or more job opportunities. Think about these issues before you begin applying to programs:

  • The debt! (Obviously.) Grad students can borrow more money at higher interest rates than undergrads can, and those loans are unsubsidized. That means that interest begins building immediately, rather than a few months after you graduate.
  • The years where you can’t work. If you go to school full-time, that’s two or more years where you’re out of the job force and not earning an income. Can you afford this?
7. Having Kids Without Preparing for the Expense

If kiddos are on the horizon for you in the next few years, begin preparing financially today.

The cost of prenatal care and child care can come as a shock. And as your kids grow, they’ll be involved in after-school activities, go on field trips, and eat every crumb of food in your house. You might need to buy a bigger home or a home in a better school district (which often results in higher property taxes).

No wonder kids cost nearly $250,000 to raise until age 18 — not including college tuition!

Obviously the decision to have a kid, or have more kids, is as much an emotional choice as it is a financial one. But kids completely change your financial picture and priorities in ways you can never predict before you have them. It never hurts to prepare!

8. Succumbing to Lifestyle Creep

You have money now! Finally, you can upgrade the clunker car and second-hand IKEA furniture you bought off Craigslist in your 20s! You can go on vacation and stay in a proper hotel instead of crashing on a friend-of-a-friend’s couch! You can ditch those roommates for a condo of your very own!

Yes, you can do all of those things … just try not to do them all at once. It’s so easy to inflate your lifestyle with each bonus or raise, to the point where you might actually be saving less money even though you’re earning more.

Use your extra income to increase your savings for long-term goals like retirement, or medium-term goals like buying a house, before you spend money on upgrading every part of your life.

Take Advantage of Your 30s

This will be a decade of huge life changes: promotions, marriage, kids, home purchases, and more. You’re going to be making big financial decisions.

This is a good time to begin enlisting the help of financial professionals like a financial planner and an accountant. As your situation becomes more complicated, they can navigate you through things like investing, company benefits analysis, tax planning, and reaching those big goals and dreams.

The post 8 Money Mistakes to Avoid in Your 30s appeared first on Gen Y Planning.

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Ah, to be in your 20s. Brunches are frequent, hangovers are less debilitating, and all the big, serious life stuff seems so far away.

So top off your bottomless mimosa, my friend, because you’ve got absolutely nothing to worry about when it comes to your finances … or do you?

Well, I’ve got good news and bad news.

The bad news is you always need to think about your finances, even when you’re just starting out and don’t have much money to your name yet.

The good news is that just a few action items now can set you up for financial comfort later. The earlier you start, the less catching up you’ll need to do in future decades.

People of all ages make money mistakes all the time, so don’t be too hard on yourself if you haven’t been maximizing every savings opportunity. Just try to avoid these common errors 20-somethings make (40-something you will be glad you did!).

1. Not Saving for Emergencies

Unexpected expenses are how many people suddenly find themselves in debt. In fact, more than half of Americans don’t have the savings on hand to afford a $500 emergency.

Protect yourself by building up a cash cushion. Start by setting aside enough money to cover a month of expenses (rent, utilities, phone, etc.) in a savings account that’s separate from your checking account. Gradually grow that amount to three to six months of coverage.

Find the highest interest rate you can for your emergency savings account. You can compare rates on Bankrate. Online banks like Ally often offer the most competitive rates. Set up an automatic contribution from your checking account so your savings can grow effortlessly.

2. Going Without Health Insurance

You may be young, but you’re not immune from injury and illness. Failing to insure yourself properly can lead to some serious emergency expenses (and four- or five-figure debt).

Don’t go without health insurance! If you don’t get this through your employer, open enrollment is happening now through December 15 on Healthcare.gov.

3. Not Getting Renter’s Insurance

Many renters mistakenly think their landlord’s homeowners insurance policy will protect them, which isn’t true. Renters insurance will help you replace items that are stolen or damaged, and can even help with medical costs if someone is injured in your home. By the way, you might not be covered just because your roommate has their own policy! Look into adding yourself to their policy or getting your own.

What else does renters insurance cover? If something you own is stolen from your car, or your luggage is stolen while you’re traveling, your losses are covered. If your apartment is so damaged that it’s uninhabitable during repairs, your insurance policy would pay for your temporary living arrangements.

Think about how much a fire would cost you: replacing your televisions, computers, furniture, clothing, artwork, and other expensive items (add to that the cost of a few weeks in a hotel). You can’t afford to not protect your rental home. And coverage is cheap — under $300 a year for about $30,000 of coverage! You can also add riders to your policy to for additional coverage for high-value items like jewelry, as well.

4. Not Taking Credit Card Debt Seriously

It’s way easier to pay off $2,000 at age 22 than have it balloon to $20,000 at age 32 and have to address it at that time. Get a second job, work over time, live at home, get a roommate — do what you need to do to knock out that few thousand dollars in credit card debt that is hanging around.

5. Being Lazy About Paying Off Student Loans

If the interest rate on your student loans is above 4% and you’ve already paid off your higher interest rate debt, then start paying off your student loans more aggressively.

A good way to do this is to take the money you used to apply toward your other debt (since you’re already accustomed to not having it available to spend) and apply it toward your monthly student loan payments.

Here’s an example. Let’s say you have a $20,000 student loan with a 6% interest rate. To pay it off in 10 years, your monthly payment would be $222, and you’ll end up spending $6,647 in interest payments over the life of the loan.

If you could increase your monthly payment by an additional $100, you’d shave nearly four years off of your repayment schedule, and pay $2,638 less in interest!

6. Not Building Good Credit

Building a good-to-excellent credit score is essential if you’ll ever take out a loan in the future, whether it’s for a home, car, or small business. Someone might check your credit when you apply to a job, rent an apartment, or even sign up for a cell phone plan. Your 20s are the ideal time to establish good credit habits.

Start with a no-fee credit card. I’m a big fan of rewards cards, but while you’re still getting the hang of using credit, find a no-fee card and make a few small charges each month. This isn’t the time to buy rounds for all your friends — credit cards aren’t free money!

Pay your credit card bill on time and (ideally) in full. This will help raise your credit score and keep you out of debt. When you only make the minimum payment, your interest payments will grow exponentially.

Check your credit report. You can access one free credit report per year from each of the three main credit bureaus. Doing this is especially important after major security breaches like what happened to Equifax. Report any errors you find so your credit doesn’t suffer because of a mistake or identity theft.

7. Waiting to Save for Retirement

When you’re young, you’ve got a nice, long time horizon before retirement. This means that you’re in a unique position to let compound interest grow your money.

Take advantage of employer-sponsored retirement accounts, especially if they come with an employer match. Accounts like 401(k)s and 403(b)s let you contribute pre-tax dollars, which is an additional benefit that will save you on your tax bill. Contribute enough to get the full employer match, with the eventual goal of contributing the max (which for 2018 is $18,500).

Max out a Roth IRA. I like these for younger workers because you contribute post-tax dollars today (while you’re presumably in a lower tax bracket) and can withdraw your money tax-free in retirement. If you meet income qualifications, you can contribute up to $5,500 per year.

8. Keeping Up With the Joneses

This manifests itself differently at different ages. When you’re in your 20s, there’s a lot of pressure to project the image of having your life together. A lot of that pressure, surprisingly, comes from your parents.

The baby boomers came of age in a prosperous time, so by the time they were 30, many were already married homeowners with kids. By the time many millennials turn 30, well, they’re none of those things. And that’s okay! So when your well-meaning relatives bombard you with intrusive questions this Thanksgiving, just smile, nod, and help yourself to more stuffing.

Don’t go into a ton of debt for a fancy car. It’s okay to stick to a more modest (and possibly pre-owned!) car for now. So long as your car is safe and isn’t in such disrepair that you have to pour money into fixing it, you’re doing just fine. You can even skip owning a car for awhile if you live in a walkable city.

Don’t buy a house because “real estate is a good investment” or “renting is throwing money away.” When you’re young, you may need the flexibility to relocate for job opportunities. Owning a home is a huge responsibility that you shouldn’t take lightly.

Take Advantage of Your 20s

You’ll never have another decade filled with so much fun, frivolity, and avocado toast (though avocado toast is equally delicious in your 30s, let me tell you).

This is the perfect time to make some small moves toward growing your net worth. My friends who tell me they’ve got $200,000 or more in their retirement accounts at 35 are usually the ones who started saving before they were 25. Even if you can only set aside small sums each month, that money will make a huge difference in your life in the future.

The post 8 Money Mistakes to Avoid in Your 20s appeared first on Gen Y Planning.

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Before going to college, you dedicated a lot of time to think about what you should major in. You likely picked schools to apply to based partially on specific programs they offered.

And now, many years after graduating, you’re feeling a bit stuck and ready to make some kind of career move. How do you figure out what’s next when you no longer want the career you decided on when you were 18 years old?

The reality is that most people don’t work in the fields they majored in, so you have plenty of opportunities to try something new and move toward a different career.

Like many financial planners, I’m a career-changer myself — if I stuck to what I studied in college, I’d be part of a traveling theatre troupe by now! Working in a variety of fields makes you an asset to the many companies that value employees with diverse experiences. Here’s how to position yourself for a career evolution.

Consider Role Changes Where You Already Work

If you like your company but are ready to take on new responsibilities, you might not have to look too far for your next job offer. Companies often like to hire from within, and you probably know of job openings before they’re widely advertised. You also benefit from being able to chat with people on that team so you can get a sense of what the day-to-day work would be like.

If you have the kind of manager who would hold you back, switching roles might be difficult and you’d need to tread carefully (and if they sabotage your attempts to switch departments, you might just need to find a job elsewhere). But if your manager wants your career to thrive whether you work for them or not, let them know of your interest in this new role. They can serve as a reference for you as you apply and interview.

Take on Side-of-Desk Projects

A good way to try out different responsibilities at work without switching jobs is to take on additional projects for other teams as your time allows. You’ll get to know coworkers outside of your department better, build up a new skill set (or hone an existing one), and possibly set the stage for a new role at your company. And if it turns out that the work isn’t for you, you can stop doing it once the project is done!

Seek Out Additional Training

If you’d like to grow your knowledge, look into conferences, classes, and certification programs. Your employer might pay for you to attend, so take advantage of that benefit!

Conferences and other training programs double as a great networking opportunity. You never know who you’ll get to talk to! I happened to meet someone in my CFP classes who later hired me to work at their firm.

Start a Side Hustle

Side hustles aren’t just a great way to earn extra income. You can gain experience in different fields, build up a whole new skill set, and make connections that can turn into full-time opportunities. It’s a low-risk way to try something new.

If you’re looking to take on more projects and earn some extra income, try posting your resume on Upwork and find your next freelance job.

Find a Great Mentor

Having someone in your corner who can advise you and connect you to the right people is so important. A mentor can help you see your strengths and find a career that highlights them.

I’ve been fortunate to have some amazing mentors throughout my career, and I love to mentor fellow financial planners who are looking to start their own businesses. If you’d like more information about my upcoming coaching group for financial planners, send an email to Sara on my team to be added to the email list!

List Your Transferable Skills

This is especially important if you’re looking for a job in a totally different field than the one you’ve been working in. While it’s not easy to totally change career paths, you probably already have the ability to take on all kinds of new roles. Think about all the skills you have that can be applied to any number of companies:

  • Writing
  • Editing
  • Video or audio editing
  • Public speaking
  • Coding
  • Graphic design and photo editing
  • Fluency in a foreign language
  • Project management

That’s just a start! What skills do you have that can land you your next job?

The post How to Create Your Own Career Path appeared first on Gen Y Planning.

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When you’re young and just starting your career, you’ve likely never earned five figures before, so that $30,000 offer for a job in New York City can feel like a king’s ransom! Besides, you barely have relevant work experience yet, so it’s not like you deserve more money. Right?

Wrong! As you gain experience and show your value to your company, you deserve more. As you hunt for a new job and get lowballed on salary even though you’re super-qualified, you deserve more. Asking for a raise or a higher salary offer can be an uncomfortable experience, but at worst you get told no — and at best you get told yes!

Think about the long-term effects of asking for more money. A 2010 study showed that an additional $5,000 a year in income could mean more than $600,000 in earnings over the course of a 40-year career. Add to that a yearly raise, and you’re in a better position to save more money for long-term goals and retire with a comfortable level of savings.

Growing your net worth takes years of earning more and saving more. Let’s get you there!

How to Ask for a Raise at Your Current Job

From the moment you start a job, keep track of your accomplishments. What project did you knock out of the park? What annoying process did you make more efficient? Have you been doing the work of two people because your boss decided not to replace someone who left the company? Did you impress a difficult-to-please client? Write that all down.

After a year, check in with your boss. Lead with your accomplishments. Talk about your plans for future work. And then … ask for a raise. If you have a specific number in mind, mention it. Repeat this every few years, any time you’ve had a major win at work, or any time you switch roles within your company.

Always frame these conversations around your value to the company — not around the fact that you need more money to buy a house, or the fact that you know someone else on your team earns more (that’s helpful information to know, but probably not the reason you’ll get a raise).

If your company can’t give you a raise at this time, see what other perks you can get instead. Maybe you’ll be happy for now with some extra vacation time, the budget to attend a conference, or a bump in your title? Ask for feedback on what would make you more likely to receive a raise in the future, and discuss a raise again in six months.

How to Negotiate a Higher Salary on a Job Offer

The best opportunities you have for rapidly increasing your salary come when you switch jobs, so take advantage!

Negotiating begins well before you receive a job offer. Use tools like Glassdoor to research salary ranges for your field in your geographic area. If a job listing doesn’t indicate the salary range, it’s more than okay to ask during the initial phone interview what they had in mind. This will save you both time if what they offer is much lower than what you’d accept.

Don’t share your previous salary with an interviewer. You want them to pay you what their company thinks this role is worth, not what your former employer paid. If they insist on you giving a number first, offer a range you’d be willing to accept.

If you receive an offer that’s at the low end of your range, tell them the number you were hoping for. They might have room in their budget to pay you more, especially if you were their favorite applicant.

How to Earn Extra Income

I’m a big fan of the side hustle. It’s a great way to start your own company while maintaining the security of a full-time job, learn a new skill set, or broaden your professional network. This can all make you more marketable the next time you search for a new job.

And of course, you’ll make more money! Bringing in additional income can help you speed up debt repayments or saving for retirement. Even earning a few hundred extra dollars a month can make a big difference.

If you’re at the top of the salary range for your field, or your company instituted a salary freeze, you might not have a chance for a raise through your full-time job. Taking on side work is like getting the raise your company can’t give you right now.

The post How to Earn More and Grow Your Net Worth appeared first on Gen Y Planning.

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When I work with financial planning clients, I tend to ask a lot of questions that don’t seem to be directly related to money at all. Where do you want to live? Do you have any upcoming travel plans? Do you like your job?

Here’s the thing: most decisions you make in your life are connected to your financial situation in some way. Travel can be expensive, and the city you move to affects your cost of living.

One of the biggest decisions you make throughout your life is your career path. Seemingly small career decisions you make today can affect your financial situation 30 years from now in a big way.

Having decades to go until you retire means you can set yourself up now for long-term career and financial growth. That doesn’t mean that you should always choose the job that pays the highest salary, by the way — there are many other factors that you should consider when weighing a job offer. Your happiness is important, too!

So what should you think about as you progress in your career? Pay attention to these factors that could make or break your financial plan.

Income Potential

Research the average salaries for jobs within your field to get an understanding of what job and salary growth would realistically look like for you. What roles are you qualified for today? What promotions can you seek out with a few more years of experience under your belt? What other jobs might your skills also be a good match for?

Whenever you switch jobs, it can be an opportunity to dramatically increase your salary. Don’t neglect to negotiate! I know that negotiating salaries is scary, but an extra $5,000 per year really adds up.

Usually the worst answer you can get is “no.” But if a company takes it further and rescinds your offer just because you tried to negotiate with them (apparently this happens sometimes!), think of it this way: you just dodged a huge bullet and are free to find a job at a company that isn’t run by jerks. Life’s too short to put up with that treatment, anyway.

Company Benefits and Perks

There’s a reason I do annual company benefit reviews with my clients during open enrollment season: taking full advantage of these benefits can really improve your financial situation.

Your overall financial picture will be affected by these job perks:

Employer-Sponsored Retirement Accounts like 401(k)s, 403(b)s, or SIMPLE IRAs. These accounts all allow you to set pre-tax money aside for retirement, which can save you hundreds or thousands of dollars a year in taxes. Add an employee match to these accounts and you’ve got both free money and a lower tax bill!

Some of you might have a Roth option on these accounts, which means you contribute after-tax dollars, but the money in the account grows tax free! This is great for those of you who are in the 15% or 25% tax bracket and anticipate your income going up in the future.

Other Tax-Advantaged Benefits like Health Savings Accounts (HSAs), FSAs, Child Care FSAs allow you to set money aside to pay for qualified medical or child care expenses. Some companies offer commuter benefits that allow you to pay for parking or transit passes pre-tax.

Stock Options and Employee Stock Purchase Plans (ESPP) allow you to become a shareholder of your company at a discount. These programs are confusing to many beginner investors, but I encourage you to learn about what your company offers and take advantage if you can.

Incentive Stock Options have different tax implications from Non-Qualified Stock Options, so make sure you talk to your CPA about how this will affect your tax situation. An ESPP allows you to purchase company stock at a discounted price (usually a 10% or 15% discount).

Cost of Living

Depending on which field you work in, you might be tied to certain cities (or free to live wherever you want!). You might choose to live in a certain place for other reasons, like being close to family, and that can affect your career prospects.

Your career might take you to from Seattle to San Francisco, for example. While both cities are notorious for high costs of living, California has the highest income tax rate in the country — and Washington state has no income tax. Those are the kinds of small details to think about when you decide where to live and how high of a salary to negotiate for.

Sometimes, it might be an amazing career opportunity that leads you to a lower cost of living area, which can have a dramatic impact on your net worth. Check out this Success Story from CNBC for an inside look on a family that made that choice, and how it positively impacted their lives.

The post The Role of Career Planning in Financial Planning appeared first on Gen Y Planning.

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Many people refer to retirement savings plans as “401(k)s” even if they’re not, because so many financial advice articles out there focus heavily on 401(k)s.

The reality is that there are a variety of ways to save for retirement, and the options you choose can depend on what kind of company you work for, or if you work for yourself. And since 401(k) plans can be complicated and expensive for employers, smaller companies generally don’t offer them.

If you’re self-employed or a small business owner, there are some other retirement savings accounts you may have access to instead.

(And if you want to learn more about creating your own benefits package when you’re self-employed, check out last week’s blog post!)

IRAs

Traditional and Roth IRAs are Individual Retirement Accounts that you open and own, regardless of whom you work for. You can contribute up for $5,500 per year. There are some differences between the two account types when it comes to taxes and withdrawals.

Roth IRAs: You contribute post-tax dollars to this account. Your earnings grow tax-free and you can withdraw money tax-free after you turn 59½. There are income limits that might make you ineligible to contribute. If you anticipate being in a higher tax bracket in the future, Roth IRAs are ideal because you pay the taxes on your contributions now, when you’re in a lower tax bracket, instead of when you make the withdrawals in retirement.

Traditional IRAs: You contribute pre-tax dollars to this account. Your earnings grow tax-free, but you pay taxes on withdrawals in retirement. This is ideal if your income exceeds the Roth IRA limits or you think you’ll be in a lower tax bracket in retirement. You are required to make withdrawals from traditional IRAs once you turn 70½.

Pro tip: If you’re not covered by an employer sponsored retirement plan like a 401(k) then you are eligible to make tax deductible IRA contributions regardless of your income!

For more information on IRAs, check out these posts from the Gen Y Planning blog:

SEP-IRAs

If you’re a freelancer, contractor, self-employed individual, or small business owner, you can open a SEP-IRA. These accounts work similarly to traditional IRAs in that you contribute pre-tax dollars and are taxed on withdrawals in retirement. Unlike traditional IRAs, you can contribute significantly more to a SEP-IRA — for 2017, that limit is the lesser of 25% of your income or $54,000.

If you work for yourself, you make the contributions yourself. If you’re a business owner with employees, you contribute to a SEP-IRA on their behalf and they don’t make contributions. You must make equal contributions for all employees of the business, including yourself. This is why they are mainly used for solo-business owners.

Solo 401(k)s

If you’re a business owner with no employees,  you can contribute to a solo 401(k). If your spouse earns income from your business, they can contribute, too.

Solo 401(k)s are similar to IRAs in that there are both traditional (pre-tax) and Roth (post-tax) options. A nice benefit of these accounts is that you can set aside a lot of money each year because you’re both the employee and employer of a sole proprietorship. You can contribute up to $18,000, while your business can contribute 25% of your compensation (up to a $54,000 maximum for employee and employer contributions combined).

SIMPLE-IRAs

Employers with fewer than 100 employees can set up SIMPLE-IRAs. The employer must contribute to the account, whether or not the employee contributes as well, and can contribute either 2% of the employee’s compensation, or a dollar-for-dollar match of employee contributions up to 3% of their compensation. Employees can contribute up to $12,500 per year.

HSAs

Health Savings Accounts allow you to set aside money to spend on qualified medical expenses if you have a high deductible health care plan. You can contribute up to $3,400 for an individual or $6,750 for a family in 2017.

I’m a huge HSA fan because of the triple tax benefit: you contribute money pre-tax, the account grows tax-deferred until retirement, and if you withdraw money for medical expenses, those withdrawals are also tax-free. You can invest the money in your HSA as well!

Many people use their HSA as a form of retirement account because once you turn 65, you can withdraw money for any reason without paying penalties. You will have to pay taxes on money withdrawn for non-medical reasons.

For more information on HSAs, check out these posts from the Gen Y Planning blog:

The post Retirement Planning if You’re Self-Employed or a Small Business Owner appeared first on Gen Y Planning.

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