Meeting with a Financial Advisor

Posted on Wednesday 28 May 2008

Yesterday, a friend and coworker sent me an e-mail saying he won a free lunch for ten people and would I like to come.  I don’t turn down free food so I said sure.  Today he e-mailed me to confirm as well as tell me the ‘catch’.  In exchange for the free lunch, we had to give ten minutes of our time to an Ameriprise financial advisor.  I still wanted the free lunch so I figured what the heck.

I will give the advisor credit.  True to his word, he didn’t take up more than about ten minutes.  He gave his spiel and passed out forms for us to fill out specifying what financial topics we wanted to learn more about as well as if we would like a complimentary 45-minute consultation.  There was no hard sell and he was nothing but friendly.

However, I still declined the consultation.  It was nothing personal but he didn’t meet my ‘standards’.   He was not a CFP (Certified Financial Planner) nor did he hold any other designations (i.e. RIA or PFS).  I asked if he held any ‘series’ licenses.  He replied series 7 and series 66.  Those allow you to sell investment vehicles.  That said to me that he hasn’t bothered to obtain any formal education in actual financial planning but he will sell you something.  I don’t find that very useful.  What’s more, he is compensated via commission vs being fee-only.  That could pose a conflict of interest.  I would prefer to work with someone whose fidicuary obligation is to me.  One of my coworkers did sign up for the consultation though so I’ll be interested to see how it went.

savvy @ 1:31 PM
Filed under: General Finances
Save Money by Using What You Have

Posted on Tuesday 27 May 2008

Bike Parking 

Creative Commons License photo credit: MoBikeFed

Lately I’ve been hearing/reading about the new Wii Fit.  I’m always saying that I’m going to start working out so I thought it might be a fun (albeit costly) way to motivate myself.  After further consideration and some subliminal messages from Mr. Savvy (playing YouTube reviews of the Wii Fit that said it’s basically a waste of time and money), I decided to make do with what I already have.  After all, if I want to run (which I don’t, LOL), I can go outside and do it for FREE.  Likewise with the yoga.  There are yoga shows on TV all the time.  Not to mention, I never use the yoga DVDs I picked up at the Target dollar spot (because they’re wack but that’s neither here nor there).

So what did I end up doing?  Riding my bike (for FREE) around the neighborhood at Mr. Savvy’s prompting.  Though I was dog-tired afterwards (I was still sore from rafting over the weekend), it was a good workout.  I was tricked into riding for two miles (I thought it was only one) but I’m sure my heart/body will thank me later.

What are ways that you’ve saved by using something you already have?

 

savvy @ 11:20 AM
Filed under: Frugality
Protect Your Assets

Posted on Tuesday 20 May 2008

umbrellas
Creative Commons License photo credit: mari_isabel20 Just as important as amassing assets is protecting them. This is the primary purpose of insurance. By paying premiums, you are paying someone else to assume the risk (of death, disability, damage, etc.) and allow you to protect your assets. Most people believe they need health insurance, auto insurance and homeowners/renters insurance. However, most neglect another type of valuable (IMHO) insurance – umbrella insurance.

I had researched umbrella insurance last year but found that insurance companies believe that owning/operating a motorcycle is a great risk. Go figure – LOL. Therefore, in order to obtain umbrella insurance, I would have had to significantly increase the insurance coverage on my motorcycle (liability only) and my umbrella insurance premiums would have been quite high. Now that I’ve sold my motorcycle, I decided to call my insurance company once again.

But before I get into that, let me explain what an umbrella insurance policy does.  It provides liability coverage above and beyond the limits of your current insurance (i.e. homeowners/renters and auto).  As an example, let’s suppose you cause an auto accident and are held liable for $200K of damages.  If your auto policy limit is only $100K, then you are personally responsible for the remaining $100K.  Not fun, huh?  Being held liable can easily bankrupt people.  Even if you don’t go bankrupt, a large portion of your assets can be taken from you.  I definitely don’t want that.  Hence, the need for umbrella insurance.

Most umbrella coverage is a minimum of $1M so that’s what I requested when I called my insurance company last night.  However, as my assets grow, I will re-evaluate that amount.  I was asked a series of questions designed to assess whether or not I’m ‘high risk’.  Some of the factors that comprise high risk are owning boats/motorcycles/rental property.  That’s not to say you won’t be able to obtain coverage but your premiums will also be higher.  Certain professions are deemed high risk as well – anyone who holds public office or sits on a board of directors as well as journalists (sorry Frugalista!).  Also, held in consideration is whether or not you own any ‘dangerous’ pets such as Rottweilers or pitbulls.

After passing the battery of questions, the agent evaluated my auto coverage.  My policy limit was $100K/$300K but I was told I would need to increase that to $300K/$300K in order to obtain umbrella coverage.  I guess $300K is the magic number at which they feel comfortable providing coverage.  That change increased my auto policy by $84/year.  The umbrella policy is $252/year.  So the grand total for $1M of protection is $336/year or a mere $28/month.  To me, that’s a small price to pay for peace of mind.

savvy @ 9:19 AM
Filed under: Insurance
Don’t Turn INexpensive Fun into Expensive Fun

Posted on Monday 12 May 2008

Most personal finance blogs advise people to find less expensive options for having fun, i.e. go camping instead of taking a full-fledged (and expensive vacation).  While this is good advice, it can be very easy to turn what should be an inexpensive trip into a not-so-inexpensive-anymore trip.

I’ll give you an example from my own life.  Mr. Savvy likes to camp.  Me, not so much but I make the best of it which means I must camp ‘in style’.  We headed to our local sporting goods store recently in preparation for our trip.  The only thing we actually needed was a new propane tank for our grill. 

What did we leave with?  We got the propane.  I got a spelunker hat (it’s actually called a headlamp but spelunker hat sounds more fun) for me because it’s dark in the woods.  Then Mr. Savvy said it doesn’t actually provide that much light so I got a lantern too.  Common sense would have said get one or the other but not both but I think my spelunker hat is cute.  Of course, I had to get batteries, lots of batteries – can’t chance running out of power in the woods.  Then we got a super-duper warm sleeping bag.  Yeah we already have a sleeping bag but it’s not super-duper warm and I get cold easily.  I did resist the urge to buy a handy-dandy all in one spice bottle though.  I would be oh-so-convenient to not carry five different bottles into the woods but I had to draw the line somewhere.

I’m not sure how much all that stuff cost (though I did have a coupon of course) because I stuck Mr. Savvy with the bill since he’s the one who likes to camp, hahaha.  However, we easily spent $50 on things we didn’t need and have survived without when camping in the past.  So beware of inadvertently turning an inexpensive activity into a costly activity.

savvy @ 9:08 AM
Filed under: General Finances andTravel
Challenge Yourself!

Posted on Tuesday 6 May 2008

It’s very easy to get complacent in life as well as with your finances.  I’m definitely guilty of this.  Therefore, i’ve decided to give myself a challenge.  I hope you’ll join in and create your own challenge.

I currently save ~20% of my gross income for retirement.  My challenge will be to increase that amount to 25% for this year.  I think it may prove difficult (I’ll be honest, I like my standard of living and don’t want to cut back) but I’m going to try it anyway.

For the purpose of this challenge, gross income will be my gross salary and any bank account interest received as well as any miscellaneous or side income.  I will not be including interest or dividends paid to retirement accounts as I have no access to those.  Retirement savings will be defined as my 401(k), IRAs and taxable brokerage account NOT any general savings accounts.

I usually do a month-end financial statement so sometime this week I will add a status bar as of April 30th and then update monthly after that.  What are YOU going to challenge yourself to do?

savvy @ 9:51 AM
Filed under: 401(k) andInvesting andIRA andRetirement andSaving
Saving for Retirement

Posted on Thursday 1 May 2008

People often ask in what order should they utilize the various retirement accounts/options.  Below is my take on the matter.

Stage 0 – Have an e-fund (at least 3 months’ expenses) in place – This should be your first priority so that when (not if) the unexpected happens, you don’t have to accrue debt.

Stage 1 – 401(k) up to the company match – This is typically the most beneficial because you get ‘free money’ (the company match) as well as tax savings.  Each dollar you put into your 401(k) reduces your taxable income, saving you between 10 and 35 cents (depending on your tax bracket) for each dollar.

Stage 2 – Traditional IRA, if you’re eligible – Depending on your AGI, you may get a full or partial tax deduction for your contributions.  There is also a saver’s credit for those deemed low-income (under $26K for singles, $39K for head of household and $52K for married filing jointly).

Stage 3 – 401(k) to the maximum ($15,500 for 2008 unless over age 50, then $20,500) – Once again, you are able to reduce your taxable income (and therefore your taxes) by contributing to your 401(k).

Stage 4 – Roth IRA if ineligible for a traditional IRA – While you won’t receive any tax deductions for your contributions, you are using after-tax dollars.  Therefore once you retire, qualified distributions are not taxed.

Stage 5 – Taxable Accounts – I only recommend utilizing taxable accounts for retirement once you have exhausted your other options.  It makes fiscal sense to take full advantage of all the tax-deferred and tax-advantaged accounts that are available to you.

Of course, one size does NOT fit all when it comes to retirement planning.  If you’re self-employed or employed by a company that does not offer a 401(k), then you will need to seek out other options but there are several to choose from.

savvy @ 5:17 PM
Filed under: 401(k) andIRA andRetirement andTaxes