Monday, January 30, 2012

Being Financially Savvy is A Family Business

Like it or not, we’re all involved in running the “family business.” We worry that our parents might outlive their retirement savings. We’re comforted by the thought that family members would probably bail us out if we got into money trouble. We strive to help our children financially, and we’d like to bequeath them at least part of our nest egg.

In short, our family is our asset, liability, and legacy. Now here’s the contention: It’s time to build this notion into the way we manage our money.

Here are just some of the reasons why:

Raising Children: If your children grow up to be financial deadbeats, you may likely rise to the rescue. Indeed, your children could turn out to be your greatest financial liability.

Don’t want your adult children swimming in credit card debt, missing mortgage payments, and constantly asking you for money? Your best bet is to make sure problems never arise by raising money-savvy children.

That’s trickier than it seems. Children grow up spending their parent’s money, so it’s almost inevitable that they will have a skewed financial outlook. After all, for children, all purchases are free, so why should they fret about the price tag or control their desires?

Make your children feel like they’re spending their own money. Give them a candy allowance when they are younger and a clothing allowance when they are teenagers, and insist they live within this budget. This way, instead of you constantly saying “no” to your children, they will learn to say “no” to themselves.

Launching Adults: Once your children get into the work force, you want them to get into the “virtuous financial cycle” where they are steadily building wealth.

They will become able to own their home rather than renting, buy their cars rather than leasing, fully fund their 401(k) plan and their individual retirement accounts each year, and never carry a credit card balance.

The sooner your 20-something children get into this virtuous cycle, the easier it will be for them to meet their goals and less of a financial drain on you. To that end, encourage your children with your words and with your fine example.

A few financial incentives may also help. Tell your adult children if they scrounge together a house payment, you will lock in some additional dollars, or offer to subsidize their 401k contribution at 50 cents on the dollar.

This doesn’t mean you intend to fund their retirement instead of your own, but getting them started as investors sure seems like a smart idea.

The above material was prepared by Peak Advisor Alliance.

Monday, January 16, 2012

The Holiday Afterglow

Maybe it’s just me, but just after “the most wonderful time of the year” is my favorite time of year. I love the start of the new year and all of the passion and resolve that it brings. I have been especially busy these first few weeks of January simply because I have soo many new things I am researching and implementing. I have overheard several conversations during the last few days where people are talking about their new fitness goals or new resolutions to make positive impacts on their financial situation – and I have to admit that the latter statement really made my ears perk up.

What is it about the first week of January that makes us feel all warm and inspired? Why do we feel the need to make changes simply because a date changed? I have a theory that I think holds true in my life and maybe for your too:

I crave improvement

I think I might be an improvement addict. It doesn’t matter how marginal the improvement is, I love it. I even love just thinking about it. That might give some of you a little insight to who I am as a person but the truth is there. I think at the end of the day the reason I love the afterglow of the holidays is simply because I can see what we did, measure it, and think about ways to improve next year.

Does that hold true for you? Why do you chose to make resolutions or goals around the first of the year?