Segelke Financial Group: November 2014

Sunday, November 9, 2014

Avoiding Family Squabbles Over Your Estate

Published November 5, 2014 | By admin

What steps may help assets transfer without a fight?

Should you rely on “will power” to bequeath assets? The more complex your estate, the more ill-advised that choice becomes. Having only a will in place when you die may not be enough. As MarketWatch noted recently, research from the Williams Group (a major estate planning firm) indicates that estate fights reduce inherited wealth for as many of 70% of families.1

Inheritance is no simple matter. In a simpler world, an individual with a $3 million estate could pass away and simply leave $1 million each to his or her children – enough said, over and done. But life isn’t so simple: one heir may deserve more money as a result of a disability or fate dealing out hardships, while another may truthfully deserve less due to his or her behavior, or his or her financial success.

If you feel one heir should receive more of your estate than another, that wish needs to be articulated in your estate planning. Stating these wishes before you pass away (the why, the how, the how much) and letting your heirs know how you feel isn’t cruel – candor now is preferable to confusion and in-fighting later.

Beyond money, what about possessions & real property? Homes, businesses, raw land, antiques, artwork, collectibles, heirlooms, and pets: your children and grandchildren may have different perceptions of their future value, and disagree on their destiny. Being clear about who is going to get what today (and why specific decisions are being made) may help defray potential legal challenges tomorrow.

Consider leaving some things up to the kids. You could call in appraisers to set values for your real and personal property, make a list of those assets and their values, and subsequently allow your heirs to take turns choosing the possessions or properties they want to inherit. If a squabble breaks out between heirs over this or that item, you can settle it with a family auction – that item goes to the highest bidder when you pass away.

Also, consider a revocable trust. More people should, as wills have basic shortcomings. If they have any imprecise language or lack in terrorem clauses (which threaten heirs that challenge them with disinheritance), they can invite lawsuits and other battles. If the author of a will is elderly, a spouse, ex-spouse or children could try to assert that the author had insufficient mental capacity at the time of authorship or wrote the will under undue influence.2

Wills are made public; they are probated. While there are many non-probate assets that pass directly to a designated beneficiary or a joint tenant (jointly held bank accounts with right of survivorship, jointly titled real property, POD accounts, most types of IRAs and workplace retirement accounts), other assets do not. The length of the probate process varies by state. It takes weeks in some states, months in others.3,4

Probate requires money as well as time: even if you have named the most capable executor around, the court costs and lawyer and appraiser fees involved may still eat up as much as 5% of your estate (if you’re a millionaire, that’s $50,000). Mostly, those fees go for basic clerical work.3,4

Assets within a revocable trust can avoid probate (assuming they have been properly transferred into the trust, of course). Upon the death of the grantor who established the trust, the grantor’s appointed trustee distributes the assets within the trust per the grantor’s wishes, no probate involved. The chance of a family fight over inherited assets lessens.5

Living wills? Those can prove quite valuable. You may not die suddenly, and you could be incapacitated for a period just prior to your death. Should that be the case, a living will (also called an advance directive) can articulate how you want to be treated. Additionally, a health care proxy document can appoint someone (known legally as a health care agent) to authorize doctors and nurses to carry out those directions. A health care proxy is also crucial in instances when a younger individual becomes severely disabled.5

Opt for more control. When you pass away, your money will have only three possible destinations. Percentages of it will go either to your heirs, to charity, or to the government. If your estate planning goes no further than a will, you could be inviting a dispute and things may not turn out quite the way you want. While creating a revocable trust can cost ten times as much as creating a simple will, it may be worth every penny in the end.6

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

1 – blogs.marketwatch.com/encore/2014/09/29/how-to-prevent-family-feuds-when-it-comes-to-your-inheritance/ [9/29/14]

2 – nolo.com/dictionary/in-terrorem-clause-term.html [10/9/14]

3 – nolo.com/legal-encyclopedia/why-avoid-probate-29861.html [10/9/14]

4 – nyparenting.com/stories/2013/5/fp_askattorney_2013_05.html [5/13]

5 – money.usnews.com/money/personal-finance/articles/2012/07/17/how-to-avoid-fights-over-inheritance [7/17/12]

6 – nhmagazine.com/July-2013-1/Wills-Trusts-and-Estate-Planning/ [7/13]

Gauging Your Financial Well-Being

Published October 1, 2014 | By admin

Six signs that you are in good shape.

How well off do you think you are financially? If your career or life takes an unexpected turn, would your finances hold up? What do you think will become of the money you’ve made and saved when you are gone?

These are major questions, and most people can’t answer them as quickly as they would like. It might help to think about six factors in your financial life. Here is a six-point test you can take to gauge your financial well-being.

Are you saving about 15% of your salary for retirement? That’s a nice target. If you’re earning good money, that will probably amount to $10-20,000 per year. You are probably already saving that much annually without any strain to your lifestyle. Annual IRA contributions and incremental salary deferrals into a workplace retirement plan will likely put you in that ballpark. As those dollars are being invested as well as saved, they have the potential to grow with tax deferral – and if your employer is making matching contributions to your retirement account along the way, you have another reason to smile.

Do you have an emergency fund? Sadly, most Americans don’t. In June, Bankrate polled U.S. households and found that 26% of them were living paycheck-to-paycheck, with no emergency fund at all.1

A strong emergency fund contains enough money to cover six months of expenses for the individual who maintains it. (Just 23% of respondents in the Bankrate survey reported having a fund that sizable.) If you head up a family, the fund should ideally be larger – large enough to address a year of expenses. At first thought, building a cash reserve that big may seem daunting, or even impossible – but households have done it, especially households that have jettisoned or whittled down debt. If you have done it, give yourself a hand with the knowledge that you have prepared well for uncertainty.1

Are you insured? As U.S. News & World Report mentioned this summer, about 30% of U.S. households don’t have life insurance. Why? They can’t afford it. That’s the perception.2

In reality, life insurance is much less expensive now than it was decades ago. As the CEO of insurance industry group LIMRA commented to USN&WR, most people think it is about three times as expensive as it really is. How much do you need? A quick rule of thumb is ten times your income. Hopefully, you have decent or better insurance coverage in place.2

Do you have a will or an estate plan? Dying intestate (without a will) can leave your heirs with financial headaches at an already depressing time. Having a will is basic, yet many Americans don’t create one. In its annual survey this spring, the budget legal service website RocketLawyer found that only 51% of Americans aged 55-64 have drawn up a will. Just 38% of Americans aged 45-54 have drafted one.3

Why don’t more of us have wills? A lack of will, apparently. RocketLawyer asked respondents without wills to check off why they hadn’t created one, and the top reason (57%) was “just haven’t gotten around to making one.” A living will, a healthcare power of attorney and a double-check on the beneficiary designations on your investment accounts is also wise.3

Not everyone needs an estate plan, but if you’re reading this article, chances are you might. If you have significant wealth, a complex financial life, or some long-range financial directives you would like your heirs to carry out or abide by, it is a good idea. Congratulate yourself if you have a will, as many people don’t; if you have taken further estate planning steps, bravo.

Is your credit score 700 or better? Today, 685 is considered an average FICO score. If you go below 650, life can get more expensive for you. Hopefully you pay your bills consistently and unfailingly and your score is in the 700s. You can request your FICO score while signing up for a trial period with a service such as TransUnion or GoFreeCredit.4

Are you worth much more than you owe? This is the #1 objective. You want your major debts gone, and you want enough money for a lifetime. You will probably always carry some debt, and you can’t rule out risks to your net worth tomorrow – but if you are getting further and further ahead financially and your bottom line shows it, you are making progress in your pursuit of financial independence.

1 – dailyfinance.com/2014/09/03/why-american-wages-arent-rising/ [9/3/14]
2 – money.usnews.com/money/personal-finance/articles/2014/07/16/do-you-have-enough-life-insurance [7/16/14]
3 – forbes.com/sites/nextavenue/2014/04/09/americans-ostrich-approach-to-estate-planning/ [4/9/14]
4 – nerdwallet.com/blog/credit-score/credit-score-range-bad-to-excellent/ [9/4/14]

Fall Financial Reminders

Published October 19, 2014 | By admin

The year is coming to a close. Have you thought about these financial ideas yet?

As every calendar year ends, the window slowly closes on a set of financial opportunities. Here are several you might want to explore before 2015 arrives.

Don’t forget that IRA RMD. If you own one or more traditional IRAs, you have to take your annual required minimum distribution (RMD) from one or more of those IRAs by December 31. If you are being asked to take your very first RMD, you actually have until April 15, 2015 to take it – but your 2015 income taxes may be substantially greater as a result. (Note: original owners of Roth IRAs never have to take RMDs from those accounts.)¹

Did you recently inherit an IRA? If you have and you weren’t married to the person who started that IRA, you must take the first RMD from that IRA by December 31 of the year after the death of that original IRA owner. You have to do it whether the account is a traditional IRA or a Roth IRA.¹

Here’s another thing you might want to do with that newly inherited IRA before New Year’s Eve, though: you might want to divide it into multiple inherited IRAs, thereby promoting a lengthier payout schedule for younger inheritors of those assets. Otherwise, any co-beneficiaries receive distributions per the life expectancy of the oldest beneficiary. If you want to make this move, it must be done by the end of the year that follows the year in which the original IRA owner died.¹

Can you max out your contribution to your workplace retirement plan? Your employer likely sponsors a 401(k) or 403(b) plan, and you have until December 31 to boost your 2014 contribution. This year, the contribution limit on both plans is $17,500 for those under 50, $23,000 for those 50 and older.^2,3

Can you do the same with your IRA? Again, December 31 is your deadline for tax year 2014. This year, the traditional and Roth IRA contribution limit is $5,500 for those under 50, $6,500 for those 50 and older. High earners may face a lower Roth IRA contribution ceiling per their adjusted gross income level – above $129,000 AGI, an individual filing as single or head of household can’t make a Roth contribution for 2014, and neither can joint filers with AGI exceeding $191,000.³

Ever looked into a Solo(k) or a SEP plan? If you have income from self-employment, you can save for the future using a self-directed retirement plan, such as a Simplified Employee Pension (SEP) plan or a one-person 401(k), the so-called Solo(k). You don’t have to be exclusively self-employed to set one of these up – you can work full-time for someone else and contribute to one of these while also deferring some of your salary into the retirement plan sponsored by your employer.²

Contributions to SEPs and Solo(k)s are tax-deductible. December 31 is the deadline to set one up for 2014, and if you meet that deadline, you can make your contributions for 2014 as late as April 15, 2015 (or October 15, 2015 with a federal extension). You can contribute up to $52,000 to SEP for 2014, $57,500 if you are 50 or older. For a Solo(k), the same limits apply but they break down to $17,500 + up to 20% of your net self-employment income and $23,000 + 20% net self-employment income if you are 50 or older. If you contribute to a 401(k) at work, the sum of your employee salary deferrals plus your Solo(k) contributions can’t be greater than the aforementioned $17,500/$23,000 limits – but even so, you can still pour up to 20% of your net self-employment income into a Solo(k).^1,2

Do you need to file IRS Form 706? A sad occasion leads to this – the death of a spouse. Form 706, which should be filed no later than nine months after his or her passing, notifies the IRS that some or all of a decedent’s estate tax exemption is being carried over to the surviving spouse per the portability allowance. If your spouse passed in 2011, 2012, or 2013, the IRS is allowing you until December 31, 2014 to file the pertinent Form 706, which will transfer that estate planning portability to your estate if your spouse was a U.S. citizen or resident.¹

Are you feeling generous? You may want to donate appreciated securities to charity before the year ends (you may take a deduction amounting to their current market value at the time of the donation, and you can use it to counterbalance up to 30% of your AGI). Or, you may want to gift a child, relative or friend and take advantage of the annual gift tax exclusion. An individual can gift up to $14,000 this year to as many other individuals as he or she desires; a couple may jointly gift up to $28,000 to as many individuals as you wish. Whether you choose to gift singly or jointly, you’ve probably got a long way to go before using up the current $5.34 million/$10.68 million lifetime exemption. Wealthy grandparents often fund 529 plans this way, so it is worth noting that December 31 is the 529 funding deadline for the 2014 tax year.¹

Citations.

1 – forbes.com/sites/deborahljacobs/2014/10/08/eight-key-financial-deadlines-to-keep-in-mind-this-fall/ [10/8/14]

2 – tinyurl.com/kjzzbw4 [10/9/14]

3 – irs.gov/uac/IRS-Announces-2014-Pension-Plan-Limitations;-Taxpayers-May-Contribute-up-to-$17,500-to-their-401%28k%29-plans-in-2014 [10/31/13]

How the Thrift Savings Plan Stacks Up

Published August 11, 2014 | By admin

Comparing the TSP to other retirement savings vehicles.

Federal workers and military personnel are offered a supplemental retirement savings plan to complement their pensions – the Thrift Savings Plan, or TSP. Just how well does it measure up to other forms of popular retirement accounts?

Picture a 401(k) or 403(b) with five fund choices. In a nutshell, that is what the TSP resembles. Does this sound limiting? Whether you perceive it to be or not, there is no denying that the funds offered by the TSP have performed well in recent history.

A traditional TSP is funded akin to a traditional 401(k) or 403(b). Pre-tax dollars are directed from your paycheck to fund the account, thereby reducing your taxable income. Put another way, you don’t pay tax on traditional TSP contributions or earnings until they are withdrawn. (Contributions to a traditional TSP made by uniformed service members are tax-exempt and those contributions may be withdrawn tax-free, although earnings off of them will still be subject to tax.)¹

Is a Roth TSP option available, allowing you to contribute after-tax dollars in exchange for potential tax-free withdrawals down the road? Yes. You can have a Roth TSP. No income limits preclude you from having one. In fact, you can make both Roth and traditional contributions to a TSP per your contribution election. You can’t convert a traditional TSP balance to a Roth TSP balance, however.¹

Assets within a TSP may be directed into one or more of five funds. BlackRock Institutional Trust Company, a division of investment giant BlackRock, manages four of them: the F, C, S and I funds. These are all index funds: one tracks large caps, one small caps, another international stocks, and a fourth the U.S. bond market. The fifth, the G fund, is managed by the Federal Retirement Thrift Investment Board (FRTIB), which oversees the TSP program. G fund assets are invested in a special-issue Treasury security; therefore, those assets are principal-protected.^2,3

The funds have performed pretty well of late. As a 2013 Wall Street Journal column noted, the TSP bond fund under BlackRock’s supervision beat its mirror – the Barclays U.S. Aggregate Bond index – every year from 2007-12. From 2003-12, it averaged a return of 3.61% a year. The large-cap fund, which mimics the S&P 500, tied or beat the performance of that index in all six of those years as well. The other two funds beat their benchmarks in 2010, 2011 and 2012.^3,4

It is often stated that investors shouldn’t put up with annual account fees of more than 1%, and the FRTIB has taken that to heart. The typical stock fund charges an annual administrative fee of around half a percent; retirement savers using the TSP saw their funds charge just 0.029% yearly expenses in 2013.^3,5

Doesn’t an IRA give you many more investment choices? Undeniably. The handful of funds offered by the TSP pale in comparison to the variety of investments you can hold in an IRA. You can go Roth in the TSP, however, just as you can with an IRA.

How does the TSP compare to indexed universal life insurance? As TSP funds have beaten benchmarks in recent years, the TSP compares favorably to IUL policies (which are sometimes strongly marketed to service members). In the TSP, your money isn’t tied up in an insurance product. While the cash value of IUL policies may grow over time as a byproduct of the insurance company investing the pooled money of policyholders, their cash value may also decrease if the broad stock market declines. While offering some downside protection, IUL policies also commonly put a ceiling on annual growth of cash value. You will find no such ceiling on TSP index funds.⁶

Are loans permitted? Yes, and the rules are similar to those for 401(k)s and 403(b)s. As long as you work for the federal government or are in the uniformed services, you can take a loan and pay it back with interest. (You must be in pay status.) General purpose loans have repayment terms of 1-5 years, residential loans (for home buying or home construction) repayment terms of 1-15 years.⁷

Are there employer matches? Yes, in some instances. TSP participants who are also enrolled in the Federal Employees’ Retirement System (FERS) receive Agency Matching Contributions (AMCs) from whatever federal agency employs them. The first 3% of pay contributed to the TSP is matched dollar-for-dollar, the next 2% at 50¢ on the dollar. Matching contributions cease if regular employee contributions cease. Catch-up contributions are also allowed starting in the year a TSP participant turns 50.⁸

If you would like to learn even more about the retirement saving potential of the TSP, talk to a financial or human resource professional today.

1 – tsp.gov/planparticipation/eligibility/traditionalRothContributions.shtml [5/6/14]
2 – tsp.gov/investmentfunds/fundsoverview/fundManagement.shtml [5/6/14]
3 – tinyurl.com/mes9bzs [1/11/13]
4 – tinyurl.com/ly7xf7p [1/29/14]
5 – tsp.gov/investmentfunds/fundsoverview/expenseRatio.shtml [5/6/14]
6 – wiki.fool.com/Pros_and_Cons_of_Indexed_Universal_Life_Insurance [6/22/12]
7 – tsp.gov/planparticipation/loans/loanBasics.shtml [5/6/14]
8 – tsp.gov/planparticipation/eligibility/typesOfContributions.shtml [5/6/14]

The Retirement Mindgame

Published July 29, 2014 | By admin

Your outlook may influence your financial outcome.

What kind of retirement do you think you’ll have? An outstanding one? A depressing one? What if it all starts with your outlook?Qualitatively speaking, what if the success or failure of your retirement begins with your perception of retirement?

A whole field of study has emerged on the psychology of saving, spending and investing: behavioral finance. Since retirement saving is a behavior (and since other behaviors influence it), it is worth considering ways to adjust behavior and presumptions to encourage a better retirement.

Delayed gratification or instant gratification? Many people close to retirement age would take the latter over the former. Is that a good choice? Often, it isn’t. Financially speaking, retiring earlier has its drawbacks and may lead you into the next phase of your life with less income and savings.

If you don’t love what you do for a living, you may see only the downside of working longer rather than the potential boost it could provide to your retirement planning (i.e., claiming Social Security later, tapping retirement account balances later and letting them compound more). If you see work as a daily set of unfulfilling tasks and retirement as an endless Saturday, Saturday will win out and your mindset will lead you to retire earlier with less money.

On the other hand, if you change your outlook to associate working longer with retiring more comfortably, you may leave work later with a bigger retirement nest egg – and who wouldn’t want that?

If you don’t earmark 66 or 70 as your retirement year, you can become that much more susceptible to retiring as soon as possible. You’re 62, you can get Social Security; who cares if you get less money than you get at 66 or 70, it’s available now!

Resist that temptation if you can. While some retirees claim Social Security at age 62 out of necessity, others do out of inclination, perhaps not realizing that inflation pressures and long term care costs may render that a poor decision in the long run.

The good news is that Americans are waiting longer to claim Social Security than they once did. Increased longevity may be a factor in that trend, but the findings are encouraging nonetheless. The number of men claiming Social Security at age 62 increased 2.3% from 2007-09 to 35.8%, and the number of women claiming Social Security at age 62 increased 2.6% in that span to 38.9%. Still, these percentages fell short of those a generation before. From 1986-97, roughly half of all women claimed Social Security when they turned 62 and nearly half the men did; since 1997, the percentages have never approached those levels.^1,2

Setting a target age for retirement – say, 65, 66, or even 70 – before you turn 60 can help mentally encourage you to keep working to that age. Providing your health and employment hold up and you can work longer, patience can lead you to have more Social Security income rather than less.

Take a step back from your own experience. For some perspective on what your retirement might be like, consider the lives of others. You undoubtedly know some retirees; think about how their retirements have gone. Who planned well and who didn’t? What happened that was unexpected? Financial professionals and other consultants to retirees can also share input, as they have seen numerous retirements unfold.

Reduce your debt. Rather than assume new consumer debts that advertisers encourage us to take on commensurate with salary and career growth, pay down your debts as best you can with the outlook that you are leaving yourself more money for the future (or for unexpected situations).

Save and invest consistently. See if you can increase your savings rate en route to retirement. Don’t look at it as stripping money out of your present. Look at it as paying yourself first, and investing for the comfort of your retirement.

1 – ssa.gov/retirementpolicy/research/early-claiming.html [4/13]2 – fool.com/retirement/general/2014/06/07/social-security-what-percent-of-americans-claim-be.aspx [6/7/14]

Couples Retiring on the Same Page

Published July 22, 2014 | By admin

Agreeing about what you want from retirement is crucial.

What does a good retirement look like to you? Does it resemble the retirement that your spouse or partner has in mind? It is at least roughly similar?

The Social Security Commission currently projects an average retirement of 19 years for a man and 21 years for a woman (assuming retirement at age 65). So sharing the same vision of retirement (or at least respecting the difference in each other’s visions) seems crucial to retirement happiness.¹

What kind of retirement does your spouse or partner imagine? During years of working, parenting and making ends meet, many couples never really get around to talking about what retirement should look like. If spouses or partners have quite different attitudes about money or dreams that don’t align, that conversation may be deferred for years. Even if they are great communicators, assumptions about what the other wants for the future may prove inaccurate.

Are couples discussing retirement, or not? It depends on who you ask – or more precisely, what poll you reference.

A 2013 survey of 5,400 U.S. households by Hearts & Wallets (a research firm studying retirement money management trends) found that just 38% of couples plan for retirement together. The fourth Couples Retirement Study conducted by Fidelity Investments (released this February) offered similar results. In that study, 38% of the working couples polled cited some disagreement on what kind of lifestyle they would retire to, 32% disagreed on how much they would need to work in retirement, and 38% hadn’t planned to manage retirement health care costs.^2,3

In contrast, Capital One ShareBuilder surveyed 1,008 employed adults this winter and found that on average, couples discuss retirement 14 times a year. (There was no word on the depth or length of those conversations, however.)⁴

Be sure to talk about what you want for the future. A few simple questions can get the conversation going, and you might even want to chat about it over a meal or coffee in a relaxing setting. Dreaming and planning together, even on the most basic level, gives you a chance to reacquaint yourselves with your financial needs, goals and personalities.

To start, ask each other what you see yourselves doing in retirement – individually as well as together. Is the way you are saving and investing conducive to those dreams?

Think about whether you are making the most of your retirement savings potential. Could you save more? Do you need to? Are you both contributing to tax-advantaged retirement accounts? Are you comfortable with the amount of risk you are assuming?

If your significant other is handling the household finances (and the meetings with financial professionals about a retirement strategy), are you prepared to take over in case of an emergency? When one half of a couple is the “hub” for money matters and investment decisions, the other spouse or partner needs to at least have an understanding of them. If the unexpected occurs, you will want that knowledge.

Speaking of knowledge, you should also both know who the beneficiaries are for your IRAs, workplace retirement accounts, investment accounts, and life insurance policies, and you both need to know where the relevant paperwork is located.

A shared vision of retirement is great, and respect for individual variations on it is just as vital. A conversation about how you see retirement today can give you that much more input to plan for tomorrow.

1 – forbes.com/sites/jamiehopkins/2014/02/03/planning-for-an-uncertain-life-expectancy-in-retirement/ [2/3/14]
2 – heartsandwallets.com/till-death-or-retirement-or-retirement-do-us-part/news/2013/02/ [2/13]
3 – shrm.org/hrdisciplines/benefits/articles/pages/retirement-couples-disagree.aspx [2/7/14]
4 – usatoday.com/story/money/personalfinance/2014/03/16/retirement-planning-couples-fight/6368967/ [3/16/14]

Bad Spending Habits That Can Be Corrected

Published July 1, 2014 | By admin

A little frugality may lead to a lot of financial progress.

Americans have a great deal of disposable income relative to many other nations, yet our free spending can take us further and further away from the potential for financial freedom. Some people fall into crippling spending habits and injure their finances as a consequence.

Bad habit: failing to save. Saving – saving even $50 or $100 a month – isn’t that hard under most financial conditions. Even so, some households don’t put much of a priority on building a cash reserve of some kind, a portion of which could be used for equity investment.

When you don’t make saving a goal, you don’t have any money to withdraw in a pinch – so if you need to get ahold of some money, where do you find it? Basically, you have three options. One, turn to friends or Mom or Dad. Two, divert money that would go toward a core need (food, rent, the heating bill) toward the sudden crisis. Three, charge your credit card. (There are other options, but they are best not explored.)

Good habit: save just a little, then a lot. You can start a savings campaign by saving “invisibly” – that is, just spending $10 or $15 or $20 less on a regular expense each month. Maybe two or three, even. That’s less than a dollar a day per expense. When your earnings climb further above your financial baseline, you can increase the amount you save/invest.

Bad habit: buying things on a whim. The correlation between impulsive spending and credit card use isn’t too hard to spot. Spending money you don’t have on material items that will soon depreciate doesn’t put you ahead financially.

Good habit: set a budget when you shop. As you arrive at the market, the mall or the local power center, arrive with a limit on what you will spend on that shopping trip and stick to it. Take an hour (or a day) to mull over any big buying decisions – are you buying something you really need? Lastly, use cash whenever you can.

Bad habit: living on margin. Living above your means, charging this and that credit card – this is a path toward runaway debt. You may look rich, but you’ll carry a big financial burden that risks being “out of sight, out of mind” in between credit card statements.

Good habit: strive for lasting affluence, not temporary bling. Possessions symbolize wealth to too many Americans. Real wealth is measured in accumulated assets. They aren’t usually visible, but you can count on them in the future, in contrast to ever-depreciating luxury goods.

Bad habit: buying unnecessary services. Cable subscriptions, extended warranties, service contracts for highly reliable items, health club memberships that translate into little more than an alternate place to shower – they all add up, they all siphon some of our dollars away each month. In many cases, we pay for options rather than necessities.

Good habit: evaluate who benefits most from those services. Are they benefiting the provider more than the consumer? Are they entrees to a “main course” – a steady, long-range financial exploitation?

Go against the norm – it might leave you a little wealthier. In April, Gallup found that 62% of Americans liked saving money more than spending it. Just 34% liked spending more than saving. This appreciation of frugality is relatively new. As recently as 2006, 50% of Americans told Gallup that they enjoyed saving more than spending with 45% preferring spending.¹

If we love saving money, a key statistic doesn’t reflect it. According to the Commerce Department, the typical U.S. household was saving 4.8% of its disposable personal income in May. The personal savings rate for 2013 was 4.5%, the least in any year since 2007. Compare that to 6.7% across the 1990s, 9.3% across the 1980s and 11.8% during the 1970s.^1,2

Perhaps many of us want to save but can’t due to financial pressures. Perhaps the economic rebound is encouraging personal consumption over saving. Whatever the reason, Americans on the whole don’t seem to be saving very much. That’s the status quo; going against it might help you build wealth a little more easily.

1 – gallup.com/poll/168587/americans-continue-enjoy-saving-spending.aspx [4/21/14]
2 – bea.gov/newsreleases/national/pi/pinewsrelease.htm [6/26/14]