College, Students

College Major … Choose Wisely

Making College Pay

I often hear people say, “You go to college to get an education.”  I’d say a more accurate statement is, “You go to college to prepare you to get a (good) job!”  Too many parents and students miss the subtle yet profound difference in these two statements.  Let’s think about this for a moment.  Does it really make sense to spend four to five years and tens of thousands of dollars attending and graduating from college only to find out there are no jobs (or very low paying jobs) in the course of study you’ve chosen?  However, it is my experience that many students give very little consideration to the long-term impact of choosing a particular major (I was one of those students!).  Parents are often just as guilty in that they provide very little guidance.

Kiplinger Magazine published an article that focused on the ten best and worst majors and the results are worth noting. 

Ten best college majors

Computer science; information management systems; software engineer; economics; finance; physics; statistics; civil engineering; actuarial mathematics and nursing.  For the most part, the common theme here is math, science and computers.  This group experienced many more job opportunities with starting wages in the $50,000 to $60,000 range.

Ten worst college majors

Culinary arts; music; child & family studies; animal science; media (radio, TV newspaper); interior design; drama; art; education; and graphic design.  A strong theme here is creative arts.  This group will often struggle to find jobs and starting pay will be nearly half that of those who graduate within a top ten major.

Why this matters

A few years ago, I was a trainer at a financial seminar and a sixty-something attendee came up to me after a session and said, “All this talk about money!  Money is not that important!”  My response was, “You’re broke, right?”  After a moment of stunned silence, he said, “Well yes, but…” 

Ok, I get that money is not the most important thing in the world and there are lots of things that are more important, but having enough money to pay your bills and save for retirement is immensely important.  I’ve watched way too many families struggle their entire adult lives because they didn’t earn enough money.  Understand that students entering college don’t have the perspective of not earning enough money because, in many cases, their parents have provided for most, if not all, of their needs.  Many see college as a fun adventure and give little thought as to ‘what happens next’ after they graduate.  They choose a major because it sounds fun.  The result is often the frightening realization that there are no jobs for which their major has prepared them and they are forced to accept a low paying job and, too often, return home to live! 

Here’s the takeaway

If you’re a student, before you choose your major, research what the job prospects are as well as the long range opportunities for advancement.  If you’re a parent, do your best to steer your children during their primary education and early secondary education towards academic areas where they’ll have the best opportunity to succeed financially.  I remember counselling a college student who had majored in accounting (a very good choice) but who was burned out had decided to take a management training job rather than continuing for one more year and getting his masters in accounting.  My partner, Greg Weyandt, CPA, and I convinced him his future was ever so much brighter if he gutted it out another year.  He did and he easily got a great job and has become a rising star in his field.  My associate, Beth Moody, CFP, points out that there are many incredibly rewarding careers with only modest income prospects.  If you choose this path, do so knowingly and prepare yourself to become a master of managing your money.  The bottom line is that your choices make a big difference in the trajectory of your life so be thoughtful and deliberate.

One final point.  My partner, Michael Wagner, CPA, pointed out that another major goal (opportunity) in attending college is to significantly expand your personal relationships.  Understand that financial success is always built around other people so the more people you have great relationships with, the more likely you are to succeed.  Use college as an opportunity to connect with lots of people through active participation in several campus organizations.  Not doing so is probably my greatest college regret.

Stewart H. Welch, III, CFP®, AEP, is the founder of THE WELCH GROUP, LLC, which specializes in providing fee-only investment management and financial advice to families throughout the United States.  He is the co-author of J.K. Lasser’s New Rules for Estate, Retirement and Tax Planning (John Wiley & Sons, Inc.) and THINK Like a Self-Made Millionaire. Visit his Web Site  Consult your financial advisor before acting on comments in this article.

Smart Moves for College Grads

Smart Moves for College Graduates

Smart Moves for College Graduates

As I reflect back on my college years I mainly remember how much fun it was and then once I entered the ‘real world’ feeling a bit shocked at the reality of it all.  There is definitely a feeling of leaving one world and entering another completely different one.  I also remember receiving very little coaching about how the new world game was played.  That led to a lot of mistakes…or what I now call “learning opportunities”.  In this two-part series, I’ll share with you twelve of the lessons I wish someone had shared with me back then.

  1. Be flexible in finding a job.  I recently read an article attributed to the White House stating that real unemployment is zero percent.  Don’t you believe it!  The job market, particularly for college graduates, is particularly tight.  In this market, you may find that you have to ‘settle’ for a less than ideal job.  Your goal is to build work experience as you continue to pursue your dream job.  Whatever the job is, treat it as if it’s the best job in the world and your goal should be to master the position.  Learn the habit of always giving your very best.  People (employers) will notice. 
  2. Get more education.  The alternative to getting a job now in a challenging job market is to get more education.  When I graduated from college I was very ready to be finished with school but in today’s environment an MBA or other advanced degree can be very valuable and buy you some additional time for the job market to continue to improve.
  3. Begin saving from your very first paycheck.  This habit, more than anything else, will make you wealthy over time.  It is the single most important key for most people who become financially independent.  Start with a minimum of 20% of your paycheck…more if you can swing it.  Ten percent will be for long-term investing and, in a separate account, the other ten percent will be for future ‘big ticket’ items such as down payment on a home.  Set this up so that the money is either automatically taken from your paycheck or transferred from your bank account to an investment account.  Don’t ponder this one…just do it!
  4. Learn about personal finance and investing.  If you were to commit fifteen minutes per day to studying personal finance and investing, you’d be a ‘genius’ in a year!  Seriously, this stuff turns out to not be that difficult to master.  Mostly, it’s simply paying attention to your money and investing on a consistent basis.
  5. Buy a home.  Since the housing bust in 2008, home prices have rebounded but it’s still a great time to buy a home and home ownership is a great way to build wealth over time.  More good news is that interest rates on mortgages are still very attractive but realize that rates are likely to rise over the next few years so your best move is to buy as soon as you can.
  6. Avoid ‘bad’ debt.  If you could learn this lesson now, it will save you much misery in the future.  The definition of bad debt is any debt that is used for purchasing something that is declining in value.  For example if you use a retail store credit card to buy a closet full of clothes and then face months’ worth of payments…that’s bad debt.  Using a credit card to finance a big night on the town when you know you can’t pay the credit card bill in full when it rolls around…that’s bad debt.  Buying furniture and appliances on credit is bad debt.
  7. Avoid bad debt around owning a car.  I once had someone tell me, “I thought you always had a car payment!”  He was dead serious and he was also broke!  A car, by definition, is a depreciating asset.  In fact, when you drive a new car off the lot it depreciates in value about 10% that very day!  Most people arrive at the dealership, find their dream car and ask the salesperson, “How much are my payments?”  You’re asking the wrong question of the wrong person!  Dealers have been asked this question so many times that they figured out the perfect system to sell more cars and more expensive cars.  To get payments as low as possible, they’ll now finance a vehicle over as long as eighty-four months!  This is a terrible financial strategy for you.  Here’s a better approach:  If you don’t have cash to pay for a car, decide on how much car you can afford based on payments over twenty-four months.  In all likelihood, this will be a used car.  Once you pay your car off, continue to make ‘payments’ but now do it in an investment account dedicated as a new car fund.  Continue to drive your existing car and fund your ‘next car account’ until you can pay cash for your next car and then keep this cycle going forever.  That way you have your money working for you rather than for someone else.
  8. Embrace the concept of ‘Good Debt’.  Good debt is the use of financing to buy things that you expect to appreciate in value.  The best example is buying a home. Other examples include borrowing for investing such as buying rental properties or to start a business.  Even borrowing to advance your education can be a good use of debt.
  9. Protect yourself from adversity.  Great health may be your greatest asset.  There’s an ancient proverb that goes something like this, “A man with good health is a man of a thousand dreams.  A man with poor health is a man but with one dream.”  Like consistent investing produces wealth, a consistent program of exercise and good nutrition yields good health.  This should be one of your top priorities.  Believe me; it’s easy to allow other things to seem more important.  In addition, build cash reserves in a money market account equal to at least three to six months of your paycheck as a buffer against the unexpected expenses.  Also, make sure that you cover the insurance basics including owning disability income insurance, health insurance, auto insurance and life insurance if you have family dependents.
  10. Prepare every day for retirement. Ninety-seven percent of Americans arrive at retirement pretty close to dead broke.  The reason?  They felt they could worry about that ‘next year’…only next year never came.  Most companies offer some type of retirement plan that you can participate in and some also offer matching contributions.  But whether your company does or doesn’t have a plan you should set one up.  Your best first choice may be a Roth IRA.  To learn more, visit and type ‘Roth IRA’ into their search engine. 
  11. Cut the parental cord.  I just read an article that stated that 30% of millennials live with their parents! Reflecting on my thirty-plus years as a financial advisor, I’ve noticed that the most successful children have been those who had to ‘make it on their own’.  More so than at any other time, I see so many ‘helicopter’ parents who insist on helping run their children’s lives well into young adulthood.  Yes, it’s time to leave the safety of the nest, spread your wings and fly!  You can do this and you’ll be proud of yourself when you succeed.  So will your parents!
  12. Always be learning. Just when you thought you were finished with education, I’m telling you that you are just getting started.  There is no greater investment you can make than in yourself.  A primary life goal should be to be an insatiable learner.  Identify successful people in your chosen field and model what they do.  In fact see if they will act as a mentor to you.  If you ask, you’ll find most successful people are very willing to offer periodic guidance. 

Realize this…as a college graduate, the only limitations you have are the ones that you place on yourself.  Create a vision of what you would like to accomplish; develop a written plan; be prepared to ‘correct and continue’ along the way; and focus on continuous improvement.  There is nothing you cannot achieve!

Stewart H. Welch, III, CFP®, AEP, is the founder of THE WELCH GROUP, LLC, which specializes in providing fee-only investment management and financial advice to families throughout the United States.  He is the co-author of J.K. Lasser’s New Rules for Estate, Retirement and Tax Planning (John Wiley & Sons, Inc.) and THINK Like a Self-Made Millionaire. Visit his Web Site  Consult your financial advisor before acting on comments in this article.


Habits of Superstar Employees

Six Habits of Superstar Employees”

In last week’s column, I discussed seven tips for having a winning job interview.  Once you’ve got that new job, here are the six habits for becoming a super star employee:

  1. “Lights on…lights off”.  Before I started my first job, my father gave me this advice, “How you conduct yourself in the first six months of work will set the tone for how your employer sees you forever.  Make an effort to be the first one at the office and the last one to leave.  Your employer will notice and in his or her mind, will see you as a hard worker.”  I took that advice and found that what started out as a 6-month goal became a habit that helped me start my own business.  One side benefit is that more time on the job equated to more job experience and a shortening of the learning curve.  I also found that folks were more willing to mentor the ‘new kid with hustle’.  So start your new job with a secret weapon, “lights on…lights off!”
  2. Adopt a ‘Whatever it takes’ attitude.  Don’t be a ‘That’s not my job!’ type of employee.  Most businesses in America are small businesses and everyone needs to be prepared to help where needed.  In fact, ideally you want to become the ‘go-to’ person when a special project comes up.  When we hire someone at our two firms, our job description is: ‘Whatever it takes’…then we proceed to outline what we call ‘Primary Areas of Responsibility’.   
  3. Be a team player.  Americans are innately competitive by nature, but in business, the greatest success comes from cohesive teams.  You know you have a good team when members are willing to help each other without concern for personal recognition.
  4. Do the unexpected.  What can you do outside your normal job responsibilities to help or add value to the company?  Roxie, my personal assistant, takes it upon herself to take lunch orders every day, sort through everyone paying their share and pick up the food.  This has been instrumental in building inner-office relationships since on most days we eat together.  Ramona is part of our administrative group.  She attends the Brock Business School’s monthly networking breakfast and uses it as an opportunity to promote our company.  Jeff, our systems administrator, often works on our systems at night or weekends.  I have similar stories for virtually every associate.  No one has asked them to take on these extra efforts but management certainly notices and appreciates them for doing so.  What can you do to help your company that would be unexpected?
  5. Think like an owner.  Too often there’s a sense of ‘us versus them’ between employees and management.  Think of how you’d act and what decisions you’d make if you owned the company and let that help guide your activities and office-related conversations.  If you have a suggestion for improving the company, let management know.  Conversely, if you have a problem that needs management’s attention, be sure to have at least one possible solution to that problem.  Understand that owners will notice when you are thinking like an owner.
  6. Embrace the concept of ‘continuous improvement’.  Every day think of what you can do to improve your skills at least a little bit.  In particular, look at where you are and where you want to go within your company then ask yourself, “What do I need to do to prepare me to move to the next level?”  It may be more education or experience in another area.  Once you decide, lay out a plan of action and either implement it on your own or with the assistance from your company.  In our companies, we require all advisors to have advanced education such as the Certified Financial Planner™ designation and we have a program that financially supports that goal.

In the end, you are in charge of your own destiny.  By proactively taking these six steps, you’ll become a superstar employee and be on your way to maximizing your career potential.

One final thought: If you are not a new employee but rather a seasoned pro, how many of the six habits would your coworkers attribute to you?

Stewart H. Welch, III, CFP®, AEP, is the founder of THE WELCH GROUP, LLC, which specializes in providing fee-only investment management and financial advice to families throughout the United States.  He is the co-author of J.K. Lasser’s New Rules for Estate, Retirement and Tax Planning (John Wiley & Sons, Inc.) and THINK Like a Self-Made Millionaire. Visit his Web Site  Consult your financial advisor before acting on comments in this article.

Wealth Creation

Wealth Creation: Own Your Own Business

Wealth Creation“Wealth Creation—Part 4: Be Your Own Boss”

More and more people are considering pursuit of the dream of owning their own business so they can control their own financial destiny.  It also happens to be the number one path to wealth creation.

Unfortunately, the majority of new businesses fail within the first four years.  Years ago I was the executive producer and host of a cable TV show where I interviewed self-made millionaire entrepreneurs who would share their secrets of success.  I’ll never forget the advice one multimillionaire business owner gave me.  He said the key to success for any business is three things.  The first key is, “Stay close to your numbers.”  Let’s see how we can apply this rule to tilt the odds of success in your favor.

I often hear that start-up entrepreneurs should expect to lose money for the first three to five years.  Nonsense!  Your business strategy should include a ‘plan’ to be profitable your first year.  Two key points here:

  • Before you start your business, you’ll need to develop a detailed month-by-month cash flow projection for the first 12 to 24 months of operation along with a less detailed projection of cash flow for an additional two to three years.  This exercise will suggest how much start-up capital you’ll need.  Technically, you’ll want to follow three sets of numbers on a monthly basis: Balance Sheet, Profit and Loss Statement and Cash Flow Statement.  The Balance Sheet lists all of the business assets, liabilities and net worth.  The Profit and Loss Statement tracks income and expenses to arrive at your profit (or loss).  The Cash Flow Statement tracks the sources and uses of your cash.  Managing your actual income and expenses against your budget will be one of your most important tools for success.  In good times, good cash management is your key to growth.  In bad times, it’s your key to survival!
  • Most new businesses require start-up capital to cover rent, equipment, salaries, etc. until such time as the business revenue can cover ongoing business expenses.  One of the biggest mistakes entrepreneurs make is underestimating these costs.  Often the entrepreneur is seeking capital from either a bank or friends and relatives and they typically ask for what they estimate will be needed, which more often than not, turns out to be inadequate.  Going back for additional funding typically proves to be a much more daunting task because the entrepreneur has now lost credibility from a business management perspective.  To your initial estimate, you should add 50% to 100% because my experience is that you will have underestimated your capital needs by that much money.

This entrepreneur’s second rule for success is, “Stay close to your customers”.  As a start-up entrepreneur, you may not have any customers yet but you do need a detailed written plan of who is your ‘ideal’ customer.  Further, you’ll need to develop a plan for how to serve these customers better than anyone else along with a plan for reaching new customers (your marketing plan).  The most successful businesses build growth based on a product or service niche.  How can you create a unique customer experience?

 The final key to success is, “Stay close to your employees”.  In the beginning, you may serve as the president, secretary, treasurer and janitor but soon you will need to develop your team.  Start by developing an organizational chart based on a successful business five to ten years into the future.  What ‘positions’ would need to be filled between now and then?  Look for people whose strengths counter-balance your weaknesses.  For example, if you excel at sales and marketing, hire someone who is excellent at operational details and managing financial systems.  One lesson I learned in building my businesses is to hire the very best people…people who are self-starters.  They will be more expensive, but they will be worth it.  Once you have great people in place, the best way to keep them is to set up a communications system that allows you to give and receive feedback regarding expectations, progress and ideas for improving the business environment.

Start your team by engaging ‘experts for hire’ including an accountant and business attorney and perhaps a financial planner.  Another excellent source of business talent that you can access for free is through SCORE.  SCORE is a nonprofit association dedicated to helping small business owners succeed.  Both working and retired executives and business owners donate time and expertise as business counselors.  For more information about SCORE, go to

The ultimate key to success will be your passion for your chosen business.  When you find yourself at a low point, it will be your passion for your business and your passion to succeed that will sustain you.

I’ll be writing more about creating wealth with your own business in an upcoming book I am writing for the Get Rich on Purpose® book series. Get Rich on Purpose® is dedicated to helping individuals achieve Financial Freedom through Financial Literacy and Entrepreneurship. To find out more, visit

Wealth Creation

Wealth Creation—Invest Like a Millionaire

Wealth CreationWealth Creation—Part 3: Invest Like a Millionaire”

To achieve higher levels of wealth you’ll need to start by learning three basic things:

  • Learn to love saving. A wise lady once told me ‘Sleep on it before you buy it!’  Much of what we spend money on adds very little value to our lives in the long term.  It’s simply ‘impulse’ buying.  Your best strategy here is to ‘automate’ your savings by setting up automatic withdrawals from your paycheck or checking account to your investment or savings account.
  • Learn the difference between bad debt and good debt. Bad debt is anything that you borrow money to buy that goes down in value.  Examples include cars, furniture, appliances, and most credit card debt.  Good debt is anything you purchase that goes up in value or at least holds its value.  Examples include a home, money for a business and, perhaps, student loans.  To create wealth, you’ll want to avoid bad debt.
  • Learn how to invest. Investing can be complicated but it doesn’t have to be.  Start with an automatic monthly investment program described in my last post, Wealth Creation—Part 2.  Now, if you’re really ready to improve your investing skills, commit to reading 15 minutes per day about investing.  Are you willing to do this?  Because this is the minimum it takes to become a great investor.  You’ll be amazed at your knowledge in just one year.  There are lots of books and Internet resources about investing but if you need a good place to start, visit  Vanguard is a low cost no-load mutual fund company that has excellent information for the beginner investor.

To become rich, study the rich

My upcoming book, “THINK Like a Self-Made Millionaire”, is based on interviews I had with self-made millionaires. It is the first book in my upcoming Get Rich on Purpose® book series. I wanted to find out how self-made millionaires created their success.  What I found out was that their success paths generally fell into one of three categories:

  • The systematic saver. I recently met the sweetest lady in her early seventies who was seeking help managing her investments because she had just retired.  She had a great life story and one that epitomized the systematic saver.  After graduation, she took a secretarial job with a start-up bank and stayed with that company her whole career as a secretary.  She made a habit of living well below her means and took advantage of all the savings and investment programs the bank offered.  Here’s a person who never made a lot of money but who had the good sense to save for her future.  Amazingly she accumulated over $1 million!  I have seen so many cases of people who simply save their way to financial independence.  This retirement savings approach tends to take twenty to forty years depending on how you invest and how much you save along the way.
  • The real estate investor. In studying self-made millionaires, two groups achieved the highest level of wealth in the shortest amount of time.  The first group is real estate investors.  One of the reasons real estate has so much potential for growth is that it uses leverage so effectively.  For example, if you have a $100,000 to invest and invest in the stock market, typically you’ll buy $100,000 worth of stocks.  However if you buy real estate you could put down, say, $20,000 and finance the balance then use the rental income to pay the mortgage and expenses.  With $80,000 left to invest, you could do this four more times and therefore control $500,000 worth of property.  Eventually your mortgages will be paid off and hopefully, your property will appreciate in value.  For example, if the property grew in value at 3% per year, in thirty years the property would be worth over $1.2 million mortgage free…not to mention substantial monthly cash flow.
  • The business owner. By far the biggest winners in the wealth accumulation game are people who own their own businesses.  Owning a business allows you to use leverage in multiple ways including financial leverage, people leverage and systems leverage.  Lisa Renshaw was age 21 and $3,000 in debt but she decided she would become a millionaire.  She scraped together enough money to purchase a failing parking garage in the Baltimore area.  Not having the money to hire a twenty-four hour attendant, she moved into the garage using a carpet remnant as a bed and kerosene heater for warmth.  She focused on great customer service but she persisted for three years before she was able to move out and buy her second garage.  Today, she owns or operates over 30 garages and is a multimillionaire!   Persistence and determination are key character traits of successful business owners.

Choose your path to wealth and do whatever it takes to learn what you must learn to succeed.  My best tip is to find a mentor, someone who has done what you want to do, and ask them to help guide you. For more information on my upcoming book, THINK Like a Self-Made Millionaire, and other upcoming books in the Get Rich on Purpose® book series, visit

Wealth Creation

Wealth Creation—The 5 Stages of Wealth

Wealth Creation“Wealth Creation—Part 2: 5 Stages of Wealth”

In Wealth Creation—Part 1, I discussed how to get started investing with as little as $1 a month.  This week, let’s look at the five Stages of Wealth and determine how much you must accumulate to become financially independent.

In my upcoming book, “The Fundamentals of Wealth Creation” (publish date: November 2016), I discuss the 5 Stages of Wealth.  This book will be the second book in my Get Rich on Purpose® Book Series, Take a moment to determine which wealth stage category best represents your current financial situation.

Wealth Stage One:  You achieve Wealth Stage One when you are paying all of your bills (on time!) and saving a minimum of 10% of your gross income.  Generally, saving ten percent puts you on a glide-path to becoming financially independent but it often takes twenty to forty years to reach that ultimate goal.

Wealth Stage Two: Here, you are paying all of your bills and the ‘growth’ on your investments is approximately equal to or greater than the amount you’re investing annually.  For example, if you’re investing $10,000 per year, the earnings (interest, dividends and capital appreciation) are also growing, on average, $10,000 per year.  Clearly, this is a significant step up from Wealth Stage One and will take a lot of years or a more aggressive investment strategy.

Wealth Stage Three:  With Wealth Stage Three, your cash flow (interest, dividends and capital appreciation) from your investments is equal to or greater than your earnings from work.  Congratulations, you are financially independent!  You get to choose whether you go to work or not.  For a lot of people, this is their basic retirement goal and happens between ages sixty to seventy.

Wealth Stage Four:  At this stage, investment cash flow allows you to significantly raise your lifestyle.  You’re not just paying your bills, enjoying the occasional night out and a modest annual vacation.  I normally think of this as you having at least two times the cash flow needed for your basic lifestyle and it’s what I refer to as ‘wealthy’!

Wealth Stage Five:  Very few people get to this stage and if you do, you are considered ‘rich’.  At this level your investment cash flow equals a minimum of five times what’s needed to cover your basic lifestyle needs.  You are free to travel extensively, own multiple homes, or become a philanthropist. You’ll also likely need extensive estate and tax planning.

How much is enough?  Achieving Wealth Stage Three

Let’s begin with the end in mind.  What’s your number?  How big of a pot of money do you need in order to retire (Wealth Stage 3)?  Let’s do a simple two-step calculation.  Step 1: Estimate what it costs to pay all of your bills for twelve months.  Step 2: Add a ‘0’ to that number.  For example, if it takes $50,000 to pay all of your bills for one year, then by adding a ‘0’, your ‘number’ is $500,000.  This assumes that Social Security will cover at least one-half of your retirement income needs.  As a footnote, according to the Social Security Administration, approximately 75% of Social Security recipients depend on Social Security for at least one-half of their income.  And approximately 50% depend on Social Security for 90% or more of their income.

If you want a ‘richer’ retirement, you’ll need to accumulate more.  I’m assuming your number is a bit of a shock and may come with some doubts about your ability to accumulate that much money.  I assure you it is possible as I’ve counseled hundreds of families who have achieved this level of wealth.   In fact, in Wealth Creation—Part 3, I’ll discuss strategies for achieving higher levels of wealth.

Wealth Creation

How to Invest $100

How to Invest as little as $100

Think of someone you know who is rich.  How did they get there?  Well, one day they had a hundred dollars and decided not to spend it, but to invest it instead!  Over the decades I have spoken to hundreds of people who simply feel lost regarding how and where to invest.  They don’t know what to do so they do little or nothing.  Today, I’m going to eliminate that excuse!

How to invest $100 or more

The single most important step to investing is the first step…getting started!  And no, it doesn’t take a lot of money to set up an investment program.  Here are two simple alternatives:

  1. The Obama Plan– Recently, President Obama launched a new savings plan called MyRA. Under this plan, you can begin by investing as little as one dollar per month so there’s no excuse for not getting started.  The money goes into the Government Securities Fund which invests in government bonds and there is no risk of loss.  Interest rates change monthly but have averaged 3.2%.  Contributions are limited to $5,500 per year plus an additional $1,000 (catch-up) if you are age fifty or older this year. .  To qualify for the full $5,500 contribution, your income must be under $116,000 for single filers or $183,000 for joint filers. You can withdraw the money anytime but must pay taxes on the interest earned if withdrawn before age 59½.   Once the account reaches $15,000, you must roll it over to a Roth IRA.  For more information visit
  2. The Welch Plan– The Obama Plan offers an investment strategy that has no risks of loss but also pays only modest returns. Most people will need a higher rate of return in order to have a chance of meeting their retirement goals…which I’ll help you calculate in next week’s column.  This means taking on the inherent volatility of the stock market.  Seasoned stock market investors know that the market is impossible to predict in the short term but historically has earned seven to nine percent over the long term (ten years plus).  While there are a number of low-cost, no-load choices, a great choice is Charles Schwab’s One Source Funds.  A large number of these fund options allow you to invest as little as $100 initially plus add as little as $1 per month.  Two choices worth considering are Schwab’s S&P 500 Index fund (symbol: SWPPX; 5-year annualized returns: 10.5%) and their Dividend Equity Fund (symbol: SWDSX; 5-year annualized returns: 7.97%).  The S&P 500 Index fund invests in 500 of the largest companies in America while the Dividend Equity Fund focuses on the slice of the large U.S. companies that have a history of paying dividends.  This dividend-paying strategy generally makes them a more conservative choice.  If you invest in either of these funds, you should plan to remain invested for a minimum of seven to ten years.

My wife likes to use the phrase, “Bloom where you are planted!”  This phrase can be used in many contexts, but here it means start investing an amount of money that you can afford to invest even if it’s $1 per month!  Creating a habit of saving is vital to your ultimate success.

Clearly you should invest where your money has the greatest potential such as your company matching 401k plan, deductible IRAs or Roth IRAs.  Take a look at all of the places you could invest and then prioritize them in order of most powerful.  For example, if your company offers a 50% matching contribution on a portion of your own 401k contribution, start there.  Then, when you get a raise (or bonus), commit one-half of the amount to your retirement savings program.  That way, you receive a boost in spendable income while also stepping up funding for your retirement.  It’s a painless strategy.  Ok, no excuses for not starting your investment program!


Your Goals for 2016

Your Goals for 2016

Take a moment to reflect on this past year. What are some accomplishments that make you feel particularly happy? Are there areas that you feel you could have done much better if you’d given them more focus? Michelangelo famously said, “The greater danger for most of us lies not in setting our aim too high and falling short; but in setting our aim too low, and achieving our mark.” My personal observation is that far too many people set their goals too low or they don’t have goals at all! Without goals, your destiny is left to the wind…to be blown this way and that by other people…often people who do have goals.

If you’ve never set goals before, here’s a simple guide:

  • Write it down. A goal unwritten is little more than a dream. By writing it down, you create a ‘connection’ between your brain and the world around you. I think you’ll be surprised at how the world will bend over backwards to help you. Keep it simple: I use one index card for each goal.
  • Be specific. Fuzzy goals equal fuzzy outcomes. Be specific about what you want and when you want it. The best test of this is to have someone read your goal. If they are clear about what you want and when, then you likely have a well written goal.
  • Review them often. My index cards of goals rest on my office desk where I see them daily. As you review them, think of ‘why’ each goal is important to you. If you have a great ‘why’, you’ll find the ‘how’ becomes much easier.
  • Go bite size. With some goals, you can just go do them (spring clean your closet), but most require a series of steps (buying a home) or setting and completing routines (exercise). Break the bigger goals down into smaller parts…pieces that are easy to accomplish one at a time. At the beginning of each week, develop a short list of actions you can take this week that will move you towards one or more of your goals…then get it done.
  • Get leverage on yourself. One of the best ways to increase your odds of success is to solicit the help of an ‘accountability partner’, someone who you share your goals with and who agrees to hold you accountable for taking the action necessary to succeed. Ideally this is someone who also has goals with you as his or her accountability partner. Make a habit of checking in weekly for progress reports.
  • Celebrate. Most goals are marathons, not sprints. Learn to celebrate as you achieve certain ‘goal posts’ along the way. It will make the process much more fun.

Easy versus stretch goals

I like to divide my goals between what I call easy versus stretch goals. An easy goal is one that you know you can do, you just need to identify it and do it. For example, one of my easy goals is to reclaim my office space. After years of storing my tax files, my CPA finally decided it was time to ‘reclaim his office’ and deliver all my files to me! Now my office if full of files and it’s my turn. They require a little bit of organization and a place to go. Not hard…an ‘easy’ goal. A stretch goal is one that you expect to be a challenge to accomplish. It’s doable but will take a lot of effort, planning and discipline. One of my stretch goals for this year is to lose fifteen pounds of body fat. I’ve always paid attention to my nutrition and exercise but even small inconsistencies in good habits catch up with you over time. Now’s the time. I plan to launch this goal in a few weeks…giving me some time to get organized and hoping that at least a few of you will join me on a fitness quest of your own. I’ll pull together a group of experts, (nutritionist, physician, and personal trainer) to advise me (and you) and I’ll set up a Twitter account and web site so everyone who wishes to participate, has the basic tools you need as well as a group of accountability partners. I’ll keep you posted on my progress in my weekly column and via Twitter. Typically, I set two to three stretch goals and half a dozen easy goals.

Why financial goals matter. I realize that a lot of people feel that setting goals has gone the way of the rotary dial telephone. However, my experience is that people who don’t have goals also most often don’t have a lot of money. I wonder if there’s a connection?

Earn an immediate 50% return on your investment by investing in your 401K

Earn a 50% Return in 1 Month—Guaranteed

Earn a 50% Return in 1 Month—Guaranteed

Earn an immediate 50% return on your investment by investing in your 401K

Earn an immediate 50% return on your investment by investing in your 401K

Would you be wary of someone promising you a 50% return on a twelve month investment? How about a one month investment? I assume (hope) your early warning antennas are blaring in your head as well they should be. But there might be a way to actually make this happen for a number of really smart people. To determine if you are one of the lucky ones, take a moment to determine how much you have contributed to your company 401k plan as compared to the amount of company matching contribution. For example, let’s assume your company matches fifty cents on the dollar up to 6% of your compensation. If your salary is $100,000, your company would provide matching funds on up to $6,000 of contributions for this calendar year ($3,000 match). If you’re already having the company deduct $200 per month, you’re on schedule to invest $2,400 this year (with matching contributions of another $1,200). But you’re leaving $3,600 of potential ‘unmatched’ contributions on the table.

Are you really interested in earning a 50% return in one month? If so, have your human resources department up your 401k contribution by $3,600 from your December paycheck(s).

Your $3,600 investment will yield a 50% return based on the $1,800 employer matching contribution! In many cases, you can increase your payroll deduction directly through your company’s 401k website.

Ok, I admit that I used a little bit of trickery to get you to think about the importance of fully capturing your company’s matching contribution, but failing to do so is like turning your back on a portion of your compensation package…you’re just leaving money on the table. And, for many people, it never occurs to them that they could significantly adjust their payroll deduction  n the last month of the year.

Another barrier I often hear is, “I need all of my paycheck to pay my bills!” Look for ways you can get a bit creative:

  • Use personal Savings. Use personal savings or money from a personal investment account to help cover your December bills.
  • Use year-end bonus money. If you are expecting a year-end bonus, consider paying some of your December bills through whatever means necessary (savings, credit cards, etc.) to handle your cash flow needs until your bonus comes in.
  • Use a home equity line of credit. If you are using a HELOC or other forms of debt, be sure you have a sure source of repayment such as a bonus, significant pay raise, savings or investments.

Even if you’re already investing enough in your 401k to capture your company’s matching contribution, this is a strategy worth considering since you obviously will benefit from an income tax deduction and long-term tax-deferred growth.

For 2015, the maximum allowed contribution (your part) to a 401k is $18,000. If you are age 50 or older you’re allowed an additional ‘catch-up’ contribution of $6,000 for a total of $24,000. Remember, it’s never too late to start saving for your retirement and I hope a guaranteed 50% return in one month is just the incentive you need!