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.

Student Loan Repayment Strategies

Student Loan Repayment Strategies

Soon, thousands of college students across America will be graduating and seeking employment.  Soon afterwards, the government will come knocking on their doors asking them to begin making payments on their student loan debt.  As most people are well aware, the job market for graduates remains tight with many graduates having to settle for lower paying jobs than they had hoped for or that their college degree suggests.  As a result, many graduates will soon discover that the student loan repayment schedule is going to be a financial burden that is tough to bear.  The good news is that help is available under a new federal initiative called Payback Playbook.  Of the $1.2 trillion in student loans, about 25% are in some stage of default.  The new initiative requires loan servicing companies to provide borrower’s with a list of customized repayment options.  These options include repayment schedules based on your income:

  • Revised Pay as You Earn Repayment Plan (REPAYE Plan) – Generally you pay 10% of your discretionary income.
  • Pay as You Earn Repayment Plan (PAYE Plan) – Generally you pay 10% of your discretionary income but never more than the 10-year standard payment plan.
  • Income-Based Repayment Plan (IBR Plan) – Generally you pay 10% of your discretionary income if you’re a new borrower on or after July 1, 2014, but never more than the 10-year Standard Repayment Plan amount. Generally you pay 15% of your discretionary income if you’re not a new borrower on or after July 1, 2014, but never more than the 10-year Standard Repayment Plan amount
  • Income-Contingent Repayment Plan (ICR Plan) – Generally, you pay the lesser of: 10% of your discretionary income or what you would pay on a repayment plan with a fixed payment over the course of 12 years, adjusted according to your income.

Under each of these programs, the loan is forgiven if it is not fully repaid by the end of the payment period (typically 20 to 25 years) and there are provisions for hardship relief.

A number of other repayment options are available including the Public Service Loan Forgiveness (PSLF) program.  Because of the complexities and potential pitfalls you should consult a professional before making changes to your current loan program.

Source: Portions of this article were taken directly from the Federal Student Aid website (


Financial Insights by Stewart Welch

Financial Insights

Financial Insights


Shopping CD Rates can mean BIG Bucks

Shopping CD Rates Can Mean BIG Bucks

Question: According to information on, investors can earn higher interest rates on their savings and money markets by banking on-line than they can earn at local banks. For example, Synchrony Bank pays 1.25% on a one-year CD. Is there any risk in doing this? G.H.
Answer: No, just be certain your bank is a member of the FDIC and that your account does not exceed the FDIC insurance limits, currently $250,000. If you have more than $250,000, there are still ways to get full insurance coverage by splitting the funds into accounts with different titling. For example, you could have one account titled in your name, one in your husband’s name and one titled jointly under both of your names…allowing you to up to $1,000,000 fully insured in a single bank. How much difference can ‘shopping rates’ make? A $100,000 one-year CD at your Internet bank would pay $1,250 in interest while a large Birmingham, Alabama bank would pay only $100!

IRA Gains & Losses

Question: If stock is sold in an IRA and there is a loss, why can’t that loss be taken off your taxes just like you have to report a gain doing the same thing? C.J.
Answer: Federal laws for the Traditional IRA do not allow losses to be taken from your income taxes. Think of a Traditional IRA as a contract that has a beginning, a middle, and an end. In the beginning, when you contribute to your IRA, you receive an income tax deduction. At the end, when you withdraw money from your IRA, those withdrawals are taxable as ordinary income. In the middle, if you sell a security for a loss, there is no tax deduction. Likewise, if you sell a security for a gain, that gain is not taxable.

janeb13 / Pixabay

Avoiding the Obamacare Penalty

Question: I work part time and have no health insurance. In 2014 I made under the threshold for paying the penalty. For 2015 I made more ($12,560.) which is over the threshold ($11,880). My question is can I open a regular IRA now and put in $1000 to get me under the penalty limit? I already have a Roth IRA. I am 55 years old. J.W.
Answer: “The Obamacare penalty is specific to size of family and is based on Modified Adjusted Gross Income. There are also several potential exemptions that you may qualify for that would allow you to avoid the penalty. Your best bet is to complete your tax return for 2015 to determine your actual MAGI, then you can determine how much to invest in a Traditional (deductible) IRA in order to avoid the penalty”, says Kimberly Reynolds, CFP, a partner at The Welch Group. As a reminder, you have until April 18th, 2016 to make your IRA contribution for calendar year 2015.

Gift Tax Limits for 2016

Question: Regarding the statement: “In any calendar year, you are allowed to give away up to $14,000 per person to as many people as you desire without triggering any gift taxes.” Does this mean you can give 10 people $14,000 each or that you can only give a total of $14,000 divided among the 10 people? S.T.
Answer: For 2016, you can give as many people as you wish $14,000 each. If you are married, you can join in the gifts and together give up to $28,000 to as many people as you choose.

Jump Start Your Finances in 2016

grop-profile-picYep, the holidays are a busy time of year full of distractions that can easily draw you away from your financial game plan.  You do have one, right?  Here is a basket of tips from my colleagues to give you a head start on your finances for 2016.  There’s even an opportunity for you to share your own financial tips with our readers in my column next week and win a prize.

Do meal plans; save money.  Write down a weekly/monthly meal plan before you go grocery shop.  Only buy what’s on your list, and then stick to what you planned for lunch/dinner.  It will also make you feel less stressed to be able to easily answer the looming “what’s for dinner?” question.  This will save you lots of money!  Use part of your savings to start a savings plan.  If you saved $5 per week for one year, your total savings for the year would be over $250 and you won’t even miss $5.00 per week!  – Andrea Messick

Be a smart shopper.  Challenge yourself to not make any unnecessary purchases.  Before buying an item ask yourself if the purchase will be worth it a year from now.  – Ramona Boehm

Leverage your pay raise.  Set aside a portion of any compensation adjustment to help fund your 401K or IRA / Roth.  – Greg Weyandt, CPA

Change a habit.  Stop a bad habit that negatively affects your health and your wallet i.e. smoking cigarettes and eating fattening foods.  – Marshall Clay, JD, CFP

Invest in yourself by getting in shape.  Regular exercise has been shown to reduce stress, make you more productive at work, reduce sick days and improve self-esteem.  Plus you might meet your next client, referral source or employer while working out.  Accountability is the key to success.  Find a friend who has similar goals and commit to work out together as ‘accountability partners’.  You’ll be more likely to reach your goal and develop a special bond with the person as they reach their goal too.  – Michael Wagner, CPA, CFP

Leverage your year-end bonus.  Use your Christmas bonus to pay off credit card debt, start an emergency fund, or fund a Roth IRA.  – Callie Jowers, CFP

Rebalance your portfolio.  Take a moment to rebalance your company retirement account’s asset allocation to your target allocations.  This insures that you are not taking more risk than you intended.  Also, given a possible rising interest rate environment, consider paying down loan balances in advance?  – Woodard Peay, CFP, MBA

Build an emergency reserve…the easy way.  If you set aside just $5 every couple of days (price of a Starbucks), you’d have about $1,000 for an emergency reserve fund.  – Wendy Weber

Use the “back door” Roth IRA strategy.  If your adjusted gross income (AGI) exceeds the Roth Contribution Limits for 2015 make a nondeductible IRA contribution (no income limitations) then convert to Roth (also no limitations).  CAUTION: if you have other IRAs you will have to prorate for taxes.  To avoid this tax problem, see if your company 401k plan will allow you to roll-up your existing IRA into your plan.  Be sure to discuss this strategy with your tax advisor before implementing.  – Hugh Smith, CPA, CFA, CFP

Track your money.  Try uploading all of your accounts into a website like  If you are really diligent, you may track spending and create a budget.  If not, you can at least track your net worth to see if you are trending up, treading water or spending down your assets.  – Foster Hyde, CFA, CFP


My Challenge to You! 

  1. Take action now.  Choose two or three of these ideas to implement now.  Creating financial success is about doing the little things right, consistently, over a long period of time.
  2. Join the game.  Email me ( your own ideas to share with my readers.  If I use your recommendation, I’ll send you a signed copy of my soon-to-be-released book, “THINK Like a Self-Made Millionaire”.  Be sure to include your mailing address.

Caution!  Do you own an inherited IRA?  Michael Wagner, CPA and partner in The Welch Group, reminded me that those of you who have inherited IRAs must also take a Required Minimum Distribution from that account before December 31st, 2015 or face a potential 50% federal penalty.  I’ve made numerous references to RMD requirements for those of you who are age 70 ½ or older but had never mentioned the requirement for those of you with inherited IRAs no matter what your age.  While most brokerage firms automatically notify age 70 ½ or older customers of both the requirement and the amount of the RMD, most provide no notice (or amounts) for inherited IRA customers.  You’ll have to figure the amount due…typically based on your life expectancy using the IRS tables


What are the Required Minimum Distribution Rules for my IRA?

“Avoid This 50% Tax Penalty in 2015”

This is one penalty you’ll want to avoid.  If you (or someone you know!) are age 70½ or older this year, don’t forget that you must take a Required Minimum Distribution (RMD) from your retirement accounts before December 31st of this year.  The federal penalty for failing to do so is 50% of the amount of the distribution you should have taken.

There are a couple of exceptions to the rules:

  • If you turned 70½ this year, you can postpone your 2015 RMD until April 1, 2016. If you do wait, you’ll also need to take your RMD for 2016 by December 31st, 2016.  In other words, you’ll have to take two RMDs in 2016.
  • If you’re still working (assuming you don’t own more than 5% of the company), you can postpone RMDs on your 401k (or similar company retirement plan) until the year you actually retire. But you must still take RMDs for other retirement plans such as IRAs or prior employer 401k plans.

People often ask me, “Why does the government have a law requiring RMDs?”  The simple answer is, “Because they want their money!”  Your RMDs are taxed to you as ordinary income and Uncle Sam would rather get his tax money sooner rather than later.

I find many age seventy-plus clients do not need the money from their retirement accounts.  Here are some of the options you might consider:

  • If you are still working (and don’t own more than 5% ownership of the company), see if your company retirement plan allows you to roll-up your IRA into the company plan. By doing so, you’ll effectively postpone RMDs until the year you retire.  Many professions such as law, insurance, and accounting lend themselves to remaining ‘active’ as employees well beyond normal retirement age.
  • After setting aside funds for payment of taxes on your RMD, invest the money tax free bonds or bond funds so as to avoid (or minimize) income taxes on interest earned.
  • After setting aside funds for payment of taxes on your RMD, invest in dividend-paying stocks (or similar stock mutual funds) which typically have much lower income tax rates than investments producing ordinary income. Federal income tax rates on dividends are typically 15% but can be as high as 23.8% while the maximum rates for ordinary income are 39.6%.
  • Transfer your RMD directly to your favorite charity. In past years, Congress has extended the law allowing RMDs to be paid directly to a charity.  While they have not yet extended the law for this year, many expect them to do so.  Ask your IRA custodian to have your RMD check made payable to your favorite charity of charities.  If Congress extends the law you’ve simplified the reporting process.  If they don’t extend the law, you’ll report your RMD on your tax return and take an offsetting charitable deduction on your return as well.  Consult with your tax advisor before implementing this strategy.

Caution #1.  If you have multiple IRA accounts, you can calculate your RMD based on the total of all accounts and take your RMD from any one or combination of those accounts.  For any 401k plan (or similar type plans), your RMD must be both calculated and taken from each plan separately.

Caution #2.  I often hear people say, “I never pay any taxes until they are due!”  However, when it comes to your IRA account, we’ve found that in many cases, your smartest move is to withdraw some funds from your IRA each year before your RMD date if you can get it out in a lower tax bracket than your expect to be in once you reach age 70½.  The best way to determine this is to do a ‘trial tax return’ before the end of the year to determine your estimated effective tax rate and compare that rate to your estimated effective tax rate at 70½. Your tax advisor can easily help you with this.

Finally, even if you have not yet reached age 70½, I bet you know someone who has.  Be someone’s hero and give them a copy of this information.


Holiday Giving without Breaking the Bank!

Low Cost Holiday Gift Ideas

It’s easy to spend a small fortune giving gifts over the upcoming holidays even if you find great deals on sale.  Last week, I asked readers to share their best low-cost gift giving ideas, and here are some of my favorites:

  • Bake and Freeze. My mom always made biscuits at least 2-3 times per week. Several years ago she made the comment that she wasn’t able to make them anymore. The biscuit board was too heavy. It took more effort and stamina than she had. It made my heart sad to hear it. For the last several Christmases, I have made homemade biscuits for her to keep in her freezer. She was able to take out and enjoy however many she needed. I did the same with cornbread. This was a gift, from the heart, that she always enjoyed. Sometimes gifts aren’t about the money spent; but about meeting the needs of others and giving from the heart.  Donna B.
  • Personal Gift Card. Make up an original and clever gift card that offer 1-2 hours of personal service.  Use your imagination for the services you’d offer but here are some to get you started: Cut the grass; rake leaves; buy groceries (labor not cash); drive car pool for a week; walk the dog for a week; wash dishes for a week (family gift); do laundry for a week (family gift); wash car.  Don T.
  • Use Travel Points. If you travel a lot, the hotel chain you use will give you points, which can be redeemed for several items — INCLUDING gift cards.  You are likely being reimbursed on your expense account for the rooms anyway, so your cost is ZERO.  Redeem points for gift cards.  A stack of $50 gift cards will allow you to complete your “shopping” from your computer, let everyone on your list shop for something they REALLY want, and you are now the “favorite uncle.”   Perry G.
  • DIY Picture Frames. If you are a crafty individual there are plenty of tutorials on how to make picture frames. That is usually a go to of mine. That way it is homemade. You can’t beat something built with you in mind!
  • BOGO Grocery Shop. Treat co-workers, teacher, etc. with doughnuts or bagels for a breakfast treat when your local grocery store has a buy one get one free (BOGO) deal going on.  Kelly D.
  • Gift Family Heirlooms. People in my family have always given special heirlooms on Christmas. My grandmother gives each of the girls in the family a piece of jewelry she already has. It makes her happy to see us enjoy something that meant a lot to her. My mother has copied cherished family photos and given them as gifts to us, so that we can have those memories in our own home. (An example is a picture of my grandparents at age 17 and 18, a few months after they were married).  Callie J.
  • Personal Services (revisited). Offer to babysit so the parents can enjoy a night out without worrying about their children.  Wash their car…this is a job most people do not enjoy doing!  Run errands for people who are short on time.  Ramona B.
  • Give Time with Friends. Instead of buying gifts, spend time together with friends or family volunteering for a charity. There are plenty of opportunities and giving back will help you appreciate what the holiday season is really about.  Maggie E.
  • Make your own ornaments: Crafting stores usually have plain, clear glass or plastic ornaments which are fairly inexpensive.  You can paint or even “stuff” the ornament ball with old pictures, a quote, glitter, or something specific to the person you are gifting to and create a one of a kind ornament for them.   Andrea M.

All Great Ideas!  If you have a group of money-saving-oriented friends that typically exchange gifts, consider declaring this season a ‘re-gift’ season.    Agree to gift something of a certain estimated value that you own as a re-gift.  Be careful it’s not something they gave you!


Five Tips for Budgeting for Holiday Gifts

Holiday Money-Saving Tips

This past weekend, I dropped in at a retailer and they were playing Christmas music!  The holiday season seems to begin just a bit earlier each year but it is a good reminder of how important it is to have a holiday spending plan in place so that you don’t start the new year in a financial hole.  Coming up with holiday gifts for the people you care about doesn’t have to cost you a fortune.  You just need to be creative.

Here are four tips you can use to budget for holiday gift giving:

  1. Set a goal. Let’s start with your number one overarching goal: Create no new debt!  The last thing you want to do is to start 2016 with credit card charges you can’t pay off in full.  Take a moment to review your current financial situation and set a ‘dollar amount’ goal.  How much can you afford to spend (paying cash) this holiday season?  It’s ok to use credit cards as long as you have the cash to pay off the new purchases in full once the bill arrives.
  2. Start saving now. Hopefully, you’ve already saved up some money for gift-giving this holiday season but you still have a few paychecks before the deadline.  Think of other ways to raise cash such as holding a garage sale, selling that boat that’s been sitting in the back yard, or selling unwanted items on eBay.  It’s a great time to clean house because what you no longer want may be on someone else’s Christmas list!
  3. Make a list. Make a list of the people you plan to give a gift and keep the list with you.  This will give you a head start on your shopping as you never know when you’ll run into a great deal!  Having the list readily available will allow you to ‘match’ a great bargain to someone on your list right there on the spot.
  4. Shop with purpose! Whether you go ‘brick and mortar’ or on-line, you now know how much you’re going to spend and who you’re going to spend it on.  As with year’s past, I expect to see lots of bargains.
  5. Pool your resources.  “Consider pooling your money with someone else to give a gift with a big impact while keeping your cash outlay relatively small. Examples include planning with your siblings for a gift for your parents or planning with your coworkers for a gift for the boss”, says Beth Moody, CFP®.  I particularly like the ‘boss’ idea!

Bonus Tip: Give something back.  The economic turmoil of the past few years has spawned financial hardship on many families.  Use this holiday season to teach your children the importance of giving to others who are in need.  There are many ways to accomplish this:  donate clothing, food, money or you can spend some time working in one of the many shelters located in your home town.


Earn 50% in One Month—Guaranteed, check your 401k Contributions

MONEY TUESDAY – Stewart Welch with the Welch Group joined us with a look at how to early 50-percent return in one month! Would you be wary of someone promising you a 50 percent return on a twelve-month investment? How about a one-month investment? Stewart assumes/hopes 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 onesDesktopSW

Medicare Open Enrollment

Medicare Open Enrollment

Medicare open enrollment begins on October 15th and ends on December 7th.  Medicare beneficiaries should take time to do a thorough review of all plans available in 2016.  Many plans have large premium increases for 2016 and some as much as 8%!  If you do nothing then you could easily be paying more than you should.  Below are some points you should consider when deciding which plan is best for you in 2016.

For your Medicare coverage, you have two main choices:

  1. Original Medicare

    With Original Medicare you will want to add a Medicare Supplemental (Medigap) plan and a Part D Prescription Drug Plan.  This option is best if you want to pay a set monthly premium and have little or no out-of-pocket cost throughout the year for medical. You will have copays/deductibles with all Part D prescription plans.  It is advantageous for people to choose this type of coverage when they travel outside of Alabama and for people who want to choose their doctors without needing referrals or being restricted to doctors within a plan network

  2. Medicare Advantage Plan

    With Medicare Advantage Plans you combine Part A, Part B and usually Part D coverage and these plans act as a HMO or PPO. Depending on what plans are offered in your area you can have the choice of a plan with no or very low premiums. With Medicare Advantage plans you share the costs of your medical and prescription care. For example, you will have doctor copays and deductibles each time you see your physician or go to the hospital. Each plan has a different maximum out-of-pocket cost so you should carefully compare the Advantage Plans available in your area for the amount you would pay for copays, deductibles and annual maximums.  You also need to check with your physician to ensure he/she accepts your plan. These plans are best if you are healthy and rarely visit the doctor and you are comfortable knowing you’ll share the costs of all doctor and hospital visits.

Prescription Drug (Part D) Planning

If you are choosing a stand-alone drug plan with original Medicare then be sure to carefully review your prescriptions and choose the best plan that matches your needs.  Be aware of each plan’s preferred pharmacies where drug pricing can be much lower than non-preferred pharmacy pricing. The most expensive plan does not mean it will be the best plan for you.  Be careful when identifying whether you take the brand or generic prescription drug because this can make a significant difference in your drug costs. You can ask your pharmacist or physician for this information.  Some individuals have saved $25 to $50 per month just on their Part D premium by switching to a plan that best fits their needs. But that’s only part of the story… having the wrong plan could cost you thousands in out of pocket drug costs.

If you are unsatisfied with the plan you choose for 2016, Medicare has one option to switch plans outside of the open enrollment period, limited to one change per year.  It is called the 5-Star Special Enrollment Period. Medicare uses information from member satisfaction surveys, plans and healthcare providers to give overall performance star ratings to plans. Plans are rated from 1 star to 5 stars. A 5-star rating is considered excellent. The 5-Star Special Enrollment Period allows you to change to a 5-star plan from December 8th of the current year to November 30th of the next year.  You must have a 5-star plan available in your area to be eligible for a change during the 5-Star Special Enrollment Period. You can see the plans and ratings

You can save thousands of dollars per year in some cases by carefully choosing plans based on your specific health and financial situation. Your best research tool is Medicare’s website where you can input your personal data and they’ll help analyze which plan is best for you.

Kimberly Reynolds, MS, CFP®, is a partner at The Welch Group and has special expertise in the area of Medicare and Social Security benefits and serves as a guest writer for this post.