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June 2019 E-Newsletter

How To Take The Heat Off Your Summer Budget


Summertime brings more than sunburns and barbecues — it can also send your monthly expenses through the roof. But with a little work now, you can enjoy the hot season and avoid pinching pennies in the fall.

“Ideally, one saves a little bit of money in each of the cooler months and then spends down those funds in the summer,” says Michael Schupak, founder of Schupak Financial Advisors in West New York, New Jersey. But, if you’ve failed to plan your budget that far ahead, all is not lost.

Saving on travel
Plan vacations wisely, paying for as much as possible in advance. Lodging, transportation and entertainment in many cases are less expensive when booked ahead. And getting started early means there will be less scrambling for money later.

If you’re down to the wire and don’t have enough money for a big trip, visit family who’ll put you up or plan a staycation this year. Crashing on a relative’s couch or being a tourist in your town may not be a dream vacation, but it is still a break and can give you a head start on saving for next year’s trip.

Saving while at home
On the homefront, find out if your utility company offers a flat rate plan. This can spread power, heating and cooling costs across 12 equal monthly payments, eliminating spikes on your bill caused by more people, like school-age children, being at home during the day in summer.

Older children home for the summer may spend their days raiding the fridge. Couponing is one way to save on groceries, but it can take a lot of effort to see measurable payoff. Instead, encourage your kids to cook and limit convenience foods — those that are easy to eat mindlessly — on your shopping list.

If you are looking for supervised activities for younger children, an overnight summer camp or full-time day care, generally the most expensive choices, aren’t the only options. If you didn’t budget for these big-ticket items, look for local day camps, which are often run by religious or community organizations and parks departments and are a fraction of the cost of child care.

For next year, Schupak recommends estimating how much expenses climb in the summer and setting aside — through automation, if possible — a portion of each paycheck for a summer fund. 

The article How To Take The Heat Off Your Summer Budget originally appeared on Nerdwallet.com

How Being Neighborly Can Save You Money

NeighborsScott King is the guy with the chainsaw. When neighbors need to hack down a stump, they borrow his, rather than buy or rent one. His friends in the Dallas neighborhood of Sparkman Estates help him, too. He borrows Shelby’s ladders, Mark’s spare bike parts, Carl’s tiller and Ryan’s fertilizer spreader. It costs him nothing — just the time it takes to walk to the neighbor’s house and maybe enjoy a beer while he’s there.

Sharing a chainsaw is one of many ways you (and your neighbors) can save money. Get to know the people around you, and they may feed your dog while you’re away, recommend an affordable plumber or give you their extra umbrella. So start connecting.

Ways to connect with neighbors

Friendly waves and “how-you-doings” can certainly lead to fruitful friendships. But to expand your network and money-saving opportunities, check out these free online forums:

Facebook groups: Search for groups specific to your neighborhood, in which neighbors may share items and services they’re giving away or selling.

The Buy Nothing Project: Check whether your community has a Buy Nothing Project Facebook group, in which members post items they want to give away, lend or share without any money or services exchanged. To see whether your neighborhood has a Facebook group, visit buynothingproject.org and browse groups by location.

The Freecycle Network: This forum emphasizes keeping items out of landfills, so members give away unwanted items, rather than pitch them. Search Freecycle.org to find a group near you.

Nextdoor: This is an app and private social network for your neighborhood in which members share information, give and receive recommendations and post items they’re selling or giving away. Search Nextdoor.com to find your neighborhood.

How to save money

Try these tactics using the forums above or through in-person interactions.

Get free (or discounted) stuff
You may be surprised by what people are willing to give away, often because they’re moving or don’t feel like reselling or returning something. Marcello Orlando, lead moderator of the Freecycle Network group in Somerville, Massachusetts, has received a couple of laptops, two couches and a window air-conditioner unit through Freecycle.

Paige Wolf, who started Philadelphia’s first Buy Nothing Project Facebook group, will often ask her neighborhood group if anyone is giving away what she’s about to buy in her online shopping cart. “A lot of times, if you ask, someone will be like, ‘Yeah, I have a sofa for you,’” she says.

Wolf rarely buys clothes for her kids, either, thanks to the group. “My kids outgrow their clothes — their clothes go in the group. My kids need clothes — I ask for them on the group,” says Wolf, who is also the author “Spit That Out!: The Overly Informed Parent’s Guide to Raising Healthy Kids in the Age of Environmental Guilt.”

Neighbors give away items on Nextdoor, too, but unlike Freecycle and the Buy Nothing Project, they also sell them. These sales can yield bargains compared to other sites, says Annie Barco communications manager of Nextdoor. That’s because Nextdoor verifies users’ addresses, she says, which may help sellers trust buyers with a deal.

Get trusted recommendations (and maybe discounts)

Whether through a community Facebook group, Nextdoor or word of mouth, a personal recommendation can save you from hiring someone who overcharges and underperforms.

Nextdoor surfaces recommendations for many kinds of businesses and service providers, including neighbor-vetted electricians, roofers and carpenters. Sometimes you can even get a locals-only deal, Barco says.

Share goods and services

Whether you coordinate online or in person, sharing services can save you and neighbors money, too. For example, as kids go back to school, Barco has seen neighborhood parents organize carpools, nanny-shares and babysitting duties through Nextdoor. And Wolf belongs to a Facebook group for locals who feed each other’s dogs and cats for free while owners are away.

In addition, sharing goods you use infrequently (like a chainsaw) can save you money, as well as space in your home, garage or shed.

Extra perks of leaning on neighbors

Buying less stuff — whether through sharing or reusing neighbors’ goods — helps both your wallet and the environment. So does giving away your old things. “You’ll feel good, because you’re helping someone else and also reducing landfill waste,” Orlando says.

And you may feel good for another reason: By participating in the Buy Nothing Project page, “we get to actually know our neighbors,” Wolf says, adding: “It fosters so much gratitude.”

The article How Being Neighborly Can Save You Money originally appeared on Nerdwallet.

Business Corner: Why You Shouldn’t Start a Business Right Out of College, and Why You Should

When she graduated from the University of Michigan Ross School of Business in 2007, Jess Lively already had eight years of entrepreneurship under her belt, having started a small business at age 15. Rather than launch a corporate career, Lively decided to run her online jewelry company full time.

Lively is part of a growing group of college graduates who skip job applications in favor of starting a business once they earn their diplomas. From 2010 to 2013, 45% of business school graduates started their own companies — nearly double the percentage between 2000 and 2009 — according to a study by the Ewing Marion Kauffman Foundation.

Of course, the decision isn’t right for everyone. There are many details to consider including business planning, marketing and financing. (NerdWallet’s small-business loans comparison provides info for those starting out.)

Here are three pros and three cons of starting your own business straight out of college.

CON: No guaranteed paycheck.
A paycheck certainly would have paid the bills, Lively says. But she enjoyed the flexibility of self-employment and worried a traditional job would tempt her into climbing the corporate ladder.

“I didn’t trust myself to not climb the ladder if it was there,” Lively says.

Her jewelry business wasn’t her ultimate career goal; it was a way to support herself while she pursued a passion: building a lifestyle brand. She launched a blog in 2009 and was eventually able to quit her jewelry business to run her lifestyle business full-time. She has a blog, a podcast and an online course called “Life With Intention,” and is working on a book.

PRO: If there’s any time not to have a paycheck, this is it. Those who start a business in their 20s have a higher capacity to take risks and time to make mistakes. Even if the business fails — half do in five years, according to the U.S. Small Business Administration — the lessons learned can be applied to a next venture. Without the responsibilities of a family and a mortgage, there’s less riding on a business’s failure, says Don Lewis, assistant director of Startup Aggieland, the student accelerator at Texas A&M University in College Station.

“There’s no other time in your life when you have so little to lose,” Lewis says. “The price of failure is cheap.”

CON: It’s lonely. Those who choose entrepreneurship post-college may feel isolated from friends who are enjoying the comforts of a 9-to-5 job with a steady paycheck. Although there’s a growing number of business school graduates starting companies, 20-something entrepreneurs are still a minority; the “peak age” for starting a company is around 40, according to the Kauffman Foundation.

Jason Dorsey, co-founder of millennial research firm the Center for Generational Kinetics, worked long hours — including Friday nights — as he was launching his entrepreneurial career. It was scary and lonely, he says.

“You’re choosing to do something that many other people only dream about or read about,” Dorsey says.

PRO: You have access to resources from college. Recent college graduates can leverage their alumni groups and relationships with professors when they start their businesses. But don’t assume people will support your company just because they share your alma mater, Lewis says. “People are going to buy from you because you have value,” he says.

“People want to support you, but not just because you’re an Aggie or a Hoosier.”

CON: Financing can be a challenge. Getting access to capital is a challenge many small-business owners face, but it can be particularly difficult when you’re saddled with student loans. There are fewer new small businesses in areas of the country where student loan debt is high, according to a July 2015 working paper by the Federal Reserve Bank of Philadelphia.

Dorsey was $50,000 in debt in 1997 when he dropped out of the University of Texas in Austin to write and self-publish his first book, titled — somewhat ironically — “Graduate to Your Perfect Job,” which spawned his career as a millennial researcher and speaker. He didn’t qualify for a bank loan, so he funded the publishing through credit cards, vendor financing and borrowing from family. To save money, he dined on samples at the grocery store and ramen noodles.

PRO: It’s a good way to learn fast. Although Dorsey doesn’t have a college degree, he believes he’s learned everything he needs to know by wearing the many hats of an entrepreneur: financier, accountant, marketer, manager.

“Even if your business doesn’t succeed,” Dorsey says, “you have a view of how business works that is a massive asset.”

This article, Why You Shouldn't Start A Business Right Out Of College, And Why You Should, originally appeared on Nerdwallet

Coulee Investment Center: Balancing Act: Income, Expenses, and Withdrawals

In projecting what you’ll need to save in order to generate enough retirement income, it helps to (1) prepare a realistic household budget and (2) understand what types of expenses you’ll have once you stop earning a regular paycheck.

Types of Expenses
  • Fixed Expenses – “Must Haves”
  • Mortgage or rent Taxes (income and property)
  • Car payments, gas and maintenance (if applicable)
  • Health insurance
  • Food
  • Utilities
  • Discretionary Expenses – “Nice to Haves”
  • Eating out
  • Entertainment
  • Travel
  • Sports and hobbies
  • Gifts
  • Shopping
Sensible savers will plan to cover all must-have expenses before they consider splurging on nice-to-have items. You’ll also need to factor inflation into your expense projections: certain sectors of the economy, such as health care, have seen prices rise much higher than everything else.

How much should you take out of your savings?1
Retirement brings with it many unknowns, including how much you can spend each month from the so-called “three-legged stool” of Social Security, retirement plan and personal savings. Withdrawal amounts depend on how much you’ve saved and the expected return on your current investment mix and age, among other factors.

Much research has focused on what percentage of account value retirees can take each year so that the money won’t run out — assuming various rates of inflation. Some analysts suggest that 3.0% to 4.0% is a sustainable withdrawal-rate range in the early years of your retirement. A 4% withdrawal rate is considered sustainable except in cases where inflation creeps above 5%. But withdrawal rates of 5% or higher are risky, especially when inflation approaches 4%.2 Depending on the size and health of your nest egg and the growth rate of your expenses, you may be able to adjust this rate in future years.

Order of withdrawals can make a difference
Deciding which of the “three legs of the stool” to spend first depends to a great extent on tax laws. Most people know that delaying taking Social Security payments until age 70 can mean higher payments later; they may not realize that a portion of Social Security income is taxable at ordinary tax rates, which currently is set at a maximum 37%.

Remember that tax issues and IRS rules on qualified plan distributions can be very complicated. For example, although your money can grow tax-deferred inside a 401(k) or pension account, once you take a withdrawal, the entire distribution is hit with your ordinary-income tax rate and possible penalties if you’re under age 59½. On the other hand, selling stocks you hold in a taxable account means that only your capital gains will be taxed at the current maximum of 20% (depending on your income). Some think it’s best to take money first from regular taxable investment accounts and let tax-deferred accounts continue to grow.

Not everyone agrees with this strategy, though. Depending on your circumstances, some think it makes sense to withdraw money from your IRA and 401(k) before spending down your taxable assets. “The idea is to let the assets that will be taxed at the lowest rate accumulate for the longest time,” says Robert Carlson, author of The New Rules of Retirement: Strategies for a Secure Future. For example, if you think income tax rates will be higher in the future, you may want to spend down your taxable assets sooner. Consider enlisting the assistance of online tools or retaining a financial planner to tailor the order of withdrawals to your specific needs and tax situation.

1 Withdrawals from qualified plans prior to age 59½ may be subject to a 10% IRS penalty. Account values are subject to income tax upon distribution. This discussion is not intended to show the performance of any fund for any period of time or fluctuations in principal value or investment return. Periodic investment plans do not ensure a profit nor protect against loss in declining markets. 2 Gerstein Fisher, “What’s a Sustainable Withdrawal Rate for a Retirement Portfolio?” Seekingalpha.com, May 1, 2018. https://seekingalpha.com/article/4168085-sustainable-withdrawal-rate-retirement-portfolio

This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. LPL Financial and its advisors are providing educational services only and are not able to provide participants with investment advice specific to their particular needs. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own, separate from this educational material.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

© 2019 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance; nor as the sole authority on any regulation, law or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.