Is a Lump Sum or Annual Payout Smarter?

Is a Lump Sum or Annual Payout Smarter?

August 31, 2023 By Nicole Spector

Lottery Winners Could ‘Make Bad Decisions,’ Says Financial Advisor — Is a Lump Sum or Annual Payout Smarter?

Lottery jackpots can reach epic heights. Case in point: the Mega Millions jackpot that surpassed $1.2 billion after the Tues, August 1 drawing. Someone (or some people) will win eventually, and the burning question for them will be, “What will you do with the money?“

The better question may be, “How will you safely and effectively manage this money?” Unfortunately, lottery winners are notorious for making poor decisions with their winnings. Some people have even ended up in even worse financial shape after landing a jackpot than they were previously. Where did things go wrong? It may have all started in the way they accepted their winnings: Lump sum (meaning getting all the cash in one fell post-taxed swoop) or taking an annuity, where the winnings are distributed over a number of years.

“It’s the most important financial decision you’ll ever make in your life,” wealth planner Robert Pagliarini of Pacifica Wealth Advisors told The US Sun. “Right off the bat, you’re making a life-changing decision that you cannot change your mind on.”

Pagliarini added that by taking a lump sum, “The advantage is they get to control the funds now, but that’s also the biggest disadvantage.”

Once you get the lump sum, you’re forced to manage a possibly unbelievable windfall in an instant. This means if you’re not making every financial move 100% correctly, you’re putting as much as your entire new fortune at stake. Unless you have an army of smart financial experts and lawyers at the ready, an annuity may make the most sense.

To continue reading, please go to the original article here:

https://www.gobankingrates.com/money/finance/lottery-winners-bad-decisions-financial-advisor-lump-sum-annual-payout-smarter/

Experts: Why Your Money Is Not Safe in Your Home or These 4 Other Places

Experts: Why Your Money Is Not Safe in Your Home or These 4 Other Places

Casey Bond  Thu, August 31, 2023

After battling inflation, rising interest rates, and a volatile stock market over the past couple of years, you may be worried about preserving your hard-earned money. Where can you stash cash and rest assured that it’s safe?

We reached out to a few experts and got their opinions on the worst places to keep your money–and where to put it instead. Find out if your cash could be at risk.

In Your House

Following the stock market crash of 1929, many Americans became deeply distrusting of banks and what they might do with their money. During the Depression era, it was common for people to keep cash hidden around the house, whether it was stuffed under the mattress or concealed in the ice box.

Although bank failures still happen, it’s less common today. However, there are a number of people who keep money hidden around their homes. Your house is one of the worst places you can store your money. “Keeping some spending money at home is handy, but keeping large sums at home leaves your fortune open to loss,” said Bill Waggoner, president at Stoney Creek Advisors in Rochester Hills, Michigan.

The problem is that if physical cash is lost, stolen or damaged, it’s near impossible to recover. A fire could wipe out your savings in an instant, or a thief could make off with your cash while you’re on vacation.

Your Wallet or Purse

Society is increasingly becoming cashless, but there are still situations when you might need some spending cash, such as when you’re shopping or traveling. A survey by Travis Credit Union found that among those who regularly carry cash, the average amount they keep on their person is $46.29.

https://news.yahoo.com/finance/news/experts-why-money-not-safe-120120035.html

4 Steps to Make Your Money Last a Lifetime

4 Steps to Make Your Money Last a Lifetime

By Jane Bryant Quinn, AARP Bulletin

A simple, easy-to-use formula to make sure you never run out of cash

As a financial columnist, I get asked the same heartfelt question over and over: “How do I make sure I don’t outlive my money?” And that makes sense. Surveys confirm that the No. 1 worry among older Americans is running out of cash.

 Fortunately, financial planners have come up with sound ways to prevent this. Collected here are their key rules for maintaining a livable income for life, plus case studies that show how to put these general rules into action. The goal is your peace of mind — knowing that you’re getting the most from the money you’ve saved and that you’ll always have enough.

The Magic Number

 The key to long-term planning is knowing one essential number: how much money you can afford to spend annually. From there, you can adjust your expenses to fit.

 You may be tempted to reverse the order — estimate your future expenses, then adjust your investment assumptions to make that spending appear possible. But that’s wishful thinking: a hope that big investment returns will rescue your budget. It leads to overspending early on, and regret later.

 Instead, let’s focus on the real, guaranteed money you’ll have. There are two main sources:

 Your personal savings and investments.

Your guaranteed income from other sources.

 Download this worksheet to help you find your sustainable income. The key steps:

 Step 1: Tally Your Guaranteed Income

The most common source is Social Security, which you may already be collecting. (If you’re not, get an estimate by calling Social Security or by opening a My Social Security account at ssa.gov.) You might also have a pension or annuity.

If you own a reliable rental property, include the amount of rent you receive after expenses.

Step 2: Estimate Your Income from Savings

How much annual income can you prudently take from your savings and investments? To get the answer, there’s a surprisingly simple rule of thumb:

Add up the current value of your spendable assets, such as bank accounts, mutual funds, stocks and bonds. Include both retirement and nonretirement savings.

 Subtract from that total a cash cushion to help cover near-term expenses.

To continue reading, please go to the original article here:

https://www.aarp.org/retirement/retirement-savings/info-2018/make-money-last-lifetime.html 

Asset Management Vs. Wealth Management

Asset Management Vs. Wealth Management

Jordan Tarver  Editor

It’s safe to say that from time to time, everyone could use help managing their money. But while many people can get by with limited assistance, some may benefit from a hands-on approach.

People with high net worths—in the millions or approaching it—may want to work with an asset or wealth management firm. We’ll help you determine which type of professional help is right for you.

What Is Asset Management?

Asset management is a service with the goal of growing your money.

An asset manager focuses on your investments and may be referred to as an investment advisor, financial advisor, registered investment advisor (RIA), robo-advisor or even an investment broker.

Your asset manager might work alone or as part of a larger company that specializes in asset management. You don’t need to be wealthy to work with an asset manager—you only need to wish to start or optimize your investment portfolio.

An asset manager may or may not be a fiduciary—a financial professional required to keep their client’s best interests in mind—so be sure to check before signing up.

What Is Wealth Management?

A wealth manager is a financial advisor who specializes in working with clients who have high net worths. They also offer advice on a variety of financial aspects beyond your physical assets. As your wealth grows, your finances become more complex, which is where a wealth manager can provide their tailored expertise.

Wealth management might focus on saving for retirement and tax planning alongside insurance protection, estate planning, and trust management. These professionals may also offer more services than the typical financial advisor to cater to the complex needs of their clients.

A wealth manager is likely to be a fiduciary, but be sure to ask before signing on.

Should I Choose Asset or Wealth Management?

To continue reading, please go to the original article here:

https://www.forbes.com/advisor/investing/financial-advisor/asset-management-vs-wealth-management/

9 Biggest Mistakes High Income/High Net Worth Millennials Make

9 Biggest Mistakes High Income/High Net Worth Millennials Make

Thomas Kopelman / August 2, 2023

We often associate wealth with financial expertise, but this could not be further from the truth. High net worth people are not immune to making mistakes. In fact, they make just as many mistakes, if not more than everyone else.  And the worst part about it is that these mistakes they make can be even more costly due to higher dollar amounts behind the mistakes.

Let me help you avoid this by walking you through 9 of the most common mistakes I see high net worth millennials make.

Note: Learn from these. You can easily avoid them!

1. Thinking Their Income Will Always Be There

This might apply towards people with high incomes more than people with high net worths. But regardless, this group of people are taking on a huge risk assuming that their income will always be there. There are 3 main ways income can be lost:

Loss of job – Plenty of high income folks get cut when businesses are not doing well. This is why diversifying, building up assets, having an emergency fund, etc. is crucial.

A disability putting you out of work – 1/4 millennials will have a disability that stops them from working. The stats are scary. Having disability insurance in place to protect your income can be crucial!

Business Failing – Many high net worth accumulators are business owners. This means most of their wealth is in the business and their income is tied to it. That concentration brings on a lot of risk. Managing this business well and diversifying as you earn is crucial to keep you on a good path. Do not just use your business as a piggy bank.

2. Making Their Finances Too Complex

This is something I see way too often, people start making good money and their wealth builds. And because of this, they think they need to start investing in anything and everything.

Anytime a friend or someone they know comes with a business idea, they get involved. And then all of the sudden their balance sheet is all over the place. They have little organization or coordination, and oftentimes even lack liquidity.

Be careful doing this! You do not need to invest in anything and everything. Oftentimes the best strategy is to keep things simple. You do not want to get burned.

3. Taking On Too Much Unneeded Risk

To continue reading, please go to the original article here:

https://thomaskopelman.com/2023/08/9-biggest-mistakes-high-income-high-net-worth-millennials-make/?utm_source=apexmoney&utm_medium=dailynewsletter&utm_campaign=keep-it-simple

Dave Ramsey Says Stay Away From People and Places That Break Your Budget

Dave Ramsey Says Stay Away From People and Places That Break Your Budget

Heather Taylor   Sat, August 26, 2023

Are you ever in a situation where you feel tempted to break your budget? Maybe it’s dinner out with friends or shopping at a store you haven’t been to in a while. Even though you’re on a budget, can it really hurt to buy something you like or order a more expensive entrée to treat yourself?

All of these treats can and do add up quickly. Money expert Dave Ramsey shared his recommendation on X, formerly known as Twitter, to stay away from people and places where you feel tempted to break your budget.

“It’s human nature to want it and want it now. It’s also a sign of immaturity. Maturity is being willing to delay pleasure to ensure a better tomorrow,” Ramsey tweeted.

What if you’re having a hard time sticking to your budget? Follow these eight tips to stay on your spending plan.

1. Be Realistic

A strict budget that gives you no breathing room is not going to be a budget you’ll follow long-term. A post on Ramsey Solutions recommends being realistic when setting every single line in your budget. This helps you to better stick to the budget and reach your financial goals.

2. Automate Payments

The more aspects of your money you are able to automate, like saving for retirement and paying bills, the less money there will be available for you to spend on things you don’t really need.

3. Meal Plan

Instead of wondering what you’ll have for breakfast, lunch and dinner and eating out, create a weekly meal plan and shop for groceries accordingly.

4. Think About Your Weekly Spending

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/dave-ramsey-says-stay-away-230008807.html

The No. 1 Mistake People Make With Their Money

The No. 1 Mistake People Make With Their Money

By Charlene Oldham  GoBankingRates

Financial gurus Warren Buffett, Suze Orman, Tony Robbins and Dave Ramsey boast net worth figures in the millions — or, in Buffett’s case, billions. Many of their followers can only dream of becoming multimillionaires or billionaires. However, each money expert offers plenty of practical advice the average Joe or Jane can follow to clean up their spending, savings and investment habits, and retire rich.

Here are seven pitfalls to avoid, along with money management tips from Buffett, Orman, Ramsey, Robbins and other financial experts that almost anyone can implement, regardless of their current bank balance.

1. Spending Too Much on Wants

Too many people spend their lives and hard-earned cash buying things that have little or no lasting value, said Robbins, whose net worth is $480 million, according to TheRichest. “You have to decide that you’re not going to be a consumer, you’re going to be an owner, no matter how little money you have,” said Robbins in a CNBC video.

“If you gave up one night out a week of meals, and you had a pizza and saved $50, then you put the $50 aside, and you multiply that over the year, and you multiply that over [30] years — when you’re getting an 8 or 10 percent return, you find that comes to about a half a million dollars just by making that one change,” he said.

2. Overspending on Needs

It might seem these first two mistakes are the same, but some spending can’t be avoided. Everyone needs a place to live, and probably has to spend at least some money to earn a living. Buffett, whose net worth topped $72 billion in March 2015, according to Forbes, is famous for frugal habits in both his professional and personal life. Despite a market capitalization of more than $300 billion, his company, Berkshire Hathaway, only employs about two dozen people at its Omaha, Neb., headquarters, to oversee administrative affairs not handled by its subsidiary companies around the world.

“It is also interesting to note that Buffet lives a simple life, choosing to stay in the same house that he bought in 1958, and keeps Berkshire Hathaway headquarters very modest,” said Doug Bellfy, a fee-only financial advisor at Synergy Financial Planning in Glastonbury, Conn. “Though he could afford to spend much more, he lives under his means and finds frugal ways to stay satisfied.”

3. Not Saving Early

“Well, I think the biggest mistake is not learning the habits of saving properly early. Because saving is a habit,” Buffett said on the Dan Patrick Show. Those who save early will get the most out of compound interest.

To continue reading, please go to the original article here:

https://www.gobankingrates.com/saving-money/savings-advice/1-mistake-people-make-with-money/

7 Frugal Living Tips To Help You Save Money

7 Frugal Living Tips To Help You Save Money

February 14, 2023 By Andrea Norris

Has your budget gotten too tight for comfort? Cutting expenses and living on less may feel overwhelming, but some simple, frugal tips can help you painlessly trim the budget and save money.

Frugal Tips for Saving Money

Here is a look at some top tips that frugal people often use to live comfortably on less.

Never pay full price.   Watch the cost of convenience.   Waste less.   Use less.   Practice self-sufficiency.

Buy in bulk.  Make things last.

Keep reading for details on each to determine which ones will work the best for you.

1. Never Pay Full Price

Try to avoid paying full price whenever possible. The internet has made it easy to find used goods in excellent condition, whether you need clothing, furniture, electronics or other items. When buying used isn’t an option, search for coupons, discounts and sales before buying.

2. Watch the Cost of Convenience

Convenience items have become so commonplace that you may not always realize what you’re paying for. Paying full price for some convenience food items may cost significantly more than preparing food from scratch. How much extra do you pay for your streaming services to avoid commercials?

If paying for convenience isn’t helping you save or make money in other ways, consider cutting the expense.

3. Waste Less

Disposable products, another form of convenience, often get tossed in the trash without considering the cost. Replace some of those disposables with reusable alternatives, such as trading paper napkins for cloth.

Also, consider how much food you buy and then waste. Food waste is often a result of overbuying or improper food storage, which are easy problems to correct.

4. Use Less

Have you ever thought about whether you use more shampoo, toothpaste or dish detergent than necessary? What about electricity, water or gas? Finding ways to use less can help you save in almost every area of your budget.

To continue reading, please go to the original article here:

https://www.gobankingrates.com/saving-money/savings-advice/frugal-tips/

What Happens If My Bank Account Becomes Dormant?

What Happens If My Bank Account Becomes Dormant?

Rebecca Lake, CEPF®  Sun, August 27, 2023

Using multiple bank accounts can be a good way to separate funds for different financial goals. However, if you forget about one of those accounts it could end up falling dormant. A dormant bank account is an account that registers no financial activity for an extended period of time. The amount of time that it takes for a bank account to be considered dormant can depend on the bank.

For help with your own banking needs, consider working with a financial advisor.

Dormant Bank Account Definition

A dormant bank account is a bank account that has no financial activity occurring for an extended time period. Generally, a bank account may be ruled dormant if there are no new:

Deposits

Credit transactions

Debit transactions

ACH transfers in or out of the account

ATM withdrawals

Debit card purchases

Automated transactions, such as preauthorized bill payments

In other words, leaving a bank account dormant means that it’s sitting and doing nothing. A dormant savings account may continue to earn interest on the existing balance, but there are no new deposits being made.

What kind of bank accounts can become dormant? Generally, any deposit account could fall into dormancy. That includes checking accounts, savings accounts, money market accounts and certificate of deposit (CD) accounts. Safe deposit boxes aren’t necessarily excluded either, as your bank may consider your account dormant if your rental fees go unpaid for an extended period.

If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.

Why Do Bank Accounts Become Dormant?

https://finance.yahoo.com/news/long-does-bank-account-become-130028748.html

What We Lose

What We Lose

Jonathan Clements  | HumbleDollar  Aug 26, 2023

WHEN WE RETIRE, we win back control over our daily life. Gone is the boss, the expectation that we’ll be at work at a certain hour, the worry about what the next office email will bring. We have a degree of freedom that, in many cases, we last knew when we were students contemplating a long summer vacation.

But even as we gain that freedom, there’s also much that we lose. If we’re to be happy retirees, we need to think hard about how we’ll cope with these losses. For some, what’s lost won’t seem all that bad. But for me—someone for whom work has been so central to my life—the seven losses below loom large.

1. Income. This is the most obvious loss, we all know it’s coming—and yet many folks are left anxious by the disappearance of their paycheck, even if they have ample savings. Moreover, with that paycheck gone, not only do we lose the ability to save, but also our financial life goes into reverse, with savings coming out of our nest egg instead of going in.

Given that, it’s hardly surprising that studies suggest retirees tend to be happier when they have ample predictable income, such as from a pension. Don’t have a pension? To ease the anxiety of retirement, consider delaying Social Security to get a larger monthly check and perhaps also purchasing immediate fixed annuities. I plan to do both.

2. Identity. When we meet folks for the first time, one of the questions is almost always, “So, what do you do?” Instead of “engineer” or “lawyer,” you’ll be saying, “I’m retired.”

How does that answer sit with you? For some, it’ll be just fine. But others will hunger for an answer that lets them reclaim the pride they felt when they described their old profession. Even now, I tell people, “I used to work for The Wall Street Journal,” resting on those old laurels, even though my last Journal byline was more than eight years ago.

3. Purpose. Our new identity will be tied to the meaningful things we choose to do with our retirement years. It might be volunteering, helping family or a “hobby.” I put hobby in quotation marks because the word can suggest something that’s little more than a way to while away the hours.

To continue reading, please go to the original article here:

https://humbledollar.com/2023/08/what-we-lose/    

6 Ways To Become Rich on an Average Salary

6 Ways To Become Rich on an Average Salary

Sean Bryant   Fri, August 25, 2023

Are you ready to take control of your finances and reach financial success? It’s not as complicated as you think, even with an average salary. Becoming rich is achievable when you commit to making smart money moves and have the right financial strategies.

In this article, we’ll discuss some of the best things you can do to grow your wealth even with an average salary.

Start Early

You’ll hear this all the time, but starting early is the best thing you can do for yourself. The sooner you start investing for retirement or open a taxable investment account, the better off you’ll be.

The reason for this is compounding returns. If you start at age 23, you only need to save $14 per day to become a millionaire by age 67. However, if you don’t start until 40, it would require $42 per day. This is assuming your portfolio has an average annual return of 6%.

“According to the Rule of 72, should your investments yield a 10% rate of return, your principal amount is projected to double approximately every 7.2 years,” says June Jia, Owner of Canny Trading and investment banker at GF Securities. “This represents a substantial accumulation of wealth over time.”

Jia discussed the importance of regular investments. “Adopting a disciplined investment approach, such as dollar-cost averaging, can enhance the pace of wealth accumulation by consistently allocating funds to your investment portfolio.”

If you start early, you can invest small amounts of money and still build a sizeable portfolio by retirement.

Prioritize Savings

We live in a world where online influencers discuss the latest fashion trends or must-have gadgets. This can lead some people to spend more money than they might have otherwise. If you want to become rich with only a modest income, you need to prioritize savings. It’s important to have an emergency fund if you want to build wealth. This provides financial security if you lose your job or incur a large expense like a medical bill or car repair.

Once you determine how much you can save each month, make saving automatic. You can set up a direct deposit from your paycheck or schedule automatic transfers from your checking account. Automating savings will remove the urge to use those funds for anything besides building a cash cushion.

Reduce Expenses

To continue reading, please go to the original article here:

https://finance.yahoo.com/news/6-ways-become-rich-average-110045881.html