7 Ways to Build Wealth Your Financial Adviser Won’t Tell You

Financial Advisors can be helpful, but at the end of the day you control your finances. Here are some wealth building tips your advisor won't tell you!

While working with a financial adviser isn’t for everyone, hiring a professional to manage your money can pay off in more ways than one. With a financial adviser in your corner, you’ll gain access to professional expertise and insights you can’t get elsewhere. And if you hire a true professional, they’ll help boost your returns with strategies you don’t even know about.

But, are financial advisers perfect? Not by a long shot.

While financial planners are trained to improve your long-term investing returns (and they often earn more money when they do), traditional investing will always be their main focus. But, as you’re likely well aware, there’s a lot more to your financial picture than the size of your portfolio.

When it comes to common sense wealth-building strategies that have little to do with the investing world, you may be on your own. Here are seven ways to build wealth you should consider no matter what:

1. Get out of Debt & Stay Out

Financial advisers are charged with helping you maximize your investments while minimizing risk. This often means they won’t counsel you to pay down credit card debt or car loans, especially if your investing goals are on track. It’s not that your financial adviser doesn’t care; it’s just that debt management isn’t in their wheelhouse. (See how debt affects your finances with a free credit report snapshot on Credit.com.)

But, should you pay off debt regardless? According to Colorado financial planner Josh Cumrine of Total Wealth Managers, the answer is almost always yes.

“Paying off debt can be one of the best wealth building tactics that can be utilized,” says Cumrine. After all, your ability to retire won’t be based only on the size of your nest egg; it will also hinge on how much money you need to live. By paying down unsecured debts, you can lower your monthly living expenses and reach retirement that much faster.

2. Invest in Your Personal Growth

While financial advisers can serve as a great resource when it comes to getting answers to your investing questions and concerns, they aren’t career counselors. They may be unaware of the personal investments you could make that could boost your earnings or improve your job prospects. Their job is making the most of your investments, not helping you earn more.

That’s why personal growth is one area where you need to do some digging on your own.

“Investing in your own personal and professional growth will pay a lifetime of dividends that will not only enhance your life but the lives of those around you,” says Massachusetts financial adviser Eric Jansen of AspenCross Wealth Management.

Imagine you could earn a certification or advanced degree that would boost your income by 20%. While you may not receive this advice from your financial adviser, it’s important nonetheless.

3. Build an Adequate Emergency Fund

As Kansas City financial planner Clint Haynes explains, most families need an adequate emergency fund in place – even if they don’t receive this advice from their financial professional. With a fully-funded emergency fund, you can spend a lot less time stressing over money since you’ll know you are prepared for any emergency that comes your way.

“Keeping a cushion of cash is an extremely important wealth building tool – especially when unexpected events occur,” notes San Diego financial adviser Taylor Schulte. “If you lose your job or the economy takes a hit, you can tap into your cash reserves instead of swiping your credit card.”

4. Focus on Tax Efficiency

Not all financial planners will go through the trouble to review your tax returns to check for efficiency. Unfortunately, this is one of area where your financial adviser has the power to leave you worse off.

“An adviser who only manages your investments may not have the expertise or inclination to analyze your tax situation to maximize your income and value of your assets,” says Virginia financial adviser Nora L. Hartquist.

You should also make sure your financial adviser is advising you on diversifying your tax load – both today and tomorrow, says Arizona financial planner Charles C. Scott.

“If the only advice you get from your adviser is to put your investments in tax-deferred investments like (individual retirement accounts) and 401Ks because you’ll be in a lower tax bracket in retirement than you are today, you better make sure you take the time to understand what that might mean to you,” he says.

“When I entered the working world the top tax rate was 70%,” says Scott. If you take the time to look at the history of tax rates in this country, you will see that they seem to have bottomed out.

5. Pay off Your House

Financial advisers who charge a fixed percentage of your assets want your investment portfolio to be as big as possible. That way, he or she can be paid more. This means the adviser may advise you to keep more of your money invested in the stock market – and under their management.

As San Diego fee-only financial planner Jon Luskin notes, however, there are many times it can make sense to pre-pay your debt. This can include things like your house, your car notes, or a business loan.

“It depends on a myriad of things, like risk tolerance, investment allocation, and the term and interest rate of the debt,” says Luskin. Unfortunately, your financial adviser may never tell you to pay off your large debts like your house since doing so would impact their own bottom line.

6. Hire a Fee-only Financial Adviser Who Is a Fiduciary

While many financial advisers are honest individuals who take pride in their work, there will always be those who line their pockets at your expense. One way to ensure you’re hiring a financial adviser who will put your interests first is to hire a “fiduciary” – a type of investment professional who is legally required to put your interests above their own.

Fiduciaries are also paid a flat fee that ensures they never earn a commission for selling you an investment. If you want to make sure your financial adviser is always on your side and never letting commissions dictate their advice, consider replacing your current adviser with a fiduciary.

7. Learn to Be Happy With What You Have

While it’s a financial adviser’s job to ensure your investments are growing, it’s not their job to help you become happy and content. The thing is, becoming happy with what you have is one of the best ways to ensure a relaxing and happy retirement. And, isn’t that the goal?

Another piece of the puzzle is learning to be generous with what you have, notes Ohio financial adviser Don Roork of AssetDynamics Wealth Management.

“When we grip our money tightly and are close-fisted, we are letting our money control us,” says Roork. “Being generous and developing a plan for giving breaks the control and power of money in our lives.”

The greatest joy in giving is seeing the fruit of the gift, notes Roork. “Giving roots out selfishness and greed in our hearts, and conversely, it helps us make better financial decisions.

Image: Eva-Katalin

The post 7 Ways to Build Wealth Your Financial Adviser Won’t Tell You appeared first on Credit.com.

Your $10,000 Bundle of Joy: How to Budget for Your New Baby

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Having a baby is a life-changing experience. Every aspect of your life will change, especially how you spend and save money. A recent BabyCenter survey found that parents should expect to spend almost $10,000 in their first year with baby.

With some forethought and careful budgeting, you and your family can moderate some of the costs associated with the first year of your baby’s life. While you can’t foresee every cost, being proactive will minimize surprises and increase peace of mind and enjoyment when your beautiful new addition arrives.

Giving Birth

Labor and delivery costs vary wildly. Location is a big factor. Where you are in the country and where you choose to give birth (home, hospital or birthing center) can alter your plans and budget.

According to the U.S. Agency for Healthcare Research and Quality (AHRQ), the average cost of a normal (no C-section or complications) birth in a hospital is around $3,200. Add in the costs of pre- and postnatal care and you’re looking at thousands more added to your hospital bill, and this is after insurance. If there are any kinds of complications, such as low birth weight or jaundice, you can realistically expect to pay more.

When you find out you’re pregnant, it’s a good idea to contact your insurance company to find out what kind of coverage you have, and if you have it, what your health savings account (HSA) or flexible spending account (FSA) will cover. If you’re insured through your work, you may want to talk to your human resources department. You will likely have several conversations in their office, especially if you plan to take parental leave.

Taking Time Off

Finding out what kind of family leave your company offers (or doesn’t offer) will affect your budget. It may be surprising, but only about one-third of all working women in the United States are offered any sort of maternity leave. If your company offers leave, find out if you get the full amount or only a percentage of your regular paycheck. This may affect how long you take. If your company doesn’t provide leave, they’re still required to honor 12 weeks, unpaid, under federal law. Fully understanding your own benefits will give you a clear idea of how to create a feasible budget for your growing family.

Budgeting for Baby

Once you have a clear idea of how much money will be coming in, you can begin creating a budget for the months leading up to, and after, giving birth. You may use a “first year” calculator to figure out what you’ll need to save. The numbers may surprise you, so expect to make some adjustments in your spending. Curious about how to start making cuts? Start by figuring out where your money is going now. To do this, you can track your expenses in Excel, or if you’re more comfortable on your phone or the computer, you can try using an app/program like You Need A Budget.

With big purchases on the horizon, it might also be a good time to check your credit score. You can see two of yours free on Credit.com.

Once you’ve figured out where your money is going, you can create a budget with savings in mind. More importantly, start that budget before the baby is born and stick to it. If you’re spending more than you’re earning (or saving), you can start cutting unnecessary expenses like cable or magazine subscriptions. You may also want to consider things like limiting your travel and avoiding eating out too often. Packing a lunch instead of ordering a sandwich can add up quickly. (Want more ideas for smart spending habits? Consider these 50 ways to stay out of debt.)

Buying for Baby

Buying furniture and supplies as you prepare your home for your little one is where a lot of families tend to blow their budgets. First-time parents are often unsure about what and how much they will need to care for their newborn.

Before you build a registry or go on a shopping spree, have an honest conversation with your partner, yourself and other parents about what’s truly necessary.

You may also want to bring a friend or relative who is already a parent on your registry trip – they will give you the lowdown on strategic purchases and can assist your internal debate between that fancy baby Jacuzzi or $10 plastic tub. That doesn’t mean you can’t splurge on something adorable you love. Just call a splurge a splurge, save for it and buy other things more affordably.

Don’t buy anything without seeing what your friends or family members are willing to lend or give you for free. Some babies grow so quickly they never get the chance to wear their newborn outfits or onesies. The same can be said of furniture like gliders or high chairs – parents may discover that their kids prefer their car seats or booster chairs. Buying gently used clothing, furniture and supplies can save you a lot of money over time. Also, consider registering or purchasing gender-neutral clothing and equipment. If you plan on having more children, you won’t feel pressured to buy new things.

Lastly, if you’re planning on using day care or home care, the sooner you can start interviewing centers or home care candidates, the better. Some have an admissions process, waiting lists or deposits so if you have a certain person or location in mind, schedule your visit well before your due date. With this sort of prudence and planning, you’ll feel more confident about bringing your baby home.

Image: KQconcepts

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Does Money Make You Lonely?

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What would you do if you got a big raise at work that put you in a comfortable position to afford everything you not only need, but everything you want as well? Throw lavish parties? Take friends and family on a trip around the world? Or hide away by yourself at home, reading the latest book you’ve downloaded to your Kindle?

Based on a study conducted by Emily Bianchi of Emory University and Kathleen Vohs of the University of Minnesota, the answer may be the latter. Their research showed that the number on your paycheck plays a role in how often you socialize, as well as with whom. People with higher incomes, they found, spent less time socializing overall, going out an average of 6.4 fewer times per year, and spending more of that time with friends and significantly less time with relatives and neighbors, compared to their lower-income counterparts.

The reasoning behind this, they believe, is that people who have financial security don’t need to rely on a social network as much (i.e. they pay a service to come mow the lawn, for example, instead of asking a teen in their neighborhood to do it) so they are allowed the freedom to socialize with whoever they want, when they want.

“For people with limited financial resources, these social ties are likely to be crucial for managing existing and impending challenges,” according to Bianchi and Vohs report.

Money’s Affect on Social Interactions

To draw these conclusions, the researchers looked at around 30,000 General Social Survey responses about household income affecting social interactions and compared this with several lab experiments. Bianchi and Vohs found that “having or thinking about money appears to heighten self-reliance and dampen attention and responsiveness to others.”

Based on their findings, they believe money motivates people to work instead of socialize and then, once money is acquired, it lowers the level of compassion toward others. In fact, they discovered that the majority of wealthy people became much more introverted, disengaging from social interactions.

‘But I Have All This Money Now’

While this research suggests that once you can afford nice dinners and drinks with your friends, you won’t want to go out anymore, but that may not necessarily be true. Cambridge University did a study earlier this year that found people who had more money to spend were happier and considered more social.

No matter how much money you’re making, or how large your social circle, it’s wise to spend within your means. If you’re going out to give yourself a needed treat but end up racking up credit card debt to do so, you’ll probably feel worse instead of better once the bills come in. Consider these saving tricks that don’t make you feel like you’re pinching pennies and this checklist to help you get out of any debt you may have. To find out how your spending habits are affecting your credit score, you can check two of your credit scores for free, updated monthly, on Credit.com.

More Money-Saving Reads:

Image: PeopleImages

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7 Subtle Ways to Teach Your Kids About Money

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As my husband and I prepare to have our first child, something I’ve been doing a lot of thinking about is how to financially prepare her for the future (along with how to prepare her emotionally, and in every other way a parent needs to prepare her child, as well). As a financial writer who has spent her career surrounded by smart, savvy financial people, I feel I’m somewhat at an advantage — but that doesn’t make the task any less daunting.

Teaching our kids to be financially savvy begins at an early age, even if at the ripe old age of 2 there isn’t much they’re doing other than playing with toy cash registers (hey, it’s a start!). Over the course of my career writing about parenting and finances, here are some of the pieces of advice I’ve picked up along the way that might help me to subtly teach my own daughter how to handle her finances. Maybe they’ll help you, too.

Idea 1: Keep a family money jar for coins

 

What it teaches: Every little bit of savings counts.

I will never forget the big, wooden coin jar we had in our family kitchen the entire time I was growing up (and it’s still there to this day). I remember being amazed at how much money could actually fit into that jar every time we counted it (who knew coins could amount to hundreds of dollars?). The point of the coin jar is to show your kids how even the smallest amount of change can add up, and if you can put that money towards something fun for the whole family, a new game for game night or ice cream out, for example. You can show your kids that it’s possible to save up for fun things without having to dip into savings or put it on a credit card.

Idea 2: Shop with lists

 

What it teaches: How to avoid impulse spending.

This is a small one, but since kids notice everything, it’s not surprising they would pick up on this concept, as well. Taking a little time to put together a list with your kid before shopping will teach them the importance of planning and cutting down on waste, and you’ll be less likely to make impulse purchases along the way, as well, which helps teach the concept of budgeting. 

Idea 3: Make charitable giving a family effort

 

What it teaches: The ability to make donating a priority.

Kids who grow up with families who donate will be more likely to make charitable giving a part of their future, as well. It’s always easy to say we don’t make enough money, there are too many other expenses or we’re busy saving for something else. Instead of putting it off for the future, if you can show your kids that budgeting for charity makes it easier to donate — and get your kids in on the action of picking the charity your family donates to — then they’ll be more likely to get excited about the idea and stick with it into the future.

Idea 4: Provide daily allowances for kids while on vacation

 

What it teaches: The importance of financial planning.

Vacations can be a landmine of spending for families, or it can be a great opportunity to teach fiscal responsibility. Rather than deal with kids who get excited every single time they pass a souvenir store or ice cream shop, try doling out daily allowances at the beginning of each vacation day and having your kids use that money as they chose. When the money runs out, they won’t be getting any more to spend. This is also a great way to teach kids the value of saving up for things they really want. For example, if your child spots a more expensive item at the beginning of the trip that he’d like, that’s a great opportunity to sit down with him an explain exactly how many days he’d have to save up his daily allowance to be able to afford the item, and then he can decide on his own if he’s patient enough to do so.

Idea 5: Match your kid’s savings

 

What it teaches: How some retirement plans work.

Whether it takes a little added incentive to get your child interested in saving or not, the idea of matching your child’s savings contributions (up to a certain amount, if you’d like), will help prepare him for the real world, as well. If your kid has grown up with the concept of savings matches, she’ll be more likely to do everything she can at her future job to get that retirement match, assuming it’s still being offered.

Idea 6: Include your child when you monitor your credit score

 

What it teaches: How to access credit scores, how credit cards work and why it’s important.

For most young kids, material possessions appear from out of nowhere, as if they’re free to whoever wants them. Of course we as adults know this isn’t the case, and it’s our duty to teach our kids how buying and using credit actually works. To do so, include your child on the practice of checking in on your own credit report and credit score (find the best free credit score sites for each bureau here), and explain to him how your credit score helped you attain the things your family enjoys, like your car and house, and how your behavior with credit cards and loans impact the score.

Idea 7: Set them up with different savings accounts early on

 

What it teaches: The importance of divvying up their money.

If you have a 529 for your children, involve them in your monthly (or however often you make them) payments, and explain to them the concept of compound interest and how this will help them be able to better afford an education down the road. (Don’t have a 529 set up yet? Check out this piece for the five best 529 savings plans anyone can use.) Set them up with a savings account and checking account as well, and help them determine how to best divide up their allowances and/or earned incomes into these two accounts so that they have money to save for emergencies, as well as to spend on fun things. If your family partakes in Idea No. 3 (charitable giving), have your kid contribute a portion of her allowance and/or earnings towards your family goal of donating to a charity, as well.

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5 Things You’re Probably Doing Wrong With Your Money

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We’re sure you’re doing a great job with your money — making payments on time, looking out for any fraudulent activity, and putting money into a retirement account. That’s all great.

Still, there are probably just a few areas of your personal finance situation that could use some work. We want to help. Our team at MagnifyMoney has been working in and writing about finance for a long time. Here are our top tips on some things you might be doing wrong, and what to do instead.

1. You’re carrying a balance on your credit card to build your credit score

This is one of the biggest myths out there, says Erin Lowry, content director for MagnifyMoney and founder of Broke Millennial. Carrying a balance on your card each month — and paying interest on it — isn’t necessary to help your score. If you’re looking to build your credit score without paying a penny, you need to do things like keep your utilization rate low (your goal should be to not exceed 30% of your credit limit) and pay in full, on time, each month. For more on building your credit score, check out this piece.

2. You use a debit card for everyday purchases

If you’re responsible enough to keep a budget and pay off expenses in full every month, then you should be using a credit card, says Brian Karimzad, a co-founder of MagnifyMoney who worked in banking and consumer marketing for 15 years. Using a credit card helps you build up your credit score (see above), and offers a lot more when it comes to fraud protection. Check out this piece for more about fraud protection and debit and credit card use.

3. You don’t know your net worth

People always think in terms of monthly payments or getting through the month, which can lead them to think it’s okay to take out huge loans for things like cars they can’t afford, says Nick Clements, a MagnifyMoney co-founder who worked in consumer banking for 15 years. In order to truly gather the full picture of your financial situation, you need to focus on your net worth (your total assets minus any money you owe.)

4. You’re happy that your credit card company believes you’re a valuable customer

Most credit card companies (American Express is a unique exception) make most of their money from “revolving customers” who pay steep interest charges. If you pay your balance in full every month and earn rewards, your credit card company is probably losing money on you. And that is a good thing. If your credit card company loves you, you are probably doing something wrong.

When it comes to banking, you want to be just loyal enough that your bank offers you great perks, but not so much that you’re a profitable customer. Credit card companies make the majority of their money from those who are in debt and pay high interest rates and make the minimum payments on their cards, says Clements. This means you want to be a reliable customer, just not a moneymaking one.

5. You have too much money sitting in liquid assets

Fear keeps many people from investing their money, but that could be a big mistake, says Lowry. The truth is that investing your money low-cost index fund will likely grow your money fast enough to keep up with (or beat) inflation, or rising prices, so that 10, 20 or 30 years down the road, you can actually think about retiring comfortably. Check out this piece if you’re wondering whether it’s better for you to invest or pay off credit card debt, and this one to learn whether or not investing in stocks is right for your family.

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