Invest in Your Career as Well as Your Portfolio

 

Jane Young, CFP, EA

Jane Young, CFP, EA

When it comes to financial planning, we generally focus on spending, saving, and investing money, and place less emphasis on career planning.  While it’s essential to properly manage the money you have saved and invested, you also need to capitalize on opportunities to enhance your earning capabilities.  Over time, investing in yourself and your career can have a significant positive impact on your net worth.  

Start by reflecting on who you are; identify your strengths, your areas of expertise and what you enjoy doing.   Identify your primary career goals; develop a personal vision statement and a personal strategic plan to help reach these goals.  Too often we leave the direction and progress of our career to chance rather than following a carefully laid out plan.  We often become comfortable and complacent in our current position, and miss opportunities to progress in our career and maximize our earnings. 

The process of investing in yourself and your career is an on-going endeavor regardless of your short term plans.   Everything you do, your relationships, behavior, and appearance all affect the success of your career.  I was reminded of this by a friend who once told me to think of myself as Jane Young, Inc.  We all have our own unique brand that needs to be developed, enhanced and reinforced. Everything you wear, say, or do creates a perception on how a potential boss or client may view you.  You need to build a brand and project an image that helps you reach your career goals.

It is also essential to nurture and grow your professional network.  Unfortunately, there is a tendency to neglect your professional network when you feel secure in a long held job.  As a result, your contacts may not think of you or may not be aware of your current qualifications when opportunities arise.  Additionally, if you unexpectedly lose your job you don’t have a solid network to tap into for help in finding a new job.

In addition to maintaining a strong professional network, it is crucial to stay abreast of innovations and changes in your career field.  Things are changing so fast that it is essential to learn new technologies and skills for your current job, as well as positions you would like to move into in the future.  You should also be taking steps to get additional education, certifications, and skills needed to meet your long term career goals.

Finally, take a proactive role in advancing your career.  You need to communicate your goals, needs, and expectations to your boss in a professional and productive manner.  Ask what is required to get a raise or a promotion, this helps establish a mutual understanding.  Be sure to consider the political dynamics within your company, and communicate your needs in a manner that illustrates the value you can provide to your boss and the firm.

Tips to Acheive Financial Fitness

Jane Young, CFP, EA

Jane Young, CFP, EA


The first step toward financial fitness is to understand your current situation and live within your means. Review your actual expenses on an annual basis and categorize your expenses as necessary or discretionary. Compare your expenses to your income and develop a budget to ensure you are living within your means and saving for the future. The next step is to pay off high interest credit cards and personal debts. Once you have paid off your credit cards, create and maintain an emergency fund equal to about four months of expenses, including expenses for the current month. Your emergency funds should be readily accessible in a checking, savings or money market account.
Now it’s time to look toward the future. Get in the habit of always saving at least 10% to 15% of your gross income. Think about your goals and what you want to accomplish. If you don’t own a home, you may want to save for a down payment. When you purchase a home make sure you can easily make the payments while contributing toward retirement. Generally, your mortgage expense should be at or below 25% of your take home pay.
Contribute money into retirement plans, for which you qualify. Make contributions to your 401k plan, at least up to the employer match and maximize your Roth IRA. If you are self-employed, consider a SEP or a Simple plan. If you have children and want to contribute to their college expenses, consider a 529 college savings plan. Do not contribute so much toward your children’s college fund that you sacrifice your own retirement.
As you save for retirement, be an investor not a trader. Investing in the stock market is a long term endeavor, forecasting the short-term movement of the stock market is fruitless. Avoid emotional reactions to headlines and short term events. Don’t overreact to sensationalistic stories or chase the latest investment trends. Establish a defensive position by maintaining a well-diversified portfolio, custom designed for your unique situation. Slow and steady wins the race!
Don’t invest in anything that you don’t understand or that sounds too good to be true. If you really want to invest in complicated products, read the fine print. Be especially aware of high commissions, fees, and surrender charges. There is no free lunch; if you are being offered above market returns, there is probably a catch. Keep in mind that contracts are written to protect the insurance or investment company, not the investor.
It is impossible to predict fluctuations in the market or to select the next great stock. However, you can hedge your bets with a well-diversified portfolio. Establish an asset allocation that is aligned with your goals, investment timeframe, and risk tolerance. Your portfolio should contain a mix of fixed income and stock based investments across a wide variety of companies and industries. Rebalance your portfolio on an annual basis to stay diversified.

The Difference Between an Roth IRA and a Traditional IRA

Jane Young, CFP, EA

Jane Young, CFP, EA


One of the biggest decisions associated with saving for retirement is choosing between a Roth IRA and a Traditional IRA. The primary difference between the two IRAs is when you pay income tax. A traditional IRA is usually funded with pre-tax dollars providing you with a current tax deduction. Your money grows tax deferred, but you have to pay regular income tax upon distribution. A Roth IRA is funded with after tax dollars, and does not provide a current tax deduction. Generally, a Roth IRA grows tax free and you don’t have to pay taxes on distributions. In 2013 you can contribute up to a total of $5,500 per year plus a $1,000 catch-up contribution if you are over 50. You can make a contribution into a combination of a Roth and a Traditional IRA as long as you don’t exceed the limit. You also have until your filing date, usually April 15th, to make a contribution for the previous year. New contributions must come from earned income.
There are some income restrictions on IRA contributions. In 2013, your eligibility to contribute to a Roth IRA begins to phase-out at a modified adjusted gross income of $112,000 if you file single and $178,000 if you file married filing jointly. With a traditional IRA, there are no limits on contributions based on income. However, if you are eligible for a retirement plan through your employer, there are restrictions on the amount you can earn and still be eligible for a tax deductible IRA. In 2013 your eligibility for a deductible IRA begins to phase out at $59,000 if you are single and at $95,000 if you file married filing jointly.
Generally, you cannot take distributions from a traditional IRA before age 59 ½ without a 10% penalty. Contributions to a Roth IRA can be withdrawn anytime, tax free. Earnings may be withdrawn tax free after you reach age 59 ½ and your money has been invested for at least five years. There are some exceptions to the early withdrawal penalties. You must start taking required minimum distributions on Traditional IRAs upon reaching 70 ½. Roth IRAs are not subject to required minimum distributions.
The decision on the type of IRA is based largely on your current tax rate, your anticipated tax rate in retirement, your investment timeframe, and your investment goals. A Roth IRA may be your best choice if you are currently in a low income tax bracket and anticipate being in a higher bracket in retirement. A Roth IRA may also be a good option if you already have a lot of money in a traditional IRA or 401k, and you are looking for some tax diversification. A Roth IRA can be a good option if you are not eligible for a deductible IRA but your income is low enough to qualify for a Roth IRA.

The Widow’s Guide to Social Security Benefits

The Widow’s Guide to Social Security Benefits (via Credit.com)

As a Certified Financial Planner™, I work with a lot of widows trying to navigate the tricky world of Social Security benefits after their spouse passes away. Social Security provides you, as a widow, with a choice between your own Social Security benefit based on your work history, and a survivor…

1 2 3 4 5