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FINANCIAL ARTICLES



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8 Steps to Financial Security
By Sarah M. Place

As we began the New Year, many of us made resolutions and vowed to get our financial houses in order. Unfortunately many of us broke that resolution long before the first credit card bill arrived. Rather than feel guilty consider these steps to get you started in the right direction - regardless of what time of the year.

1. Build your Emergency Fund: Not just the pot of gold that you were considering for a new car or vacation, a fund for real emergencies. Your emergency fund should include at least three to six months worth of living expenses. These funds should only be tapped for healthcare emergencies, times of unplanned unemployment and other events of this magnitude.

As you develop your emergency fund, keep enough money in your bank account or money market account to cover three or more months expenses and than ask your Financial Advisor or your banker to help you set up a series of short term CDs to form a ladder with the rest. Laddering funds will allow you to earn more interest on the money that you may need to get your hands on in hurry. At the same time, it helps to make sure that you don't get your hands on it all at once for non-emergency purposes.

2. Use credit wisely: Avoid purchasing items on credit whenever possible. If you must carry debt, look for the lowest rates that you can find. Shop out your loans and credit cards for better deals. Ask your creditors for better rates. If you make all your payments on time and are in good standing with them, most likely they will lower your rates. If not, consider moving elsewhere. Be sure to review your credit report at least annually and watch for identity theft as well.

3. Budget money wisely and do not overspend: Take the time to sit down and set a budget or a spending plan. Live within your means and don't try to keep up with the Joneses. We are all guilty of it from time to time, but unless we win the lottery we may want to let the Jones get ahead just a bit so that we are not struggling in retirement. You may be surprised to know that there are a lot of doctors and executives out there who are making well over $500,000 per year who are in debt up to their eyeballs and giving the term "living paycheck to paycheck" a whole new meaning.

Be careful not to overspend when it comes to your investments either: Some firms are offering free trading if you "simply pay the bid ask spread" or have large sums of money in an account. Other firms are offering low priced stock trades while charging outrageously high margin rates or other fees. Investigate these offers closely and make sure that your free lunch is really free. Some times you can save a few dollars on a commission and spend thousands on a wide spread or other fees. Most importantly, do not try to save a commission by trading online or buying no load funds if you really don't know what you are doing and are likely to risk your hard earned money.

4. Be prepared: Make sure that you are properly insured. Not just for your car or home (if renting, be sure to pick up rental insurance) but also for your life, health, disability and if appropriate, long term care. Check your coverage on insurance polices, update beneficiaries on your life insurance and make sure that you have an updated will.

5. Learn as much as you can about investing: According to a Lusaardi and Mitchell study cited in Money Magazine, individuals who understood simple calculations such as compound interest or percentages had higher net worth than those who did not. The internet offers a great deal of help to arm you with information about investing. But don't be too proud to get help if you still need it or to get a second opinion to see how you are doing.

6. Set realistic goals: Don't start with pie in the sky ideas. Set short, medium and long term goals that you can stick to. A short term goal may include building up that emergency fund that you swore you were going to start or perhaps saving for a house. A medium term goal may include paying for your children's education and a long term goal may include planning for retirement. Set aside time to plan for each of these and be sure to monitor your progress along the way.

7. Know your Benefits: Learn what you are entitled to or if you will be entitled to any benefits. Does your employer offer a pension plan? Are you eligible for social security? Are you eligible for a spouse's benefits in the event of death or divorce? Be sure to review your benefits from time to time as they may have changed. Some employers have significantly reduced or even dropped their pension plans all together.

8. Invest with Discipline: In a recent "Retirement Reality Check" survey, conducted by the Allstate Insurance Company, 40 percent of respondents admitted that they are not even saving seriously for retirement. Overall, 38 percent of respondents said that they expected their retirement to be "financially difficult." Start saving early and often to help avoid this situation.

Estimate your retirement needs. Fund your 401(k) retirement plan to the maximum or start an IRA (or alternative retirement plan) if you are eligible. Invest automatically via your employer, through payroll deduction or through your financial institution and have money drawn automatically every month before you have a chance to spend it. Pay yourself first. Treat your savings like a bill and pay yourself every month. Make careful decisions between stocks, bonds, mutual funds and other investments. Pick quality investments, stick with them and rebalance when your allocations are no longer in sync with your plan.

Get started. Don't wait until tomorrow or until you get a raise or until after the holidays. Take action today.

The topics covered in this article are for discussion and information purposes only. Clients should take special care in understanding all of the risks involved prior to investing. Nothing contained herein should be considered as an offer to buy or sell any security or securities product. Place Trade Financial, Inc. does not provide legal or tax advice. Please consult your own tax and/or legal advisor prior to investing. This article contains links to other web sites. Place Trade Financial, Inc. is not responsible for the privacy practices or the content of such web sites. Please contact Place Trade Financial at 1-800-50-PLACE or visit http://www.placetrade.com for further information. Place Trade Financial, Inc. is a registered broker dealer. Member FINRA, SIPC.

Sarah M. Place, MBA is the President and CEO of Place Trade Financial, Inc., Member FINRA, SIPC. She has over eighteen years experience in the financial services industry. She has vast experience working with stocks, bonds, mutual funds, 401(k)s and other investment vehicles. She is a member of the National Association for Business Economics (NABE) and the Finance Roundtable, serves as a member of the North Carolina Council on Economic Education (NCCEE) Board of Directors as well as several other boards and committees that are dear to her heart.

She has presented topics including economic issues, investments and retirement planning to numerous groups over the years including the Tufts University Alumni Association and the Cary Jaycees. She is a contributing writer for several publications including Balance Magazine, the Carolina Newswire, the NC Journal for Women, NC Career Networking Magazine and Women in the Triangle.

If you would like to receive a free subscription to our monthly newsletter please visit http://placetrade.com/abt-newsletter.htm

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