Who’s Rich Anyway?

Presented By Nick Bautista

Think about this, in the US the top 20% households make $107,628 annually. If your networth is more than $415,700 you are also in the top 20%. Here is the total breakdown:

Household Income Annually
Top 1%	$521,411
Top 5%	$208,810
Top 10%	$148,688
Top 20%	$107,628

Household Net Worth
Top 1%	$6,816,200
Top 5%	$1,863,800
Top 10%	$952,200
Top 20%	$415,700

WSJ: 2012 data from Tax Policy Center
 

To put this into further perspective what is considered the poverty line for a two person household is $15,510. Meaning that a two person household making $46,530 makes 300% more than someone in poverty.  (http://aspe.hhs.gov/poverty/13poverty.cfm)

So who is rich anyway? This week I was reminded that the little things in life are what matter most. I read an interesting article about Brett Favre. When asked if he would return to the NFL with all the injuries to key quarterbacks, he simply said no. A man who made millions upon millions (top 1%). He thought he put his family on hold for 20 years and couldn’t stand the idea of putting them off any longer and he gets to fulfill being with them doing the things he loves, which actually isn’t football related. I found that refreshing, that someone who was defined by their work became something more, a father. No matter how much money he made he ultimately valued the things money and fame couldn’t buy.
 

What are you striving for today, this week, or in life? Do you have more than you need, or do you constantly need the next best thing? We all, including myself need to be reminded that what we have is enough. Don’t let money rule your life, for you might find out it’s not that satisfying.

 

Brett Farve article: http://espn.go.com/nfl/story/_/id/9872646/brett-favre-return-sources-saying-rams-reached-out

From A Six Figure Salary To Minimum Wage: A Story Of Bad Planning

Presented by Nick Bautista

Sometimes the stories we hear can mean more than words we read from any text book. Such is the case for Tom Palome. A man who was an executive earning a six figure salary most of his lifetime and now has to work two minimum wage jobs due to inadequate savings.  I define the unretired 77 year old as a failure to plan. He had a total of $90,000 saved for retirement. All I can think is, really? Of course, he can still enjoy life but how would you like to live to 77 and be flipping burgers instead of pursuing the dreams you have had your entire life?

To me it comes down to the most fundamental question of all. How much do you need in retirement to live the life you want to? As of 2011 the median retirement account had a value of $120,000. So tell me how that works for 30 years in retirement?

Maybe Tom Palome can help you get a better picture of what that looks like. Read the entire story here…

http://www.businessweek.com/articles/2013-09-26/former-executive-tom-palome-spends-his-retirement-flipping-burgers

Who Is Your Go-To Person For Financial Advice?

Presented by Nick Bautista 

Have you ever thought about the people in your life who you turn to for financial advice? Think about that for a minute. When you have a financial question, who do you call or text, and why? Is it because you perceive them to be smart, or wiser than you? Or is it simply because you believe they have the experience to handle your similar situation.

Whatever and whoever you listen to when making your financial decisions, there is one thing you should know. It goes back to the old saying you used to hear when you were a kid. “If Johnny were to jump off a bridge would you do jump too?” Although a ridiculous analogy for following what others do, the message is clear. Why do we blindly follow the advice from someone who doesn't necessarily know or understand our financial situation?

Okay maybe this doesn't hit too close to home or is just too simplistic. So instead, think of the first person you would ask if you had/needed medical attention, a gaping wound, would your parents or best friend know if you needed stitches and be able to do it right then if you did need them. Of course not, you would go see a doctor immediately. So why is it that in our financial need we turn to those who do not understand our situation?

Everyone agrees that finances are extremely important yet we automatically assume those around us with little or no experience can help us with our questions. No one financial situation is the same. Let me repeat that so it sinks in, no one financial situation is the same. Just ask any doctor and they will tell you how no one patient is exactly the same.  

So again I ask who do you ask for financial advice? How much experience do they really have and is it the exact same or similar situation you are in? If the answer is yes, then think one step further. Does your financial friend know if you should do a Roth Conversion or how much you should defer in 401k contributions to save on taxes now? Do they know how much you can contribute to your retirement in a given year based on your retirement plan? Do they understand the history of the stock market or the correlation between asset classes in a given time period, knowing what your allocation should be based on your age and amount saved already? Do they know your goals, and what the money is needed for in order to invest it in a suitable place? Do they know the effect on your retirement plan for buying that car or house you are thinking about?

If your answer is no to any of the above you are getting poor advice and ultimately the wrong answer. While your wound may be okay without stitches you don’t want to find out 30 years later you really needed them, or more importantly you were given the wrong financial advice and your retirement plan is now underfunded to meet your goals.   

10 Facts About Obamacare & How It Will Affect You

Presented by Nick Bautista

August has ended and we have four months until Obamacare goes into effect. So what is Obamacare?

The overall goal is to provide affordable health insurance for all U.S. citizens and reduce the growth of health care spending. Obamacare does not replace private insurance, Medicare , Medicaid or employer sponsored plans. Instead look to see small changes in the insurance landscape via these 10 facts:

      1. Starting January 1^st 2014, insurance will be sold on health insurance exchanges, although you can still purchase an individual plan through health insurance companies (through a broker)
2.    With the new exchange each state will now be responsible for its own health insurance marketplace
3.    Summary of benefits and coverage- will make it easier to compare cost for common items such as having a surgery, having a baby, etc.
4.   Already in effect but, kids under 26 are able to be on their parents health plan (whether they are married, living with them or not, full time student)
5.   No-cost preventive care coverage- get screenings, physicals, vaccinations at no cost (this may not be available on grandfathered policies)
6.   Already starting in August is the women’s preventive care services, which gives care to women for birth control, STI screenings and breast feeding. Also insurers can’t discriminate based on gender.
7.    No pre-existing condition limits in 2014. You cannot be turned down from individual plans for having a pre-existing condition. Note this doesn’t apply to group plans as group plans cancel out any pre-existing conditions you have.
8.   Medicare is working to close the gap on Medicare part D coverage. The program is meant to help you pay less for brand name prescriptions in the coming years.
9.    In 2014 you must have health insurance or you will be penalized, $95 per adult, $47.50 per child, up to $285 per family or 1% of your taxable income. (whichever is greater)
10.  Can’t afford insurance, there will be credits or subsidies for buying health insurance based on your income, based on these provisions: You're an individual making $14,856 to $44,680 or a family of four making $30,656 to $92,200, and You don't get coverage at work or have access to affordable coverage (meaning your plan costs more than 9.5% of your income).

Feel free to look at the Anthem Insurance website for more information, or contact me at nick@phillipswealthmanagement.com with any additional questions, comments or concerns.

Aim To Retire Comfortably, No Matter How Much You Make

Presented by Nick Bautista

When thinking about saving for retirement it is often forgotten that even if you don’t make a lot of money, you can still retire comfortably. Building saving habits and spending less than you make are some of the keys to success.

Too often I see young people not save any money when they get out of College, and this is usually the slippery slope to bad savings habits. The temptation to spend every penny made is so high that a majority of them don’t start saving until it’s too late. This unfortunately continues into adulthood as the thought of savings gets pushed to the side for a variety of reasons, (house, car, kids, kids’ college, etc.)

The principles for pursuing a comfortable retirement boil down to two simple rules.

         1.  Spend less than you make

         2.   Set aside money every paycheck no matter how much it is.

Doing both these things can help create good saving habits and help you get better aligned with your financial dreams.

So, think about how much are you saving in retirement; are you spending less than you make?

What It Means When Cities Go Bankrupt

Presented By Nick Bautista

With the recent news of Detroit filing for Chapter 9 bankruptcy and more closer to home the California cities of Stockton, San Bernardino, and Mammoth Lakes, the question remains, what does it means for a city to file for bankruptcy?

The law is pretty clear on what bankruptcy is and sets forth 4 eligibility requirements for filing for Chapter 9 which are found on the courts website. http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics/Chapter9.aspx.

All bankruptcies are different, and as such it is hard to compare bankruptcies to one another.

 But, basically it comes down to the city not being able to pay the debt that the municipalities have agreed to.

On the one hand it seems odd that cities file for bankruptcy when they will always be able to tax their citizens. Cities get funding from taxing our properties and sales tax on goods. Problems though arise when all those revenue streams dry up as they did in 2008. Property values dropped and people needed to save more, both of these things negatively affecting city revenue.

So what happens to the citizens in the city? Well, most of the cuts that come out of bankruptcy are to government and public workers. A lot of the reason these cities are bankrupt is due to pensions that cannot be sustained due to their high payout assumptions and returns needed to meet those payouts. With interest rates so low, the projections made aren’t sustainable. So, the first thing to get cut is pension benefits or public worker hours.

In terms of people who live in the city life goes on. They don’t really notice dramatic changes, although change is likely to happen. In short Bankruptcy is never good, but then again, it brings on the option of the city to start anew and hopefully become better for it.

Why Are You Listening To The News?

Presented by Nick Bautista

Marketwatch had a bad headline the other day. “Key Market Indicator Now Generating a sell signal.” The article goes on to describe an indicator that was created in the 1970s and is used to supposedly tell investors when to buy and sell. The indicator looks at companies that make up the index and creates a spread based on the companies who are reaching their highs along with companies reaching new lows. If the indicator sees that companies are moving to these highs and lows it can predict where the market is heading.

Not but two days later the same author came out with this article, “Buy and hold strategy wins again.” Both articles were big type, front section headliners and the content inside couldn’t be more polar opposite. (BTW the author is Mark Hulbert)

If you are listening/reading the majority of investment news you are making a poor decision. News companies are in one business, the get viewers business or more specifically the entertainment business. Sure the numbers are factual for stock prices and the like, but does Mark Hulbert have your specific and best interest in mind? Of course not, no financial advisor would have such a short term outlook, let alone flip strategies from sell, to buy and hold.

The news will always be entertaining because that’s how they make money, but in truth they don’t have your best interest in mind. Think about your emotions related to your money, are you letting the news dictate what you are feeling? If so, you need to stop listening to the news and start listening to your advisor. Your advisor should know your specific situation and can help you secure your financial future through financial planning.