Category: Education

How well do couples communicate on money? – Part 6

Most couples think they communicate well, but research indicates otherwise when it comes to finances. Communication on financial issues between couples is especially poor, as we have discovered in previous essays.

Couples were asked what advice they would give to newlyweds and young couples about finances. Newlyweds usually do not put frank talk about finances at the top of their “to-do” list. That may be a big mistake.

The most common suggestions for young couples starting out in life together were:

  • Save as early as possible for retirement (57{030251e622a83165372097b752b1e1477acc3e16319689a4bdeb1497eb0fac93}).
  • Make all financial decisions together (41{030251e622a83165372097b752b1e1477acc3e16319689a4bdeb1497eb0fac93}).
  • Make a budget and stick to it (39{030251e622a83165372097b752b1e1477acc3e16319689a4bdeb1497eb0fac93}).
  • Make sure you have an emergency fund (38{030251e622a83165372097b752b1e1477acc3e16319689a4bdeb1497eb0fac93}).
  • Don’t hide expenditures (28{030251e622a83165372097b752b1e1477acc3e16319689a4bdeb1497eb0fac93}).
  • Disclose income, debts and assets early (24{030251e622a83165372097b752b1e1477acc3e16319689a4bdeb1497eb0fac93}).

One of the easiest ways of accomplishing all of these objectives is for young couples to consult a financial advisor as soon as possible. By doing so they will reveal their finances to each other, develop a budget that matches their income, agree on an investment strategy, and be given a roadmap to long-term financial peace.

Our final essay on this subject will summarize what we have learned.

Korving & Company, the 2015 Suffolk Small Business of the Year is a family owned investment management and financial planning firm. We deliver a very personal level of service to guide, empower and assure our clients that their money is carefully managed to meet their long-term life goals.

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How well do couples communicate on money? – Part 5

Most couples think they communicate well, but research indicates otherwise when it comes to finances. Communication on financial issues between couples is especially poor, as we have discovered in previous essays. Despite concerns about medical costs, running out of money, inflation and Social Security, most couples have not created a plan to deal with these worries.

The 20{030251e622a83165372097b752b1e1477acc3e16319689a4bdeb1497eb0fac93} of couples who have created a plan get the benefit of peace of mind, less stress, and a more cohesive relationship. Uncertainty and doubt around important financial issues creates stress within relationships.
Couples who have a retirement plan in place:

  • Are twice as likely to live a very comfortable retirement.
  • Are 50{030251e622a83165372097b752b1e1477acc3e16319689a4bdeb1497eb0fac93} more likely to be “completely confident” in assuming responsibility for retirement.
  • Are much more confident that their partner will be OK in retirement.
  • Are twice as likely to know how much they will need in retirement.
  • Are less concerned about unexpected health care costs.
  • Are much less likely to be concerned about outliving their savings.

Having a plan to reach your goals is much like going to the grocery store with a shopping list. You know what you need and are less likely to forget important items, nor are you as likely to buy things you don’t need.

Creating a plan forces couples to be open with each other about their goals, their finances, and the issues that may keep them from achieving those goals. Working with a Certified Financial Planner™ (CFP) to create a plan also brings an important measure of reality to the process. Professional guidance creates realistic assumptions about how much should be saved and the rate at which it should grow. A CFP can also help mediate differences between couples when issues arise.

Our next essay will focus on advice to young couples.

Korving & Company, the 2015 Suffolk Small Business of the Year is a family owned investment management and financial planning firm. We deliver a very personal level of service to guide, empower and assure our clients that their money is carefully managed to meet their long-term life goals.

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How well do couples communicate on money? – Part 4

Most couples think they communicate well, but research indicates that communication about finances is often not good. In our previous essays we have discussed common financial disagreements.

In this essay we will discuss some of the financial worries couples have.

Nearly three-quarters (74{030251e622a83165372097b752b1e1477acc3e16319689a4bdeb1497eb0fac93}) of couples worry about unexpected health care costs. For more than half, it’s their top concern. With people living longer than ever before, advances in medical technology and the skyrocketing cost of health care, this concern comes as not real surprise.

After health care, the next biggest concern for couples (51{030251e622a83165372097b752b1e1477acc3e16319689a4bdeb1497eb0fac93}) was outliving their retirement savings.

The negative effects of inflation and concerns that Social Security may run out were the next biggest concerns.

Despite these worries, only 20{030251e622a83165372097b752b1e1477acc3e16319689a4bdeb1497eb0fac93} of couples actually have a plan in place to address these issues! And over one-third (36{030251e622a83165372097b752b1e1477acc3e16319689a4bdeb1497eb0fac93}) haven’t even thought about planning!

Our next essay will take a look at those couples who have taken the time to create a financial plan.

Korving & Company, the 2015 Suffolk Small Business of the Year is a family owned investment management and financial planning firm. We deliver a very personal level of service to guide, empower and assure our clients that their money is carefully managed to meet their long-term life goals.

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Protecting yourself against financial fraud.

Bernie Madoff isn’t the only fraudster preying on the unwary. There are a number of scam artists in the financial services business.

There’s the case of Malcolm Segal. According to the SEC:

Segal allegedly promised his clients 12{030251e622a83165372097b752b1e1477acc3e16319689a4bdeb1497eb0fac93} returns on CDs bought through Aegis. But he’s alleged in some cases to have either bought the CDs but redeemed them early or not bought them at all. Citing the SEC, the Philadelphia Business Journal says he raised about $15.5 million from at least 50 investors in this fashion.

It puzzles me how people can actually fall for something like this. Perhaps I have been in the investment business so long that I have seen too many of the ways people are fleeced out of their money.

How do you protect yourself against financial fraud? The first thing to do is to be suspicious of offers that are too good to be true. No actual, legitimate bank is offering 12{030251e622a83165372097b752b1e1477acc3e16319689a4bdeb1497eb0fac93} CDs in a 1{030251e622a83165372097b752b1e1477acc3e16319689a4bdeb1497eb0fac93} interest rate environment.

Another thing to do is to make sure that your assets are held in custody be a third party; a custodian like Charles Schwab, Fidelity or a major bank trust department.  The reason that Madoff was able to fool his clients for so many years is that he printed his own statements. These statements “showed” that he was trading for them and that they were making money. In reality, he was not trading and their account statements were fabrications.

At Korving & Company we use Schwab as our custodian and our clients receive trade confirmations and statements from directly from Schwab. We encourage our clients to view their accounts on-line at Schwab.

We had an experience with a client who had an account with another advisor. He suddenly dropped his custodian and began producing his own account statements. That’s a wake-up call. They asked us to look at their statements and when we noticed that their end-of-year tax reports did not include taxable income from CDs that he claimed to have bought for them, we knew he was defrauding them.

If you have any concerns about your financial advisor, feel free to contact us for a second opinion.

 
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How well do couples communicate on money? – Part 3

Most couples think they communicate well, but when it comes to their finances research indicates otherwise. Our previous essays on the subject have shown just how poor it typically is.

On the issue of retirement, nearly half (48{030251e622a83165372097b752b1e1477acc3e16319689a4bdeb1497eb0fac93}) of the couples surveyed had no idea how much they needed to save in order to maintain their current lifestyle once they retire.

Nearly half (47{030251e622a83165372097b752b1e1477acc3e16319689a4bdeb1497eb0fac93}) disagreed on the amount they need. Even more startling, those who were nearest to retirement – when changing course is the most difficult – disagreed the most!

Over half (52{030251e622a83165372097b752b1e1477acc3e16319689a4bdeb1497eb0fac93}) of the respondents had “no idea” what they would receive in monthly retirement income. Asked about Social Security, 60{030251e622a83165372097b752b1e1477acc3e16319689a4bdeb1497eb0fac93} either did not know, or were not sure, what they would receive. That includes the about-to-retire Baby Boomers.

Roughly one-third of couples disagreed on their retirement lifestyle. Half could not even agree on when they would retire.

Our next essay on this series will have a look at what financial issues couples worry about financially.

If this sounds like you or someone you know, contact Korving & Company.

Korving & Company, the 2015 Suffolk Small Business of the Year is a family owned investment management and financial planning firm. We deliver a very personal level of service to guide, empower and assure our clients that their money is carefully managed to meet their long-term life goals.

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How to connect with your spouse about finances

Too many spouses don’t share enough information about family finances. It’s not unusual for one spouse to take care of investments and pay the bills. The other spouse may not be interested or may be too busy. It’s a fact that not everyone is interested in investing, budgeting or banking.

But this can lead to a bad outcome in case of death, divorce or separation. In fact, money is one of the top 10 reasons for marriage breakdown.

Money or anything related to finances can be a possible cause of disagreement between many people – including couples. Married couples, whether they are happy or not, may have disagreements over little financial issues to much bigger shared financial responsibilities or unequal monetary status. Money may not always be the principal cause but in fact is usually combined with other forms of reasons for divorce. In any case, it is still a significant contributor and should be managed with fairness from both sides, mutual understanding and a tiny dose of compromise.

But even couples that are financially compatible should sit down from time to time to review their financial situation. Our books: BEFORE I GO and BEFORE I GO WORKBOOK were written to help people do this.

If there is a difference in the financial mind-sets of a couple, a financial advisor may be able to act as a facilitator to reconcile the differences.

A financial advisor can educate the couple about investing, budgeting and retirement planning. Regular meetings with a couple’s financial advisor provide them with the opportunity to share critical family financial issues, keep everyone informed and help resolve issues before they lead to conflict.

Having a trusted financial advisor in place, one who is already familiar with a couple’s finances, can also help in case you find yourself “suddenly single.”

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What to do if you win the lottery

Lottery winners so often end up broke that it’s become a common story. If you want to break the curse of the lottery winner here are a few simple things you can do.

1. Lottery winners usually go on a spending binge because they now have more money that they ever imagined. This leads them to believe their new-found wealth is endless. It’s not. Kings, potentates, even countries (see Greece) have gone broke; even billionaires can run out of money. The financial object of a lottery winner should be to insure that then never end up broke, even if they live a long time. There are ways of insuring that you won’t run out of money. The first thing you need to do after receiving that check is to get a good, honest financial advisor.

2. Lottery winners attract people like bees to honey. These can be relatives, friends, strangers who heard about the winner’s good fortune. They want gifts (and you want to give them), they expect you to pick up the check. The most dangerous are the people who come to you with “deals” that will make you even richer. One of the best ways to handle this is to refer everyone to your financial advisor; explain that he’s the person who’s handling your finances. That way you are not the one turning anyone away.

3. Lottery winners have tax issues that they never had before. Before accepting that check, it’s a good idea to organize a small team – quarterbacked by your financial advisor – that includes a including a CPA and an attorney.

Buying a lottery ticket is not a wise investment. If you beat astronomical odds and win, you are the same person you were before even though people will suddenly find you incredibly witty, smart and good looking. But if you must buy a ticket – and win – keep these ideas in mind.

How to live well in retirement

No one plans to live in poverty in retirement. But one of the biggest problems for the majority of current workers is that they don’t plan … period. So what can we do to live better in retirement?

  •  Save, save, save and start early. The biggest tool that anyone has is time. Time is the magic that makes compound interest a miracle.  There is no substitute for starting early, and that means as soon as you leave school and begin work. Those who begin saving in their 20s saving $50 a month will end up with more money that those who started in their 40s.
  • Don’t retire early. People are living longer than ever before. Unless you are already rich, retiring early has at least three pernicious effects. First, your income stops and you begin drawing down your savings. Second, your pension and social security payments are much lower than if you wait. Third, you will spend more time as a retiree, forcing you to reduce spending to stretch your savings dollars.
  • After you retire from your main job and if you are physically able, find a paying job that will supplement your other income sources.
  • Find a way to cut costs. One of the best ways to reduce the cost of living during retirement is to be out of debt and that includes mortgage debt. It also pays, once you are empty nesters, to downsize the home. This has the effect of reducing taxes, utility and maintenance costs.

And once you are retired, get a copy of my book, Before I Go, so that you will be ready for the next stage on your journey.

What Rich People Need to Know

I ran across an article at Market Watch titled “Ten things rich people know that you don’t.”  It listed the usual things:

  • Start saving early
  • Automate your savings
  • Maximize contributions to 401(k)s
  • Don’t carry credit card debt
  • Live below your means
  • Educate yourself about investing
  • Diversify
  • Hire a qualified financial advisor

All of that is something to take to heart when you’re young and just starting in life.  But what do people who are already rich need to know?

Lots of people get rich without following the rules.  They may start a successful business, enter a highly compensated profession, climb the corporate ladder, win the lottery, become a sports star or inherit a fortune.   Once you are rich, the number one objective for most people is to stay rich.  One very successful financial advisor with just 28 very wealthy clients said

“People don’t come to me to get rich, they come to me to stay rich.”

That’s the role of a good financial advisor.   Their job is to  do more than manage their client’s portfolios, it’s to take care that all of the other boxes are checked off:  to diversify the client portfolio, to educate the client about investing, to see to it that they live within their means.  In many cases they take care of family issues, lifestyle issues; the kinds of things that family offices do.

It’s what we do.  It’s what our clients expect.

Have a wealth maintenance question?   Contact us.

Are you flunking the retirement readiness test?

A recent article in Financial Advisor proposed an interesting analogy: “Imagine boarding a jet and heading for your seat, only to be told you’re needed in the cockpit to fly the plane.”

That’s the situation many people are finding themselves in today.  Once upon a time, employers set up pension plans managed by investment professionals.  You worked and when you retired the pension checks began coming for the rest of your life.

That ended when 401(k) plans began replacing defined benefit pension plans.

Once, employers made the contributions, investment pros handled the investments and the income part was simple: You retired, the checks started arriving and continued until you died. Now, you decide how much to invest, where to invest it and how to draw it down. In other words, you fuel the plane, you pilot the plane and you land it.
It’s no surprise that many people, especially middle- and lower-income households, crash. The Federal Reserve’s latest Survey of Consumer Finances, released in September, found that ownership of retirement plans has fallen sharply in recent years, and that low-income households have almost no savings.

But it’s not only the low-income workers who lack basic financial wisdom.

Eighty percent of Americans with nest eggs of at least $100,000 got an “F” on a test about managing retirement savings put together recently by the American College of Financial Services. The college, which trains financial planners, asked over 1,000 60- to 75-year-olds about topics like safe retirement withdrawal rates, investment and longevity risk.
Seven in 10 had never heard of the “4 percent rule,” which holds that you can safely withdraw that amount annually in retirement.
Very few understood the risk of investing in bonds. Only 39 percent knew that a bond’s value falls when interest rates rise – a key risk for bondholders in this ultra-low-rate environment.

If you fall into this category and want to find out what help is available, contact us.  We’ll be glad to chat; no sales pitch and no pressure.

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