Ask A CFP: Are You Pessimistic or Optimistic?

Ask A CFP® Pro: Are You Pessimistic or Optimistic?

Today is the first episode of our Ask a CFP series.  Each month we will answer your questions about money, investing, and retirement.  The big question today: “Are you pessimistic or optimistic about where we are going?”

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Are you pessimistic or optimistic

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Ask a CFP® Pro: Are You Pessimistic or Optimistic?

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pessimistic or optimisic

Today's Questions

Here are the questions we answer on today’s show:

  1.  Are airline stocks a good buy? What’s the best way to invest?
  2.  My employer stopped matching my 401(k), should I also stop my contributions?
  3. Since my IRA has decreased in value, is now a good time to convert it to a Roth IRA?
  4. With businesses starting to reopen, is now a good time to buy stocks?
  5. Do you think we’ve seen the end of the bear market? Are you pessimistic or optimistic about where we are going?

What is your pressing question?

Do you have a question about money, investing or retirement.  Here is your chance to get straight answers from a Certified Financial Planner­™ Pro.  Click on the button to send us your questions.  We’ll answer it on an upcoming episode of our Ask a CFP show.  

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You can also ask your question in the comments section below!

Are you pessimistic or optimistic

 

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Financial Planning

About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors.    He specializes in helping hard working, middle class families plan for retirement.

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Are Card Rewards Worth It?

Are Credit Card Rewards Worth It?

Are credit card rewards such as cash back or travel perks worth it? Should you use multiple credit cards to get better rewards? 

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Are Credit Card Rewards WOrth it

On May 9th, the Marietta Times ran an article written by NerdWallet. “Why Family Loyalty Shouldn’t Apply to Your Credit Cards.”  It encourages people to shop for things like cash back perks and travel rewards. It also encourages people to consider using multiple cards to maximize those rewards.

Are The Rewards Worth It?

Are credit card rewards worth it? You know those frequent flyer miles or cash rebates for your purchases. For some people, the answer is yes. I’ve personally benefited from using travel rewards on my credit card purchases.

But there is a caveat. The rewards are only worth it if you pay your full balance each month.

The Basic Math…

You buy $100 worth of groceries. Your card gives you 2% cash back, so you get a $2 reward. If you pay your bill, it’s $2 in your pocket. But if you only make the minimum $10 payment, you’ll spend more in interest than your perks are worth. And that will happen in two months or fewer too

Are Card Rewards Worth It?

Should You Use Multiple Cards?

I think this adds more complexity than it’s worth. You have to keep track of more things, make more payments, and stay more organized. From my experience, simple is better, cleaner, and reduces mistakes.

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The Verdict: Good for Some, But Not Everyone

You have to be very careful with these so-called perks. They can be a perverse incentive. They can give you the rationalization to use your credit card, even if you can’t pay the balance each month. And they can cause you to spend more than if you were using cash or a debit card.

Are the perks and rewards worth it? For some, yes. But you must do it responsibly. If you can’t pay for all your purchases each month, the rewards don’t matter.

Worth it Credit Card Rewards
Card Rewards Worth It
Credit Card rewards

 

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Financial Planning

About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors.    He specializes in helping hard working, middle class families plan for retirement.

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3 Questions To Help Evaluate Your Cash Flow

3 Questions to Help You Evaluate Your Cash Flow

The COVID-19 Pandemic forced a lot of major changes to our lives. IT has also created a unique opportunity to gauge how we spend money. Today, we’ll pose three questions to help you evaluate your cash flow.

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Questions To help Evaluate Your Cash Flow
3 Questions to Evaluate Your Cash Flow

A week ago, we talked about the importance of building your financial safety net. One of the first steps was to take a hard look at your spending. Today, we have three questions to help you evaluate your cash flow.

Question 1

Evaluate Your Cash flow

The things you really enjoyed—the activities that added value to your life, you’ll find a way to do them again. Eliminating the ones you don’t miss and the costs associated with them, can help you get your budget back on track.

Question 2

Questions to Help Evaluate Cash Flow

Was it that fancy cup of coffee, or breakfast sandwich on the way to work? Could it be something bigger? If you haven’t missed it when you were forced to stop buying it, you don’t have to start just because you can. You may find that many of those little things can add up to a lot of money each month.

Question 3

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When things get tight, we start to look at the details. It’s easy to identify the line-items on your bank statement that cause you stress. It could be the amount you spend eating out. Or, that pesky gym membership you don’t need or use. And then there are all those subscriptions. It could be something even bigger like a car payment.

Weigh the stress of those expenses now that times are tight to see the true value they provide to your life. If those two things are “out of balance,” take some time to clean them up.

Remember, there are no wrong answers to those three questions.

This pandemic forced us to alter our spending habits. In the process, it revealed what was essential, important, and truly valuable to our lives. And that can help us make better choices about money going forward. It can help us build our financial safety net and save for our future.

evaluate your cash flow questions
evaluate your cash flow questions
Questions to Evaluate Your Cash Flow

 

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Financial Planning

About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors.    He specializes in helping hard working, middle class families plan for retirement.

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Creating Your Financial Safety Net

Creating Your Financial Safety Net

As America begins to reopen, we can set our sights on what we need to do to get our financial situation back in order. What should be at the top of your list? In my mind, creating your financial safety net should be a high priority.

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Create Your Financial Safety Net

Some Disturbing Numbers

America is starting to reopen. Hopefully that means we will all be able to get back to work soon and begin your own financial recovery. But as you begin to focus on what you need to do, what should be your top priority?

The best place to start: your financial safety net. By this we mean focus on building a cash reserve and eliminating debt.

When we look at the some of the numbers we see some very disturbing statistics.

Lack of Savings…

According to gobankingrates.com:

  • Over 2/3 of Americans don’t have $1,000 in a savings account.
  • 45% have no savings at all.

Massive Consumer Debt…

According to NerdWallet, Americans owe more than $14 trillion
  • $466 billion in credit card debt
  • $9.5 trillion in mortgage debt
  • $1.3 trillion in car loans
  • $1.5 trillion in student loans

The “Average American” has no safety net!

Financial Safety Net

A Major Financial Crisis

When 30 million people lose their jobs, and millions more see their pay reduced, it is going to cause real problems very quickly.  This time, the government stepped in to provide some relief.  Many banks and lenders have been very understanding too.  But the next time you face a financial crisis, you may not be able to depend on the same measures.

Having cash allows us to keep the lights on, food on the table, and a roof over our heads.

Eliminating debt means we have less money going out each month. And this means the money we do have can go for what we truly need.

How Do You Do This?

We need to focus on how to avoid these problems if or when there is a “next time.”

How do you do this?  It’s simple, but not necessarily easy.

1. Take a hard look at how you spend money.

The past few months should have revealed what expenses are truly essential.  You will need to make some hard choices and big changes in the expenditures that aren’t.

2. Make saving a higher priority.

As things return to normal, make it a point to save something from each paycheck.  Aim to have at least $1,000 in a savings account to start.

3. Create a plan to eliminate your debt.

Focus on your car loans, your credit cards, and student loans.  One of the best ways to do this is to use the debt snowball created by radio personality, Dave Ramsey.

Your Financial Safety Net

Be ready for the "next time"

We don’t know when the next financial crisis will happen, and it may only be YOUR financial crisis.  Your financial safety net will mean a whole lot less stress and a lot less pain.

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About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors.    He specializes in helping hard working, middle class families plan for retirement.

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4 Ways The Pandemic Could Impact Social Security

4 Ways the Pandemic Could Impact Social Security

Social Security is the cornerstone of retirement income for many Americans.  Have you wondered if the Coronavirus outbreak will impact your benefits? Here are four ways the pandemic could impact Social Security.

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The Covid-19 Pandemic and the Economy

The Covid-19 virus has turned the world and the economy on its head. The financial impacts are being felt far and wide. We have record unemployment claims, with nearly 22 million people out of work–so far. And Pew Research estimates 27% of American workers have seen their pay reduced.  Government response has also been extreme.  All of that will impact the future.

Most of the media focus has been on how this outbreak has impacted current workers. But it can also affect retirees. Here are four ways the pandemic could impact your Social Security benefits.

pandemic social security impact

Social Security does provide an inflation-adjusted income stream. But over the past several years those average increases have not been all that great. In some years, it hasn’t been enough to cover the increase in Medicare premiums. 

According to the Federal Reserve Bank of Cleveland, the current 10-year inflation expectation is less than 1.2% per year. If those projections hold, it means small benefit increases. In some years, it could mean your net check decreases due to rising Medicare costs.

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Pandemic Impacts Social Security

Depending on how long the economic shutdown lasts, many older workers could be forced to retire earlier than they expected. For many, this forces them to start Social Security earlier than their normal retirement age. And those discounts could be close to 30%.  

Social Security Impact pandemic

Social Security uses Average Indexed Wages to compute your Social Security benefits. The economic downturn means total wages earned in 2020 will be less. They could be a lot less.

This could impact how they compute your Social Security benefits. The end-result could be a smaller monthly payment. This will most likely impact those who are close to age 60.

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If you are 50 or older, and thinking about your retirement, click here for a free retirement assessment.

Pandemic Impacts Social Security

Right now, fewer payroll taxes are being collected. This places an extra strain on an already stressed system.

Prior to the pandemic, Social Security looked to be solvent until 2034. This means they had enough to pay the promised benefits. But the reduced tax collections could mean the problems could happen a year sooner.

Unless there are major changes, when Social Security reaches this point, benefits will have to be reduced.

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Far Reaching Impact

The coronavirus pandemic has affected more than our health. It has had a significant impact on many areas of our economy. And this includes your Social Security benefits.

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Financial Planning

About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors.    He specializes in helping hard working, middle class families plan for retirement.

Our Most Recent Videos And Posts