finances

Beat These 5 Financial Challenges

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

By Bankrate

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A number of signs indicate the U.S. economy is improving. They include soaring consumer confidence, highs for the stock market, and the low unemployment rate (most recently 4.5 percent).

At the same time, financial obstacles remain for many Americans. A new survey from the National Foundation for Credit Counseling underscores some of these ongoing challenges.

Common financial obstacles and how to overcome them

I picked some of the biggest challenges highlighted in the survey and added some advice on how to fight back if you’re going through them.

Rising credit card debt

Thirty-nine percent of respondents carry credit card debt from month to month, compared with 35 percent last year. Some 16 percent of adults say they carry $2,500 or more in credit card debt every month.

What you should do: Pay off as much as you can now. Benchmark interest rates are on the rise, and the Federal Reserve has indicated that rates are likely heading higher this year. So credit card debt is going to get more expensive. Consider getting a balance transfer card to reduce the interest you’re paying.

Student loan strains

Among respondents, 11 percent wouldn’t recommend student loans to finance college education, the same percentage as last year. Those who said their student loan was a good investment rose a bit to 9 percent, compared with just 6 percent over the previous two years.

What you should do: If you’re saddled with student debt, make larger payments if you can afford it. Also, have a percentage of your income automatically directed toward a college repayment fund so you won’t be tempted to use the money on something else. Check out this calculator that shows you how long it will take you to pay off your student loans based on varying factors.

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People saving less

Some 54 percent said they are saving the same as last year, down 4 percentage points from last year. The percentage of those saving more is unchanged at 26 percent. Meanwhile, 68 percent say non-retirement saving has decreased slightly over the past year.

What you should do: First, monitor your spending and make a budget. Then, make sure you’re getting the most from your accounts. Compare rates on savings accounts and CDs to make sure you’re getting a competitive return. Also, set up a direct deposit to transfer funds into your savings account.

Not saving for retirement

Among respondents, 27 percent aren’t saving any portion of household income for retirement. That’s little changed from last year. Asked about what areas of their finances worry them most, the top response was retiring without having enough money set aside.

What you should do: If your employer offers a 401(k) and matches a percentage of your contributions, make sure you’re taking advantage of the full match. Look over your current investments to make sure you’re not being charged high fees. Once a year, increase the amount you contribute by 1 or 2 percentage points at a time.

Need professional advice

A whopping 80 percent of U.S. adults say they could benefit from professional advice and answers to everyday financial questions.

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

Retirement investing through the decades

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

By Bankrate

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Investing to grow your retirement savings is a long-term project. The earlier you begin, the better, thanks to compounding interest.

You don’t have to worry about saving a lot at first. It’s all about forming a plan you can stick to.

Here are suggestions for retirement planning through the decades.

Your 20s: Open a 401(k) and IRA

You will likely land your first job in your 20s and can begin saving money for retirement. But before doing so, make sure you have enough cash to pay for three to six months’ worth of living expenses, in case an emergency arises. If you set up a retirement account and then withdraw from it to pay for emergency expenses, you may be subject to taxes and a penalty payment.

Once you have emergency savings, start funding a 401(k) if your employer offers one, especially if the company matches some of your contributions. If you turn down the option to contribute to a 401(k) plan that matches, you’re essentially giving away free money. In 2017, you can contribute up to $18,000 in a 401(k).

You also can open an individual retirement account, or IRA. In 2017, you can contribute up to $5,500.

If you can’t save enough to maintain both a 401(k) and an IRA, go for the 401(k) because contributions are automatic, pretax and subject to matching.

Your 30s: Consider a Roth, adjust asset mix

If you open an IRA in your 20s or 30s, you’ll want to consider a Roth IRA. Unlike a regular IRA, you don’t receive a tax deduction for contributions to a Roth. But when you withdraw money from a Roth IRA during retirement, it’s all tax-free. The money you withdraw from a regular IRA is taxed as regular income.

So if your tax rate is likely to be higher when you withdraw money from your IRA than it is now, you’re better off with a Roth IRA.

When it comes to allocating your retirement investments, try to put at least 60 percent in stocks during your 20s and 30s. But it all boils down to your risk tolerance. If you are unwilling to stomach losses, don’t put everything in stocks. The worst thing you can do is buy stocks and then sell them for a big loss.

Your 40s: Stay focused on the long run

Many people purchase homes in their 30s and 40s. It’s important to remember that your house is not part of your retirement plan, says Mick Heyman, an independent financial adviser in San Diego.

“I haven’t seen too many times that somebody buys a great home, sells it at 60 and then lives off the profits,” he says. So don’t spend so much money on a home that you can’t afford to save for your retirement as well.

You also must be realistic in providing for your children. Don’t spend so excessively on your kids that you neglect your retirement savings goals. That may even mean putting retirement plans ahead of your children’s college. Tuition payments can come from many sources, but retirement funds will have to come largely from the parents.

Your 50s: Capitalize on catch-ups

The 50s are the peak earning years for most people, so it’s even more critical to save. The government gives you some assistance, allowing increased contributions to IRAs and 401(k)s through “catch-up provisions.”

For IRAs, people 50 and older can contribute an extra $1,000 this year — $6,500 in total.

For 401(k) plans, participants 50 and older can put in an extra $6,000 — $24,000 in total.

If you have children who are now out of the house, you might have enough money to finance those catch-up payments.

Your 50s are a good time to opt for more safety in your asset allocation, experts say.

“Somewhere in your 40s and 50s, you want to transfer to more conservative stocks, and make sure you aren’t all in stocks,” Heyman says. “Start having 20 to 30 percent in bonds.” He also recommends orienting your stock holdings toward dividend-paying blue chips. They offer safety and income payments that you’ll appreciate during retirement.

Your 60s: Plan an income strategy

This is the decade in which you may well retire, which means you’ll begin withdrawing from your retirement funds.

The traditional rule of thumb is that you can cash out about 4 percent of your portfolio in each year of retirement. But with low interest rates limiting the amount of income your portfolio will generate, 3 percent may be more appropriate now.

Ideally, you should have two years’ worth of living expenses in cash to avoid having to dump your investments when markets are weak.

Adjust your asset allocation so that bonds account for a larger part of your portfolio, given your need for safety and income.

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

Are You Ready for the 2017 Season?

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It’s January. You are probably busy planning for the upcoming season.

Your highest priority may be completing the items on your checklist:

  • Hiring assistant pros and shop assistants
  • Scheduling vendors to visit at the PGA show later this month.
  • Purchasing equipment and merchandise
  • Setting fees for lessons, tournaments, driving range, and bag storage
  • Developing promotional programs
  • Scheduling tournaments and other events

But have you considered the most important item of all: determining your goals for this year?

In an ideal world, your goals would drive your checklist. You’d define your goals first and then tailor your checklist accordingly.

That may not be practical this year. You’ve got too much to do. You’ve got to complete your checklist first. But you still can do some planning before the season starts.

Break down your 2017 plan into these categories:

  • Financial goals
  • Performance goals
  • Activities and programs (Your checklist)
  • Tracking member activity – Lessons, Clinics, Tournaments, Purchases

Financial Goals

You may not have closed your books for 2016 yet. But you probably have a pretty good idea of how much money you made.

How much money do you want to make in 2017? Look at revenue and expenses for 2016 and, ideally, several years before that.

Analyze the trends and then set a target for your 2017 bottom line. To get to your bottom line, you need a goal for each of your major sources of revenue:

  • Merchandise and equipment sales
  • Lessons & Clinics
  • Tournament Fees
  • Range and bag fees

Performance Goals

Your financial goals are WHERE you want to go. Your Performance Goals are HOW you’ll get there.

Some of your income, particularly your salary from the club, is already fixed. You can’t control that.

However, you can control member-generated revenue. You can set the fees and you can project the number of lessons, tournament participants necessary to meet your revenue target.

Here’s an example:

300 lessons (performance goal) x $100 a lesson (Fee – program) = $30,000 in lesson revenue (financial goal)

Your metrics will drive your revenue. Those metrics include:

  • Number of lessons
  • Number of clinic participants
  • Number of tournament participants
  • Number of members taking lessons
  • Frequency of lessons per member
  • Makeup of merchandise and equipment sales

Your Metrics Matter

Your club’s software and the golf shop point of sale system may provide some or all of the data above. At the very least, it should provide totals for the sources of revenue.

Beyond that, ideally, it should provide information on each member’s activities and enable you to perform analyses. For instance, if there were 300 lessons last year, how many members took lessons and how often?

Did 60 members take an average of 5 lessons each or did 150 members take an average of two lessons each? There is a big difference.

If the answer is 60 members, you want to develop programs to get more members to take lessons. If the answer is 150, you want to encourage members to take more lessons.

This information will drive your communications programs plus special efforts as playing rounds with members and providing free tips on the driving range.

Tracking Your Metrics

If your club’s systems don’t provide the information you need, you may have to set up a parallel system to track member activity.  For this, you’ll need CRM (Customer Relationship Management) software. There are a number of inexpensive and easy-to-use CRM software programs on the market.

You’ll want to know for each member how many lessons they took, what was discussed during the lesson, what merchandise they purchased, and the clinics and tournaments they participated in.

One of your shop assistants may be able to input most of the data. Your assistant pros or you will have to put in the information about the lessons.

Having all your members’ info in the database will allow to track individual members’ skill levels and preferences. The information about your members can also show trends that will guide your marketing, programming, and purchasing decisions.

The bottom line: To improve your bottom line you need detailed information about your members! If you don’t have an effective tracking system, make that a priority for 2017.

Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.