MAKING CENTS: Make risk assessment your first step

Many say that an analysis of risk should be the first step of the financial planning process after you’ve compiled your financial statements and enumerated your dreams, goals and objectives. The reason for starting with risk is because the occurrence of an unplanned risk may prevent your best laid plans from ever having a chance to become reality.

Perhaps the first risk would be to your income.

Perhaps you’ve received a pink slip or two in your life, and if you have, you understand

better than anyone the value of having some cash stashed aside for your rainy day fund. How large your rainy day fund should be depends, but somewhere between 3 and 12 months of living expenses is recommended for many.

For those of us working now, what type of disability income protection insurance do you have? Many have this coverage in the form of group coverage from an employer, but along with the pink slip comes the loss if group disability coverage in most cases.

Retirees also should look to their income sources, and learn about ways that you may increase, stabilize or protect your income.

Now we turn to protecting your health. Beyond basic health insurance, which everyone should have, you may look to coverage for catastrophic injury or illness and then on to life insurance. For catastrophic health care, long term care insurance is the best way to protect yourself. As baby boomers age and care for their parents, long term care coverage seems to make sense. Other factors such as low interest rates on the insurance company’s investments and the lack of cancellations from policy holders are amongst the factors contributing to skyrocketing LTC insurance costs.

For life insurance, your most important factor is the amount of coverage needed. Start with knowing how much protection your family needs and then see if your coverage is adequate in amount. Beyond the amount of coverage, is your life insurance the right type? Do you need term or permanent coverage? You then need to evaluate your holdings against what you need and search for the type of product that fits the time frame, health and underwriting facts of your life and goals.

Lastly, a thorough evaluation of the protection in place for your stuff and general liability is mandatory. This may mean your home, business, car, valuables, toys or rental properties. Unfortunately, this is the area most frequently overlooked by financial planners

Don’t think that this part of your financial plan is easy or all set. Get professional guidance to make sure that your down side is covered before you start counting on living your dream.

John P. Napolitano is CEO of U.S. Wealth Management in Braintree, Mass., and 2012 president of the Financial Planning Association of Massachusetts. He may be reached at jnap@uswealthmanagement.com or on Facebook as JohnPNapolitano and US Wealth

John Napolitano is a registered principal with and securities offered through LPL Financial. Member FINRA/SIPC. He can be reached at 781-849-9200.

Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through U.S. Financial Advisors, a registered investment advisor and separate entity from LPL Financial. The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with resident of the following states: AL, AR, AZ, CA, CO, CT, DC, FL, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MN, NC, ND, NH, NJ, NM, NV, NY, OH, OK, OR, PA, RI, SC, TN, TX, UT, VA, VT, WA, WV. USFA, and U.S. Insurance Brokers, LLC are wholly-owned subsidiaries of U.S. Wealth Management. U.S. Wealth Management companies are not affiliated with LPL Financial.

The information being provided is strictly as a courtesy. When you link to any of the web sites provided here, you are leaving this web site. We make no representation as to the completeness or accuracy of information provided at these web sites. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, web sites, information and programs made available through this web site. When you access one of these web sites, you are leaving our web site and assume total responsibility and risk for your use of the web sites you are linking to.

MAKING CENTS: Don’t let your trash become someone else’s treasure

In this technologically influenced world, we hear a lot cloud computing and a paperless world. I don’t know about you, but the piles of paper still seem to be there and the only way to manage that growing pile is to have a great filing and disposal system. Both the storage and disposal parts leave you vulnerable to criminals looking to steal your money and

image source: emoware.org

identity.

In terms of filing and storage, make sure that your filing cabinets are locked and as secure as you can possibly make them. You may even consider scanning in your important documents into a secure, encrypted storage medium and keep your originals in an offsite secure storage facility.

More common than people breaking into your house for confidential information are the dumpster divers who steal your confidential information from the trash. Whether it is an old tax return, a copy of your W-2 or simply an insignificant document that may contain your signature, how long should you save these things and how to you properly dispose of these?

In terms of document retention, there clearly are some documents that you’d like to have around for a period of time. Starting with tax records, you only need to keep three years on hand. Most tax professionals however, would suggest that you hold onto these for 7 years. The tax documents that should be saved are the actual forms filed along with the supporting forms like W-2s and 1099s. But you also need to keep your back up for deductions or any other positions that you’ve taken on your tax return. This may include cancelled checks, bank statements, or invoices for deductible items.

Home improvement records should be kept until three to seven years after selling the home. You’ll need to calculate your basis (that’s cost in tax speak) to properly report the sale on your tax return. If you’ve already tossed the back up for improvements made in the past, start now with a list of the improvements that you’ve made to back up your basis calculation. Also retain any copies of your deed, closing documents and any mortgage information from the closing until 7 years after you sell.

Maintain copies of all insurance policies in force. Last year’s auto policy can be destroyed when the new one is issued, but your policies for life, disability or long term care should be retained as long as they are in force.

For investment statements and supporting trade tickets or performance reports, retain the monthly statements until you receive the year end statement and are sure that everything is accurate. Make sure that these statements show your cost basis for all holdings, then retain up to seven year end statements electronically or in hard copy.

Under the radar screen are address labels for direct mail, magazines or credit card receipts. These too should be properly disposed. Proper disposal may not include that old $20 shredder in your home. Get a cross shredder or use a disposal company who will give you a certificate of disposal.

John P. Napolitano is CEO of U.S. Wealth Management in Braintree, Mass., and 2012 president of the Financial Planning Association of Massachusetts. He may be reached at jnap@uswealthmanagement.com or on Facebook as JohnPNapolitano and US Wealth

John Napolitano is a registered principal with and securities offered through LPL Financial. Member FINRA/SIPC. He can be reached at 781-849-9200.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through U.S. Financial Advisors, a registered investment advisor and separate entity from LPL Financial. The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with resident of the following states: AL, AR, AZ, CA, CO, CT, DC, FL, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MN, NC, ND, NH, NJ, NM, NV, NY, OH, OK, OR, PA, RI, SC, TN, TX, UT, VA, VT, WA, WV. USFA, and U.S. Insurance Brokers, LLC are wholly-owned subsidiaries of U.S. Wealth Management. U.S. Wealth Management companies are not affiliated with LPL Financial.

The information being provided is strictly as a courtesy. When you link to any of the web sites provided here, you are leaving this web site. We make no representation as to the completeness or accuracy of information provided at these web sites. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, web sites, information and programs made available through this web site. When you access one of these web sites, you are leaving our web site and assume total responsibility and risk for your use of the web sites you are linking to.

MAKING CENTS: Advice for new college grads

This time of year, I like to say something positive to the new entries into “the real world.”  New college grads have always had challenges transitioning into a world of work, bills and responsibilities.

image source: blog.studentadvisor.com

In today’s economy many have large amounts of debt from school and face dim prospects for earning more than they did during their summer jobs at the beach or restaurant.

So let’s start with the obvious. Stay within your means financially. Do not run up credit card debt and do not agree to move out of the house without a sustainable income plan to pay for those costs. An exception may be a guaranteed subsidy from a parent or other family member.

Next is what to do with your new found free time. The obvious answer is to do something productive. That could be work, education, or pursuing your passion.

As for work, there are two ways to look at it in the short term. You are either laser focused on a career or you are not. The short answer would be to be great at what you do; you owe it to yourself to make the most out of your chosen profession. That doesn’t mean you are married to that job or profession for life, but you must be great at it to discover what you don’t like about it and what you do like about it. This type of thinking will steer you right throughout your career in whatever it is.

If you are not laser focused on your career, look at a job search from the bottom up. The first bottom up is how much you need to earn to support your desired lifestyle. If you’re not a numbers person, don’t lose sleep over this exercise, just ask a nerdy friend to break out an excel spreadsheet and help you figure it out.

The second bottom up is from the bottom of your heart. Take this opportunity to think about the things that you absolutely love to do; the things that you could do all day long and make you feel happiest. Not discounting the need to support your lifestyle, spending time to pursue your passion at this early stage may also be your best investment. Many of today’s most successful entrepreneurs have worked with their passion to build very unique and valuable enterprises. Beyond the remote possibility that you’ve got the next Google or Facebook idea, working or furthering your studies in an area that you find completely captivating will lead you to your big idea if you are open to it.

Trust yourself, and learn to be bold. You will find failures in your professional life. Your job is to learn how to turn negatives into positives. From these failures, ask what you may have done differently to obtain the desired outcome. Make this a way of life, and your classmates may look back on you in 20 years and ask how you did it.

John P. Napolitano is CEO of U.S. Wealth Management in Braintree, Mass., and 2012 president of the Financial Planning Association of Massachusetts. He may be reached at jnap@uswealthmanagement.com or on Facebook as JohnPNapolitano and US Wealth

John Napolitano is a registered principal with and securities offered through LPL Financial. Member FINRA/SIPC. He can be reached at 781-849-9200.

Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through U.S. Financial Advisors, a registered investment advisor and separate entity from LPL Financial. The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with resident of the following states: AL, AR, AZ, CA, CO, CT, DC, FL, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MN, NC, ND, NH, NJ, NM, NV, NY, OH, OK, OR, PA, RI, SC, TN, TX, UT, VA, VT, WA, WV. USFA, and U.S. Insurance Brokers, LLC are wholly-owned subsidiaries of U.S. Wealth Management. U.S. Wealth Management companies are not affiliated with LPL Financial.

The information being provided is strictly as a courtesy. When you link to any of the web sites provided here, you are leaving this web site. We make no representation as to the completeness or accuracy of information provided at these web sites. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, web sites, information and programs made available through this web site. When you access one of these web sites, you are leaving our web site and assume total responsibility and risk for your use of the web sites you are linking to.

MAKING CENTS: You can’t borrow your way out of debt

As consumers, we learned the hard way that consolidating credit cards or rolling that card debt into a bigger home mortgage doesn’t solve the real problem; too much debt. For some reason, our federal government is having a tough time adjusting to this common principle of economics.

image source: skiny-vkontakte.ru

I’m not saying that what the Fed did by expanding its balance sheet was wrong, but I am saying that the short-term fixes that made us all feel a little better are not likely to be the fixes that solve our economic woes in the long term. And the short term fixes did more than make us feel better as people, it made your investments feel better as the financial markets have soared since the famous quantitative easing process began a few years back.

In fact, QE 3, the Feds latest round of pumping liquidity into the economy is adding about $85 billion per month into the economy. Even with that massive amount of stimulus, our gross domestic product (GDP), the measurement of goods and services produced here in the USA is only growing by about 2 percent per year. For market watchers, this is a troubling sign that raises the question about our financial markets, and why they have risen so precipitously over the past year.

If you are wondering if I am turning sour on our markets here in the U.S., the answer is yes. I wonder just how sustainable this current rally is under the facts and circumstances as they currently exist. In fact, it appears as if the trends are going in a direction that typically precedes a market slowdown or correction.

This past week, the U. S. manufacturing index has declined by almost 10 percent. That’s a pretty big drop for an economy that is allegedly in recovery; something that you don’t ordinarily see during a strong rebound.

The same can be said about falling interest rates. The interest rate tool is one of the Feds most powerful tools at stimulating an economy that is stalling. But this time, equity markets are rising and the rate for the 10 year U.S. Treasury continues to fall. One of these two is headed in the wrong direction, and I’m concerned that it is not the interest rate.

Another indicator of economic strength is copper. Copper prices typically rise when an economy is in recovery. Recently we’ve seen copper prices soften considerably along with many other metals and inflation hedge type of asset classes.

None of these should keep you up at night when considered alone, but the combination of them all make me wonder if we are not headed into another soft spot or at least a market correction.

Stimulus may have kept us out of the throes of another great depression, but has it really made things better under the surface? Our government has delivered almost $4 trillion in stimulus to generate about $1 trillion in growth. How would your boss react if you did that with your corporate resources?

None of these should keep you up at night when considered alone, but the combination of them all make me wonder if we are not headed into another soft spot or at least a market correction.

Stimulus may have kept us out of the throes of another great depression, but has it really made things better under the surface? Our government has delivered almost $4 trillion in stimulus to generate about $1 trillion in growth. How would your boss react if you did that with your corporate resources?

John P. Napolitano is CEO of U.S. Wealth Management in Braintree, Mass., and 2012 president of the Financial Planning Association of Massachusetts. He may be reached at jnap@uswealthmanagement.com or on Facebook as JohnPNapolitano and US Wealth

John Napolitano is a registered principal with and securities offered through LPL Financial. Member FINRA/SIPC. He can be reached at 781-849-9200.

Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through U.S. Financial Advisors, a registered investment advisor and separate entity from LPL Financial. The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with resident of the following states: AL, AR, AZ, CA, CO, CT, DC, FL, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MN, NC, ND, NH, NJ, NM, NV, NY, OH, OK, OR, PA, RI, SC, TN, TX, UT, VA, VT, WA, WV. USFA, and U.S. Insurance Brokers, LLC are wholly-owned subsidiaries of U.S. Wealth Management. U.S. Wealth Management companies are not affiliated with LPL Financial.

The information being provided is strictly as a courtesy. When you link to any of the web sites provided here, you are leaving this web site. We make no representation as to the completeness or accuracy of information provided at these web sites. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, web sites, information and programs made available through this web site. When you access one of these web sites, you are leaving our web site and assume total responsibility and risk for your use of the web sites you are linking to.