Making Cents: Why financial education is Important

We live in the age of information and big data. As a result, there is no shortage of ways to obtain information about any matter of personal finance.

Sometimes the information that you find is relevant and useful, and other times it is outdated and not germane to your topic or need. The problem is recognizing whether the information that you are digesting or acting on is completely applicable to you. An appreciation and understanding for all of the moving parts in your financial life will give better context to all financial decisions.

One of my fondest memories about money as a child was when the local banker actually came into the classroom. Each week, the students who could bring in a dollar and give it to the banker would have that dollar added to their account. Every now and then, we’d also bring our passbooks to school for updating and learn about the concept of interest. (Sorry to those of you who are too young to know about passbook savings accounts.)

I can’t say that this early ritual made me the best saver in the world, but it definitely engrained deeply in my subconscious that saving was fun. Somehow make it fun for your kids, and teach them some early lessons to last a lifetime.

Everyone has dreams. When the reality wears off that you may not be the next bonus baby to the NBA, you begin to realize that for many dreams there is a financial connection. In addition to Blondie telling rock fans that “Dreaming is Free”, I can tell you that it is also healthy. Without a clear vision of what your dream looks like, you’ll never find it.

In the pursuit of dreams, we’ve all done something stupid. Whether it was not buying insurance, betting too much on an investment or tanking a business, stuff happens.

Not even the smartest person alive will be flawless in their financial decision making. The best laid plans get derailed and changed by reality -- life, interest rates, economies, markets, employment, health to name a few.

A lesson in needs and wants is valuable at any age. This lesson is also best learned at a young age. The most creative program that I’ve seen for youngsters comes from a local savings bank that has created a Broadway style play for grade school children about good financial habits. It is entertaining, informative and memorable.

If you think that it’s too late for you to learn a few new tricks about anything financial, guess again. I learn something new nearly every day and I’ve been doing this for over 30 years. Financial education is for everyone, and making its way into your neighborhood schools. Ask your school superintendent what you can do to help.

Have a happy, healthy and fiscally savvy New Year.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. John Napolitano is a registered principal with and securities offered through LPL Financial. Member FINRA/SIPC. He can be reached at 781-849-9200.

MAKING CENTS: Expanding your annual financial check up

As the calendar marches toward the start of another year, there are certain financial rituals that many astute investors embrace. They routinely scour their portfolios for gains or losses to harvest, look to see that their allocations are in line with their expectations and look around for ways to reduce the income taxes they’ll pay for the year.

These are all good practices, but this year I’m going to ask you to expand the scope of your year-end rituals to include matters frequently ignored.

Start with a re-cap of the past year. Look at income and expenses, and compare that with where you expected to be for the year. Did you save as planned, did you pay down debt and in general did your cash flow stay the path that you need to accomplish your objectives?

Now look at last year’s forecasts and compare that to where you stand today. Are you still on track to retire by age 68? What changes may you need to make in the upcoming year to get back on track?

An annual examination of assumptions versus actual in your financial forecasts can help alter courses to get you back on track.

As you are looking through your portfolio, ask yourself if you have significant concentration risk. Concentration risk is when one or more investments occupy too much space in your overall portfolio. How much is too much is open for discussion, but many experts feel that any more than 10 percent of your portfolio in one holding may be too much.

For married taxpayers with taxable incomes less than $75,000, the capital gains tax rate will be zero. All too often I see people with concentrated positions because they are afraid of paying taxes on the gain. If that position later suffers dramatic losses, most investors wish they had sold and paid the tax to salvage some of the value.

Take a look at your insurance policies. Are you adequately covered for any perils? Perhaps there are new issues in your life such as an underage driver or an inherited house that you now own with your two siblings. Also take a look at your life insurance. Some types of extended term life insurance, for example, have consequences including the termination of coverage at the end of the stated term.

Look at your wills and trusts. Do the executors, guardians and inheritance provisions still make sense?

For most, the guidance of a skilled professional is beneficial. If you always do it yourself, you may be consistently overlooking the same things.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. John Napolitano is a registered principal with and securities offered through LPL Financial. Member FINRA/SIPC. He can be reached at 781-849-9200.

MAKING CENTS: Why get your financial house in order?

Perhaps the most common reason for the gaping holes in one’s financial plan is the lack of focus on what you are trying to accomplish. Why get your financial house in order?

During the course of my week as a financial professional, we frequently see people with gaping holes in the financial plans. Some have no wills, some have poorly constructed portfolios and others are severely

underinsured. Rarely are they flying solo; often there is the typical collection of professionals such as lawyers, accountants, brokers and insurance agents who have advised on their particular subject matter. So why the gaps?

It may be as simple as the lack of communication from one professional to another. Every expert simply does his thing without knowing what the other experts are doing or thinking about recommending to the client. Even for simple situations, a little collaboration may go a long way toward improving the odds of achieving your financial dreams and goals.

Fear is another cause for gaps in financial plans. Some people are simply afraid to hear the cold hard truth. Whether it is an insurance person suggesting that you may be underinsured or the investment professional suggesting that you add regularly to your accounts, fear of making the wrong move often paralyzes progress. To mitigate your fears, learn more about your choices to make an informed decision and understand the consequences of making no decision.

Perhaps the most common reason for the gaping holes in one’s financial plan is the lack of focus on what you are trying to accomplish.

For example, if your goals include educating children or grandchildren in the event of your premature demise, you may want to listen more carefully to the insurance recommendation. Similarly, if you want your business to survive to the second generation, you may need to engage with your insurance agent, accountant and attorney.

Take a few moments, and list out your goals. Start with some looking you right in the face, such as college expenses, your replacement windows or home painting. Get a good handle on the quantitative financial issues that you need to solve with a timeline for when.

Beyond the quantitative goals, start to look at the qualitative side of your life with an open mind. Develop a realistic vision of how you want to spend your time, and what is most important to you. The hope for you is that each of these categories will spark emotions strong enough to get you moving in the right direction to eliminate the gaps in your financial plans.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. John Napolitano is a registered principal with and securities offered through LPL Financial. Member FINRA/SIPC. He can be reached at 781-849-9200.