While some predictions and forecasts happen to come true, it has been proven over and over again that the next prediction is not guaranteed.   Predictions are as random as flipping a coin 25 times and trying to find a pattern of heads or tails.   While patterns and order give us comfort, sometimes we believe we have discovered order where no order actually exists.  This belief can be destructive when it comes to investing.

As well as relying on financial planners to bring order to our portfolio by predicting when the markets will surge or plummet, or what will outperform what next year.  Making predictions does not bring order at all.  Yet it is irresistible like an addiction, to avoid taking action when you hear a hot tip from your brother-in-law or from the media.  Human nature seeks out what has performed well in the past to make a logical conclusion that it will happen again.   So we buy.   Then when it does not happen, we sell.  Steering our investments like a roller coaster ride of buying high and selling low.

The only way to buy low and sell high is to rely on strategic asset allocation and rebalancing.  We must avoid the herd behavior to buy and sell based on predictions. This behavior results in buying stocks after they go up and then when the stocks do poorly, selling when they are down. This is the exact opposite of what we should do.

Knowing what we don’t know is one of the keys to increasing returns.

Gives insight into what’s happening with consumers and how it’s affecting the retail market.

Mark Matson, CEO of Matson Money, gives Advice to Investors:

“Do Not Try To Pick Winning Stock in Retail ~ Own Them All!”

Matson Money
http://matsonmoney.com/

Yahoo Finance
http://finance.yahoo.com/

 When developing a retirement plan and calculating what you will need it is important to consider the cost of inflation.   In 20 years you can’t expect the prices to be the same as they are today and we’ve seen how dramatically prices can change over a period of 20 years or so.  There is no crystal ball that will give you this information but one way to try to factor in the cost of inflation is to review history and the pattern of rising costs for living expenses.  Analysts are always trying to predict the future based on statistically history, sometimes their calculations are close but this form of measure isn’t always accurate. All of the predictions you see today regarding the costs of inflation in the future ultimately see a rise in rates.

So how much do you calculate in our retirement plan for the rising costs of inflation?

Let’s first have a look at the pattern of inflation and prices over the past 20, 30 and 40 years.

20 YEARS AGO (1992)

Inflation rate was 3.03%, the average interest rate was 6%.

Average Price of a New House: $122,500.00

Average Price of a New Car: $16950.00

Average Price of Gas: $1.05/gallon

Average Price of Rent $519.00

 30 YEARS AGO (1982)

Inflation rate was 6.16%, the average interest rate was 11.5%

Average Price of a New House: $82,200.00

Average Price of a New Car: $7983.00

Average Price of a Gas : 91 cents/gallon

Average Price of Rent $320.00

40 YEARS AGO (1972)

Inflation rate was 3.27%, the average interest rate was 5.25%

Average Price of a New House: $27,500.00

Average Price of a New Car: $3695.00

Average Price of a Gas : 55 cents/gallon

Average Price of Rent $165.00

If you had started saving 40 years ago and are about to retire, you would never have expected the way the economy has changed in the past few years nor would you have been able to forecast the dramatic increase in gas prices, groceries and every day living expenses.  Looking at the past prices they all increase, inflations rates fluctuate and so do inflation rates.  It is very hard to see a defined pattern based on the past but one thing we know for sure, prices increase overall as the years go by.

So the answer to the question…

“How do I calculate for inflation in my retirement plan?”, 

you do so in the same way analysts do and that is predict the expected costs during your retirement years and always allow extra money for the unexpected.   Using your retirement plan and retirement living budget, calculate a percentage that you want to allow for the unexpected.  Having extra money saved for the unexpected will give you a nest egg of extra funds that will help in the event that inflation soars over the next 20 or 30 years.

Realistically it is best to always save more than you need anyway, the more you have put away for retirement the more secure your financial future will be.  Sounds easy enough but for those that want to learn more about retirement planning and wish to seek professional financial advice, find a Financial Coach.

A Financial Coach educates clients on the best and smartest way to invest their money for long-term growth and financial security as well as help you to develop retirement plans based on your retirement goals and needs while factoring in the unexpected costs of inflation and other expenses.

It’s possible with a Thrift Savings Plan, if you start early and take advantage of all that the retirement system has to offer!

If you are an employee of the U.S. Government, whether it is as a Federal employee or a member of the uniformed services, the Thrift Savings Plan, is a retired benefit plan available to you.

There are 3 different Thrift Savings Plans available based upon your type of Federal Employment:

•  FERS- Federal Employee Retirement System
•  CSRS- Civil Service Retirement System
• Uniformed Services

It is important to know which retirement system you belong to so that you can learn the best ways to take full advantage of your Thrift Savings Plan.   The Thrift Savings Plan offers a secure way for Government employees to save money towards their retirement.    There are many options available for contributing and investing your money within your Government Retirement System you belong to.

Many people don’t realize that when they increase their contributions to 5% each pay that the agency will match a full 4% of their contributions.  That’s like getting a raise of 4% instantly.  In some plans the Automatic Agency contributes 1% so when you add this together for every 5% you put into the plan, the agency is actually matching your 5%.   Instantly your investment is doubled even before you get started.   Granted, this is an example of the potential of a TSP Plan and it may not apply to everyone but it’s a good example to show some of the benefits that are offered that some people may not be taking advantage of.

Now with all good things there are limits and the Thrift Savings Plan has them as well.  Contribution Limits are set by the IRS annually but even with the contribution limits the plan still has a lot to offer when it comes to retirement planning.

There are some areas of the Thrift Savings Plan that are a little complicated and hard to understand, finding a professional who is knowledgeable with the Thrift Savings Plan can help you learn the basics and the complexities of the TSP.  In the end this will give you a better understanding of your plans potential and help you make better decisions concerning your Thrift Savings Plan.

You do not need a Financial Advisor or Planner to handle your Thrift Savings Plan but a Financial Coach can give you the guidance and education you need to use every available benefit within your Government Retirement System to save for the future and reach your retirement goals.

If you were to invest 5% of your income, based on a salary of $40,000/year, receive 5% agency contributions to the limit and receive a rate of 7% return on your investment, you could accumulate over $400,000 in 10 years.  If you are lucky enough to start early and contribute for 40 years in your Thrift Savings Plan using the same figures could accumulate to over $870,000.  That would make for a comfortable retirement.

Education and learning are the key factors in making wise investment decisions, as a Financial Coach we understand the benefits of the Thrift Savings Plan and can provide you with the necessary education so that you understand them as well.

For more information about Brown Coaching and Financial Coaching Services visit our website at www.browncoaching.com.

Make the most of your Thrift Savings Plan and take the right steps to a comfortable retirement.

For many this is a time to clean the house from top to bottom, make minor repairs and organize excess clutter accumulated throughout the winter months.  Spring Cleaning is a time to get your home in order and organized.  Spring Cleaning doesn’t have to be just for your home, it can be a good time to get your household finances tidied up and organized as well.

With the burden of tax time put behind you , there is not better time to ”Spring Clean” and organize your finances.

We’ve put together some simple steps to help you “Spring Clean Your Finances” and keeping your finances organized all year long.

1.  A Financial Filing System

There is no better way to keep track of important household papers then a proper filing system.  Whether it be an expandable folder, a tote box with hanging file folders or a filiing cabinet itself; setting up a filing system will enable you to put away important documents, tax receipts and financial statements that can easily be found later on when needed.  This will save you time when it comes to next years tax season because all your documents and receipts are will be easily located within your financial filing system.  Setting up a time either weekly or monthly to file your receipts, utility bills, financial statements and other financial documents will save you hours trying to organize this all at once next year.

2. Keep What You Need

Once you have a financial filing sytem in place then comes the task of filing.  When first setting up a filing system this could take some time as you have many years to organize but knowing what you need to keep will help with this process and decrease the amount of receipts and papers that need to be filed.  It is not necessary for you to keep 20 years worth of receipts or tax returns, the government requires you to keep the last 7 years of your tax returns and associated receipts.  The previous years can be discarded as they are no longer needed or required.  Some people like to hold on to financial documents longer, just in case they need them and that’s a personal choice.   The key to keeping your finances organized is to maintain your financial filing system so that your documents can be easily located when needed.

3. Protect Yourself When Discarding Old Documents

We’ve all heard horror stories of identity theft.  One way to protect yourself when discarding old financial papers is to put them through a paper shredder  before putting them in the garbage.  When it comes to Spring Cleaning your finances there is bound to be documents that are no longer needed with your name, address, financial account information and even your social security number on them, but you should never just throw these in garbage without being shredded first.

4. Review Your Monthly Expenses

Taking a look at your spending habits and expenses monthly can open your eyes to ways of cutting back and saving extra money.  Life is busy; between careers and family committments, there isn’t always the allowed time to sit down and review receipts, bank accounts and our overall cash flow on a day to day basis.  Taking the time to Spring Clean your finances starts with reviewing your spending habits and the unncessary spending that could instead be put into savings.  It’s important to take the time to look at excessive bank charges, interest, annual fees, late payment charges and other expenses we don’t realize are adding up.  Some of these expenses can actually be avoided if we pay attention to our finances.   Once you review your spending you’ll see where you can avoid these extra expenses in the future.  Setting up a monthly budget based on your previous spending is a great way to keeping on track with your finances and putting away money into your savings account.

 5. Review your Financial Status

Once your filing system is set up and organized it will be easier for you to find all those important documents that will give you a better understanding of your financial status.  Take a look at your assets, your investments, your savings and review how well your financial status is?  Is it time for you to seriously start saving and cutting back on your expenses? Is it time to start planning for your retirement? Or does your overall financial status look to be in good shape?

6.  Planning For The Future

It is never too early or too late to plan for your financial future.  Setting goals for retirement are important and should be a part of your annual Spring Cleaning.  Knowing where you are financially today and what your financial plan is for the future will help when developing a monthly savings plan and an overall long term financial plan.

For many day to day finances, monthly budgeting, planning for the future can be very overwhelming and they often seek the advice and guidance of a Financial Coach.  Having your finances organized will help when needing to retrieve financial documents while speaking to your Financial Coach, you’ll be able to find the information you need quickly within your financial filing system.

Overall, Spring Cleaning Your Finances is about getting your financial documents organized, knowing your expenses and spending habits, reviewing your overall financial status, working with your Financial Coach, saving and planning for your financial future! 

A long-term financial plan that is designed properly can virtually do all the work for you and take the worry out of investing.  Too many people waste their time checking the value of stocks, trying to pick the right stocks and listening to others who think they can predict the future of stocks.  Stock picking is high risk investing and with it comes the stress of unknown outcomes.  Financial planning for long-term goals shouldn’t be left to chance.

There are investment options available that are more reliable and stable that take the stress out of investing with a guaranteed return on your investments.

Here are the Key Steps To A Stress Free Investment Plan

SET GOALS ~ Retirement Planning involves knowing how much money you will need during your retirement.  Having this information gives you a goal to works towards and allows you to better plan your financial portfolio to reach those goals.

LEARN ~ There is no greater power then being educated, learning about investing for your financial future will give you the power to make wise long-term investment choices. There are many resources available when it comes to investing; books, articles, television shows, professionals and financial educators.

PROFESSIONAL GUIDANCE ~ There are many financial professionals available when it comes to investing but finding the right professional is important when seeking financial advice.  Financial coaches are professional financial educators and their main interest is guiding you in developing a secure financial investment plan to meet your retirement goals.  Financial coaches do not sell investments nor do they encourage high risk investing, they are teachers of ”Smart Financial Planning”.

PLAN ~ Developing a well designed plan that aligns with your financial goals using wise investment choices is the road map to successful investing.  Long term investment planning gives you peace of mind so you can relax in knowing your plan is working to reach your retirement financial goals.

AVOID TEMPTATION ~ Not a term commonly used in investing but it is so easy to be tempted by the lure of an investment that promises high returns in a short period of time.  The major problem with these types of investments is that they’re not a guaranteed investment and if the promises are not kept you could end up losing your initial investment.  Sticking with your original plan and focusing on your long term goals will provide you with a secure financial future.

BE PATIENT ~ Long term investing takes patience because your portfolio will need time to grow.  Allow your investment plan the time it needs to mature and grow.  Your patience will pay off with a well-developed long-term investment plan.

RELAX ~ If you follow all the key steps above such as; knowing what your financial future goals are, learning wise investments and long-term investing, seeking professional financial guidance, develop a long-term investment plan, avoid temptation of high risk short-term investments and become patient with your investment portfolio and let it do what it was designed to do, you will in fact be able to SIT BACK, RELAX & LET YOUR INVESTMENTS DO THE WORK!

For more information or Questions on Long Term Investing, Planning for your Retirement or getting the skills and education you need to become a wise investor contact us at Brown Coaching.