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Americans Are Taking Control of Their Money

By | 2016, Money Moxie, Newsletter | No Comments

Do you remember what America was like in 2006? If we could give the year a financial theme, I would label it, “Borrow and Spend!” Buying a home was easy; no verification of employment and no down payment were necessary. An interest-only loan could be obtained without any reasonable expectation of one’s ability to repay the loan.

As a matter of fact, you could borrow up to one-hundred percent of a home’s value, skip a month’s payment, and even cash out any value that had come from the rising price of the home. Leverage was the hot financial fad! Many Americans borrowed as much as they could and bought whatever they wanted!


What a difference ten years can make. Contrast 2006 with 2016; today people are taking control of their financial situations, putting themselves in the driver’s seat, and keeping their own hands on the steering wheel. Financial responsibility is much more prevalent.

Disposable income —the money we have left to spend after taxes have been paid—has increased at an average rate of just less than one percent per year over the past ten years. So income is up a little. This makes the fact that personal saving is up very impressive. We have seen the personal savings rate increase from 3 percent at the end of 2005 to 5.5 percent at the end of 2015.

This significant improvement demonstrates a shift for Americans towards greater financial strength. Here are some of the positive outcomes.Americans saving

Reduction in personal debt
Still smarting from the financial pinch of the last recession, cash flow is now king. For many of us the perception of acceptable levels of debt has changed significantly. Debt is financial fragility, which is why Americans again recognize the value of getting out of debt as quickly as possible. Many have taken advantage of low-interest rates and refinanced to shorter-term loans. Paying off short-term loans such as car loans and signature loans is now a priority, and the use of credit card debt has reduced significantly.

Spending less
Knowing what we should do and putting it into practice can be challenging. This is especially true when it comes to living within your means. However, it is possible and it is powerful. No other financial habit is more important!

We have had the opportunity to meet with many people that have adopted the philosophy of a simpler lifestyle. This allows them to enjoy what they have without the pressure to get more “stuff” and then live with the financial burden. Managing spending also impacts our future lifestyle. If we spend everything today…what will we live on in retirement?

Increased accessible savings
After experiencing financial instability, many people have gained a witness of the need for liquidity. Access to emergency money to cover needs for 3 to 6 months has been widely recommended for decades, but it has gained new favor in the last 10 years. The wisdom of this applies beyond those still working. Retirees are also paying attention to liquid savings to make sure they can cover the unexpected emergencies that will surely come.

Focus on planning for the future
A shift has taken place in young people as well. They are saving for their futures at the beginning of their careers. Company-sponsored retirement plans such as 401(k) or 403(b), as well as individual IRA or Roth IRA, are now common to this young generation and they are off to a strong start.

Financial Health

Those who see retirement on the horizon have a new goal. They want to maintain a comfortable lifestyle throughout their retirement years. With fewer pension plans providing retirement income, the burden to provide income during retirement has been shifted to them. Many have hit the ceiling on contributing to their retirement plans and are using additional savings to help them reach their goals.

It is clear that over time all things can change; the market, our spending and savings habits, even our perception of what’s important financially. We have learned many valuable lessons and have made significant strides to improve our financial situations. The next ten years will undoubtedly bring more changes; some will be good and some will be bad. Remember to prepare when times are good and don’t fall prey to the next financial fad. Keep in mind that you are in the driver’s seat.

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Rightsizing For Retirement

By | 2015, Money Moxie | No Comments

Most seniors prefer to stay in their own homes as long as possible – we refer to this as aging in place. This is more likely to happen with sufficient retirement funds and a willing family close by to help when needed. However, there are many reasons to consider rightsizing your home as retirement grows near. Before making a decision to rightsize, consider these scenarios:

Moving to a state or city to reduce your cost of living.
If your career has kept you in the same location, retirement may be a great time to consider a move. This is especially true if you live in an area with higher costs of living. In looking for a new location consider these points:

  • Personal visit: Take a trip and spend some time in the areas that you may want to call home. Stay at a local hotel. Visit local restaurants and grocery stores. Go to the local parks, malls, and entertainment districts.
  • Talk to the locals: You can learn more about an area, good and bad, from the people who live there. They are generally happy to share what they love about an area. They can also steer you to other acceptable areas.
  • Property tax: Contact the county assessor’s office to find out how local property taxes stack up based on home size in the locations you desire.
  • State and local tax: There are seven states that do not charge income tax. But you have to do some research. They make up the difference through sales, property, excise, and franchise taxes.

Getting closer to children and grandchildren.
If your children have moved out of state, you may consider relocating closer to them. This creates the opportunity to be more involved in their lives and build a closer relationship. You may also have the support of your children as you age.

Family Meal

Acquiring a home more conducive to entertaining.
This generally means having fewer bedrooms and more common area. As your family grows, the holiday parties and family gatherings include more people; suddenly your five-bedroom home feels cramped.

  • Floor plan: Consider a new floor plan with fewer bedrooms and a large family room and kitchen area. It may also mean a smaller home in a planned unit development (PUD) for seniors, offering a clubhouse, park, or even a swimming pool that residents can use to entertain.
  • Neighborhood living: If you age in a single family home, there may come a time when you can no longer keep up with the physical demands of taking care of the yard and exterior of your home. You can hire someone to do the work or rely on your family members to step in and help out. Either way there may be a cost.
  • Planned community living: One benefit that is easily overlooked in a PUD community is living among neighbors in a similar stage of life. These communities offer planned events and entertainment. Landscaping and maintenance of common area buildings are included in the association dues.

Converting real estate appreciation into income.
For many, the motivation behind a move may be cash flow. Downsizing allows a homeowner to take a portion of the capital they have amassed in their home and use it to supplement retirement income. While this may be true, there are some hurdles to overcome.

Homeowners may find their home sold for less than they had planned and the new home may cost as much as the one left behind. When all is said and done, there may be little cash left over to supplement income.

Get the details before putting your house on the market. A real estate agent can provide you with comparison of home sales in your particular area, having the same size and features to gauge the value of your home. When looking for your new home, contemplate the costs and fees associated with the purchase as well as any ongoing expenses that might be incurred. Having the details before you make a move will help prevent a financial blunder.

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Untimely Disasters – How to Protect Your Home

By | 2015, Money Moxie | No Comments

Disasters are going to happen. There have been a number of them this year. Unfortunately, we don’t know when or what will happen next. It might be a forest fire, electrical fire, hurricane, tornado, flood, or earthquake. You can’t protect yourself from every disaster, but there are steps to help you put the odds in your favor.

Start by making a checklist of all the items you feel cannot be replaced. Save this list where it can be located quickly. This will help avoid an important item being left behind as your mind is racing during an emergency.

Examples of items for your list:

  • Home and auto insurance paperwork
  • Automobile titles
  • Healthcare information
  • Passports, marriage and birth certificates
  • Wills and trusts
  • Memorabilia, keepsakes, heirlooms
  • Photos (not already backed up digitally)
  • Statements: banking, mortgage, credit cards
  • Investments and retirement information
  • A few years of tax returns

Many of these are available online. Of the items that are not available digitally, scan them to your computer and save them on your home computer and in your backup location (preferably off site or in a fireproof safe).

If your home is destroyed, the insurance company will want a list of damaged items. The best way to do this is with pictures or video. Start with the exterior of the home and yard. Then move through each room, closet, and storage area. Label the pictures or videos and save them to your computer (and your backup). Remember to update as necessary.

This might be a good time to check with your insurance to make certain you have proper coverage to rebuild or repair your home in the event of a disaster. Go through scenarios that concern you to confirm you are covered. (Many policies do not cover floods or earthquakes.)

As we have seen, disasters can happen anytime, anywhere, and to anyone. Take time to be prepared should disaster regrettably strike.

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