Financial

For years, the goal of retirees has been to pay off one’s mortgage. In addition to the immensely positive emotional benefit that comes from owning one’s home “free and clear,” there is a financial reality of making a retirement budget much easier to manage if one doesn’t have a mortgage.

But extraordinary times call for a re-thinking of conventional wisdom. Our government and the Fed are taking unprecedented steps to drive down interest rates. One reason they are doing this is to spark economic growth in an effort to eventually lead to hiring. Another reason is so the government can re-finance its debt at very low levels; borrowing money for 10 years and paying less than 1.7 percent a year. What a deal! With interest rates so low, it makes financial sense to rethink where money goes.

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As we head into tax season, many people are in for a rude awakening as they compare their 2013 tax burden to last year. Plenty of new tax laws have appeared on the books over the past 12 months and the cumulative effect will wreak havoc on people’s budgets and psyche. The federal income tax and capital gains rate went up to 39.6 percent and 20 percent for top earners, respectively. The state income tax has also risen to 13.3 percent for top earners, and the payroll tax holiday has ended returning to the tax to the full 6.2 percent. On top of all these increases, the Affordable Care Act tacks on another 3.8 percent for top earners. You add it all up and the combined effect is one huge tax increase. So, how did we get here? read more

Marie was a client who had difficulty saving money.  She was doing a great job on her retirement savings, contributions were taken out of her paycheck before she ever saw the money, but she needed to save some money for a “rainy day fund” outside her retirement accounts.  Knowing that she enjoyed daily trips to Starbucks, I proposed to her the “Starbucks Savings Plan.”  Under this plan, Marie would “match” her spending at Starbucks with a similar contribution to her savings account.  

The exercise was a real eye-opener for Marie.  She was shocked to learn she was spending nearly $50 a week on coffee!  A $4 per drink every morning, plus she often bought for others and would occasionally get an iced coffee in the afternoon, it was really adding up. She agreed to match her weekly coffee expenditures with an equal deposit into her savings account. read more

It’s a question we get often… How much do I need to keep in cash?   It is asked by individuals for their family money, and by executives who are tasked with managing corporate assets.   For the last 4 years, it has been easy to justify keeping cash because of fear and economic uncertainty.  But after a few years of earning “zero” or “close to zero” on your cash, is it time to search for a little more in yield?

The message from the Fed is simple, short-term rates will be kept low for the next few years.  Translation: you will continue to earn nothing (or next to nothing) on your cash or money market assets for the foreseeable future.  Ben Bernanke is daring you to take a little risk.  

One possible solution: “buckets.”  Separate your assets into “buckets” defined by your time horizon and risk tolerance for difference pools of capital.  A possible bucket solution might look something like this: read more

The more an individual knows about investing and planning for their future, the more confident they are in sharing the information and assisting clients with planning for their future.  With this philosophy in mind, River City Bank employees have spent the summer participating in the Bank’s first financial wellness campaign: the Financial Fitness Challenge. River City Bank was one of 18 companies selected from across the nation to participate in this unique program. Hosted by Employee Benefit News in partnership with Educated Investor, it provided our employees with the opportunity to compete for prizes while increasing their fiscal knowledge. Everyone participated—from the executive team to our back office employees and customer service representatives. read more