5 Essential Steps to being Financially Stronger.

With interest rates on the verge of climbing, economy on loose footing, and unemployment still above 6%, I think this is a good time to address the following questions and have further discussions about your financial well being.

  • Are you living within your means? or are you living paycheck to paycheck?
  • Do you feel you’re getting financially stronger?
  • How are you tracking and measuring your progress?

Understanding your expenses is the vital first step in assessing your financial health. You must figure out where you are spending your income., therefore, every bill and every expense must be accounted for.. If you haven’t already done so, start itemizing your expenses. While conducting monthly reviews, you should revisit and justify all expenses. Vet them out, and make sure don’t accrue new ones.

The next step is to plan for a budget. It must be detailed and comprehensive. It may vary month to month, but common expenses such as mortgage/rent, utilities, insurance, phone/cable, car payment should not vary too much. On the other hand, food and entertainment may fluctuate depending on your lifestyle.

Following a strict budget can help you put new spending in perspective – posing the questions such as: 1) can I afford this new handbag, should I buy this wireless entertainment center, 3) do I really need a new car, etc,…
a list of metrics to check if you’re income supports your current lifestyle.

5 Essential Steps to being Financial Stronger:financially stronger

  1. Setting Goals.
  2. Controlling Expenses.
  3. Monitoring Budget.
  4. Saving monthly.
  5. Investing aggressively


Follow those essential steps and slowly you will find it easier to gauge your spending and soon enough you will notice a gradual increase in your savings’ account. It’s poor judgment to put most of your expenses on credit cards, and can easily get you in trouble – this is the leading factor for living outside our means. If you can’t afford it, don’t buy it. Be smart and get financially stronger now!

Wake up now, wake up quick.

Everyday, we are reminded of civil and political unrest, economic uncertainties, violence, riots, genocide, war threats all around the globe. What is happening to our amazing planet?? Why is there so much unrest and violence?? Why can’t we seek peace and serenity??  I know those questions are hard to answer and peace feels unattainable at times – It is certainly becoming the norm to hear disturbing news on a daily basis.  We have been desensitized to the constant chaos and troubling conditions, so we continue on living and hoping there’s an end to this madness.  But ‘hope’ doesn’t come with a parachute.  It certainly doesn’t pick sides, or protect you from harm.

uncle-sam-stealingThe size of our government keeps on growing, while its functionality keeps on shrinking – rendering it inefficient, ineffective, and most importantly costly.  Washington has proved, year over year, that it is fiscally irresponsible. There are many loop holes in the system that favor the rich, the giant oil & pharmaceutical companies, their lobbyists, and their cronies.

Let’s really face it- who’s coming to your rescue when you lose your job, or when you’re savings isn’t enough, or when your wage continues to be stagnate. Who’s coming to your rescue when your bills keep climbing, your healthcare costs keep on rising ..
The answer is simple: No one. yes no one. You have to make wise and calculated decisions to protect yourself, your family and your financial well being. Uncle Sam will take as much as he can out of our pockets; no doubt about it. Wake up… Wake up now, and take action.

+ Have you spoken to a financial advisor to discuss your objectives, goals, and plan for your retirement?
+ Have you reviewed and analyzed your monthly budget?Steps-to-success
+ Have you determined where you can cut down on spending?
+ Do you have a saving plan, and have set monthly targets?
+ Have you started an emergency fund?
+ Are you contributing towards a retirement account, like a 401k?

Those are easier questions to answer and are within your control. Make the change now, wake up and get your financials in place so you can have peace in mind that you will have enough money for any situation.

Get serious about your financial goals, and subscribe to our blog. We are determined to make you ‘Financially Stronger‘.

Plug those financial leaks, now!

We are all guilty of being distracted by our daily life affairs that we overlook simple measures of saving money. Whether it’s at the grocery store, local coffee shop, around the house, or that summer vacation. It’s not that we don’t have intentions of saving; but rather the convenience overshadows our commitment to it. Yes, that Espresso is a great kick starter in the morning, but is it a daily need? I say get a coffee machine!

CheeseIt’s hard not to notice the gradual price increases on produce, consumer staples, etc,. A box of Cheerios is $5!! a Cheese wedge is $8, seriously!! I find myself everyday reaching over to the private labels for the same goods. I can’t really notice the taste difference; but I sure notice that 20% savings at the checkout! Another way to keep those extra dollars in your wallet is by using coupons – I used to be embarrassed by that until a good friend set met straight!

When planning that summer vacation: 1) shop around, 2) look for online deals, 3) don’t wait for last minute, 4) travel during off-peak.

Follow this link for more simple ways to save money and take control of those financial leaks.

Also, CNN Money contributor, Amanda Gengler, talks about ways to address financial pitfalls that are eating away at our savings: Plug Common financial leaks – via CNN Money.

The American middle class – is it shrinking ?

What’s the definition of middle class and its role in today’s society:

The American middle class by one definition consists of an upper middle class, made up of professionals, salaried professionals and managers – distinguished by exceptionally high educational attainment as well as high economic security; and a lower middle class, consisting mostly of semi-professionals such as skilled craftsmen and lower-level management. The lower middle class needs two income earners in order to sustain a comfortable standard of living, while many upper middle class households can maintain a similar standard of living with just one income earner.

The American middle class commonly have a comfortable standard of living, significant economic security, considerable work autonomy and rely on their expertise to sustain themselves. Those individuals, are characterized by conceptualizing, creating and consulting. Middle class values tend to emphasize independence, adherence to intrinsic standards, valuing innovation and respecting non-conformity. Politically more active than other demographics, college educated middle class professionals are split between the two major parties. Their income varies considerably from near the national median to well in excess of $100,000. They are very influential, as they encompass the majority of voters, writers, teachers, journalists, and editors

Most societal trends in the US originate within the American middle classes

The American middle class IS slowly shrinking. It’s getting short changed in every way – from tax codes being skewed towards the 1%, system loopholes, tax shelters, tax-evasion, big government, to retirement contribution caps.


Fact: The top 5 percent of earners accounted for almost 40 percent of personal consumption expenditures in 2012, up from 27 percent in 1992. Largely driven by this increase, consumption among the top 20 percent grew to more than 60 percent over the same period.

top 5 percent chart

Even more striking, the current recovery has been driven almost entirely by the upper crust. Since 2009, the year the recession ended, inflation-adjusted spending by this top echelon has risen 17 percent, compared with just 1 percent among the bottom 95 percent, (according to the economists Steven Fazzari, of Washington University in St. Louis, and Barry Cynamon, of the Federal Reserve Bank of St. Louis).

The effects of this phenomenon are now rippling through one sector after another in the American economy, from retailers and restaurants to hotels, casinos and even appliance makers.

In response to the upward shift in spending, big stores and restaurants are chasing richer customers with a wider offering of high-end goods and services, or focusing on rock-bottom prices to attract the expanding ranks of penny-pinching consumers.

For example, luxury gambling properties like Wynn and the Venetian in Las Vegas are booming, drawing in more high rollers than regional casinos in Atlantic City, upstate New York and Connecticut, which attract a less affluent clientele who are not betting as much, said Steven Kent, an analyst at Goldman Sachs.  Read full report here.



Take charge of your financial strategies to keep up with current regulations, economic evolution, and tax laws. Open retirement account(s), use tax-exempt funds, save rigorously, contribute religiously.



By Jennifer Good (Courtesy: theselfemployed.com)

Being self-employed typically means you subscribe to the belief that you can make something more of yourself. You believe that you are in control of your success. However, the hard truth is that generally 50 to 70 percent of small business owners will fail in their venture within the first 18 months.

So, what makes the difference between those who achieved success and those who didn’t? While a lot of factors can contribute to a successful business, there are a few characteristics that all successful people have. If you’re looking for some ways to increase your chances of achieving success, try these tips.

Focus on the positive.
Successful people don’t waste their time concerning themselves with negative thoughts. In fact, they go out of their way to think positive thoughts. More than a “feel good” technique, the field of positive psychology continues to make leaps and bounds. The idea of shifting your thoughts towards positive outcomes as way to increase the odds of said outcome is a popular method used by many successful people. This ideal brings new meaning to the saying “energy flows where attention grows.”

Face problems head on.
It’s no secret that everyone has their share of problems. It’s what creates diversity in your life. What’s different, though, is how you deal with them. Successful people are willing to face problems head on. They know that a situation not dealt with can quickly spiral out of control and can result in a problem even bigger that the original situation. Whatever the problem, figuring out how to fix it as soon as possible is pretty much always going to be the best course of action.

Make the most of your time.
You’ve heard the expression “time is money.” Successful people take this mantra to heart. It doesn’t mean that life is centered around money, but rather realizing that your time is actually worth something. That means you spend time on tasks you don’t need to or letting people monopolize your energy and talents. Successful people realize quickly what tasks are better left to others and which tasks make the best use of their talents. If you don’t value your time, you can’t expect anyone else to.

Be willing to work for what you want.
Successful people know there’s no such thing as instant gratification. You can’t expect immediate results without some hard work first. If you really want the “big goal” you’ve got to get your hands dirty and do the work that no one else wants to. You can’t hire it out or spend four hours a week working and expect to reach your dreams. If you aren’t willing to do the work, you aren’t willing to be the success you were meant to be.

Focus on what you can control.
One of my favorite sayings is “you can’t always control what happens to you, but you can always control how you react.” It’s important to realize that you can’t always control the things that happen in your life. Successful people realize this and only focus on areas they CAN control.

Setbacks are part of life and are going to happen, either to you personally or to your business. The key to success in these situations is to quit focusing on areas you can’t control and focus on what you can. If something bad happens, it doesn’t change the past to keep dwelling on it. Instead, put your attention on what you can do moving forward and what changes you can make to hopefully avoid the problem again.

Be grateful.
If you really pay attention to the successful people around you, you’ll probably notice that not many of them are very negative people. In fact, they seem to exude positivity. Do they have some magic positivity pill? Luckily, the answer is a lot simpler. They’re filled with gratitude about the things around them. It may seem like it’s easier for them to be grateful since they are already successful, but what you may not realize is that most successful people started with an attitude of gratitude even when they weren’t successful. Like in point #1, they don’t waste their time with thoughts that don’t contribute to their overall goals. Feeling grateful for what you currently have in your life is the best way to shift your focus to the things that will make you successful.

Be around people who make you feel good.
Working hard to achieve your goals only works when you are surrounded with people who make you feel good. You need to be at your best to achieve the big dreams in your life. Negative people just weigh you down. While you can’t avoid every negative interaction, you certainly control the big influencers. Make sure the people who are closest to you support you as a person and what you want to achieve. While you may be able to do it in spite of adversity, it’s a much better experience when everyone around you is invested in your success.


Your Investment Objectives Should Be Clearly Defined

Defining your investment objectives is the core step in crafting your own needs out of your financial mission.

Your money should always be working – it’s sole purpose is to earn more money for you. If you’ve managed your financial affairs wisely, when you reach retirement age, your portfolio should be large enough to replace the household income you need – that is your goal. Without affecting your standard of living even though you are no longer punching the proverbial time clock.

Simple questions to help you understand the scope & magnitude of this topic:WhyYouInvesting
• What is the purpose of your money?
• What do you want it to do?
• How much risk are you willing to take to achieve above-average returns?
• When do you need this money?
• Do you want your money to grow or preserve its current value?

The answers to these questions are the fundamental elements of determining your investment objectives. You will need to spend some quality time on writing your objectives down and understanding your goals. Things do change year over year, therefore you need to be ready to adjust those investment objectives accordingly.

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Here are 3 benefits of defining your investment objectives
1. Define investment objectives to lower your overall risk:
Avoid securities and assets that don’t fit with your goal. Setup an emergency portfolio where you’re investing in intermediate duration tax-free municipal bonds. The objective, is to always provide a safe, emergency source of backup household income that generates cash that you can live on, even if all your other sources of income get cut off completely. At that point, it wouldn’t matter if stocks crash and they are dirt cheap. It doesn’t matter if the investment of a lifetime comes along. The entire purpose of having an objective is to make sure you never wake up in a position of having lost money you can’t afford to lose, or coming up short from the amount of cash you need.

2. Define your investment objectives to avoid mistakes:
If your objective is to grow your investment year-over-year with low risk, then you should pick stocks in great companies (large market cap), that have proven track records, that offer dividends. Like the performance you’d see with Microsoft, IBM, AT&T, McDonald’s.

As you look for potential holdings to add to that portfolio, keeping the objective in mind can help you avoid adding something that might appear attractive on different grounds.
High return stocks can always lead to high volatility.
They are not particularly good long-term holdings. No matter how attractive they appear, they don’t fit your investment objectives – specifically this portfolio. Click on Cyclical vs Non-Cyclical to read about types of investment

3. Define you investment objective to keep your eyes on the Finish Line:
Make sure your asset allocation encompasses an array of stocks, bonds, mutual funds, ETFs that spread over different sectors and industries. A diverse portfolio protects your investment against volatility, and fluctuation in the market. Money is only useful to you for what it can do. Stick to your mission.

The different types of investment objectives you might pursue:
• Principal protectiong and Capital preservation
• Current liquid and net worth
• Risk aversionInvestement
• Investing time horizon
• Income levels and strategies
• Expense levels
• Planned charitable contributions
• Restrictions on security selection
• Growing the principal as fast as possible, so you have more money in the future
• Generating the highest amount of risk-adjusted passive income as possible, so you have more household income from your assets

The objective of capital preservation is to protect your initial investment by choosing investments that minimize the potential of any loss of principal.

5 reasons why annual financial planning review is crucial

Annual financial planning review– You might be asking yourself why do i need one?? I am comfortable with my current saving portfolio, I am too busy to get into the nitty gritty research, I think my investments are doing great….

Things can change in one year, or even 6 months. You do a physical exam every year, don’t you?! Because you know your health is super important – and so is your financial freedom. You should make this a habit

An up-to-date financial plan is especially important in uncertain times. The economy is in constant state of flux; and your investments should make the necessary adjustments to ensure you are fully engaged during periods of volatility. Annual financial planning review serves many purposes- allowing you to evaluate and adjust your goals, ensuring that your strategies are aligned with your goals.

Ongoing economic uncertainty hast made the need for an updated personal finance plan more critical than ever. Consulting your investment professional to start your annual financial planning review is highly recommended. It will help you identify and prioritize the topics that are most important to you.

Here are the five reasons for why you should have an annual financial planning review:

asset-allocation-grocery-basketYour investing goals might have changed: Check your asset allocation to ensure it continues to meet your investment needs and preferences. Evaluate your retirement portfolio and assess whether you are on track to achieve you savings goals. Perform any re-balancing that might be necessary in light last year’s market performance. Take a look at specific investment (Mutual funds, Bonds, stocks), evaluate if they continue to have a role in your portfolio.

401-retirementYou could be paying more taxes: Tax efficient strategies could help you reduce the tax hit on your investments and increasing your after-tax returns. Take advantage by contributing to 401(k) plan, by investing in tax-exempt bonds or by choosing tax-managed mutual funds. Also, be wise about the types of accounts you invest in, monitor deductions and distributions, know when to sell and when to hold. Consult with your financial advisor.


Your retirement plan might not reflect your last priorities: An annual financial planning review should assess your retirement plans from the view point of both lifestyle and financial needs. Check your progress toward establishing your retirement income plan. We well conceived retirement plan seeks to establish guarantee lifetime income, enough to cover your essential expenses. Blue metal compassCheck your tax assumptions and determine if they need to be adjusted- your advisor should be able to guide you with the tax rates and how to benefit from them.

Your insurance needs might have changed: Life insurance is a good place to start. Depending on the size of your family, adjust the amount of insurance to protect your loved ones from a devastating loss of income. as you age your health insurance becomes more critical. I suggest you have a good health insurance. Also check your beneficiary designations on all your accounts. Make changes where you see fit.

Your estate planning: Make sure your plan continues to reflect your current family status, financial situation. and latest estate and tax laws.

In summary, an annual financial planning review is well worth the effort
annual financial planning reviewconsidering all the hard work you invested in building and protecting your wealth. It’s very important to have a long-term view of your wealth strategies. Stay focused on your goals and keep your strategies current so you are prepared for whatever this economy has in store.

Some content is courtesy of Fidelity. Fidelity Investments is among the most diversified financial services companies in the world, offering a full range of product solutions for individual investors, employers, institutions and intermediaries. Their fundamental mission is to help customers and clients achieve their financial objectives. Fidelity is one of the largest mutual fund companies, the leading provider of workplace savings plans in the U.S., and the country’s No. 1 provider of Individual Retirement Accounts (IRAs). They offer retirement planning, portfolio guidance, brokerage services and many other financial products and services to more than 20 million individuals and institutions, as well as more than 5,000 financial intermediary firms. I currently have a retirement account with Fidelity.

Economic growth: Vanguard’s prospective- must read!

Vanguard, one of the world’s largest and most respected mutual fund companies, has published an extensive paper on their global growth and assessment, covering topics such as economic growth, inflation, interest rates, stock, and bond return over the next 10 years. I urge to read full report here:

Here are the snippets of their economic growth report:

Global economy. For the first time since the financial crisis, our leading indicators point to a slight pickup in near-term growth for the United States, parts of Europe, and other select developed markets. Continued progress in U.S. consumer de-leveraging, strong corporate balance sheets, firmer global trade, and less fiscal drag indicate U.S. growth approaching 3%. That said, this cyclical assessment should be placed against a backdrop of high unemployment and government debt; ongoing structural reforms in Europe, China, and Japan; and extremely aggressive monetary policy with exit strategies that have yet to be tested.

Inflation. In the near term, reflationary monetary policies will continue to counteract the deflationary bias of a high-debt world still recovering from a deep financial crisis. As was suggested in previous outlooks,
consumer price inflation remains near generational lows and, in several major economies, below the targeted rate. Key U.S. drivers generally point to higher but modest core inflation trends in the 1%–3% range for the next several years. For now, the risk of returning to the high inflationary regime of the 1970s is low despite the size of central bank balance sheets; in parts of Europe and in Japan, the specter of deflation remains a greater risk.

Monetary policy. Tapering of the Federal Reserve’s quantitative easing (QE) program has begun, although an actual tightening is likely some time off. The Fed’s forward guidance implies that the federal funds rate will remain near 0% through mid-2015; the risk that this “lift-off” date will be further delayed is notably lower than it was in prior periods. However, real (inflation-adjusted) short-term interest rates will probably remain negative through perhaps 2017. Globally, the burdens on monetary policymakers are high as they contemplate exiting from QE policies to prevent asset bubbles on one hand and remain mindful of raising short-term rates too aggressively on the other. The exit may induce market volatility at times, but long-term investors should prefer that to no exit at all.

Interest rates. The bond market continues to expect Treasury yields to rise, with a bias toward a steeper yield curve until the Federal Reserve raises short-term rates. Compared with last year’s outlook, our estimates of the “fair value” range for the 10-year Treasury bond have risen; the macroeconomic environment justifies a ten-year yield in the range of 2.75%–3.75% at present. However, we continue to hold the view that a more normalized environment in which rates move toward 5% based on stronger growth, inflation, and monetary tightening may be several years away. We maintain that the odds of a U.S. fiscal crisis and a sharp spike in yields are less than 10% at the moment, although they rise later in the decade based on the expected trajectory of U.S. federal debt.

Global bond market. As in past editions, the return outlook for fixed income is muted, although it has improved somewhat with the recent rise in real rates. The expected ten-year median nominal return of a broad, globally diversified fixed income investment is centered in the 1.5%–3.0% range, versus last year’s expected range of 0.5%–2.0%. It is important to note that we expect the diversification benefits of fixed income in a balanced portfolio to persist under most scenarios. We believe that the prospects of losses in bond portfolios should be weighed against the magnitude of potential losses in equity portfolios, because the latter have tended to exhibit much larger swings in returns.

Economic Growth Outlook-Vanguard

Global equity market. After several years of suggesting that strong equity returns were possible despite a prolonged period of sub-par economic growth, our outlook for global equities has become more guarded. The expected ten-year median nominal return is below historical averages and has shifted toward the bottom of the 6%–9% range compared with this time last year, a reflection of less constructive market valuations (i.e., price/earnings ratios) in the United States and some other developed markets. A notably wide range of outcomes is possible, even over long horizons, making us hard-pressed to identify market “bubbles.” However, we are uneasy about signs of froth in certain segments of the global equity market. Because the premium compensating increased equity risk appears to have come down recently, we would encourage investors to exercise caution in making strategic or tactical portfolio changes that increase this risk.

Asset allocation strategies. Broadly speaking, the outlook for risk premiums is lower across a range of investments than was the case just two or three years ago. Our simulations indicate that balanced portfolio returns over the next decade are likely to be below long-run historical averages, with those for a 60% stock/40% bond portfolio tending to center in the 3%–5% range, adjusted for inflation. Even so, Vanguard still firmly believes that the expected risk-return trade-off among stocks and bonds leaves the principles of portfolio construction unchanged. Specifically, our simulated mean-variance frontier of
expected returns is upward sloping—it anticipates higher strategic returns for more aggressive portfolios, accompanied by greater downside risk. We believe that a long-term, strategic approach with a balanced, diversified, low-cost portfolio can remain a high-value proposition in the decade ahead.

This was an excellent report; well written, supported with plethora of details. Great Job to the authors (Joseph Davis, Ph.D., Roger Aliaga-Díaz, Ph.D., Charles J. Thomas, CFA, Andrew J. Patterson, CFA)

Choosing Bonds?

So why choosing bonds is good for any portfolio??

We already covered the definition of Bonds in previous posts. But let’s do a quick recap – A bond is a loan to somebody (a corporation or government) with a fixed interest rate over a fixed period of time. Bonds are called “fixed-income” securities because they pay a fixed return (or coupon) based on the interest rate. Most bonds distribute earnings every six months, some quarterly, or even monthly.Choosing Bonds

Companies and municipalities use bonds to finance everything from real estate to machinery to routine operating costs. Buying a bond is akin to lending company money and they will pay you back later with interest.

So why choose bonds?

  1. Bonds provide consistent income; very useful when you’re living off of your investments
  2. Many bonds are considered lower-risk investments than stocks. For this reason, investors use bonds to minimize the volatility inherent with investing in the stock market. Theoretically, when you own a larger percentage of bonds than stocks, you should experience smaller swings in your portfolio’s value.
  3. As a rule of thumb, your portfolio should have a good mix of stocks and bonds. They compliment one another regardless of economic conditions. The ratio depends on your age of course and how risky you intend to be.
  4. Young investors shouldn’t use them as lower-risk replacement for stocks but as a less-volatile complement a portfolio of stocks.
So, is choosing bonds good for your portfolio?? I say: ABSOLUTELY !!
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