To know who you are, both personally and professionally is an amazing feeling. To have the confidence in knowing that conquering the world…or at least your little piece of it…is just around the corner is a heady feeling. To truly comprehend and be thankful for the fact that you can’t do it alone? Now that’s growth.
For most of my 38 years, I’ve considered myself a leader – I’ve encouraged, I’ve coached and I’ve inspired. But I’ve been able to do these things in large part because of the people who have directly influenced my life, both personally and professionally. I have built a network of people who have taught and directed me. People who have helped me develop into the woman I am today. I have been encouraged, coached and inspired.
As with financial security, we must build a solid foundation for growth. As financial professionals or students of finance, we know that without a savings plan, a budget and appropriate insurance, we cannot grow our wealth potential. My foundation includes a husband who supports me in my dreams, the FINRA Foundation which awarded me a scholarship to help me earn my AFC® (Accredited Financial Counselor) certification and my children who are surprisingly interested in my budgeting and savings tips.
In 2014, as a PhD student in Kansas State University’s Personal Financial Planning program, I applied for the AFCPE Symposium Student Scholarship. In my Student Scholarship recommendation letter, my professor included a comment, “I do not believe that Kate has met a stranger…” It’s true. I’m not shy. I believe that meeting and interacting with others opens up so much potential for friendship, development and opportunity. This kind of interaction doesn’t always come easily. It’s a skill that must be nurtured and developed.
Networking is about being interested in meeting others, learning about others and figuring out what you can do to help others. It’s about being outside of yourself and focused on who others are and what you can do for them. The same is true for those you meet. It’s a nifty little dance that has some give, some take and a whole lot of focus on building relationships.
Networking is going in to a room, no matter how big the crowd, and seeking out people you want to meet, or maybe people you didn’t even know that you wanted to meet. Once you meet them, sincerity is imperative. Self-deprecating humor can help break the ice, but the number one key to networking is intent – intent to meet others, determine their interests and see if there is a way to work together to better both of your futures.
I am so thankful for the experience I had at the 2014 AFCPE Symposium. If you are a financial practitioner, educator or researcher there is a student out there waiting for you. Someone who has questions about which way to go, how to do what they want to do; a student who needs encouragement to persevere and keep their focus on the potential ahead of them. There is a student out there who may feel that they have all the pieces of the puzzle together, but could use a little help thinking forward about how to continue growing their area of interest.
If you are a student in the financial counseling and planning field—the BEST possible thing you can do for yourself is to find a mentor. A mentor can help you develop needed networking skills and introduce you to others in the field that can help you as well.
Life is full of changes, developments, wants and needs…kind of like our budgets. There are things that we can absolutely do on our own. But why take the journey alone? If we can grow ourselves by helping grow someone else, then we can expand our network, improve our area of influence and better the growth and reputation of Accredited Financial Counselors throughout the world.
Guest Contributor, Kate Mielitz, AFC®, 2014 AFCPE Symposium Scholarship Recipient
There’s no way around it – financial struggles are can be both difficult and overwhelming. However, if you take some time to visualize where and how your money is being spent, you may find that you actually have more money than you thought. “How,” you ask? Here are three simple steps:
- Develop a Spending Plan.
Because money without a name will disappear, most people who prepare a written budget discover money they didn’t realize they had. Give it a try – you may be pleasantly surprised. However, even if you learn that you are indeed “upside down” every month, your budget is still your friend. Why? Because it tells you the raw truth . . . something only a real friend will do. A family I know (let’s call them the Jones family) recently prepared a budget which told them they were spending $600 more than they were bringing home every month. The good news is that they also discovered that they already had that much money – and more — they just needed to find it and start using it. How? Read on.
- Turn your “extra” checks into Residual Income.
Because Mr. Jones is paid weekly, he receives five paychecks four months each year. His wife, who is paid bi-weekly, receives three checks two months every year. These “extra” checks totaled $5,000 throughout the year – just what they needed to be setting aside for property taxes and homeowners insurance (budget items which come due annually).
Think with me on this: The Jones’s had already budgeted this $5,000 by having $417 automatically transferred from their checking to their savings account each month. However, by agreeing to always obligate their “extra” checks toward property taxes and insurance, they freed up $417 from their budget. Let me hasten to state that this tactic won’t work for those who get paid monthly or bi-monthly because they have no “extra” checks. This family, by finding and utilizing money they already had ($817 a month), did not only meet their budgeted expenses, but also paid an additional $217 each month on debt reduction. Their stress levels have gone way down as their money management skills have gone way up. The Jones family is a happy family.
- Incorporate your income tax refund into your Budget.
The average refund nationwide is about $3,000, but the Jones family normally received more than twice that amount. Think about what is wrong with this picture: They struggled to make ends meet month after month while sending Uncle Sam money throughout the year . . . money the IRS would clutch until the Jones’s filed a proper tax return the following year. By claiming more exemptions on their W-4 forms, this family was able to increase their take-home pay by $400 a month . . . a huge step in the right direction, but still $200 a month short of balancing their budget. Again, they already had this money, but weren’t making use of it until they applied step three.
Have you applied any of these three steps to your finances? How did it go? Do you have any additional tips on finding money you already have? Leave a comment!
Guest Contributor, Deran Tolbert, AFC®, Serco, Inc.
A good credit history is crucial in today’s economy. Far more than just a number, a good credit score can make the difference in being able to access the affordable lending products necessary to go to college, buy a home, or start and grow a small business. Renting an apartment, paying for car insurance, signing up for utilities and even landing a job can also be affected by a person’s credit history – or the absence of one.
Unfortunately, for many of the 64 million Americans with no or “thin” credit files, the ability to establish a good credit history is hampered by lack of access to affordable mainstream credit building financial products. A disproportionately large number of these individuals are low-income and many live in areas underserved by traditional financial institutions. They depend on predatory financial service providers who do not report their borrowers’ on-time payments. Thus, many of these low-income households find themselves trapped in a vicious credit cycle: the use of predatory financial products prevents them from building good credit and their impaired or nonexistent credit furthers ongoing dependence on asset stripping alternative financial products.
As credit reports and scores are used more widely by creditors, employers and other businesses, financial practitioners are recognizing the connection between consumers’ credit profiles and the opportunities available to them. Over the last five years many have begun to embrace credit building as integral to helping low- and moderate-income and other underserved constituents build and sustain financial assets.
Responsible credit building – which combines access to safe, affordable financial products with skilled and relevant financial education — is a powerful strategy for financial practitioners to help the households they serve take control of their financial lives. In just six months, on-time payments reported to the credit bureaus on an installment loan as small as $100 can help an individual with a low credit score increase his or her score by an average of 35 points and move an individual with no credit score to a prime credit score.
A good credit history is not only an asset, it is the means to greater and more sustainable financial stability, savings and asset building opportunities.
Join Credit Builders Alliance (CBA) and AFCPE® for a 3-part webinar series designed to help financial practitioners enhance their understanding of credit building as an asset building strategy and help create ideal conditions for individuals and families to build credit and assets. Begins February 2015: http://bit.ly/1BsDWkL
Guest Contributor Dara Duguay, Executive Director, Credit Builders Alliance
As a mix of part-time financial counselor and part-time retiree – and certainly more retiree than counselor – I’ve had to go through all the necessary steps to ensure my spouse and I have the funds needed to retire comfortably. I found this to be no easy task and if you’re like me, you’ll find yourself second-guessing your actions quite often in the retirement planning stages and thereafter. After all, ensuring the investment tools, funds and systems are in place to carry a married couple for 30 years in retirement is a complex and somewhat risky proposition. In the end, one can never be absolutely sure that all systems are go and running smoothly for an extended retirement.
One of the key financial tools I’ve wrestled with in planning for retirement is annuities. The concept is fairly simple. You give up a lump sum of money to an insurance company that can be annuitized either immediately or at some later point in life, depending on the terms of the annuity contract and when you need the money. There are several variations of annuity products. I wrestled with whether I should buy an annuity a few years ago, not too long after we experienced the “Great Recession”, and I did eventually purchase a deferred variable annuity through a major life insurance company. At the time, I questioned my decision, but ultimately concluded that on a whole, it worked for me.
However, since then, I’ve continued to struggle with my decision to purchase an annuity. I suppose if the markets had continued to be poor following the recession I would have thanked my lucky stars and patted myself on the back for making such a smart decision. But the fact is the markets have trended up since the 2008-2009 recession so the money I invested in my annuity might have been worth more today if I had invested it in the market. Of course, I accept the market upside-downside risk, and at the time the annuity gave me peace of mind. For someone as close as I was to retirement in the tough 2008-2009 environment, it felt like the most comfortable choice.
For those who are considering purchasing an annuity, I share some hindsights that my purchase has provided:
Annuities are complex.
One of major negatives associated with annuities is that they are often complicated products and difficult to explain to prospective buyers. In fact, I think it’s almost impossible for the average guy on the street to fully grasp the complexities of annuities and, frankly, I think many financial pros who sell them often have difficulty with the detail. I know I did.
Annuities can be expensive.
My annuity continues to be more expensive than I initially thought. You can buy annuity riders (guaranteed income rider, death benefit rider, etc.) and absorb other fees (mortality and expense fees, fund fees) that can eat up as much as 4% or more of the return you’ll get by investing in an annuity. At the time I bought my annuity, I thought I needed the Cadillac product offered by my insurance provider and accepted riders and fees that have eaten up a good deal of the return from my deferred income annuity investment. Comparing the return I’ve experienced through my variable annuity to the return I could have gotten outside of my annuity is a little disheartening.
Annuities have “surrender fees”.
A surrender fee is the insurance company’s right to charge the annuitant a steep fee for walking away from the annuity contract before the end of the surrender period. My surrender period is four years, but many surrender periods are even longer. Having to surrender thousands of dollars for walking away from an annuity can certainly keep one locked into a product that you may no longer want. Will I walk away from my annuity? Certainly not before my surrender period ends and I am exempt from occurring an additional fee.
Once annuities annuitize, the insurance company controls your money.
My annuitized money will turn into a monthly stream of income for the rest of my life, which is nice, but the insurance company now controls this money and I can no longer get my hands on the lump sum I invested. It should be noted that there are some death benefit riders that will allow you to pass the annuity or the lump sum remaining on to your survivors, but at a price, of course.
Annuities are a transfer of risk investments with the insurance company.
They are not growth investments and they should not be viewed as such. Costs and investment limitations play too big a role in annuities to expect anything other than so-so returns. On the other hand, lowered risk through an annuity purchase can leave one sleeping much better at night; knowing that there is safety in at least part of your retirement portfolio. Surely, many have found this to be true as annuity sales have been steady, if not spectacular, over the past several years.
Financial expert, Ken Fisher, CEO of Fisher Investments, says, “I hate annuities and you should too”. See his video explaining why he feels this way, or get his annuity insights publication. You’ll note that much of his problem with annuities focuses on the costs associated with annuities that diminish the return on investment.
On the contrary, I occasionally consult with a financial planner about the concern I have with my annuity purchase. She noted that “in a continually rising market; these (annuity products) are not that attractive. If you think the market will always do nothing but rise, then you would not need the income guarantees (that annuities provide). If I was certain my house would never burn down, I would not need homeowners insurance. But I am not willing to take that risk and it gives me and my family greater comfort knowing it exists.”
Do I regret my decision? I don’t know the answer. Prepping for retirement is not an easy task, and you’ll often find yourself second guessing your decisions. However, I do know that if you are considering an annuity, the purchase should be coordinated and balanced with other investments in your retirement portfolio. Some, like Ken Fisher, would say any annuity in a portfolio is a mistake, period. I agree that certainly too much of an annuity in a portfolio is not a good thing, but if you are risk averse, an annuity that makes up a small portion of your portfolio may be a good way to build balance and peace of mind.
Will I keep my annuity? I still don’t know, but I’ll likely make a decision for the long-term in the next six months. Maybe I’ll provide an update at that time.
Guest Contributor, Wayne Hanson, AFC®, Financial Wellness Services, LLC
2014 Recipient of the AFCPE® Celia Ray Hayhoe Distinguished Fellow Award
This year, AFCPE was proud to recognize Sharon Cabeen as the recipient of the Distinguished Fellow Award. The honor goes to a colleague who deserves our greatest recognition for his or her significant and long-lasting contributions to AFCPE and to the field. It also must represent someone who exhibits the highest standards of professional and ethical conduct. This is Sharon Cabeen.
Sharon has spent 10 years serving AFCPE in a variety of capacities, including: Chairperson of the Member Services Committee; member of the Strategic Planning Committee; and an officer of the Board and Executive Board as President and Past President.
A fellow colleague fondly recalls, “Once Sharon joined our team, her passion and mission to assist consumers in better managing their finances was obvious. Although our organization’s focus is on the student — that is, student access, retention and student loan debt — she has helped us, and others in the higher education industry, realize that our contributions are a small part of the bigger picture, which she refers to as ‘The Farm’.”
The Farm is an analogy that Sharon uses to describe the world of finances. The silos on the farm are the different components of the big financial picture, including student loans, credit, spending, etc. With more than 35 years of experience – 25 years in credit counseling management and financial education and 10 years in the student loan industry – Sharon has devoted much of her career to building a bridge between the industry’s silos.
As a result of her efforts, professionals in each silo have retained and shared knowledge invaluable to one another. Student loan counselors have experience in the complex world of the FAFSA and student loan repayment, while AFCs are equipped to discuss multiple debt types and help consumers develop spending plans that align with their personal values and financial goals. Sharon has used her leadership to open the eyes of both industries and to realize the importance of collaboration.
Sharon is the creator of two different financial literacy programs that are being used today by two different organizations. Thanks to Sharon, there has been an increase in AFC® certifications as well as AFCPE memberships from student financial aid professionals, lenders and guarantors across the country. Because of her, scholarships were created for student financial aid professionals to enroll in the AFC program and student financial aid experts are now attending and submitting proposals for conference presentations and increasing the network of knowledge amongst AFCPE’s membership. And through her leadership, financial aid offices are now creating positions devoted to financial literacy on college campuses across the country with a focus on a holistic approach to student aid.
The bridge is being built. AFCPE Staff, Board and Members agree – it has been, and continues to be, an honor to learn from Sharon and work together toward her vision of the perfect farm.