Financial Focus

July 2015 Newsletter

It's Complicated: Money and Happiness

Does more wealth lead to more happiness? Researchers have tackled this question for decades, and although the results have differed > Read more ...

Reviewing Your Finances
Mid-Year

You made it through tax season and now you're looking forward to your summer vacation. But before you go, take some time to review your finances > Read more ...

How Much Income Do you Need in Retirement?

Making the leap from working to retirement can be scary life event. Your whole life, you have probably become used to receiving a paycheck on a regular basis > Read more ...

Top 10 Movies for the
4th of July

The 4th of July is a time to celebrate America's history and freedom with your family and friends. Enjoy one of these classic films this July! > Read more ...

Plus...

• Recipe of the Month: Bruschetta with Tomato and Basil

It's Complicated: Money and Happiness ¹

Does more wealth lead to more happiness? Researchers have tackled this question for decades, and although the results have differed, one fact is certain: The relationship between money and happiness--or "well-being," as many researchers put it--is complicated.

Think before you spend.

In their book, Happy Money: The Science of Smarter Spending, Professors Elizabeth Dunn and Michael Norton summarize their own and others' research. What they found is that it's not necessarily how much you make that matters to overall happiness (although that certainly contributes), but what you do with your money. They boiled down the findings to five "key principles of happy money."

1. Buy Experiences. Investing in memories can result in a more sustained level of happiness than buying a bigger house, a more luxurious car, or other material goods. Buying the latest technological gadget might elicit the kind of joy a child experiences opening a new toy on the holidays, but just like that new toy, the gadget loses its novelty with time--a principle psychologists refer to as "hedonic adaptation." On the other hand, experiences--even those that are fleeting or may initially provoke trepidation, such as hang gliding--create memories that help foster prolonged contentment.

2. Make It a Treat. While you're investing in those experiences, be sure to spread them out so they don't become expectations or habits. In this way, the novelty of each new experience will be fully realized. As the book says, "Abundance is the enemy of appreciation." This is also true with something as simple as a cappuccino. If you make it a daily ritual, it becomes a habit. If you instead substitute your daily coffee once a week with a froth-covered treat, then it becomes a reward to savor.

Conversely, credit cards can be a dangerous, albeit convenient, financial tool, facilitating a "consume now, pay later" dynamic. One study cited in Happy Money found that all 30 people surveyed underestimated their monthly credit-card bills by a sizable average of nearly 30%.

5. Invest in Others. Regardless of your circumstances--wealthy or not, young or old--research finds that spending money on others leads to greater happiness than spending on oneself.

The danger zones
While some experts differ on whether higher incomes result in greater levels of happiness, they tend to agree on the following: Increasing debt levels are detrimental to happiness, and keeping up with the Joneses can lead to a general sense of dissatisfaction. Instead, actively managing debt while finding ways to appreciate what you already have on a day-to-day basis may help you make well-thought-out saving and spending choices that support your overall level of well-being.

Reviewing Your Finances Mid-Year ²

You made it through tax season and now you're looking forward to your summer vacation. But before you go, take some time to review your finances. Mid-year is an ideal time to do so, because the demands on your time may be fewer, and the planning opportunities greater, than if you wait until the end of the year.

Think about your priorities

What are your priorities? Here are some questions that may help you identify the financial issues you want to address within the next few months.

• · Are any life-changing events coming up soon, such as marriage, the birth of a child, retirement, or a career change?
• · Will your income or expenses substantially increase or decrease this year?
• · Have you managed to save as much as you expected this year?
• · Are you comfortable with the amount of debt that you have?
• · Are you concerned about the performance of your investment portfolio?
• · Do you have any other specific needs or concerns that you would like to address?

Take another look at your taxes

Completing a mid-year estimate of your tax liability may reveal tax planning opportunities. You can use last year's tax return as a basis, then make any anticipated adjustments to your income and deductions for this year.

You'll want to check your withholding, especially if you owed taxes when you filed your most recent income tax return or you received a large refund. Doing that now, rather than waiting until the end of the year, may help you avoid a big tax bill or having too much of your money tied up with Uncle Sam. If necessary, adjust the amount of federal or state income tax withheld from your paycheck by filing a new Form W-4 with your employer.

To help avoid missed tax-saving opportunities for the year, one basic thing you can do right now is to set up a system for saving receipts and other tax-related documents. This can be as simple as dedicating a folder in your file cabinet to this year's tax return so that you can keep track of important paperwork.

Reconsider your retirement plan

If you're working and you received a pay increase this year, don't overlook the opportunity to increase your retirement plan contributions by asking your employer to set aside a higher percentage of your salary. In 2015, you may be able to contribute up to $18,000 to your workplace retirement plan ($24,000 if you're age 50 or older).

If you're already retired, take another look at your retirement income needs and whether your current investments and distribution strategy will continue to provide enough income.

Review your investments

Have you recently reviewed your portfolio to make sure that your asset allocation is still in line with your financial goals, time horizon, and tolerance for risk? Though it's common to rebalance a portfolio at the end of the year, you may need to rebalance more frequently if the market is volatile.

Note: Asset allocation is a method used to help manage investment risk; it does not guarantee a profit or protect against investment loss.

Identify your insurance needs

Do you know exactly how much life and disability insurance coverage you have? Are you familiar with the terms of your homeowners, renters, and auto insurance policies? If not, it's time to add your insurance policies to your summer reading list. Insurance needs frequently change, and it's possible that your coverage hasn't kept pace with your income or family circumstances.

How Much Income Do You Need In Retirement?

When determining your overall income plan for retirement, a great place to start is realizing your potential sources for income. Some assets may provide you with regular income for the rest of your life. Other assets may be more difficult to earmark for steady income, due to account fluctuation. A great tool to begin this planning process is a Rule of 100 Report.

Contact us at (800) 334-0734 to obtain a personalize Rule of 100 Report – we would love to help you begin creating your retirement income plan. If you are already in retirement, the report can also reveal any potential holes your existing retirement income plan may have. Call us today!

Top 10 Movies For The Fourth of July ³

1. Rocky
2. Independence Day
3. The Patriot
4. Jaws
5. Born On the Fourth of July
6. Drums Along the Mohawk
7. Live Free or Die Hard
8. Yankee Doodle Dandy
9. Johnny Tremain
10. Red Dawn

Recipe of the Month: Bruschetta with Tomato and Basil⁴

Bruschetta is a popular Italian starter dish consisting of bread rubbed with garlic, and topped with a variety of ingredients. Here is a simple yet delicious version that really incorporates the flavors of early summer. Enjoy!

Ingredients
1/2 baguette or crusty long loaf bread, sliced (12 pieces)
2 large cloves garlic, cracked away from skin
Extra-virgin olive oil, for drizzling
3 small plum tomatoes, halved and seeded
20 fresh basil leaves
Coarse salt

Directions
Preheat broiler to high, (if you prefer you can also grill the bread). Place bread slices on a broiler pan. Char bread on each side under hot broiler, keep an eye on it! Rub toasts with cracked garlic and drizzle with oil. Chop seeded tomatoes and place in a small bowl. Pile basil leaves on top of one another and roll into a log. Thinly slice basil into green confetti and loosely combine with tomatoes. Add a drizzle of oil and a little coarse salt to the bowl and gently toss tomatoes and basil to coat. Pile toasts around the bowl of topping. Place a spoon to scoop topping in bowl and serve.

¹ Broadridge Investor Communication Solutions, Inc. Copyright 2015.
²Broadridge Investor Communication Solutions, Inc. Copyright 2015.
³http://www.forbes.com/sites/markhughes/2012/06/30/top-ten-movies-for-the-fourth-of-july/
⁴http://www.foodnetwork.com/recipes/rachael-ray/bruschetta-with-tomato-and-basil-recipe.html?oc=linkback

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John White offers investment advisory services through Gradient Advisors, LLC (Arden Hills, MN 877-0508), a legal SEC Registered Investment Advisor. Gradient Advisors, LLC and its advisors do not render tax, legal, or account advice. Financial Guideposts is not a registered investment advisor and is not an affiliate of Gradient Advisors, LLC.