Financial Focus

September 2015 Newsletter

Estimating Your
Future Income

Estimating income seems self-explanatory but is seldom as easy to implement as it sounds. It is the process of combining everything you know or > Read more...

Common Financial Mistakes People Make at Different Ages

There's a saying that with age comes wisdom, but this may not always be true in the financial world. As people move through different life stages > Read more...

Are Your Beneficiaries
Up-to-Date?

Do you know where your will is? What about your beneficiary designations forms? Did you know that beneficiary designations override bequests made in your will? > Read more...

Top 15 Age-Benefiting
Superfoods

Are these age-benefiting superfoods part of your daily diet? These delicious foods help protect your eyes, lungs, heart, brain and more > Read more...

Plus:

• Recipe of the Month: Ice Cream Freezer Pops

ESTIMATING YOUR FUTURE INCOME ¹

What is estimating income about?
Estimating income seems self-explanatory but is seldom as easy to implement as it sounds. It is the process of combining everything you know or sense is likely to affect your income for a specific future period, then using it to forecast income. Some sources of income are naturally much more difficult to forecast than others. With multiple income sources, it is necessary to first estimate each one, then add the individual estimates to derive total estimated income for the period being considered.

Estimating income is
essential to various aspects
of financial planning
Understanding how to estimate income is important whether you are creating a budget, planning to achieve financial goals, or attempting to avoid financial problems. Total estimated income (by week or month) forms the basis of your spending plan and aids in projecting cash flow for future periods.

Combine prior period income with
anticipated changes to estimate your future income
Begin estimating income by separately considering income from each source for a prior period equivalent to the one to be estimated. Common income sources are listed below, but you may have income from other sources not shown that are less common. For each source, estimate the amount of income you expect for the period being forecast. Finally, add the individual estimates to derive total estimated income for the period.

Try to anticipate income from all
possible sources and potential changes in income
Here are some of the factors that can increase levels of income from various sources (and sometimes decrease it):

• Alimony
• Awards
• Bonuses
• Business upturn/downturn
• Child support
• Commissions and royalties
• Cost-of-living adjustments
• Disability
• Dividends
• Divorce settlements
• Gifts
• Health condition

• Inheritance
• Interest rate changes
• Investment gains/losses
• Job promotion
• Personal property sale
• Salary merit increase/decrease
• Social Security changes
• Tax bracket drift
• Tax refund
• Tax withholding changes
• Unpaid leave of absence

Estimate conservatively
When estimating income that is highly variable, good judgment requires estimating conservatively. Being surprised by an income surplus is far more pleasant than having an unexpected income shortfall. In fact, the latter can cost even more if you need to rely on credit to cover the shortage. Use the reasonableness test to avoid unrealistic estimates.

COMMON FINANCIAL MISTAKES PEOPLE MAKE AT DIFFERENT AGES ²

There's a saying that with age comes wisdom, but this may not always be true in the financial world. As people move through different life stages, there are new opportunities--and potential pitfalls--around every corner.

In your 20s

Living beyond your means. It's tempting to want all the latest and greatest in gadgets, entertainment, and travel, but if you can't pay for most of your wants up front, then you need to rein in your lifestyle. If you take on too much debt--or don't work diligently to start paying off the debt you have--it can hold you back financially for a long, long time.

Not saving for retirement. You've got plenty of time, so what's the rush? Well why not harness that time to work for you. Start saving a portion of your annual pay now and your 67-year-old self will thank you.

Not being financially literate. Many students graduate from high school or college without knowing the basics of money management. Learn as much as you can about saving, budgeting, and investing now so you can benefit from it for the rest of your life.

In your 30s

Being house poor. Whether you're buying your first home or trading up, don't buy a house that you can't afford, even if the bank says you can. Build in some wiggle room for a possible dip in household income that could result from switching jobs, going back to school, or leaving the workforce to raise a family.

Not protecting yourself with life and disability insurance. Life is unpredictable. What would happen if one day you were unable to work and earn a paycheck? Let go of the "it-won't-happen-to-me" attitude. Though the cost and availability of life insurance depend on several factors including your health, the younger you are when you buy insurance, the lower your premiums will likely be.

Not saving for retirement. Okay, maybe your 20s passed you by in a bit of a blur and retirement wasn't even on your radar screen. But now that you're in your 30s, it's critical to start saving for retirement. Wait much longer, and it can be hard to catch up. Start now, and you still have 30 years or more to save.

In your 40s

Trying to keep up with the Joneses. Appearances can be deceptive. The nice homes, cars, vacations, and "stuff" that others have might make you wonder whether you should be buying these things, too. But behind the scenes, your neighbors could be taking on a lot of debt. Take pride in your savings account instead.

Funding college over retirement. In your 40s, saving for your children's college costs over your own retirement is a mistake. If you have limited funds, set aside a portion for college but earmark the majority for retirement. Then sit down with your teenager and have a frank discussion about academic options that won't break the bank--for either of you.

Not having a will or an advance medical directive. No one likes to think about death or catastrophic injury, but these documents can help your loved ones immensely if something unexpected should happen to you.

In your 50s and 60s

Co-signing loans for adult children. Co-signing means you're on the hook--completely--if your child can't pay, a situation you don't want to find yourself in as you're getting ready to retire.

Raiding your home equity or retirement funds. It goes without saying that doing so will prolong your debt and/or reduce your nest egg.

Not quantifying your retirement income. As you approach retirement, you should know how much you can expect from Social Security (at age 62, at your full retirement age, and at age 70), pension income, and your personal retirement savings.

Not understanding health-care costs in retirement. Before you turn age 65, review what Medicare does and doesn't cover, and how gap insurance policies fit into the picture.

ARE YOUR BENEFICIARIES UP-TO-DATE?

Do you know where your will is? What about your beneficiary designations forms? Did you know that beneficiary designations override bequests made in your will? Non-probate assets such as life insurance, annuities, qualified retirement plans, and IRAs will be inherited by the beneficiary named on your designation form.

Though often overlooked, beneficiary designations are a vital part of estate planning as they trump marital laws, wills, and court orders. Proper beneficiary designations will ensure your wishes are met and keep your assets in the hands of your loved ones making sure they are distributed as intended.

Ask yourself these important beneficiary questions:

• When was the last time you reviewed your beneficiary designations?
• Has your family situation changed?
• Has your life been impacted by death or divorce?
• What about current tax laws?
• What about your overall wealth?

Without a comprehensive beneficiary review, you may be leaving assets to those you did not intend or no one at all. Don’t let the money you’ve worked so hard to accumulate end up in the wrong hands. Call us today at (800) 334-0734 to schedule your COMPLIMENTARY Beneficiary Review today!

TOP 15 AGE-BENEFITING SUPERFOODS ³

These delicious foods will help protect your eyes, lungs, heart and brain!

• Apples
• Asparagus
• Blueberries
• Broccoli
• Butternut Squash

• Dark Chocolate
• Coffee
• Fava Beans
• Greek Yogurt
• Green Kale

• Oatmeal
• Olive Oil
• Pears
• Quinoa
• Salmon

RECIPE OF THE MONTH:
ICE CREAM FREEZER POPS ⁴

People of all ages will love these mini ice cream treats. This simple recipe can easily be customized with different candies and cookies to satisfy your sweet tooth.
Best enjoyed with a loved one!

Ingredients
1/2 package sandwich cookies (12 to 14 cookies), crushed
15 regular-size peanut butter cups, crushed
10 ounces candy-coated chocolate pieces (about 1 cup), crushed
1/2 gallon good quality vanilla ice cream, slightly softened
Special equipment: 15 5-ounce paper cups

Directions
Combine the crushed cookies, peanut butter cups and candy-coated chocolate pieces and add a spoonful to the bottom of each paper cup.

Scoop the ice cream into a large bowl of a mixer, then pour in the remaining chocolate-cookie mix. Mix gently with a paddle attachment. Spoon the ice cream into the cups and carefully insert a popsicle stick into each pop.

Freeze until the ice cream has solidified. Tear off the paper cups to serve.

¹ Broadridge Investor Communication Solutions, Inc. Copyright 2015.
² Broadridge Investor Communication Solutions, Inc. Copyright 2015.
³http://www.aarp.org/health/healthy-living/info-12-2012/top-superfoods-photos.html
⁴ http://www.foodnetwork.com/recipes/ree-drummond/ice-cream-freezer-pops-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.