Detroit’s Bankruptcy: It Should Affect How You Manage Your Money

Detroit’s Bankruptcy: It Should Affect How You Manage Your Money

As soon as I learned of the city of Detroit’s filing for Chapter 9 bankruptcy protection, I posted the following across my social media platforms:   Today, I want to add a few more reasons why this historic event should really – and, I mean REALLY – matter to you and serve as a wake-up call for how to best manager your money. The city’s bankruptcy has at least five (5) clues and cues for you. In no particular order, here’s why I believe you shouldn’t dismiss this as a “that’s their problem” scenario:  401(k) To elaborate on what I said on the interwebs last week, if you participate (and I hope you do) in your company’s 401(k) plan and the company’s stock is one of the investment options, be sure to minimize your exposure to said stock. As so many people (re)learned on September 15, 2008, your company’s value can evaporate – go poof! – in a single business day. You’ll need to work with your financial advisor to determine the specific percentage as it is situation dependent, but as a conservative general rule of thumb, I’d aim for 5-10%. Here’s why this is relevant to you: You don’t want your retirement savings tied to a single security, especially if your earnings are tied to the company of that security. Make sense? Municipal bonds You shouldn’t have municipal bonds in your 401(k) plan anyway (there’s no added value), but just in case you do…check your investment allocation to municipal bonds. You should do the same for your taxable brokerage accounts, too. Make sure you know how financially healthy...
Are You Making These 401(k) Mistakes?

Are You Making These 401(k) Mistakes?

If I were to wager a guess, I bet the only time you think about your 401(k) is now (during benefits season) and when you get your quarterly statement. Yet, 401(k)s play a critical role in your finances. Or, at least they can. They have morphed into THE retirement option offered by most employers. But as you know from conversations with your parents and grandparents, this wasn’t always the case. 401(k)s are relatively “young;” did you know that? They were introduced in the early 80s as a vehicle to supplement traditional defined-benefit plans – aka pensions. But pension plans are all but gone for most employees. Thus, the shift from defined-benefit to defined-contribution puts you in the drivers seat. As such, you get to decide: whether to participate; how much to contribute;  in what to invest; how to allocate your investments; when to withdraw; and more. And as the driver, you shoulder ALL of the responsibility for managing the various elements of your 401(k) – often with little to no guidance. As a result, you just might be making mistakes – some of which are obvious, others less so. But… The most costly mistakes are the ones you’re making, unwittingly. So here’s a list of common mistakes and what you can do instead: Mistake #1 – Not enrolling in your employer-sponsored 401(k) or its non-profit cousin (403(b) Truly, none of the other mistakes can be made if you make this one! And this one is costly in both the short- and long-term. Therefore, as soon as you are eligible enroll in this employer-sponsored benefit! Mistake #2 – Putting too...

Money Myths & Truths

In the November issue of Essence Magazine, Charlotte Stallings, Stacey Tisdale, and I debunk nine (9) prevailing money myths, such as: “It takes thousands to start investing.” (Myth #1); “My kids will provide for me in retirement.” (Myth #4);  “Using a bank debit card is the same as cash.” (Myth #7) If you are not a subscriber, the issue is on newsstands now! Our advice begins on page 103 and provides truths to live by for investing, home-ownership, managing your 401(k), managing the sandwich generation, credit and debt management, insurance, and cash management. And a bonus for me: “Financial Intimacy” (see page 109) is listed as one of five (5) must-read money books!...