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Financial Planning

Saving for Short-Term Goals

Pursuing short-term financial goals — those that you’d like to achieve within one to five years, such as a down payment on a home or car — can require a different strategy than pursuing long-term goals. Here are some steps to help you save and invest when you’re going to need your money sooner rather than later.


Step 1:

Be specific about your goal. Setting a specific short-term goal will help you to evaluate your progress toward meeting it. For instance, the vague objective “I want to save money to buy a house” becomes “I want to save $25,000 over five years to put toward the down payment of a house in (town/city).”

Step 2:

Take steps to free up extra cash. How will you save the money that you need? Eating out less often, canceling a gym membership that you don’t use, or downgrading your cable from a premium to a basic plan could easily free up $100 per month or more toward your goal. There are probably many areas where you can save a few bucks. Make a detailed list of what you spend in an average month and see where you could afford to trim.

Step 3:

Match your investments or savings vehicles with your goal. Safety and liquidity will be priorities if you need the money within a few years. Stocks can experience extreme fluctuations over short-term periods. You don’t want to be forced to sell your assets when the value of your investment has dropped. More appropriate choices for short-term needs may be conservative instruments that offer a more stable return, such as short-term bond funds and money market funds. Federally insured savings vehicles, such as certificates of deposit, could also play a role.

Understanding Short-Term Investments

Short-term bond funds primarily invest in U.S. government or corporate debt with maturities that range from one to three years. Money market funds pool investors’ dollars to buy money market instruments. These types of securities aim to produce current income, offer liquidity (how quickly you can sell an asset), and usually aren’t subject to the dramatic ups and downs of stocks. Certificates of deposit are interest-bearing debt instruments with a wide range of maturities. In exchange for purchasing a certificate of deposit, the investor will receive the return of principal plus interest at the maturity date.

Finally, remember that short-term financial objectives should not take away from investing for long-term goals.



Investors should carefully consider the fund’s investment objectives, risks, charges and expenses before investing. To obtain a prospectus, or if available, a summary prospectus containing this and other information, contact appropriate fund company or view the fund prospectus on Website of the appropriate fund company. Please carefully read the prospectus or the summary prospectus before investing.

Your investment is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

Current performance maybe higher or lower than the past, which cannot guarantee future results.

Share price, principal value, yield and return will vary and you may have a gain or loss when you sell you shares.

An investment in money market funds is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in these funds.

Bonds are subject to interest and market rate risk if sold prior to maturity. Bond values will decline as interest rates rise and are subject to availability and change in price

Improving Your Credit Score

Your credit score is a number that lenders use to gauge how likely you are to repay debts on time. It is derived from information compiled in a credit report, including your payment history (whether you have missed or been late with any payments for bills or loans), the amount you owe creditors compared with the amount of credit that is available to you, and the extent of your credit history (how long various accounts have been open).

Know Your Number

Before launching a campaign to raise your credit score, know what you are shooting for. Get a current copy of your credit report and review it for accuracy. All U.S. consumers are entitled to free annual credit reports from the major credit reporting agencies, which are Experian, Equifax, and TransUnion. You can request all three reports at Unlike credit reports, your credit score is not free. You can purchase your score from one of the above-mentioned agencies or from A typical credit score will range between 300 and 850 points. Although all lenders make decisions based on the particulars of the lending situation, generally speaking, the higher your score, the lower the perceived risk to the lender, and the more attractive the interest rate you will be offered.

Room for Improvement

A few tips for raising or maintaining a higher credit score include:

Paying your accounts on time and keeping your balances low. Lenders are looking for a proven track record of making timely payments. Payment history determines about 35% of your credit score.
Being conservative in the amount of available credit you use at any given time. About 30% of your score is determined by what the industry refers to as your “utilization ratio,” which is the amount you owe in relation to the amount of credit available to you. If that percentage is more than 50%, your score will be lower.
Holding on to older, unused accounts. The longer an account has been open and managed successfully, the higher your score will be.
Maintaining a diversified credit mix. If you hold an auto loan, a home mortgage, and credit cards that are well managed, you will generally have a higher credit score than someone whose credit consists mainly of finance companies.

© 2011 McGraw-Hill Financial Communications. All rights reserved.

How to Help Keep Identity Thieves Away

The more business we do and information we share online, the more identity theft becomes a growing threat to our financial security. There are ways you can help protect your good name and credit. Here are some tips to help keep you and your family safe.

Monitor Your Accounts

This goes for everything you have financially — credit cards, banks, brokerages, credit unions — as well as email and social networking accounts. You should also monitor your phone bills (both cell and landline), as thieves can “piggyback” on your plans.

But above all, be sure to check your monthly financial statements carefully. If you notice something strange — even if it is just for a small amount — call the issuing financial institution immediately and report it.

Sometimes identity thieves test, or “phish,” stolen account numbers by running a small charge or debit — often of a dollar or less — to make sure the account number is legitimate. Most accountholders don’t notice the transaction or don’t think it’s worthwhile to alert their financial institution. That is, until a few weeks or months later when thieves wrack up big credit card purchases or drain a bank account. Bottom line: If you see something “fishy,” no matter how small, report it right away.

Vigilance is the word for your email and social media accounts. The more information you share with the world — say, by posting your birth date to your Facebook profile — the easier you are making it for thieves to find that information. Check your privacy controls, and keep checking. Facebook for one is notorious for changing its policies with little or no notice. Also check the information your children are sharing online. They are less likely to be aware of privacy concerns and the consequences of sharing sensitive information.

Finally, you should Google yourself periodically to see what type of information about you or your family is publicly available. You may be in for a surprise.

Shred Sensitive Documents

You don’t have to shred every piece of mail you receive, but anything with account numbers or other personal data should be shredded. You should also be sure to shred certain pieces of junk mail — especially those unsolicited pre-approved credit card offers that seem to show up in your mailbox on a weekly basis.

You can further reduce or even eliminate these nuisance offers by opting out of the lists aggregated by credit bureaus, who then sell your name to lenders. Go to or call 888-567-8688 to get your name off these lists.

Check Your Credit Reports

The Fair Credit Reporting Act gives all American consumers the right to access their credit reports from the big three credit bureaus (Equifax, Experian, and TransUnion) for free once a year. Many unscrupulous firms will offer access to these reports for a fee or on a subscription basis. You shouldn’t pay anything for this access. To get the reports, go directly to the source:

You can also place a security freeze that will prevent anyone from viewing your credit report who is not affiliated with a company that you already have a financial relationship with or certain government and exempt agencies. You have to visit each credit bureau individually to do so.

Note: Security freezes are not free. Each agency charges a fee for this service, unless you are already the victim of an identity theft.

© 2011 McGraw-Hill Financial Communications. All rights reserved.

How Can You Manage Your Debt?

Understanding how much debt you can handle and being smart about managing it can help you pursue long-term financial goals. Consider the following tips when analyzing how much you owe:

1. Calculate how much debt you carry. Although there are exceptions for special situations, many mortgage providers consider the most attractive candidates to be those with a total debt-to-income ratio of 36% or less, and a mortgage payment that does not exceed 25% of gross monthly income. If your debt thresholds exceed these percentages, you could have difficulty repaying existing debt while you invest for retirement or other long-term goals.

2. Investigate refinancing options. With rates on fixed-rate mortgages averaging around 5%, you may want to consider refinancing an existing mortgage. You’ll really have to crunch some numbers to determine if you can lower your monthly payment by a significant margin. Don’t forget to factor in closing costs and to think about how long you plan to stay in your home. If you’re planning a move within five to ten years, you may not recoup the cost of refinancing.

3. Know your credit score. The best deals on credit go to the applicants with the highest credit scores. To check yours, request a free report annually at Tips for maintaining a good credit score include paying your accounts on time, keeping balances low, being conservative in the amount of credit you use at any given time, maintaining older accounts, and maintaining a diversified credit mix.

4. Search for lower credit card rates. Pay attention to mailings from credit card companies where you have accounts. Because of rising delinquencies attributed to the recession and new laws that take effect in February 2010, many banks are raising interest rates, reducing credit lines, and imposing higher fees, even on borrowers with good payment histories. If this has happened to you, you can try shopping for better terms, but some observers believe that banks are likely to tighten access to credit going forward — leaving many consumers with fewer options than they had in the past. Paying more than the minimum payment due each month can really help reduce interest costs over time.

5. Start an emergency fund. You never know where or when an emergency will happen, but you can take steps to prepare. Setting aside a little every month — and having the discipline to not tap into that money unless it is absolutely necessary — will go a long way toward helping make situations less stressful when the unforeseen happens.

© 2011 McGraw-Hill Financial Communications. All rights reserved.

Four Steps to a Simpler Financial Life

For many Americans, financial life seems to be getting more and more complicated. Perhaps that’s because more workers bear responsibility for their own retirement savings thanks to the proliferation of 401(k) and other plans. Or maybe it’s because there’s so much information and so many investment choices to sort through. Whatever the case, here are some suggestions that may help to simplify your financial life.


1. Start with a Plan

A little time spent planning now can benefit you later. First, determine short-term financial goals. Do you want to purchase a home in five years? Are your kids heading off to college soon? Is buying a car a top priority next year? Next, think about long-term goals, such as saving for retirement and, if your children are young, college expenses. Estimate how much money you’ll need to meet each of these goals.


2. Build a Better Budget

Next, look at your current monthly net income and then set up a budget. Creating a budget allows you to see exactly where all your money goes and to determine where you can scale back. After making cuts, invest that money to help pursue your financial goals.


3. Invest Systematically

You can take time and guesswork out of investing with a systematic investing program. With mutual funds, for example, you can make arrangements to automatically invest a specific amount of money on a regular (e.g., monthly) basis, a strategy also known as dollar cost averaging.* In addition to making investing easier, dollar cost averaging could potentially save you money. You’ll buy more shares when prices are low and fewer shares when they’re high. Over time, the average cost you pay for the shares may be less than the average price.


4. Rely on an Investment Professional

While the financial world is far more complex than it was just a few years ago, you don’t have to go it alone. Think about tapping into your investment professional’s expertise before making any major change in your investments. He or she can help you to evaluate how new tax rules and changing market conditions may affect your portfolio and, in turn, your financial goals.

*Dollar cost averaging involves regular, periodic investments in securities regardless of price levels. You should consider your financial ability to continue purchasing shares through periods of high and low prices. This plan does not assure a profit and does not protect against loss in declining markets.

© 2011 Standard & Poor’s Financial Communications. All rights reserved.

Financial Planning Tips for Unmarried Couples

Today’s “modern family” is decidedly nontraditional. According to the latest Census data, fewer than 25% of American households currently consist of married couples with dependent children, while more than 40% of unmarried couples have children under the age of 18. Even the term “married” can be defined differently depending on where you live. Some states allow and recognize same-sex marriage, but the majority of states and federal government do not. Therefore, it’s important for domestic partners to ensure they have legal protections in place to protect their families and themselves.


Legal Protections

Unmarried partners lack many of the legal protections granted to spouses in the event of divorce or death. Although most states will consider a claim by an unmarried partner, there is no specific legal precedent in the absence of a written contract. Domestic partners may wish to consider creating a domestic-partnership agreement that details the sharing of expenses as well as the ownership and distribution of assets should the relationship end. Unmarried couples with children should consider signing a written agreement acknowledging parental rights and responsibilities and having each partner name the other as primary guardian in wills.


Retirement Considerations

Unmarried couples are not eligible for their partner’s Social Security benefits and, in some cases, employer-sponsored retirement plan distributions. The IRS allows a nonspousal beneficiary of an IRA to take required distributions over his or her lifetime rather than in a lump sum, allowing for potential tax-deferred growth over a longer period of time. Domestic partners who can afford to do so may want to contribute the annual maximum to an IRA to capitalize on this benefit.


Estate Planning Issues

If an unmarried individual dies without a will, the state may distribute assets to his or her closest blood relatives, leaving the surviving domestic partner out in the cold. To help rebut a challenge to a will, domestic partners may want to videotape their wishes in the presence of an attorney.

Federal tax law allows all assets to pass to a spouse tax free and no applicable estate taxes are due until the second spouse dies. Unmarried couples, however, do not enjoy this tax advantage. For those with significant taxable assets, it will be necessary to pursue other avenues to avoid estate tax. One strategy is to purchase life insurance to pay any potential federal and state estate taxes. The surviving partner must own the insurance to avoid it becoming part of the estate of the deceased. Therefore, each partner should own enough insurance to pay anticipated taxes on the assets of his or her partner.


This communication is not intended to be legal and/or tax advice and should not be treated as such. Each individual’s situation is different. You should contact your legal and/or tax professional to discuss your personal situation.

© 2011 McGraw-Hill Financial Communications. All rights reserved.

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