What is Your Net Worth, and Why Should You Care? Steve Knudson Quoted

One of Intermountain Financial Group’s financial advisors , Steve Knudson, was quoted in the article, “What is Your Net Worth, and Why Should You Care?”

You probably know how much you make each year, and maybe even what you spend each month, but do you know your net worth? And more importantly, how to use the information in a way that matters?

Knowing your net worth can have a significant impact on your budgeting, spending, and retirement plans.

What is net worth?

Simply put, net worth is everything you own minus what you owe. While online calculators can be used to run the actual numbers, it’s important that you determine assets from debts accurately, to arrive at the most accurate breakdown.

Create a personal balance sheet with two categories: What you own (assets), and what you owe (liabilities). The “owned” category should include checking, savings, certificates of deposit, investment and brokerage accounts, retirement and college savings plans, and the value of vehicles you own outright (which can be found using Kelley Blue Book).

If you own furniture, electronics, art, technology, or jewelry worth significant value, those items are assets, as is the equity (what you own) in your home or investment property. (It is not the market value of your home — unless you own it outright).

Conversely, the “owed” category should include the balance you owe on your mortgage loan, student loan debt, auto loans, credit card bills, taxes owed, alimony or child support, and lease obligations you may be bound to for a car or rented dwelling.

Though actual calculation of net worth is simply subtracting what is owned from owed, it’s imperative that your balance sheet “inputs” are accurate.

Financial expert Steve Knudson of Intermountain Financial Group says that relying too heavily on net worth becomes problematic when based on unrealistic projections of unpredictable forces.

For example, if you’re invested in stock markets and the economy is booming, so is your net worth. Market values plunge one day — your net worth goes with it. An overstated net worth analysis can lead to borrowing things you can’t actually afford, and underestimating what you need to put aside for retirement.

“I have seen far too many portfolios trashed due to over aggressive valuations on real estate and private company stock valuations that have never materialized,” Knudson says.

Here are three simple ways to put your net worth balance sheet into action:

See where you stand with retirement

Forbes contributor and financial adviser David John Marotta, president of Marotta Wealth Management, says that saving 15% of your take home pay each year throughout your working life should theoretically provide sufficient savings for retirement, even with the ebb and flow of the market. Obviously, the exact number that percentage amounts to will change with your salary throughout the years.

Using your net worth balance sheet, you can easily arrive at a very basic spot check of how well you’ve planned for retirement so far.

Let’s suppose you started contributing to retirement five years ago, and your annual take home pay has been $40,000 for that time. Sticking to basic math, you should have about $30,000 earmarked in a retirement account. Of course, you may have more, or less, based on the investments you’ve made and employer matches, but the 15% rule is a simple way to see where you currently stand. If you’ve fallen short, you’ve got some catching up to do, either by spending less, saving more — or a combination of both.

Start a debt elimination strategy

Retirement planning is about strategizing a way to live in an essentially income-less scenario, aside from what you’ve saved. Ideally the “owed” section in your net worth balance sheet will be blank when you retire — even if that’s far from your reality today.

The steps you take now to eliminate debt can be just as important as what you contribute into retirement savings, particularly if the debts you carry have you paying far higher interest rates than your investments earn.

Using your “owed” column, formulate an action plan for long-term debt elimination that will allow you to eventually enter into retirement debt-free. Start with the highest interest rate loans first, and work your way down. As you whittle loans away, you’ll free up more funds to build liquid assets, and invest for retirement.

Focus on long-term planning

Knudson suggests a triangle-style approach to net worth analysis that focuses on three critical aspects of long-term financial management: income, access and growth.

To determine income needs, calculate your monthly fixed expenses compared to your monthly cash flow. If monthly income sufficiently covers those costs, Knudson says “there is no need to “burden an investment portfolio with bonds or low performing investments.”

To evaluate access, add up the total of your “owned” assets that are completely liquid, meaning that if a financial emergency happened tomorrow, you could withdraw your money without paying fees or penalties, or selling assets that may or not be worth peak value.

If most of your “owned” column consists of property, stocks, bonds or mutual funds, consider shifting some assets into more liquid savings tools to protect your long-term financial affairs. Once you’ve determined income and access, Knudson suggests investing the balance of cash in a long term growth portfolio to hedge against inflation, provide for appreciation, and invest for opportunities.

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The New Retirement – Predictable Engagement (Financial Services Professional, Steven Knudson Interviewed)

7/15/2012 Web Talk RadioLearn More

One of Intermountain Financial Group’s Financial Services Professional’s, Steven Knudson, was interviewed on Web Talk Radio.


One key retirement goal is financial security. We get this when we have ample and reliable income and predictable expense. As long as you can manage both sides, income and expense, your retirement can become sustainable. Steve Knudson a financial adviser with thirty years of experience shares his insights on how to manage both sides of the ledger.

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5 Crippling Money Moves You Could Be Making Now (Steve Knudson, One of our Financial Advisor’s was quoted)

5 Crippling Money Moves You Could Be Making  Now

By            Stephanie  Taylor Christensen        Jun 26, 2012 11:10 am

Read more: http://www.minyanville.com/trading-and-investing/personal-finance/articles/personal-finance-money-moves-crippling-money/6/26/2012/id/41920#ixzz1zlHoHPGN

MINYANVILLE ORIGINAL  Many people wrongly assume that making more money would solve their  financial woes, but in reality, what you do with your money has far  more impact than the amount of your paycheck.  Here are five crippling  money moves you could be making right now.

Skipping the  financial baby steps to invest. Turn on any news program that focuses  on the markets and the excitement of investing is palpable:  There’s breaking news, scandal, and constantly changing opportunities that allow  your mind to wonder whether this is the big break that will contribute  to an early retirement filled with pool time and umbrella drinks. In stark  contrast, saving and paying off debt is dull, and frankly, a little depressing.  It’s only natural to be drawn to the action of “The Street” — but that desire  could cost you a boat load in the long term.

Financial counselor  Andi Wrenn says that the most frequent financial mistake she sees are potential  investors seeking advice how to get into the market before they’re financially  ready to start investing.  Before you start reading up on the latest investing trends, conduct a bit of due  diligence: Do you know your budget and spending behaviors? Do you carry debts?  How’s your credit health? And do you have a long-term financial plan?

“Unsexy” as these factors are, they encompass financial well-being. If you  haven’t mastered them, the odds are good that you’ll benefit more from managing  what you can control, like resolving debt, building savings, and  knowing where your money goes, than by diving in to investments. Case in point:  Investing will deliver about a 4% to 7% return on your money, if you’re lucky,  says Wrenn. On the other hand, paying down debts that currently cost you money  (and could be as high as 21%) delivers a guaranteed reward in the long-term.

Not staying current on insurance rates and beneficiary  designations. You may have insurance policies, a will, power of  attorney and beneficiary designations in place, but when’s the last time you  checked in on them?  Gerard R. Gruber, CFP and chief investment officer at Hayden  Wealth Management, tells Minyanville that even clients with well-formulated  estate plans commonly have issues with “inappropriately named beneficiaries and  property titling that can cause a significant tax liability for their  estate.”

If you’ve named a beneficiary and your relationship with them  has since changed, check in with your assets and ensure that you’re not naming a  person who no longer fits the bill. If you’ve had a child since you last checked  in on your estate, make certain that they are appropriately named on policy  documents — and that you’ve taken steps to manage your tax liability in the  process. If you carry insurance policies secured some time ago, Gruber says you  may be overpaying. “Clients frequently hold onto old insurance policies with  older mortality tables and that were issued with higher assumption rates. With  mortality rates changing every 10 to 15 years, policies now are less expensive  and more multidimensional.”

Making buying decisions based  on others. Peer pressure to make the certain purchases is all but  unavoidable, especially now that personalized social media algorithms tell us  exactly what our friends are reading, listening to, buying, and coveting. When  it comes to investments, removing your emotions and the thoughts of others is  key to a solid long-term plan.
Season Investments co-founder and portfolio manager David  Houle says that he commonly sees people trying to “proactively manage investment  assets without a rigid process in place. ”  As a result, they react to  headlines out of emotion, and “step in and trade proactively at exactly the  wrong times.” But emotional financial errors aren’t limited to investing. Think  about the last time you bought a product at the suggestion of a friend or  advertisement, adopted a lifestyle change because you read about it in the  media, or even bought a certain type of car or house because you felt like you “should,” having reached a particular age or income bracket. There is a  cumulative effect that goes into all money decisions, and these decisions can  ultimately derail even those who make sizeable incomes. The way to combat them?  Devise a financial plan that maps out current and longer-term goals and filter  out the noise by sticking to it.

Thinking you’re too well  off to worry about savings.  The saying “The more you make, the  more you spend” could be extended to “The more you make, the less you worry  about saving.” But in reality, your savings cushion should be appropriate to  your level of income, and lifestyle. Henk Pieters, CFP and president of Newport  Beach, Calif. based Investus Financial Planning, says that his working/middle  class and wealthy clients commonly discount the need to have a significant  emergency fund.  Pieters recommends that all clients have at least three to  six months worth of living expenses covered in an FDIC-insured savings  account—provided they have a very stable career. Business owners and  those in industries or salary tiers that present higher degrees of professional  uncertainty need to save an entire year’s worth of living expenses.

Not planning for disaster. In 2009, the online  edition of The American Journal of Health published a Harvard study reporting that more than 62% of bankruptcy   is medically related in some way. Perhaps the most concerning aspect of it  was thatmedical debtors were well educated and middle class,  and three quarters had health insurance at the time bankruptcy was filed.” Aside  from having sufficient savings, it’s important to educate yourself about the  insurance coverage you have, and fill in gaps where you find them.

Steven K. Knudson, financial advisor at Intermountain  Financial Group, says that even those with a “Group Long Term Disability” plan at work should add personal fixed income protection in a non-cancellable  disability insurance plan to make sure assets are covered. Additionally he  recommends securing adequate life insurance coverage as early as possible. “With  term life insurance so inexpensive these days, get it while you are young enough  to qualify and it’s cheap enough that you can afford it.”
 

Twitter: @WellnessOnLess
Read more: http://www.minyanville.com/trading-and-investing/personal-finance/articles/personal-finance-money-moves-crippling-money/6/26/2012/id/41920#ixzz1zlHzixIu