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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Steven Knudson quoted in article regarding “6 Ways to Test Your Financial Literacy Today”

Written by: Stephanie Taylor Christensen

Improving your personal finance know-how is a goal worth aspiring to, but with so much to learn, how do you know where you stand when it comes to financial literacy?

Here are six aspects of money management to test your own financial literacy:

Budget basics

While there are plenty of online and mobile app tools that ease the burden of budgeting, your dedication to managing spending, eliminating debt, and saving as much as you can is key. The longer and more consistently you budget, you’ll begin to identify and plan for those red flag financial events like car repairs, vacation expenses, gifts, and medical bills so you don’t have to turn to using high-interest credit cards.

If you have debts, your budgeting plan should also include eliminating them, systemically, based on the interest rate on each loan. (Hint: Pay down the one that costs you the most, first).

Pre “financial crisis,” budgeting was about not overspending. In light of renewed focus on the risks of living paycheck to paycheck, the advice has shifted not to living within your means, but well under them.

In her book “Money Rules,” finance expert Jean Chatzky  says anyone under the age of 35 should aim to save 10% of what they earn. Anyone older who hasn’t saved yet should strive to save 15%. If those numbers aren’t feasible, identify what you can save — even if it’s $10 a month, and start doing it automatically.

doing it automatically.

Saving strategically

Building savings is the hallmark of financial security and is important in financial literacy, and it’s important no matter how much money you make.

Though saving can be as simple as putting money in a savings account, true financial literacy is about saving strategically, and staying current on what savings tools pay you for your business, while costing you nothing.

Search current deposit interest rates on checking, savings, money market accounts and certificates of deposit using a comparative tool like Bankrate.com, and consider only accounts that don’t require an account minimum, or charge fees to access or transfer your money.

If you’re comfortable with online banking, you’ll typically find higher rates than brick and mortar institutions offer.

Although  deposit interest rates have been paltry over the past few years, the idea is to make savings systemic, and consistent. Take advantage of automatic savings plans (also called ASPs), or automatic deduction options that an employer might offer so that a portion of each paycheck goes directly into savings, without giving you the opportunity to miss it.

Understanding fees

Banks got hit hard with regulatory legislation following the 2007 financial crisis, and they’ve got to make up for lost revenue in the form of fees.

It’s estimated that banks need to recoup, on average, between $15 and $20 a month from each depositor just to earn what they did in the past, according to an analysis on checking accounts by Oliver Wyman, a financial consulting firm.

If you’re unsure whether you’re paying fees to bank or use a credit or debit card, educate yourself by examining statements and the latest terms of your accounts online. If you’re in a product that doesn’t fit your needs, be proactive and seek one that is a better fit — before you dish out hundreds of dollars on a year on pointless fees. If you can’t find one at your current institution, a credit union may be a less expensive alternative.

You may never see an actual “bill” from a financial planner and wealth adviser, but rest assured, they don’t work for nothing. However, different advisory firms have different policies. Some get commissions from trades made on your behalf, others work on a flat- fee, and others take a percentage of the value of your portfolio, in a “ “you don’t win if I don’t win” approach.

The fee you are paying will be reflected in some shape or form on statements you receive, but it may be clear as mud. If you have no idea what you’re paying a financial adviser, ask. If you feel the value of their services is worth what you’ve paid, you’ve developed a good relationship. If you don’t, move on. The beauty of being financially literate is the power to make informed decisions.

The importance of expecting the worst

You probably know you need auto, renters, and homeowners insurance, but long-term financial planning and wealth building is highly correlated to an understanding of insurance as a risk-management tool that can protect you, your family, and your wealth for the long-term.

Familiarize yourself with the major benefits and drawbacks of different kinds of insurance, like term-life, disability, and long-term care, even if it seems like they don’t impact your life today.

Steven Knudson, financial adviser at Intermountain Financial Group, says that not having adequate life insurance is a disaster waiting to happen, and that anyone in their 50s and beyond should “obtain some level of long-term care insurance to avoid the catastrophic loss of a chronic illness in later years.”

Though employers may offer some level of insurance coverage, including for death and disability, it may not be enough to cover your survivors, and/or your assets. “Even if you have a group long term disability plan at work, pick up a personal fixed income protection in a non-cancellable disability insurance plan,” Knudson says.

Savings is largely based on preparing for the unexpected, and undesirable, aspects of life, too. Henk Pieters, certified financial planner and president of Newport Beach, Calif. based Investus Financial Planning, says that regardless of income, all clients should have at least 3-6 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.

Impact of tax laws

You know that taxes take a chunk out of your paycheck but the more you understand about them, the more you can leverage taxes to your advantage and increase your financial literacy.

There are many expenses that the government allows as deductions for tax reasons, including business-related travel, entertainment, and mileage. Education costs, child-care credits, mortgage fees, and expenses related to job-hunting, relocation, or a home-based business can mean paying fewer taxes, too.

Some charitable gifts and donations, including items made to qualifying non-profits, and funds that you “gift” to relatives or loved ones, whittle your tax burden too.

If you sell assets that appreciate in value, like stocks or bonds, you’ll need to pay capital gains taxes on them, but a qualified financial adviser can help dentify the best strategies to keep the most amount of money you legally can.

Use credit for good

Credit is often blamed as a reason people struggle financially, but when used as it was originally intended, it’s one of the greatest means of financial empowerment you can access and a key to financial literacy.

Building and maintaining healthy credit habits opens opportunities to borrow from lenders who can help you to build wealth, whether you choose to start a business, buy property, or invest in your future.

David West, Founder of West Capital Advisors, Inc. Joins Intermountain Financial Group Firm

David West aligns his 30-year practice with local agency to further assist his clients with additional products and services

Salt Lake City, UT—David West, CLU, ChFC, has recently joined Intermountain Financial Group, the Utah Agency of Massachusetts Mutual Life Insurance Company (MassMutual), as a financial services professional with over 30 years of industry experience. West joined the firm to enhance his product offerings for his current and future clients.

West’s focus is working with successful physicians and dentists in developing comprehensive strategies regarding their wealth. West also works with influential clients in transition with retirement, estate planning, and business succession needs.

“Joining Intermountain Financial Group was a decision that I did not take lightly,” stated West. “My clients’ wellbeing and financial needs take precedence, and this move allows me to offer additional strength and stability to their portfolios and lives.”

West received a Bachelor of Science degree in Business and History from Montana State University at Billings, and a Masters of Business Administration (MBA) from the University of Phoenix. He has worked in the industry for over 30 years, has earned the Charter Life Underwriter designation, earned the Chartered Financial Consultant designation, and is a member of the Financial Services Professional Utah Chapter.  

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For more than 150 years, local residents and businesses rely on Intermountain Financial Group (http://www.intermountainfinancialgroup.com) to help them secure their financial futures. The company significantly impacts Utah’s economy as seen in the numbers below (as of December, 2011):

  • More than 13,800 policyholders and clients1
  • Servicing over $740 million in assets2
  • Over $3.9 billion in life insurance coverage in force3
  • Over $21 million of life insurance benefits (claims) paid4
  • More than $8 million in dividends to whole life policyholders5

 The company has been in awarded the national Sloan When Work Works award in 2012, 2011, 2010, 2009 and 2008, as well as the Work/Life Award by the Utah Department of Workforce Services in 2011, 2010, 2008 and 2007 naming them one of Utah’s best places to work. The company currently has offices in Salt Lake City, Utah and St. George, Utah.

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*Securities and investment advisory services offered through qualified registered representatives of MML Investors Services, LLC. member SIPC.  (Salt Lake City Agency – 6330 S. 3000 E., Suite 600, SLC, UT  84121 – (801) 943-6277)

 MassMutual Financial Group is a marketing name for Massachusetts Mutual Life Insurance Company (MassMutual) and its affiliated companies and sales representatives.

 Insurance offered through MassMutual and other fine companies.

 1.         An insured, owner, or payer of a MassMutual policy or contract.

2.         Includes values of MassMutual and subsidiary insurance companies’ insurance and retirement products and investment products offered through MML Investors Services, LLC, a MassMutual subsidiary.

3.         Amount of individual life insurance in force as of 12/31/11 related to products issued by Massachusetts Mutual Life Insurance Company and its subsidiaries, C.M. Life Insurance Company and MML Bay State Life Insurance Company.

4.         Amount of individual life insurance claims paid from 1/1/11 to 12/31/11 related to products issued by Massachusetts Mutual Life Insurance Company and its subsidiaries, C.M. Life Insurance Company and MML Bay State Life Insurance Company.

5.         The amount of dividends to whole life policyholders in 2011.

 

*David West is a registered representatives of, and offers securities, investment advisory, and financial planning through MML Investors Services, LLC. Member SIPC.  (Salt Lake City Agency – 6330 S. 3000 E., Suite 600, SLC, UT  84121 – (801) 943-6277)

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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.

Listen to Podcast

Steve Knudson, one of our highly respected and experienced financial advisors was interviewed on WebTalk Radio

The New Retirement – Predictable Engagement

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Last Updated on Thursday, 12 July 2012 10:01
Written by billschiffler
Monday, 16 July 2012 12:01

–>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. Sometimes predictability can lead to boredom. Spending twenty to thirty years in retirement with little or nothing to do can drive many people stir crazy. New retirees will need to be engaged in matters of personal importance. Lisa Taylor CEO of The Challenge Factory tells us how to shift into successful, meaningful and balanced ‘Legacy Careers’. Learn what questions to ask and how to structure your approach to the next phase of your life.

http://webtalkradio.net/2012/07/16/the-new-retirement-predictable-engagement/

The Ten Commandments of Selecting a Mutual Fund as a 401k Option

By Christopher Carosa, CTFA | April 4, 2012

(This is the second installment of a special three-part series)

While the four steps to a well-documented 401k investment due diligence process just fell in our laps, getting into the nitty-gritty of the first two steps – the identifying the selection and monitoring processes – might prove a tad bit morelaborious. There’s another thing about this particular portion of the due diligence process you must be warned about. It’s the part where the arguments start.

If you take any two investment advisers and ask them which specific characteristics one should focus on when selecting a mutual fund to be included among a 401k plan’s investment options, you’re likely to get vastly different answers. Fortunately, in speaking to different advisers, we’ve been able to whittle down their recommendations to very broad areas – wide enough for most advisers to swim comfortably within. So, if you’re looking for a fight, you won’t find one here.

I.        Company’s Custom Statistics – It all starts here, with specific data pertaining to the company’s demographics. This data set will produce the major criteria 401k plan sponsors – or their advisers – will later use when determining appropriate fund options. Todd Reid, General Agent for Intermountain Financial Group in Salt Lake City, Utah says this will indicate the “time horizon, liquidity, and true risk tolerance” of the plan’s investors; hence, act as a great starting point towards selecting funds. II.      Company’s Goal-Oriented Target Analysis – While company demographics are generic, it’s important to recognize that even employees of the same age may have difference return requirements. In order to best select relevant funds for the plan option, it’s critical to know the range of target returns. This will come in handy during the later performance analysis of each candidate fund. III.    Key Characteristics of the Fund – Before even getting into performance and costs, it’s important to identify a set of key differentiators you’ll review among all funds, whatever the investment objective. Boyd Wagstaff, 401k and Qualified Plan Specialist for Intermountain Financial Group, likes to focus in on the fund managers. He looks at years of tenure and style. “We want to make sure that fund or investment is true to its value,” he says. “For example, if we are looking for a large-cap value stock, we want to make sure it does not change to some other style, but that it remains consistent with its original design.” IV.     Peer Group Performance – Manny Schiffres, Executive Editor, Kiplinger’s Personal Finance in Washington, D.C. says, “We look at performance, specifically the consistency of performance. How has a fund done year by year against its peer group and an appropriate benchmark is far more important than cumulative results, which can be swayed by one outstanding year.” V.       Rolling Long-Term Performance – This approach to performance measurement is more consistent with the results of studies in behavioral finance as it dodges the dangers of short-term volatility and avoids the “snapshot-in-time” phenomenon Schiffres refers to. He says, “Analysis of the sort that says this or that fund has beaten its peers or an index over the past 1, 3, 5 and 10 years is bogus. As mentioned earlier, one outstanding (or awful) year totally distorts the numbers. Plus, because this sort of analysis can change depending on whether a fund is strong at the beginning or the end of the period, even if the results are essentially the same in either case, it is obviously a flawed approach to analyzing performance.” VI.     Generic Fund Statistics – All funds share common traits. Some of them may reveal characteristics the plan sponsor will want to shun or emphasize. Among these can include the number of holdings (addressed previously in “Overdiversification and the 401k Investor – Too Many Stocks Spoil the Portfolio”), the concentration of holdings, the fund’s size and any unique costs associated with the fund. When it comes to a fund’s size, Schiffres says “The bigger the fund, the harder it is to manage. This is especially true when the fund focuses on less-liquid investments, stuff other than big-cap stocks and Treasury bonds. When you buy in big quantities, you tend to force up the price of the security you’re buying. When you dump large quantities, you help push down the price. Neither is helpful to the manager.” Regarding costs, besides the usual expense ratio, Reid also looks at the “sales charge in relation to the fund class, and available break points purchased. The different fund fees vary by Class A, B, and C. Some classes have front-end fees, while others do not. Service fees are also a piece of the fees needing to be considered and vary by manager, and length of deferred sales charge.” VII.   Proprietary written description of Fund’s Investment Objective – These next four Commandments have one thing in common. They all rely on written documentation beyond the fund’s prospectus. While plan sponsors must read the prospectus, they must also remember the prospectus is inherently a sales tool. Getting a third party’s opinion can often help the plan elude the seemingly attractive pitch of an inappropriate fund. Sometimes this third party view comes from an adviser, sometimes it comes from a publisher. Ideally, it will be proprietary in nature, aimed at the specific needs of the plan and not for the general mass market. The first detail the 401k plan sponsor will want to see is an objective description of the fund’s investment objective. That’s the basis of each of the next three items. VIII. Proprietary written analysis of Fund’s ability to meet its objective – Did the fund meet its objective? Plan sponsors should not count on the fund to tell them. Select an unbiased party. Reid uses these sources to “review the history, performance of sector, and scrutinize any drifting that may have occurred.” He says, “It is my duty to my clients to ensure them the funds stay true to their sector and that the allocations are relevant.” IX.    Proprietary written commentary on Fund management – According to Schiffres, “the manager is the person responsible for the record.” He matter-of-factly says “past performance is not guaranteed. Expenses pretty much are baked into the cake. In other words, expenses are something you know in advance, so you want to keep them as low as possible. Of course, super-low expenses are the main justification for going with index funds. To recommend actively managed funds, you have to feel confident that you can identify managers you think are good enough to overcome their expense disadvantage.” X.      Proprietary written recommendation of relative appropriateness – When all is said and done, a plan sponsor must always ask “Is it time to replace this fund?” Here it’s vitally important to have a wide variety of choice, since any limitations may expose the plan sponsor to greater fiduciary liability. Wagstaff says, “We use a variety of sources to compare and contrast. We use third-party resources and we look for balance. We don’t want to load the platform up with one type of fund. We prefer a large number of funds to cherry pick and collect a platform for our clients that we believe is cost appropriate, diversified, and with excellent returns.”

We trust this represents a Decalogue possessing both credence and compatibility. Not only does it make sense to use, but the vast majority of plan sponsors can easily adopt each category of scrutiny.

We end this series next with a summation of the ideal 401k investment due diligence process.

Part I: 4 Easy Steps 401k Plan Sponsors Can Take to Insure a Well-Documented Investment Due Diligence Process Part II: The Ten Commandments of Selecting a Mutual Fund as a 401k Option Part III: 10 Point Checklist for the Ideal 401k Investment Due Diligence Process

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Christopher Carosa, CTFA

We won the gold bowl!

MASSMUTUAL’S INTERMOUNTAIN FINANCIAL GROUP AGENCY NAMED GOLD BOWL WINNER

General Agent Todd A. Reid, JD, CLF Recognized as Part of the 2007 Chairman’s Trophy Award

 

Salt Lake City, St. George and Provo, UT., April 3, 2008 –Massachusetts Mutual Life Insurance Company (MassMutual) announced that Intermountain Financial Group, LLC, a MassMutual general agency with locations in Salt Lake City, Provo and St. George, Utah under the leadership of General Agent, Todd A. Reid, JD, CLF, has received, for the third year in a row, the Gold Bowl in MassMutual’s Chairman’s Trophy competition. The award recognizes the Agency for superior overall performance and measures a number of areas during the previous year, including overall production, growth, agent development and capacity and persistency. This year the Agency was the sole Agency within the MassMutual system to lead in every qualifying category. MassMutual has an extensive field force of more than 4,000 agents in over 80 agencies, which are eligible for the award.

Reid attributes his Agency’s success and receipt of the award to, “our financial professionals, staff and management team who have worked very hard to provide quality products and service to our clients,” he said. “We value each and every client. The receipt of these rewards serves to show that we are continuing to not only accomplish our goals but exceed them in our community.”

For more than a century, the Intermountain Financial Group/MassMutual has provided a comprehensive offering of a diverse array of products, including life insurance, annuities, disability income insurance, long-term care insurance, retirement planning products, mutual funds, and access to money management to individuals and businesses in Utah, Idaho and parts of Montana.

 

*Securities and investment advisory services offered through qualified registered representatives of MML Investors Services, Inc. member SIPC.  (Salt Lake City Agency – 6340 S. 3000 E., Suite 500, SLC, UT  84121 – (801) 943-6277)

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MassMutual Financial Group is a marketing name for Massachusetts Mutual Life Insurance

Company (MassMutual) and its affiliated companies and sales representatives.

Insurance offered through MassMutual and other fine companies.