Archives for March 15, 2018

Auli’i Cravalho — star of Disney’s “Moana” and NBC’s new show “Rise” — is only 17, but her approach to money is savvy. The breakout star reveals she’s actually a stickler when it comes to saving.

“I hate to be that person, but I’m smart with my money,” Cravalho tells CNBC Make It.

“I’m not used to having a lot…. I grew up in really humble beginnings on a small island in the middle of the Pacific Ocean,” explains the actress, who is from Hawaii.

“I knew that if my mom brought home white bread, we were like, in it big. We were going to be okay for the next month,” she says.

Now her bank account has changed but her priorities haven’t. “I mean, it’s crazy now to come to this industry and to have excess,” she adds. “I’m not used it, so I’m saving every penny, and also looking for philanthropic causes, because I can’t give in the way I have been given, but I can certainly try.”

While Cravalho’s career has already hit high notes — she took the stage at the 2017 Academy Awards, belting out the hit song “How Far I’ll Go” and won fans over as the voice of Disney’s first Polynesian “princess” — she reveals another refreshingly relatable reason she’s so keen on saving: She’s college-bound.

“I have not treated myself with any of my paychecks at all,” Cravalho tells CNBC Make It. “I’m still in high school, so thinking about college, putting that away.”

For other university-bound young people, Cravalho suggests setting up a savings account that you don’t touch until you turn 18.

“Use your money wisely,” she says. “We can say it doesn’t grow on trees, and it’s true. Know that you’ve worked for every cent you’ve put in, and be proud of that work.”

Indeed, when saving for something big, experts recommend having a set amount of money automatically deducted from your bank account and sent to your savings account. “Do it on the same day you get paid. You’ll never even see that money and it’s a really easy way to make sure you stay consistent with your savings,” Katharine Perry, financial consultant at Fort Pitt Capital Group, previously told CNBC Make It.

As for where Cravalho will go to school, she’s looking at colleges in California and New York because they are the busiest coasts for acting work.

“Growing up in Hawaii I thought, ‘Well, somewhere in the mainland, somewhere where I can make it big and get a really good education. Now I’m looking at NYU, I’m looking at Julliard because, well, Julliard is Julliard,” she says of the famous music and arts school in Manhattan.

Adds Cravalho, “I’m realizing college applications are kind of sucky. They’re really hard. But I know they’re well worth it.”

This failure is the nation’s biggest single financial regret and younger generations are on course to repeat the mistake.

Putting money aside for the future is never easy, but as inflation hits 3 per cent a year while wages lag behind at just 2.5 per cent, it is getting harder all the time.

Savers have also been punished by years of record low savings rates, with the average easy access account paying just 0.49 per cent, rising to 0.79 per cent on cash Isas, according to MoneyFacts.co.uk.

Every adult can save up to £20,000 in an Isa before April 5, plus another £4,128 for children or grandchildren through a Junior Isa, with all returns free of income tax and capital gains tax

You can also save in a personal pension and claim tax relief on your contributions.

Even if you can only afford to save small amounts, doing something is better than doing nothing at all.

Delaying saving is the nation’s single biggest financial regret, with just over half of all working people wishing they had started earlier and put away more, according to new research from insurer Aegon.

Pensions director Steven Cameron said with the state pension unlikely to provide an adequate income people need to save early and often: “Join your workplace pension or save into a personal pension if self-employed and make sure you are paying in enough.”

Think twice before taking advantage of pension freedoms to start cashing in your pot from age 55.

Cameron added: “If you access your pension pot too early it may not be there when you really need it.”

With the average retiree spending £208 a week but the basic state pension just £122.30, savers need to plug a deficit of £85 per week, or £340 a month.

Figures from charity Age Partnership show one in four retirees is struggling to do that and more than one in three underestimated how much money they needed to live comfortably in retirement.

As a part of Global Money Week 2018, experts are calling on the older generation to encourage younger family members to save.

That task has been made harder by the Bank of England’s decision to hold interest rates near zero for nine years, destroying the incentive to save and fuelling a house price boom.

Banks and building societies are also part of the problem. Three years ago City watchdog the Financial Conduct Authority said banks have failed to remedy the flaws it found in the savings market in 2015, when the average rate on a closed branch-based account was just 0.1 per cent.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said very little has changed: “Savers who do not switch get far less in interest than those who do. Savers must shop around for better rates.”

Nationwide Building Society offers a best buy easy access cash Isa at 1.30 per cent on £1 and above, while Charter savings Bank pays 2.25 per cent on £1,000 fixed for five years.

It is not all doom and gloom: savings rates are creeping up and the workplace auto-enrolment scheme has given eight million mostly lower paid workers a workplace pension for the first time.

Stock markets, too, have risen strongly since 2009 to reward those willing to take a risk with their money.

The Isa season is upon us so do not waste this latest opportunity to boost your savings pot.

The month of March is dedicated to eating your fruits and vegetables. Becky Holcomb, a dietitian at Mercy in Springfield, explained why this year’s theme is “Go Further with Food. “No matter who you are, or what you’re involved in, or what your health status is, food is going to make a difference,” said Holcomb. “Finding that right fit for you, what the right food choices are for you, it’s going to help you go further in life.”

That includes people on a tight budget. The Academy of Nutrition and Dietetics website gives tips to help you save a couple dollars. Those tips include planning around sales, making a shopping list, shopping for seasonal produce, and reducing food waste.

Holcomb also said it’s especially important to understand that everyone’s nutrition needs are different, even within the same family. She said some people will need to eat more or less to maintain a healthy weight, while others will require specific nutrients being increased or decreased.

“It really is about that overall balanced diet approach,” said Holcomb. “What you do in the long term is going to matter more than what you do in the next three months to loose weight.”

Holcomb said that “balanced diet” also includes the occasional dessert. “We definitely promote a balanced diet so that does include desserts, so that does include a slice of pie every so often,” said Holcomb. March 14 also happens to be Pi Day, as in the mathematical number. Holcomb said if you find yourself want pie more often, there are several ways to make it healthier. She said people can change out ingredients and bump up the fiber or nutritional content in recipes. She also described how pie fillings aren’t that unhealthy. “It’s a good opportunity to get some fruit in if you’re doing that fruit pie or if you’re doing a savory pie get some vegetables in.”

Half of Americans aren’t on track to generate enough income to cover essential expenses in retirement, according to a recent survey by Fidelity Investments.

Of course, that means that the other half is mostly on track. The question is, do know whether you’re on the right side of this 50-50 divide?

Before you answer, check out the following four red flags, each of which could be a sign that you need to review your retirement planning right now.

You may need to reboot your retirement strategy if…

1. You have less saved than you should given your age.

One way to get a quick sense of whether you’re actually saving sufficient is to go to Fidelity’s Get Your Retirement Savings Factors, a tool helps you estimate how many multiples of your current annual salary you should have saved in retirement accounts at various ages, depending on the age at which you plan to retire and the type of lifestyle you envision.

For example, if you’re 35 and hope to retire at 65 and maintain your current lifestyle, the tool estimates that you should have two times your salary saved at 35, seven times your pay by the time you reach age 50, and 12 times at 65.

If you find after going through this process that your nest egg is much smaller than it ought to be, you know that at the very least you’ll need to ramp up your savings rate. And if you’re late in your career and seriously lacking in savings, you may also have to re-think your planned job-exit date.

2. You lack a coherent investing strategy.

Here’s one way to tell if you have a sensible investing strategy: If you start moving money in and out of stocks depending on whether you think the market is ready to surge or go into a tailspin (both have seemed like possibilities the past few weeks), you don’t have a disciplined approach to investing.

You’re winging it.

The foundation of a sound retirement investing strategy is setting a diversified mix of stocks and bonds that’s aggressive enough to generate returns that can grow your portfolio during your career and help maintain its purchasing power during retirement — yet conservative enough so you won’t bail out of stocks every time the market heads south.

In short, you want a portfolio you’ll be comfortable sticking with regardless of what’s going on in the financial markets.

To get an idea of what blend of stocks and bonds might be right for you, check out Vanguard’s free risk tolerance-asset allocation questionnaire. After you answer 11 questions designed to gauge how you might react to market setbacks and when you’ll need to start tapping your investments for income, the tool will recommend a mix of stocks and let you see how that mix as well as others more conservative and aggressive have performed in the past under different market conditions.

Once you’ve settled on a stock/bond allocation that you feel provides the right balance of risk and return, you should largely stick to it, except to rebalance periodically and perhaps gradually shift to a more conservative mix as you near and enter retirement.

3. You underestimate how much time you’ll spend in retirement.

Underestimating the number of years you may end up living in retirement can wreak havoc with your plan.

If, for example, you figure you need to save enough for only 20 years of retirement and you end up living 30 years after calling it a career (which is likely for a great many people), you’ll probably enter retirement with a smaller savings stash than you’ll need.

Whatever size nest egg you enter retirement with, you’ll run the risk of spending it too quickly if you misjudge how long it might actually have to support you.

So how can you plan realistically for retirement given that you don’t know exactly how long you’ll live? Well, you can at least get a more nuanced sense of how long you might around by going to the Actuaries Longevity Illustrator, a tool created by the American Academy of Actuaries and the Society of Actuaries.

You enter your age and sex, select smoker or non-smoker, and indicate whether your health is poor, average or excellent, and the tool will calculate your chances of living to specific ages (75, 80, 90, etc.) or for a given number of years (15, 20, 30, etc.).

We’re talking estimates here based on mortality data of the U.S. population from the Social Security Administration, not iron-clad guarantees.

But with a decent idea of your probability of living to various ages, you should be better able to gauge how much you’ll need to save during your career how many years you may be depending on your nest egg to support you.

4. You don’t have a plan for generating reliable retirement income.

Creating a strategy for getting the income you’ll need from Social Security, any pensions, and your savings is something you probably don’t need to focus on seriously until you’re in the home stretch to retirement, say, 10 or so years before leaving the workforce.

But it’s a task that requires your full attention, as getting it wrong could relegate you to a less secure and enjoyable retirement.

Start by deciding when to start collecting Social Security benefits.

Generally, you’re better off doing so later rather than sooner, as your benefit rises by roughly 7% to 8% for each year you delay between age 62 and 70 (after which you receive no increase for waiting). However, the strategy that’s right for you can depend on such factors as your health and what other resources you can tap for retirement income.

If you’re married, you and your spouse may also be able to boost the amount you receive over your lifetimes by coordinating when each of you takes benefits. Since poor claiming decisions and other mistakes can potentially cost you tens of thousands of dollars, you may want to consult a professional or an online Social Security service for help.

Next, you’ll want to settle on a reasonable withdrawal rate for pulling money from your nest egg to supplement Social Security — that is, a rate that’s not so high it’s likely to deplete your assets too quickly, nor so low that you end up sitting on a big pile of cash in your dotage, along with regrets you didn’t spent more freely earlier on.

Finally, you may want to consider whether it makes sense to devote a portion of your savings to buy more guaranteed income than Social Security alone will provide.

The important thing, though, is it have a retirement income plan ready to go well before you leave the workforce. Otherwise, you could find out too late that you won’t have sufficient income to lead the post-career lifestyle you envisioned after all.