BCR Finance Matters 011621

Finance Matters

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Are you optimistic about your financial future in 2021?

See FINANCIAL FUTURES on page two

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FINANCIAL FUTURES

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PUTTING 2020 IN THE REARVIEW To help build a better financial future, consider these three things you can do to move forward:

Study:

 Begin with a budget • Of those who said they were in a ‘better’ financial situation this year compared to last, more than one in five attributed the success to budgeting better. With so many online tools to make tracking your spending and savings easier, including Fidelity’s Budget Checkup, there are simple ways to create and stick to a budget aligned with a ‘50-15-5’ guideline.

Shaw Media/ January 2021

Most Americans say they’re optimistic about a brighter financial future in 2021

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 Replenish that rainy-day fund • More than 8 in 10 Americans say they’ll build up their emergency savings in 2021, an important money move considering that many may have tapped into their stash of cash due to financial setbacks in 2020.

 Find new sources of income • Nearly two-thirds say they plan to find new ways to make money in the new year, whether with a side hustle, selling items online or getting a part-time job. And with 30% of Americans planning to ‘declutter’ their homes in 2021, there’s a good opportunity to find more than just loose change in those cushions and closets.

To get more tips for making and keeping your financial resolutions, visit Fidelity.com.

s we enter 2021, here’s one more essential item to put on your list in addition to canned goods and masks: a financial checkup. According to Fidelity Investments’ 2021 New Year Financial Resolutions Study, more than two-thirds of Americans experienced financial setbacks in 2020, often from the loss of a job or household income or another emergency expense. Even those lucky enough to maintain their income still may have had to tap savings to help others, as nearly one in five attribute their financial setback to providing “unexpected financial assistance to family members or friends.” Despite this, many Americans remain optimistic and determined to make their money work harder in the New Year, with 72% confident they’ll be in a better financial position in 2021.

oversight for Life Event Planning at Fidelity Investments. “This year’s top financial resolutions are consistent with what we’ve seen in the past, however, what makes 2021 unique is how people will achieve them, given the financial pressures and major life events many continue to experience throughout the pandemic.”

“Americans are clearly ready to leave 2020 behind and start 2021 off on the right foot, including when it comes to their finances,” said Stacey Watson, senior vice president with

“Younger generations are building up their careers, families and finances, so it makes sense they have important financial resolutions to make. Still, Gen-X-ers and Boomers also experi-

This year, 65% of Americans are considering a financial resolution for 2021, which is down marginally from last year (67%), but still quite strong given the headwinds experienced by so many families. Younger generations appear to be more committed to actively improving their finances in the new year, with 78% of all Gen Z and Millennial respondents considering a financial resolution compared to 59% of all Gen X and Boomers.

enced significant financial challenges in 2020 and may want to consider making some resolutions of their own to build a stronger financial future particularly when it comes to retirement readiness,” continued Watson.

MAKING A RESOLUTION, AND CHECKING IT TWICE Resolutions are an important start, but the key is to keep good financial routines going strong well beyond January - and ultimately have them become life-long habits. The study reveals the key to a successful resolution is the good feeling of making progress and setting clear and specific financial goals. Having someone to help keep you on track and hold you accountable also plays a role, as nearly one-infive indicated this was a major reason they were able to stick to a financial resolution last year. In fact, more than three-quarters (77%) of people working with a financial professional were able to stick to their financial resolution in 2020, compared to just half (50%) of those who did not work with one.

This study presents the findings of a national online survey, consisting of 3,011 adults, 18 years of age and older.

The generations are defined as: Baby Boomers (ages 56-74), Gen X (ages 4055), millennials (ages24-39), and Gen Z (ages 18-23; although this generation has a wider range, we only surveyed adults for the purposes of this survey).

Interviewing for this CARAVAN® Survey was conducted October 14-21, 2020 by Engine Insights, which is not affiliated with Fidelity Investments.

The results of this survey may not be representative of all adults meeting the same criteria as those surveyed for this study. Margin of error is +/- 1.79% at the 95% confidence level. Smaller subgroups will have larger error margins.

Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917 © 2021 FMR LLC. All rights reserved.

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FINANCIAL PLANNING

3 FINANCE MATTERS | Shaw Media/ January 2021

Money moves to kick off (BPT) - Just imagine: Holiday shopping is behind you, the eggnog has officially worn off and the seasonal coffee drinks have lost their allure. A new year is beginning and it’s time to prepare.

“As you gear up for a new year, it’s important to take a hard look at your finances, and decide what financial habits you should carry into 2021 and which ones you need to kick to the curb,” stated Navy Federal Credit Union’s Senior Vice President of Savings Products Jaspreet Chawla.

DON’T IGNORE YOUR DEBT. Tackling debt can be intimidating, but also can’t be ignored. Make a game plan to strengthen your financial situation and get yourself back on track. For example, set a deadline for yourself and figure out exactly how much money you can put toward your debt on a regular basis to meet that deadline.

If you have more than one credit card or other loans, you may be able to consolidate those debts into one payment at a lower interest rate. This helps simplify everything by giving you one payment each month instead of multiple payments and due dates. Talk to your trusted financial institution to see what options are available to you.

KEEP YOUR EMERGENCY FUND TOP-OF-MIND. You don’t want to be left scrambling if your car breaks down or basement floods, or worse, if you lose your job.

And COVID-19 has taught us how important it is to be prepared for the unexpected. It can be daunting to know where to begin, especially if you don’t have a fund to cover emergencies yet.

First, start small. Try putting a set amount each month into a savings account specifically for emergencies and make transfers into this account

automatic. If you already have an emergency fund, consider increasing your contributions or exploring other tools to diversify your savings portfolio. In the event you need to tap into your emergency fund, it’s important to focus on rebuilding it as soon as you can.

DIFFERENTIATE “NEEDS” FROM “WANTS” IN YOUR BUDGET. It’s a good idea to identify “needs” versus “wants” to eliminate unnecessary expenses. Do you have to have the extra streaming service or biweekly manicure? Or what about fre-

quent take-out meals or the daily trip to your favorite coffee shop? A few simple, mindful lifestyle changes now can make your dollar go a lot farther in the long run. You might be surprised how much of a difference it’ll make.

like mobile apps to help support your short-term and long-term financial wellness.

“We work to provide our members with the tools to improve their financial circumstances every day and we’re always here to help,” continued TAKE ADVANTAGE OF A MIX OF Chawla. “Changing just a few habits SAVINGS TOOLS. Your future self will thank you! can really make a positive impact on From basic savings accounts to cer- your financial future.” tificates to money market accounts Overall, these tips can help pave and beyond, you have many options to make your money really work for the way for a more financially fit year you. Also explore digital savings tools ahead.

TAXES

Tax season 2020 will look different:

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Here’s how to prepare

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Shaw Media/ January 2021

t’s no secret that 2020 has been a tumultuous year. Due to the COVID-19 pandemic, many Americans found themselves out of work - at least temporarily and received unemployment benefits. Others may have experienced employment changes, like working from home or taking on multiple jobs. All of these factors will have even more of an impact come time to file income taxes on tax day, April 15, 2021. “For many, the 2020 tax season will likely look different,� says Mark Steber, Chief Tax Information Officer at Jackson Hewitt Tax Services. “The pandemic brought unexpected, overwhelming changes.�

To help you prepare and get the maximum tax refund you deserve, Steber offers the following tax tips.

1. UNDERSTAND HOW UNEMPLOYMENT BENEFITS WORK If you received unemployment benefits this year, it may have been for the first time. Make sure you’re aware of how they affect your taxes.

Unemployment benefits are taxable and must be reported to the IRS on your tax return. Taxable benefits also include any special compensation authorized under the Coronavirus Aid, Relief, and Economic Security (CARES) Act earlier this year. That means if you did not withhold enough taxes from your unemployment benefits, you could See TAXES, Page five

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Notice 1444 you received with your stimulus check for your 2020 tax records. Collect your charitable contribution totals, mortgage interest, property taxes you’ve paid, and any additional state and local income taxes paid for the year. If you were furloughed and able to pick up a temporary job, gather your W-2s for each job you worked. If you worked a side gig, make sure to keep a record of your income, the miles you drove,

and any additional expenses. And if you’re not filing single, be on the lookout for family members that may have been impacted to make your tax return more complicated.

No matter your 2020 situation, follow these tips to prepare for any unexpected tax implications. For more information and help during the 2020 tax season, visit jacksonhewitt.com.

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TAXES

you made this year and locate any receipts. Whether itemizing or taking the standard deduction, under the FROM PAGE 4 CARES Act, all taxpayers are eligible see a big tax bill or a much smaller to deduct up to $300 worth of montax refund than you normally receive. etary donations to qualified organizations.

Unemployment benefits can affect tax credits. Unemployment is considAnd while many Americans have ered unearned income, so it won’t been working at home for months, count toward certain credits. For ex- a home office deduction is not guarample, you must have earned income anteed. The home office deduction to qualify for the Child Tax Credit or is only available to those who are the Earned Income Tax Credit. Addi- self-employed. tionally, your adjusted gross income must be below certain levels to get 4. CONSIDER MAJOR LIFE CHANGES certain credits.

Life goes on, even during a pandemic, and life changes can bring size2. SET MONEY ASIDE TO COVER able tax implications. Some changes UNEXPECTED TAXES that cause the biggest impact include If you received unemployment ben- getting married or divorced, having a efits and did not withhold any federal baby or adopting a child, buying or or state income tax, you’ll need to selling property, retiring, or starting pay tax on that money. To prepare, a business. If you experienced any of consider setting money aside now to these events in 2020, know that your cover those taxes on your 2020 return return will look different. and brace yourself for a much smaller refund or no refund at all this tax sea- 5. KEEP TRACK OF IMPORTANT son.

DOCUMENTS Even if your taxes won’t be af3. TAKE ADVANTAGE OF POSSIBLE fected by unemployment, make sure DEDUCTIONS you gather all your documents, such Every taxpayer will get a charitable as W-2 forms and 1099s for interest donation deduction for 2020. Make dividends and even retirement disa list of any IRS-approved donations tributions. Remember to include the

Shaw Media/ January 2021

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INSURANCE

Ensure your financial stability with insurance

(BPT) - Finances are consistently a top concern for many Americans, with “saving money” a top-10 most common New Year’s resolution. This year, Americans are more concerned than ever before due to the uncertainty created by the COVID-19 pandemic.

USE Credit Union reported that more than 75% of non-transactional calls received since the start of the pandemic were from members concerned about their financial future, citing economic hardship as the primary reason for concern. The economy and job market remain in a state of constant flux, which is causing many families to worry about their ability to pay an unexpected bill, continue to pay off student loans, mortgages or credit card debt, or save money for the future.

“Saving money is more than just putting spare change into a coffee can, or simply ordering takeout less often,” said Jeff Schroeder, vice president and chief product officer at Mercury Insurance. “Sure, those things can add up over time, but people may find that their greatest savings can come from taking a look at the necessary expenses they pay for every month, such as insurance.”

Schroeder recommends these four tips to help protect your finances in the coming year:

 Check your auto insurance cover- good idea to check in with your insurages. There’s no reason to pay for more ance agent each year to ensure you coverage than you need, but being have adequate coverage, especially underinsured can leave you exposed. if you’ve made renovations, own col“The cost of repairs after a collision lectible or valuable items, or live in an has grown in recent years, both as a area that’s prone to flooding or earthresult of more crossovers and SUVs on quakes, as standard homeowners inthe road, and more technologically ad- surance policies typically don’t cover these situations. vanced vehicles,” Also, maintain a said Schroeder. home inventory “Beyond paying for make sure to more expensive reThe most effective way to to have an accurate pairs if your insurrecord of your ance doesn’t cover make sure your finances belongings and it, if you’re underinsured, you may are minimally impacted by property. also be responsible  Be aware of for paying out of insurance costs in 2021 is pocket for medical potential gaps in bills, which could to speak to an independent coverage. A stanpotentially devdard homeowninsurance agent. astate savings for ers insurance a down payment policy often on a house, your doesn’t cover mechild’s college tuichanical failures tion or a future vato your home’s cation. It’s vitally important to make appliances, HVAC or other essential sure you have the right amount of auto systems, nor does it cover a break to insurance coverage to protect against service lines on your property that unforeseen events.” supply your home with electricity, gas or sewer functions. In either of these  Know what your homeowners scenarios, this means you would be reinsurance covers. First and foremost, sponsible for writing a big check to a be sure to read your homeowners in- repair company or having to purchase surance policy so you’re clear about a pricey replacement. However, addwhat it does and doesn’t cover. It’s a ing home systems protection and ser-

vice line protection endorsements can help provide coverage for costly repairs and replacements, saving money and your peace of mind. Pennies spent now can save you thousands of dollars later.

 Regularly shop for the best coverage and price. Insurance prices can vary significantly from company to company, so it’s a good idea to take a few minutes to see if you’re getting a good deal. Shop around at least once a year - making sure to look for the exact same coverage limits - to see if you can find a more affordable rate.

“Often, regional insurers like Mercury Insurance are more attuned to their policyholders’ needs and can offer better rates,” Schroeder added.

“For example, the California Department of Insurance found that Mercury auto insurance policyholders save an average of $670, which can go a long way in feeling more secure in your savings.”

The most effective way to make sure your finances are minimally impacted by insurance costs in 2021 is to speak to an independent insurance agent.

They can help make sure you have the proper amount and type of coverage to keep yourself, your family and property protected.

FINANCIAL PLANNING

“Financial planning” is an umbrella term that can be applied to various aspects of money management. Many people associate financial planning with retirement. However, effective financial planning can help people confront today’s challenges just as much as it can help them prepare for their golden years.

The pandemic that spread across the globe throughout 2020 posed numerous challenges, including a recession sparked by widespread job loss and declines in economic activity. The U.S. Bureau of Labor Statistics noted that the unemployment rate in the United States exceeded 10 percent in July 2020, while Statistics Canada reported the Canadian unemployment rate was just under 11 percent in that same month. While each country has since witnessed declines in their respective unemployment rates, tens of millions of workers in both nations remain out of work.

The sudden rise in unemployment and decline in global economic activity underscores the need to plan for recessions, even during those times when economies are thriving. Taking steps to recession-proof your finances is an important component of financial planning that can help people overcome the stress of living during a downturn.  Build up your savings. A recent poll from the Kaiser Family Foundation found that 45 percent of adults said their mental health had been negatively affected due to stress related to the virus. That poll was conducted in March, shortly after lockdown measures were instituted and the term “social distancing” entered the North American lexicon. As the pandemic wore on through the summer, fall and into the winter, stress remained a big concern for many people. Much of that stress stemmed from the economy, but one way to ease that stress is

20%

SAVINGS

30% to have a substantial amount of money in savings. Each person’s financial needs are different, but many planners recommend clients have at least six months’ worth of expenses in their savings as a cushion to help them get through job loss.  Pay down debt. Debt, particularly high-interest debt, can compromise your ability to save. A 2019 survey from Bankrate.com found that 13 percent of Americans admitted that debt was preventing them from saving more money. Pay down debt like credit cards and only make credit card purchases if you have the money to pay the bill in full when it’s due.  Avoid overspending. Many financial planners recommend a 50-30-20 approach to money management.

Such an approach advises people to devote 50 percent of their earnings to needs, 30 percent to their wants and 20 percent to savings. Spending more than 30 percent on wants can make it difficult to build up a savings account to levels that can protect you in the event of a recession.  Expect the unexpected. The American economy was doing historically well as recently as January, only to have the bottom fall out during the pandemic. If you want to recession-proof your finances, do not take your foot off the gas in regard to insulating yourself from the next recession.

No matter how strongly the economy is performing, continue to expect the unexpected and prioritize saving so you have a soft landing awaiting you should the economy again take a sudden turn for the worse.

The timing of recessions is unpredictable, but they are inevitable. Effective financial planning can help anyone overcome the challenges posed by economic downturns. MM20C488

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Strategies to recession-proof your finances

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Shaw Media/ January 2021

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Reaching your goals Whatever goals are on your horizon, we can offer products and services that can help you work towards achieving them. Together, we can make sure your plan is keeping pace with your changing lifestyle, and can work to help you protect what matters most. We may even find ways for you to save more money.

Call today to get started!

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