The Million Dollar Question

By Nicole N. Middendorf, CDFA

How much money will you need to retire? One million dollars? Five million dollars? In The Million Dollar Question, author and financial advisor Nicole N. Middendorf provides the answers to real-life money questions about everything from retirement to college loans and estate planning.

Geared toward all ages and all financial situations, this guide jumpstarts your financial knowledge in an easy-to-understand way. It offers discussions of:

the basics of making better financial choices
marriage, divorce, and everything in between
teaching healthy money habits to kids
understanding the basics of investing
business ownership
retirement and beyond
manage your future by helping to preserve your assets.

The Million Dollar Question shows you how to prevent the most common money mistakes while at the same time creating a plan aimed at helping you get through each money stage of life. It helps you enjoy today and prepares you to take control of your financial future.

• Language: English
• Publisher: Lulu Publishing Services
• Release date: Aug 12, 2016
• ISBN: 9781483452340

Book preview

CDFA

Copyright © 2016 Living Financially Well Media.

All rights reserved. No part of this book may be reproduced, stored, or transmitted by any means—whether auditory, graphic, mechanical, or electronic—without written permission of both publisher and author, except in the case of brief excerpts used in critical articles and reviews. Unauthorized reproduction of any part of this work is illegal and is punishable by law.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your Financial Advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

ISBN: 978-1-4834-5235-7 (sc)

ISBN: 978-1-4834-5234-0 (e)

Library of Congress Control Number: 2016907992

Because of the dynamic nature of the Internet, any web addresses or links contained in this book may have changed since publication and may no longer be valid. The views expressed in this work are solely those of the author and do not necessarily reflect the views of the publisher, and the publisher hereby disclaims any responsibility for them.

Any people depicted in stock imagery provided by Thinkstock are models, and such images are being used for illustrative purposes only.

Certain stock imagery © Thinkstock.

Lulu Publishing Services rev. date: 7/8/2016

CONTENTS

Acknowledgements

Introduction

Chapter 1 A Beginning Guide to Better Financial Choices

Chapter 2 Marriage, Divorce and Everything In-Between

Chapter 3 Teaching Healthy Money Habits to Kids

Chapter 4 Understanding the Basics of Investing

Chapter 5 Business Ownership

Chapter 6 Retirement and Beyond

Chapter 7 Securing Your Future: Protecting Your Assets

Budget Worksheet

Divorce Checklist

Financial Assessment

About the Author

ACKNOWLEDGEMENTS

First, I want to thank you for taking the time to learn more about your money and your future. After all, knowledge is power. I’m sincerely proud you took the first step of understanding your finances and making the commitment to yourself that your future will be fiscally responsible.

I want to thank my amazing children as they are my truest inspirations. Parker and Gabrielle, you make me laugh and I relish in your love. I am the most proud of being your mother and enjoy every second laughing and learning with you. I love teaching you about the importance of money and how to live in accordance with our values.

Thank you to my Mom and Dad who raised me with such great morals and values. You have given me a great foundation and helped me to make me who I am today.

Thank you to our awesome team at Prosperwell Financial and everyone I get to work with on a daily basis. I am very proud of the people I work with, from our amazing marketing department to our Wealth Advisors and our Client Service Center. We really all put our clients first.

Thank you to our clients. Working with you to help you pursue your goals and dreams is such a treat!

Nicole

Securities offered through LPL Financial. Member FINRA/SIPC.

INTRODUCTION

The purpose of life, after all, is to live it, to taste experience to the utmost to reach out eagerly and without fear for newer or richer experience

– Eleanor Roosevelt

You’ve just done something many others would not have even attempted: You picked up a book about money. This is the beginning of a journey that I know will help you to grow financially and emotionally. After all, when you’re financially prepared, amazing things happen! By taking financial control of your future, you’ll inspire your friends and family to do the same. While you read this book- share what you’ve learned with those around you. My goal is to ignite change: Let’s all become more financially-literate and well-prepared for our retirement.

The ever-elusive million dollar question is one I’m asked often. There’s a myth around investing for retirement and that thought is, You need a million dollars to retire. For some cases, this may be true. But real financial planning- the kind we do with our clients, is much more personal. A single number can’t encompass what they need or who they are. The amount one needs to retire is going to vary from person to person. For one, a million might be enough, for another – not even close. Investing for your future is not just one number. How do you know if a million or 4 million is enough? You need to look at your situation today and what your life is going to be like in retirement to determine the amount you will need to be able to have that lifestyle you are planning on having. You also need to take into account estate planning and making sure you have all your needs met for yourself and your beneficiaries so that you can enjoy your life today and that plan will allow you to enjoy your life in the future.

This book comes from many years as a Financial Advisor fielding questions from seminars, social media, radio, television, magazines, and our clients at Prosperwell Financial. My goal is to get you excited about money! As you read through the questions in this book, you’ll realize that money in itself is not that complicated; it is we, as individuals, who make it complicated. And we’ll make one promise moving forward: There is no question about money that is not worth asking. Every question matters and every answer helps you get closer to your goal.

Each chapter in this book begins with a brief introduction, followed by a format that focuses on questions and answers. This will allow you to zero-in on the issues and questions that apply to your life, as its happening- right now!

To learn, you don’t have to know the right questions, you just need to ask the question that comes to your mind. You do need to be in the right frame-of-mind. Having the desire to learn and being willing to accept what you may not know. Today is your day to realize something very, very, important: We all learn best by living and doing. That also means of course, that we learn by making mistakes. My ultimate goal is that the questions and answers in this book will help reduce your mistakes and speed up your path to financial independence. It CAN happen- I’ve seen it firsthand with our clients and those who we help, every day.

Each of us changes constantly in life. 25 years ago, I was a completely different individual. I never thought I’d be writing a book about money- or frankly that I’d work as a Financial Advisor. I found my passion by being introduced to the financial sector and have never looked back. One of the most profound realizations I came across my first few years as a Financial Advisor was, most people don’t want to even TALK about money. I realized none of us should ever leave our finances to someone else. We need to learn the answers to our questions so we too, can achieve financial independence.

I’ve laid out this edition of my Questions and Answers into life-stages, allowing you to more easily flip to each section or page. Sometimes, moving in comes before marriage, (and children too!) Flip to the relevant chapters that speak to you, but don’t forget to read through the rest. I recommend starting at the beginning and reading through to the end. Many of our clients came to us later in life and wished they had come earlier. One thing is for sure: each individual was on a different track and they needed professional guidance and empowerment.

This book is very important for another reason: So many of us don’t live life to the fullest and forget to plan for what’s to come.

Most importantly, this book is for YOU. It’s for any and every individual, male or female, teen or adult who has a burning question, a budding curiosity or a newly-found desire to learn more about the world of money and finances. Here’s to your future, I’m so proud to be able to walk you through the basics of financial planning and investments. Remember, it’s not about money. It is about enjoying life today and saving money so you can enjoy your life in the future as well.

Best Wishes,

Nicole N. Middendorf, CDFA

Prosperwell Financial CEO

LPL Financial Advisor

www.prosperwell.com

CHAPTER ONE

A Beginning Guide to Better Financial Choices

Financial security and independence are like a three-legged stool resting on savings, insurance and investments.

– Brian Tracy

Congratulations on making it to the first chapter. I know you’re not regretting learning about your finances, because you’re still here … and that says something! This chapter focuses all about the NEW. Whether it’s a new home, car, credit card, your first credit score or sticky situations that might need some extra help, these next few pages will attempt to guide you through to a more secure financial future.

One of the most important ideas about money I want you to take away is this: Money is simply a vehicle and you have the power to choose what kind of car you drive. Will you be in a shiny red convertible, racing to the finish line? Perhaps you’ll drive an eco-friendly electronic car, saving the larger payment for your retirement. Either way: Remember, that you have the power and you’re behind the wheel!

Every morning when you wake up, you have the choice to be in a good mood or a bad mood. When it comes to your money you also have a choice. Every time you choose to spend money, you are, by default, choosing not to spend, save, or invest your money in something else.

The truth is this … It all comes down to a question only you can answer: Do you choose to save to buy things you want or do you choose to buy the things today and end up paying more for them by using credit cards?

You can choose today to run your money and your life, not the other way around. That process begins with thinking about your money, and thinking about money begins with setting a budget – or at least taking control of your money. Yes, budgeting is a dreaded word. And it can seem difficult because often what you spend varies from month to month; sometimes even the money you have coming in is different from month to month. Obstacles happen to every one of us. Don’t let them stop you from shaping your future to be financially solvent. So, let’s talk money!

Don’t Forget: A budget is a work in progress and can change from year to year. Some expenses may go up from year to year such as the cost of electricity or gas. Make sure to take this into account and review your budget yearly, if not every 6 months.

The Credit Score: What you should know

Q: What makes up your credit score?

A: I’ll never forget the first time I received a bad grade in school. For most of us, we can remember the exact moment we feared to tell our parents about a bad grade we received. Some of our clients have experienced the embarrassment or pain of a poor credit report score. I’ve seen the first-hand damage it can cause. However, just like that all night cram session from the 10th grade, your credit score also needs improvement. (This time though, you’ll likely skip the Doritos and college radio station.)

Remember that your credit score is like a report card, with a grade on how responsible you are with your money. The credit score number is made up of how much your income is compared to what you owe, your history of making payments on time and using credit, and how much debt you have. Did you know that your credit score follows your Social Security number? That’s why it’s so important you keep your identity safe and secure. If you are married, your relationship means you have joint liabilities with your spouse. A mortgage with both your names, can affect your credit score- like anything else! Be careful who you marry. Are they worth it?

Q: What is a good credit score?

A: If only credit scores were shared like Facebook updates, maybe then the worry and the anxiety over credit would end! While we’re all a bit secretive, here’s what you need to know about credit scores. First, they generally range from 500 to 850. The higher your score, the better your credit, and the better the rate you’ll get the next time you take out a loan. Your score is important! Make sure your information is up to date and valid by checking your credit every 6 months, or at least once a year.

Q: Where do I get a free copy of my credit report?

A: The only free website where you can get a free copy of your credit report is www.annualcreditreport.com. Don’t rely on an Internet search as many sites state they are free but actually they are actually charging you. Some of these companies might even leave information out, or give you incorrect information that’s not to your benefit. The site I listed does not give you your credit score free of charge. You should run your credit report at least once a year to stay on top of your credit. Looking for errors and make sure that your credit stays at a high level. Want to learn how to pull your credit like a rockstar?

Maybe you know, or maybe you don’t … but there are three credit bureaus: Equifax, Experian, and TransUnion. Each one of the bureaus will give you a free report every year through the website, www.annualcreditreport.com. Think of it this way, every few months you can go to this website and get a copy for free. For example, today you can go to Experian’s site. Then, three to four months from now you go to the same website and pull the one from TransUnion. A few months later you can pull the one for free once a year from Equifax and so on. This way, you’re staying on top of your credit from all of the three companies each year. You’re protecting your financial identify and being a good steward with your money. In other words: You’re a credit rockstar!

Q: How quickly can my credit score improve and what can I do to improve it?

A: Generally, it takes at least six to twelve months to start to improve your credit score. You can help your credit score by getting a credit card, charging a small amount on it every month and paying it off in full every billing period. You can also help by keeping a balance below 50 percent of your credit limit on each card. But even better yet, consider not charging 50 percent of your credit each month. Go even lower. Want to know the most important tip of credit restoration? Pay your bills on-time, every time! This includes your mortgage and utility bills. If you are late on one payment with one card or creditor, it can affect other cards that you own and your score as a whole.

Q: How fast can my credit score drop?

A: You’d be truly surprised at just how fast you can lose ahold of a great credit score. Your credit can drop quickly if pay bills late, or not on-time. You do not ever want to be more than 30-days late on any payment.

Q: I need to remove something from my credit report. How can I do that?

A: You can dispute any incorrect information with the credit bureau, themselves. But if you have some debt that was discharged or that you did not pay that is on your report, generally it will take seven years before it comes off your credit report. Ouch, right?!

It is important to make sure all the information on your credit report is correct. The reports themselves are not uniform from company to company, so make sure you have information from all three agencies. Once you have your credit reports, verify all your credit report’s information. You may have accounts that are reported incorrectly or a wrong name or address.

Every report is also scored. Scoring is the system that creditors use to determine your credit experience. These scores are valid for all three agencies and are uniform in value. If you look at all the information on your credit report and it is correct but the score is low, then you are faced with having to improve either your payment history or reduce your debt.

Inaccurate information, however, such as reported late payments that you disagree with or a listing for a debt that is not yours is repairable. If you have more than one item you are disputing on your credit report, then you may have to send a separate letter for each instance to be certain that each item is addressed. So make sure you look carefully at everything on your report to ensure you don’t have any errors on your credit report.

Q: Does