December 2020 NewsletterSubmitted by Dorval & Chorne on November 30th, 2020
Keagan Kinsella | December 1, 2020
Happy December! The last month of 2020 is upon us… and with that comes the last newsletter of the year! Here’s a preview of what we’ll be talking about today:
- Question of the month: Budgeting for Christmas and Black Friday? The perfect way to budget for auto repairs, life events, birthdays, weddings, and vacations
- Tis the season…for Open Enrollment! Five things to know about private health insurance coverage
- Survey says- “I’d rather jump from a plane than do this!” Taking the intimidation factor out of retirement planning…
Question of the month: “I never know how to budget for things like Christmas since I always end up overspending on Black Friday and during the holiday season.”
The holiday shopping season is upon us, on Black Friday consumer spending hit an all-time record…$9.0 billion! This was an increase of 21.6% year over last year (according to Adobe Analytics data.) In 2019, the average consumer spent $664.79! This probably isn’t too surprising considering it is so easy to shop online, especially in the current state of the world. What I am curious to know is how many people are saving for this kind of expense! I’m guessing America’s credit card debt increases at an alarming rate on Black Friday as well.
What’s not surprising is that although Christmas happens every year, millions of Americans go deeper into debt financing the holidays? There is a way to avoid this, and the concept is called a “sinking fund.” A sinking fund is a term used in corporation settings where revenue is set aside over a period of time to fund a future capital expense, or repayment of a debt. However, it is also a practice that can be implemented in your personal budget!
If you like to budget and plan out your expenses it helps prevent the surprise of things like Christmas bills, an annual vacation, or house maintenance that are hard to forecast. If you want to incorporate this practice into your saving, what you can do is look at how much you spend on certain things…let’s say, Christmas. What did you spend last year? Divide that by 12 and if you run your budget monthly, add it as a line item, and set aside that money every month so Black Friday doesn’t pop up on you, and you’re feeling like you’re blowing all your money!
‘Tis the season…for Open Enrollment
For my fellow December-birthday companions, although we may be forgotten—we know Christmas isn’t the only exciting part of the month! This year, I get an extra gift for my 26th birthday, I need to find a new health insurance policy.
Like millions of other young adults in the US, I have had coverage under my parent’s family health insurance plan up to this point. Working for a small company, we don’t have a group health insurance plan, and instead get a stipend to pay for it on our own. Since I began working, it has always been cheaper for my parents to add me on to the family plan, and in turn I just paid them for my portion of the cost. But, as the Affordable Care Act states, upon turning 26 you are no longer eligible to remain on their policy. Basically, I am getting the boot, and I wanted to share some helpful tips if you are in my situation, or if you will be in the future. Here are five things you should know about private health insurance on the “exchange.”
- Open enrollment is when you have to sign up for a policy (which can be done online). It can be done from November 1st to December 15th each year (Minnesota extends theirs until 12/22).
- You can be eligible for special enrollment periods for certain reasons (ie: you get married, retire, lose coverage through work, turn 26, etc.) throughout the year, as an exception to open enrollment.
- You should evaluate if what you are paying through your employer is more or less expensive than a private policy. It may be cheaper for a spouse or kids to get coverage independently (through a private policy) than to be added to an employer plan.
- If your income falls between a certain range (differs for single vs. married couples), you may be eligible for subsidies to make health insurance coverage more affordable!
- Look into plans with Healthcare Savings Accounts (HSAs). An HSA is tax-favored account that is used in conjunction with a high deductible insurance plan to make healthcare more affordable (because dollars go in pre-tax and come out tax-free!).
Skydive… or Retirement Plan?
According to a survey done by Empower Retirement, 1 in 5 U.S. adults approaching retirement say skydiving is less intimidating than preparing for retirement! Empower is the 2nd largest retirement services company in the country, so I’m guessing their sample size for their survey was pretty comprehensive. They also reported that 62% of American families have money saved for retirement outside of Social Security. While that may not sound too optimistic, they also say they are seeing higher and higher savings rates among millennials!
Do you fall into the category of people who dread the thought of planning for retirement? If you are a millennial or Gen Z’er, there are probably lots of other things you are trying to plan for, outside of retirement—perhaps student loans, saving for a house, or starting your career. There are lots of things to balance! Here are some simple things you can do to put yourself on the right track for not dreading the idea of retirement planning today:
- If your employer offers a match in your 401k or 403b, always put in enough to get every free dollar you are eligible to get!
- Consistently live within your means. If you can’t afford it, don’t buy it. Credit cards can be dangerous if financing a higher lifestyle starts to outpace your income.
- Invest with a long-term approach. If your retirement is more than 15 years down the road, don’t worry about the ups and downs of the stock market. If you get uneasy about watching the stock market nosedive and have considered moving all to cash until things get better, you might want to think twice. In any 10-year period of time, it is very likely you will see negative months, and also negative years… However, looking back historically, the S&P 500 has an annualized average return of around 10% since its inception through 2019! Basically, don’t try to time the market. Studies show that individual investors who try to speculate consistently underperform the market long term.
Hopefully those tips get you on the right track to begin making progress for long term goals like retirement. Let me know if you have specific questions about what you can to do make sure your goals are aligned with your priorities.
All right, that’s it for this month! Stay tuned for my next newsletter where I will continue to share and inform in new and creative ways. If you want to sign up for the newsletter email, click here (and let others know they can sign up.) Last but not least, let’s connect on LinkedIn!
Advisory services provided through AdvisorNet Wealth Management (AWM). Dorval & Chorne Financial Advisors and AWM are not affiliated.