Category Archives: Personal Finance

November 5, 2018

Nine-Point Retirement Checklist

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9 Steps to Help Your Retirement Assets Last

By Gregory S. Ostrowski, Managing Partner, CERTIFIED FINANCIAL PLANNER®, CRPC®  Scarborough Capital Management

9 Steps to Help Make Your Retirement Assets Last
What should you be thinking about when nearing retirement? Here’s nine tips to help ensure that you can make the most of life’s next chapter.

What should I be thinking about when nearing/considering retirement?  It’s one of the most common questions we’re asked and it’s critical to review your personal finances and plan how to spend money after you retire.

Retirement means different things to different people. To some, it could mean having additional time to visit family. To others it might present more opportunities to volunteer in the community. And to some it might even mean having the chance to get a little more golf or tennis in with close friends.

But while some of these things can be very low or even no cost (think hiking or reading in the shade), many of them will still require money.

If you’re getting to the point where the idea of retirement is becoming more of a reality, but you haven’t yet considered its financial impact, here are nine tips to help ensure that you can make the most of life’s next chapter.

Take stock. All this step requires is that you examine your assets and liabilities. In other words, did you leave a 401(k) at an old job? Have you checked your main stock portfolio lately? Do you have a number of outstanding loans? Do you have too much cash saved in a low-interest savings account, or even worse, a basic checking account?

Once you can get a handle on what you have and where you have it, record everything in a simple spreadsheet or in a notebook. Once you do, you can move on to step two.

Evaluate expenses. The financial world has lots of plans for people to save for retirement, but very few people talk about how to spend during retirement. This fact alone can get the best saver off track very quickly.

For example, if someone said to you that you’d have $1 million in the bank for retirement, you may say, “hey, that’s great!” But in reality, that sum might only equate to about $40,000 to $50,000 per year of income. Would this be enough for you and your spouse for the rest of your lives?

For this step, first, figure out all of your current expenses – and yes, we mean all of them. Even those “inexpensive” stops to the coffee shop can add up. Again, this can be as simple as making a list and totaling it up.

Next, figure out what expenses you will still have after retirement, those that you may be able to cut, and even those that may come up.

For example, you may have a car payment, and that won’t change. But what about your mortgage payment? Could that be adjusted if you downsized? Relocating could reduce not only the cost of the mortgage, but also property taxes, utilities, and maybe even travel expenses if you move closer to places you visit frequently.

In terms of what could arise, some people have the dream of wanting to own a beach or mountain home as a vacation spot, or even simply taking more vacations. These costs will add up fast, so be sure to give your best estimate.

And if you think this step doesn’t matter, please reconsider that thought. Just a few years of outpacing your budget at the beginning of retirement could mean trouble later.

Formulate a plan. This is the most involved part of planning for retirement and where you should consider reaching out for help.  At Scarborough Capital Management we’ll help provide visibility on your retirement picture and can develop side-by-side scenarios of what retirement might look like under various circumstances.

If you’ve created a budget and have an idea of what you’ve already set aside and what you’ll be spending, you have the basis to build your plan. With that, we’ll really be looking at two things – money you currently have, and money you may still need to make.

What to do with cash. Volatility in the stock market has often caused retirees stress, as they have fewer years to recoup any losses they suffer as a result of a market dip. While it might be a good idea to keep 40 percent to 50 percent of your assets in some type of bonds or cash in retirement, the smart investor knows that taking all of your money out of the stock market or other interest bearing vehicles may not be a good idea.

The reason is that without any capital gaining interest, any money that’s just stored “in a mattress” for instance can’t keep pace with inflation. This “longevity risk” could be more risky than having a solid, diversified portfolio.

Timing of investment account withdrawals. How much you withdraw early on and how the market performs can be some of the most important factors in your retirement picture. In this case, the guidance of a professional may be key in helping you avoid some serious mistakes.

Timing of income, such as employer pensions or deferred compensation plans. Depending on your circumstances, you may have some flexibility in when you commence your pension or deferred compensation benefits. In other cases, there may be pre-defined dates and timelines for income.

Further, many large employers are also offering lump-sum pension payout options versus a monthly check over time. Be sure to evaluate these decisions as part of your broader plan.

Timing of Social Security benefits. As recently as early 2016, the Social Security system had more than 550 claiming scenarios. Recent legislation has reduced that amount somewhat, but commencement of benefits (or delaying them) is a decision that should not be made lightly. There is no “one size fits all” advice in this arena, so it’s important to examine your options to see how they fit your situation.

“Pecking order” of accounts. Various types of accounts – like a Roth IRA or tax-deferred annuity or checking account – have various tax treatments. Understanding the characteristics of all your assets – in conjunction with your goals, timeframes and legacy wishes – will help you determine a tax-efficient strategy to draw on your assets during retirement.

Review protections. You may be paying for insurance you don’t need (for instance, an old life insurance policy that has adequate cash-value to maintain itself); in other cases it might be beneficial to add coverage you don’t currently have (such as an umbrella policy or long-term care insurance).

You may find though that after going through the budgeting process that you have a gap between what you have and what you are planning on spending. If you’re going to maintain your spending plan you’ll need a small income stream during this period of your life.

In fact, this exact scenario has caused a number of retirees to go back into the job market. This doesn’t have to be a bad thing either. Some of these individuals have earned some extra income by looking for employment at places they find enjoyable or meaningful, such as a garden store, library, or even community center.

In other words, it doesn’t have to be viewed as work if you find enjoyment or meaning from it, and if you’re setting your own schedule.

As a final note, sometimes it may seem like planning for retirement can be too daunting of a task to take on, but it doesn’t have to be.

While these steps are not meant to be exhaustive, they are designed to help retirees see that with some preparation and professional assistance, you can help put your mind at ease and enjoy everything that you worked so hard to achieve.  Call us; we’d love to help you.

July 25, 2018

The Importance of Rebalancing Your Portfolio

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The Importance of Rebalancing Your Portfolio

By Joshua P. Goldsmith, Vice President of Investments, CERTIFIED FINANCIAL PLANNER®, CRPC®,   Scarborough Capital Management

Do you rebalance your portfolio?
Rebalancing is an important part of managing the performance of your portfolio. Are you ready to rebalance your portfolio?

When the market takes a downturn, what do you do?

You probably know better than to panic and start selling. Selling when values start to fall goes against the basic premise of trading, “buy low, sell high.” But holding tight during a downturn can be a nerve-wracking experience.

That’s why most experts suggest a strategy of regularly rebalancing your portfolio to help minimize vulnerability if things take an unexpected turn. There’s evidence to back it up—a study  published in May 2014  found that rebalancing is a far safer strategy than selling during a downturn, and can even outperform portfolios that demonstrate “hands-off” patience.

What it Means to Rebalance Your Portfolio

Rebalancing is where you evaluate your portfolio and make adjustments to your investments. When rebalancing, essentially, you’re looking to sell high and buy low on a small scale. You’ll divest from assets that are over-performing, and invest in items that are underperforming. This puts you in a position to potentially minimize risk and maximize gains if those assets’ performances correct themselves.

So if rebalancing is shown to work, why is it even an option? Why wouldn’t everyone do it?

The answer is that rebalancing requires you to be a little counterintuitive. Yes you’re selling high and buying low, but you’re also selling gains and buying investments. Remember, you’re looking to rebalance outliers, meaning that you’ll be selling stocks that are outperforming their expectations in favor of picking up ones that are underperforming.

And for some investors, that’s just plain silly.

But that’s an emotional decision, not a rational one. Statistically, rebalancing works. Which is why it’s best advice to remove emotional attachment to investments and enlist the help of a certified professional to help manage your assets!

Rebalancing in Three Simple Steps

While actually rebalancing your portfolio is best left to a professional, it’s important that you understand the steps they’ll take when moving your money around. After all, it’s your money—you should know what’s happening with it.

Rebalancing, on a basic level, involves three steps:


Rebalancing relies on comparing the performance of individual assets against their history, so the first step is recording that history. Your portfolio manager will look at the values of your assets when you acquired them, and divide that value by the total value of your portfolio to determine a weight for the asset. The idea is that, going forward, you’ll maintain these asset weights by making adjustments to individual assets.


Your portfolio manager will look at how each asset class is performing, compared to its historical record. They’ll come up with new weights for your asset classes and compare them to the original weights. If there’s a significant change (positive or negative) it may be time to make a change.


If there are any major changes to your portfolio, your financial manager will use a formula to figure out how to readjust your investments to reduce your exposure to risk. This will involve getting rid of assets that have grown too large in your portfolio, and using that money to reinvest in underperforming assets.

When to Rebalance Your Portfolio

You have two main options for determining when to rebalance your portfolio: Time and Performance. Both of these strategies have some merit.

If you choose to rebalance based on time, you’ll set annual, semi-annual, or quarterly dates where you revisit your portfolio and make adjustments to your asset classes. The benefit of this approach is that it lets you control exactly how often you’ll be rebalancing your portfolio—and paying the fees associated with it.

Rebalancing based on performance thresholds means that your financial manager will constantly monitor your portfolio, and make adjustments any time an asset class is off by a certain percentage (which you’ll pick based on your risk tolerance). This makes sure your portfolio is always optimally balanced, but it could be costly to maintain.

But there’s a third path, one recommended by a number of experts, that combines time and performance into a hybrid approach. You set one or two dates each year to check your portfolio, but only make adjustments to assets that have hit a certain performance threshold. This approach optimizes maintenance costs with performance gains.

Are You Ready to Rebalance Your Portfolio?

Rebalancing is an important part of managing the performance of your portfolio and being prepared for unexpected downturns in the market. Even though it involves selling assets that are outperforming your expectations, rebalancing has been shown to help minimize risk and maximize potential gains.

If you don’t have a rebalancing plan in place, we highly recommend meeting with a financial professional to get one set up!

June 27, 2018

The Secret to Timing the Stock Market: Don’t

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The Secret to Timing the Stock Market: Don’t

By Ian Arrowsmith, Managing Partner, CMFC®, CRPC®  Scarborough Capital Management

Don't be tempted to time the market.
A good investment plan will help set you up for success in the future, without the constant agitation and struggle of chasing trends.

Do you have that one friend who is always trying to time the stock market, analyzing the ups and downs of past performances to predict the perfect moment to strike? Do they approach investing the way TV detectives approach a hard case, with cork boards full of pictures connected by miles of red string?

Did it ever occur to you that this friend might just be a little… off?

Sure, there are certain pundits who swear “timing the market” is the key to making ridiculous gains. And there are plenty of people who believe it’s possible, especially among those who aren’t heavily involved in the market.

It certainly seems plausible that it just takes is the right insight, and presto! You predict when the market is about to make a big swing and rake in huge profits.

But the truth is that it’s no easier to predict the future of the market than it is to predict the future. There have only been a few successfully predicted bear markets over the past 100-some years; most “predictions” around market swings are actually just examples of a prognosticator getting lucky, and the “experts” are the ones who try to pass off that luck as skill.

No offense to your friend, but when it comes to investing, successfully “timing the market” is one of the biggest myths around.

Don’t Try to Predict the Future

You can look at the past performance of an investment to get a general idea of how it’s performing, but there’s no way to turn that into any sort of accurate prediction about its future earnings—and its future earnings are what will matter to you as an investor.

Performance indicators change all the time, and when a reliable indicator is actually found, it quickly leads to crowding that negates the potential benefit. In addition, the advanced models and simulations needed to create a reliable prediction are often so expensive that they cost more than the potential benefits to begin with!

Instead of looking for particulars, focus instead on broader trends. You can get a general sense of the direction a particular investment is trending, and use that to make an informed decision. Just don’t fall into the trap of focusing too much on past performances; you can’t make an accurate prediction about when an investment will reach an exact value, no matter how much research you do.

Remember, if investors could accurately predict how well their investments will behave, everyone would be a millionaire.

That’s why the best investment strategies are the ones that balance tolerable risk with potential gains. You want a portfolio that can be adjusted and corrected, and that relies on probability to earn you money over time without gambling on hitting it big with one well-timed transaction.

Play the Long Game

Patience might just be the most important part of a successful investment strategy. Make long-term investments that can grow steadily, rather than trying to time the market for short-term gains. Take the long view and approach your investments with an attitude that you won’t see results right away, but that your portfolio is growing.

Investing successfully is like growing an apple tree; it’s going to take years for it to grow and develop. If you plant one tomorrow, you wouldn’t expect to eat an apple from it the next day. The same is true of investments. Invest now, but don’t expect to see profits from your investments until far down the road.

By focusing on the long game, you’ll deftly avoid the most common pitfalls for inexperienced investors: panic and overconfidence. These are the major drivers of irrational investment decisions, especially when it comes to short-term investing. Investors with a short-term view are easily spooked by fluctuations and corrections in the market, and their decisions suffer for it.

Don’t fall victim to these common mistakes. Instead, set up a plan with a qualified financial advisor and stick to it. You’ll be more likely to end up with a diverse, long-term investment strategy that’s tailor-fit to your goals—and your risk tolerance. Just understand that you’re establishing a long-term plan, not chasing after quick gains.

A good investment plan will help set you up for success in the future, without the constant agitation and struggle of chasing trends. When it comes time to cash in on your investments, you’ll be glad you took this approach. Your friend, however, will probably still be chasing after that big windfall from one “properly timed” investment… and most likely chasing after a whole lot of lost money right along with it.

May 8, 2018

HSAs: A Compelling Way to Save for Healthcare Costs in Retirement

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HSAs: A Compelling Way to Save for Healthcare Costs in Retirement

By Gregory S. Ostrowski, Managing Partner, CERTIFIED FINANCIAL PLANNER®, CRPC®,  Scarborough Capital Management 

reduce your tax bill with an HSA
You HSA could allow you to reduce your tax bill while putting money aside for future health care expenses.

One of the most common questions we get is, “how do I prepare for my healthcare costs in retirement?”

And one of the best answers just might be three little letters: HSA.

Health Savings Accounts (HSAs) can be useful tools when it comes to paying for healthcare costs, because they are specially designed to lighten your tax burden in three different ways. Money goes in on a tax-deductible basis, grows on a tax-deferred basis, and can be spent tax-free as well—so long as it’s spent on qualified medical expenses (including Medicare premiums).

This gives them an advantage over other forms of retirement planning accounts—not even your IRA account lets you save this much on taxes. The only catch is that your HSA account must be used for qualifying expenses—namely, healthcare. But, according to our research, the average retiring couple will need at least $200,000 saved up for medical care in retirement. That’s a lot of cash—and it doesn’t even include the costs of long-term care.

If you’re going to need that much money just for medical costs, you may want to consider a dedicated account for it. Choosing an HSA as your dedicated account for future healthcare costs could make sense under the right circumstances. An HSA may even help you save on your current taxes.

The Basics of an HSA

In the simplest of terms, an HSA works like a savings account. You put money in, and you take it out when you need it. But there are very specific rules that must be followed, around how that money is spent that make an HSA different.  Adhering to those rules allows for tax breaks that may make an HSA another way to save for future healthcare costs.

Here’s what you need to know:

  1. You own the account, and the funds don’t expire.
    1. There’s no “use it or lose it” provision with an HSA, so your funds won’t disappear if you don’t touch them. You can even keep the funds if you change employment—once the money is in your HSA, it’s yours. It is important to note, however, that some accounts have maintenance fees that can add up over time.
  2. Contributions are limited.
    1. Like all good things, there’s a limit to how much you can contribute to your HSA each year. These limits change from year to year, so do your research before making any big financial plans.
  3. They’re the only account to offer triple savings on taxes.
    1. Money contributed to an HSA is tax deductible. It grows tax-deferred. And it comes out tax free, as long as it’s spent on qualified medical expenses1. This may save you 30% or more on every dollar you put in.2
  4. Misuse the funds, and you will be penalized.
    1. If you’re under 65, you will be subjected to a penalty for using your HSA funds for anything other than qualified medical expenses. The amount you withdraw will be subject to income tax and may be subject to an additional 20% tax. Be sure to review the rules and regulations of your HSA, and contact your tax professional with questions.
    2. Regardless of age, withdrawals will be subject to taxes if not used for eligible medical expenses.
  5. You must meet the requirements to enroll.
    1. You are covered under a high deductible health plan (HDHP), on the first day of the month.
    2. You are enrolled in only in that HDHP plan.
    3. You cannot be enrolled in Medicare.
    4. You cannot be claimed as a dependent on someone else’s taxes.

If you meet the above requirements, you’re good to go! And, like all savings accounts, the earlier you get started, the better off you are.

Getting the Most out of Your HSA

Now that you know the basics, let’s talk a little about the details around your HSA.

First and foremost, being enrolled in an HSA-compatible health plan means having a high deductible. If you tend to spend a lot on medical expenses to begin with, you may be better off with a different type of plan (if your employer offers one). One unlucky medical event, or even a lucky but expensive one like the birth of a child, and thousands of dollars could vanish from your HSA to cover your deductible.

That being said, an HSA may be a good plan option for younger, healthy individuals who don’t usually spend a lot of time (or money) at the doctor’s office. That’s because the costs of the plan tend to be low, and most employers offer some sort of contribution matching. All of this means you won’t be paying for a health insurance plan you won’t likely use, as you would under a traditional plan; you’ll be contributing to a savings account that can pay off down the road, when you need it most.

HSAs also offer a nifty tax benefit—since the money you contribute to an HSA is tax-deductible, you may be able use your HSA to reduce your taxable income and get into a lower tax bracket if you’re on the cusp. This could be a benefit, if you qualify, so be sure you take advantage of it if it makes sense for your individual situation.

A Priority for Retirement Saving

While an HSA should by no means be your only way to save for retirement—it can be, after all, an effective option for covering medical expenses—it should definitely be an option you consider as part of your retirement portfolio.

When used properly, and for those who qualify, no other savings account is as tax efficient as an HSA. That makes these accounts a valuable way to maximize your current income for future expenses. If you think an HSA might be right for you, get in touch with a professional today and see how it fits into your personal retirement plan.



1 For detailed information on HSAs and qualified medical expenses see:

2 There are no federal taxes on HSA contributions, but some states will tax them. Consult with an expert to know all the details before starting your HSA. SCM does not provide tax or legal advice.


May 1, 2018

Live Webcast – What You Need To Know About Social Security

Informative webcasts brought to you by carborough Capital Management

Join us for a live webcast presented by David Sizemore, CFP®

What you need to know about Social Security

Social Security provides an important source of guaranteed income for most Americans. Making the right moves at the right time is even more important under new Social Security regulations.
We’ll cover:

  • How Social Security benefits work for you and your spouse
  • When and how to start receiving benefits
  • Opportunities to increase your benefits throughout retirement

Please join us for this informative webinar. We encourage you to forward this invitation to your family, friends, or anyone who may be interested in this timely information.

Click a link below to register for a session.

Wednesday, May 9th @ 10am Eastern

Wednesday, May 9th @ 6pm Eastern

Get to know David.

Click here to learn more about David Sizemore.

April 17, 2018

Roth IRAs vs Traditional IRAs: What You Need to Know

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Roth IRAs vs Traditional IRAs: What You Need to Know

By David Herman, CRPC®, CCPS®, Vice President of Investments,  Scarborough Capital Management

Start planning now and learn which IRA plan is the best fit for you.
There’s a lot of excitement about new Roth IRA conversions, but are they really better than Traditional IRAs? Here are the pros and cons of each.

When you’re planning for retirement, one of the biggest decisions you need to make is whether to invest in an IRA and if so, which may best suit your needs: a traditional or a Roth IRA.

We’ll look into these two types of savings plans in detail and talk about the similarities and differences between these two types of IRAs.

Roth IRA vs Traditional IRA: The Similarities

Let’s start by looking at the many ways in which these two types of accounts are similar. First and foremost, they’re very obviously both IRA accounts. It’s right there in the name. But what does that name mean?

It stands for Individual Retirement Arrangement. That means that each plan is built specifically to help one person plan for retirement.

Notice we said “one person.” When they put the Individual in IRA, they really meant it. As long as you’re alive, you can’t gift or transfer your IRA to anyone else. If you do this, you’ll lose the tax protections offered by the IRA for whatever money you transfer.

They were serious about the Retirement part too—both traditional and Roth IRAs have penalties for withdrawals before age 59-½ (though Roth accounts offer some exceptions to this). These investment accounts were specifically designed to help people save for their golden years, so once you start investing in one you shouldn’t expect to take money out for a long time.

And the Arrangement part is specific as well—your IRA is technically an arrangement between you (the owner) and the business in charge of managing your IRA. This is why it’s A for Arrangement and not for Account (and why it’s not redundant to say “IRA account.”)

So both types of IRAs are designed to help an individual save for retirement, which is one of the main reasons they are worth looking into. It’s never a bad idea to over-prepare for retirement.

Both main types of IRA also incentivize savings by offering tax benefits. But the specific types of tax benefits offered are the biggest differentiators between these two types of retirement plans. Let’s take a closer look at each.

Taxes and Traditional IRAs

Traditional IRAs allow you to contribute pre-tax dollars, and you won’t pay taxes on your contributions until you start to withdraw. This has a two-fold benefit: you may be able to get yourself into a lower tax bracket in a given year by contributing to your IRA and lowering your taxable income (if your employer doesn’t offer some other kind of retirement plan). When you retire, your IRA will count as taxable income—but you may be in a lower bracket then. In that scenario you’re paying less to the government when you put money in (by reducing your taxable income through pre-tax contributions) and potentially paying lower taxes down the road when you take money out (if your retirement income is lower than your current income).

And in between, your investments can grow and compound on a tax-deferred basis, meaning you won’t pay capital gains or dividend taxes while they grow.

Sounds like a pretty great deal, right? Well, that’s because it can be under the right circumstances. The government wants you to invest in an IRA and plan for retirement, so that you are more likely to be able to fend for yourself instead of relying on Social Security (if it still exists when you retire).

Roth IRAs: Taxed Up Front

Roth IRAs take the opposite approach to Traditional IRAs when it comes to taxation.

Your contributions to your Roth account come from income that has already been taxed. They’ll still grow tax-free, so you won’t have to pay capital gains or dividends taxes (just like a Traditional IRA). And then, when it comes time to take qualified withdrawals1 from your Roth IRA, they’ll be 100% tax-free.

That’s right—with Roth IRAs, you don’t have to pay taxes when you start taking withdrawals (as long as you hit all the qualifications). Since your money was taxed once before going in, it won’t be taxed again.

And that’s a pretty sweet deal, especially if you’re expecting to be in a higher tax bracket when you hit the magic age of 59-½ than you are now. Or if you’re concerned that the future changes to tax laws might put a pinch on your retirement income.

So the biggest difference between the two types of IRA accounts is when you pay the taxes. Traditional IRAs take out taxes when you take out withdrawals, and Roth IRAs don’t (because they only take money that’s already been taxed).

Pay Attention to Restrictions

IRAs can be a great benefit to individual retirement planning, but they do come with restrictions. Aside from the age restrictions on withdrawals2, there are also certain requirements and restrictions on your contributions, and even your eligibility.

These restrictions change from year to year, so it’s best to make an appointment with a qualified financial planner before opening a new IRA. But, generally speaking, IRA restrictions center around yearly contribution limits ($5,500 in 2018, or $6,500 if you’re age 50 or older. And counting total contributions to your Roth and Traditional IRA accounts, if you have both).

Roth IRAs also come with income eligibility limits. Again, these change from year to year, but for 2018 you have to earn under $117,000 as an individual or $184,000 as a jointly filing couple to qualify for your maximum Roth IRA contributions.

So Which One is Best?

Even though there’s been a lot of excitement over the recent changes allowing for “backdoor Roth IRA” conversions,  there’s nothing inherently better about them than with Traditional IRAs (unless you count the relaxed penalties for early withdrawals). As long as you hit the qualifications to contribute, they can both be powerful tools to help you prepare for retirement, each with its own way of potentially saving you money on taxes.

If you’re ready to start a new IRA account, or want to get a specific consultation about whether an IRA is right for you, get in touch!






February 7, 2018

The Younger You Are, The More Sense It Makes To Save.

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The sooner you start saving for retirement, the better off you’ll be.

By Shawn J. Walker, Managing Partner, CERTIFIED FINANCIAL PLANNER®, CRPC®,  Scarborough Capital Management

Start saving early with Scarborough Capital Management
Plan your budget with your future in mind, and start saving whatever you can afford to put away.

And that’s not just because you’ll have longer to stash money away. It’s because you’ll be taking full advantage of compounding interest to let your finances grow exponentially. Your money will literally be making more money for you while you sleep (and also while you’re awake).

Here’s how it all works.

We Heard You Like Interest

Compounding interest essentially means you’ll gain interest on your interest. You can check out the formulas and the math at work, if you’re into that sort of thing, but the important thing to understand is that it will grow your savings much, much faster than simple interest.

That’s because you’re earning interest on top of your interest, instead of just on the money you put into the account (known as the principal).

For example, let’s say you put $100 into a savings account that gets 6% simple interest (so it’s not earning you money off the interest). So that’s a principal of $100, growing at 6% of the principal ($6) every year. In a year, that’s $106. In 20 years, that $100 would have grown to $220. That’s nice, but compounding interest is nicer.

If you put that same $100 into an account earning 6% compounded interest, it would still just earn $6 in that first year. But then, instead of earning another $6 in year two, it would earn 6% of $106. That’s $6.36, and okay maybe that’s not that exciting yet, but each year it will keep earning more and more, because it’s including your interest earnings in the equation.

After 20 years of compounding at 6% interest, that $100 will grow to $320.71—a whole $100 and 71 cents more than you would have earned on simple interest alone.

Now, let’s say you put another $100 in that same savings account every month. After 20 years of 6% compounding interest, you’ll have a savings account worth $44,142.71. Kinda weird that it still ends in 71 cents, right?

If you started this account when you were 25 years old and let it run until you turned 65, you’d have over $185,000 in your savings—just from stashing away $100 a month in a fairly typical savings account.

Obviously, not everyone can afford to save $100 a month. But save what you can, and make it a priority. If that’s $10 a month, do it. If it’s $1000 a month, great! Do what you can, and your future self will thank you for it.

Play around with this investment calculator to see how your savings can turn out.

Forget You Have Money

This may seem like a strange tip, but it’s really good to pretend that your savings account doesn’t exist.

Since you get the most benefit from compounding interest by just letting it grow, any money you take out of your account is just going to cut into your future earnings. Set up a direct deposit to your savings account (if possible) and just let it run on autopilot. If you get a raise, give your retirement deposits a raise as well. You’ll reap the benefits when you retire.

But what if something unexpected happens, and you need to rely on your savings?

That’s what your emergency funds are for. If saving for retirement is the best thing you can do for your future self, setting up a separate emergency account is a close second.

Actually, let’s call it a rainy day fund instead of an emergency account. That just sounds nicer, right?

Start saving in your rainy day fund until you have at least three to six months’ worth of living expenses stashed away. Once you’re comfortable with your rainy day fund, start sending those contributions to your primary savings account instead so they can help feed into your compounding interest.

Your rainy day fund gives you a cushion in case something unexpected and expensive happens in your life. It lets you cover those costs without taking on unnecessary credit card debt or dipping into your primary savings and messing with your retirement money.

Start Saving Now

Okay, so it’s pretty clear that saving early and saving often are good strategies for putting money away for retirement, right?

So start doing it. Find a bank or credit union that offers a savings account with compounding interest, and start saving. Even if you can only afford a few dollars a month, that is so much better than nothing.

Same with your emergency funds—they may grow slowly, but at least they’re growing.

Plan your budget with your future in mind, and start saving whatever you can afford to put away. With time (and the magic of compounding interest) you’ll be well on your way to a comfortable future.


November 29, 2017

How To Make Your Annual Bonus Work As Hard As You Do

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How to make your annual bonus work as hard as you do.

By Jay Sprinkel, CRPC®, Managing Partner,  Scarborough Capital Management

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Here are a few suggestions to make your annual bonus work as hard as you do and keep working long after you’ve retired.

Many times when people receive an annual bonus, they’ll think about all of the great things they can potentially do with it. Bolster an IRA account. Continue saving into a child’s college fund. Or even take a vacation.

But sometimes, those plans get put on hold or simply forgotten. The funds are deposited into a checking account, and before the person knows it, the money has gone to dinners out, some new clothes, an unforeseen car repair and maybe even a new gadget.

So what happened?

Mainly, brainstorming and dreaming of what the best course of action to take with the bonus stopped short of actually planning. In order to prevent this, here are a few suggestions to make your annual bonus work as hard as you do and keep working long after you’ve retired.

Tax implications

The first thing to think about in terms of a bonus is how it could potentially be taxed. Some people think that a bonus is taxed more than your regular salary. While this may be true in some cases, it’s not that way for all.

The easiest way to think about it is that your bonus is a lump sum raise that gets added to your annual salary. This could move you up into the next tax bracket, causing you to pay at a higher rate. (And this adjustment is what gives the impression that a bonus is taxed more.)

Be aware of what that change could mean and be sure to consult your tax professional for your specific situation. And while this article should not be construed as tax advice, some of these suggestions may offer insight into what to speak to your tax advisor about.

Maxing out your 401(k)

In 2017, you’re able to contribute a maximum of $18,000 to a 401(k) plan, or $24,000 if you’re 50 years old or older. If you haven’t yet reached this limit, your bonus could be a great addition. Also, if you’re in your late 20s or early 30s, this money could be worth more down the road due to compounding interest. Don’t fall into the trap of thinking that you can just play catch up later. Do it now and you won’t have nearly as much catching up to do down the road.

For example, if you get a $5,000 bonus, put it in an account earning 5 percent annually and do absolutely nothing to it, you would have over $10,000 in about 15 years. You just doubled your bonus by not doing a thing.

The thing to be aware of here is if your employer will let you do this. Some only let you contribute up to a certain amount, and you may not get the full match if you spread out your contributions. Check with your human resources department for more information on your situation.

Pay down debt

Debt, especially the high interest credit card kind, should be dispatched as quickly as possible. If you have $4,000 of credit card debt at 10 percent interest and pay only $100 a month, it will take you slightly over four years to pay it off at a cost of around $900 in interest.

Alternatively, you can simply take that lump sum bonus and pay the entire bill. You can use the money you saved in interest towards a vacation for yourself instead of helping send a credit card company executive on one.

College savings

If you have young children it may seem like just when you finally get caught up paying for necessities, something else comes up. It’s easy to see your bonus as a way to cover these expenses, but it may also be a good idea to use some of it to start saving for their college education.

With a college savings plan, you can take advantage of some great tax benefits when you use the money you save towards educational expenses. Be sure to check with your financial professional for specifics on how these plans work and which might be right for you given your situation.

Have fun!

If you’ve taken some of your bonus and paid off debt or put it to work in some type of savings or investment account and still have a little left over, it’s still perfectly fine to use the rest as a treat. Carve out a portion just for you or your family for a fun purchase or better yet a memorable vacation. More and more people have been minimizing their physical possessions and investing more in experiences, which they say makes them happier.

Everyone is going to have different needs and goals with respect to their money. Whatever yours may be, it’s best to take stock of your personal financial situation and then allocate the money toward whatever has the most leverage for you. Start thinking about this today, and if need be, contact your financial professional for more guidance on these topics.


Opinions, estimates, forecasts and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice.

This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results. Diversification and asset allocation do not guarantee positive results. Loss, including loss of principal may result. 

Examples used are for hypothetical purposes only. They are not intended to portray past or future investment performance for any specific investment. Your own investments may perform better or worse than these examples. These examples do not include taxes, which could have a dramatic effect on your results.  

November 16, 2017

Six Ways To Teach Your Kids About Money

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Save early, save often.

By Greg Ostrowski, Managing Partner, CERTIFIED FINANCIAL PLANNER®Scarborough Capital Management

Teaching children about moneySome people think the methods CERTIFIED FINANCIAL PLANNER™ professionals use are extremely complex, and they just don’t have the mindset to grasp those concepts to use in their own financial planning. I can tell you however, that as a CERTIFIED FINANCIAL PLANNER™ myself, most of what I do each day has been built on a foundation of lessons on the basics of money management and common sense that my parents taught me.

In other words, it’s never too early to teach a child about starting off on the right financial foot.

If you want to help teach a young person solid financial basics, here then are some of the lessons I learned that may help you start that conversation.

Pay yourself first. At age 12, as a paperboy, my parents opened a custodial investment account for me, and I’m glad they did. In fact, I think a large part of that early investing experience led me to my career today.

While an IRA may or may not be right for your child, teaching them to save definitely is. Maybe they get some money for doing chores around the house, shoveling a neighbor’s driveway, or from running a lemonade stand. Teaching them that the first thing they should do with that money is put some way for themselves for later is a critical lesson.

Save early, save often.

Worry about yourself first. This may come across at first glance as a lesson on how to be a selfish person. It’s not. It also may come across as the same thing as “pay yourself first.” It’s not that either.

What it means is to make sure that your financial responsibilities are taken care of before you follow what your friends are doing. For example, if your teen has a car payment coming up, make sure he has enough money to cover that before buying that concert ticket, even if “all his friends are going.” What he also may not understand is that some of his friends put that ticket on a credit card, which won’t be paid off until much later.

Pay off your credit card every month. Credit cards are a great way to pay for things conveniently or to earn points from rewards programs. What they are not, however, is a free line of credit that allows you to borrow how much you want, for the time period you want, with zero interest. A good rule of thumb is if you don’t have the money in the bank to cover your next statement, then don’t put it on the card and don’t buy it at all. Online accounts also allow easy ways to monitor purchases so there are no surprises.

Delay gratification. In the now famous “marshmallow test,” Dr. Walter Mischel and researchers from Stanford conducted an experiment that tested what children would decide to do if given the choice between getting one marshmallow now, or two marshmallows about 15 minutes later. (And keep in mind how long 15 minutes is for a child.) The researchers found that after studying these children for years after the test, the ones that could hold off on the one marshmallow for the reward of a second had better SAT scores, a lower BMI, and better educational outcomes.

All of that said, it’s not a bad way to teach a child about delayed gratification and how interestworks. If they can avoid the instant gratification of having something now, they will have a better chance of having more later.

Buy whatever kind of car you want, but buy a good used one. We all know that cars lose value the moment you drive off the lot. If you purchase a new car, the value is going to be reduced drastically more than if you bought a good, used one. I’ve found over the years that I’m much more apt to buy a nicer luxury car used than I ever would be willing to spend on a new one.

And with how much information on cars is online today, your homework can be done well in advance of ever stepping foot in a dealership. Knowing your numbers ahead of time puts you, not the salesperson, in the driver’s seat.

Invest in yourself. Unlike the purchase of a flat-screen TV or expensive new shoes, investing in education appreciates over time. You can even say that knowledge is a “worldwide currency.” I’ve tried to take every opportunity to better myself and always be learning. The smartest people I’ve met over the years are the first to admit they have much to learn.

Another way to look at this is not “this book or course is going to cost me X,” but “this book or course is going to allow me to earn X times the cost of what I invested in it.” Think of it as the return on investment for yourself.

So, as you can see, there are several ways to begin the conversation with kids to get them started on their way to better financial habits. And while getting them to eat their greens might be a struggle, hopefully the ideas above will make discussions about money a little easier.


Opinions, estimates, forecasts and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results. Diversification and asset allocation do not guarantee positive results. Loss, including loss of principal may result.

September 28, 2017

Live Webcast – After Tax Money In Your 401(k)? Hate Taxes?

Informative webcasts brought to you by carborough Capital Management

Join us for a live webcast presented by David Sizemore, CFP®


after tax FB adPlease join us as we outline an important strategy for those with after-tax assets inside their 401(k).

  • Learn how to determine if you have after-tax assets inside your 401(k)
  • Learn how you may be able to “unlock” the assets, allowing for tax-free growth inside a Roth IRA
  • Review of IRS Notice 2014-54
  • Ongoing strategies with a goal to make the most of your retirement dollars

We encourage you to forward this link to your family, friends, or anyone who has questions about their 401(k).


Click a link below to register for a session.

Tuesday, October 10th @ 6pm Eastern

Thursday, October 12th @ 10am Eastern


Get to know David.

Click here to learn more about David Sizemore.