Larriva

About Mike Larriva

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So far Mike Larriva has created 18 blog entries.

Consistent Saving is a Vital Habit

About 58 percent of Americans have less than $1,000 in personal savings, according to a recent survey by gobankingrates.com. If we think about all the federal employees impacted by the current government shutdown, that means six out of 10 will likely experience financial difficulty due to this interruption in their incomes and lack of savings. A government shutdown is rare. Still, it is a powerful reminder to us all to be prepared for unexpected loss of income or large expenses. Consistent saving is a vital habit.

Having an emergency savings account (for things like a broken water heater, automobile repairs or unplanned medical bills) can save you a lot of anxiety. It can save you hundreds of dollars, as well, since late fees for credit cards, car loans or utility bills often run $30 or so per month. Having an emergency reserve will also help you maintain a good credit score during challenging financial times.

When speaking to young adults, I often recommend they keep $1,000 to $1,500 as a minimum target for a checking account. Adults with children or additional financial responsibilities should set a higher reserve target. The savings not only helps in an emergency, it helps you avoid monthly bank fees that can add up quickly. If you can set aside $20 per week (only about $3 a day), you will have accumulated $1,000 by the end of the year.

Once you have your emergency fund in place, you can focus on your retirement savings. Setting up an automatic deposit from your paycheck into a retirement account is one of the easiest ways to save money. That money never reaches your checking account, so it is less likely to be spent. For 401k contributions, start with 5 percent of your salary or enough to receive any company-matching contributions. After a few months, you will hardly miss the smaller amount going into your checking account.

Consistent saving is a vital habit that lasts a lifetime. Taking that first step is important. According to US Census data, the median household income was $60,336 in 2017. For a typical 40-hour work week at that income, $5 is equivalent to about 10 minutes. Wouldn’t investing just 10 minutes (or $5) a day be a worthwhile investment in yourself?

By |2019-08-14T13:59:46-07:00February 4th, 2019|Current Affairs, Financial Planning, Retirement|

Understanding Liability Insurance

Liability insurance can protect you in the event of serious injury, property damage or other economic liability. Thus, understanding liability insurance is an important piece of your personal financial plan.

One of the most common types of liability insurance is bodily injury and property damage for your auto coverage. It provides payment to others when you are the driver at fault in an accident. Arizona has minimum levels of coverage of $15,000 bodily-injury liability per person, $30,000 per incident (two or more people) and $10,000 for property damage ($15k/$30k/$10k). If someone has a $50,000 medical claim and you only have the minimum $15,000 in bodily injury coverage, they may pursue you for the remaining costs. More typical levels of coverage are $100k/$300k/$100k.

Another common type of liability protection is a vital component of homeowner’s insurance. Coverage typically starts at $100,000; however, to protect your family’s assets, $300,000 or more is advisable. If a guest or contractor slips and falls on your property, medical bills and lost wages can quickly add up to more than $100,000. Do you have a dog, pool or trampoline? Claims from these risks are common for pain and suffering, as well as for medical bills.

An umbrella liability policy is less common, though strongly recommended. Also known as a personal liability policy, it complements your auto and homeowner’s insurance by extending liability coverage where the underlying policies end. A car accident resulting in severe injuries can quickly exceed $500,000 in medical bills, property damage and lost wages, not to mention claims for pain and suffering. Any amount not covered by your auto policy could cause an action to be brought against you and your family for your personal assets (bank accounts, cars, home equity, wages). With a $1 million umbrella liability policy, you would have more sufficient coverage. In addition, the insurance company would pay for an attorney to represent you and negotiate with the other party.

More generous umbrella policies may also cover claims such as false arrest, libel or slander (such as a negative online review). Premiums for umbrella policies typically range from $250 to $500 per year for an additional $500,000 in liability protection.

By |2019-08-14T13:59:49-07:00July 1st, 2018|Financial Planning, Insurance|

Congress Finalizing Tax Reform Bill

The U.S. House and Senate have each passed different tax reform bills and are working together to reconcile the differences. The goal is to deliver a final tax reform bill to the president before Christmas.

“Both bills are big improvements to America’s out-of-date tax code,” wrote Adam Michel, a policy analyst for the Heritage Foundation, in a recent article comparing the two packages. “Both bills cut taxes for individuals and businesses, largely repeal the state and local tax deduction, and allow businesses to invest more in the American economy through temporary expensing.”

Though nothing has been finalized as of this writing, a common theme seems to be allowing fewer itemized deductions for individuals and to balance that by increasing standard deduction amounts. For example, the personal exemption of $4,050 for income taxes would be eliminated and offset with a higher standard deduction of $12,000 for individuals and $24,000 for married couples. (The current standard income tax deduction is about half that – $6,350 for individuals and $12,700 for married couples.) Deductions for state and local income and sales taxes (SALT) will likely be capped at $10,000. In contrast, the child tax credit is expected to increase from $1,000 currently to $1,600 or more.

In anticipation of potential changes, those who typically itemize on their income tax returns may want to consider accelerating deductible expenses in 2017. For example, they could pay second-half property taxes and/or make a January mortgage payment before year-end. They could also make their fourth-quarter estimated state income tax payment by year-end.

By |2019-08-14T13:59:51-07:00December 18th, 2017|Current Affairs, Taxes|

Shopping for Auto Insurance

Mike Larriva, CFP shares personal insights on shopping for auto insuranceShopping for auto insurance is something I put off for years. I was happy with my existing company, and comparing new policies and rates was a hassle I just wouldn’t prioritize. My priorities changed recently, as my teen son is getting his driver’s license soon and I know teen drivers are expensive to insure. I had to bite the bullet and do some comparison shopping. Fortunately, I was pleasantly surprised how easy it is to get quotes now. Most companies were able to provide online quotes, which were emailed to make it easy to compare.

Most states require minimum coverage for bodily-injury and property-damage liability, to protect others when you are the driver at fault in an accident. But it’s wise to purchase more than the minimum required.

Uninsured/underinsured motorist coverage is especially important because it protects you if another driver with minimum or no insurance causes an accident and you incur costly injuries and repairs. This happened to me in 2000. I was involved in a rollover accident. Our SUV was totaled and the young man who hit me only had minimum coverage. My underinsured coverage protected us by helping pay for a replacement vehicle and medical expenses. A typical level for this type of coverage is $100,000 or more in benefits.

There are additional coverage options to consider, as well. Collision coverage helps pay for repairs to your vehicle when involved in a collision. Medical coverage helps with medical expenses that might not be covered by bodily-liability coverage. Comprehensive coverage is for repairs not caused by collision (such as theft, vandalism or hail damage).

As you are shopping for auto insurance, be sure to ask about any discounts that may be available. When I added my son to my policy, I learned many companies offer discounts for students who get good grades (B average) and who’ve taken defensive driving classes.

Consider comparing your auto insurance rates every few years. I did and made some changes that will help reduce costs for our family.

 

By |2019-08-14T13:59:52-07:00July 31st, 2017|Financial Planning, Insurance|

Two Small Financial Planning Steps

The New Year has begun and many resolutions have already been abandoned. When we decide to make changes, it’s easy to think big, look 10 steps ahead and become overwhelmed. Sometimes this causes us to give up and make no changes at all. Start small. Two small, yet often overlooked or neglected, financial planning steps everyone can and should make is to start saving and address estate planning.

Save Today

My biggest suggestion for the New Year is to put your savings on autopilot. Set up automatic savings from either your payroll or your checking account (401k contributions, straight to IRA, or emergency account).

Taking that first step is important. In 2015, the median household income was $55,775 or about $28 per hour, according to the U.S. Census Bureau. Just $5 a day is equivalent to about 11 minutes per day toward your personal savings. Investing 10 to 30 minutes of your work per day for yourself is a worthwhile investment. After a few months you’ll adjust to the smaller amount deposited in your checking accounts and hardly miss what you are saving.

Plan for Tomorrow

The next important step you should take is to address your estate planning. This is an uncomfortable subject for many, I know. However, after having recent family experiences with Alzheimer’s disease and cancer, and now caring for a parent with ALS, I have a great appreciation for the importance of estate planning.

An easy first step is to simply review the beneficiaries listed on your IRA, 401k and life insurance policies. You can do this today in just a few minutes (check your files or look online). Are the people listed still appropriate? If not, make a change. A year ago, I found one small IRA that still listed my sisters as beneficiaries instead of my wife and children.

Always list a primary beneficiary and a contingent beneficiary. If you don’t, then your state’s intestacy laws could supersede your wishes. Next, talk with your advisor and make plans to have your will, power of attorney and possibly trust documents created or updated. Take the time to create your estate plan this year, and communicate it to others. Your loved ones will appreciate your diligence, and it can greatly simplify an already difficult time in their lives.

By |2019-08-14T13:59:55-07:00January 23rd, 2017|Estate Planning, Financial Planning|