Bonds 101: A Beginner's Guide

When we talk about investing, the spotlight often falls on stocks. But bonds are just as important in building a balanced portfolio. So, what exactly are bonds, and why do they matter?

What Are Bonds?

A bond is essentially a loan you give to an organization—like a government, municipality, or corporation—in exchange for regular interest payments and the return of your initial investment (the principal) when the bond matures. Think of it as an IOU.

When governments need to fund infrastructure projects or companies want to expand, they issue bonds to raise money. Investors like you can buy these bonds, becoming lenders rather than owners (as you would be with stocks).

How Do Bonds Work?

Here’s a simple example:

• Issuer: The entity borrowing the money, like the U.S. government or a corporation.

• Face Value (Principal): The amount you lend, usually $1,000 per bond.

• Coupon Rate: The interest rate the issuer agrees to pay you annually, often expressed as a percentage of the bond’s face value.

• Maturity Date: The date the issuer returns your principal.

If you buy a 10-year bond with a 5% annual coupon rate, you’ll earn $50 in interest each year for ten years and get your original $1,000 back at the end.

Why Invest in Bonds?

Bonds are known for being less volatile than stocks, making them a reliable way to preserve wealth and generate income. They’re particularly attractive to retirees and conservative investors who prioritize stability.

Bonds can help reduce the overall risk of your portfolio. Adding fixed-income investments can temper the impact of significant equity market declines.

The Bottom Line

Bonds are a cornerstone of investing, offering stability, income, and diversification. Whether you're just starting or refining your portfolio, understanding how bonds work can help you make smarter financial decisions.

Adding bonds to your portfolio isn’t just about safety—it’s about strategy. Diversifying with bonds can help you weather market ups and downs and reach your long-term financial goals.

Gifting Credit Card Points

Gifting credit card points for travel is a smart and budget-friendly way to give a meaningful present! Here’s a breakdown of how you can go about it effectively:

Option 1: Book Directly Through Your Credit Card’s Travel Portal

This is probably the most straightforward approach: log into your credit card’s travel portal and use your points to book flights or hotel stays in the recipient’s name.

• Pros: It’s quick and easy, with minimal hassle in terms of logistics.

• Cons: Travel portals sometimes don’t give the best point redemption value, which means your points might not stretch as far as they would with other booking options.

Option 2: Transfer Points to a Partner Airline or Hotel Loyalty Program

This option involves transferring your credit card points to one of your card’s partner loyalty programs (for example, a specific airline or hotel) and then using those points to book travel for the gift recipient.

• Pros: Transferring points can offer a much better redemption rate if you find the right deal.

• Cons: This method requires some upfront research, as transfer rates, redemption options, and availability vary across loyalty programs.

Pro Tip: Flexibility is Key

To increase your chances of finding a great redemption, ask your recipient for a range of travel dates. The more flexible they are, the more likely you’ll find a high-value booking for their trip!

With a bit of research, you can maximize your credit card points, making for a thoughtful and cost-effective gift that your recipient is sure to enjoy.

Tips for the Upcoming Thanksgiving Holiday

With Thanksgiving just around the corner, balancing the holiday preparations with everyday responsibilities can feel a bit overwhelming. However, with a few practical strategies, you can get everything ready without the stress. Here are some tips to help you prepare for Thanksgiving efficiently, leaving you time to relax and enjoy the day.

1. Plan Ahead & Prioritize

Begin with a clear plan—either on paper or a digital list. Write down the dishes you want to serve, the ingredients you’ll need, and any additional items like drinks or decorations. Prioritize the essentials, and don’t hesitate to take shortcuts for items that aren’t must-haves. For instance, pre-made pies or store-bought sides can save you time without sacrificing quality.

2. Make-Ahead Dishes

One of the best ways to stay on top of things is to prepare as much as possible ahead of time. Many dishes—like casseroles, mashed potatoes, or stuffing—can be made the day before. Some foods can even be frozen a week in advance and simply reheated on Thanksgiving, making the day-of preparations much easier.

3. Stick to Simple, Elegant Recipes

You don’t need complicated recipes to impress your guests. Focus on dishes that are both simple and delicious. A roasted turkey with basic seasoning or herbs, for example, can be just as impressive as one that requires more elaborate steps. The same goes for sides—roasted vegetables or simple salads are easy to prepare yet add a touch of sophistication to the meal.

4. Use Time-Saving Kitchen Tools

Take advantage of kitchen gadgets to speed up the cooking process. Slow cookers, Instant Pots, and air fryers can make preparing certain dishes faster and less stressful. These tools can also keep food warm, freeing up your oven for other dishes and saving you from last-minute scrambling.

5. Delegate & Outsource

Don’t feel like you have to do everything on your own. If you’re hosting, ask guests to contribute by bringing a dish. This not only lightens your workload but also gives everyone a chance to share their favorite recipes. Alternatively, consider ordering pre-made sides, appetizers, or desserts from a local bakery or store.

6. Create a Cozy, Simple Atmosphere

The goal of Thanksgiving is to enjoy time with loved ones, so don’t stress about creating the perfect setting. A few seasonal touches, like a pumpkin centerpiece, autumn-colored napkins, or scented candles, can create a warm and inviting atmosphere without hours of decorating.

7. Make Time for Yourself

While preparing for the holiday, remember to take a few moments for self-care. Whether it’s enjoying a cup of tea, going for a short walk, or simply sitting quietly for a few minutes, these small breaks can keep stress levels low and ensure you feel refreshed when your guests arrive.

With these tips, you can enjoy a well-organized and stress-free Thanksgiving, leaving you more time to savor the holiday with family and friends.

The Benefits of Hiring a Cleaning Service

For many of us, keeping a clean and organized home is a priority, but finding the time and energy to maintain it can be a challenge. One solution often overlooked is hiring a cleaning service. Though it might seem like a luxury, outsourcing this task offers a range of benefits that go far beyond just having a spotless home.

1. Time Savings

One of the most immediate benefits of hiring a cleaning service is the time it frees up. Cleaning your home thoroughly can take several hours each week. Imagine how you could better use that time.  By delegating this task, you’re reclaiming time and shifting your focus to things that truly matter to you. The peace of mind that comes from knowing your home is taken care of can be invaluable.

2. Professional-Level Cleanliness

While many of us are capable of keeping our homes tidy, professional cleaners bring expertise and specialized tools that often result in a deeper and more thorough clean. They know the best techniques for tackling issues, reaching hidden nooks, and using the right products for different surfaces. 

Hiring an expert also ensures that the cleaning is consistent. Rather than rushing through chores or skipping areas, professionals follow a routine that covers every corner of your home.

3. Stress Reduction

Cleaning can be stressful, especially when life is already filled with obligations. When you hire a cleaning service, you’re removing that stress from your plate. 

You can come home to a clean space without the lingering thought of when you’ll have to tackle the next big clean-up. A decluttered home often leads to a decluttered mind, leaving you feeling more at ease and ready to tackle the other demands of life.

4. Health Benefits

A clean home isn’t just about appearances; it’s also about creating a healthy living environment. Dust, allergens, bacteria, and other pollutants can accumulate quickly, especially in high-traffic areas. 

Additionally, for people with allergies or respiratory conditions, having a regular cleaning service can significantly improve their comfort and health by keeping allergens and irritants under control.

5. Better Work-Life Balance

In today's fast-paced world, maintaining a healthy work-life balance is more important than ever. Balancing work, family, and social commitments can be a constant struggle. Cleaning is often one of the tasks that gets pushed to the bottom of the to-do list, and when it does get done, it can feel like a chore that eats into your downtime.

By outsourcing your cleaning, you're buying back some of that balance. The hours you would spend cleaning can now be devoted to activities that nourish your well-being—whether that’s spending more time with loved ones, pursuing personal passions, or simply unwinding.

6. Cost vs. Value

It’s easy to look at the cost of hiring a cleaning service and feel like it’s an unnecessary expense. However, when you factor in the time, effort, and stress it saves, the value often outweighs the price. By freeing up your schedule and improving the cleanliness and health of your home, you're investing in your overall quality of life.

For many people, the small financial outlay can lead to significant improvements in their well-being, productivity, and happiness.

7. Tailored to Your Needs

One of the great things about professional cleaning services is the flexibility they offer. Whether you need a weekly, bi-weekly, or monthly cleaning, or even a deep clean before a big event or after a renovation, you can customize the service to fit your budget.

Some cleaning services also allow you to specify certain tasks or areas of your home that need more attention, ensuring that you get exactly what you want out of the experience.

If you’re considering hiring a cleaning service, think of it as more than just a convenience—think of it as a way to enhance your well-being and improve your daily life.

Paying Bills with Credit Cards to earn Travel Points

June 27, 2024

Question:

I have been reading about people paying their rent and taxes with their credit card for the travel points. Is this a good idea?

Answer:

While everyone’s circumstance is different, in general it is not a good idea to pay rent or taxes with a credit card.

• If you do not pay your credit card bills in full every month, it is not worth accumulating points on a travel credit card.

• There is often a roughly 3% fee to pay bills like rent and taxes with a credit card. That’s a high bar to make the points “pay for themselves”.

  • Caveat: many credit cards incent new customers with a huge points bonus when they spend a certain amount in the first 3 or 6 months.

• If you need to charge rent or taxes to earn the bonus and you pay your credit card bill in full every month, then there may be a benefit.

For more information, here is an article from the Wall Street Journal that I found on the subject.

Asking for a Friend - How often should I look at my tax return?

June 24, 2024

Question:

How often should I look at my tax return?

Answer:

At Rooted Planning Group we think of tax planning year-round and incorporate it into every aspect of our practice. We’ve said it before, but we consider your tax return one of the key planning documents along with social security estimates and investment statements. We recommend that all our clients look at their tax return at least two times a year.

As a next step, why don’t you set a reminder in your calendar to review your 2023 tax return in September. You can compare how your dividends and capital gains look and if your income is higher or lower. There are still 2 estimated tax payments in September and January to make any adjustments necessary.

Asking for a Friend - I think I am about to come into an inheritance that I didn’t expect so soon. What should I do?

June 10, 2024

Question:

I think I am about to come into an inheritance that I didn’t expect so soon. What should I do?

Answer:

One piece of common advice that I agree with is don’t do anything with the inheritance for six months. With rates on cash hovering at or above 5%, I would put it into a money market fund or even a short-term CD. The caveat to that advice is if you have any high interest credit card debt that needs to be paid down or paid off.

A recent article in the New York Times recommended taking 3-5% of the inheritance and donating to charity and using an additional 3-5% for something you really want. I’ll leave those two thoughts up to you.

If you are working, you could use the money to bolster your retirement savings. The good news is that you can put it into a taxable brokerage account and have a lot more flexibility in terms of tax treatment than in your 401(k) or IRA.

If you are close to retirement, you can use the money as a cash cushion until Social Security or pensions kick in. This would serve as a buffer especially if the equity markets decline in your first few years of retirement.

You could also start or add to an emergency fund.

Whatever you decide, I suggest you consult with a financial professional. If you have a financial planner, they are a fiduciary and must act in your best interest. You could also check in with your accountant to make sure there are no tax implications.

Also see: What Issues Should I Consider If I Experience a Sudden Wealth Event?

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Asking for a Friend - My grandson is graduating from college. I’d like to give him a gift that will start him off on a solid financial path. I think he has student loans. Any advice?

June 3, 2024

Question:

My grandson is graduating from college. I’d like to give him a gift that will start him off on a solid financial path. I think he has student loans. Any advice?

Answer:

What a great offer to make and what an opportunity for your grandson!

Does he have a job lined up? If he has a job, ask him if his company has a student loan benefit. In other words, does his company pay any of his monthly student loan bill? One thought is you could cover the difference between what his company pays and his total monthly bill.

Another thought if his company does not have a student loan benefit or he is still looking for a job, is to cover his student loan payment for a period of time, say six months to a year. Don’t forget that he doesn’t have to start making payments for six months after he graduates.

He can also apply for the SAVE program which is an income-based repayment plan.

In return, you could ask him to “match” your student loan payment, but he has to start an emergency fund.

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Pass those questions on to us at AskRPG@rootedpg.com and we will feature them in our future newsletters.

Asking for a Friend - What is the best time to seek the advice of a financial advisor?

May 27, 2024

Question:

What is the best time to seek the advice of a financial advisor?

Answer:

This is a two-part answer:

• First, the term financial advisor is broad. It can include life insurance representatives who also sell investments, it can include financial advisors at brokerage firms who primarily look after your investments, it can also include financial planners who focus on a client’s entire financial life and charge for services rather than on assets. All these types of advisors are compensated differently so it pays to do your homework. We think the financial planner model could be right for most folks as it provides holistic advice and eliminates conflicts of interest with a straightforward fee structure.

• In terms of when is the best time, most people seek financial help as they get closer to retirement. We think that folks should begin to engage with an advisor as soon as they feel like they have too many questions going unanswered. Though there isn’t one right time to seek help, establishing a trusted relationship in your late thirties or early forties can make the transition to retirement easier and less anxious.

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Pass those questions on to us at AskRPG@rootedpg.com and we will feature them in our future newsletters.

Asking for a Friend - My daughter is starting to think about colleges & majors, do you have any advice?

May 20, 2024

Question:

My daughter is a sophomore in high school and is starting to think about colleges and majors. I want her to go into this with her eyes wide open, do you have anything I could share with her?

Answer:

This is an exciting time of both your lives, and we commend you for this approach.

While the cost benefits of attending college vary significantly, we hope this article helps give you both some direction: College Cost Analysis

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Do your friends ask you financial questions?
Pass those questions on to us at AskRPG@rootedpg.com and we will feature them in our future newsletters.