Learning personal finance as an adult doesn’t have to be scary–in fact, it can be liberating. When you learn how to manage your money, you tend to feel more in control of your life. Check out this FINRA Investor Education article by KAITLYN KIERNAN .

When you first enter the real world, it can be scary. For all you learned in high school or college, many of us are left feeling unprepared for the responsibilities that come with setting out on your own. This can be particularly true when it comes to managing your finances.

The fact is, very few Americans get the financial education they need in school, so many are left to figure it out on their own. In 2002, just four states required that personal finance education be offered to high school students, according to data collected by the Council on Economic Education, a non-profit group that has promoted children’s financial education for more than two decades.

Since then, the numbers have improved. In 2007, the number of states requiring high school-level personal finance education increased to nine, and in 2016, it was up to 22. However, that doesn’t help those who were out of high school before a personal finance education was implemented, or who were in a state that didn’t have a program at all.

Learning personal finance as an adult doesn’t have to be scary—in fact, it can be liberating. When you learn how to manage your money, you tend to feel more in control of your life.

If you are just getting started on your journey as an adult (or even if you are a few years in and need to level-set), here are five things I wish I knew about managing my finances when I first embarked in the real world.

Understand Compound Interest

The most important thing to understand as an adult is something called compound interest. Compound interest can either be your best friend when it is working in your favor (think retirement savings accounts) or your worst enemy if it is working against you (think credit card debt).

You either can earn interest in savings accounts or on other investments or you can owe interest on any sort of debt you carry. That interest becomes compound interest when it is added to your balance and included in future interest calculations.

An easy example of compound interest working in your favor is when you have a savings account at a bank that earns interest. Say you have $1,000 in a savings account earning 5 percent interest annually (hard to find these days, we know, although rates have begun to rise again). In month one, you would earn $4.17 in interest on the $1,000 in the account. But in month two, you would earn interest on $1,004.17, so the next month you would earn $4.18 in interest.

That may not seem like a big difference, but over time, it can really add up. If you didn’t touch that account for 10 years—you didn’t deposit any additional money or take any money out—and the interest rate stayed constant, you would end up with $1,647 without lifting a finger! Even if your account paid 1 percent interest annually (closer to today’s national average), you would have $1,105, and with 2 percent, $1,121.

Unfortunately, the same principle applies to most of your debt like student loans, mortgages and unpaid credit card balances. The balance you don’t pay off each month will accrue interest and increase your balance, so you pay interest on this higher balance each time. To make matters worse, credit cards generally have significantly higher interest rates than savings accounts. In fact, in June 2018, the national average annual percentage rate (APR) hit a record high of 16.75 percent. That means unpaid credit card balances can quickly spiral out of control.

To learn more about how you can use compound interest to your advantage, check out The Time Is Now: The True Value of Time for Young Investors.

Take Inventory—and Set Goals

What are you making (after taxes)? What are your expenses? Is there anything unnecessary in those expenses? How do your expenses compare to how much money you have coming in every month? You need to ask yourself these questions—and more—to truly get started on the road to managing your money like an adult.

Use this information to set up a realistic spending plan. But don’t stop there. Set goals. Setting goals helps you to stay focused on saving and gives meaning to the dollars you put away (or to the luxuries you skip) to make your goal a reality.

Some goals will take longer to achieve than others, which is why it is good to set some short-term goals. If you are only focusing on saving for events far in the future, like retirement, your long-term goals can begin to feel overwhelming. Your short-term goals can help you stay on track toward achieving those goals that are further down the road.

What are some good short-term goals? If you have high interest debt like credit card debt, make paying that down a priority (see the bit about compounding interest above). Here are three strategies to get you started.

Set Up Your 401(k) or IRA

When you start your first full-time job, there are plenty of outlays vying for a piece of your new paycheck. You might have student loans to pay, an emergency fund to save for and new furniture to buy for your new apartment. You might think it’s impossible, or unnecessary, to set some money aside for retirement now. Let’s be honest, it’s decades away and you are just getting started.

But that’s no excuse. Wrong. You need those decades to build up a retirement income you can actually live on, and the earlier you start, the better off you will be. Many employers offer a 401(k) and it is a great way to get started without having to do too much heavy lifting. A rough real-world estimate of how much you should put aside—at last 10 percent.

Many employers also match an employee’s 401(k) contributions up to a certain percent of salary. If you contribute at or beyond that threshold, you take full advantage of the benefit. But if you contribute less than your employer is willing to match, you may be passing up free money. Unfortunately, many people do miss out. Americans leave billions of dollars in 401(k) company matches on the table each year.

But investing in a 401(k) can have other benefits as well, including tax advantages that are worth a second look. Check out Retirement Isn’t Free—But Your 401(k) Match Is for more information.

Don’t Ignore An Emergency Fund

When I first graduated, I set up my 401(k) and contributed enough to get the full match, but then I was putting everything I could into my student loan payments. It wasn’t until I had a meltdown after receiving a larger-than-expected medical bill that I came to appreciate the importance of an emergency fund.

There will always be large, unexpected expenses in life, whether it is a medical bill, a flat tire, a family emergency that requires a flight home or something else unexpected. An emergency fund prepares you for that inevitability and allows you to tackle the challenge without resorting to your credit card (see above about how quickly compound interest can come to hurt with credit card debt).

Ideally, an emergency fund should be big enough to cover three to six months’ worth of expenses, but you can start small—even a few hundred dollars can help give you a buffer as you get started.

Related: Start Your Financial Road Trip With an Emergency Fund

Consider Other Investments

Let’s get one thing straight: You don’t need to make a lot of money to invest. It’s a common misconception that investing is for rich people, but it isn’t—it’s for everyone. In fact, investing early could help you become one of those rich people for whom you thought investing was reserved!

When you have paid off high-interest debt and have an emergency fund set up, it’s a good idea to consider opening a non-retirement investment account, such as a brokerage account, to save money and invest toward future goals. That’s because the goal of investing is to grow your money faster than you typically could in a bank account.

Investing with a small amount of money is easier than ever with new apps that will let you start investing with just a few dollars, basically allowing you to buy fractions of stocks or funds that invest in a wide range of companies. Before you get started with any of these platforms, however, be sure to check out these tips on automated investment tools.

Subscribe to FINRA’s The Alert Investor newsletter for more information about saving and investing.

If you or a loved one needs help in this area- we do that! Give your Trusted Financial Advisor a call today.

Best regards

Tim Shanahan

Omar Mian, Tom Licciardello & Tim Shanahan at the SEI Strategic Advisor Conference in Washington DC.

Top Compass Advisors: Omar Mian, Tom Licciardello and Tim Shanahan, this week all attended the SEI Strategic Advisor Council National Meeting in Washington DC .  The conference was attended by the country’s top 250 financial advisors who use SEI as an investment solution for their clients. The theme of this conference was SEI’s Client-First Commitment. This theme is consistent with the values of all Compass advisors as we are committed to putting our client’s interest first.

SEI Director Carmen Romeo and SEI Founder and Chairman Al West flank Compass Capital Corporation founder Tim Shanahan

Compass Capital is now in its 25th year of working with SEI as our primary platform for client investments. Compass has used the SEI practice management, operational and investment and trust services to help grow its business by a factor of 10 in that time. You may have heard us mention that we try to have  a “deep bench” at Compass and our partnership with SEI is a significant part of deepening our bench.

We congratulate SEI founder and Chairman Al West on SEI’s 50 years of business success. SEI is an amazing story with its start as a class project for Al West and some classmates while getting advanced degrees at the Wharton School of Business in 1968.

We also commend Carmen Romeo for his vision and leadership in starting and managing the firm’s investment advisors business. Carmen V. Romeo has been an Independent Director of SEI Investments Co. since June 1979 and was previously SEI’s Executive Vice President from December 1985 to December 2004 and Treasurer and Chief Financial Officer from June 1979 to September 1996.

Today SEI has 3,200 employees worldwide, serves about 8,600 clients, including banks, trust institutions, wealth management organizations, independent investment advisors like Compass Capital, retirement plan sponsors, corporations, not-for-profit organizations, investment managers, hedge fund managers, and high-net-worth families.

SEI manages or administers $869 billion in hedge, private equity, mutual fund and pooled or separately managed assets, including $335 billion in assets under management and $530 billion in client assets under administration.

SEI is a public company with a history of innovation and is listed on the NASDAQ exchange under the symbol SEIC.

We hope that our putting some light on SEI helps our clients to understand why we’ve chosen to partner with SEI for so many years.

Keeping Your Account Secure: Tips for Protecting Your Financial Information – FINRA Investor Alert

It is our goal to keep you up-to-date on the latest market news, so you have meaningful context for your investment portfolio.
Your brokerage firm has an obligation to safeguard your personal financial information. And every investor should take time to understand their firm’s cybersecurity procedures. But even the best procedures cannot prevent all instances of identity theft-especially if the vulnerability lies with you, the customer. Here are critical steps you can take to safeguard your financial accounts and help prevent identity theft.

How Does Identity Theft Occur?
A host of ways. Some identity thieves use keystroke-logging software to capture usernames and passwords, disseminating these programs through instant messages, emails, or freeware. Others “phish” for sensitive information by sending phony emails that purport to come from a legitimate financial institution but which ask for information your firm would never request through email-such as confirmation of an account number, password, credit card number, or Social Security number. Still others use the old-fashioned method of “dumpster-diving” to recover your discarded account statements or other records that haven’t been properly shredded.

How Can I Protect Myself?
Take the following steps to secure your brokerage accounts and your personal financial information:

Use Strong Passwords and PINs and Keep Them Secret. Use strong passwords and PINs that contain both numbers and letters and, if allowed, symbols. Do not share your passwords or PINs with others, and do not store them on your computer. If you need to write them down, store your list in a secure, private place. You should change your passwords and PINs regularly and use a different password and PIN for each of your accounts.

Maintain Your Computer Security. Personal firewalls and security software packages (with anti-virus, anti-spam, and spyware detection features) are a must if you engage in online financial transactions. Make sure your computer has up-to-date security software, including security patches, that the software is configured for automatic updates, and that the software is always turned on. For laptops, be sure to use encryption software. Computer hardware and software providers also maintain security pages on their websites with tips for checking and improving the security of your system.

Use Your Own Computer. It is generally safer to access your brokerage account from your own computer or device. Avoid using public computers to access your brokerage account. Public computers may contain software that captures passwords and PINs, providing that information to others at your expense. If you do use another computer, be sure to delete your “Temporary Internet Files” or “Cache” and clear all of your “History” after you log off your account. You should occasionally check to make sure that no one else has attached any device or added programs to your computer without your knowledge or consent. Consult the Help function on your browser and operating system to learn how to delete this information.

Log Out Completely. Always click the “log out” button to terminate your access to your brokerage firm’s website. Access may not be terminated if you simply close or minimize your browser or type in a new Web address when you’re done using your online account. Other users of the computer might be able to re-enter the site and have access to your account online if you do not properly log out. You also potentially expose yourself to “session stealing” if you have multiple Web pages open while logged on to your brokerage account. Avoid multi-tasking on multiple Web pages when checking your financial accounts online-or, if you must visit another site, use a different type of browser rather than opening another window.

Be Prudent When Using Wireless Connections. Unsecured wi-fi connections do not provide as much security as either wired Internet connections, encrypted wireless networks or your mobile carrier’s cellular data connections. Many hotspots-wireless networks in public areas like airports, hotels, and restaurants-reduce their security settings so it is easier for individuals to access and use these wireless networks. This increases the possibility that someone may intercept your information. You may decide that accessing your online brokerage account through a wireless connection is not worth the security risk. If you use your own wireless network, make certain you secure the network with wireless encryption.

Use Apps Wisely. If you use apps on mobile devices to access your financial accounts, be sure to password-protect your device-and make sure you select the highest security setting that the app offers.

Check for Secure Websites. When you access your brokerage account online, check to ensure that the log in page indicates that it is a secure site. The address of a secure website connection starts with “https” instead of just “http” and has a key or closed padlock in the status bar (which typically appears in the lower right-hand corner of your screen). When you click on the padlock, the security certificate should confirm the identity of the site you are visiting. In Microsoft Internet Explorer 7, look for the address bar to turn green.

Be Careful Downloading. When you download a program or file from an unknown source, you risk loading malicious software programs on your computer. Download software only from sites you know. Be wary of free software because it can be accompanied by other software such as spyware. Do not install software unless you know what it is and what it does and do not click on links in pop-up windows. Using anti-spyware software helps protect you from such programs.

Don’t Respond to Emails Requesting Personal Information. Legitimate companies will not ask you to provide or verify sensitive information through email. If your financial institution actually needs personal information from you or your statement, call the company yourself-using the number in your files or on your statement, not the one the email provides! Do not respond to emails, such as “phishing” emails, seeking your password, PIN, or other personal information.

Read Your Statements. Read all your monthly account statements (bank, brokerage, credit card, etc.) thoroughly as soon as they arrive to make sure that all transactions shown are ones that you actually made or authorized. Check to see whether all of the transactions that you thought you made appear as well. Be sure that your brokerage firm has current contact information for you, including your mailing address and email address. If you see a mistake on your statement or do not receive a statement, contact your financial institution or credit card issuer immediately and follow-up in writing, where necessary.

Secure Your Confidential Documents. Keep all your financial documents in a secure place, and be careful how you dispose of any documents with financial or other confidential information. Shred documents that have confidential financial or identification information before throwing them away.

Using the Cloud?

If you are considering storing your personal financial information in the cloud, here are some additional considerations:
Research the provider – Just as you are careful to choose a reputable broker or investment advisor, look into the reputation of the cloud provider for positive or negative comments in press coverage or social media. In addition, review their security policies; do they appear thorough and understandable?

Compare costs – Be sure to understand all fees, including whether you will be charged more if you increase your storage.
Look for Two-Step or Two-Factor Authentication – Also known as multi-factor authentication, two-step or two-factor authentication is a strong approach to controlling access and is effective at preventing account theft. In addition to username and password, you may need to enter a code received via text message or a one-time password generated by a small device.

Ensure encryption – Verify whether your data will be encrypted while stored in the cloud.
Read the Terms – Thoroughly read any terms of service before signing an agreement or clicking an “I Agree” box online. And ask about any terms or conditions you don’t understand.
Safeguard Your Social Security Number. Do not use your Social Security number as a username, password or PIN, and make sure that it does not appear on your printed checks. If your Social Security number appears on your driver’s license, be sure to ask your state’s Department of Motor Vehicles whether it can use an alternative number. Keep your Social Security card in a safe place and avoid carrying it with you. You should also be sure to safeguard the social security numbers of any dependents.
Do a Periodic “Identity Theft” Check. Reviewing your credit report may alert you to inaccuracies and unauthorized activity. You can obtain a free credit report every 12 months from three different credit bureaus by contacting the Annual Credit Report Request Service at AnnualCreditReport.com. This is the only authorized online source for you to get a free credit report under federal law. Be aware that you will have to disclose your Social Security number to obtain this report.

What Should I Do If My Identity Has Been Compromised?
If you think that your personal information has been stolen, immediately contact your brokerage firm and other financial institutions, including credit card issuers, to notify them of the problem. You should also notify the credit bureaus to put a fraud alert on your file. If you detect unauthorized transactions in or withdrawals from your brokerage account, ask the firm to investigate. Be aware that your firm will need time to determine what happened and may need your help in identifying family members or others who might have access to your account. In the meantime, be sure to change your username, password and PIN for the account.

Additional Resources

To obtain your free annual credit report:

http://www.annualcreditreport.com
For more information on identify theft, including how to file a complaint:
http://www.consumer.ftc.gov/features/feature-0014-identity-theft
For more information on phishing, spyware, and other online threats:
http://onguardonline.gov
http://www.sec.gov/investor/pubs/phishing.htm
For more information on smart investing:
http://www.finra.org/investor
http://www.sec.gov/investor.shtml
To receive the latest Investor Alerts and other important investor information sign up for Investor News.
– See more at: http://www.finra.org/investors/alerts/keeping-your-account-secure-tips-protecting-your-financial-information?utm_source=MM&utm_medium=email&utm_campaign=Investor%5FNews%5F012816%5FFINAL#sthash.W6cSVqV9.dpuf

If you have any questions, please do not hesitate to contact any of our Trusted Financial Advisors. We look forward to speaking to you soon.

Thanks
Tim Shanahan
President and Chief Investment Strategist

As we suspected and reported some months ago, the investment markets are undergoing some significant stress. Volatility has been evident as equity markets world wide have given back significant value so far this year. See this chart (click to enlarge) to the left  from Investors Business Daily of the World Major Markets as of 2/11/16 to get an idea of how negative returns are everywhere- there is nowhere in the world that right now looks like a good place to invest. Cash is still basically at 0% return.  This will improve over time and the lower values will make these same losers more attractive to invest into and they will become winners on the other side of the cycle.

We’ll spare you the technical babble and leave the speculation about the reasons for the correction to the talking heads/pundits. As the late economist Ezra Solomon once remarked, “The only function of economic forecasting is to make astrology look respectable.” We gets lots of research from many of the best thought leaders in the investment world and we filter it daily. We’re here to let you know that we used a “dashboard” of valuation metrics for guidance in our decision to raise cash and to “de-risk” our portfolio strategies over the last two quarters.   That same dashboard is flashing mostly red still today so we continue to hold a heavy cash position. When the dashboard shows more green than red we will re-allocate appropriately. As I’ve said before – money goes where it’s treated the best.

We’re touching base with you now to just let you know that we’re monitoring things closely. We’re aware of the concerns you have. We know that retirement funds are sacred and largely not replenish-able. We share your concerns as we do eat our own cooking. Remember your long term goals. If your risk tolerance has not changed and your time horizon remains the same as it was before this correction, keep calm and let us steer the ship. We will get you through the storm.

As always feel free to call on Your Trusted Financial Advisor for any questions or concerns.