Frequently Asked Questions

Financial planning is the process of creating a comprehensive strategy to manage your finances to achieve your life goals. It involves assessing your current financial situation, identifying future goals, and creating a structured plan to reach those objectives. Good financial planning covers areas such as budgeting, saving, investing, tax planning, retirement planning, and estate planning.

Budgeting is the foundation of financial stability. It helps you understand where your money goes, prioritize spending, reduce unnecessary expenses, avoid debt, prepare for emergencies, and save for future goals. By creating and following a budget, you gain control over your finances rather than wondering where your money disappeared to each month.

Financial experts typically recommend keeping 3-6 months of essential expenses in an easily accessible emergency fund. This provides a financial buffer in case of unexpected events like job loss, medical emergencies, or major home repairs. If you have variable income or work in an unstable industry, you might aim for 6-12 months of expenses.

The amount you need for retirement depends on your desired lifestyle, expected retirement age, anticipated lifespan, and other factors. A common guideline is to aim for 70-80% of your pre-retirement income annually. More precisely, many financial advisors recommend saving 10-15 times your annual pre-retirement income. Pencive's retirement calculator can help you get a personalized estimate based on your specific situation.

A 401(k) is an employer-sponsored retirement plan with higher contribution limits and potential employer matching, while an IRA (Individual Retirement Account) is opened individually with more investment flexibility. Both offer tax advantages but have different contribution limits, withdrawal rules, and eligibility requirements. The main types are Traditional (tax-deferred) and Roth (tax-free growth).

Ideally, you should start saving for retirement as soon as you begin earning income. The earlier you start, the more you benefit from compound growth. Even small contributions in your 20s can grow significantly by retirement age. If you haven't started yet, the best time to begin is now, regardless of your age.

The 4% rule is a guideline suggesting that retirees can withdraw 4% of their retirement portfolio in the first year of retirement, then adjust that amount annually for inflation, without running out of money for at least 30 years. While this provides a simple framework, it should be considered a starting point rather than a rigid rule, as individual circumstances and market conditions vary.

While saving is important for short-term goals and emergencies, investing is crucial for long-term financial growth. Inflation erodes the purchasing power of money held in low-interest savings accounts over time. Investing in assets like stocks, bonds, and real estate offers the potential for higher returns that can outpace inflation and help build wealth over the long term.

Stocks represent ownership in a company, making you a shareholder who may benefit from company growth and dividends but also faces greater risk if the company performs poorly. Bonds are essentially loans you make to a company or government, which promises to pay you interest and return your principal at maturity. Generally, stocks offer higher potential returns with higher risk, while bonds provide more stable but typically lower returns.

Diversification means spreading investments across different asset classes, industries, and geographic regions to reduce risk. By not "putting all your eggs in one basket," you minimize the impact of poor performance in any single investment. A well-diversified portfolio typically includes a mix of stocks, bonds, cash equivalents, and potentially alternative investments based on your risk tolerance and time horizon.

Index funds are passive investments that track market indexes like the S&P 500. They're recommended for beginners because they offer instant diversification, low fees, simplicity, and historically competitive returns compared to actively managed funds. They allow investors to participate in market growth without the need to select individual stocks or time the market.

Pencive is a financial tracking application focused on helping you monitor your progress toward retirement and other financial goals. It provides visual dashboards, account tracking, and insights to help you understand your financial health and make informed decisions about your future.

Yes, securing your financial information is our top priority. Pencive uses industry-standard encryption protocols, secure authentication methods, and doesn't store your bank credentials. We implement strict data access controls and regularly review our security practices to protect your sensitive information.

Pencive provides tools for tracking and visualizing your financial data, but it doesn't offer personalized financial advice. The insights and projections are for informational purposes only and shouldn't be considered as financial or investment recommendations. For personalized advice, we recommend consulting with a qualified financial advisor.

Currently, you can't connect your Fidelity account because Plaid, our current aggregator, no longer supports Fidelity. We understand this is frustrating. Once we reach $1,000 in monthly revenue, we'll be able to migrate to an aggregator that supports Fidelity accounts. Thank you for your patience and support as we work to expand our coverage.