The Best Apps For Tracking Spending

March 09, 2018

In my 11 years in the financial services industry, I have noticed an interesting phenomenon when it comes to spending plans (aka budgets – those terms will be used interchangeably in this post). Most people I coach understand the importance of tracking their spending to ensure they are spending less than they make. Despite that understanding, many people do not actually have a spending plan in place.

I hear a lot of reasons for this like, “it’s too much work,” “I don’t know where to start,” or “I’ve started to make a budget, but just never stuck with it.” Luckily in today’s age of technology, we no longer need to write out our expenses or plug them into a spreadsheet. There are a slew of apps that will help us see where we are spending our money and make sure that we don’t spend more than we make.

Let’s look at several of the more popular ones out there to see how they work and who they work best for (in no order of preference):

Mint

mint.com

Cost: Free

How it works: After you link them, Mint automatically syncs with all your bank, credit card, and investment accounts. The automatic syncing feature makes it easy to track spending by account by providing balances, transactions, and bills due. Mint automatically assigns categories to all transactions – you will need to double check this regularly, and correct them if necessary.

Mint will also create a budget (that you can customize) so you can track your spending and easily see when you are over budget in a category. You are also provided free credit score information. Heads up, as a free service, it does use targeted ads that recommend products and services.

Who it works best for: Folks new to budgeting and those preferring a hands-off approach to tracking their spending and budget.

YNAB or You Need A Budget

www.youneedabudget.com

Cost: $6.99 per month after 34-day free trial

How it works: YNAB is a pure budgeting solution – it does not offer other features like investment tracking or bill pay. Previous versions of YNAB were a desktop-based app, but the latest version is web based. This means you can automatically connect your bank and credit card accounts to import transactions versus uploading files from your bank, and you no longer have to manually enter transactions to make sure they are all captured.

Because budgeting is all YNAB does, they provide a strategy using three rules to help you spend less than you make, pay off debt, and stop living paycheck to paycheck.

Who it works best for: Those looking for a more hands-on approach and who resonate with the three rules YNAB applies to their budgeting strategy. Also, those “budget purists” not looking for other features like access to credit scores and investment tracking will enjoy the quality of the budgeting resources.

PocketGuard

pocketguard.com

Cost: Free

How it works: PocketGuard connects to all your financial accounts and creates a simple budget. Itfocuses on what you have available for spending – aka what is “left in your pocket” for the day, week or month. It does account for bills, spending, and savings contributions as well. PocketGuard also allows you to dig a bit deeper to track certain spending categories like groceries, clothing or eating out.

Who it works best for: Those looking for a simple, bare-bones budgeting app.

Wally

wally.me

Cost: Free

How it works: Wally is a mobile-only app (there is no website login option at this point) that does not require you to connect the app to all your accounts. Users input a starting total and then add expenses as money is spent. Wally uses the income and expense information you enter to give you your remaining budget for the day and month. Note that you will need to enter upcoming expenses to get a true sense of how much you have left for the month. The app also allows you to categorize expenses to track where you are spending your money.

Who it works best for: While it does not have as many features as Mint or YNAB, Wally does offer a solution for those who don’t like the idea of having to link all their accounts to the app.

GoodBudget

goodbudget.com

Cost: Free version or $6 per month ($50 per year) for an upgraded version

How it works: GoodBudget is a digital version of the old envelope system. Instead of carrying around an envelope with cash for each spending category, this app allows you to do that digitally. Each time you spend in a certain category, money is removed from that envelope. Once the envelope is empty, you can’t spend any more in that category.

It is not required to link accounts to GoodBudget, but you can upload a CSV file from your bank to populate transactions. You then create your envelopes and add money you earn or is already there. Then you fill your envelopes and track your spending from those envelopes. Not overspending becomes easier with the envelopes and allows you to save for other goals.

Who it works best for: Those who like the envelope system (it has been around for a long time because a lot of people have had success with it) and are looking for a digital way to use it. You can use the free version across two devices, so couples can stay on the same page. Remember, it only works if you stick to the philosophy of the envelope system – once an envelope is empty, you must stop spending!

Banking apps

Many banks also have budgeting tools and apps to help you track your spending and save for your financial goals. Some have internally developed apps, while others have acquired platforms (KeyBank purchased HelloWallet for instance). These apps generally integrate with your bank account automatically. Check with your bank to see what tools they offer and test drive them to see if they work for you.

The bottom line

As you can see, there are a lot of tools out there to help you with your spending plan (this list is not exhaustive either). Each one works a bit differently, offers unique features, and different pricing as well. Finding the right tool for you is critical in helping you develop your budget, and most importantly, stick with it!

Having a spending plan is so important to your financial well-being because it allows you to live within your means, avoid debt, and save for the things that are most important to you. If you have struggled to put one in place in the past, hopefully this will help you renew your commitment to your financial goals. Happy budgeting!

4 Steps Women Can Take To Keep Their Life Options Open

March 08, 2018

It’s no doubt that there is no greater time to be a woman in the history of our civilization — I agree that there’s still a lot of work to be done, but I can’t help but feel an overwhelming sense of gratitude to be alive right now as who I am today. It’s true that there continue to be barriers for women, particularly women of color, but generally speaking, we have more choices today than ever before. In fact, we have so many choices that it can often lead to a tremendous amount of second-guessing and anxiety.

Saying yes is also saying no

As Elizabeth Gilbert (whom I consider to be one of my personal mentors, even though she doesn’t know it) put it once, when we make a choice in life, we are also saying, “no” to hundreds of other choices — saying yes to becoming a financial coach for me was saying no to opportunities in musical performance, environmental work and fitness. In today’s society where we get to see how everyone else’s choices play out on carefully curated Instagram feeds, it’s waaaay too easy to get caught up in second-guessing our choices.

“Should I have broken up with that guy sooner so I could have kids? Should I have pursued that opportunity to champion recycling at governmental facilities? Do I really want to close the chapter on teaching fitness?” These are questions I’ve asked myself and the reason I have quotes all over my house reminding me that, “All things happen in God’s perfect timing,” and “…no doubt the universe is unfolding as it should.”

Keeping your options open

Many of my friends, colleagues and people I’ve had the honor of working with express similar doubts, although often not as deep — sometimes it’s as simple as, “I just wish I hadn’t used my credit card to fund that shopping spree last year.” Regardless of your certainty (or lack thereof) of your life choices so far and the future you’re embarking upon, there are some financial moves that you can make in the meantime that will keep your options open as you navigate this time of tremendous opportunity for women.

4 steps women can take to keep their life options open

1. Eliminate debt ASAP. When I was first starting my career, nothing stressed me out as much as the self-flagellation I endured every time I thought about what else I could be doing with the $300 per month I was paying on my credit card that I’d run up on stupid things like clothes and food. In the three years it took me to get to balance: $0, I limited pretty much anything optional in life. But it was worth it — being debt-free allowed me to leave a marriage I hated and also later allowed me to leave a job I hated.

2. Get confident about investing. Studies have shown that women are better investors than men, but we’d never know it — it’s by default because we are more cautious and shy away from going big in areas where we don’t feel 100% confident that we know what the heck is going on. The majority of the women I work with on investing choices and education are actually doing everything just fine, they just don’t know it. The sooner you can find the certainty that you’re doing fine with investing (because you’re putting money away for retirement, right???), the easier your mind will rest. And the more your early saving will help keep your future options open.

How to get more confident about investing

The simplest way would be to use Target Date Funds, understanding that the entire purpose of these mutual funds is to diversify your investments in a way that is appropriate for someone planning to need the money in the year named in the fund. In other words, I use Target Retirement Fund 2040, which is the closest year to when I’ll most likely be retiring. I know then that the fund will put my dollars in the appropriate mix of stocks and bonds, allowing me to take advantage of market growth over the years, without taking too much risk for my age.

If you want to get more hands-on, start reading. I like the books The 5 Mistakes Every Investor Makes and How to Avoid Them as well as Picture Your Prosperity. I’d also be remiss not to mention What Your Financial Advisor Isn’t Telling You: The 10 Essential Truths You Need to Know About Your Money, which was written by our CEO Liz Davidson. And of course, I invite you to poke around this blog for more insights from my brilliant colleagues.

Pick one and stick with it

Finally, know that there are as many investing philosophies and strategies out there as there are make-up tutorials on YouTube — the key to confidence and success is choosing the one that resonates most with you and sticking with it. Much like I stated above about the dichotomy of choice, saying yes to one means saying no to many others, you just have to go with it. And just like you can change your mind on many of life’s choices (including your eye shadow pallet), you can change your mind on investing strategies, but monkeying around with it too much can obliterate any progress.

3. Stockpile savings in a Health Savings Account (HSA). This is one of my top financial regrets — when HSA’s were first introduced, all I saw was the high-deductible that was required in order to start an HSA and I shied away. What I didn’t recognize was that I NEVER went to the doctor, so having a deductible wasn’t an issue. I played it TOO safe by sticking with an HMO plan for too many years, and missed out on literally thousands of dollars from employers who would’ve funded my HSA over the years. Not to mention I missed out on the tax savings of putting my own money in the account.

Why saving in an HSA can be so powerful for young women

Fast-forward almost 20 years into my career and I’ve literally spent over $10,000 in the past 2 years on various healthcare stuff — everything from acupuncture for fertility to having skin cancer removed from my arm and my scalp to seeing a physical therapist for IT band syndrome. Ask any 40-year old woman about her health and she’ll most likely tell you that it’s been a lot more expensive than she thought. If only I could go back and save some of the money I spent at Old Navy and re-direct it to my future healthcare expenses, I’d still be ahead of the game.

If you are planning to have kids one day, this becomes doubly as powerful, even for guys — maternity care is expensive, kids go to the doctor a lot, and you never know when an emergency appendectomy will have you headed to the OR. (just ask a couple of my colleagues who’ve had to deal with this recently)

4. Take care of yourself but don’t be too Type A about it. If I had a dollar for every stressed-out looking but perfectly sculpted adorable young woman I saw at the yoga studio I frequent, I’d be able to afford the unlimited membership — one of the things we’ve done well as a society is instilled the importance of good health in young women. I often worry though that they are putting so much pressure on themselves to do all that stuff perfectly that they’re missing out on the fun of life. It’s not about getting it all “right” all of the time, it’s about enjoying the journey. The easier my life gets, the more I realize it’s the challenges that make it worth living.

Enjoy some cheese fries, for Pete’s sake, just don’t charge it to your card unless you’re paying it off each month.

Should You Be A DIY Investor?

March 07, 2018

Should you choose your own investments or have someone else do it for you? It’s a choice that every investor has to make. Let’s take a look at the pros and cons of do-it-yourself investing:

Pros

It can be cheaper. You avoid advisory fees and you can choose low cost funds or even avoid fund fees entirely by investing in individual stocks and bonds. This is important as minimizing fees is one of the surest paths to investment success. In fact, a study of various asset allocation strategies found that fees mattered more than which strategy you chose in determining your performance.
You have more control. Having someone else choose your investments can mean giving up some control. If you are very particular about your investment strategy or want to avoid investing in certain companies or industries for moral reasons, you may be reluctant to give up that control.
It can be fun. Many people prefer to manage their own investments because they actually enjoy it. This is especially true for more speculative and “hands-on” investments like individual stocks, direct real estate, and more recently, cryptocurrencies.

Cons

It can also be more expensive. Most of the costs of investing are relatively hidden and don’t show up on your statements or trade confirmations. Mutual fund expense ratios are generally buried in the fund prospectus and turnover costs aren’t reported at all but can have a significant impact on your returns.
You have more control. More control isn’t always a good thing. Some of the most common mistakes investors make include chasing past performance, not being properly diversified, holding on to losing investments too long in the hope that they recover, and paying more in taxes than you need to. At the very least, it can be helpful to have a second opinion. A Vanguard study found that a good financial advisor can save you about 3% a year (net of a 1% advisory fee) in helping you avoid bad decisions.
It can be time consuming and stressful. Even if you are good at managing your investments, you may not have the time or desire to manage them yourself. Your time may be better spent elsewhere.

How to get started

Let’s say you want to be a do-it-yourself investor. Where do you start? Here some tips:

Have a strategy. You don’t want to just pick whatever happens to be doing well at the time, your brother-in-law’s recommendation, or what “feels right.” Instead, you might want to start by taking a risk tolerance questionnaire like this one and follow the guidelines as to how much to invest in stocks vs bonds vs cash (known as your “asset allocation”). You can also check out these asset allocation models by the American Association of Individual Investors and these “lazy portfolios” put together by various investment experts. Once you’ve decided on a strategy, consider putting it in writing.
Keep your costs low. Remember that study that found that fees can be more important than your asset allocation strategy? To keep your costs low, consider Warren Buffett’s recommendation of investing in index funds, which tend to have very low fees and turnover costs. By using index funds, you also avoid having to choose an active fund manager, which can be a notoriously difficult choice to make as most underperform the market index (which is what index funds track) and those who outperformed in the past are no more likely to do so in the future. If you don’t have index funds available to you, look for funds with the lowest expense and turnover ratios in their category.
Consider individual securities. Another way to minimize costs is to avoid fund fees altogether and purchase individual stocks and bonds. (Just be careful of commissions and other trading costs.) To be diversified, make sure you have at least 20-30 different stocks from a variety of sectors and with no more than 10-15% in any one stock. You can use a free stock screener to help you find stocks that meet your criteria. If you don’t know what criteria to use, you probably shouldn’t be picking individual stocks. Don’t worry though. As we saw, most professional investors fail to beat the market so you probably won’t either and would likely be better off with simple index funds.
Don’t gamble with your retirement or college funds. Your retirement and college funds should be in a boring, diversified, low cost portfolio. If you insist on wanting to “play” the stock market or gamble on Bitcoin, consider doing so only with money you can afford to lose…or just take that money and go to Vegas. You’ll probably have more fun that way.

What My Dog Taught Me About Estate Planning

March 06, 2018

I’ll be honest: no one likes to do estate planning. It is not pleasant to think about death, so we put it off. Between my Uncle Bob passing away and my work in a trust department, I’ve seen so many cases of people putting it off for too long — not having a will or a plan and then passing away — along with the pain that it causes to those left behind.

Estate planning is more than just a will

That said, there is another part of estate planning, health care directives or sometimes called end of life planning, that could be arguably more important and could cause YOU pain if it’s not in place when you need it. That is where you let your family and medical professionals know what you do or do not want to be done to keep you alive should you end up needing life support.

The story of Nick

Right now we’re going through this with our beloved dog, Nick. He’s been a big part of the family and my “Helpline buddy” for years. He has spinal cord issues that have caused him to lose most of the use of his back legs. He hasn’t been able to do a full walk around the block in over a year and he struggles to get around the house. In the last couple of weeks he has declined.

When I got home from a work trip recently, he wasn’t able to stand and couldn’t go to the bathroom without laying or falling into his own mess. We took him to the vet and they told us he was too chronic for surgery but that we could treat him with medication to see if it would reduce the swelling in his vertebrae and give him back partial use of his legs. We know that the time is coming when he may have to be put down to end his suffering but we want to give the treatment a shot. But who are we doing it for?

If Nick could talk

I used to think, “Nick, I wish you could talk,” when he would be barking for no apparent reason, or whining at 1:30 am. Now, I realize that was nothing. These days what I really wish I could ask is, “Nick, do you want a few more days, weeks or months to see another spring? Do you want to spend a few more days doing fun things with us or is the pain and humiliation too much?” I’m literally agonizing over what is the right thing to do for my dog.

Letting your loved ones know what you would want

I can’t imagine what it would feel like if instead of Nick, it was one of my parents or my wife that I was asking this of — I keep thinking about someone I love being dependent on a feeding tube and ventilator to live, with me not knowing what they wanted. That would just be devastating.

We can make our wishes known

The difference is that we can talk, and more importantly, put those words on paper by completing a health care directive and a power of attorney for health care decisions. If you tell your loved ones what you do or don’t want done in writing, then you have taken a HUGE burden off of their shoulders. (it’s also a good idea to tell them verbally, just in case) It may be a tough conversation to have, but it’s sure easier than talking to your dog or having to make a gut wrenching decision on your own. Get it done today.

8 Ways To Make The Most Of A Big Raise

March 05, 2018

“I’m so tired of driving this old beat up car. As soon as I make some more money, I’m getting my dream car. I deserve it.”

“We have so outgrown this house. There just isn’t enough space for us, to entertain, or for anything really. As soon as I make some more money, I’m getting my dream house. It’s about time I get something I really want.”

“I can’t even remember the last time I had extra money to just splurge with. As soon as I get a raise, that’s the first thing I’m putting money aside for.”

Have you ever found yourself saying some version of these things to yourself? I can definitely relate — early on in my career, I often found myself daydreaming about the ways I would spend additional income.

Hitting the pause button

Depending on your line of work, big bumps in income may come along often or only rarely, but regardless, when they do, it’s easy to quickly start dreaming of a bigger home, nicer car or even just a fancier wardrobe. At the extreme, many of us think that having a higher income will make our lives easier, only to find that when we look back over the years of small increases, nothing’s really changed in the way we feel about our financial situations.

The next time you find yourself with a bump in income, before you start bookmarking properties or loading up your shopping cart, PAUSE. This is the perfect time to consider how to make the most of your new pay rate and to ultimately make sure that you never have to revisit these thoughts again.

Here are eight suggestions that may not sound very exciting, but when taken seriously, can get you to the point of NOT needing a big raise in order to have the life you want.

Accelerate debt payoff – Use the Debt Blaster calculator to find out just how much sooner you can get those lingering student loans or credit cards paid off by adding a bit more to your monthly payments.
Bump up your emergency fund – More income means you’d miss it more if it went away, so use this time to add to your savings BEFORE taking on more financial responsibilities (like a new car or a bigger house) that make it harder to do so.
Max out your Health Savings Account (HSA) – Maybe you haven’t elected the High Deductible Health Plan (HDHP) before because you didn’t want the risk of having a big out of pocket hit, which often makes sense for situations where money is tight. Now that you make more money, the risk may be outweighed by the opportunity to save more tax-free for future expenses, like starting a family.
Contribute more to your 401k – Retirement may seem way off (especially if it literally is), but saving more in your earlier years will give you more options for later years. Use the Retirement Estimator calculator as a way to gauge how even just one percent more saved at a young age could mean retiring a year or more earlier than you expect.
Save for short and long-term goals in a Roth IRA – You can put an extra $5,500 into a Roth IRA for 2018, and even more if you’re 50 or older. When just starting out, a lot of people actually use a Roth IRA as savings account. Since whatever you contribute you can always take out tax-free and penalty-free, it can be a way to build up an emergency fund, while also boosting your long-term savings. Check out these 12 benefits of a Roth IRA on top of that. (By the way, you can still make a 2017 contribution to a Roth IRA by the tax filing deadline of April 17, 2018.)
Purchase some stock through your Employee Stock Purchase Plan (ESPP) at work – If your employer offers an ESPP, it’s a great way to get more bang for your buck because you purchase shares of your employer’s stock at a discounted price. You can leave that money alone until retirement or some people prefer to sell right away to take the earnings from the discount, then put that money toward their next big vacation.
Think bigger – Is there something really cool that you’d love to have, but always figured you could never afford, like a vacation property, or a cleaning person? Depending on how big your income jump is, and assuming you have the Big 3 (emergency fund, no high interest debt and saving enough for retirement) in place, perhaps it’s time to shift your money mindset to something you never considered a possibility before, rather that using the additional money to just upgrade to a bigger house or fancier car.
But not too big — Beware of lifestyle inflation: our “needs” tend to grow as our income grows. I’m not suggesting that you continue to live like a college student, but living below your means is the key difference between most “everyday” millionaires and those who may earn the same salary, but spend every dime they have.

At the end of the day, the point is to enjoy life and a part of enjoying life is having enough money to pay the bills and save for the future while still living in the moment! You put in the hard work needed to get to this new income level. Now, make the most of it by putting some of that extra money towards living life now and making sure you are financially stable in the future.

Are You Financially Ready To Retire?

March 02, 2018

The day is finally approaching. You’ve been saving and investing most of your adult life for this moment, but now you’re not so sure you’re really ready to retire. It’s a predicament faced by many employees that we work with. While retirement readiness has many non-financial components to it, here’s how you can know if you’re financially ready to retire:

1. How much income will you need? Don’t make the mistake of “guestimating” your expenses. That might be fine when you’re decades away, but you don’t want to discover that you’ve underestimated your income needs several months into retirement. Start by tracking your actual expenses over a few months and then make any adjustments you foresee to your lifestyle (like downsizing or relocating) to create a retirement budget. (You can use this calculator by AARP to estimate your health care expenses.)

2. What will you be receiving from Social Security? You can run a projection on the Social Security web site and enter the exact age you plan to collect. If you’re married, don’t forget that you and your spouse get the higher of your own benefit or a spousal benefit that’s about 1/2 the other spouse’s full Social Security benefit.

3. What other income will you be receiving? If you’re fortunate enough to qualify for a pension, get a pension estimate. Include net rental income from any real estate you own. I’d be hesitant about including income from a part-time job or business since you don’t know how long that income will last.

4. How much can you safely withdraw from your retirement savings? Add up all of your retirement savings, including retirement plans from previous jobs, your current employer’s plan, IRAs, and any other investment accounts intended for retirement. Then multiply that total by 4%, which has been found to be the historical safe inflation-adjusted withdrawal rate from a diversified portfolio over 30 years. (If your portfolio includes small cap stocks, you can increase that withdrawal rate to 4.5%.)

5. How much will you owe in taxes? Your taxes will vary based on your mix of income sources and what state you retire in. You can use this site to estimate your retirement tax liability based on those variables.

If your retirement expenses and taxes are more than your retirement income, you may want to consider reducing your retirement expenses, purchasing an immediate income annuity, taking out a reverse mortgage, or working a bit longer. Otherwise, you probably have the financial resources to retire. Here are a few steps you can take to help make sure you stay that way:

Make sure your portfolio is diversified and low cost. Keep in mind that the 4% rule was based on a diversified portfolio of market indexes. The simplest way to mimic that is with a target date retirement income fund made up of index funds since they’re designed to be fully-diversified “one stop shops” for people in or approaching retirement. If you prefer a more customized approach, consider using a low cost robo-advisor tool that can design a portfolio for you.
Consider long term care insurance. You can see your entire nest egg wiped out by long term care costs. That’s because Medicare and other health insurance policies don’t cover it. Medicaid does but it’s a poverty program that requires you to spend down virtually all of your assets to qualify and many places don’t accept Medicaid.Long term care insurance can protect your assets and your choice of care. In particular, see if your state offers a long term care partnership program. Purchasing a policy through one of these programs can protect your assets even if you use up all the insurance benefits and have to rely on Medicaid.
Have a withdrawal strategy. It’s not just how much you’re withdrawing but where you’re withdrawing from. If you’re withdrawing from pre-tax as well as tax-free (Roth) and regular investment accounts, you have the opportunity to structure your withdrawals to minimize taxes and even reduce health care costs in retirement. If your situation is complex, this is an area where a tax-aware financial advisor can be helpful.

The idea of retirement can be both exciting and terrifying. Hopefully by following these steps, you can make it more of the former and less of the latter. Are you ready?

This post was originally published on Forbes.

How To Avoid Penalties On Unpaid 401(k) Loans

March 01, 2018

One of the biggest risks to borrowing from your retirement through a 401(k) loan is the heightened likelihood of the loan becoming a taxable distribution if you leave your job (voluntarily or not) while still paying back a 401(k) loan. Because 401(k) loans are paid back via payroll deduction, when your paycheck goes away, so does the ability to repay it, so many employers require payment in full within 60 days of leaving.

New tax law provides relief

While some employers do allow you to continue to make loan payments if you leave your job, one provision of the new tax law that hasn’t gotten much attention can make a huge difference to people who find themselves in a bind with an outstanding loan and no more job. Basically if you “default” on your 401(k) loan, there is a way to still repay it, but the details matter.

What’s the big deal?

Prior to January 1, 2018, employees generally had two options to prevent the loan balance from becoming a taxable distribution if they left their employer with an outstanding loan:

Pay the loan back in full. It is rare that an employee is able or willing to go this route.
Repay the loan balance via “rollover” by contributing the amount still owed to an IRA within 60 days of leaving your job.

If you don’t pay back the loan, then any balance from a pre-tax 401(k) becomes taxable income, and if you are younger than 59 ½, you will also owe a 10% penalty for taking an early distribution from your retirement account. Since one of the advantages of taking a 401(k) loan is that it is not taxable if repaid, this can be a hard pill to swallow.

What’s changed?

The new law, which applies to distributions treated as being made after December 31, 2017, extends the rollover deadline from 60 days to the tax filing due date (including extensions) for the year in which the loan was considered defaulted. Let’s look at a couple of examples of how this works:

Example 1: You leave your job in January of 2018. You could feasibly have 20½ months to pay back the balance of your loan by depositing the amount owed into a rollover IRA. Why so long? Because you have until the filing due date of your 2018 tax return, which can be extended all the way until October, 2019. If you file in April, the payments would be due by then, so this would be a reason to extend your return (keep in mind this does NOT extend time to pay any taxes due, including if you end up NOT completing the rollover).
Example 2: You leave your job in December of 2018. You still have 10½ months (until October of 2019) to pay back the loan via contributions to your rollover IRA, but you may have to stretch a bit more financially to make it happen.

Keep in mind that even if you can’t pay it all back by the deadline, you should still pay back as much as you can to avoid those taxes and penalties.

The logistics

It’s important to note that you’ll have some paperwork to do in order for this to work. Here’s what I mean:

Let’s say you leave your job in June, while still owing $2,000 on a 401(k) loan. If you extend your tax return for that year until October, you’d have about 16 months to pay back your loan; that’s $125 per month.

Because your old job has no way to know you are paying the loan back into your rollover IRA, they will issue a 1099-R for the $2,000, showing it as a distribution to you.
The company where you have your rollover IRA will then also send you a Form 5498 showing you made $2,000 in rollover contributions to the account (make sure the deposits are recorded as a rollover and not new contributions).
If your plan is to pay the loan back via monthly deposits to your rollover IRA, it’s best to check with the IRA company first to make sure they are equipped to handle that while treating each payment as a rollover — it could be a real hassle if they code monthly deposits as new contributions, which WON’T satisfy the loan rollover rule. You may have to set up a separate savings account to collect your monthly payments, then make one lump sum rollover contribution to satisfy the loan rules.

Because it is unclear what type of documentation the IRS will require, make sure to keep all forms and communication you receive and consult your tax professional to help you reflect this process on your tax return. Keep in mind that this process could take a few back-and-forth letters with the IRS, due to the timing of when the 1099-R and Form 5498 are mailed.

To avoid any issues, if you know you are planning on leaving your job, your best bet is to not take a 401(k) loan at all. However, if you find yourself unexpectedly moving on from your current job and have an outstanding 401(k) loan, keep these new rules in mind. Your future self will thank you when it comes time to retire and your present self will thank you for saving a lot of money on taxes and penalties!

How To Get Late Fees Reversed Even If You Actually Paid Late

February 28, 2018

First of all, I need to clarify that I would never advocate paying bills late — not only can it become costly, but it can quickly ruin your credit score — even after you’ve paid a late bill, once it’s on your report as a late payment, it stays; only time will heal that wound. This post is specific to rare instances where you realize you forgot to make a payment and less than one billing cycle has passed (past due accounts are typically reported on a monthly basis to credit bureaus).

The story

A couple of weeks ago, I logged in to my bank account and realized that the payment for my credit card hadn’t posted and it was at least 3 days after it was due. A feeling of dread took over as I slowly logged in to my credit card to find that yep, I had a late fee and interest charges assessed on my entire balance. (Now that I’m debt-free, I pay my card off every month and just enjoy the cash back rewards)

I SWORE I had scheduled the payment weeks before, but as I searched my email, I couldn’t find any confirmation. The reality was, I’d forgotten. A costly mistake as the late fee alone was $35, plus interest for that month’s charges, which happened to be a month where I had a lot of work travel, so a higher balance than normal.

You may have a get out of jail free card

Most people, upon realizing that the error was truly their own, would be likely to just pay the fee and interest and then set a reminder to make sure this Never. Happens. Again. However, I figured it couldn’t hurt to plead for mercy. Here’s what I did:

Submitted a payment for the full balance immediately.
Opened an online chat window with a card company rep.
Explained that I’d simply forgotten to schedule the payment but had since paid in full.
Pointed out my long history as a cardholder as well as my record of on-time payments.
Asked if there was any way I could have the fee and/or interest reversed?

After a brief pause while the agent looked into it, I got the best news: as a valued card member, they were happy to make this one-time exception and reverse all charges. Success!

I had to wait about a week for all the charges to reverse, and then the following month, more interest charges showed up for the few days that I’d carried that balance over into the next statement cycle, but a quick chat message with a reminder of the previous conversation was all it took to have that reversed as well.

You’ll never know if you don’t ask

The lesson here isn’t to be sloppy with making bill payments – do it too many times and not only will those fees add up, but it could also really hurt your credit score. However, if you’re diligent about paying on time and happen to have a little brain fart like I did, it doesn’t hurt to ask for mercy. And with online chat windows, you may not even have to pick up the phone!

Scheduling autopayments

You may find yourself asking why I don’t just set up my bills to go on auto-pay, which is a legitimate question. I do use auto-pay for my bills that have a consistent amount due, like my cell phone and even electric bills, but for credit cards, I prefer to keep it manual because the amounts can fluctuate greatly, so I want to be sure that there will be enough in my account to cover the payments. Sometimes that requires me to move funds from my savings, especially when I’ve charged something that I’d been saving for like a vacation. Another reason I do it this way: because I enjoy it. (nerd alert!)

If you tend to keep a bigger cushion in your checking account (my Type A personality has me keeping the “cushion” in an attached savings with a higher interest rate), then scheduling auto-pay for everything may be an alternate solution. Just make sure you’re still logging in periodically (ideally at least once a month) to check that things are working!

Are You Embarrassed To Talk About Money?

July 20, 2017

When I first heard about Financial Finesse’s workplace financial wellness programs, which are offered free to employees of client companies, I assumed that almost all of the employees would want to take advantage of it. After all, how often do you have the opportunity to speak with a CERTIFIED FINANCIAL PLANNER™ professional with at least 10 years of experience who won’t charge you or try to sell you anything? At best, it could change your life, but even if you decide not to do anything, what’s the harm in talking?

But what I’ve learned over my years here is that people find all kinds of reasons not to take advantage. Don’t get me wrong, we are busier than we’ve ever been working with employees to improve their financial lives, but I often wonder what keeps everyone from making the most of this amazing benefit. I find one of the obstacles is people feeling embarrassed to talk about their financial situation. Which I hate, because there really isn’t anything to be embarrassed about — we’ve heard it all and we are a judgement-free zone.

Here are 3 of the most common things I hear people say and why they shouldn’t feel that way:

I feel stupid about money. People tell me this ALL the time. The funny thing is that these people are far from stupid. Many of them are lawyers, doctors, scientists, etc. However, we have an education system that doesn’t really teach personal finance, a financial system packed with unnecessarily (and some would even say purposefully) complicated jargon, and busy lives that leave us without much time to learn this on your own.

Far from being “stupid,” acknowledging what you don’t know is a crucial first step in improving your financial wellness. No one knows it all and even if you did, we all have emotional biases that can prevent us from making the right decisions. It never hurts to get a second opinion (at least when it’s free and unbiased).

I feel guilty about what I spend on X. This is another one I hear constantly. Remember, there is no one right amount to spend in any given area. It all depends on your personal situation, goals, and values.

For example, many New Yorkers complain about how much they spend in rent, but they often forget how much they aren’t spending on car payments, car insurance, gas, and car maintenance. A person who is debt-free and saving enough to hit their goals can afford to spend more than someone trying to pay off credit card debt. You may decide to spend more on travel and less on shopping, while your friend does just the opposite. Neither of you are wrong, as long as that spending doesn’t lead to additional debt.

I know I should be doing X, but I’m not. Welcome to the club. Even financial planners will admit to this. Personal finance reminds me a lot of dieting and exercise. Most of the time we know what we need to do, but the hard part is actually doing it.

Just like working with a personal trainer, a good financial wellness coach can not only help you decide what to do but help motivate you to actually do it. One way is to hold you accountable. In that case, your fear of embarrassment can be your best asset.

You’re not alone.

If you’ve ever said any of the above, know that you’re definitely not alone. These feelings are also nothing to be embarrassed by. (I’m much more concerned about the person who is in denial and doesn’t think they need any help.) The only thing to be embarrassed by is not doing anything about them….especially when the help is free!

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How To Get Free Help With Your Finances

October 08, 2015

Want free help with your finances? From the beginning of Oct to the beginning of Nov, the CERTIFIED FINANCIAL PLANNING™ Board of Standards, the Financial Planning Association®, the Foundation of Financial Planning, and the US Conference of Mayors are offering Financial Planning Days in cities all across the country. At each event, CERTIFIED FINANCIAL PLANNER™ professionals will be volunteering to provide free one-on-one financial counseling and education sessions to members of the public without selling products, giving out business cards, or collecting contact information. Continue reading “How To Get Free Help With Your Finances”

Get Ready: April is Financial Literacy Month

March 12, 2013

I always like an excuse to plan a party or event, so here’s a good reason to plan something for your workforce during the month of April. Financial Literacy Month actually evolved from Financial Literacy Day, first introduced by the National Endowment for Financial Education (NEFE) more than a decade ago, who then turned Financial Literacy Day over to the national Jump$tart Coalition for Personal Financial Literacy, which expanded the day into Financial Literacy Month. During the month, schools and employers are encouraged to focus on financial literacy initiatives. Continue reading “Get Ready: April is Financial Literacy Month”