How To Enjoy Your Money Today Without Sacrificing Your Financial Future

October 27, 2017

I have a confession: I am having a legitimate mid-life crisis. See, I recently turned 50 and as I approached this milestone age, I did the math and figured out that I basically only have 10 more summers to do the things I want to do while I still can. It’s not that I don’t think I’ll still be around at 60, but the reality is that I might not be able to physically do what I can today — my dad retired at 65 and died from pancreatic cancer less than a year later, so I’m seriously feeling the squeeze of my mortality.

I have had the opportunity to enjoy some great adventures, but my bucket list isn’t complete. Time is ticking and I’m getting busy on that bucket list.

Making trade-offs

Much of financial planning focuses on the distant future. And while it is necessary to plan for those long-term goals, I talk to people every day who are just as much, if not more, concerned about the near-term, just like I’m thinking more seriously about the next 10 summers.

Adventures and travel take time and money, neither of which I have a lot of by any means. Plus, I have other goals that I would like to accomplish, like retiring comfortably in my mid-60’s for instance. To do it all, there are trade-offs I must make – most of us do. If we spend all our pennies today, we won’t have any for the future.

Balancing the long term against the short term

In order to check as many things off my list over the next 10 summers without compromising my longer-term goal of retiring comfortably, I have basically two choices:

I can increase my income (maybe take a bar-tending job a couple nights a week) or
Decrease my expenses.

Because I value my evenings and weekends, I’ve decided to cut back on discretionary spending. My wife and I figured out the limit we wanted to set on things like groceries, dining out, gas and shopping so that we could direct the rest toward travel throughout our 50’s.

How we are limiting our spending

To stick to our limit, we set up a separate checking account with a debit card (our only one) and fund it with a defined amount each paycheck. I don’t have the patience or desire to constantly edit an online app to track each category. In fact, I don’t care which category it goes to, but when it’s gone – it’s gone, and we have to live the rest of the pay period without.

It happens almost every time, sometimes our balance gets down to less than $5, but that’s by design. It wasn’t easy at first but now that we are used to it, we feel less stress about our finances. At the end of the day, we are able to check the bucket list while addressing our other financial goals such as staying on track to retire when we’re ready.

On Conspicuous Consumption: How Jay-Z’s 4:44 Album Gets It Right

October 26, 2017

When hip hop artist Jay-Z released his most critically acclaimed album 4:44, it was praised not only for its transparency, but also because of its economic messages. It’s no secret that pop music does not have the best track record of promoting good financial decisions. And with a few exceptions, hip-hop is the worst offender. You can even find a song like “Money Ain’t a Thang” in Jay-Z’s old catalog.

Essentially that is what has driven the buzz about this project — Jay-Z goes counter to the braggadocio of his youth and gives a little sage advice on areas we could all stand to work on. Here’s what I mean.

“Ya’ll on the ‘Gram holding money to your ear. There’s a disconnect, we don’t call that money over here” – The Story of O.J., by Jay-Z

Calling out conspicuous consumption

In “The Story of O.J.,” he raps, “Ya’ll on the ‘Gram holding money to your ear. There’s a disconnect, we don’t call that money over here,” which is referring to the “money phone” phenomenon. If you are not sure what that is, search the term “money phone” and you will find countless images of people holding stacks of cash to their ear. It is a show-off maneuver that is supposed to convey that money is calling the person.

You may not have hundreds of dollars to your ear while posting it to Instagram, but it doesn’t take much to fall into the trap of conspicuous consumption — the desire to have the newest car, the swankiest house and even the newest iPhone — which can actually result in a circumstance that puts you further away from having the wealth you’re looking to represent in the first place.

The problem with conspicuous consumption

Conspicuous consumption says you don’t belong. Many try to increase their consumption level in order to raise their status among others and be a part of the “in crowd,” but it has been my experience that such conspicuous consumption often highlights the insecurity of the person.

In my years of working with truly affluent clients, one thing I gleaned is that it is very difficult to convince someone who is actually wealthy enough to have that status that an outsider belongs there. It is like being a traveler to a foreign country. The natives know tourists when they see one and affluent people know who is affluent and who isn’t, regardless of consumption levels. Gaudy shows of wealth tend to confirm a person’s status as lower; it doesn’t improve it.

Conspicuous consumption could be a symptom to a deeper concern — and it never ends. Outward displays of wealth can result in sabotaging your journey to building your actual wealth. Wealth is a relative concept and when we fall into “Keeping up with Joneses,” it can be a never-ending spiral. When you see someone with that new phone or in that nice car, it is likely that that person could be judging themselves against someone in an even nicer car.

The real way to measure your wealth

Here at Financial Finesse we have come up with a definition of financial wellness that is objective and has very little to do with what you own. Through our work with millions of Americans, we’ve defined that true financial wellness is:

A state of being where an individual has achieved the following:

Minimal financial stress
Living below their means with no high interest debt
An adequate emergency savings fund
Income and assets are protected from loss
And an ongoing plan to reach future financial goals

So for example, if you use debt to get those extra things that might make you look wealthier (or more financially well), you could find yourself cutting back on your lifestyle later to pay off the things you thought you would make your life better today. By making good financial choices now, you set yourself up for more of the things you like later, without sacrificing your future.

This is not say you cannot enjoy nice things — financial health does not mean you must quench your sense of style. I have my own penchant for Italian loafers and German cars, but I also recognize I really only need one black pair and one brown pair of loafers. I also purchased my Audi used and it has been paid off for several years now. There’s a balance.

Next time you feel like you need to buy something that would compromise your ability to reach that state of financial wellness, take a self-assessment — ask yourself if the things you want are the things you really want and not just for PDC (public displays of consumption.) Be authentically you, but keep your financial future in mind.

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Could This Be The Real Thing That’s Keeping You From Saving More Money?

October 25, 2017

Scene: Pet store, just before Halloween.

You walk in and the first thing you see is that all pet costumes are 40% off. Of course you stop to look, and ohmygosh, that princess costume is exactly what your Siamese cat needs because come on, she’s the most royal of them all. It wouldn’t be fair to just dress her up, so you also pick out a Jester costume for the kitten, which is actually kind of purrfect since he’s constantly annoying her while she’s holding court.

Holding court with the commoners

You move along to the next display and see that they also have Christmas collars and who doesn’t want their cats to be dressed up for the family photo?

And just like that, I went from buying a bag of cat food to (almost) spending $75 on impulse buys that I absolutely, 100%, would have regretted within a week.

A real joker

Sound familiar?

Each item on its own didn’t seem like much (although $25 is actually a lot of money for a cat costume, now that I’ve left the store and regained my rational mind), but this is how retailers snag your dollars. They KNOW that you’ll be drawn to those displays and they know that you’ll already be adding up the social media likes and comments before you even hit the register.

My mom could not resist this one for Taz – worth it!

While saving up for life’s events like weddings, holidays and other fun times is one key to avoiding that infamous “borrowing” from your savings (I used to do it too, I kept a running tally of what I took out of my savings thinking that some day I’d pay it all back, when like what, I won the lottery? I was kidding myself), reinforcing your wallet against impulse spending on stuff is another important key for many of us.

Ideas to overcome the impulse

I won’t insult anyone by suggesting you just stay away from Target or only shop with a list (although that works for some), but if you also find yourself spreeing away your extra dollars, try one of these methods to see if you can’t keep it in check.

Eliminate the extra cash from your checking account. There’s a reason that happy hour is always busier on payday — everyone feels richer due to the buoyed balance in their checking account. Psychologically, I know that I feel much more spend-y when I have some wiggle room in my account, but if the balance is getting down there, I instinctively think twice about spending on anything beyond planned purchases. Hack your own habit by transferring any money you’re not planning to spend on bills and other planned expenditures before your next paycheck to a separate savings account. You may need to dip into it when things come up you didn’t anticipate, but it may make you think twice the next time a shiny object catches your eye.
Give yourself a splurge budget. Whether that’s factoring in that you can’t get out of Target without spending $100, or keeping an extra fifty dollar bill in your wallet that only gets replenished on the first of the month, allowing yourself to partake in the impulse spending — but in a more mindful way — can help to keep it in check.
Remember what you’re saying no to by saying yes to the dress/scarf/tote bag/cat costume. This is the trick I used that had me putting the cat clothes back — I somehow had the presence of mind to remind myself that the more money I save today, the earlier I can retire or the more fantastic vacation we can go on next year. Maybe put a post-it note on your credit card or some other physical blocker that can take you out of your emotional/impulsive mind and back to your rational head.
Match your splurge. Make a rule that for every dollar you spend on an impulse buy you will match with a dollar to savings.
Save your savings. If you’re a sucker for a flash sale or love looking at the bottom of your receipt to see how much you saved at discount stores like Marshalls or TJ Maxx, make a commitment to actually save that money by pulling up your banking app on the spot and moving the “savings” amount into your actual savings account.
Put yourself on a temporary spending diet. One way to deal with the fact that impulse buying is our emotional mind overcoming our rational mind is to create a habit, which takes practice. I’ve lost count of how many food diets I’ve tried and while I may stray from the eating plans after approximately 11 days, some of the habits stick over time. For example, now that I know how much sugar is in a pumpkin spice latte, I’ve gone cold turkey even if I do pop into Starbucks for a treat on occasion — I just choose a lower sugar option. By committing to NOT impulse buy for, say, 21 days (the length of time many experts say it takes to create a habit), you may naturally quell the impulse even if you go off your “diet.”
Create an email filter for all retail emails to skip your inbox and go straight to a folder. This way you can still get the coupons if you need them, but without the daily nudges to shop. This is another trick I actively use and here’s how I know it works: If I know I need to go to Michael’s to buy something, I look in my “Shopping” email folder to see whatever coupon or offer they emailed me that day, but otherwise I’m not tempted because I don’t see it in my inbox. On the other hand, a few weeks ago, an Athleta email escaped the filter and within minutes of opening the email I found myself pages deep in yoga pants and sweater dresses. Danger zone!

What ways have you found that keep your impulse buying in check? I’d love to know and share them in a future post! You can email them to me or just comment on this article on our Facebook page.

Are You Committing Financial Infidelity?

October 20, 2017

Have you ever cheated or lied to your spouse or significant other regarding a financial matter? Amazingly, 42% of adults who combine their finances with a partner admit to committing financial infidelity, according to a survey last year. The survey also found that almost 4 in 10 people had hidden cash, a purchase, a bill, or even a bank account from their significant other, while 16% reported more significant lies such as how much they earned or how much they owed.

These numbers are higher than when the same survey was conducted 3 years earlier. Perhaps we need Sweetest Day as a reminder to be good to our partners after all!

Money fights can lead to divorce

I have to say that I’ve occasionally tried to pass off a new outfit as if it had been in my closet for a while, but never to the point where a financial deception would cause an argument between me and my husband. Luckily, we don’t fight about money since arguments about money and finances is the top source of marital tension based on Money Magazine‘s Americans and Their Money survey.

Fights about money that occur at least once a month were reported by 41%, followed by chores and quality time together, and this financial stress isn’t good on the state of their relationships. Utah State University professor Jeffrey Dew, an expert in money and family relationships, has found that couples who disagree about finances almost every day are 69% MORE likely to divorce than couples who rarely or never argue about money.

Spotting the signs of cheating

So how can you spot the signs that your partner in love and money is cheating on you financially? It usually gets detected with finding a stray receipt or credit card statement you aren’t familiar with, or even worse, calls from creditors.

Another red flag is if your loved one gets defensive or withdrawn when you try to bring up money issues or if they handle all the bills and you never get to see how the money is being spent (or earned). In some cases, financial deception could be a sign of a serious issue, such as gambling or a compulsive shopping addiction.

Avoiding financial infidelity

To avoid being cheated on or to fess up to your own financial infidelity, the first step is to sit down and have the “money talk” at least once a month. Clear the air and share all of your debts, account balances, and review your latest pay stubs. Talk about what is causing you to stray from your financial goals as a couple and set a spending limit like $100 for individual purchases that don’t require approval from your partner.

Paying the bills should be a joint venture so both of you know how much is owed and to which creditors. This way, the only thing left to argue about will be what’s for dinner tonight — which, believe it or not, 28% of couples argue about every month!

How To Find The Best Travel Deals During The Holidays

October 19, 2017

Along with a respite from work and the joys of celebration, the holidays can bring stress…and debt. One of the biggest culprits is the cost of travel. Fortunately, there are some things you can do to cut those travel bills down to size:

Flights

When to book: You can pay considerably different prices for the same flight and seat depending on when you buy your ticket and earlier isn’t always better. There are some rules of thumb like purchasing tickets 30 days to 3 months before a domestic flight and 1 ½- 5 ½ months before an international flight and specifically on a Tuesday at 3 pm ET (when airlines release the most sales). If you have an iOS device, another option is to use an app called Hopper^†, which tries to predict the best time to book your flight.

Finding the best fares: When it’s time to book your ticket, check out a site called Yapta, which stands for “Your Amazing Personal Travel Assistant.” It’s powered by Kayak (the sites even look the same) and adds a feature that makes it live up to its name. It can automatically alert you if the price of your flight drops more than the exchange fee and helps you get a credit for the difference. The service works with most of the major US airlines but no foreign-based carriers.

One carrier that doesn’t work on Yapta but that you’ll also want to consider is Southwest. They allow you to change your flight with no fee or cancel for a credit so you can always switch if you see a better deal. Sometimes I even purchase more than one Southwest flight to give me multiple options and then cancel the unused flights for credits I can use in the future.

Choosing your seat: If you’re traveling alone, never choose a middle seat. If your only options are middle seats and premium seats for a fee, consider leaving your seat selection blank. You’ll be assigned a seat at check-in and there’s a good chance you can score a premium seat for free if they’re the only ones left. (This often happens since people will often choose a middle seat to avoid the fee when booking.) There’s no guarantee there will be any available but choosing a middle seat guarantees…a middle seat.

If you’re traveling with someone, you and your travel partner might want to each choose an aisle and window seat in the same row. If someone sits in the middle seat, I’m sure they’d be happy to switch with one of you. But if no one chooses to sit in the middle, you have the whole row to yourself.

Rental cars

Another site called Autoslash does basically the same thing as Yapta for car rentals except they automatically re-book you if the price goes down since you generally don’t pay for car rentals in advance. They also search and apply for coupons you may be eligible for. However, they only include certain car rental companies.

Hotels

Tingo works the same exact way as Autoslash for hotel reservations. They automatically re-book you if the price drops and refund the difference back to your credit card. But unlike Autoslash, Tingo works with virtually every major hotel group and thousands of independent hotels.

There’s one more step you can take after booking the best deal you can find on Tingo. Just before the hotel becomes non-refundable, check an app called Hotel Tonight. It provides great last-minute hotel deals for select cities.

These methods don’t require any sacrifice and little to no extra time. In fact, you don’t really have to change your behavior much at all. Don’t you wish saving money during the holidays was always this easy?

How I Learned To Lend Money To Family & Like It

October 13, 2017

In traditional financial planning circles, lending money to family is considered taboo. However, I must admit, I’ve bent the family finance rules a few times. Please don’t judge. After making some big mistakes (that you don’t have to make because you are wisely reading this blog), it’s actually worked out well for everyone. Here’s what happened.

Lending to family the first time: 3 big mistakes

A close relative of mine who had been living with me in the Rocky Mountains found a job opportunity in Las Vegas that was exactly what she needed to get her foot in the door. All she needed was a reliable car to get there and then to use while living there. Since she had no money, I agreed to sell her one of mine at less than market (because she is family) and we agreed she would make payments to me once she got settled.

Saying good-bye to my Trooper

So, that’s how my perfectly maintained, excellent condition 1992 Isuzu Trooper was soon never to be seen again. Long conclusion short – things hadn’t gone according to plan and my family member didn’t want me to know that the job hadn’t panned out the way she’d hoped. She had sold that awesome SUV for an absurdly low price to raise cash, keep her place, and continue her job search. She couldn’t bear to tell me and kept hoping she’d get a job and be able to start paying me back without my noticing too soon.

When I finally did find out, I felt soooo foolish. Every older person I knew had warned me never to lend to family or friends. I learned some valuable lessons:

Mistake #1 – Not assigning market value. The market is the market when it comes to anything, and if you end up with an asset for whatever reason, you want to make sure you’re not devaluing for no good reason. (even if it is family)

Lesson: Assign a realistic value to things.

Mistake #2 – Not formalizing the agreement. There’s a stereotype about rural folks whether they be from the mountains or the plains: Your handshake is as good as your word. While I’ll admit the stereotype is completely true (it’s still dangerous to go back on a handshake deal), you may be surprised to know that even where it’s recognized as official, it’s just a place holder until something formal is put in place. Without something in writing, the terms of any loan can get fuzzy and someone or everyone gets hurt.

Lesson: Put it in writing. As my father always said, “When you trust each other, neither of you has any problem putting it in writing.” When it comes to family, the formal agreement is arguably even more important than in traditional business. The repercussions are very long, after all.

Agree to sign a Promissory Note with your borrower (you can get a template online for free) and set up a payment schedule in the document. You can always make changes, but this ensures you are both on the same page with expectations (and should the deal go bad, you may even have a tax write-off).

Mistake #3 – Not insisting on insurance of some kind and letting her keep the title (presumably for automobile registration). If the family member doesn’t have the money for the transaction, how do you think they’re going to be able to pay you back if something goes wrong?

Lesson: Keep collateral. I should have held onto the title of the vehicle until my family member paid me back, and I certainly should have obtained a copy of the insurance policy to make sure my collateral could be replaced if something bad happened.

Lending to “family” the second time: a success story

My good friend, David, had been a great employee of mine in corporate America, and I supported him with advice and motivation when he chose to leave and figure out his true career path in music. David was in his late 20’s. He was single, owned a nice little condo, a cool jeep, and an adorable cat.

The time came when he needed to buy a new vehicle and clear his debts in order to keep pursuing his career in music (which was actually going well). It made sense for him to sell his condo — he could rent for less than his mortgage and the debt was limiting his credit. In the meantime, he needed some cash to tide him over — $30k to be exact.

Putting the deal together

He came to me with a formal proposal (in writing), basically saying that if I could lend him the $30k he needed to buy a new vehicle and clear all his other debts right now, then when the condo sold he would reimburse me, with interest. It was big chunk of change, but it all went according to plan because we solved all of the mistakes and he and I became partners in his condo sale.

Assigning value — David and I worked together to sell his condo. We were realistic about the market value and I knew that if the sale didn’t happen and I didn’t get my $30k cash back, the value was still there.

Putting it in writing — We signed a Promissory Note and I recorded a lien on the property at the county in case anything went wrong.

Keeping collateral — What if the condo sale hadn’t gone according to plan? If I had been a banking institution I would have pursued David for the remainder, foreclosed on the property, taken him to collections or court, you know the drill.

Since he is a friend (and adopted family), I instead had to be prepared to walk away with my losses and the condo as collateral. Since I’ve been a landlord since I was 22, I knew I could use the condo either as a sale or a rental to offset the worst-case scenario; and David and I could still look each other in the eye and smile at family gatherings.

The result

I broke even on the deal, and David went on to become my business partner for 12 successful years, and remains my closest, surrogate brother. I’ve since been able to assist family with other needs, including helping my brother open and sell a successful restaurant in Madrid, an experience that we all profited from.

Thanks in part to the things I’ve done right in family and friends lending, I’ve been able to revel in their successes more, and even have a part of ownership in a number of businesses and properties that I never would have considered on my own. The successes are great stories at family gatherings, and with the right pieces in place, the failures are a laugh and a bonding moment.

How To Cut Cable Without Giving Up Access To Live Sports

October 12, 2017

You may have heard about people who are saving a ton of money by not having cable TV (cutting the cord) and using streaming services like Netflix, Hulu or a host of newer streaming services to watch their favorite shows. I was one of those people who hated paying for cable, but I loved sports too much to pull the trigger until a year ago.

We are now saving roughly $65 a month and while I no longer get the History Channel – which would be a problem for me is they still actually did history – it has been a good economic move for us. Here’s what I found in my research (extensive/obsessive research according to my wife).

Make sure you have the right internet speed

First of all you need to make sure that you have enough speed to stream without constant issues with buffering. According to Lifewire, you probably need at least 5 MB speed and preferably 15 – 25 MB in order to stream 4K movies, which is the latest high-def picture quality. (you can get away with less if you don’t have the latest equipment or don’t watch movies in 4K)

Check with your Internet Service Provider (ISP) or the other ISP options in your area to find out what’s out there. You also want to make sure there aren’t any data limits or more likely, “throttling,” when the cable company starts to slow your speed once you’ve used a certain amount of data each month.

You need:

Good speed;
No data limits or “throttling;”
A good price

Many plans run $15 – $35 per month. Super-fast gigabit speed service runs about $70 per month.

Get the right equipment

Your equipment matters! If you have a “smart TV” with apps already loaded then you may not need an extra device. Many TVs today are sold with apps built in, but check to see if the apps you want are included. If not, you can also buy BluRay players to play your BluRay and DVD movies and also get apps for Netflix, Hulu, etc. You can also get devices such as a Roku, Amazon Fire or Google Chromecast if it’s not in the budget to upgrade your TV.

Decide what programming you want

The streaming service you choose will depend on what type of programming you watch — are you more of a TV show and movie watcher or do you prefer live TV like news and sports? If you don’t care as much about live programming such as news and sports or you can wait a little bit to catch up on the current season’s episodes of your favorite shows then you can save a LOT of money.

You would probably do just fine with services like Netflix, Hulu and/or Amazon TV. These run about $10 – $15 each, so even if you got all three, it would only be looking to pay about $40/month. If you want to combine Amazon TV with either of the other two, then the Amazon Fire is worth looking in to if you need a device to get the programming to your TV.

Sports and live TV

My hang up was my sports. I couldn’t go without them. Now that there are ways to get access without subscribing to 1,000+ channels I’ll never watch, I was finally able to cut the cord. Here are the different options that are out there:

Sling prices its service based on what channels you choose. It tends to be less expensive for the base “orange” option, but you lose Fox networks and therefore I’d be giving up watching K-State, the Royals and sometimes the Chiefs — not an option for me. If you are willing to pay a bit more for the “blue” package, then you get a lot more options, or you can combine both packages to get most of the top channels. So for saving the most money without giving up live TV, you might try Sling.

YouTube TV has comparable prices and lots of similar channels. It has all of the broadcast networks and lots of minor sports channels so it may be an even better option for live TV fans. It also has a much more robust DVR option and is built to work with Chromecast, so if you already have one of those, even better.

The issue that we had is no HGTV or Food Network and a few other popular channels. Just like I had to have my sports, I’ve got to take care of my lovely wife and she nixed this option.

DirecTV Now is a bit more like a cross between these streaming options and cable. The starting price and options are comparable, then you can choose more add-ons for additional money. If you have 120+ channels now that you don’t want to give up, this could be for you. AT&T wireless customers also get an intro rate of $10/month on the base package, making it worth a try if that’s your cell phone provider.

What I chose

I chose PS Vue and so far it’s working out great for my sports watching. I have all the Fox and ESPN networks and the apps that go with it. The best thing for a sports lover is that if you can get the local CBS affiliate – you generally get 1 or 2 local stations through the PS Vue – then you will be able to get all of the major sports events/channels between Vue and the apps.

You also get a cloud based DVR but it only saves shows for a month, which means you can’t save up for major binges. Also, some sports fans may not like the fact that if you record a game, you can’t start watching it until the recording is over. If you own a PS 3 or PS 4 gaming system or you have a recent model Sony smart TV you will NOT need an extra device so PS Vue might be your first stop.

For movies and other shows, I combined that with Amazon TV on an Amazon Fire. We already had Netflix, so with all those options combined, we get tons of TV, movies and sports for $65 less than our old cable bundle.

It’s worth mentioning that you can always keep your cable or satellite provider if you are willing to play hardball with them once a year to keep the promotional prices that are higher than streaming but much less than regular cable.

Hopefully this helps you find a TV option that will provide you with entertainment and a few more bucks in your pocket for your other needs and goals.

How 4 “Good” Financial Decisions May Actually Lead To Financial Issues

October 03, 2017

“I don’t understand. How can I be financially struggling if I did everything I was told to do – get a degree, a good paying job, a car and a house?” This was the question posed by a young woman a few years out of college, wondering how she found herself living from paycheck-to-paycheck.

I told her that I am sorry. We are all great at giving general advice without explaining the boundaries needed for the advice to actually help and not potentially hurt someone financially. Getting a degree, a good paying job, a car and a home can all be tools to help you become financially secure if done strategically, with boundaries. If not, each decision can sink you into financial insecurity:

Getting a degree

An article by McGraw Hill Education mentioned that those with a college degree earn an average of a million dollars more than people without a college degree. There is a value to earning an education – if done without straddling you to debt that will take you into the next century to payoff.

I believe in doing what you love, but if you are sacrificing 4+ years of your life and possibly your finances for 10+ years of student loans, you should at least know the following about your future career: the minimum education requirements, the average cost to get the degree, the average starting salary and the average length of time it may take you to finish paying off the loan.

An article by Bankrate does a great job breaking down the numbers for you. Basically, you do not want to spend $150,000 on a degree that may only pay $40,000 a year. A rule of thumb is the total of a student loan should equal your minimum first year starting salary.

Even better, look for companies that will foot the bill for you. Employers like Starbucks offer programs that can help you get your degree tuition-free. Other employers offer tuition reimbursement programs to help you pay for college.

Worth it or not?

One of the best analogies I ever heard of pursuing a Master’s degree is to a tattoo. You really want to make sure you want to get one because the cost can be lifelong. If you are thinking of pursing a graduate degree, use graduate school ROI calculators to estimate if the cost is worth it. Bottom line: getting a degree is financially beneficial if you can do it cost effectively with a degree that will open the door to employment instead of a sinkhole of debt that will take you a century to climb out of.

Buying a car

Yes, depending on where you live, you may need a car for transportation to get you to the job that will help you become financially secure, but this does not mean that car has to be a 2017 BMW when your salary can only afford a late model Corolla. If your car is older, driving it until the wheels fall off may be one of your best financial decisions.

An article by Consumer Reports mentioned that keeping your car until it at least hits 200,000 miles (on average about 15 years) could result in savings of $30k or more. Buying a vehicle with a history of reliability, following the manufacturer’s maintenance schedule and not skimping on parts can get your vehicle to the 200,000 and above mark.

Car loan guidelines

If you get a car loan, consider sticking to the 20/4/10 rule: 20% down, finance terms of no more than 4 years and a total monthly expense under 10% of gross monthly income (car finance rule of thumb).

When I was younger, it was hard not to feel tempted to “treat myself” to a new car. Today, the average monthly payment on a new car is $479 and the average car loan is $30,032. If you got a car at age 25 for even half that amount and invested the extra $240 in a mutual fund earning about 7%, you could have close to $300,000 by the time you are 55. So the next time you think about getting a new car, think to yourself, is it worth $300,000?

Purchasing a home

Buying a home when you are financially prepared can be a wealth builder. Buying a home when you are not prepared can be a wealth stripper that can haunt your credit in the form of a future short sale or foreclosure. Before purchasing a home, pay off high-interest rate debt so you have more disposable income and have a budget so you know how much of a mortgage to get to help you maintain your lifestyle.

Mortgage guidelines

The guidance is to get a housing payment (principal, interest, taxes, insurance and HOA fees) that represents about 25-35% of your take-home income. If you love to travel, consider looking for a mortgage closer to 25% of your take-home income to still give your budget room for your favorite activities.

Consider all the costs

Keep in mind that choosing a mortgage payment strictly based on what you pay in rent does not fully account for the additional cost of homeownership. For example, when our air conditioning went out in our $1,000 a month apartment, we called maintenance and had a brand new air conditioning unit with no cost out-of-pocket. If we were homeowners with a $1,000 mortgage, that same incident may have cost an additional $5,304 for a new air conditioning unit.

Home repair rule of thumb

A rule of thumb is to save about 1% of the purchase value of your home for repairs. The number can be adjusted based on the age, location and type of home.

Looking for a better paying job

I am all about looking for better opportunities, but before you do, consider what you are giving up. I have a friend that accepted a job with a $20,000 pay increase. Sounds great, right?

Better pay does not always mean a better job

But after talking to her, there were a few details she had not considered. One, she was a single mom and her old job was very flexible in allowing her to work remotely and leave early or late so she could attend her child’s events. Her job also paid 100% of her medical premiums and paid almost 100% for her daughter’s. Her new employer’s benefits were going to cost her about $500 a month, instantly wiping out almost 1/3 of her new salary.

Her old job was also closer. The extra commute for her new job was going to cost her an additional $60 in gas monthly and $100 in monthly parking fees. Her old employer had a robust tuition assistance program and lots of opportunity for growth. Her new employer was a much smaller firm with no tuition assistance. She would also have to rebuild relationships – relationships that helped her get promoted and allowed her to have a flexible schedule.

Do your homework before taking the plunge

Before you take the plunge, do some homework. Go on websites like Glassdoor and research employee comments about your possible future employer. Employees are not shy about giving their opinion or sharing information.

Finally, do not make a decision emotionally. If you are frustrated, give yourself time to cool off before leaving. If you are overworked, take some PTO and carefully decide if leaving makes sense. The last thing you want is to have to take a step back in your career because of a bad move.

Moving toward financial security

Strategically making decisions regarding pursuing an education, a vehicle, a home and even a job will help ensure that each decision will take you a step further into financial security, instead of plunging you into a spiral that you may spend the next decade (or two) digging yourself out of. If you need help, consider consulting with a qualified and unbiased financial professional. Your employer may even offer one for free through a workplace financial wellness program.

This post was originally published on Forbes, September 3rd.

Why You Shouldn’t Be So Obsessed With Your Credit Score

September 27, 2017

I saw a headline recently about how to get your credit score above 800 that really had me shaking my head. My first thought was, “Who cares?” It’s true that a good credit score is essential to obtaining the best rates when borrowing to buy a home or a car, but it’s definitely not the end-all, be-all that a lot of young people seem to be obsessing over.

Once your credit score is over 750, you pretty much qualify for all the best rates anyway. Working to take it higher is really more about perfectionism or competitiveness that won’t really offer you any financial perks that you don’t already have. In fact, I’ve seen too many people actually hurt their financial situations in an effort to increase their score.

Your credit score is only a measure of one part of your financial wellness.

Great credit, bad finances

I remember working with a woman who was drowning in debt. She was scraping by to make her minimum payments and couldn’t pay her bills without using her cards, but her credit score was still pretty good because she was paying on time and hadn’t maxed out any cards. When I suggested she enter credit counseling to get it under control, she balked.

Credit counseling would be a ding to her credit score and she needed to keep that up so she could get more credit. I felt helpless. Keeping her score up was more important to her than addressing the thousands of dollars she was losing to interest each year and there was nothing I could show her that would change her mind.

Great finances, bad credit

On the flipside, I have a friend who has zero debt, a fully-funded emergency fund and is on track to retire, but he has a terrible credit score because he has avoided debt and has no real credit history.

The wrong way to compare

If you were to compare the financial wellness of these two people based on credit score alone, you’d get a completely wrong picture. It’s kind of like the thin person who looks super healthy but has high blood pressure, cholesterol issues and vitamin deficiencies. Keeping your weight down is just one component of good physical health.

Your credit score is simply a measure of your ability to pay lenders back when you’re supposed to. If you’re planning to borrow money soon, then it’s something to be worried about. But if you have no plans to buy a home, finance a car, go back to school on a loan or apply for any other type of credit, don’t worry about it so much.

What you should focus on instead

Generally speaking, the people that tend to obsess over their credit score are doing so because it’s something concrete they can measure. It’s just like getting on the scale each Monday morning to assess the weekend’s damage. But there are better ways to track your overall financial wellness that are much more likely to get you to financial independence.

Tracking your financial wellness by net worth

I used to focus on my total debt as a measurement of my financial wellbeing, but that can be a little depressing. It also wasn’t considering the fact that I was increasing savings in other ways so I started tracking my net worth instead, which has been incredibly motivating.

How to find your net worth

Your net worth is all your assets (savings, retirement accounts, home, car, etc.) minus all your liabilities (credit cards, student loans, mortgage, car loan, etc.). If you’re just getting started in life, chances are you have a negative net worth, but that’s ok. As long as it’s growing each month, you’re good.

High income does not always mean high net worth

Remember when Kanye West asked Mark Zuckerberg for a loan and we all pointed and laughed at the extravagant lifestyle he lives? He may have been asset rich, but he was also liability rich. He had a negative net worth. Your net worth is the ultimate measure of your financial wellness and your goal should be to increase that number, month over month.

If you can get your net worth up while also paying your bills on time, chances are you will have a decent credit score by default, although I once unfollowed an NFL player on Twitter for tweeting about paying his cable bill late “just for fun.”

Having a high income and a lot of money in the bank doesn’t a good credit score make (in fact, neither of those factors affect your score at all), but concentrating on keeping more of the income you make and paying back more of what you owe is bound to help you achieve financial freedom. Isn’t that ultimately what we’re all after anyway?

This post was originally published on Forbes, July 2nd.

Ways To Save On Food That Don’t Require Extreme Couponing

September 26, 2017

I was recently talking with a friend who was struggling to save for emergencies, so I took a look at her budget and found some easy fixes around her family food spending. I told her it wasn’t the one day of eating out inexpensively that was hurting her, it was the fact that she was doing it 5 times a week, at an average of $30 a meal. That’s actually not bad for a family of 4, but it adds up — to an extra $600 a month!

We also looked at her grocery spending, which was about double what I pay for a family of the same size — this seemed like a no-brainer fix for me: stop eating out and start cooking at home. I told her when I was looking for ways to cut back and pay off debt, I found my grocery spending was a Titanic-sized leak in my budget. I couldn’t see it because it was hidden behind daily trips averaging a small amount, but they added up to large amounts.

Eventually, I got sick and tired of having $5 in savings and shaved our dining out and grocery bills in half, without being an extreme couponer. Here’s what I did:

No extreme couponing needed

1. Invest in time-saving kitchen equipment. I am ashamed to admit that if I was stuck on a desert island with electricity and could only take a few things, I would have to debate between my kids and my slow cooker. My slow cooker is one of my favorite pieces of equipment. All I have to do is dump ingredients in the pot, turn it on and in the evening dinner is done.

I love that I can do all the prep days in advance too — I just put all the ingredients for the meals in large plastic bags, freeze them, then when it’s time to cook it, I take the bag of food out of the freezer the night before to let it defrost then dump it in the slow cooker in the morning. I am forgetful, so I got a programmable Crockpot with a timer that switches the setting from cook to warm when the food is done — this saved me from having mushy meals.

You can also choose a slow cooker based on how you eat — some come with a meat thermometer, and some even have an app so you don’t have to be in the kitchen to turn it on. Others have multiple functions so you can sauté and brown without having to use multiple pots. Some of my favorite websites for recipes include Stockpiling Moms, Crock-pot Ladies and The Crockin’ Girls (YouTube and Pinterest also have a ton of great recipes).

2. Meal plan for the week. I find when I don’t plan my meals, every bad food I have been fantasizing about magically appears on my plate, plus I’m much more likely to order take-out. If you struggle to meal plan there are a ton of great online meal planners and apps to help you. I used Emeals initially, which sent me weekly meal plans and recipes as well as a shopping list organized by the sections in a supermarket — it also has an app, which was great for those days I forgot my grocery list. I am no Martha Stewart, so I chose the meal plan that was budget friendly and easy.

Lunch planning

Whatever we have for dinner becomes lunch the next day for the adults, but I found myself at times nearly pulling out my hair planning lunches for my kids. They really like peanut butter and jelly sandwiches though, so I starting making them in batches and freezing them. I also bought their favorite snacks in bulk and had them help put the snacks in individual bags — I found this was cheaper, and bonus — the more involved the kids are in the meal, the less likely they are to complain. One rule in my family is that the first person to complain about the meal is the person who cooks the next meal – it’s amazing how the fear of having prepare a meal can fix whiny kids!

3. Try a 6 month challenge. My family challenged ourselves to see how much we could save over a six month period by eating at home and strategizing our meals. This got us all excited about making a change and also made it easier to resist the temptation of dining out. We saved enough to pay for a family vacation for a week!

Other ways to save at the store

Don’t shop with kids or anyone that likes to “try something new.” I love spending time with my husband and kids, but I find I spend a lot less when I grocery shop by myself. If possible, leave everyone at home.
Take a list. Always. This keeps me on track.
Sign up for store cards. If your store has online apps with a member card, sign up. Many times they can link your card to store coupons, so you don’t have to worry clipping your store’s coupons.
Shop with cash. I find the fear of not having enough cash at the register makes me think twice about purchases.

Start small

Making a dramatic change in your eating can be overwhelming, so start small. Start with a goal of cooking 2-3 meals per week and build from there. Once you are comfortable, start eating at home every meal by incorporating some of the ideas above.

If you have other tips or a favorite kitchen appliance please let me know on Facebook. I am always looking for ideas.

The Pros & Cons Of Balance Transfers

September 20, 2017

If you’re carrying credit card debt and paying on time, chances are you also regularly receive offers from various financial institutions offering you balance transfer deals. If you’re serious about paying off your debt and have fixed whatever issue caused you to accumulate the debt in the first place, then it can seem like a no-brainer — using balance transfer deals can be a key step in getting to zero debt sooner. But before you pull the trigger to transfer your balance to a new card, make sure you’ve considered all the potential pitfalls first.

Advantages of balance transfers

Lower interest rate — The lower your rate, the more impact your payments will make toward your balance. Just make sure you know you’ll qualify for the low interest rate before committing to the transfer or you could end up with a higher rate than your original card.
Accelerated debt pay-off — To determine exactly what the impact of lowering your interest will have on your timeline, plug your info into the Debt Blaster calculator to confirm.
Pay less interest over time — You can also use the Debt Blaster to calculate how much you’ll save in overall interest, but you also need to add in any balance transfer fees. Make sure you do the math before committing to make sure the savings are worth the potential risks.
Consolidation of balances — Balance transfers can also help you to consolidate several small balances onto one lower-interest card, which means you’ll have less hassle and less chance you’ll forget to make a payment.

Potential disadvantages of balance transfers

Transfer fees — Most balance transfer offers include some type of fee, which is typically 1 – 3% of the balance you’re transferring. For example, if you’re transferring a $3,000 balance to a card with a 3% transfer fee, you’ll be starting with a balance of $3,090. Make sure you factor that in to any interest savings calculations you perform. If you can find an offer with no transfer fee and a lower interest rate, take it! (check the fine print first to make sure there isn’t some other catch to make up for it though)
Promo rates — Keep in mind that balance transfer rates are typically lower than new purchase rates, so if you are using the new card to shop while trying to pay down your balance (which is a very slippery slope anyway), you’ll most likely negate the interest savings of the balance transfer. A best practice is not to “comingle” your debt — keep the cards you’re using for low balance transfer rates strictly for paying down balances.
Rate expiration dates — Many times the low rate that card companies offer to entice you to transfer your balance has an expiration date, usually between 8 and 24 months after you open the card. That’s fine, as long as your plan includes that end date so that you can either have the balance paid off or transfer it to another card.
Type A personality traits required — Managing the debt payoff via balance transfer does require a bit of attention to detail, so just be aware that if you’re not Type A like me, you’ll probably need to put some stopgaps in place like setting multiple reminders on your calendar and phone and even asking a friend or family member to make sure you come back and reassess your situation at least a month before any promo rates expire.
Could dig you deeper — The reason that banks offer these deals in the first place is because they know that many people, despite their best intentions, will simply use this new card to accumulate even more debt, rather than pay it off as would be the best plan. When you open a new card to transfer the balance, consider cutting up your old card to avoid the temptation to accumulate another balance on that fresh zero statement. You don’t have to close the card (that could be a hit to your credit), but cut it up or give it to someone you trust for safe-keeping.
Credit score ding — It’s true that applying for credit does cause your score to take a temporary dip, as will closing old cards to make sure you aren’t tempted to run the balance up again, but if your goal is to get out of debt faster and this achieves it, worry less about your credit score (which will rebound) and more about saving money in unnecessary interest and getting out of debt ASAP.

One final thing: make sure that you’re doing balance transfers strictly as part of a debt pay-off plan instead of as a way to accumulate even more debt. I’ve worked with people before who found themselves deeper and deeper over their heads in debt when they started playing musical credit cards with their balance. It’s important that it’s part of a debt pay-off plan and not just a way to stay afloat.

5 Steps To Start Your Recovery After A Hurricane

September 19, 2017

I’ll never forget the first day I saw the aftermath of Hurricane Katrina. It looked like something out of a sci-fi movie — homes smashed together like accordions and cars upside down throughout the streets.

Not only were the cars upside down, but a lot of the people I talked to felt like their lives were also turned upside down. They all said that they were initially shell shocked, not sure what to do. I can only imagine.

If you find yourself in a similar situation after one of our recent natural disasters, consider using financial toolkits like the one on the Consumer Financial Protection Bureau’s website to map out a game plan.

Beyond that, here are 5 steps you can take to begin the process of getting your life turned right side up again:

1. As soon as you can, contact any of the following organizations for assistance:

FEMA (Federal Emergency Management Agency) — They can provide the latest information and resources specific to your area.
Call 2-1-1 — This is a free service offered by the United Way to help people find local resources. They can provide information about shelter and housing options along with utility assistance and disaster relief support.
Your local chapter of the Red Cross — They can help you find shelter, and in some cases, aid and vouchers.
Local places of worship — When I volunteered after Hurricane Katrina, my group (I went with my local church) went to other local places of worship to find out who had contacted them for help. We divided up the assignments by skill set and availability, then attempted to help everyone on the list. We helped with everything from cleanup and moving people’s possessions to actually repairing homes (this may vary depending on the volunteer skill level.)
Disaster Assistance Improvement Program — You can use this website to see if your area has been declared eligible for individual assistance.

2. Contact your insurance company. Verify your coverage and if you do not already have a copy of your policy, ask for an electronic copy. Consider taking pictures and videos of any damages before you start cleanup to document any claims you are making. Use the Insurance Information Institute website to walk you through how to settle an insurance claim.

3. Contact your creditors. Even if you think you have it financially together, contact ALL of your creditors and inform them that you have been affected by a natural disaster. At a minimum, they will have it on record, so if you run into problems, you’re good to go. The key is to contact them BEFORE you miss a payment. If your income has been impacted, you can ask your creditors to work with you.

4. Beware of scammers and verify everything before working with a contractor. I was blown away by the amount of contractors going door to door offering their services (for a fee) during my volunteer time after Hurricane Katrina. Many were honest, but a few were scammers. Before agreeing to any type of work, get everything in writing and do not pay in cash and do not pay up front. Make sure you go online to read reviews of your potential contractor. And before you just sign up with someone who knocks on your door, try asking for referrals for local contractors, preferably one that has already worked with someone in your area.

5. Take care of yourself. You and your family have been through major trauma. If you are struggling to sleep or feel yourself slipping into depression, contact your company’s Employee Assistance Program for guidance. Don’t forget to talk to your kids — oftentimes they may need your help to express how they are feeling. Be patient; tempers may be shorter than average and your kids may be extra clingy. As you contact organizations for relief, consider also asking for counseling for you and your family, if needed.

Remember, recovering from a natural disaster takes time and often persistence. Consider using the steps above as a guide to get on the path to recovery.

The 5 Things You Should Do Right Now To Protect Your Credit (Even If You Weren’t Affected By The Equifax Hack)

September 13, 2017

In case you haven’t heard, credit reporting bureau Equifax announced that 143 million Americans’ financial information was hacked this summer, putting about half of us at risk of identity theft. (to find out if you’re one in 143 million, start here) It was only a matter of time before one of the credit bureaus was hacked — I have to say I’m not entirely surprised.

There have been lots of rumors swirling around whether or not the Equifax “fix” is something you should sign up for and whether or not it’s enough. The short answer is that yes, you should sign up since the concerning clause about giving up certain legal rights has been removed (more on that here), but no, it’s probably still not enough to ensure you’re safe from future issues around identity theft. Besides, even if you’re one of the lucky ones whose information wasn’t lifted, chances are it was in another breach over the past couple years.

Here are 4 more things you can do to hopefully secure yourself against future issues:

Check your credit report right now — You can access your free reports from all 3 credit bureaus at AnnualCreditReport.com, or if you’ve already checked all three within the past year, use a free service like Credit Sesame or Credit Karma to at least see if there’s anything fishy with your credit score. If so, you may want to pay to have another credit report pulled to see what’s causing the issue in case it’s due to identity theft. (note that the Equifax service will provide you with a copy of their report)
File your taxes ASAP — One way that hackers use your SSN and other personal information is to file fake tax returns on your behalf to collect big refunds. In this scheme, the hackers are actually stealing from the IRS using your information, so you’re not out any money, but it can cause you IRS headaches if they use your information to do so because the onus is on you to prove that the tax return YOU’RE trying to file is the correct version. If you’ve already filed your return and a hacker tries to file a fake one, their scheme will be blocked.
Consider placing a credit freeze — This isn’t free, but this is the best way to simply lock down your credit so that no new accounts are opened using your info. The problem is that when you’re ready to open an account or apply for a mortgage, for example, you have to have it lifted, which also costs money. Credit monitoring services and fraud alert systems are a bit more reactive, but they’re free.
Check all your accounts going back to May, then make it a habit — One thing that’s extremely frustrating about massive hacks like this is that there’s always a delay in reporting it while the legal team works to cover their butts and the PR team gears up for the onslaught. The Equifax leak was open from mid-May through July, and yet we aren’t learning about this until September. In the meantime, who knows what’s happened with our personal information. It’s worth your time to review all your accounts to make sure there aren’t any errant transactions that you should report. Going forward, make it at least a monthly habit to look at each transaction to make sure it’s valid. I actually check my 3 main accounts as part of my morning routine — I check texts, then email, then Instagram, then Snapchat, then my checking account and credit cards.

If you find any issues

If you find fraudulent charges on your credit or debit card, report it to the bank immediately. It’s not uncommon for banks to have a 60 day window for reporting fraud — as long as you’re within that window, they’ll do all the work to get it fixed. (a big reason to check your accounts regularly)
If the problem extends to someone using your identity to open new accounts or file tax returns, then the steps you need to take are more extensive. The FTC has a great website that covers all the scenarios, so start there.

In the meantime, make sure you’re still staying vigilant by protecting your information to the best of your ability. These tips from a former con man can help.

Retirement Account Loan Strategies You May NOT Have Thought About

September 06, 2017

Taking a retirement plan loan may be considered taboo in some cultures, primarily because it can be detrimental to your retirement preparedness. That said, not all retirement plan loans are bad.

For instance, if you are carrying a balance on a high-interest credit card, taking a retirement plan loan may be a sensible way to pay off the debt faster while paying the interest to yourself. Or maybe you plan to use the money to help fund a child’s college tuition, or to pay for an unexpected medical bill. All of these could be seen as valid reasons for borrowing from your retirement account, but that doesn’t negate the fact that you may still be jeopardizing your future retirement goals.

If you are considering a loan, here are a few tips and strategies to make it less costly and more beneficial for you now, and in the future:

Before you submit your loan request

There are at least two things you should do before submitting your loan request.

Model the loan to make sure it doesn’t put too much of a strain on your current cash flow. Most retirement plan providers offer loan modeling so that you can estimate how much will come out of each paycheck in loan payments. Compare this to your budget and adjust spending as needed.
Run a retirement projection to see if you are on track to reach your retirement goals. If not, determine what changes you can make now to get on track.

Take advantage of tax breaks

Depending on the purpose of the loan, you may be eligible for tax breaks as well. Here’s how:

For medical expenses

Are you using the loan to help pay for medical expenses incurred while eligible for a health savings account (HSA)? If so, then consider depositing the proceeds of your loan—up to the annual contribution limit—into your HSA and then withdrawing the funds to pay for qualified medical expenses from there. That way you get the tax deduction on your contribution, and tax-free money to pay for your medical expense.

For college-related expenses

Are you using the loan to pay for tuition, fees, or other qualified educational expenses? If so, then you may be eligible to claim one of two educational tax credits.

If you’re not eligible for tax credits—either because your income is too high or you are paying for an unqualified expense like room & board—your state may offer income-tax deductions (or other benefits) for contributing to their 529 plan. In this case, consider depositing the loan into your state’s 529 plan, and then withdrawing the funds to pay for college-related expenses — there’s no requirement that the funds have to stay in the account for a certain amount of time. That way you get the state income tax deduction, or other benefits, associated with the plan.

Once the loan is paid off

By now you’ve probably adjusted your lifestyle to a lower paycheck. Once the loan is paid off, rather than increasing your current spending, consider one or more of the following strategies to help avoid future loans:

Stop using a credit card

Using a retirement plan loan may be a good way to pay off high-interest debt, but it would be even better to avoid high-interest debt in the first place. Sometimes it can’t be avoided, but when it can, it should.

Create/rebuild the emergency fund

Sometimes we need to take a loan because of unexpected events. Being prepared for the unexpected is part of a healthy financial plan. Now that you have a little extra in each paycheck, start setting that amount aside each month until you build up 3 to 6 months of expenses.

Contribute to a health savings account

As noted earlier, contributions to a health savings account (HSA) are deducted from income tax, and distributions are tax free when used to pay for qualified medical expenses. Best of all, unused funds remain in the account, and most plans allow you to invest the funds once they reach a certain threshold. For this reason, you may want to treat your HSA like it’s a supplemental retirement account.

Contribute more to your retirement plan

At a minimum, you should contribute up to your company match (if available), but if you can afford to save more you should. Not only will this offset any negative effect the loan may have had, but it will likely help you reach your retirement goals faster.

Start or add to a college savings account

If you or someone you love plans to attend college in the future, consider funding a college savings account. It may not pay for everything, but it should reduce the amount needed in student loans.

As a financial planner, I would prefer you save enough to avoid having to borrow in the first place, but if a retirement plan loan seems to be your best option, then learn how to get the most out of it. Maybe then it won’t be so taboo.

Our Top 10 Blog Posts Of 2017 (So Far)

September 04, 2017

This Labor Day, as you (hopefully) enjoy a day away from the normal go-go-go of daily life, we’ve curated our Top 10 most popular posts of 2017 so far, in hopes that one or all of them will assist you toward the goal of financial independence — aka, the day you have to labor only because you want to, not because you have to! Enjoy and have a safe and happy Labor Day!

The Art Of Financial Trade-Offs: What Do You Value Most?

September 01, 2017

Last week, I found myself debating the best course of action for watching “The Money Fight” between Conor McGregor and Floyd Mayweather (spoiler alert: Mayweather won, to no one’s surprise). I’m a big fan of mixed martial arts (MMA), but for those who aren’t as into it, the appeal of the fight was that the biggest star in MMA (Conor McGregor) accepted a challenge from the biggest star in boxing (Floyd Mayweather) to go head to head in a boxing match, for what turned out to be Mayweather’s 50th win and last fight of his undefeated career.

I’m not a Mayweather fan (mostly because he glorifies a lifestyle of excessive spending, which is OK if you’ve earned $1 billion in your career like he has, but not great advice for most of his fans), so I was rooting for McGregor to win by early knockout. Despite the odds being stacked heavily in Mayweather’s favor, both men stood to win several million dollars.

In the fight world, this is a big deal. And, for me, it presented a challenge of how I wanted to watch the match — a challenge of both finances and fun. I had a few options here:

Stay home and buy the pay-per-view at ~$100.
Pros:
– Watch in my PJ pants and eat/drink whatever I want.
– Ability to adjust the volume to be whatever I need it to be.
– No line at the restroom or waiting for a drink.
Cons:
– Unless I invited friends over and they brought food or beverages or chipped in for the PPV cost, this could be my most expensive option.
– If something spectacular happens, there is no crowd yelling, which is part of the joy of watching with a crowd.
Head out to a local pub that is showing the fight.
Pros:
– I can control the cost by limiting the number of cocktails and food I consume.
– The bigger the crowd, the more entertaining the “oohs” and “aahs” and “OHMYGOD’s!” are.
Cons:
– It would be very crowded, so may be tough to get a table.
– I’ve gone to watch big fights before and never gotten a table, and standing at the bar all night isn’t my favorite activity.
– It could be a long night, so chances are that I would order food and a few beverages that could raise the cost close to the PPV cost.
Skip the fight and read a good book, catch the highlights online the next day.
Pros:
– I get to read a classic and check it off my list.
– It could be a nice, quiet night and I probably wouldn’t stay up till 1AM.
Cons:
– I wouldn’t get to experience the adrenaline rush and joy that I get when I see a great night of fights (although I find boxing incredibly boring after a decade-plus of watching MMA).

Making the trade-off

The trade-offs I had to make here, and that you probably face at times, had to do with several factors:

Cost vs. experience
How to spend discretionary dollars
Evaluating “needs vs. wants”
Probably a few others

At times, budgetary concerns are the deciding factor; other times, the fun and experience factor is what decides it. What I had to do in this situation was determine what my end goal was and then set a spending limit for my choice.

What I decided

I went with a hybrid of immersing myself in the experience while trying to limit my spending: I ended up going to a local pub with some friends, but first I made dinner for the kids and myself at home. That way I didn’t run up a big tab at the pub on food, but still got to see the fight without spending $100+.

I’m curious – how do others make this type of trade-off? I’d love if you would share your thoughts with me on Facebook or via Twitter.

The Ins & Outs Of Balance Transfers

August 30, 2017

One way to speed up the process of paying off debt while saving money in the long run is by transferring balances to credit cards with lower interest rates. This is a strategy that I used to dig myself out of over $8,000 of credit card debt after college.

Moving even a $2,000 balance from a 16.99% interest rate to one with a 3.99% rate while continuing to pay the $40 minimum payment can save you over $1,300 in interest and reduce the time you’re paying by almost 3 years. It’s really just a form of refinancing debt using credit cards. But there are some nuances to understand when employing this strategy.

Here’s how it works.

When you perform a balance transfer, you’re essentially using your new credit card to pay off the original obligation by paying what you owe to the original card, loan or bank. Your original lender can’t stop this, as they simply see the transfer as a payment being made on your behalf.

Timing

You can request a balance transfer to a credit card you hold at any time, although many card companies offer special deals if you transfer a balance to the card within 30 days of opening the account. If you are opening a new card to transfer your balance, it’s a good idea to include that request at the same time as your application, as this may help ensure that the credit limit of your new account will be high enough to enable a full transfer of your old balance. If not, it’s still worth it to lower the interest on at least part of your balance, just make sure you stay on top of your payments.

Beware the final payment

Even if your balance transfer pays your former account off in full, you may need to make one more payment the following month for any interest that had accrued up to the day you transferred, so make sure you plan for that. I remember thinking I had finally broken free of a super high rate card back in the day, only to be hit with a late fee for not paying the final $30 of interest that had been charged to my account after I’d paid off the balance. That’s perfectly legit, so double check your balance is at zero for good for a couple statement cycles before you officially forget about your original account.

Length of promo rate

If you are taking advantage of a special interest rate offer (they typically last between 6 and 24 months), make sure you know how long the low rate will last so that you can try to have the balance paid off (either by paying it down over the months or by transferring your balance to another card in the future) before the rate increases. Set a reminder on your calendar at least a month out from the expiration date to make sure you don’t miss it.

Transfer fees

Most cards charge a balance transfer fee, which is typically a percentage of the amount you transfer, especially if you’re transferring to a 0% card. If you can find one that doesn’t charge a fee, that’s a great deal! Make sure you take that in to consideration when you’re evaluating the total cost of the move (interest plus fees) to make sure it’s still a good deal.

Also know that sometimes card companies will send you checks in the mail with special offers for using them, such as a lower interest rate or bonus reward points — double check the fees to use those checks before you take advantage, as sometimes it’s higher because it’s considered a “cash advance,” even though you’re not actually getting any cash.

What you can transfer to a credit card

All major card companies will allow you to transfer your balance from any other major credit cards and most also allow you to transfer balances from store cards. If you’re looking to transfer other types of debt, like a car loan, student loan, business loan or payday loan, you’ll want to check with the card company to see if they will allow that — some do, some don’t.

What you’ll need to initiate a transfer

The account number of the balance you’re looking to transfer
The amount you wish to transfer
The personal information required when opening a new credit card (social security number, income, employment info, etc.)

Other things to consider

Your credit score might go down, but it should bounce back as you pay down the new account — Chances are your balance transfer will take up most of the credit limit of your new card, so your credit utilization score might take a hit. As long as you pay down the balance (that’s the reason you’re doing this in the first place, right?), that issue will go away, so it shouldn’t stop you unless you’re also planning to apply for another loan like a mortgage or auto loan before you can get your credit utilization back down.
Keep your original account open, even if you don’t use it — This will not only help your credit utilization score, but it will help to maintain your credit history as well. If you’re worried that you might be tempted to run the balance up again, you can cut up the card, just don’t close the account. That’s what I did.
Avoid new purchases with your balance transfer card — You may start to receive nudges from your new card company encouraging you to use the card for purchases by offering you things like cash back or reward points, but don’t take the bait! I’ve seen too many people fall into this trap and wind up in way worse shape than they started because they used their new card to shop while also trying to pay down the original balance they transferred. When I was paying off balance transfer cards, I didn’t even carry the card with me to avoid this pitfall.

The ability to transfer my balance from card to card as I paid down the balance was a huge reason I was able to dig out of my $8,000 debt in about 5 years. If you’re serious about doing what it takes to get out from carrying credit card debt for good, mastering the art of balance transfers will help significantly.

Are You Ready For This Trifecta Of Budget Breakers?

August 29, 2017

As August winds down, we are entering what I call the “Superbowl” of budgeting season. This is the season where some of us will be victorious and have at least $1 left by 12/31 and others will have bank accounts on life support, crippled by the big three: Halloween, Thanksgiving and the granddaddy budget killer of them all, Christmas.

Worse still, once your bank account has made the final death spiral in the form of an American Girl doll purchase, you may be tempted to turn to credit, which ultimately extends the crippling. To increase the chances you’ll survive with your bank account intact, NOW is the time to start planning. Here’s how I get ahead of this trifecta of expensive holidays:

Halloween: Are you one who goes all out for Halloween by decorating your home and hosting a party in addition to buying everyone costumes for trick-or-treating? Then you need to start saving now. Log in to your account and add up your spending from October of last year — that amount is your Halloween budget. To make sure you have enough set aside, divide that total by how many paychecks you have between now and October 31st, then save it each paycheck until Halloween. I also start shopping online now for costumes on websites like Party City, SpiritHalloween, or Amazon for the best selection at the best prices.

Thanksgiving: Thanksgiving seems innocent enough, but it is crawling with budget busters. Daycare for kids on school break, travel and Thanksgiving Day meals can wreck havoc on your finances. Start asking around early to find a family member that may be able to watch your kids during Thanksgiving break. If you’re planning to travel via airplane, train or bus, buy your tickets at least one to two months in advance. I recall the year we hosted Thanksgiving when we were on a much tighter budget. To help, I made it more of a potluck by assigning dishes to everyone, then we just supplied the space, dishes, cutlery and turkey, saving us a lot of money.

Christmas: Start making your list now for who you are going to buy gifts for, along with your budget. After-Halloween sales are a great time to buy gifts for kids who like to dress up; costumes are up to 70% off. Start shopping high-end consignment shops now for kids’ toys. I found that new moms and newlyweds appreciate picture frames, which are an inexpensive and easy-to-find gift. Get creative — one of the best gifts I received when my daughter was younger was from another mother who gave me coupons for free babysitting. If everyone loves your chocolate chip cookies, consider baking a huge batch, then packing them in decorative tins from your local dollar store.

Now that school is back in session, the next couple months are going to fly by. You’ll be making New Year’s resolutions before you know it. Taking the time now to plan for the holiday trifecta will go a long way toward helping your budget (and your sanity) survive the holidays.

How I’m Teaching My Polar Opposite Daughters About Money

August 25, 2017

If you’re a parent, you probably know that sometimes you can be around your kids and wonder just how in the world they are actually related because they are so different. As a father and financial planner, I have really seen that difference in my two daughters this past year. My girls are teenagers and both are now working part-time and taking on more financial responsibility. That is where the similarities end.

Polar opposite financial personalities

My oldest daughter has a great work ethic and is a practical shopper when it comes to big ticket items, but she struggles to really plan or track her daily spending at all. My youngest daughter, on the other hand, will work only as hard as she needs to in order to make money and that’s it. When it comes to spending money, she values fashion over function and plans her expenditures down to the penny. Total opposites.

So how does a dad help these two very different daughters reach the same goal of financial well-being? Here’s how I am approaching it with each of them.

Work smarter, not harder

I don’t worry about my oldest daughter working hard enough. If things get tough, I know that she will do whatever it takes to make ends meet. As a result, my advice to her is not to work harder but to work smarter. She needs to take a look at the big picture before diving in to a project or a job to see if there are ways to be more efficient or even farm out the easier, less costly parts of a job.

Letting perfect get in the way of good enough

For my younger daughter, I know that she will have analyzed things from every angle to make things easy and efficient for her. Her challenge is that sometimes she lets the perfect get in the way of the good.

For example, she had a host of reasons for not wanting to work at the pool this summer – one of the few jobs that would take her before turning 16 this fall. She eventually found a job that was more to her liking, but she ended up only able to get 20 hours a week instead of the 32 per week she probably would have been able to get at the pool, which limited her earning potential. So for her and analyzers like her, sometimes it is better to take the good opportunity instead of waiting for the perfect one.

Finding a way to keep the little things in check

My oldest daughter is pretty good about finding a good deal when it is a big ticket item, but the little things kill her. When it was time to find a car – which she had to pay half of – she did extensive research and even though her dream car is an SUV, she realized that a compact car made more sense and found a great deal on a Ford Focus that should last her well into her young adulthood.

Day to day purchases are just the opposite – the debit card and apps like Starbucks make it very easy for her to fritter away her hard-earned money on convenience and impulse buys. She needs a better way to track her money.

She doesn’t need to spend hours each week planning out her spending, but I’ve suggested that she find a “hack” to make things easier like an app on her phone or using envelopes to limit impulse spending. Perhaps one of these six ideas from my colleague Kelley might help.

When fashion gets in the way of function

My younger daughter is constantly looking for car options… and she keeps looking for champagne cars on her beer budget. She likes crossovers but the challenge here is getting her to realize that they are more expensive so she would have to buy an older, higher mileage car that likely won’t last as long. Plus they would cost more to insure and burn more gas. She may feel cooler now, but will she still feel that way having to buy a new car all on her own in her very early 20’s? The jury is still out on whether she’ll listen to me or go with her penchant for fashion over value.

On the plus side, she has planned her day-to-day spending like a pro. She has literally budgeted every paycheck she is expecting between now and March to parcel out how much will go for the car, gas and her drama department trip to New York, while she plans to use her tips for fun money.

She puts her debit card away to prevent her from using it for impulse buys and only uses the cash tips for her spending money. I have given her a lot of praise for her planning and how she is managing her daily expenses.

The challenge that I talked to her about is over-planning – an issue that I have dealt with. She doesn’t really have an emergency fund or any wiggle room, so when she doesn’t get enough hours or things happen, it puts her into a tizzy. Planners like her and I will always struggle with over planning but having an emergency fund or a “life happens” line item in the budget can help ease the stress of things not going according to plan.

Different girls, same end goal

Despite their differences, my girls are great kids and both have a lot of money skills. The different personality traits mean that they may need different approaches to get to the same goal but I expect them both to do well in life.

Expecting? You Can Probably Skip These 3 “Needs”

August 22, 2017

I am a great aunt!!! My nephew and his wife recently welcomed my beautiful great-niece into the world, and I am so excited for them. As I saw the joy and, frankly, terror of the new life that they are now responsible for on their faces, I started to think of how I felt when I held my daughter for the first time. I felt this overwhelming responsibility to make her world perfect to the point where I was making financial decisions based on what I thought I should be doing rather than what made the most sense for our financial goals. I see a lot of new parents feeling the same way.

If you’re feeling the financial pinch of new parenthood, the good news is that a lot of the things we are told we “need” to have for our kids are actually just “nice to haves.” Here are three things that I initially felt like we needed that it turns out we could go without just fine.

Buying a bigger home because we need “room.” To quote my colleague Daphne, “Really????” The last time I checked, all a 7 – 8 pound newborn did was eat, sleep and poop, mostly on top of mom. If we are honest, all the stuff we buy for the baby is mostly for us — the baby does not care. What your new baby needs are parents that are not financially stressed. Consider staying in your current home longer while working to pay off high interest credit cards, build an emergency fund, and ideally save up 20% to put down before purchasing a home with a mortgage payment that represents no more than 25%-35% of your take home income. Sticking to a mortgage within your means gives you the wiggle room to handle the sticker stock of childcare, which can easily be over $800 a month.

We have to have a super cute nursery. I have mentioned this in previous posts, but your newborn can barely see at first and will probably sleep with you for the first few months — the truth is that a nursery is unnecessary. The average cost of a nursery can easily exceed $2,000. I still regret that I spent so much money on a color scheme and furniture for a person that can only initially see black and white and slept 10 hours. In retrospect, not surprisingly, she did not care what the room looked like; she was never in it.

To save money, stick with the basics — even a bassinet with a shelf underneath for onesies, diapers, and receiving blankets is enough at first. You can buy more things as your baby gets bigger and starts needing more. Consignment shops, Craigslist, yard sales, and the moms of toddlers are your new best friends for finding great deals on baby items.

We need a bigger car because we need more “space.” I know that getting a car seat into a small car requires the skills of a Cirque du Soleil performer, but your newfound flexibility is better than being saddled with a $400 car payment. We were at the dealership getting ready to buy a larger car and thankfully starting thinking about our finances after the baby was born and changed our minds.

There are enough financial adjustments you will be making with the baby — diapers, wipes, formula which can easily cost over $100 month, not to mention my earlier mention of the possible $800 in childcare expenses. I decided to stick with my Pontiac Sunfire (two doors) then researched car seats for small cars and compact strollers to fit in my small trunk. It was tough, but the lack of payment gave us the breathing room to pay off debt, save for emergencies, and handle the financial needs of our growing family.

Thinking through your baby’s needs vs. wants can go a long way toward helping you manage your financial stress along with your growing family.