3 Mind Tricks To Hack Yourself Into Spending Less

April 11, 2019

If you feel like you’re stuck in a rut, living paycheck to paycheck and worried that an unexpected expense could topple your financial situation, you’re not alone. The good news is there are little things you can do today to break the cycle, and no, I’m not talking about making a budget or cutting back on dining out (although those things can help).

Part of the escape from paycheck-to-paycheck living is a shift in your mindset. A little bit like Jedi mind tricks, one part of the solution is to change the environmental cues around us to encourage, motivate, and support mindsets and behavior that lead to better financial decision making.

Here’s what I mean in 3 different ideas.

Harness the power of pre-commitment

We tend to think of our future selves as a more perfect version of our present self. Yet like the popular phrase reminds us, it seems like tomorrow never comes. Pre-commitment will help you think about your future self by making a binding commitment today to save money from a future payday.

How to apply it

Next time you expect a tax refund, bonus, or pay raise, make a binding contract with yourself to save a portion of that money (remember, pay yourself first). Some ideas to implement that include:

Use an app that lets you make savings decisions in advance such as Digit.
Set a savings goal in percentage terms in advance of receiving your tax refund, and stick to it. For example, commit to putting 30% of your tax refund in savings.
Establish a preset percentage or dollar amount of your bonus that you will set aside, and set it up before you get paid.

If you can pre-commit and set it on automatic, the savings magic can happen.

Use transition moments to your advantage

We tend to get really excited anytime our lives are transitioning, whether it’s a birthday, new year, the start of a new week, or the changing of a season. It’s called The Fresh Start Effect and it’s a real thing. Take advantage of this behavioral phenomenon to take positive financial action accordingly.

How to apply it

Highlight a specific transition moment that is going to happen in your life and set a reminder in your calendar to do something that you’ve wanted to do financially before that day or time. Some ideas include:

The day before your birthday, increase your 401(k) contribution or the amount of money you are saving on a monthly basis by $100.
Decide that every Monday or perhaps the first Friday of the month you will sit down and review your budget.
Schedule 30 minutes at the beginning of every week to work on your side hustle (or any other medium to longer term goal), until you get it going.

You’ll find that you will have a much easier time getting motivated to do these things by leveraging the idea of a “Fresh Start.” The great thing is, if you ever need one, you can conjure one out of thin air!

Change your environment

If you find that it’s the small, frequent purchases that are adding up to slowly kill you, welcome to the club – this is what kills most of our savings efforts. Studies show that the #1 expense we regret after bank fees is eating out.

Take a look at your credit card or bank statement for the last few months. You’ll notice that a coffee here, a burrito there, a health smoothie next all adds up. And if you live in a city, ride sharing apps can be killer. Think about all of those times you took an extra 5 minutes to get ready and as you are running to catch the subway or bus, you give in to grab a ride instead ($$$). (These were all my personal Achilles heel of money). Small and frequent purchases to our budget is like death by 1,000 cuts and my bank account is proof.

How to apply it

Link a pre-loaded card to these purchases, then commit to using ONLY that card for those purchases. Physically force yourself to take your other cards out of your wallet and unlink them from your wallet app (I know I am asking a lot here, but it’s for your own good).

Every additional step (or barrier) that you can add will help you to stop and think before you mindlessly spend another $3 here or $10 there on something you’ve already said you regret spending so much on.

Another idea is to limit yourself to how many rides you will take per week, or how many small favorite food purchases you will make per week. Since we tend to enjoy tracking and counting how many times we do things these days, this mental hack can work to your advantage.

Mind tricks work

Getting out of the paycheck to paycheck rut takes a little mental hacking so that you can change your environment to help your future self, but it works. Follow and apply these 3 behavioral principles and I am confident that your days of living paycheck to paycheck will soon be behind you with your brightest future just ahead.

Why You Never (Ever) Want To Fall Behind On Federal Student Loan Payments

April 08, 2019

Few of us are ever on time for everything all the time. While it might be inconsiderate to be late for a meeting or pretentious to arrive fashionably late to a party, being late with bill payments can be expensive. If the late bill is a federal student loan payment, it can be even more than expensive; it can be frightening, physically disruptive, and even embarrassing.

What can happen when you’re late with your student loan payment

Imagine getting mysteriously called into your employer’s human resources office one day. Fearing the worst, you are relieved when the HR exec tells you they aren’t firing you. They do, however, want to discuss with you an ominous letter they received from the federal Department of Education notifying them of wage garnishment procedures against you. Yikes!

I spoke with someone recently who called our financial coaching line distraught about his spouse’s federal student loans. Not only was she behind on payments, but she had reached the point that her wages were being garnished and their expected federal tax refund was replaced by a letter stating the refund had been recaptured to help repay the outstanding student loan balance.

How did they get into such a pickle? Let’s take a closer look.

When you miss a student loan payment or two

When your payments are late by 30-90 days, here are some of the unpleasant things that can happen:

Late fees begin to stack up.
Your student loan processor begins to call you.
Your loan status changes to “delinquent.”
Your credit score begins to drop.
Interest rates on your credit cards may begin to rise.

You might be surprised to know…

The folks who process loan payments on behalf of the Department of Education (or ED, as it’s known, not DoE) are actually pretty friendly if you miss a payment or two. I know this from personal experience. Way back when, after I graduated with my bachelor’s degree, I knew my student loan payments were soon to commence, but I had somehow missed a communication or two and let the first couple of payments get by me.

I received a pleasant phone call asking if I was aware of this situation. We had a quick chat to verify some details; I made a payment that day and then set up automatic bill pay with my bank so THAT wouldn’t happen again.

Lesson learned: keep the lines of communication with your student loan processor open from the start. Add them to your smartphone contacts. Although delinquency is serious, it is usually easily fixed by catching up on your payments and keeping them caught up.

What if payments are more than you can afford right now?

Don’t stick your head in the sand and ignore – that’s the worst thing you can do. Student loan lenders will work with you – to an extent – but only if you communicate with them early on and stay in touch.

Several repayment options are available, and you may be able to switch to a less expensive monthly payment arrangement. This move will, however, result in additional interest payments and a longer payback period, making the cost of your education that much more expensive. However, this added bit of expense is better than the alternative. Restructure your budget; have a yard sale; take on a side gig… do whatever it takes. But keep making payments to avoid the next level, which is kind of a point of no return.

What if you miss several student loan payments?

Now things begin to get seriously serious. As in serious times two. And expensive. Seriously expensive. And possibly semi-permanent. If your student loan payments are late by more than 270 days (that’s about 9 months), your loan status changes from “delinquent” to “default.” This is very, very bad. Here is the additional unpleasantness that awaits:

Your federal student loan balance(s) are now due in full, along with any accrued penalties, interest, fines, and collection agency charges. (I told you it was bad).
The federal government can (and often will) garnish up to 15% of your wages to repay the amount owed.
The IRS will keep your federal tax refund as well and apply it to your loan.
Your credit score is now very, very ugly. Getting new credit is going to be a challenge. And expensive. Maybe impossible.
Your student loan service may take you to court. This can also be very expensive.

Defaulting on a student loan is ugly business. You really don’t want to do this. You might blow off the cable or electric bill or even your landlord for a month or so, but don’t mess with student loan lenders. They can and will take some very serious steps to collect what is owed. After all, they have the power, might, and resources of the United States government behind them, and they are not afraid to use it.

Default can be undone, however

Defaulting on a federal student loan is extremely unpleasant, but it doesn’t have to be permanent. According to Federal Student Aid (an office of the U.S. Department of Education), there are two ways you can get out of default, other than immediately repaying the entire loan amount in full:

Loan Rehabilitation: This is when you enter into an agreement with the lender to make a certain number of payments within their timeline, and if you do so, then your loan will no longer be in default. (you’ll have to continue the payments though to keep it that way)
Loan Consolidation: If you qualify, this is when you roll the defaulted loan in with one or more other federal loans and continue repaying them under an income-driven repayment plan. You must first make several payments on the defaulted loan to demonstrate that you’re serious, but then you may be able to combine it with another loan to get it out of default.

Loan rehabilitation takes a bit longer, but it can also be more flexible than loan consolidation. The Federal Student Aid website provides more information and detailed instructions on how to do both of these.

How To Have The Money Talk With Your Spouse Without Slamming Doors

April 04, 2019

Have you ever had “The Talk” with your partner and it ends in hurt feelings and a slammed door? This is a financial blog so of course I mean the “Money Talk.”

If you haven’t, well then congratulations – can you tell me how it’s done? For the rest of us, you’re not alone. In an almost 30 year career as a financial planner and 26 year “career” as a spouse, I have had the money talk end in a slammed door and talked with people about how to have the money talk quite a few times.

What I’ve learned over the years is that there’s no perfect way to avoid it, but with practice and patience, you can decrease the door slamming and money stress in your relationship. Here are some guidelines that have worked for me:

1. Set reasonable expectations

Not a one-time deal. Unless you’re in Hollywood, the Money Talk is probably not going to have a romcom ending – you’re not going to be able to just have a 30 minute talk and then live happily ever after without ever having to bring it up again. Getting and staying on the same page as a couple takes work and repetition.
Judgement free zone. Start off with the expectation that there will not be a slammed door. This is where I failed miserably for a long time. In order to accomplish that, the talk must be judgement free – it is not an opportunity to blame each other over who spent too much last month.
Don’t be a jerk. This is also an opportunity for you to use your big boy words and not sound like a CFP® with an MBA who does this for a living. Sounding like a lecturing jerk is a major cause of doors getting slammed. (don’t ask me how I know)
Give each other grace. If your partner is trying his best not to sound like a jerk, grade him on a curve (he is a guy after all).

2. Remember that this is a planning discussion

Break it down into shorter milestones. I get overwhelmed if I try to think of the next 30 years. If this is you or your partner, narrow your timeframe. I suggest you start by discussing the next 4 paychecks (if you’re paid twice a month) or the next 2 paychecks (if you’re paid monthly).
Have a common starting point. To frame your discussion, you need to find some way of seeing where your money has gone (How to Find a Spending Plan that is Right for You). This is not the focus of the meeting, it is just where you start.
Stick with the next month or 2. Adopt the mindset of “What do I want to spend the next 2 (or 4) paychecks on?” Think of it as planning a vacation – you don’t have the time or money to do everything, so the task is figuring out what matters to you, then focus your time and money on that.
Work to limit the ‘must-spend’ items. There are some things like electricity that you must spend money on. Focus on figuring out how to spend the least amount on these items, so you can free up money to save or spend on what is important to you.
Follow your debt-payoff plan. Run a DebtBlaster to see how to pay off your debts sooner.
Take a look at retirement progress. Run a Retirement Estimator to make sure you are on pace to be OK in retirement.
Keep the focus on what you can change. Make sure your Money Talk is a forward-looking talk – if you’re talking about the past, doors will be slammed.

3. Think about the best time to have “The Talk”

When are you at your best? I am a morning person, which is another way of saying I am slightly less than perky at night. Some would say I am grumpy at night. The best time for me to have the Money Talk with my spouse would be at 6:30 on Saturday mornings. Unfortunately, my proposed time was met with a surprising lack of enthusiasm. We compromised and decided that 10:30 every other Saturday morning was a better time.
When can you talk uninterrupted? Find a time when both of your energy levels are high and you can have a relatively quiet 30 minutes.
Schedule it. Put this on your calendars, and if something comes up, you can make a note on your appointment to discuss it then. This is a lot better than having the talk when you are both rushing off to work.

4. Make a plan for all the money you’ll save on doors

One huge benefit to planning a regular Money Talk is that you will save a lot on door repairs. What will you do with that money instead?

Do You Really Need To Tip For That?

March 28, 2019

The other day I popped into one of my favorite burger places to pick up a cheeseburger and fries to carry out and enjoy at home. As I was paying, the check-out guy turned the tablet around for me to sign and I was offered the opportunity to tip. No one was going to be serving me, but I added an extra $1 to my tab just because I was asked.

This got me thinking – why did I do that? If I were picking up the same meal at a fast food joint, they wouldn’t ask for a tip. And if I’d paid with cash, he’d just give me back my change rather than ask me if I wanted him to keep any of it.

Is it because if I’d ordered my food to eat there that someone would deliver it to my table, in which case I might offer them a tip? Was I worried that somehow the burger chef would know and do something gross to my food? Or is it simply that companies have figured out that they can easily get you to part with a few more dollars at the point of sale, so they do?

Before I go any further, I should state that when it comes to more “traditional” tipping practices such as tipping your server at a restaurant, unless the establishment specifically states NOT to tip, I’m a strong advocate for 20% or more of the entire bill. The point of this post is to discuss some of the more nuanced tipping practices that have popped up in recent years, but nothing has changed when it comes to taking care of your bartenders and servers.

When does it really matter?

My colleague Cassie offered up a similar dilemma, asking: “Am I supposed to tip on a $4 latte? Uber/Lyft? Or take out food when I pick it up? What about Postmates (some of my friends give cash to the delivery person but aren’t you supposed to tip in the app?) Or in every beauty treatment available? For instance, my hairdresser is an independent stylist, so she charges whatever she wants – am I supposed to add 20% on top? How do tips affect those who receive them? Do they need tips? Or are they getting paid adequately? I wonder how many dollars I just throw into jars vs. add 15%-20% by the push of a button…..am I a bad person if I don’t tip? I need direction!”

How to decide when and how much to tip

Cassie puts it perfectly – it seems like everywhere we turn these days we are being asked to tip, but whether or not it’s appropriate really depends a lot on how the person you’re tipping is paid along with your own personal preference. The best way to answer this is to go through each circumstance:

Coffee shop:

Should you tip? Up to you.

My logic: In order to earn loyalty points at Starbucks, you have to pay through the app, which doesn’t ask you if you want to tip. Message there: tipping is not expected, although if you’re paying cash, it’s a nice touch to throw your change into the tip jar. Caveat if you go every day – it never hurts to throw a couple bucks in the tip jar every once in awhile, even if you are paying with the app/your card.

Rideshare:

Should you tip? If the driver was courteous and got you to your destination without drama, yes.

My logic: Tipping is a way to reward your driver for making the effort to provide you with a safe comfortable ride, and I know that most of these people are either doing this for a living or to supplement inadequate earnings from their “real” job – I’m more apt to be generous. Most of my rides are in the $10 range, so I’ll add $2 or $3, depending on my experience – $2 for a clean, decent ride, $3 if the driver and I had a great chat. Longer rides, like to the airport, I’ll add 20% unless the driver made me fear for my life.

Takeout food:

Should you tip? If you’re picking up the food, I’d say no, unless it’s sushi, in which case I will leave a tip in the jar for the sushi chef, same as I would when dining in.

My logic: If I’m doing everything but cooking the food, there’s nothing for me to tip for unless the restaurant employee goes above and beyond in some way to ensure a good pick-up experience (although I can’t think of an example, tbh). This same philosophy goes for food trucks – tips are appreciated, but not required.

Food delivery:

Should you tip? Definitely.

My logic: How much depends on a few things: whether the delivery was on time, did the driver come to my door versus call me from the street, and how far they had to drive to get the food to me. Bonus $$ if the weather is nasty. Rather than tip as a percentage of spend, I tip in full dollars based on distance, timeliness and effort required of the driver.

THING TO KNOW: I recently saw a news story on a few food delivery services that make tips part of the total compensation of the driver. In other words, they promise drivers a certain amount per hour, but tips can be a part of that. As a result of this knowledge, I tip in cash when I can for food deliveries that are through an app like Postmates, Uber Eats, GrubHub, Instacart, etc.

Beauty services when they are offered by the owner of the business:

Should you tip? This is a tricky one – I always heard that you didn’t need to tip the salon owner since they get to keep all the money, but when I asked about it at my salon, where I see the owner for my haircuts, the answer was, “Most people still tip him.”

My logic: I decided to tip him as I would any other employee, considering that while he gets to keep all the proceeds, he also has to pay the rent and all the other bills. However, when I go to a colorist who does hair out of her home, I don’t tip her as she doesn’t have employees or other business expenses. My clue that she didn’t expect a tip? She sent me a Venmo request, which doesn’t have an option to add a tip.

Baby-sitter, pet-sitter or dog walker:

Should you tip? It depends on how you booked them and how often you use them.

My logic: I used to baby-sit and pet sit and when the parents contacted me directly, I never expected more than the hourly rate we agreed to. However, when families booked me through a service where the rate was set by the booking company, it was nice to receive a little more than the rate when it was someone I regularly helped out.

When in doubt, ask yourself this question

Would you leave a tip if you paid cash? One reason that a lot of businesses are asking if you want to tip is simply because they can – it’s easy and they figure why not? But if the person you’d be tipping is simply running a cash register or some other transactional work, chances are that tips are just nice-to-haves, but not a key part of their compensation.

On the other hand, if someone is serving you by bringing goods to you or providing a service like doing your nails, there’s a strong chance that they rely on tips as part of their income. When in doubt, feel free to ask!

When to be generous versus keep it for yourself

In the big picture, it’s helpful to understand that there are some instances when you should always tip, such as when you’re waited on at a restaurant or a valet parks your car – how much will depend on the level of service and how much you spent. In some of the grayer areas, such as your daily latte or a restaurant that isn’t quite full-service, I think it’s ok to forgo the tip unless you’re a regular, in which case you might want to add a tip every once in awhile as an expression of gratitude for the workers remembering your order or greeting you with the news of the day.

And when it comes to some of those areas where you could tip but decide not to, consider using that as an opportunity to boost your own savings – if you were about to add $2 on to your sandwich order at the deli, but decided that it was not necessary, click over to your banking app and transfer that $2 to your savings instead. It may not seem like a lot, but it can really add up.

How I Mooched Off My Parents With My Pride (And Their Retirement) Intact

March 27, 2019

Some of the toughest calls I handle as a financial coach are situations where someone is struggling to make their bills because they loaned money to a loved one or have taken on the responsibility of supporting others. Understandably, they wanted to make things easier for someone they care about, but now they’re under stress because they can’t meet their own obligations.

I’ve been there before

My parents and I experienced this dynamic ourselves almost 20 years ago when I was diagnosed with cancer. I was barely in my thirties and, like most people my age, I was healthy, working hard, and enjoying my free time playing softball, volleyball and boating with friends.

I was also in the second year of building my own practice as a financial advisor, so my savings account was thin (okay, non-existent). However, my income was steadily growing and I was confident I would be on solid financial ground within 1-2 years.

After my diagnosis, I was not able to work for several weeks during treatment. Since my income was built around commissions, it didn’t take long for the revenue stream to dry up, the savings to be depleted, and the medical bills and credit card balances to start growing out of control.

The thing that made me cry about having cancer wasn’t having cancer

Strangely enough, I never cried over the diagnosis – I was confident in my medical team and it was beyond my control really. However, I did cry the day my parents wrote a check to cover my mortgage payment. That really broke my heart because I should have known better than to let myself get into that vulnerable financial position.

Seriously, I talked to people daily about emergency reserves and disability protection and here I was taking money from my parents to pay my bills. I was also fully aware of my parents’ financial picture as government employees trying to retire soon. At that time, we didn’t know how long my illness would go on, but I knew they loved me enough to jeopardize their own futures for me – that’s just the kind of people they are.

Making a plan to pay them back

When I eventually came out the other side with my health intact, we agreed on a payment plan so I could reimburse them for all of the bills they helped me with. My parents insisted it wasn’t necessary to pay them back, but I explained that I had to for my own peace of mind.

So we created a monthly payment plan, put it in writing, and agreed on an interest rate that was minimal. The rate was higher than what they could earn at the bank but much lower than I would have paid to a credit card company (win-win). As my situation improved, I ramped up the payment.

What I learned in the process

It took a few years to fully reimburse them, but I learned several valuable lessons by handling my dilemma this way:

Making the most of living below my means: I had developed the habit of living without those monthly payments, so when I was finished, I immediately redirected those dollars to my retirement plan. I had a lot of catching up to do. I had also learned to live below my means, and it felt great.
Practicing what I preached: I now practice what I preach and try to maintain 3-6 months of reserves on hand for life’s next unexpected curveball. I also always, always enroll in my employer’s short-term and long-term disability programs.
Rethinking career choices: I re-evaluated my career choice and found a full-time, non-sales position with a reliable salary and good benefits (just in case the cancer came back).
Respecting my siblings: By paying my parents back for everything, I avoided potential tension down the road with my siblings who may not have appreciated the burden I was putting on our parents or felt I was being rewarded for making poor financial choices (or burning through their potential inheritance).
Resolving not to repeat history: I came out of that situation determined not to go through anything like it again.
Taking care of the most important thing to me: Most importantly, my parents’ financial future was left intact.

We lost Dad about five years ago, but I’m happy he and Mom passed some great lessons along. They always provided a safe place to fall and never allowed me to hit rock bottom, but they also helped me get back on my feet with my pride intact.

8 Things To Know About Negotiating A Car Purchase

March 26, 2019

One of my most vivid money memories growing up was when my dad took me in to the finance managers office to negotiate a car deal for the first time. We sat down and immediately my dad came out of the gate with a set price and would not budge. It set off a stare down with the car salesman who tried to look offended by his lowball offer.

What the salesman didn’t know was that my dad had done his homework and had a firm understanding of what the car was worth. He would also eventually learn that my dad would walk away from the negotiation unless the dealer budged significantly.

Negotiating for a used car in today’s environment

Unfortunately, these days that strategy may not work as well. I took a lot of good negotiating tips from my dad, but in my last few car negotiations I have not been able to extract the big price reductions on used vehicles that he was able to achieve 20 years ago. The fact is that car dealers are now advertising prices that are in close range of the Kelley Blue Book value on used cars. This means they know you know what the car is worth now too.

This also means that while you could get thousands off a used car sticker price in the past, it is more likely to only be in the hundreds today. As a result, dealers are more willing these days to walk away from a negotiation because their own research shows them that if I won’t buy that car at that price, someone else will.

There is still money to be saved in terms of how you approach your car purchase though – these tips are designed to give you the most bang for your buck.

How to negotiate for a car in today’s market

1. Negotiate from a position of confidence.

If you’re financing your purchase, get pre-approved for a loan before you walk into a dealership or meet with a seller. Sometimes dealer rates can be higher than other sources. If you’re paying cash, notify them of the ability to close a deal quickly if you believe that will give you a pricing advantage.

2. Know what you should pay for the car you want.

Most cars are sold below the manufacturer’s suggested retail price (MSRP) and some cars are sold below the dealer’s invoice price. Knowing the difference can help you.

The invoice price can be found on many auto websites and is a good target in your negotiations. It can be difficult to obtain a price that’s lower than invoice. It helps if you can find out the real dealer cost, which may be lower than the invoice price because of things like secret factory-to-dealer incentives, customer rebates and holdbacks (a payment made by the manufacturer to the dealership if it sells the car within 90 days of arrival on the lot — a guaranteed profit even if the vehicle is sold to you at cost).

Be aware of any repairs needed

For used cars, don’t discuss price until you know exactly what kind of repairs the vehicle needs. Arrange for an independent inspection by a reputable auto mechanic. Needed repairs may give you a bargaining chip.

3. Stay focused and tune out dealer tactics.

This is the part that a lot of people hate about car buying. Dealers are trained to distract you from the central task of negotiating the best car price. Avoid conversations about trade-in values before you agree on a firm price for your car purchase. Resist last-minute attempts in the financing office to add options or packages that you don’t want, don’t need, and never agreed to.

Recognize dealer tactics designed to intimidate you, such as:

Demanding that you put down a cash deposit to show you mean business
Changing salespeople in the middle of negotiations
Holding your keys long after using them to test drive your car for trade-in purposes
Asking for an unusually high down payment

Don’t be afraid to call these as you see them – it will hopefully make them stop once the dealer realizes they are working with an informed buyer.

4. Speak only to decision makers.

Countless hours have been wasted at dealerships where salespeople scurry between manager and customer. This practice is designed to wear you down and frustrate you. Tell the dealership up front that you want the manager in on the discussions because you don’t want to waste time. Leave (politely) if they won’t agree.

5. Be businesslike.

Few things are more vexing to car sales personnel than a customer who is level-headed, well-informed, friendly and calm. Never raise your voice, but don’t hesitate to repeat yourself as often as necessary to get your point across. Keep your interest in a vehicle free of enthusiasm. Remarks like “This is my dream car!” undermine your credibility and put the seller in a position of power. When a dealer tries to induce emotion into a car purchase, I am apt to remind the person it is just metal and plastic sitting on 4 pieces of rubber.

6. Know when to bend.

For my most recent car purchase, we learned of a private seller with a SUV that was not on our list. It ended up being the car that met our needs at the right price. Likewise, when dealing with dozens of cars on a lot, some flexibility is necessary for successful negotiation. Make small concessions wherever you can — it will appease the seller and allow you to stay focused on what’s important to you.

7. Get everything in writing.

Take notes about who said what throughout the negotiation process. Make people wait as you write. You’ll be glad you have a record of promises and figures as negotiations continue.

Once an agreement is reached, get it in writing. Don’t sign anything you don’t fully comprehend or have no record of discussing. Should the dealer try to raise the price on you later, point to the agreement as a reminder of the original deal. Take it slowly — there is no three-day cooling off period or right to cancel a car purchase contract, so you’ll want to get it right.

8. Know when to walk away.

Not happy with the way things are going? Feeling a little queasy? Not certain how to proceed? Just walk out. The alternatives include saying something you’ll regret, agreeing to something you don’t want, or getting emotional. Be polite and express your thanks, but don’t hesitate to leave and take your business elsewhere.

Hopefully these tips will help you start your own family tradition of getting the right vehicle for the right price for you and your family.

4 Red Flags To Watch Out For With Student Loan Pay-off Offers

March 22, 2019

If you’re dealing with student loan debt, I’m sure you already know that the total amount owed these days is over $1.5 trillion. Wouldn’t it be nice to be able to hit the reset button and just not have to pay that debt back? Or to at least get some type of relief, either in the form of a lower interest rate, or legitimately having the debt forgiven?

There are actually programs out there to help with that, but before you start taking advantage, it’s important to understand that there are some scams out there too. How do you know?

Here are the red flags to watch out for

Red flag #1: A promise to just wipe away all your debt

It’s hard to get in a relationship with someone who makes promises they can’t keep. If a company is promising they can wipe out your debt or slash it in half, a red flag should go up.

It’s true that there are ways that your federal student loans can be forgiven if you meet the requirements. Those include being employed by a government or not-for-profit organization, and making at least 10 years’ worth of payments. If that’s you, you may be able to receive loan forgiveness under the Public Service Loan Forgiveness Program or if you’re a teacher you might be eligible for the Teacher Loan Forgiveness program.

However, taking advantage of these opportunities is totally on you, so beware of any company telling you they can make it happen without the above circumstances.

If you have private loans, the fact is that they don’t have a loan forgiveness option. Consider reaching out to your private lender directly to inquire about this as rules can change, but walk away from anyone promising to alleviate you of all your private debt without you actually having to pay it off.

Red flag #2: Charging a fee to help you

There are federal programs available to help with federal student loan debt and enrolling in one of those programs costs you exactly $0.00. Not a typo. It’s free.

A scam artist will entice you by letting you know these programs are available to you and that they can help enroll you into one. All you have to do is pay them a fee. Don’t fall for it!

Also, watch out for companies that want to charge you a fee to help you refinance or consolidate any of your loans. You typically can do that without an upfront fee as well.

Why pay someone for something that you can do on your own at no cost besides your time? It’s true that time is money and money is time, but in this case it doesn’t sound like a good deal. Check out your federal loan servicer for more information – they are there to help for free.

The bigger lesson here is that whenever you’re presented with programs that require upfront or advanced fees before they help you, it’s a sign that you may be about to fall for a scam.

Red flag #3: Pressure to act immediately

In most areas of life when someone is trying to rush you into making a decision, it’s a good time to pump the brakes a bit and do your due diligence. Check out the company or program you’re considering. How much information is out there about them? Are there reviews available for you to learn more about them?

Visit their website, but don’t enter any personal information on their site before you’re comfortable that it’s safe. Ask people you trust which companies they’ve used to refinance or consolidate their loans. Take the time you need to make sure you’re signing up for a good deal. If anyone is trying to get you to act right away before a “deal” goes away, let it – it’s probably not a good deal anyway.

Red flag #4: Requesting your social security or account number

Another red flag is when a company contacts you first, then asks for personal information like your Federal Student Aid ID or your Social Security number. Obviously if you’re making a call to a loan servicer or to refinance or consolidate, you’ll eventually have to provide that information, but anyone contacting you and leading with that request should be a red flag.

A legit company will likely not ask you for this type of personal or sensitive information until you’ve decided to move forward with engaging their services.

What to do if you suspect a scam

The reality is that scam artists exist. If you come across a student loan scam, please take the time to report it by filing a complaint with the FTC, and the CFPB.

The bottom line is that the best way to pay off your student debt, whether you have federal, private or both, is to know your options and put together a plan of attack on your own. Sometimes that may mean not prioritizing paying back your student loans over other financial goals, other times it may mean that you do. Either way, take caution not to get scammed in the process.

These 2 Accounts Could Fix All Your Budgeting Woes

March 19, 2019

Have you ever heard of the “see food” diet? I like to joke that sometimes that’s my diet: I see food and I eat it! The best way for people like me to stick to a plan to eat better is to just not have junk food around, right?

Well, I’m also on a “see money” budget, and I think a lot of people are: I see money and I spend it. That’s why the only money I keep in my spending account is money that I can afford to spend on discretionary stuff like sushi, wine, athleisure-wear and spa pedicures, while money that I need for things like veterinary expenses, car problems and groceries is separated out.

The same principle applies when it comes to sticking to any type of budget or savings plan – if you want to spend less money so that you have enough set aside to pay for things that come up, for people on the “see money” budget, the best way to do that is to get it out of your sight.

The reason that many budgeting and savings intentions fail is that too often we try to eyeball whether we can afford to splurge on stuff, which often happens right before pay day – we see that we actually have some wiggle room in our checking account and we know it’s about to be replenished, so we go ahead and spend it, only to find that we need that extra money when something else comes up after pay day and all the money is already allocated to other priorities.

One idea I had to combat this issue, which is often what leads to credit card debt that can easily get out of hand, is to fund two specific accounts each paycheck:

Account 1: The ‘Oh, crap!’ account

This account is for things like, “Oh crap! I just dropped my phone and I need a new screen” ($90) or ,“Oh crap! I have a flat tire and I need a tow” ($100) or the latest in my house, “Oh crap! The cat has thyroid issues and needs monthly blood tests” ($120). In order to make sure you have enough money set aside to cover these things, take a look back at the last several months for all the things like this that made you say, “Oh crap!”

Set up an online savings account and have the amount put directly in from your paycheck. For me, that’s $50 per pay or $100 per month, which seems to be the average cost of “oh crap!” This account is for everyday life things that truly make you just say, “oh crap,” that you couldn’t have predicted. (Note that after the initial blood test for the cat, the $120/month became part of my monthly budget, since I can now predict it)

Account 2: The ‘treat yo’self’ account

Most people I talk to would say that dining out is one of the areas that they tend to bleed money and it’s one area they’d like to cut back, but they often go to extremes and just don’t budget anything for it. It’s unrealistic to think that you’re never going to eat out just so that you can build up a savings account or save for retirement, so why not have an amount of money set aside for things like, “Hey, I’m in the mood for a $5 Starbucks drink today,” or, “I really don’t feel like cooking dinner so I’m gonna pick up my favorite meal on the way home from work.”

Maybe this account can be used for salon pedicures or a personal training session at the gym – whatever it is that you’d like to limit, but not totally give up in order to buckle down on other goals. We all need a treat every once in awhile, no matter how tight our budget. Having a separate account with, say, $25 going in each paycheck, allows you to do that without going overboard.

What these accounts aren‘t for

Note that these accounts are different from your emergency fund, which is there to pay your bills in case your income goes away – that’s a third account that we all need, although it can sometimes do double duty if you’re just starting out. These accounts are also not there to pay for things that you can plan ahead for, such as gifts, vacation travel or ongoing care like hair cuts and childcare. That’s what the strategy I describe in avoiding the number one budget breaker is about.

Finding what works for you

The thing about cash management is that there are lots of different ways to do it, some more involved than others. If you’ve tried other methods and still struggle to plan adequately for your life spending, try this method. For me, figuring out this part about money is just as much about hacking yourself and your habits as it is about willpower and control. Keep tweaking it til you’ve found a way that works, allowing you to more effortlessly work toward other goals.

7 Steps To Fit Student Loans Into Your Financial Life Plan

March 18, 2019

What started out as whispers of a potential financial crisis related to recent student loan borrowing has grown to a cacophony of fear, frustration, and concern. The staggering amount of student loan debt in our country has been a shocking wake-up call. As a result, many recent graduates are in need of guidance.

While high student loan balances are having a significant impact on people of all ages, they are particularly stressful for younger employees or those who went back to school during the “Great Recession.” We often hear the anxiety in employees’ voices about having student loans and wanting to pay them off sooner versus later.

But as my colleague Kelley Long notes, there are situations where student loan debt isn’t as bad as it seems. In a Forbes contribution she highlighted the importance of prioritizing other personal financial goals before worrying about making extra payments on student loans. Here are a few financial wellness steps that generally should be taken before making any extra payments on student loans:

Step 1: Make a list of your most important goals.

Student loan debt may seem like a significant burden, but it doesn’t have to be the fun killer that prevents you from reaching meaningful life goals. No matter how tight your budget is, it is important to have a written financial plan to provide guidance when prioritizing where to allocate your time and financial resources.

In fact, the simple act of putting your specific goals in writing and the steps needed to accomplish them actually increases the likelihood you will achieve those goals. Your financial plan doesn’t have to be anything too elaborate. As Carl Richards points out in his book appropriately named The One-Page Financial Plan: A Simple Way to Be Smart About Your Money, you can accomplish big things with a basic plan.

Many people assume that just because they have student loans, they will never be able to buy a home or retire. A simple one-page financial action plan that helps you set SMART goals could be the solution to help you feel like you are making as much progress as possible as you fit student loan payments into other areas of your financial life.

Step 2: Create (and follow) a personal spending plan.

This one sounds like a no-brainer yet only one out of three Americans actually follows a budget and tracks income and expenses on a regular basis. Depending on which repayment plan you have, student loan payments are typically 10 to 15 percent of discretionary income.

Over 40 percent of student loan borrowers are not currently making any payments. If your loans are currently in deferment status, try to go ahead and incorporate your future payments into the spending plan. Instead of paying your loan servicer, you can start saving some of those payments and get into the habit of making the payment to yourself.

For those who are making payments, the average monthly payment is $351 for borrowers between the ages of 20 and 30. Choosing the right repayment plan is about more than just minimizing your current payments. Knowing how long it will take to become debt-free and how much you will pay in total interest over the life of your loan are major factors to consider. To learn more about choosing the right repayment plan for federal student loans visit Studentaid.ed.gov.

Step 3: Establish a starter emergency fund.

This is the “baby steps” stage that sets the framework for creating a fully funded safety net account. The starter safety net fund typically ranges from $1k-$2k in an account separate from your regular checking account and will come in handy if any unexpected medical, auto, or home expenses occur.

Step 4: Contribute enough to your retirement plan at work to get the full employer match.

If you work for a company that offers some type of matching contribution to your retirement plan, don’t be like the 25 percent of workers who are leaving free money behind. Take advantage of these matching contributions by at least contributing up to the matching amount. A contribution rate escalation program, if provided, can also help you reach that full matching level over time, even if it’s difficult to do now.

Step 5: Eliminate high interest credit card debt and personal loans.

When it comes to paying off loans and other debt obligations, it is important to realize that not all debt is created equal. Low interest student loans or mortgage debt are generally okay since the interest may be tax-deductible and they can help build your credit score. However, try to keep these payments under 25% of your monthly income.

For those other debt obligations with interest greater than 6% such as credits cards, the best approach is to create a plan of attack to eliminate that high interest debt first.

Step 6: Fully fund your emergency savings.

Do you have enough to cover at least 3 to 6 months of basic living expenses? The majority of Americans don’t have enough savings to cover 1 month’s worth of expenses. This is where it helps to be different than the average American and pay yourself first. Set up an automatic transfer from your paycheck into a separate savings account until you’ve built up enough savings.

If you are experiencing student loan anxiety, you may feel the urge to bypass this important step. My best guidance is to avoid this temptation and focus on building up an emergency fund first just in case a life happens moment occurs along the journey. If you participate in a health savings account or contribute to a Roth IRA, you can choose to include these funds in your emergency stash. Just keep in mind that you will typically need at least 3 months of liquid savings before investing those funds.

Step 7: Make sure you are on track to replace at least 80% of your income during retirement (or your own goal).

This is a difficult financial priority to focus on if you are in the early career stages and feel burdened by student loan debt. Paying off student loans may feel like a more urgent priority, but it is generally recommended to save at least 10-15% of income throughout your working years to achieve financial independence. You can use this retirement calculator to see where you stand and try to increase contributions as needed. See if your employer has an auto rate escalator feature which is a painless way to give your retirement savings a raise each year.

It is important to point out that the previous action steps are recommended before paying extra on student debt. If you have student loans that are starting to feel more like a mortgage payment, remember that creating a financial plan that is simple and flexible is the first step you can take to assume control over your situation. As my colleague Kelley Long wrote, she didn’t like making those 10 years of student loan payments, but she was happy to finally be done and have some other life goals completed as well.

Spring Cleaning For Your Finances

March 15, 2019

With the official start of spring looming, perhaps it’s time for some spring cleaning of all those things we’ve been ignoring up until now. I’m not just talking about your home or your work space. Here are some financial areas of our lives that could probably use some spring cleaning too:

Your tax records

With tax season upon us as well, it’s a reminder of our own version of that overstuffed file cabinet in the corner that we’d rather not think about. (If you don’t know what I’m referring to, your spring cleaning may consist of starting such a file.) We know we probably don’t need all that paper but we’re afraid of getting rid of anything for fear that it will someday get us in trouble with the dreaded IRS.

What the IRS recommends

For that reason, let’s look at the IRS recommendations for how long we should keep tax records.

They suggest that we keep copies of our filed tax returns to help in preparing future returns.
As long as you filed a non-fraudulent return and reported at least 75% of the income you should have reported, you can discard any other tax records for that year after just 3 years.
If you under-reported your income by 25% or more, those 3 years become 6.
But if you filed a fraudulent return or none at all, keep your records indefinitely. You’ll need all the help you can get.

There are a few other exceptions to the 3 year rule. If you filed a claim for a credit or refund after filing your return, keep records for the later of 2 years after you paid the tax or the regular 3 years after you filed. Keep those records 7 years if you filed a claim for a loss from worthless securities or bad debt reduction.

Keep all employment tax records for 4 years after when the tax is due or is paid, whichever was later. Finally, keep records related to property until after the period of limitations runs out for the year in which you sell the property.

Confused? If you’ve sold some property, consider speaking with a tax professional about what to keep and for how long.

Don’t forget that taxes aren’t the only reason to keep some of these records. Make sure that they’re not needed by your insurance company or creditors before you throw them away. You might also want to keep receipts for warranty purposes.

Your credit report

We’ve all heard about the importance of checking our credit report for errors but how many of us actually take the few minutes to do it? Having errors on your report doesn’t just mean you could be paying higher interest rates and being disqualified for loans and apartments. You could also be paying higher insurance premiums and risk being disqualified for jobs.

How to check for errors

The first step is to request a copy of your credit report from each of the 3 bureaus (Equifax, TransUnion, and Experian) on annualcreditreport.com if you haven’t already done so in the last 12 months. That is the only official site, so don’t fall for a copycat. If you’ve been denied credit, you can also get a free copy of your report from the bureau used by the lender that denied you.

Correcting credit report errors

If you see any errors on any of the reports, you can dispute it by filling out the form that comes with your report, using an online dispute form, calling the bureau, or contacting the creditor to request that they update the bureau with the right information.

If you make a phone call, you might want to follow up with a letter. In any case, be sure to be specific as to what information is wrong and why. The bureau must then complete their investigation within 30 days and send you a new copy of your credit report.

Cleaning up items that aren’t errors

Sometimes it’s not just the inaccuracies that need to be cleaned up. Try to bring any recently delinquent accounts up to date. If you have old debts, you might want to get them paid off or settled as well, especially if you’re planning to buy a home or refinance your mortgage. Just be aware that even just contacting an old creditor can actually hurt your credit score by turning an old debt into a new debt since more recent debts count more towards your score.

Paying it off should improve your score after 2-6 months though, especially if you can get the creditor to report them as “paid-in-full” or “paid-as-agreed” rather than “settled” or “charged-off.” That being said, you may want to ignore those old debts if you can’t pay them off (making a partial payment without settling it may only hurt your credit score) and they’re past the statute of limitations to sue you in your state or you’re planning to file for bankruptcy.

Your accounts

If you’re like most people, you may have multiple bank and investment accounts all over the place. It can be hard for you to manage and keep track of and even harder for your loved ones in case something were to happen to you. There may be good reasons for this but if not, it could be time to do some consolidation.

Why consolidate?

In addition to making your life easier, consolidating bank and brokerage accounts can qualify you for lower fees, higher interest rates on your savings, and other perks. Don’t forget to shop around on sites like money-rates.com and depositaccounts.com to see if someone new can give you an even better deal than your existing institutions.

You may also have retirement plans floating around out there from previous jobs. Unless they offer you a unique investment option, you might want to roll them into an IRA or your current employer’s plan. An IRA can give you more flexibility in how you invest the money and how you withdraw it (unlike other plans, you can use it penalty-free for education expenses and a first-time home purchase).

On the other hand, rolling it into your employer’s plan would allow you to have all of your retirement money in one place and possibly the option to borrow from it tax and penalty free at any time and for any reason. Your plan may also offer you unique investment options and free advice on investing within the plan. Finally, if you retire after age 55, you can withdraw penalty-free from a 401(k) while you’d have to wait until age 59 1/2 with an IRA.

Taxes, credit reports, and financial accounts — none of these sound particularly exciting to most people, which is how we come to neglect them. But if you take some time now and do some spring cleaning in these areas, you may be surprised to see how liberating it feels to have a smaller and cleaner tax filing cabinet, a credit report that’s not keeping you down, and money that’s working as hard for you as it can. You can then sit back and relax, knowing that summer is right around the corner.

A Working Parents Guide To A Budget-Friendly Spring Break

March 11, 2019

Spring break is an anticipated holiday for kids (young and old) around the country. It can also be a stressful time for parents that have to work and are not able to take time off – or maybe don’t have the extra cash for a big trip. We want to keep our kids occupied and entertained, but that can be easier said than done when time and/or money may be tight.

Here are some ideas to help make spring break a blast for your kiddos without stressing you out … too much.

Job share the parenting – If you are married or have an ex that you share parenting with, divide the week between the two of you. Maybe you take off the first half of the week while the other parent takes off the second half. This allows you to spend some fun time with the kids and still tend to those pressing matters at work.
Over the river and through the woods… – Spring break can be a good time to enlist the help of grandparents to spend some quality time with their grandkids. If the grandparents live somewhere else, it can be a fun experience for the kids to travel somewhere away from home. Aunts, uncles and cousins work too – this was my experience growing up and it was always a blast to play and stay with some relatives.
Send them camping – I’m not suggesting packing the kids off to the woods alone for a week to connect with nature. Find some local camps in your area that match what your kids like to do – science, music, math, sports – there are all sorts of options. Now, I know what you are thinking, camps are expensive. But many offer scholarships or discounts if you enroll more than one child in the camp to help with the cost.
See what their friends are up to – If your kids have friends that are sticking around over break, organize some play dates with their parents. In exchange for taking your kids for a day, offer to have them over one evening or weekend so they can enjoy a night out – everybody wins!
Master the “staycation” – If you have some time off, but don’t want to spend a fortune on an expensive trip, find some cheap local activities to enjoy. This is my plan this year. My wife is a teacher and she will be off with the kids, but I plan to just take a couple of days off that week so we can ski one day (we live in Colorado – it’s not cheap but we have mastered the art of a “reasonable” ski day) and spend some time together at a hot spring in the mountains.
Check your benefits for back-up care – Worst-case scenario, if you’re unable to take any time off and you’ve tapped all your free care resources, check with your workplace EAP – many employers offer back-up daycare support for a limited number of days. Assuming you haven’t used all those up with snow days, you may find some relief there if needed.

The important thing is to keep things in perspective and relax! There are plenty of options to provide a fun and engaging spring break for your kids, even if you must work and have limited funds. With a little research and planning, you can all have a great spring break!

Common Financial Mistakes Parents Make By The Decade

March 05, 2019

Lately, I’ve had a lot of heartbreaking conversations with folks who are working hard to be the best parents that they can be and are really struggling to balance finances and parenting. What I have noticed is that it seems that there are recurring themes of money mistakes that parents make based on their age and stage of life.

As a dad myself, I get it. It is so hard to always be “on” and make the right decision. Perhaps by sharing some of the common mistakes we regularly see, I can help you avoid similar situations.

A top mistake parents make in their 20’s

Placing kids before career

Some of the most successful people I know had kids at a very young age. I’ve worked with many single parents who heroically balanced work and early parenthood to scratch their way to success. Often, the resilience and time management they learn in the process helps them later.

One super successful friend of mine started his family when he and his wife were 23 and in grad school. Today he is ranked as one of the 50 most influential people in the US in his profession. That said, they are the exceptions. My friend would tell you that the hardest times in his marriage were those years of school, work, parenting and living at the poverty level.

Without unbelievable willpower and a pretty great support system, most people don’t thrive when they start a family before they start the foundation of their career. That doesn’t mean you have to be in your dream job and have tons in the bank – just that you have put yourself on the right path.

How we avoided this mistake

My wife and I got married just a few weeks before I turned 23. She was a new nurse and as such, always had the night shift. I was still figuring out what I really wanted to do with my degree, so we decided to wait a few years to have kids. I’m so glad we did – 5 years later when we started our family, we were excited about the idea of having kids instead of worrying about how that would change things because we were both more settled in our careers.

I know that it may sound preachy and that isn’t my intent. But as we published in a recent Society of Actuaries essay – our research, and research of leading think tanks, shows that having a committed partner and a career path before a baby goes a long way towards long-term financial wellness.

A top mistake parents make in their 30’s

Not putting limits on kids’ activities

The hardest, but sometimes best, thing we can say to our kids is, “No.” However, in today’s crazy culture of over-scheduled kids, we sometimes don’t even let our kids say “No” because we get worried that they will miss out on something. As activities like sports, music, dance, etc. start at younger ages, sometimes we can forget that our kids haven’t even asked us about playing soccer, but here we are signing them up like their futures depend upon it.

I can’t tell you how many friends I have talked to over the years who have said something to the effect of, “When did our kids activities start running every minute of our lives?” Not only does this impact the time you have to spend with your spouse, your family, friends and even your kids – but it is expensive!

How we placed limits without our daughters hating us

My youngest daughter has been involved in cheerleading over the years and one of the things we had to say at one point was that once she got to high school she could no longer do competitive cheer. It just didn’t make sense to pay huge amounts of money for her to do an activity she was already doing at school, which also required us to drive half way across town two or more times a week (not to mention the cost and time of traveling to those competitions).

My daughter’s initial reaction was not good – she didn’t like it at all. But we stood our ground, then discussed how the money could be directed to other things important to her like vacation and her college fund. She eventually calmed down and I’m happy to report that a month or two into high school, she even said how glad she was to not be doing competitive cheer because she didn’t think she could balance that time commitment with everything else.

The moral of the story

It’s important to encourage your kids to try new things and discover their passions. But it is perfectly OK to set limits on your monetary and time commitment to anything – especially below the middle school level.

A top mistake parents make in their 40’s

Not putting limits on kids’ college choices

No matter where you get your news, you’re probably seeing the same thing we hear every day in talking with people about finances: student loan debt is financially killing people – students AND parents.

Sometimes student loans are unavoidable. My wife entered college right when her dad’s business hit hard times. She got some grants and worked a ton, but she still had to borrow about 1/3 of the cost of her education. That’s what the program was originally designed for – to get students over the final line.

Somehow over the years, costs have risen faster than incomes and more and more people are borrowing to fill the gap. That said, many people are focused on their “dream school” and not their return on investment for education. All education – from technical training to Harvard Law – is a great opportunity as long as you measure the expense against the benefit.

How we’re balancing this in our family

My oldest daughter is majoring in elementary education. She realized early on that our contribution would cover a state school, but she would have a ton of debt at most private or out of state schools. On a teacher’s salary that didn’t make sense, so she’s heading to a state school.

On the other hand, my youngest wants to major in supply chain management. She only has one in-state option in a new program or two nearby states have highly rated programs. Both of those out of state schools will offer her in-state tuition if she gets the ACT score she’s shooting for. Even if she gets a mediocre score, it would probably only mean borrowing about $10,000 – $14,000 for one of those top programs.

That is probably a good investment for a highly rated program. It’s worth noting that her “dream school” for her major would result in about $75,000 of debt or more. On a standard 10-year repayment that would mean an extra $638 per month for essentially the same degree! Needless to say, it’s not even on her list.

So, when talking to your kids about their post-high school education, don’t focus on the name or the cool campus – come at it from a longer-term perspective by setting a maximum amount of debt that jobs in their major can support and don’t go over that amount. A common rule of thumb is that total student loan debt upon graduation should not exceed the first year’s salary in your major’s field in order for the payments to be affordable. If at all possible, stay well below it!

A top mistake parents make in their 50’s

Helping adult kids at the expense of their own retirement

According to a recent study by Merrill Lynch, American parents are setting aside $250 billion annually for retirement while spending $500 billion per year helping their adult children! Think about that for a minute: using twice as much to help your adult kids as you’re using to help yourself.

According to the study, 79% of parents are helping their adult children and most alarming is that 25% of the time people are dipping into their retirement funds to do so. I get it, we all want our kids to succeed because we love them dearly. But I often describe it to people like what you hear from the flight crew before takeoff: if oxygen masks are deployed, put your own mask on first before assisting anyone else. The same concept applies here.

You don’t have to be independently wealthy to help your kids, but you should run a retirement calculation to make sure that you are on track for retirement and that the help you provide won’t jeopardize that. You also want to make sure that you are not making your kids dependent on you, but instead helping them to become self-sufficient. Then you’ll be able to enjoy knowing that not only are you going to be able to enjoy retirement but that you will be able to see your kids enjoy the help.

A top mistake parents make in their 60’s and beyond

Worrying about leaving something to the kids instead of caring for yourself

The last stage of mistakes I’ve seen parents make is worrying about running out of money – not for themselves but that they won’t be able to leave an inheritance to their kids. Of all the mistakes, this is probably the least frequent, but it is still very real and it makes me sad.

It is disheartening when someone works their whole life and then doesn’t do those “bucket list” things because they are worried about their kids again. What’s worse is that usually when I see this, it’s not a vacation that someone goes without but things that really impact their quality of life – I have seen my own family members not want to spend money on things like hearing aids, medical treatments or making accessible improvements to their homes so that they don’t “spend their kids’ inheritance.”

I don’t have a financial solution for this one but just some advice: Remember that your children and grandchildren love you and want you to be healthy and happy. They would rather see you enjoy the fruits of your labor and maintain your quality of life than get a few extra bucks after you are gone. Believe me, they tell me all the time in my line of work.

Here’s How Your Income Tax Withholdings Work

March 04, 2019

I was recently given the opportunity to explain tax forms to a bunch of 17-year olds with part time jobs. They were eating pizza in my house when one of the guys asked me to explain how they will pay their taxes when they are adults. I was pleased to hear that one of them was not planning on living with me forever. Here’s how I explained it.

Paying your taxes through work

When you get a job, you fill out something called a W-4, usually on your very first day. This form tells your employer how much money to withhold from each paycheck and your employer sends it to the IRS. At the end of the year you get another form, called a W-2, which shows how much was withheld over the course of the year, along with how much you were paid and some other numbers as well.

I went on to tell them that you will use your W-2 to fill out your IRS Form 1040, which is what you use to file your taxes. At this point I realized that in 15 seconds I had referred to 3 separate tax forms – I was losing them fast and had to change tactics.

An example of how withholding taxes work

I started over, saying, “Let’s say you earn $10 an hour and work 10 hours a week. What would your weekly income be?” They correctly said $100 (with a little eye rolling). I went on: Now suppose you worked 50 weeks a year, what would your annual income be? Proving they have some math acumen, they said $5,000, which seemed like a lot of money to them (to be young again!).

The W-4 is what would tell your employer to keep $5 from your paycheck and send it to the IRS, then they would pay you the other $95 (keeping it simple here). At the end of the year, you would have sent $250 to the IRS.

After the end of the year, you get your W-2, which confirms this information – you earned a total of $5,000 and pre-paid $250 of what you owe to the IRS through your employer. You use that to fill out a tax form called a 1040, where you calculate what your actual taxes due on your income should be.

How you end up owing taxes or getting a refund

If you didn’t have enough withheld, aka your taxes for the year are more than $250, you have to pay the balance by the April 15th deadline. If you withheld too much, aka your taxes for the year are less than $250, then you get a refund for the balance as soon as the IRS receives your form and processes it.

Why not always aim for a big refund check then?

They liked the idea of getting a refund and one asked me why you would just have $10 withheld in order to get more back. I told him that is a very common strategy that some people use who have a hard time saving money. The problem is that you don’t get any interest on that money while the IRS is holding it, whereas if you’d instead just took that extra $5 per paycheck and put it in a savings account, you might have earned a few extra dollars from your bank in interest.

The moral of this story is that when you file your income taxes this year, if you’re due a large a refund or owe more taxes than you want to pay in one lump sum, the best way to avoid that next year is adjust your W-4 withholdings at work.

Creating A Values-Based Spending Plan

February 28, 2019

Note: Today’s post was co-authored by my colleague Laura Finn, who is a Senior Consultant at Financial Finesse.

Here at Financial Finesse, we talk to a lot of people about budgets (we often call them spending plans). We talk about tools to help you create a spending plan, tips to help and guidelines on percentages of take home pay you should allocate to housing, transportation, savings, etc.

But how do you account for the things you love, but don’t really fit into a traditional spending plan? A recent team exercise shed some light for me on something I had never really considered (shout out to Statia Thomas for this great idea) – why don’t we build our spending to reflect the things we value and enjoy the most in life? We decided to explore this concept more in depth.

What the “traditional way” is missing

As a financial planner, I champion the idea that operating within the confines of your spending plan is fundamental to reaching your goals. So then why do so many people struggle with this seemingly simple concept?

Our theory is that it’s not that most people don’t understand the concept; it’s that the spending plan may not be reflective of what truly makes you happy in your everyday life! While most of us have inherent needs for food, shelter, transportation, and saving for retirement, what about the other inherent “needs”? While I may value experiences (like travel or local concerts), others value more tangible items (Laura admits that she goes to Sephora so often, she uses their black-and-white bags to bring her lunch to work).

These examples may or may not resonate with you, but you probably have your own version of travel or Sephora. The key to success is to ensure that these things are captured in your spending plan and have their own line item. Trying to pretend as though they don’t exist will not only continue to thwart your short-term spending plan, it may keep you from hitting those long-term, larger goals.

What if you’re not sure what you truly value? Our solution is start with the person who knows you best: you!

Hack yourself!

The first step in making your values-based spending plan is to work to better understand yourself. What items and activities do you truly love? Do they cost money? Here’s a short list that our group brainstormed for themselves during this exercise:

Vinyl record collection
Graphic T-shirts
Makeup and hair products and services (aka Sephora)
Gym membership and spinning app
Golf
Travel

After making this list, we went around the group and shared if we budgeted for these items. The answers were mixed, but the bottom line is, most of us could refine our spending plans to better include the things that we loved most.

Maybe you like grabbing drinks with your colleagues, and your spending patterns truly reflect this. Let’s go a step further: If you find yourself at your favorite watering hole each week, how much are you typically spending there? And, more importantly, why are you there?

Are you there because you truly enjoy the environment, or is it the company you value? The bottom line is if it’s important enough to you, then it should have its own line item in your budget! But how much should you allocate? If you find that you enjoy the atmosphere, perhaps you can find ways to lower your tab there by eating or drinking less, or, if it’s the company you value, perhaps you can find a less expensive way to get together (such as hosting at someone’s home twice a month).

The bottom line is, there are trade-offs here. And frankly, if you truly love your outings as they are, find another trade-off within your spending plan. For instance, if you care less about what kind of car you drive than spending time with your friends, perhaps keep this in mind when it’s time to make your next purchase.

Making it about you instead of what society may be saying

The overriding message here is to make your spending plan a true reflection of who you are and what you love rather than making it follow anyone else’s ideals and guidelines. We all need shelter, but does the big house (with the large rent or mortgage) really make you happy? Maybe cut that back to spend less there in order to spend more on your record collection or makeup.

The goal is to shift your mindset to have your spending reflect what YOU value as opposed to what the world around you tells you is important. What a cool lens to view your spending plan through! If our spending aligns with what we value, might more of us be able to stick with a spending plan long term?

A mindset shift, but don’t forget the basics

We need to be clear here. We are not suggesting that you stop saving for emergencies or retirement in order to spend more on the things you value. Rather, changing our mindset about where we spend money and understanding the “why” in our spending patterns can help us establish a healthier relationship with our money.

Be gentle with yourself and don’t go it alone

This is always true when we are trying to make any change in our lives – it’s bound to be tough. Let’s take trying to be healthier for example. It never happens overnight, and we will always have stumbles along the way. This is natural and even healthy, if we don’t let that discourage us to the point of giving up.

Let your spouse or a confidant know what you are trying to do and ask them to be an accountability partner to help you stay the course. Having support can make all the difference!

This was such a fun exercise for us and I am so excited to share this with all of you. I hope this helps if you have ever struggled to stick to a spending plan.

Making Sure You’re Covered During A Short Gap In Employment

February 25, 2019

As much as we all love our jobs (at least I do), sometimes for one reason or another we find ourselves considering a new career opportunity. One of the fun things about switching jobs is that, if we arrange it just so, we get a little time off between finishing up one job and starting the next. Recently, this was the case for a friend’s husband. They were so excited about him having some time off without having to take vacation days that they forgot all of the repercussions this can have.

The ripple effect of even a short employment gap

In their case, not only was he going to have a one week gap in employment, but he wouldn’t be covered by health, dental, disability and life insurance right away at his new job. They asked me to help them look at the risks this posed and decide what to do.

The most important thing: health insurance

The first consideration was health insurance. While the risk was very small that he would actually need health insurance during that week, an unexpected accident or health event is far from impossible and could be catastrophic to their finances without the proper insurance. Luckily, he checked with the benefits department at his current employer and found that his current insurance would cover him until the end of his last month at work, but that was going to leave 4 days of the next month uncovered until he started his new job.

He decided to check with the new employer to see if there was any way to start his new insurance on the first of the month, but that wasn’t going to be a possibility, so that led us to consider other options:

1. COBRA – Many employees have access to COBRA coverage when they leave a job which would typically provide for up to 18 months of insurance at the full premium, but it is usually very expensive. The nice thing, however, is that there is a 60 day window for applying and coverage is retroactive to the first day of eligibility, so you can take the wait and see if needed approach before signing up.

Caveat: This would have worked well except that because he had been working for a small employer (less than 20 employees), he was not covered by COBRA.

2. Healthcare.gov – Losing coverage is a qualifying event for enrolling in health insurance through the marketplace mid-year. For someone who needs coverage for a longer period of time, this may be an option to at least consider.

3. Spouse’s policy – If you are married and your spouse can get coverage through work, that is an option as well. Again, even though open enrollment is over, because he lost coverage mid-year, that is a qualifying event allowing my friend to add him to her coverage through her employer. We did look at this option, as she could have added him for one month and then removed him once he had coverage through his new employer. The cost was not too bad, but there was yet another option to consider.

4. Short term insurance –We decided to check out the option of a short term policy with a very high deductible. He would only be needing the coverage in the case of a true emergency, so they were effectively reducing their risk from hundreds of thousands of dollars down to $12,000 (the average deductible), which is much more palatable. The cost was reasonable as well, so this option seemed to make the most sense for them.

5. Bubble wrap – The only other option I could think of would be for him to confine himself to the house and be a couch potato for 4 days to take away his risk of an accident, however, I suppose he could still have a heart attack, so that isn’t even a perfect solution!

Other insurance coverage gaps

To address the issue of not having dental, life or disability insurance for a while, they decided to add him to my friend’s work policy for dental and get life and disability insurance in the private market. Since they don’t really need the extra coverage, once he’s enrolled in those coverages through his new job, they will likely discontinue those policies.

Let’s not forget the income gap

Lastly, having a week off between jobs may also mean that you miss out on a week’s worth of income (unless you have vacation pay coming to you). To handle that, make sure that you have enough in savings to comfortably cover the gap in income for that time period while still maintaining the recommended 3 to 6 months worth of living expenses in your savings account.

Taking even just a couple days between jobs can feel like a real break, so take the opportunity if you can. And don’t forget to enjoy some down time!

6 Things That Fortnite Can Teach You About Financial Wellness

February 15, 2019

What does America’s obsession with Fortnite have to do with making the most of your financial wellness benefit? Surprisingly, more than you would think. Fortnite is on track to be the most popular video game in history and is currently beating out television and movies for user engagement. For those who play it regularly, it’s become part of their identity – inspiring dance moves, fashion and online commentary.

I’ve got a son in middle school, so I’ve witnessed this up close. He and his buddies are obsessed with all aspects of the game. What keeps them, and the millions of other players, so engaged, and how can we apply those factors to changing our own financial behaviors?

1. Collect and construct.

Fortnite draws in the new user through its “collect and construct” feature, where the player goes into the battle with a tool they can use to chop down and collect objects and then uses those materials to construct structures to advance in the game. An effective financial wellness program impacts you in a similar way, inviting you to collect the building blocks of financial health and use them to construct good financial habits. For example:

Tracking expenses to develop a spending plan;
Pulling together accounts, online and social media information to develop a digital estate plan;
Gathering account data and goals to run a retirement projection ( See Want to Retire 3 Years Sooner? This Benefit Could Be Your Ticket); or
Taking inventory of credit cards and student loans to pay down debt more efficiently.

2. Engage and entertain.

How does Epic Games keep players coming back again and again to play? It’s contagiously fun – and doesn’t take itself too seriously. Characters are called “skins,” with a range of colorful, anthropomorphic animation. You can get them to dance by using an “emote” – and learn it yourself if you’re inclined.

An effective financial wellness program helps you to improve your financial habits by encouraging repeat usage. Pay attention to the various ways that you can access your benefit and take advantage:

Gamification of tools and resources – making it fun to progress;
Multimedia learning tools so you can learn in the style which works best for you;
Coaching to empower you to make changes (vs. advice which keeps the power with the advisor); and
Facilitated workshops and webcasts which use the power of “show not tell” to create “aha” moments.

3. Play alone or with a friend.

Sometimes you want to be alone and sometimes with companions. Fortnite lets gamers play in teams (“squads”) or play on their own (“playground mode”). Financial wellness programs offer multiple ways to engage, including:

Self-directed learning online using articles, blog posts, multimedia planning tools, videos and podcasts;
In-person and telephone coaching conversations with a CERTIFIED FINANCIAL PLANNER™ professional or financial counselor; and
Group learning using facilitated workshops, webcasts and peer-to-peer coaching groups.

4. Leave you wanting more.

Did you ever try to get your teenager off of Fortnite to come to the dinner table? It’s so difficult. That’s because Fortnite is “sticky.” Gamers are rewarded in some way every single match. While it may be easier to get someone in the middle of running a retirement projection to pause for dinner than to lure your teenager, aim for “stickiness” in your financial wellness journey:

Break up action steps into bite-sized, achievable pieces;
Start high level and drill down when you need to – look for a big picture summary and ways to dive deeper; and
What’s in it for me – take advantage of opportunities to personalize your financial wellness benefit so that you can practically and easily apply what you’re learning to your financial life.

5. Avoid overload.

Has the Fortnite player in your life ever had a Fortnite induced meltdown? Not so fun, right? Too much of that kind of intense neurological stimulation can activate the fight or flight mechanism in the human brain. Financial wellness is a process and a practice, not an event. That means:

Define your goals then prioritize them one at a time;
Tackle tasks one thing at a time and don’t try to do everything at once; and
Be gentle with yourself – work at the pace that works for you, and don’t worry about your colleagues and friends.

6. You don’t have to pay to play – but watch out for a hidden sales pitch

A basic version of Fortnite can be downloaded for free and anyone with a compatible device can play. Truly unbiased financial wellness programs are offered as an employer-paid benefit. It should be offered at no cost to you – without any sales of financial products or services.

Unfortunately, some financial services providers are now using the term “financial wellness” to try and earn insurance or investment sales from employees. Beware! That’s just like downloading Fortnite Battle Royal then getting tempted to buy lots of V-Bucks. Not sure if your program is an unbiased financial wellness program? See this infographic.

Do you have to actually play Fortnite to become better at improving your own financial wellness? Not unless you want to take inspiration from a successful video game. I encourage you, however, to take a few steps today and then keep going. With all the time you’ll save once you’ve gotten your finances in order, you’ll have more time to work on perfecting your floss.

Do You Really Need To Break Your Expenses Down Into Wants Versus Needs?

February 14, 2019

When it comes to budgeting, the conventional wisdom is that we should divide our expenses into “wants” and “needs.” Even our own Expense Tracker worksheet does this. But I think it’s actually a waste of time and let me tell you why.

Want or need?

First, there’s no clear line between “wants” and “needs.” You should see the debates that often happen in our budgeting workshops about what’s a need versus a want. Many would argue that their morning coffee, smart phone, Internet access, and cable TV are all “necessities” while others would call them luxuries. The same debates can happen between couples or even internally.

It’s also not just that we have different ideas of what constitutes a necessity. Each category of spending is a mix of need and want. For example, food is clearly a necessity but most of what we actually spend on food probably isn’t. The same goes for clothing, housing, the car we drive and even electricity.

We don’t really need all of our “needs”

Thinking of certain spending categories as needs can also make us think of them as untouchable. Yet, some of the biggest sources of savings can come from choosing lower cost housing, driving an older car, spending less eating out, looking for discounts on groceries, and reducing cable and phone bills. Focusing on just the “wants” like entertainment and shopping can cause us to miss these opportunities, and blow our budget because we miss those things. It’s also important to be honest with yourself about this when a crisis hits.

Discretionary v. non-discretionary

Besides, unless you’re truly living on a subsistence income, I don’t know anyone who only spends money on wants. So if we’re going to spend on a mix of wants and needs, what’s a better way to characterize spending categories? I prefer to think of spending as discretionary vs non-discretionary.

This doesn’t mean we have no discretion over “non-discretionary” expenses. It just means we’re not exercising that discretion on a regular basis. For example, while it’s certainly not an example of good budgeting practices in any other sense, the federal government essentially breaks down its expenses into entitlement programs like Social Security and Medicare and discretionary expenses like our military and education programs. The difference is that entitlement programs are on auto-pilot while Congress and the President fight about discretionary spending every year.

How to classify

With your own budget, non-discretionary expenses would be things like rent or mortgage payments, insurance premiums, utility bills, and subscriptions. While they may fluctuate over time, they’re generally determined by decisions we make in advance like where to live, which mortgage and insurance coverage to get, and what cable, phone, and gym plans to sign up for. We should take some time and go through each of these to make sure we’re getting the best value for our money. But after that, they’re pretty much on auto-pilot until something changes.

On the other hand, we’re constantly making spending decisions about things like eating out and shopping. How much we spend on these items can also vary considerably from month to month. Rather than try to budget for each of them in advance, which can be pretty difficult, you can give yourself a fixed monthly or weekly “allowance” to cover all of them.

The idea is that you get to spend as much as you like but when the money is gone, it’s gone until the next allowance period. Likewise, whatever you don’t spend can carry over to be splurged in the future. You can then decide what feels more like a want versus a necessity with each purchase.

The reality is that almost every expense can be a “need” or a “want” based on your perspective. What’s important is that you’re prioritizing your spending according to what’s important to you. Arbitrarily splitting your expenses into needs and wants won’t do that. Thinking through each and every expense will.

Should Newlyweds Combine Their Accounts?

February 13, 2019

At Financial Finesse I am often given the opportunity to assist people at the most important events of their lives. We encourage people to make good financial decisions at the outset of a career and on the cusp of retirement. We share in the joy of the birth of a child or the sadness of the death loved one. As such, it is quite common for couples to reach out to us before they marry to get the best tips for handling their finances. There is one questions that is universal:

Should we combine all our accounts or keep them separate?

Marriage represents a joining together of two individual lives and so it is reasonable to question how much needs to be combined. Combining accounts sounds simple, but it can be a shock to your system if you are accustomed to being independent. To help people decide, I like to review three different methods.

Option 1: combine all your cash accounts

Pros

Totally transparency
Less confusion because there are less accounts
Mitigates arguments over who should pay for which expense

Cons

Concerns about losing control
Requires significant changes upfront to ongoing auto deposits and auto withdrawals

Option 2: keep your accounts separate

There are cases where one person may walk into the marriage with unresolved financial issues from debt or a previous marriage. In those cases it may make sense, even though it may be the long-term plan to put it all together, to hold off on establishing joint accounts and paying bills out of them.

The alternative sounds appealing to couples that would like to enjoy a higher level of individual autonomy, but as noted below separate accounts often call for a much higher level of coordination to make sure bills do not fall through the cracks. Also, there needs to be an agreement on what constitutes individual versus household expenses.

Pros

Maintain total autonomy
Fewer changes to direct deposits and auto withdrawals
Could avoid fights about differing spending priorities

Cons

Requires significant coordination of payments for expenses incurred together
Requires a common understanding of what is considered joint expenses
Could lead to resentment if one spouse appears to have more spending power than the other

Option 3: the hybrid method

The system that worked for me and my spouse, and for many of the couples I work with, is to both combine and separate. It starts with having at least 3 accounts – one account for general household expenses and separate accounts for individual expenses. I have found this method helped us come together on what the joint expenses were. It also took away the 50/50 mentality which can become hard to track and is a major point of contention for many couples.

Over the course of our marriage, there have been years when I have earned more than my spouse and in other years she has earned more than me. Having most of the funds come to one place with one purpose took away our need to attempt to equalize. In the individual accounts we have money for personal expenses. Those individual accounts offered us the proper level of autonomy.

This method can be applied in multiple ways. I have a friend that deposits and keeps over 95% of his earnings in the joint or household account. His wife keeps a lower percentage because they agreed her personal expenses were higher than his. In our family, the percentage that goes to the household account has increased as our family has grown. For others, the individual accounts grow because joint household expenses were a smaller percentage of their overall budget.

There is no one right way

Couples are as different as the individuals they consist of and so there is no one-size-fits-all method to handling joint finances. I have seen couples handle finances in all three ways outlined above and I have seen them all handled successfully and unsuccessfully. The biggest key to success was that they got on the same page as a couple. Take some time to be self-reflective about how you came to your current money beliefs and discuss them together.

Regardless of which route you choose, the road is a lot smoother when there is genuine agreement about the destination. Take the time to get on the same page financially and the choice on how to work together will become clearer.

Budget-Friendly Ideas To Enhance Your Child’s Learning

February 12, 2019

I’ve spoken with people who have a specific type of schooling in mind for their young and toddler age children that doesn’t always exactly match what they are actually being taught in school. They are looking for ways to incorporate more learning activities, without impacting their budget too much.

If you are a parent that likes the idea of your children learning another language, learning to read early, fine-tuning their math skills, etc., and are looking for budget friendly options to support their learning at home or outside of the classroom, here are some ideas our planner team shared that could help.

Want them to learn another language?

If you speak more than one language, a perfectly free option is to simply speak your other language to your child instead of paying for multilingual preschool or language classes. My colleague Cynthia spoke French to her kids until they went to kindergarten so that they had exposure to the language. She also suggested joining or creating a foreign language play group, as well as playing foreign language CDs in the car and watching DVDs together that are in whatever language you want your toddler to learn.

Structured activities (i.e. sports groups and other learning groups) too costly?

Cynthia also suggested simple activities that make an impact like taking your toddler on a science walk every day instead of paying for structured activities. Jump in the mud, watch the digger at construction sites, throw sticks in the river, pick up bugs, etc.

Looking for a customized learning program?

Consider a home education program. Cyrus likes IXL Learning, which allows you to create a personal learning experience for kids of all ages for as little as $10 per month if you go with their more basic options. They cover various topics like math, science, Spanish and social studies. Another perk is that IXL’s questions automatically adjust to the level of difficulty for your child.

Cyrus also found Meet the Sight Words videos and flash cards to be very helpful for his child. You can check those out as well as other educational tools offered by the Preschool Prep Company.

Want them to learn with others but can’t find a school you like?

How about organizing a homeschool/preschool cooperative with other like-minded parents? Cynthia had a friend that went this route and as her kids grew older, it turned into an actual school. With this group, each parent could be responsible for one part of the program (i.e. math or science), so that it’s not too overwhelming. You could also rotate houses or use a church or community center.

Budget friendly ways to support your kids’ education exist. Just find the one that works best for your family.

3 Financial Aspects To Consider About Getting Married

February 11, 2019

I’ve always said that there are three things that you need to find in a romantic partner in order for your relationship to thrive:

They share your values.
They are attractive, at least to you.
They have their act together – aka they aren’t a hot mess when it comes to “adulting.”

Criteria number 3 includes money – they don’t have to have a lot or make a lot (unless that’s one of your values) and it’s even ok if they owe a lot, as long as they have their act together about it and are willing to be open and honest, while also working to improve their situation if needed.

If you’ve found someone that checks all three of those boxes, perhaps you’re thinking of making it legal. It turns out that there are financial benefits to be had from that perspective. While I have worked hard to be financially independent, after 4 years of marriage (happy anniversary, babe!), it’s obvious that both of us are better off than if we had opted not to go to City Hall that February day back in 2015. Here are 3 key financial aspects (pros or cons, depending on your situation) to consider about getting married (beyond paying for the wedding):

1. It could lead to better cash flow

First of all, you can save some major money on your daily living expenses. If you’re living with roommates, you already know this – sharing expenses like housing, utilities and food is a definite benefit of sharing your home with someone. And when you’re also sharing the same bed, you may even be able to live in a smaller place than you would with a roommate if money is tight.

The old “opposites attract” adage can play to your advantage here too. When a spender marries a saver, and they are able to find a healthy compromise in their habits that helps them to achieve their goals together, it’s often the spender who has the most benefit because they often have a serious lack of savings and sometimes huge amounts of high interest rate credit card debt.

A saver can balance that out by encouraging the spender spouse to prioritize healthier financial habits — in effect, a saver sometimes ‘saves’ a spender from themselves. Serious caveat here though: this is not about a saver controlling a spenders’ habits nor is it about nagging or one spouse being “better” than the other – it’s about finding a balance that works for both of you, and may also require a saver spouse to loosen up a little bit about money.

2. Taxes – they could be more or less

Once you’re married, you’re required to file that way on your taxes – you choose jointly versus separately – and that could mean you pay less or more, depending on your situation.

For example, if you and your spouse are both high earners and file jointly, that could bump you into the next tax bracket, meaning you’ll pay a higher percentage of some of your income than you would when you were single. But if one of you earns significantly less than the other and you file jointly, your combined income will be taxed in the middle, resulting in a lower tax bracket for the high earner. Lower income couples in the 10% or 12% tax bracket may also see a lower overall tax rate when combining their income.

The standard deduction allowed for married couples is also twice what it is for an individual, while the $10,000 limitation on deducting state and local income taxes is NOT doubled, so you may find yourself claiming the higher standard deduction even if you own a home with mortgage interest and property taxes.

There’s also the fact that you can transfer unlimited amounts of money to your spouse, while you’re limited to $15,000 per year to a non-spouse before gift taxes kick in. This can make estate planning simpler if you’ve accumulated significant savings over the years.

3. Til death do you part

Getting married gives you access to retirement savings options you may not have otherwise had, like a spousal IRA – you’re only able to contribute money to an IRA to the extent that you have earnings, but if you’re married to someone who has earnings and you don’t (perhaps because you’re home caring for children), you may still be eligible to continue saving during those years.

And once your spouse passes away, being legally married will only help you. For example, you’ll qualify for spousal benefits through Social Security and if your spouse happens to die without a will, you’ll automatically have a claim on their assets. (although the rules there vary by state so it’s always better to have a will than not)

You can also roll over and combine their retirement assets with your own when your spouse dies, which can allow you to enjoy that tax-free growth for longer. (There are stricter rules governing withdrawals for non-spouses who are left retirement accounts, which Mark wrote about here.)

Keep the big picture in mind

While there are many financial factors to consider, here’s the truth of the matter: Whether or not getting married is financially beneficial has less to do with the benefits afforded and more about the person you’re actually marrying — and their financial health. As my colleague Cynthia points out, your life partner could end up being your best friend or your worst enemy when it comes to money.