How Bankruptcy Changed One Couple’s Life For The Better

December 15, 2017

After a recent client meeting, I realized just how impactful financial conversations can be. It is truly amazing to see positive changes in a family’s life after what seems like a relatively straight forward, simple conversation. I met with this couple almost a year ago and they followed up a few times after that conversation with some quick questions. Then, 10-11 months went by and I saw them on my calendar. I was interested to hear what had developed in their life.

The situation:

She works for a big company that offers Financial Finesse services to their employees. He is a self-employed medical professional.

Back when the recession hit, his business took a turn for the worse. His patient visits declined annually and his expenses climbed. He kept taking on more debt as his rent increased and he tried to enhance his marketing efforts to attract new patients.

No savings and no debt, except…

When I first talked to them, they had no liquid savings and zero personal debt outside of their mortgage, but a mountain of business debt. We talked about their situation and their goals. They are very close to 60 and she would like to retire by age 65. He would love to work as long as his body will allow him to continue.

We looked at multiple ways for them to address their situation and with over $100,000 in business debt and a practice in decline, they were facing some less than pleasant potential solutions. Here are some of the ideas we bounced around prior to them making a decision and running with it.

  • Home equity. There was no reasonable hope the business could help them earn their way out of debt, so we looked at their personal assets as a potential source of funds to pay down the debt. Because the business had been “hemorrhaging dollars” for a number of years, they had exhausted all of their liquid finances along the way. The only real asset they had left was their home and they were considering a home equity line of credit to pay off as much of the business debt as they could. The downside of this option is they would end up collateralizing their home for business expenses.
  • Private lending. We looked at refinancing his debt through a private lending opportunity that was presented to him. The upside was that the interest rate was incredibly low. The downside is that the payments were still greater than the income his practice was generating.
  • 401(k) widhdrawal. Her 401(k) was gaining momentum and becoming a sizeable asset, with almost a $250,000 balance. We talked about the pros of taking a large hardship withdrawal from her plan – paying the debt off completely. We also talked about the downsides – a huge tax liability and needing to work an additional 5-10 years to recover the lost ground.
  • Bankruptcy. I very delicately waded into the waters of bankruptcy. They had very clear concerns. What would that do to their credit scores? What would that do to his reputation? He took on the debt, so isn’t he morally obligated to pay it off?

A textbook case

All of the debt was in the business name and not their personal names.  Much of the debt was owed to a real estate management company that itself was in bankruptcy proceedings. They had trepidations about this path, but from a purely financial viewpoint, their situation was a textbook case of when bankruptcy makes sense.

Those were the options we talked through and we also discussed the ongoing operations of his practice.  His biggest expense was rent and with a declining revenue stream, I questioned the level of rent. He was already a few steps ahead of me and was in the process of joining forces with other providers and moving into a space that was already operational and in use.

When talking specific numbers, this move lowered his rent by about 80% and made staying out of debt a relative certainty. Our first conversation and follow up emails confirmed that he was leaning toward moving into the new space and assessing his options for the debt once the move was completed.

Last week, we had a conversation about what they did and how they are progressing toward an eventual retirement. They let me know that they in fact went through with a Chapter 7 bankruptcy filing. It was approved and their business debt was forgiven.

On the personal side, they moved out of their house and bought a much smaller one since their kids are away at college or out on their own post-college. The net proceeds from the downsizing allowed them to reduce their mortgage payment by about $750/month and that is allowing them to build a substantial cash cushion and her to contribute the full $18,000 to her 401(k) as well as the $6,000 post-50 catch up contribution. He is going to fund a retirement plan for himself and we discussed multiple options for that during our follow up conversation.

The turning point

The moment that I will remember for a very long time in our most recent conversation was when they told me that they were totally opposed to pursuing bankruptcy because they felt morally obligated to pay off every penny of that debt. When I told them that they were a “textbook” example of bankruptcy, they looked at each other and in that moment, knew that they had to look at it. They went to a library and looked at a number of financial textbooks. When they read about bankruptcy for businesses, they saw themselves in a lot of the examples.

That quick conversation changed the trajectory of their financial future.

Why bankruptcy exists

The bankruptcy isn’t bailing them out because they have poor financial management skills. It’s helping them “hit the reset button” and get back to being the fiscally responsible couple they had been up until the recession and geography (their town is growing smaller by the year as people move to other local areas) hit with a force greater than his practice could handle. Bankruptcy exists to help people who have faced situations very similar to this. But bankruptcy can’t be a cure all.

Not a cure-all

Some people should absolutely not consider bankruptcy. Some of those types would be people who need a high-level security clearance, as bankruptcy could disqualify you from receiving that clearance level. Public figures and those in professions that require reporting/disclosing bankruptcy proceedings would be candidates for whom bankruptcy might not be suitable.

This couple’s debt was business related so that made bankruptcy a great option. Debts that are generally NOT able to be discharged in bankruptcy are IRS debt and student loan debt. It also wouldn’t be a great option for those who wouldn’t necessarily be considered “financial stewards” and have a lot of consumer debt because of living way beyond their means and not wanting to change that. If the behaviors that create a credit card heavy lifestyle aren’t changed, bankruptcy would only be a short term fix. It might even make things worse.

Not as bad as they thought

Postscript:  The new arrangement with the other practitioners is working extremely well. He has had four consecutive months of increasing revenue and can see a point in the next 6 months when he will be able to fund a retirement plan for himself for the first time in over a decade. The bankruptcy didn’t impact their credit scores much at all. He went from 805 to 750, but is now back at near 775.

For the first time since the recession started, they feel like they can breathe. The incredibly stressed couple I talked to initially had magically transformed into a relaxed, fun couple. There was laughter and optimism in our most recent call when during the first call all I heard was self-doubt, negativity and zero hope for the future. For me, seeing that I made a difference in the lives of a couple and the potential ripple as they interact with the rest of the world is exactly why I do what I do.

This post was originally published on Forbes.

Meaningful Gift Ideas I Learned From My Grandmas

December 08, 2017

With the holiday season upon us, many people struggle with whether to search for the perfect gift to buy, make something from the heart or just give cold hard cash. What I learned from my grandmas is that this isn’t a one-size-fits-all question and the answer can change from year to year.

An evolution of gifts

One of the most special people in my life is my Grandma Russell. Even at 95, she is full of life — a few years ago she did her Christmas card picture on my Uncle Ralph’s Harley! For many years my Grandma and Grandpa Russell gave gifts from the heart. Two of my most favorite pieces of memorabilia from Kansas State football and basketball are from them — Grandpa even built a special case for them and I’m reminded of his love every time I sit down to watch a game.

A couple of years later we were all given a Nativity set. Grandpa built the manger and Grandma made all the ceramic figures. No matter how much or little Christmas decorating we do each year, the Nativity set is ALWAYS set up. Those are arguably the most special gifts that I’ve ever received. But life doesn’t always give us the time for those types of gifts.

Meaningful doesn’t have to mean lots of time

Today, my Grandma still does a lot, but with 5 grandkids and 13 great-grandchildren she couldn’t possibly make special gifts for all of us. So with some help from my Aunt Linda, she buys gifts for all of the great-grandchildren, but the grandsons all get the same thing every year: “Crinkly socks.” Socks, because everyone needs them, but there is some cash in there for each of us to use “just on us.”

As a father of two kids, it is kind of liberating to have money that is “just for me.” So much of what I do is geared around helping my kids, doing things for the family, etc. Outside of football tickets and my Orangetheory membership, I don’t tend to do much for myself. So, whether I use that cash for a date night dinner with my wife or a souvenir on a bowl game trip, that cash actually means a lot to me.

Using cash for longer-term impact

The other type of gift is more of a long-term financial gift. That is what my Grandmother Spencer focused on. Grandmother was definitely “thrifty” and when we were kids we didn’t exactly have high hopes for cool gifts from her. What we didn’t understand was the contribution she was making to our financial futures.

Grandmother was a shrewd investor and she loved real estate. She accumulated several tiny rental homes over the years and eventually built a 12 unit building when I was a teenager. When she passed at 102 years old, she left that building and some other properties to my Dad and my cousins — someday that and one of the other properties will help me in my retirement years.

So, while I didn’t care for her gifts when I was 7, at 47 I have a tremendous gratitude for the sacrifices she made for us.

Gift ideas for bigger impact

Most folks aren’t going to snap up tiny rentals across a college town like Grandmother, but they can help their kids and grandkids by taking steps like setting aside money for education in a 529 plan, payments on student loans or making a gift towards a down payment on a house.

How much you give your family is NOT a measure of your love. The tiniest of gifts can be the most lasting. Whether you gift a custom-made item, a purchased gift, cash or a long-term investment, you can find a gift idea that makes an impact on your loved ones for years to come.

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Try This Gifting Strategy To Stay On Budget Without Being Scrooge

December 05, 2017

I was so excited the first Christmas when my daughter was about 1 year old. I scoured the ads to find the latest “must haves” for the toddler in your life — it was the year of Elmo. I carefully mapped out all the stores that carried the exclusive Elmo gift; I was determined to get her that toy, no matter how many other desperate parents I had to mow over.

After finally getting the Elmo (I only knocked over one parent and she already had one Elmo doll — greedy!) and other presents for her, I spent 20 minutes on YouTube learning how to create award-winning gift wrapping designs and carefully put my awesomely wrapped gifts for her under the tree. I was so excited.

When Christmas came, I had the camera ready to take pictures of her anticipated excitement over the gifts. When she saw the wrapped Elmo, she clapped her hands and started playing with the bows — it took me a second to realize that she thought the box was the gift. Understandable, I guess, for someone’s first Christmas. So I helped her unwrap the gift and showed her the Elmo doll.

She held Elmo for a second, then literally threw it at her dad and climbed in the box, laughing with glee over her newfound toy. As I watched her happily play with the box, I learned very quickly the value of taking the time to think through gift-giving.

Mapping out a strategy

Now that I’m older, much more seasoned, and living on a budget, we sit down months before Christmas to map out a gift giving strategy. First is our budget — we decide exactly how much we are going to spend overall on gifts for everyone (friends and family). We create a budget for the kids and how much my husband and I will spend on each other. When my husband and I were on a “debt- payoff mission” we even decided not to give each other Christmas gifts those years.

Next we decide how many gifts each child gets (we typically give 3-4 per child) and decide on the type of gift we will give our kids. The younger the child, the smaller the budget. (Boxes are pretty cheap!)

One article I read had a great idea to not only limit the number of gifts to your kids to 4, but to have the following strategy for the types of gifts:

  1. Something they want
  2. Something they need
  3. Something to wear
  4. Something to read

Brilliant! A tweak to this can be if your child is a tween or older. If there is an expensive gift on their want list (as long as it’s within your budget), talk to your teen about receiving less gifts so they can have their one big “want” gift — a powerful way to help them understand the need for trade-offs in life.

Creating gratitude

A few of my friends have mentioned a struggle to reduce the number of gifts when their kids are so used to receiving several. I’ve found that the greatest way to help your kids appreciate the gifts they do receive is to engage them in an act of service. My family donates our time to homeless shelters with children and donates gifts to the families. Over time, our kids have begun to ask for less gifts and are far more appreciative of the gifts they do receive.

Having a budget and a gift giving strategy can make the holidays a lot less stressful. And sticking to the plan makes the January aftermath much less painful.

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Time May Be The New Money, But Only If You Already Have Money

December 04, 2017

What would you rather have: more money or more time?

In an article, “Being Part of Generation Rent Doesn’t Have to Be a Bad Thing,“ Marisa Bate asserts that millennials are playing by new rules that reflect real economic changes. “If time is our chief commodity (perhaps our only), then we want it as much as possible – and that means outsourcing things so we can get more,” she wrote. “Once, we saved money; now, we save time.” Millennials don’t own anything and outsource everything, she contends.

Should an entire generation give up on financial security?

Bate, a British journalist who counts herself in the millennial generation, says that cash-poor twenty-somethings need a marker of success beyond the traditional home purchase and retirement savings. If millennial employees can’t find an easy path to home ownership and a pension, she observes, then they will look for experiences and flexibility. “We millennials,” she writes, “by all accounts, love experiences and not things anymore.”

Really? An entire generation should give up on financial security in favor of time flexibility? I wondered if that opinion was broadly shared, so I posted the article on social media and asked my younger connections to weigh in. Is time really the new money?

Student loans cause money and time debt

“What’s the point of time if there’s no money to enjoy it?“ was a common response. The burden of student loans caused some to feel like they had experienced a bait and switch. They followed the rules for a good education to be competitive in the job market, but someone changed the rules without telling them. People shared examples of working multiple jobs to pay the bills and stay current on astronomically high student loan balances.

For those early career employees, especially those with graduate school debts, their student loans weren’t just financial obligations. They felt like debt was a drag on their time in all areas of their lives, leaving little free time or financial resources to enjoy life now. The bigger the loan balance, the more their future time was already pledged to activities to make their loan payments. These workers used some time-saving services, such as Amazon Prime or Blue Apron, but not to create work-life balance. They used them so they had something in the refrigerator when they got home from their second job.

Urban strivers will do what it takes for work/life balance

Those with higher-paying careers or lower student loan balances were more enthusiastic about doing everything they could to create extra time in their lives to spend with family and friends. Those less financially-stressed urban professionals are prioritizing extra time over personal economy.

“I do everything in my power to save time in everything I do,” explained one 28-year-old. “I use Stitch Fix, Lyft, Amazon, Netflix and more because I’m working 60+ hours per week (and on call 24/7). I need all the time I can get if I’m going to spend quality time with my family, work out, eat healthy, take care of my mental health, socialize with friends, travel, volunteer, read, etc. I need more time so if I can save an hour here and there by avoiding a crowded mall or grocery store lines, I will do it.”

Another who favored time-saving services wrote, “I’m not a huge fan of shopping in stores and my free time is valuable to me. Working Monday – Friday, I’d rather spend my weekends doing the things I truly enjoy and that really doesn’t involve shopping of any sort.” This subset of younger employees, who have corporate jobs with good benefits and lower financial stress, are more open to incentives which give them time to focus on life outside of work.

Marriage and kids change everything – especially in the suburbs

Some of my social media friends in Generation Y (born in the early to mid-eighties), now in their early thirties, had a different perspective. They worked and played hard in their twenties, got married, bought homes in affordable suburbs and had children for which they were financially prepared (“the success sequence”).

Although many had student loans still outstanding, especially those with advanced degrees, they had not borrowed so much money that the debt impeded reaching life milestones. These friends are prioritizing homeownership and saving for goals and were more likely to own multiple cars, cook for themselves and shop locally.

Marriage and kids changed their perspective on financial issues, catapulting them into the natural focus on good financial habits that is necessary to be a homeowner. “I’m struggling to think of any friends who didn’t purchase a home within a year of having their first child,” noted one reader. “I don’t know too many people who rent now that we are in our 30s,” commented another.

Both had left more expensive urban areas to live in less expensive towns. (The opposite is true for one young, married parent I work with, who sold a home in a southeastern city to become a renter in mega-expensive Los Angeles.)

The takeaway: if you’re broke, money is still more important

My conclusion is that time is the new money only for those who already feel on track financially. Those who have a strong sense of financial possibility and faith that they will eventually reach their goals are more likely to spend money to create more time. For those millennial employees who are working multiple jobs just to pay the bills and repay student loans, money is much more important than time.

This post was originally published on Forbes.

5 Financial Rules That You May Need To Break

November 30, 2017

There are certain guidelines that we financial planners tell people to help keep them out of trouble. Most of the time, they’re right on. But there’s almost always an exception to the general rule. Here are some of those rules, why they usually make sense, and when they might not.

RULE: Pay your credit card balances off in full

Why it usually makes sense:

Not paying off your credit cards in full each month means that you’ll have to start paying interest to the credit companies at an average rate of 14%. That’s high, but you could be charged a lot more than that, especially if your credit isn’t too great.

Have you seen those calculations that show how the magic of compound interest can grow your savings over time? Well, when you have credit card debt, that same magic of compound interest is actually working against you. Pretty soon, you could find yourself paying more in interest than you spent on the original purchases. Some will even have to file for bankruptcy…and it all started with carrying that first balance.

Exceptions to the rule: 

There are two opposite situations that I can think of in which carrying a balance can make sense.

  1. If you have a very low rate and would be better off investing the money than paying down the balance. In this rare instance, your credit card debt actually becomes “good debt” like a mortgage or student loan. In fact, I wrote a whole post about how you can make money off zero rate credit card offers. However, that post actually came with a warning from our CEO because you have to be very disciplined to make sure that you save that money and that you keep track of when the low interest rate offer expires so you can pay it off beforehand.
  2. When you’re in such financial difficulty that you’re having trouble paying your mortgage or your car payment. In that case, make sure those bills are paid first because as much as you don’t want to pay interest or fall behind on credit card payments, you don’t want to lose your home or your car even more.

RULE: Aim to have 80% of your income in retirement

Why it usually makes sense: 

First, any target is better than none. In fact, our research shows that most employees aren’t confident they they’re on track to retire comfortably and have never even run a calculator to see how much they need to save. 80% is a good starting place because people tend to need less income when they retire since they won’t be saving for retirement or paying into Social Security and may have their have kids out of the home and their mortgage and other debts paid off.

Exceptions to the rule: 

The key word there was “tend.” Your situation may be different depending on the lifestyle you want to have in retirement and how your various expenses may change. For example, you may want to spend a lot more on travel while someone else may prefer to stay close to home and spend more time with the grand kids. Look at what debts will be paid off but don’t forget to add in the costs of retiree medical insurance and possibly long term care insurance. In short, some people will need a lot less than 80% and some will need a lot more.

RULE: Start contributing to your 401(k) as soon as possible

Why it usually makes sense: 

The earlier you start saving for retirement, the better off you’ll be. The longer you delay, the more you’ll have to save or the later you’ll have to retire. In other words, your future self won’t be very happy that you had other “priorities” with your money. Plus, if your employer offers you a match, you don’t want to leave that free money on the table.

Exceptions to the rule: 

There are three reasons why you might want to delay contributing to your 401(k).

  1. To focus on paying down high-interest debt. This is because high-interest debt can cost you more than you’re likely to earn in your 401(k). Just make sure that you make up those lost contributions once the debt is paid off.
  2. To build up an emergency fund. Your future emergency may not qualify you for a hardship withdrawal and even if you are eligible, you could be subject to a 10% tax penalty, so it’s best to have funds available outside your 401(k) to pay for things that come up. You might be able to borrow from your plan but only up to half of your balance, which may not be enough.
  3. To save for a home purchase. After all, owning a home could be part of your retirement plan too. Once again, just be sure to make up for those lost contributions after you throw that house warming party.

One final note is that you can save for emergencies or a home with a Roth IRA since the contributions can be withdrawn tax and penalty-free at any time for any reason and the earnings can also be withdrawn tax-free for a first-time home purchase as long as the account has been open at least 5 years. The advantage is that anything you don’t use can grow tax-free after age 59 ½ so you’re still saving for retirement too.

RULE: Don’t borrow from your 401(k)

Why it usually makes sense: 

Speaking of 401(k) plans, too often people use them like an ATM. Since the interest you pay just goes back into your account, it can seem like a cost-free loan. However, you’re missing all the earnings that your money would have earned if you hadn’t borrowed it. Meanwhile, the loan payments you’re making could have been additional contributions. If you leave your job for any reason, you may also have to pay the outstanding loan balance back within 60 days or it would be considered a taxable distribution and subject to a 10% penalty if you’re under age 59 ½.

Exceptions to the rule: 

I’ve seen situations where people have used their 401(k) to pay off high-interest debt and get themselves out of severe financial distress. That’s because there’s no credit check and low interest rates mean that the 401(k) loan payments could be a lot lower than the credit card bills.

The key is that this needs to be part of a long-term strategy to get and stay out of debt. The worst thing you can do is find yourself back in debt but with a much lower retirement account balance. Also, don’t raid your retirement account if you’re thinking of declaring bankruptcy since it’s a protected asset.

RULE: Don’t borrow from your home either

Why it usually makes sense: 

In short, you’re putting your home on the line. Lots of people did this during the housing boom, expecting to pay off their loans with rising property values, only to find themselves underwater and struggling to make the payments.

Exception to the rule: 

If you have a comfortable amount of home equity and you’re confident that you can afford the payments, a home equity loan can be a tax-deductible and low-interest alternative to more expensive sources of credit. Just be careful of variable rates and balloon payments that can make that loan not so affordable in the future.

As they say, rules were made to broken. But that doesn’t mean they should be broken lightly. If you’re unsure, talk to a qualified financial professional first. After all, you don’t want to learn the hard way why the rule was created in the first place.

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The 3 Risks Of Saving Too Much

November 29, 2017

There’s no shortage of headlines in the personal finance world telling us how poor Americans are at saving money, particularly when it comes to saving for retirement. It’s easy for people who have an unhealthy obsession with saving money to justify their habit since it’s culturally supported for the most part. But there is such a thing as saving too much.

Does it pain you to spend money?

One sign that you may be too obsessed with saving money is if it actually causes you pain to pay for things like buying new clothes, a nice dinner out with friends or a gift for a family member, even though you have more than enough money in the bank to pay your bills and then some. You may have a fear that any type of spending that can be classified as frivolous is the beginning of a trend of needless spending that could ultimately leave you penniless.

Are you afraid to retire?

Another sign of an unhealthy need to save money is if you’ve reached an age (and a savings level) where it would be reasonable to retire, yet you insist to friends and family that you can’t afford to take time away from work to travel, even when your spouse or children are begging you to see the world with them. People with a saving mentality like this often only feel relief from their fear of financial ruin when they are actually physically depositing money into their savings.

It’s not about greed

People who over-save are usually doing it out of fear of never having enough or to fulfill some other need that is temporarily met when they see their net worth grow. They’re rarely greedy. Rather, their behavior is more about self-preservation than self-promotion. They have trouble ever enjoying the fruits of their labor, even when logic tells them that they can safely afford to.

You could be hurting yourself more in the long run

The personal finance industry generally supports this unhealthy mindset. The problem is that there are real risks to being overly obsessed with saving money. Here are three:

  1. Poor investment performance due to overly active trading. People who are unhealthy savers tend to pay too much attention to their investment performance, which can often lead to losses due to failed attempts at market timing or investing too conservatively due to a risk-averse orientation. To overcome this habit, resolve to only check your accounts quarterly, and consider using a pre-mixed investment strategy like target date funds, where the asset allocation decisions are made for you. Ask a financial planner to run a few projections showing you different outcomes based on more aggressive versus more conservative investment mixes to show you what you may be missing out on by being too vigilant about market risk.
  2. Inappropriate levels of insurance. You may be tempted to skimp on insurance because the cost of the premiums may seem too high, but being underinsured could easily lead to realizing your biggest fear of losing everything. On the other hand, you may be way over-insured to protect you against any loss at all. Your best bet here is to consult an independent insurance broker and request a review. Obtain a couple of opinions if you’re concerned about being sold or if you have access to an unbiased financial planner through your workplace financial wellness benefit, use it. Some of my favorite conversations with employees are what we call “second opinion” calls.
  3. Deathbed regrets. The mantra of many over-spenders applies here: You can’t take it with you, and it’s true. Too many people who spend their entire lives accumulating cash find themselves at a point when they realize they’ll never see the benefit of all that sacrifice and immense regrets ensue. The best way to avoid this tragedy is to sit down with an independent financial person you trust. Maybe it’s your financial advisor or maybe it’s your accountant, but ask them to help you ease your grip on your money so that you can spend some of it on yourself, family, travel, a vacation home – whatever will fulfill you besides the feeling of saving money.

Look at the numbers

Whenever I have the opportunity to encourage an over-saver to spend, I give them comfort by showing them in real numbers what they need to keep in the bank in order to feel safe. A savings account with enough cash in it to pay six months’ worth of bills is more than enough unless you are the primary income earner with multiple dependents. Next, run a retirement projection to see that you’re saving enough. If it all looks good, go out and enjoy some of that money guilt free.

Don’t get me wrong. Saving money is definitely a necessary aspect of achieving financial security. But there’s a balance that we all need to achieve in order to find that sweet spot of seizing the day while also setting our future selves up for financial independence.

This post was originally published on Forbes.

How Giving Your Money Away May Actually Improve Your Budget

November 28, 2017

You may think I’ve gone crazy or made a HUGE typo by suggesting that giving your money away could actually lead to more money, but I really mean it. Some people can actually help their ability to budget by being generous with their money. Here are several reasons to be generous this giving season:

Taxes

This may be obvious, but charitable giving can reduce your taxes, which may put more money in your pocket. If you itemize your deductions on your income tax return, then you can get a tax break for every dollar that you give to charity – as long as you have a receipt or proof of your donation.

That’s one thing to keep in mind when giving money away — by making bigger contributions by check or debit card where you get a receipt, you’ll get a bigger bang for your buck than by giving a couple of bucks in cash to several organizations here and there.

Just like anything else, the more you focus on the things important to you, the better results you will get. By finding causes that really resonate with you and supporting them to what you feel is a significant degree, you will get more tax benefit and more emotional satisfaction than randomly throwing money here and there.

Going big

Charitable giving to high levels, such as the Biblical principle of tithing or giving away 10% of one’s income, forces you to be accountable for every other penny you have because so much has already gone out the door. I’m not suggesting that your giving be restricted to religious organizations (nor am I promoting a religion), I’m just pointing out that the concept has been around for a long time.

If you are paying your taxes and then giving away another 10% to the charities of your choice, then you will have to prioritize the other dollars that you keep. Sometimes people find that by prioritizing the remaining 90%, they actually spend less and save more than when they have the full 100% available to them but don’t track where it’s going because they are always getting by. Here’s what I mean.

Scarcity often leads to better use of what we have

My wife recently completed graduate school to become a Nurse Practitioner. While she was in school, she continued to work full-time (3 days, 12 hours per day) while doing 2 days per week of shadowing in a medical practice, PLUS 1 day a week in class. Somehow through it all, she managed to continue being an amazing Mom to our kids and partner to me. We talked about her cutting back to part-time at one point, but she wasn’t sure it would help. When I asked her why, she said, “All that would mean is that I’d have a day to sit on my backside and watch TV. As crazy as this schedule is, I am so much more productive because I know that I have to be.” I think the same principle can often apply to our money.

Giving leads to gratitude which leads to greater performance

One other way that being charitable helps is that it makes us feel better about other people, ourselves and what we have. When we are focused on what we don’t have, are we really doing the best job we can for our current employer or do we have one foot out the door? If we are truly thankful for what we have and focused on doing the best job possible, that often translates into better job performance. While there are no guarantees, over time better performance usually leads to more pay and better earning opportunities.

So we’ve seen that there are tangible and possibly some intangible benefits to being generous with our money. If I’m right, then hopefully you will end up with a better bottom line even though you are starting with less. If I’m wrong, then you will have a little less money, but the world, and you, might be changed for the better. Is that a bad thing?

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How To Get Great Deals On Cyber Monday And Still Stay Within Your Budget

November 27, 2017

Do you have a computer, smart phone or gaming system on your shopping list for this holiday season? If so, you are definitely not alone in the search for deals. Electronics purchases are expensive, and planning can help you get the best deals without busting your budget.

Decide how much you’ll spend

Don’t browse online or in the store to see what looks like a good deal. Make a plan in advance for what you intend to buy and the maximum you plan to spend. Write this on a sticky note and post on your computer, or carry it in your wallet.

Read and compare in advance

Do your research on what you want to buy before you start surfing the deals. Read product reviews in advance, preferably from independent sources like Consumer Reports, Wirecutter and PC Magazine.

Hunt for great deals

Are you looking for an electronic gift for your gadget-loving spouse? Every major media outlet and web portal is running articles about Cyber Monday deals. Check out these articles from Good Housekeeping and CNN for suggestions on saving big bucks. Try retail coupon aggregators like RetailMeNot and search your favorite sites like Amazon, Target and Best Buy.

Shop safely

Consumers made 2016 Cyber Monday the biggest online shopping day in history, a trend which is expected to continue in 2017. Inevitably, that kind of sales volume also comes with fraud and identity theft. Here’s how to protect yourself:

  • Shop online on reputable sites. Don’t shop from a site you reach by clicking on a link. Search for it independently, and make sure it’s a name you recognize.  Shop from home or the office – never on public wifi. Only enter your credit card info on websites that are secure — look for the lock icon in the address bar of your browser. If it’s not there, it’s not secure and your information could be at risk.
  • Pay with a credit card. For an expensive electronics purchase, it’s generally better to pay with a credit card, in case you have to challenge a vendor charge where the goods weren’t delivered. Debit cards don’t usually have the same fraud protection – and you’ll be out the cash immediately while you try and resolve the problem. Some cards also offer limited purchase protection. We used that one year when my son tripped and cracked his Nintendo 3 DS within minutes of opening his present.
  • Think before you download that app. Read this MarketWatch article about how to protect yourself from phony or malicious apps. Research from Risk IQ found that 1 in 25 shopping apps for the Black Friday/Cyber Monday weekend were unsafe to use. Consider bypassing the app and shopping from your laptop or browser on your phone.

Visit a real store

Call me crazy, but there’s still something to be said for actually going to the store. It may be crowded – but it might be less crowded than you think given how much everyone is shopping online these days. I’ve found that most physical locations will match any online deals, and you won’t have to wait (or pay) for shipping. Now that’s a good deal!

 

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4 Offbeat Hacks To Stay Within Your Shopping Budget

November 22, 2017

One of my favorite parts of gift-giving is shopping for the perfect item, so avoiding the stores this time of year is not an option for me. To control my inner Santa, who’s prone to buying lots of “To: Me, From: Me” gifts, I’ve found some non-traditional hacks. Try them for yourself:

1. Calculate how many hours you’ll have to work

In the book Your Money Or Your Life, the authors describe the process of calculating your “true hourly wage,” where you add up ALL the time you spend related to work then divide it into your earnings. Beyond just time spent at work, add in the time you spend getting ready for work, commuting, answering emails after hours and even “vacating” work — it adds up to far more than the standard 80 hours we typically use.

When you’re tempted to buy something you hadn’t planned on, take a moment to figure out how many hours of work it will cost you. Suddenly a $25 sweater at Old Navy doesn’t sound so cheap when that means 3 more hours of work!

2. Go to yoga first

A Brigham Young study found that when you’re focused on physical balance (such as attempting tree pose in yoga), you’re more likely to weigh your shopping options and often choose the lower priced item. Don’t have time for yoga? Just wear high heels instead!

3. Only spend big bills

If you’re prone to rationalizing small purchases as “only” so much money, this one’s for you (those things add up). Go to the bank first (you’ll actually have to go inside to the teller) and get your shopping money in large bills — 50’s and 100’s. Psychologically, this will give you that moment to pause and think twice about an impulse buy, or even just that quick stop at Starbucks for a $6 latte. You will probably find yourself resistant to breaking a $50 bill for a cup full of sugar and might even think twice about a large purchase that requires you to lay out more than one bill.

4. Keep your hands to yourself

My ex used to work at the now-defunct Circuit City, and he was always telling me that one of the ways he got people to buy stuff was by suggesting that they pick it up and play with it. Another study backed that up, finding that merely touching an object creates perceived ownership, which makes you want to take that thing with you. If you’re serious about sticking to your list and not over-spending, keep your hands in your pockets or on your cart.

If your holiday rituals also include plunging headfirst in the bustle of the mall or the Magnificent Mile, try these tips and let me know how you do — I know I’ll be pulling out all the stops to enjoy the season without draining my bank account. Have some fun, but not so much that you’re hating yourself going into the New Year.

 

6 Steps To Treating Christmas Shopping Like A Military Operation

November 21, 2017

My husband says I treat Christmas shopping like a military operation. And as a proud Army veteran, I can’t really argue. As we gear up for yet another season of decking the halls and letting the wrapping paper fly, here are my tactics to survive the season:

Step 1) Evaluate available resources. In the military, the goal is to win wars. In shopping, it is to not go broke by January 1. Evaluating your resources means understanding exactly how much money you spend on gifts and creating a limit on how much you will spend on Christmas gifts.

Step 2) Triage. In the military, triage is assigning a degree of urgency to wounds. In shopping, it is who is going to get the good presents vs. who will get a $50 gift card. Decide this in advance. Typically children, spouses, and immediately families are first. Everyone else gets a gift card — you can make your life easy by stocking up on a bunch of coffee or restaurant cards, which will make anyone happy. Even coffee haters can find a treat at Starbucks.

Step 3) Have a plan of attack. In the military, this would mean you are going to map out what maneuver you are going to use to surprise the enemy. With Christmas shopping, the enemy are other shoppers ready to take your gifts.

Start early and slowly start buying Christmas gift bags/wrapping paper at the dollar stores (they go quickly) and take advantage of all of the “pre-Black Friday” sales. If you are brave enough to do Black Friday, enjoy. I can’t deal with the craze and I am normally done with my holiday shopping by November.

If you are taking kids, have a bribing strategy because that is the only way you are going to survive shopping with children. My favorite is ice cream at the mall or cake pops at Starbucks. Give stipulations as to what behavior you expect in order for them to get their treats. I know they should behave no matter what, but I need cooperative kids while finding deals and I will use any means necessary, including a sugar rush, to finish shopping.

Step 4) Plan for the unexpected. In the military, you are always told to be prepared for the unexpected. In Christmas shopping, leave room in your budget for that unexpected gift you received, which means you now have to buy a gift — maybe keep a supply of champagne on hand for this purpose (see the next tip for why). Plan for last minute holiday parties and days where you are too tired to cook and want to eat out by leaving some wiggle room in your dining out budget.

Step 5) Know your surroundings. In the military this means you’re constantly surveying your environment for potential threats and escape routes. With gift buying, that means shop around. After you’ve done some looking around and decided what you want, comparison shop for the best prices.

Instead of driving all over town or spending hours on the internet, make use of some specific websites or apps that do all the work for you. Try Pricegrabber, Nextag, or even Google Shopping if searching the web. If you’re at the store and want to compare prices instantly, download the RedLaser app to your smart phone and use it to get a price check against other nearby stores. Then either ask the store to match the price or head to the one with the best deal.

Step 6) Timing is everything. In the military, this means obeying the rules of engagement and knowing when to fire and when to hold. With Christmas shopping, it means understanding that certain times of the year are better than others to make purchases. A study by Lifehacker determined the best time of year to buy everything from Broadway tickets and computers to tools and wedding supplies.

It turns out that December is a great time to buy champagne but a lousy time to buy a gym membership. Who knew?

The bottom line is, with a good battle plan, you can make it through the holidays without going into “sticker shock” in January. Get your strategy set today!

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Don’t Let Black Friday Put You In The Red

November 20, 2017

It’s official. The Holiday shopping season has begun. If you are like me and my family, spending for the holidays is one of the biggest budget busters you will face. Even if you have done a great job controlling your spending up until now (and I hope you have!), the desire to splurge during the holidays is all too real.

To help, I’ve put together some tips on how to manage your spending while keeping that holiday cheer:

Create and execute a detailed budget

I know, it sounds cliche, but it works. Start by breaking your spending down into categories. I suggest:

  • Gifts
  • Décor
  • Entertainment
  • Travel
  • Food
  • Last minute miscellaneous

Then, write down how much you are willing to spend in each category. Consider using a spreadsheet with a separate tab for each category or envelopes – the more detailed the better.

For every person you want to buy a gift for, record their name and the amount of money you want to spend on them. If you feel like it’s “you against the world” when you are budgeting, don’t create your budget in a bubble – include your significant other or a close friend to serve as both a reality check and an accountability partner.

Finally, beware the impulse buy – don’t make any holiday purchases before confirming that it fits in your budget or that it’s already in your plan.

Be careful of Black Friday and Cyber Monday

If you’re planning to be one of the over 154 million consumers expected to make a purchase on Black Friday, this one’s for you. The sales can be great, but don’t buy something unless it is specifically covered by your budget and in your plan. So, if you find that 70-inch TV at 50% off, but the price still exceeds your budget, consider not making the purchase – especially not for yourself.

If you feel like you spend more on yourself than other on Black Friday, you’re not alone. Studies show that 60% of the people who make purchases on Black Friday are “self-gifting.” If you can’t find the perfect sale on Black Friday to fit your budget, don’t worry – you still have about 4 weeks until the end of the holiday season and there will be other sales.

If you fall into the category of feeling obligated to shop on Black Friday because it is a family tradition or you like the rush, consider starting a new tradition such as volunteering in your community. Helping others while sticking to your budget sounds like a win/win situation to me.

Find creative ways to save money

If you are getting nickeled and dimed to death by buying a small gift for several people (teachers, neighbors, not-so-close friends, etc.), think of ways to spend less and still provide a personal gift.

If you are a baker, consider making a huge batch of your favorite cookies or pastries and pass them out (just don’t defeat the purpose by going crazy on cute packaging). A good sweet gift can go a long way toward putting a smile on someone’s face while keeping you on budget.

If you are hosting a family dinner for the holidays, consider baking a lasagna or using a more budget-friendly cut of meat, rather than prime rib, and ask your guests to bring their favorite beverage. You will still be serving a great meal and your guests will have the drink of their choice – that makes for a festive and affordable evening.

Managing your money effectively during the holidays does not mean you have to be a Grinch. Just sit with your accountability partner and write down a realistic budget that will still allow you to enjoy giving to others. Start some new traditions that are fun and affordable, and always remember that spending time with others is more valuable than spending money on others.

Happy holidays!

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Should You Buy Or Lease A Car? 5 Questions To Ask

November 17, 2017

It might not always seem black and white when it comes to deciding whether to buy or to lease a car. There are pros and cons to each, but there are some things to think about that may have you leaning more in one direction. It also helps to calculate your potential savings to see which makes more sense. When deciding, ask yourself these 5 questions, which should help.

How do you feel about your overall monthly costs?

As long as you lease, you’re renting the car, so you will have a monthly payment. A few things about that:

  • If the thought of always having a payment bothers you because you’re looking for ways to minimize your monthly expenses, you may want to buy a car rather than lease. If you really want to get a big bang for your buck, consider buying one that’s a couple years old with low mileage. Here are some ideas to get the best deal when buying a car.
  • You will have a choice to buy the car at the end of the lease, but the details of the contract matter if you decide to go that route.

Does your current vehicle look like it went through a war zone?

Wear and tear matters with leased cars, so consider the following:

  • If your kids will likely add their own touch, leaving behind stains on your car seats and carpet or you simply find it hard to keep your car in good shape, you may want to purchase instead of leasing. If you return the car in a condition outside of what’s considered “normal” wear and tear in your lease contract, you’ll be responsible for some additional costs. Check the terms of the potential lease for the specifics.
  • If you buy a car, you can pretty much do as you please since you own it. Wear and tear matters more if you want to resell the car at some point later down the road.

How fast do you rack up miles on your car?

There’s typically a limit to the number of miles (usually 12,000 – 15,000 miles per year) you can put on the car during your lease contract. Going over that limit will be an extra cost.

  • If you know you’re likely to go over the approved mileage, but still prefer to lease, consider purchasing additional miles upfront.
  • If you want to drive as far as you want and as often as you want, without restrictions or any additional costs, purchasing might make more sense.

Do you value being able to switch from one new car to the next every 3 or 4 years?

Leasing is an easy way to stay up to date with the newest models available.

  • We all have things that we value and are willing to pay for. If being able to drive the latest and greatest car is something you fancy, the lease could work great for you. Just make sure that constant monthly payments fit within your budget.
  • If you aren’t really into cars or you are the type to keep a car for 10 years, without payments, and feel like you’ve won, purchasing will likely make you feel more at ease.

Do you need a car, but you’re short on cash or don’t want to use your savings?

Depending on where your credit stands, you can typically get into a leased car for either no money down, or very little upfront and you usually have a lower monthly payment.

  • If you want to get into a car without eating up too much of your savings or lack thereof, a lease could work for you.
  • If you don’t want to return the car in the end or be faced with a choice to purchase it or go another route in 3 years at the end of your lease, you may prefer to simply purchase a car upfront.

The decision to buy or lease is a very personal one. It depends on your financial situation and what you prefer and value.

Either way you go, arm yourself with knowledge. If you decide to go with a lease, be prepared to negotiate the terms of your lease. If you decide to purchase a car instead, know what to consider whether you decide to go with a used car or a new car.

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Should You Do A Balance Transfer?

November 16, 2017

A friend of mine recently asked me about doing a balance transfer, which is a common question I receive. After all, you may get offers in the mail for credit cards with rates that look quite enticing compared to what you’re currently paying. There are definitely some pros and cons, and here are a few other things to consider:

How’s your credit? Depending on your credit score, you may not qualify for the best deals or even any new credit at all. To make matters worse, if your application gets turned down, that will hurt your credit score even more. You can get a free credit score at sites like Credit Karma, Credit Sesame, NerdWallet, and Quizzle to see what balance transfer offers you might actually qualify for before applying. (keep in mind that those sites use their own formula and may not be exactly the same as the credit scoring system the credit card company uses)

What are the fees and how long does the balance transfer rate last? You want the interest savings to outweigh any fees you may have to pay to transfer your balance. Be aware that you may end up with a higher fee once the promotional rate ends. You may be able to find a better long term deal from peer-to-peer lending sites like Lending Club and Prosper.

Can you borrow from your 401(k)? If you can’t qualify for a new credit card or if the balance transfer rate is still higher than 4-6%, you may want to pay off your credit card debt with a 401(k) loan instead. There’s no credit check and you pay the interest back to yourself. But you should also be aware that there are potential downsides to this option as well.

Do you have equity in your home? Another option is using a home equity loan or line of credit to pay off your credit card debt. If you have a good credit, you can qualify for a pretty low rate that’s also tax-deductible. If you’re in the 25% tax bracket, a 4% loan would really be a 3%, which is much less than you can expect to earn by keeping your 401(k) money invested. The big downside is that you can lose your home if you default so this is not a good option if you might have trouble making payments.

Is this part of a strategy to pay down your debt? No matter which of the above options you choose, one of the biggest mistakes people make is to do a balance transfer or otherwise refinance their debt and then run the debt right back up on the old credit card. Make sure any balance transfers you do is part of a wider plan to pay down your balance faster rather than get deeper in debt. That starts with getting control over your spending so you’re living within your means. See some relatively painless ways to save money here and here.

Like with most financial questions, the answer to whether you should do a balance transfer is,“it depends.” Know the pros and cons of your different options. Regardless of your decision, make sure it’s an educated one.

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The Amount We Spend On This One Thing Really Surprised Me

November 15, 2017

When it comes to planning your spending (sometimes called that nasty “budget” word), there are many ways to do it. I’m personally not one to track every penny or even allocate between shopping, dining out, travel or wine, but some people are. There’s no right or wrong way, just the way that works for you — diff’rent strokes for diff’rent folks.

While I don’t track specific categories of spending, I do like to be prepared for things that might come up that I can’t avoid, which is why I have a savings account labeled “car expenses” where I auto-deposit $25 per month — when something comes up with my car, whether it’s a dead battery, new tires or even just the annual oil change (I drive an older MINI Cooper, so it’s not cheap), I like to have the money set aside. What’s worse than having to cut back on wine because your stupid car broke down?

But a recent article that breaks down where paychecks tend to go caught my eye and has me considering adding a new auto-save category to my money. What caught my eye?

We spend an average of 8% of our income on healthcare.

Eight percent! If you had asked me what percentage of income I thought I was spending on healthcare, (not including fertility treatments), I probably would’ve guessed about 5%, which I would consider high due to the year I’ve had. (have I mentioned I hit my insurance out of pocket max in August?) But 8% really struck me — how many people are putting 8% into their 401k? If you’re not, I imagine it may be due to the fact that you feel you can’t afford it. But healthcare expenses are here and now — we can’t afford NOT to afford it.

So what to do with this revelation?

Planning ahead for the unknown

I’ve said before that the biggest budget breakers aren’t usually shopping sprees or vacations, although those can exacerbate the problem. What usually breaks budgets are random, one-time expenses that you really can’t predict. Or you can predict them, but you’re not sure exactly when they’ll strike, such as knowing your hot water heater is 13 years old, but for now it’s still steaming…

To get ahead of this, rather than trying to come up with the money to pay for healthcare expenses out of your spending money when they happen to pop up, just plan for them. Use the 8% guideline or find your own by adding up all your costs so far this year and dividing it by your income. Then set up a separate account just for healthcare expenses.

So if you make $60k, that’s $4,800, but keep in mind that the total includes any premiums, co-pays and even non-insurance covered stuff like acupuncture or therapy. If you have a Health Savings Account, make sure you are making full use of the tax-savings capabilities by running all eligible expenses through there. And if you happen to be reading this during open enrollment and use a Flexible Spending Account instead, make sure you’re not short-changing yourself by underestimating your expenses! It’s true that it’s ‘use it or lose it,’ but you can always stock up on band-aids, sunscreen and aspirin if you have some left over. (or try acupuncture!)

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The 5 Different Ways To Address Identity Theft

November 14, 2017

The only silver lining I can think of to the Equifax breach is that it has expanded awareness of credit fraud, moving people to look for ways to protect their credit. But for many, the options to protect your credit may seem overwhelming. Ultimately, the best option is the one you will actually do and one that gives you peace of mind. As you start searching for options, you can use the following as a guide to help you make the most informed decision:

Credit Freeze: A credit freeze, sometimes called a security freeze, restricts who can access your credit report. This,  action can help prevent new credit from being opened since most creditors will want to view your credit report prior to opening a new line of credit. Existing creditors and collection agencies can still access your credit. One thing to note: a credit freeze only applies to getting new credit. Your existing credit may still be susceptible to fraud.

Generally, a credit freeze may be ideal for someone who is already a victim of identity theft and/or someone who has no plans to apply for anything requiring a credit check. To place a credit freeze, you must contact each credit reporting agency – Equifax,  Transunion and Experian. The cost associated with the credit freeze varies by state. Look for you specific state information here. In most states, the credit freeze stays on your report until you contact the credit reporting agency to temporarily or permanently remove the freeze, while in other states, the credit freeze will expire after a set number of years.

You may need to “unfreeze” for these events

Keep in mind that if you do a credit freeze, the freeze applies to any request that may require your credit report being pulled such as switching phone carriers, renting an apartment, getting utilities turned on, a background check for employment, or even changing insurance carriers. You can unfreeze your credit report temporarily though. The cost to temporarily remove a credit freeze varies by state.

Fraud Alert: Fraud alerts are less restrictive than a credit freeze and are free. A fraud alert places a notice on your credit report to creditors to take additional steps, like verifying identity, prior to issuing credit. Since a creditor may call to verify your identity, it’s important to make sure your contact information with credit reporting agencies is current. Unlike a credit freeze, you only have to request the alert at one credit reporting agency and that agency will contact the other agencies. Typically, the alert will be forwarded within 24 hours.

The initial alert lasts for 90 days. If you are a victim of ID theft, you can extend the fraud alert for 7 years. In order to file an extended fraud alert, you must generally file an identity theft report.

If you are in the military, you can request an active duty alert. This type of alert stays on your credit report for one year. Even better, bureaus will remove your name from pre-approved credit offers for 2 years. You can even renew if your deployment lasts longer than one year. You will have to provide proof of identity in order to get an active duty alert.

Credit lock: Similar to a credit freeze, a credit lock will prevent your report from being viewed and prevent new credit from being opened. The big difference is that a credit freeze is under state law and a credit lock is under a contractual obligation between you and the company locking your credit. An article by Consumer Reports suggests that a contractual agreement may not be as strong as having protection under the law.

With a credit lock, you can receive alerts from credit bureaus if someone applies for credit in your name and you can unlock or lock your report immediately. You have to sign up for a credit lock at all three reporting agencies. The price for a credit lock varies with each credit reporting and monitoring agency. One thing to note, your credit lock is based on the contract you sign with the credit reporting agency so you want to read your contract carefully to make sure the service you want is actually the service you are getting.

Credit Monitoring: Credit monitoring is periodically checking your credit, looking for signs of fraud and identity theft. You can self-monitor by pulling up your credit report for free and checking it. Be honest with yourself though. If you know you are not going to diligently monitor your credit yourself then consider a credit monitoring service or at a minimum, placing alerts on your accounts.

You can step this up a notch by signing up for free alerts at your financial institutions. These alerts are worth their weight in gold. We have alerts on all of our accounts and were immediately alerted of suspicious activity which turned out to be fraud. Because we found out as soon as it happened, we were quickly able to resolve the fraud and have the funds returned to our account.

Beyond free

If you want more comprehensive credit monitoring, you can sign up for a service. Contact your bank and creditors for credit monitoring services. But before signing up, do your research. Compare different plans to ensure you are getting your desired level of monitoring.

One important thing to note: these services alert you if you may be a victim of fraud. They do not prevent it. The key is the earlier you are aware of possible identity theft, the quicker you can stop any further theft.

Identity Restoration Services: Credit freezes and alerts makes it harder for criminals to steal your identity, credit monitoring alerts you if your identity may had been stolen and identity restoration services clean up the mess after identity theft. Typically, a counselor walks you through the process of dealing with creditors after your identity has been stolen. The level of help you get depends on your contract. Identity theft recovery may be ideal for someone who recently experienced a home invasion, auto theft, or anything in which your personal information may had been compromised.

As with everything, do your research, compare different programs for level of service, cost and customer reviews. If you are thinking of getting identity theft restoration services, consider asking the carrier of your homeowner/rental insurance for coverage. If coverage is not offered, ask if it can be added.

Ultimately, you are your best defense. Shredding documents with your personal information, carrying as few documents with personal information on you as possible, safeguarding personal information at your home, having two factor authentication for online banking, emails and any accounts with sensitive information, and choosing passwords that are difficult to hack is the first line of defense. These steps along with the options listed can go a long way to safeguarding your identity.

 

This post was originally published on Forbes.

How To Find A Bargain When Making A Big Purchase

November 10, 2017

Over the last few months, I’ve been on a quest to add a new skill into my life. Living in Maryland, near the Chesapeake Bay with marinas galore, and as a former boat owner – I decided that sailing is a skill that I should learn.

I grew up spending lots of time on the bay and lived on a boat for a number of years after my marriage ended. But I’ve always been a power boat guy — fire up the engines, get out into open water, throttle up and head to wherever we wanted to go. I always admired the simplicity and beauty of sailboats, but have never spent much time on them. I’m going to change that now. But, the journey hasn’t been easy.

Finding the perfect sailboat with a limited budget

I had some parameters that made buying my boat a bit difficult: I had a fairly low budget because I bought a house about a year and a half ago and used a large chunk of my savings for that. With a new mortgage and child support, cash flow is still relatively constrained. As excited as I am about learning to sail, I’m not willing to compromise my other goals like retiring on time in order to have a boat today.

So within my small price range, I got to work looking and I saw a lot of boats. Usually, my first thought was, “I can maybe make this work,” or “Is this a boat or a crime scene?” Everything I saw needed A LOT of work and I’m not opposed to that, but some were going to be lucky to not sink when they hit the water. None of them struck me as “this is the one,” though.

Adding up all the costs

I kept looking, kept searching, and then… boom: in the same week I saw 2 that were within my price range and felt like “home,” although one had a higher “sticker price” than the other. That’s when I started doing the full blown calculations of what this will cost me. Things I included:

  • the price of the boat
  • monthly cost of a slip at the marina
  • insurance
  • repairs & upgrades I’d want to do, etc.

After factoring in all of that, the full cost of each boat was roughly the same.

How to choose

So, it came down to preference – when I gave each boat a score from 1 to 100 based on what I wanted from an old sailboat, they both came in at about 90. Which is awesome because the others came in at around 10-15 on that 100 point scale! These were 2 serious outliers, and perhaps a bit mis-priced.

What I later discovered is that both were owned by people trading up to much larger and much more expensive boats and they wanted to unload their boat quickly to avoid paying for insurance and marina costs. With 2 boats that I valued equally, my “buying strategy” was to put in an offer a bit lower than the asking price on each one and see what happened.

What happened?

I lost out on one boat to another buyer and on the other, they gave me a counter offer, which I accepted. So by the time you read this, I’ll be out on the Chesapeake Bay learning how to sail. Wish me luck!!! I’m just hoping I keep my head low enough not to be hit in the head by the boom (some of my early sailing terminology at play here) as it swings from one side to another, knocked overboard and unconscious. If that happens and I’m out on the boat alone…this may be my last blog!

The big takeaway for everyone

When you are planning a major purchase, whether it’s a car, boat, household appliance, house, etc., the best way to go about getting the most value for your hard-earned dollars is to have a plan and have a strategy. I went into this with a definite maximum spending limit. It was low! Patience was required because I looked at over a dozen boats in person, and hundreds online and only found 2 that were acceptable given my goals.

Factor in all the costs

Don’t just look at the price of “the thing,” look at all the associated costs. For example, when my daughter bought a new car, her insurance rates went way up. When buying a major appliance, there are delivery and installation costs to figure in. Don’t forget closing costs when evaluating a mortgage.

Control your emotions

Don’t let your emotions make you “buy up.”  When looking at 1 boat that had a dirty smelly frat house vibe, I walked past another that had a “For Sale” sign on it & I looked at that one the next day. It was several thousand dollars above my maximum price, but it was NICE and my emotions told me that I could somehow make it work. I had to talk myself down from that emotion and stick to my plan. Emotions can sometimes be the enemy of good decision making.

How I kept my head in the game

In the end, I had a little index card where I wrote down the things that I wanted from a boat, including my maximum price and some things that would be deal breakers. When in doubt or I was tempted to stray from my plan, I’d look at my handy dandy index card and it would help bring me back to rational world. This way I know that I’ll always have smooth sailing, at least when it comes to financial side of this new hobby.

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The 8 Things That Saved Our Sanity When My Husband Went Back To School

November 08, 2017

When my husband and I first made the decision that he would stop working and go back to school full-time to take accelerated classes towards a nursing career, we were both pretty excited.

Sure, there were sacrifices involved. He’d sacrifice his desire to work and have a steady income for a short time as well as give up most of his free time to studying. I’d give up some luxuries so that we could cut expenses, and I’d need to hold down the fort when he needed to study, especially around exam time.

The thing we didn’t anticipate

What we did not really think about was some of the stress that came with our decision. Now, if you are superman or superwoman and you can do all things, that is awesome! I admire you! I have friends like that, but sometimes, I can’t find my cape. So, if you find yourself in a similar situation as us and you aren’t feeling superman-ISH and superwoman-ISH, I’m here to help you.

Here are some things that have helped us keep our sanity along the journey.

1. Control the emotional rollercoaster. Talk about your concerns and remember that you are both making sacrifices, so you’re in this together, fighting on the same team. It makes the journey so much better if you don’t spend your time arguing.

2. Be prepared to experience hiccups along the road. The spouse going to school is human and may not get an A+ on everything and may need to repeat a class. If you’re the one in school, don’t give yourself a hard time about that. If your spouse is in that situation, give him/her some grace.

3. Stick to a realistic budget. All work and no play is just boring and it’s not sustainable over a long period of time. Create a monthly spending plan, so that adjusting to your new level of income won’t leave you with more bills than money at the end of the month. It also will keep you from being disappointed when you aren’t able to conquer the world like you used to.

For instance, you may not be able to ramp up your savings of your own or for your kids’ college education during this time. This may not be the best time to accelerate your student loan payments either. Just remember that this is a temporary situation.

4. Get a head start and at least create a plan you can tackle once you are back to two incomes. That really helps us when we get to feeling stressed.

5. Have an outlet for you both. Remember, neither of you are robots. You need an outlet. I cut back on getting my hair and nails done as frequently and signed up for a personal trainer at the gym. (Best shape I’ve ever been in, by the way, and it’s a stress reliever.) Find budget friendly gyms in your area. Facilities like YouFit and Planet Fitness have great deals for gym memberships on a budget. Or sometimes you can get corporate discounts for gym memberships simply because of where you work. Check with your employer to see which gyms might offer additional perks.

My husband is an avid car lover and found his outlet by working part-time at a friend of the family’s mechanic shop. DOUBLE WIN! He had an outlet and we had additional cash to go enjoy ourselves!

6. Don’t overthink dating, JUST DATE! Everything you do does not have to be over the top or complicated. Walking around the lake or park, holding hands and talking doesn’t cost a penny…Well, except for the gas you use on the way if you have to drive, but you get the point. Groupon is your friend. Try a new experience together. 

The point is that consistent dates are important. Most of what I read says you should go on a date once a week. Wow! We have a 2-year-old and are still working on the consistency part. Like I said, I’m not superwoman.

7. Give yourself some grace about household chores. If it’s been a long day with work, school and the kids, consider leaving the dishes in the sink until tomorrow, or letting the dishwasher do the job.

If the thought of that makes you stress out, and you can find room in your budget, consider hiring a maid. You can have the maid service twice a month, once a month, whatever you can afford. Added bonus: You can still take credit for the clean house. Hey! You did the leg work to hire some help.

A lot of people have had a maid at some point, so you may be able to get a referral from a friend, family member, or co-worker. You can even check out Angie’s List. Don’t forget you might find a deal on Groupon, too.

8. Get help before things get out of hand. If you find it challenging to talk and your marriage is on a very rocky road, consider marriage counseling with the pastor at your church or seeking marriage counseling outside of church. Be sure that you and your spouse can both relate to, and feel comfortable opening up to the counselor.

Another option is to check with your employer. Many companies offer free/discounted counseling services to their employees through an Employee Assistance Program (EAP).

Keep the end-game in mind

The most important thing to remember is that your decision is going to better position your family to live the way you really want to in the long run. For us that means a number of things like more family time, and an overall better quality of life. Stick together, keep the end in mind and remember all your sacrificing will soon pay off.

And for those of you who listen to TD Jakes: Just remember these are light afflictions during a short time in our lives.

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The Science Behind Spending Habits & How To Break Them

November 07, 2017

I crave ice cream before bedtime. I know the high, empty calories are not good for me, but it’s still like a WWE fight in my brain every night – the good guy (don’t eat it) is on his back while the bad guy (go for it) has him in a figure 4 toe hold trying to convince him to surrender. The good guy is throwing counters at him – “this stuff is going to make you fat!” “you’re going to regret it tomorrow!” — while the bad guy keeps the pressure on – “you deserve it!” “it will make you sleep better!” Sometimes the good guy wins, but most nights I eat the ice cream and regret it in the morning.

What’s happening in your brain when you make a decision

What’s going on in my mind is called an intertemporal choice or decision. This part of our brain weighs the immediate versus delayed gratification, or how current decisions affect future opportunities. Marketers use our intertemporal utility function against us when they advertise. Being aware of what’s going on during this decision process can help us make better decisions, especially financially.

Here’s another example:

The case of the shopaholic

My daughter is a self-admitted shopaholic. I bet she has over 100 pairs of shoes. (don’t worry, she knows I’m writing this) She and I discussed what goes on in her mind when she makes the decision to purchase yet another pair.

What’s going on in her mind

She tells me that she sees herself wearing them with a particular outfit and getting compliments on how she looks. She has created an image around her shoes where her peers identify her as the “shoe princess.” When I asked her how she feels later about owning so many pairs, she says she has mixed emotions – she loves her title of the Shoe Girl, but she laments the amount of money she has wasted.

Conflicting priorities

At 23, she is starting to think about bigger financial decisions like getting her own apartment and purchasing a new car. With these new obligations, it will be very difficult to keep her title.

How she got to this point

The problem is that she has actually created a habit out of shopping, the same way other people pick up habits like smoking, checking their phone, or eating ice cream. Her brain has built in a craving for the next purchase. If she continues to let this habit control part of her financial life, she will struggle to accomplish her long-term goals.

Reversing the habit

So, what actions can she take to curb this craving and reverse the habit? The first thing she can do is recognize it as a habit. The awareness that her current behavior has negative consequences on her future is a good place to start. And understanding that seemingly small amounts of money spent or saved today, can have big impacts in the future.

Here are some concrete things you can do when facing an intertemporal choice around spending:

  • Create a budget line item for purchases. Some people go as far as opening a separate checking account and giving themselves an allowance every paycheck they can spend on discretionary items. If they have their eye on an expensive item, they wait until their allowance accumulates.
  • Have someone to run your purchases by. If you have a spouse, parent or friend whose opinion would be helpful in analyzing a purchase, make it a rule to call them before you pull the trigger.
  • Set some rules for yourself. Set a dollar amount for purchases that need to have a 24-hour waiting period before you can buy it. Many times, a day removed can make the impulse less favorable.

It’s working!

I have already seen progress in my daughter’s positive financial habits — these days she calls me when she wants to make a large purchase and plans out every paycheck. Now I need to take my own advice and start changing my own habits, like cutting out the bedtime ice cream snacks.

BTW – This blog is really about whiskey, not ice cream.

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Winter Is Coming: How To Prepare For The Expenses

November 06, 2017

I woke up this morning realizing it was time to put snow tires back on my car. This does not thrill me. However, since we moved to NJ from Bermuda, I’ve learned the hard way that an ounce of prevention is worth a pound of cure when it comes to winter. Making smart decisions before the season arrives can save you lots of money:

Prepare your home for cold weather

Simple steps can help you save on heating costs, and avoid expensive repairs like a burst pipe or fallen gutter:

  • Get a tune-up for your heating system and change the filters. Check with your utility company to see if they’ll send a technician for an energy audit.
  • Turn off the water that leads to the outside spigots so those pipes don’t freeze and burst. (Learned from experience!)
  • Install programmable thermostats. Ours are set to 65 at night and 68 during the hours when we are home. We’ve saved hundreds every season by doing this.
  • Clean your gutters in late fall. A gutter stuffed with leaves can freeze and fall, possibly damaging the house or roof. (Yes, that also happened to us, even though we had gutter leaf guards).
  • Check your windows. Are caulking, plastic covers or new energy efficient storm windows needed?
  • Call the tree company If you have a lot of mature trees on your property, have an arborist check them once a year. Trimming dead branches and cutting down deceased or dying trees can save you the thousands you would spend if something fell on your house (or the neighbor’s house).

For more home winter tips, see this Popular Mechanics article.

Winter-proof your car

Preventive maintenance now can prevent expensive repairs later and help keep you safe in a storm. For more details see 5 Steps to Preparing Your Car for Winter. Make sure you:

  • Put on snow tires and get the car realigned
  • Check the battery
  • Change the oil, refill the windshield wiper fluids and check engine coolant and antifreeze
  • Keep your fuel tank at least half full

Don’t forget to put a winter survival kit of emergency supplies in your trunk, in case you are stuck in a storm and need to wait it out.

Check your family’s winter gear

Make sure everyone tries on their winter coats and snow gear before it gets cold! Do the kids’ boots and coats still fit?

  • Stock up on extra gloves, scarves and hats – you know the kids are going to lose some of them.
  • Replace outgrown items at a discount. Check for Black Friday sales, coupons and discounts at your preferred department stores if you need to replace anything. I usually replace the kids’ snow boots and outerwear at sports consignment shops as they may grow out of them in less than one season.

You know winter is coming. Don’t wait to get ready. Depending on where you live, you may have 2-6 weekends left before the snow arrives! Use them wisely to save yourself money and hassles during the cold weather season.

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5 Seasonal Job Ideas To Earn Extra Holiday Cash

November 01, 2017

Whether you’re a holiday purist who loathes the fact that Christmas displays start popping up even before Sweetest Day, or if you’re one of those who is excited that certain radio stations are already playing holiday tunes, there’s no escaping that the beginning of November pretty much means we’re off to the races for the holiday season. I personally LOVE this time of year — any excuse for merry-making is a good excuse for me! But it’s also a time of busy-ness and stress, and can also get very expensive if you’re not careful.

If you’re looking for a way to help balance the budget against increased spending on things like gifts, travel, meals, etc., how about finding a way to earn some extra bucks? Here are five flexible ways that you can work into your schedule.

  1. Delivery driver — As online shopping continues to take over, more drivers will be needed to deliver purchases to shoppers. For example, Amazon Flex allows drivers to choose when they want to deliver and can be a quick way to pick up an extra fifty bucks for a quick after-work or weekend delivery shift. Look to bakeries, flower shops or meal services for seasonal opportunities as well.
  2. Grocery shopper — Most large grocery chains now have at least one service that allows customers to submit orders online for delivery within a certain window. The delivery shoppers choose which orders they want to fill and the tips aren’t bad either — one of my friends squeezes in a few shopping runs between work and picking her kids up from after-school sports, and it’s allowed her to completely fund their next family vacation.
  3. Pet and house sitting — I’ve personally done this to boost my holiday budget, although the most plum earning opportunities are on the actual holidays, so if you’re one who travels or doesn’t have time to run out for a few hours before serving the holiday meal, it may not work. There are services that allow you to sign up as a contractor and they set up the clients in exchange for keeping up to half the fee, or you can just post in your neighborhood Facebook group or send out the word at work that you’re available to help out with pets and empty houses while people travel.
  4. Gift wrapper/order filler — Many department and big box stores offer complimentary gift wrapping during the holidays, so if you’re pretty good with your hands, this could be a fun night and weekend gig that could also allow you to exercise some creativity. Are there any small businesses in your community that have a large mail-order presence? My mom worked one season for a local gift shop where she hand-wrote all the notes that went with gifts that customers ordered. The coolest part was when she had to write a note from one country music star to another.
  5. Retail — This one may be the most obvious, but it’s still worth mentioning. I’ve held several seasonal retail jobs, including a season at Michael’s Crafts where I became known as “Yarn Kelley” for my Type A obsession with organizing the yarn bins. It’s hard work, but if you’re just doing it for a few weeks, a few shifts at a time, the money adds up and it can also give you an appreciation for your non-retail day job. Just take care not to spend all your earnings taking advantage of the employee discount! (and consider wearing compression stockings)

With a little creativity, there are earning opportunities all around you! Just be sure that you are strategic with the extra money — maybe open up a separate account to make sure you don’t fritter it away or designate the money to pay a certain bill like your cable and internet for the winter months.

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