The Secret Financial Power of Home Cooking

December 12, 2016

If you could save an extra $500 per month or more by doing just one thing differently, would you do it? Think about what you could do with that $500: pay off your student loans or credit cards, save for a home purchase or home renovation, power up your retirement account or even take a fabulous vacation. If you’re like many Americans who are feeling squeezed for cash to apply to your big goals, there is one simple thing you can do to save a lot more money – cook and eat at home.

I’m as guilty as the rest of us. While I love to cook, I am the first one to order a pizza when the time crunch of work, kids and activities gets crazy. Plus, as an extrovert who works from home most of the time, I enjoy taking my computer to a café so I can see some actual humans.

The keys are 1) moderation – set an “eating out” maximum for the month and 2) preparation – plan to eat at home and shop in advance for ingredients. Need motivation? Here’s how much you could save:

Save money on breakfast

Let’s take a typical breakfast on the go: a ham, egg and cheese sandwich on an English muffin with a cup of gourmet coffee for $5. Eat that every day and you’ll spend $35 per week. How to cut this down?

Cook your eggs. Making your egg sandwich at home could cost you as little as $1.00 if you kept all the ingredients on hand and cooked from scratch (not to mention that it might taste a lot better). Your savings per week? $28 or $1,456 per year.

Brew your own coffee. You don’t have to sacrifice coffee quality. My serious Nespresso habit costs me about a dollar per day and I save the pricier coffee shop brew for when I’m out meeting friends.

Buy prepared in bulk. Even reheating a breakfast sandwich in the microwave and brewing a coffee pod would only cost about $2.50 or less per meal. Your savings per week: $17.50 or $910 per year.

Save money on dinner

Unplanned take-out food is the easiest place to fall off the wagon when it comes to your meal budget. For a single person, take-out Chinese food or a pizza dinner would cost about $15-$20 depending on where you live, and you’ll get two meals out of it. For a family of four, a take-out meal costs about $40.

Stock your pantry and fridge for easy meals. Having a well-stocked pantry and fridge is like having money in the bank because you’ll always have ingredients on hand to pull together a quick and easy meal. See the Food Network’s list of essentials to keep on hand and these suggestions from Real Simple magazine for easy meals you can make in a hurry.

Making dinner at home can save you about $7 to $15 per person. Replace just one person’s meal out per week with a home-cooked version and you’ll save $364 to $780 annually. That’s $1,456 to $3,120 for a family of four.

Use your slow cooker. My slow cooker is my favorite piece of equipment in my kitchen. I load it up with ingredients in the morning, turn it on, and presto! There’s dinner at 5 pm.  See this list of easy recipes from Cooking Light.

Save money on lunch

A typical lunch on the go costs $10-$15. Sure, you’ll want to eat out occasionally with co-workers in order to connect and have a change of scenery, but you don’t have to do it every day. How much can you save from bringing your lunch?

Bring leftovers. What better thing to bring for lunch than last night’s yummy leftovers? Bring a hot lunch of leftovers just once a week and save $520 to $780 per year.

Stock sandwich ingredients at home. You can make 5 tuna subs at home for the cost of buying a single one at the sub shop. Your savings? About $28 per week or $1,456 per year.

Save money on snacks

That mid-afternoon latte and muffin or trip to the smoothie shop can cost you $3 to $7 per day easily. Buy snacks you like in bulk and keep them in the office to save $520 to $1,300 per year. If you’ve got kids, you’ll save even more by keeping a cooler in your car stocked with healthy snacks to keep the hungry hoard at bay.

It doesn’t have to be all or nothing

I’m not suggesting that you should never eat out again. Rather, be mindful of how much you are spending on food out and set some limits. If you’re saving for a big goal or trying to pay down debts, this is an easy and almost painless place to cut back on your spending. Your return on your investment for preparation and cooking – or even just reheating — is high. That’s the secret financial power of home cooking.

 

Do you have a question you’d like answered on the blog? Please email me at [email protected]. You can follow me on the blog by signing up here, and on Twitter @cynthiameyer_FF.

 

How to Pay for Unexpected Dental Expenses

December 05, 2016

Last week, I cracked a molar, the second time in two months, and my dentist just informed me that the only way to prevent more of this going forward is to get braces. My total costs for dental care not reimbursed by my insurance carrier this year exceeds $3,000, and the cost of braces could be up to $10,000 over the next few years. Needless to say, I was not expecting this at all. I’ve taken great care of my teeth my entire life. However, as an apparent consequence of having kids in my forties (which caused my teeth to move during pregnancy) three years of teenage braces have been undone, causing stress fractures in my teeth when I bite.

Perhaps I should have expected it though. Unexpected dental expenses happen. In fact, they are more common than not, so perhaps they should be considered “expected but unpredictable” — and expensive. On the average, per an American Dental Association (ADA) study, only 48% of dental expenses are financed by private insurance.

The typical dental insurance plan is capped at $1,500 in coverage per year. If you have an unexpected dental expense that you aren’t financially prepared for, how can you handle it? Here are some ideas:

Flexible spending account

An FSA is a tax-advantaged account at work to which you can contribute up to $2,600 in 2017 from your paycheck in order to pay certain medical and dental expenses. If you already contribute to an FSA, that’s the perfect source to pay for most dental treatments that haven’t been covered by insurance. If your dental treatment is not urgent or can be spread out over time, consider putting it off until the following year, so you can choose to fund an FSA during your benefits enrollment. FYI, if you already contribute to a health savings account, you’ll need to choose a “limited purpose” FSA (just for dental and vision expenses) in lieu of a regular FSA. For tips on using an FSA, see this blog post.

Finance it

Dental problems don’t heal themselves. If you need treatment, but you don’t have resources available to pay in full right now, you may want to consider financing:

Credit card  – The advantage of putting the charge on your credit card is that it’s easy and immediate. The disadvantages are significant though: high interest rates, lower credit score (from higher credit card utilization) and reduction in monthly cash flow from credit card payments.

Personal loan – For a borrower with a good credit score, a personal loan may be a good alternative. Rates are generally lower than credit cards. Because a personal loan is considered installment debt (like a car loan or a mortgage), it may actually help your credit score.

You’ll still see a reduction in your monthly cash flow from loan payments though. Make sure you choose a reputable lender with low fees. See this article for more tips on finding a personal loan.

Dental office payment plan – For treatment plans that stretch out over time, your dentist may offer you the option of a payment plan, typically financed by an outside company. However, a dental office payment plan can have a very high rate of interest, more than a credit card. Be cautious and make sure you read all the fine print before you sign.

401(k) loan – A small loan against your retirement plan balance can be processed fairly quickly, without a credit check or any reporting to the credit bureaus. You’ll be repaying yourself via after-tax payroll deductions at a low rate of interest. There are downsides, however, including when you leave your company for any reason, any unpaid loan balances typically become due in full or are considered an early retirement plan distribution – subject to income taxes and a 10 percent penalty for early withdrawals.

Consider a dental school clinic

Many top dental schools offer affordable care from dental students and residents. This can save you fifty percent or more on the cost of your treatment. Search “dental school clinic” online for clinics or search this list of accredited dental schools near you.

What I chose

Luckily, I was able to dip into our cash reserves to pay my dentist for this year’s treatment. That’s what emergency funds are for, after all. I can’t say I enjoyed having to spend the money though.

I also chose to defer the decision about braces until next year, so I have time to weigh the pros and cons. We have some new benefits at work and no longer have access to a limited purpose FSA, so that’s not an option for me. I have some regrets, though, for not funding a limited purpose FSA for 2016. It would have come in handy.

 

Do you have a question you’d like answered on the blog? Please email me at [email protected]. You can follow me on the blog by signing up here and on Twitter @cynthiameyer_FF.

What to Expect When Closing on a Home

November 28, 2016

You’ve found your perfect home, you’ve qualified for a mortgage to buy it and it’s passed inspection by a qualified home inspector. Now it’s time to sign on the dotted line. A closing is the last step in buying and financing real estate.

If you are buying a home for the first time, you’ll be in for a surprise. There’s a lot more to do in order to cross the finish line. Here’s how to make sense of the process:

Your lender will ask for a lot of documentation

Your mortgage lender has given you approval for your loan, conditional on you documenting your income and assets. Be prepared to submit:

  • Tax returns
  • Account statements
  • Pay stubs
  • Documentation of the sources of recent, large bank deposits

Your lender is likely to have a “trust but verify” attitude towards your documents. They want to see everything. Make sure you include every page, including the mysterious “this page left intentionally blank” one that you think doesn’t matter. Lenders typically run an additional credit check on borrowers right before closing date, so make sure you don’t do anything which could jeopardize your loan, such as opening a new credit card, taking a car loan or switching jobs.

You’ll need homeowner’s insurance

You will need to give proof of your new homeowner’s insurance policy to your lender, so start shopping around. Ask your real estate agent for suggestions on insurance carriers if you are new to the process. Make sure to get at least three written quotes before you decide on a policy. For more tips on shopping for a homeowner’s policy, see this blog post. FYI, if you live in a flood or earthquake zone, those aren’t included in a traditional policy, so decide if you need flood insurance or earthquake insurance.

You can’t bring cash to a closing

The cash you need to close can’t actually be paid in large bills.  Make sure you receive and understand the written instructions on whether to bring a cashier’s check or plan for a wire transfer of funds on the closing day.

Review your loan estimate

It’s up to you to understand the terms of the loan agreement you’ll be signing. Your lender will send you a loan estimate. Review this very carefully and make sure that the written terms of the loan match what you’ve discussed. You can use this guide from the CFPB as a framework. Be proactive about asking your lender questions if there are differences in what you have discussed and the loan estimate terms.

You can shop around for closing service providers

Closing costs can be expensive, especially costs relating to title. Not all of them are fixed, however. You can shop around for services in section c of your loan estimate (“Services You Can Shop For”):

  • Title costs, including insurance, title search and settlement agent
  • Pest inspections
  • Survey

Receive a closing disclosure and other key documents

Your lender is required to give you a closing disclosure statement three business days prior to your closing. Use this checklist as a guide to double check that all the details on the closing disclosure are correct. If you find that something isn’t correct, contact your lender immediately and ask for an explanation.  Ask for your other closing documents in advance in order to review them:

  • Mortgage (also called security instrument)
  • Promissory note
  • Initial escrow disclosure
  • Right to cancel form

You may want to consider hiring a real estate attorney to review your documents before closing.

Take a final walk through

The last step before you start signing paperwork is to take a walk through the home with your real estate agent to make sure the home is still in the same condition it was when you made your initial offer. Make sure that everything that the seller agreed to repair is repaired and that items they agreed to leave in the home (such as a washer/dryer, air conditioners or curtains) are still there. If there are big problems, this could potentially push back the closing or even void the deal. See this article for more walk through tips.

Don’t sign anything you don’t understand

Read everything you’ll be signing and ask questions about things that don’t seem clear or seem different from what you expected. This is the step that many homeowners skip and later regret. Remember, it’s up to you to understand the legal documents you are signing. Use the CFPB’s closing checklist for things to review before, during and after your closing. Don’t sign anything until you are comfortable that it’s correct!

 

Do you have a question you’d like answered on the blog? Please email me at [email protected]. You can follow me on the blog by signing up here, and on Twitter @cynthiameyer_FF.

 

Basics for Financial Caregivers

November 21, 2016

If you’ve ever had to manage someone else’s money, you know it can be highly stressful. The responsibilities for managing a parent or other family member’s finances may have fallen on your shoulders suddenly or perhaps you had time to prepare to be a financial caretaker. It might be a responsibility you don’t even want or feel equipped to handle. Here are some resources to learn more about what your responsibilities entail and where you can turn for help.

What it means to be a fiduciary

Whether you have a power of attorney for finances or are a court-appointed guardian, a trustee, or a government fiduciary, you are required to act in the best interest of the person whose money you are managing. That’s called being a “fiduciary,” and it comes from the Latin word, “fiducia,” meaning trust. A fiduciary must act for the benefit of another person in a financial relationship and not for their own personal gain. The four basic duties of a fiduciary for a parent (or other person) are:

  • Act in your parent’s best interest;
  • Manage your parent’s money and property carefully;
  • Keep your parent’s money and property separate; and
  • Keep good records.

The first thing you must do is clearly understand the scope of your new position. Practically speaking, you’ll need to be very careful to follow the rules. For help, the Consumer Financial Protection Bureau (CFPB) offers guides for four types of fiduciaries managing someone else’s money. They can all be downloaded here.

What’s a power of attorney?

A power of attorney for finances is a legal document that gives someone (called the “agent”) the legal authority to make decisions about your money and property. Generally, that legal authority kicks in when the person who granted it is sick or injured. CFPB help for agents under power of attorney can be downloaded here.

What’s a court-appointed guardian?

If a parent or other family member with diminished capacity has not made advance plans via a power of attorney and a judge finds that the person cannot manage their money and property alone, it may be necessary to ask the courts to intervene. Different states have different names for this, but the person appointed to take financial authority is often called a conservator or guardian. CFPB help for court-appointed guardians of property or conservators can be downloaded here.

What is a trustee?

A trust is a fiduciary relationship in which a person gives another person, the trustee, the right to hold title to property or assets for the benefit of a beneficiary (or beneficiaries). The grantor (e.g., your parent or other family member who sets up the trust) transfers money and property into the trust, which lays out the circumstances under which a trustee can step in to manage property and pay bills when the grantor is no longer capable. CFPB help for trustees under revocable living trusts can be downloaded here.

What is a government fiduciary?

A government agency may appoint someone to manage someone’s benefits if that person needs help. That person only manages the recipient’s benefits checks but not other financial affairs. The Social Security Administration calls that person a representative payee. The Department of Veterans Affairs calls that person a VA fiduciary. CFPB help for representative payees and VA fiduciaries can be downloaded here.

Look for signs of financial scams, fraud or abuse

Be on the lookout for sneaky business when you take over the finances of an older parent or family member, especially if it’s sudden or unexpected. Do you or your parent think that there is some money missing? Has your parent tried to send money to someone you don’t know? Are they not able to pay a bill they would normally pay, such as for the mortgage or electricity? Has a caregiver been informally handling their money or bills without full disclosure or legal authority?

Saying “yes” to any of those questions could indicate potential problems. As a fiduciary for your parent, be aware of financial scams and take steps to prevent them. Download the CFPB’s guide to preventing financial exploitation here.

Managing money for a parent or family member can feel like a huge responsibility, but it’s one you don’t have to face alone. Local and state agencies can also help provide resources, referrals, best practices and training. Start with the CFPB guides mentioned here and your employee assistance program to steer you in the right direction.

 

Do you have a question you’d like answered on the blog? Please email me at [email protected]. You can follow me on the blog by signing up here, and on Twitter @cynthiameyer_FF.

 

 

 

 

 

8 Inexpensive Ways to Prepare Your Home for Sale

November 14, 2016

Are you selling your home or thinking about doing so? Time to get to work – your home needs a pre-sale makeover. Once you’ve decided to sell it, think of your home more like a product and less like your home. You probably don’t want to invest a lot of money in major changes (despite what certain home renovation shows encourage). Here are eight inexpensive ways to prepare your home for a satisfying sale:

Remove Half of Your Stuff

Buyers want to imagine themselves in your home, and they can’t do it if it’s full of your stuff. Banish your clutter and create spaciousness. Unless you’re a minimalist, you probably have a lot to remove. Now is the time for a major purge.

For most items, if you haven’t looked at them in  a year, you probably don’t need them anymore. Homes for sale also generally look better with less furniture, so get some feedback from your real estate agent on what to remove. Spend as long as it takes to clear your house of half your things: throw away, recycle, donate, and sell what you no longer want and put the rest in a storage unit. See this list from Realtor.com for decluttering tips before a home sale. Everything that’s left should be arranged neatly, with personal items out of sight and off floors and surfaces.

Fix the Problems That Are Easy to Fix

Do you have marks on the wall from nails, discolored grout in the bathroom or an old refrigerator? You might not notice them, but a potential buyer will. Make a list of all the small projects and get a handy person in for the day to fix them all (or if you’re the handy one block out time to do this). If your appliances are old – and you have the cash – consider replacing them. For a checklist of things you should consider repairing, click here.

Repaint the Walls

Consider repainting your walls with neutral colors if you haven’t repainted in the past two years or you have highly personal color choices. If you are handy and detail-oriented, you could consider doing this yourself. If you’re not, a professional painter is worth the money.

Refresh Your Floors

Beautiful wood floors can add value to your home. If you have them, consider refinishing them if they are damaged or scratched or update them to a modern stain. According to Realtor.com, costs can be as low as $1 per square foot for recoating and as high as $5 per square foot for a custom look. If you have older carpet, consider replacing it (costs $1-$10 per square foot installed for) for a fresh and clean look. If your carpets are newer, get them professionally cleaned.

Clean the Inside until Spotless – and Keep it Clean

Even if you’re a clean freak, you’ll probably have to keep your home even cleaner while you’re showing it to potential buyers. Once you’ve refreshed your interior, give your home a top to bottom cleaning (or hire someone to do it for you). Think of it as if you are “detailing” your home. Look at every baseboard and around every light switch. Your home should pass the white glove test.

The hard part will be keeping it that way during the period you are showing your home. That’s when you’ll be glad you removed half your stuff. There’s less to clean now!

Beautify Your Yard

Once the inside of your home is squeaky clean, you can turn to the outside. Rake leaves, mow the lawn regularly and weed all your gardens. Put down mulch (if you use it) for a fresh look. Plant flowers around your home and/or in pots by your front door.

And speaking of the door – does it look good? If not, add that to the list of things to be painted. For more tips on landscaping your home to increase curb appeal, click here.

Upgrade Your Lighting

Good lighting can add to your home’s appeal to potential buyers. Make sure each room has at least three sources of lighting. This could be overhead lighting, standing lamps, table lamps, etc. Real estate agents will often leave all the lights on when showing a home so use energy efficient bulbs (and prepare for higher electricity bills during that period). For more tips on lighting, see this article.

Hire a Professional Stager

There’s a science to making homes look their best for a sale. Consider consulting with a home staging expert to set your home up for maximum appeal to potential buyers. A stager will work with what you already have in your home to rearrange and redecorate. Please don’t take her feedback personally if she doesn’t like your floor to ceiling collection of knickknacks and wants to banish them to storage. It’s a stager’s job to look at your home objectively to have the broadest appeal to buyers.

Selling your home can be an emotional time. The process you go through to prepare your home for sale not only sets you up to succeed, but also prepares you for your eventual move. It’s work – but it doesn’t have to be expensive!

 

Do you have a question you’d like answered on the blog? Please email me at [email protected]. You can follow me on the blog by signing up here, and on Twitter @cynthiameyer_FF.

How to Evaluate an Early Retirement Offer

November 07, 2016

You’ve received an offer from your employer with financial incentives to retire early. You’ve got to admit you’re intrigued. Should you consider accepting it? Before you say “yes” or “no,” ask yourself these questions:

Am I ready to leave?

Before running any numbers, be honest with yourself. When you received the offer of early retirement incentives, were you excited, somewhat interested or depressed? The more interested you are emotionally in moving on, the less likely you will regret your decision if you decide to accept the offer.

It’s also important to assess the state of the company. If you decide to stay, are there any reasons your job might be in jeopardy in the near future? Be clear-eyed about all the possibilities, and factor them into your decision.

Can I afford to completely retire now?

Run a retirement calculator to see if you could retire now, based on what you’ve saved so far and your estimated income from Social Security and any pensions and/or other investments.  Make sure you run the worst case scenario, not just the best case scenario. For example, model scenarios assuming a 2% return, a 4% return and a 6% return, and consider running the scenarios through ages 85, 90 and even 100. If the model shows you can retire with a reasonable lifestyle, keep pace with inflation and not run out of money in old age, you will feel more comfortable that you are ready.

What will I do for health insurance?

Health insurance is expensive. Up until now, you’ve participated in a group health plan, with your employer picking up a large part of the cost. If you have family coverage, the typical full cost of coverage is $17,500 per year. If you accept the offer, you’ll need to find and pay for new health care coverage until you are age 65 and can participate in Medicare. Review your options:

  • Continue your group coverage under COBRA for 18 months. You would pay the full premium yourself (or with retiree health plan dollars if you are fortunate enough to have one). If you have funds in your health savings account (HSA), you can use them to pay for insurance premiums for health care continuation coverage through COBRA.
  • Get coverage from your spouse’s employer-sponsored plan, if applicable. A spouse losing their coverage is a  qualifying event and they will be able to add you to their insurance.
  • Seek coverage under the Affordable Care Act. Even if you retire outside of the open enrollment period, losing your employer-provided coverage is a qualifying event. Start at healthcare.gov to see what is available in your state. Depending on your new family income after early retirement, you may qualify for a subsidy of your insurance premiums. In any case, you cannot be turned down for coverage.
  • Look for coverage on the private market. An insurance broker or online marketplaces such as eHealth or GoHealth are helpful places to start comparing plans and prices. Even if you are considering coverage under the Affordable Care Act, it’s a good idea to shop around and compare.

When will I claim Social Security?

The earliest eligible retirees can claim Social Security benefits is age 62. Most workers receiving early retirement incentive offers now would not be eligible for full Social Security benefits until age 66 to 67, depending on current age. If you claim early, benefits will be reduced based on the longer payout period.  Delaying Social Security to full retirement age or even as late as age 70 will increase your monthly benefits.  Factors to consider include:

  • Will you need the money? If you will need the income to make ends meet, you have your answer. However, if you can get by with some additional income from part time work, you’ll be able to receive higher monthly benefits by delaying claiming Social Security.
  • Is your spouse still working or do you anticipate any employment income? If your spouse is still working, you’ll be taxed at their marginal tax rate on your Social Security benefits. Plus, if your family earnings exceeds $15,720 for 2016, you’ll lose $1 for every $2 you earn above the limit. (Note that the benefit isn’t truly lost. You’ll be able to recoup that once you hit full retirement age).
  • How’s your health? If you have health issues, you may decide to take Social Security early. If you don’t, delaying may make more sense.
  • Do you have longevity in your family? Do you have someone in your immediate family who lived to 95 or 100? If folks in your family generally live long lives, consider delaying Social Security benefits
  • Do you have other assets you can tap? Does it make sense to tap your 401(k), pension, Roth IRA or brokerage accounts first? Model different scenarios to see which offers you the highest total lifestyle in retirement.

As you can see, there are a lot of factors to consider in deciding whether to take an early retirement offer. There is no right or wrong answer for everyone. Just make sure yours is an educated one.

 

Do you have a question you’d like answered on the blog? Please email me at [email protected]. You can follow me on the blog by signing up here, and on Twitter @cynthiameyer_FF.

 

The Parents’ Guide to Making a Will

October 31, 2016

Are you raising one of America’s 73.6 million children? If yes, do you have a will? If you don’t have one, you urgently need one. Don’t wait. A will, with a provision which names the person who should be the guardian of your children if you die, is the most important step in making sure your kids are raised by the people you would want to raise them.

What happens if you don’t have a will?

It’s not fun for any of us to think about what would happen if we died unexpectedly. That probably won’t happen, so you might be tempted to put it off thinking it’s silly to prepare for a worst case scenario. The problem is, if you die without a will which names a guardian for your children and specifies what funds are available to care for them, you have zero control over who raises your kids and how much money remains for their support. Your state’s courts, with government social services, is going to decide what happens to your kids, who raises them and how your money is divided up.

You need a will even if your spouse remains to take care of your children. If you die without a valid will, the courts will decide what happens to your assets according to a preset formula (e.g., some to the surviving spouse, some to the kids). Your spouse may not have full access or control over the money allocated to the children.

Don’t feel sheepish about not putting one together yet. According to a Caring.com survey, nearly half of American parents don’t have a will or living trust. Here’s how not to be one of them.

Make three decisions

Once you’ve decided you are going to make a will, it’s relatively straightforward to get started. You’ll need to make three critical decisions before you write anything up:

Name a guardian. Who is the best person to take care of your children until they are adults in the unlikely event that you are no longer living? Does that person share your values? Do they share your beliefs about parenting? Do they love your children?

FYI, in most cases where parents are divorced or unmarried, the default would be for the children to stay with the surviving biological parent, so if you have an objection to that, you’ll need to put that in writing. Choose your first and second choices for a personal guardian to include in your will. You’ll want to name a legal adult who has the time, energy and willingness to raise your children if needed. Before naming a personal guardian, make sure you’ve asked that person and they have agreed to accept the responsibility if needed.

Decide what happens to your money and stuff. Any assets that do not automatically pass according to their title or beneficiary (called “beneficiary of law,” such as property held as joint tenants with right of survivorship,  retirement accounts or life insurance) are included in this category. Make sure you fully designate what happens to your property, bank accounts and investments.

Minor children won’t be able to manage that money for themselves, and you may not want them to have full access to it until they are well established adults. Who will control the checkbook? Decide if that’s an individual – it could be a different person than the guardian if you prefer –  or a trust company.

Name an executor. An executor is a person named in your will (or appointed by the court if you die without a will) whose job is to carry out the instructions in your will. The executor takes care of your last financial business such as paying taxes/bills and re-titling property according to your will. Don’t forget to include a digital executor to control your online and social media accounts, who may or may not be the same as your financial executor. As with a guardian, make sure your executor is someone who is willing and capable to take on that kind of big responsibility.

Prepare your will

Once you’ve made the big three decisions, you’re ready to write your will. Here are some options for preparing a valid one:

Use an attorney. The biggest advantage to using an attorney to prepare a will is that — if you pick a qualified estate planning attorney – you can be more confident that it conforms to the laws of your state. The downside is that it’s more expensive. Check your employee benefits. You may have access to a prepaid legal program as a voluntary benefit or access to lower cost resources through your employee assistance program (EAP). The American Bar Association also offers an online state by state guide to wills and estates.

Use an online legal resource. If you need a basic will without a lot of personalization, an online resource may be a fit for your situation. Check with your EAP to see if you have access to any free or low cost will preparation services. There are also online will preparation sites such as Nolo.com and Legalzoom.com where you can make a will for a reasonable price.

Communicate your plans

Finally, a will won’t help if no one knows you have one. Let a few trusted people, such as a sibling, parent or close friend, know that you’ve prepared a will, and where they can find it if it’s needed. Make sure your executor knows how to access your will and has contact information where needed.

Do you have a question you’d like answered on the blog? Please email me at [email protected]. You can follow me on the blog by signing up here, and on Twitter @cynthiameyer_FF.

 

When Should You Go the DIY Route?

October 24, 2016

Have you ever wondered, “when does it pay to have a professional do it versus doing it myself?” My fellow planner, Cyrus Purnell, CFP® and I were chatting about our funny home improvement adventures. Then the conversation turned to other areas where sometimes it’s better to go it alone and sometimes to get help. Here’s what he told me:

A couple of weeks ago, I saw an Instagram post of a buddy of mine with his face buried in his hands and a pair of car keys with the hashtag #failmomentoftheday. Apparently, he tried to program a new key for his wife’s car and managed to deprogram both keys. The result was hiring a tow truck to haul the car to the dealership – what he was trying to avoid in the first place.

I spoke with him afterwards and he mentioned he was convinced to go the DIY route after watching YouTube videos. If alcohol is liquid courage, YouTube is definitely digital courage. My own failures after a little digital courage include: various attempts to fix my car and lawnmower, burnt pieces of meat offered up to the grill gods and a Craigslist’s furniture fixer upper which now resides in my attic.

I can now laugh at these DIY disasters. However, sometimes doing it yourself may not be a laughing matter. At what point does the cost of making a rookie mistake outweigh the price of having someone else do it?

When does it make sense to hire a financial advisor to help guide you in decisions related to your nest egg? Should you try to write your own will? Can you find the best insurance and mortgage rates on your own? Here are some thoughts on the value of hiring a professional:

When should you hire a financial advisor?

The value of a financial advisor is found in their ability to work with you to build a portfolio you can tolerate during the inevitable ups and downs of the market. Time in the market generally beats timing the market and a good advisor can help you stay on track in this area. Additionally, once your nest egg is in place, a good financial advisor helps you design a strategy which allows you to take income.

If you want to invest outside of your employer’s retirement plan and retirement is more than 10 years away, DIY investing can make sense. There are a lot of low cost investment options to consider or robo adviser options which can function as an “advisor lite.” If you are simply not comfortable going alone or you are nearing your investment goal, it may be time to interview an investment advisor.

Financial advisor is a generic term so you may want to look for someone reputable and with training specific to your needs. My colleague Erik Carter wrote a blog post that explains exactly what to look for in a trusted adviser: https://www.financialfinesse.com/2012/10/04/can-you-really-trust-your-financial-adviser/. Doing your due diligence is so important my CEO wrote a book about it: What Your Financial Advisor Isn’t Telling You: The Ten Essential Truths You Need to Know About Your Money. That’s a good place to start to see if you really need one.

When do you need a professional to assist with estate planning?

An estate plan can direct where your assets such as a car, home, business, savings, etc., will go in the event of your death. Our own mortality is not the most pleasant topic, but it is one we all deal with it. A well thought out estate plan can make it much easier for those we leave behind.

If you have a blended family or assets across multiple states, professional assistance is especially helpful. If you think a trust might be necessary, you will certainly need to have an attorney to establish one. If you are looking for an attorney that practices estate planning law in your area, a great resource is your local estate planning council: http://www.naepc.org/. Also consider looking into whether your employer offers a legal assistance benefit.

Do you feel your situation does not merit hiring an attorney? Then it can make sense to find a tool to help you put a will in place. Websites like nolo.com offer wills which conform to the laws of your state.

When do you need to hire a tax professional?

If you are filing a 1040EZ or you are not claiming deductions beyond your home and your kids then using tax software will typically do a good job of filing your taxes at a minimal cost. There are cases when a software program may not be the right fit though. If you own a small business, collect income from rental property or if you are settling an estate, hiring a certified public accountant or an enrolled agent can be a very prudent investment.

If you are going to pay someone to help you, hiring a CPA, EA or an attorney would be preferable because they can speak to the IRS on your behalf if you are ever audited. Not only can these professionals help you file your taxes, but they can also give you advice regarding how to run your business to take maximum advantage of the tax rules. The IRS actually offers a site to find qualified professionals in your area: https://www.irs.gov/tax-professionals/choosing-a-tax-professional

When should you work with  a mortgages or insurance broker?

From personal experience, I can suggest the more “plain vanilla” your circumstance is the more likely you can save some time and money online, but the more complex your circumstances are, the better off you may be with a seasoned professional. What is not “plain vanilla?” In the case of life, disability, and long term care insurance, if you have a health condition that could be viewed as negative or uncommon, it may pay to talk to an insurance broker. They can point you to the right companies that will insure you in spite of that condition. In the case of a mortgage, if you have some instances which merit explaining on your credit report, it may pay to have a mortgage broker shop and find the bank or mortgage company that would look more favorably on your situation.

Knowing whether to hire someone or DIY can be tricky. Hopefully this gives you an idea of when to call someone. Otherwise, you may experience your own #failmomentoftheday.

 

Do you have a question you’d like answered on the blog? Please email me at [email protected]. You can follow me on the blog by signing up here, and on Twitter @cynthiameyer_FF.

 

Returning to Work After a Career Break

October 17, 2016

Have you had a break in your career and are ready to return to the workforce, or perhaps you are considering taking time away from your work but worried about how you’ll jump back in when you are ready? Many career breaks are voluntary, with workers choosing to stay home to raise children, take a sabbatical or pursue an entrepreneurial idea. Others are involuntary, due to a serious injury or illness, caring for a family member or an extended period of unemployment.

Plan for your return

Ideally, you should plan for your career reentry before your break begins. In 2005, I left my financial planning practice at a global financial services firm to accompany my husband on an overseas assignment and stay home with my baby daughter.  Before I even left, I planned for my return, intending to add to my financial designations and teach financial education workshops while I was away.

My absence from the corporate world lasted longer than I originally planned due to the arrival of my youngest son! In the meantime, I worked on improving my skills, invested in rental properties and taught part-time before returning full force. Return-to-work organization iRelaunch profiles hundreds of success stories on its website of men and women who returned to the workforce after different types of career breaks.

It’s not just about your professional standing. It’s also about your financial security. According to Financial Finesse’s 2016 Gender Gap in Financial Wellness Research, women who take career breaks face shortfalls of up to $1.3 million dollars more in retirement than women who don’t. Women can plan for a career break by saving more during the years when they are fully in the workforce. For example, a retirement savings rate of 25 percent can fully offset the negative financial effects of an early career break.

Evaluate your relaunch path

If everything worked out exactly the way you wanted it to, would you return to the work you did before or change your career path? Do you want to work full time or part time? Is flexibility important? Is it more valuable to you to return to a corporate job with great benefits or to pursue consulting or entrepreneurship?

For me, I first returned to work with more flexible self-employment and teaching. I then chose Financial Finesse, where I could work from home most of the time, a helpful bonus as a working parent of school age children. Before I decided on Financial Finesse, I worked with a coach to clarify my professional goals and weigh the pros and cons of the different paths I was considering.

Update your professional profile

Consider using a professional resume writer to craft your resume and update your LinkedIn profile. Think of this as the equivalent to painting walls and staging your home before you put it on the market. A blockbuster resume is worth the investment.

A professional resume writer can position your skills and your interim experiences in a way that is most appealing to employers. I followed the guidance in Back on the Career Track, by iRelaunch co-founder and CEO Carol Fishman Cohen and Vivian Steir Rabin, in being upfront about my career break and included a brief statement about it in my resume objective. It’s also a good idea to get a professional photo taken for your LinkedIn profile. Depending on your field, it may be important to have a professional presence via a website or other social media too.

Stay current and improve professional skills – especially technology

Understand that missing years in your employment history make a potential employer wonder if you have the current skills needed for the job. In order to reenter the workforce with hope of making a salary similar to when you went on break, it is imperative that you improve your professional skills during your time away. If you have licenses or professional credentials, maintain them in good standing. While you are on career break, work to improve your skills in your field through continuing education. if feasible. During the years when I was home with my kids, I earned the very challenging Chartered Financial Analyst designation, as well as maintained my financial planning designations and kept up with trends in financial planning.

Don’t forget to stay current on technology. I had migrated to a Mac and had to re-acclimate to a Windows environment. Consider updating your technology skills by taking a course at a local community college or though an online learning portal such as Lynda.com.

Build your personal network

Social media, especially LinkedIn, can help build your connections but don’t forget the value of in-person networking in your job hunt. Connect with former professional colleagues, attend conferences and join professional and business organizations. Sending your resume in response to ads won’t be nearly as effective as reaching out to your network for ideas. If you are considering a career break but haven’t started yet, don’t forget to keep in touch with colleagues and to build your networking (and resume) through volunteer activities. You may also consider a “returnship,” a program similar to an internship for experienced professionals.

Have you returned to work after an extended absence? How was your experience? Let me know by emailing me at [email protected] or tweet me @cynthiameyer_FF.

 

Don’t Ignore Your Symptoms

October 10, 2016

“…the upside of painful knowledge is so much greater than the downside of blissful ignorance.”― Sheryl Sandberg

Do you ever get that nagging feeling that something isn’t right with your finances? Should you brush it off or dive deeper? On the blog today, my fellow planner Cyrus Purnell, CFP writes an intriguing guest post about the importance of not ignoring your financial symptoms:

Are you getting that nudge that things are not working the way they should in your finances? Don’t wait until a problem shows in your credit report or as a shortage in your checking account. Take the time now to diagnose where that nagging feeling is coming from.

I came into 2016 not feeling my best. I was tired all of the time. I was always cranky. My kids were walking on eggshells. I was sick more often.

I went in for my annual physical and there was no sign of anything wrong in all of my tests. But the way I felt told me something was wrong. When I would talk to my doctor and peers about it, their answer was pretty simple, “Oh Cyrus, you are just getting older.”

Thankfully, that answer was not good enough for me. I took steps to investigate why I was not feeling well. I began looking into everything from what I was eating to what time of day I was eating it. I started tracking my sleep. I plunged into reading blogs and listening to podcasts about health.

I finally figured out the culprits and gradually felt several years younger. I am convinced that if I stayed on the road I was on, the way I felt would eventually show up in the form of a bad diagnosis. While I did not enjoy feeling the way I was feeling, the discomfort probably saved me a lifetime of issues.

On paper, you may not be financially sick. Your income may be more than your bills, your credit score may qualify you for anything you want to purchase and when you compare your financial situation with your friends and family, your circumstances may look fine. In spite of all of this, you may still have anxiety about where you are financially. You may be experiencing financial stress.

In our own 2016 Financial Stress Research, we uncovered that 85% of us are experiencing some financial stress. Our research also showed that unmanaged financial stress can result in problems like depression, hours of lost sleep, and overeating. It is at the onset of financial stress, before it becomes unmanageable, that you want to take steps to do something about it. You can start to alleviate financial stress by taking a C.A.L.M.™ approach to cash management:

Create a plan. Create a new plan to manage your cash, calculating necessary expenses and establishing a way to track them. A financial coach, such as a CERTIFIED FINANCIAL PLANNER™ professional, a financial or credit counselor, or an employee assistance program counselor, can provide assistance as needed.

Automate bill payment and savings. Put everything you can on autopilot, setting up automatic bill payments for monthly expenses and transfers to emergency and other savings.

Lower nonessential spending and debt. Track expenses for several months, looking for opportunities to reduce spending on nonessential items and to make extra payments on debt.

Make progress. Make progress by focusing on small, achievable goals, accomplishing one before moving on to the next.

Don’t ignore your symptoms. Look at the early stages of financial stress as a gift. By paying attention to the early discomfort of financial stress and following the C.A.L.M. approach, you can meet the source of your financial stress head on and save yourself from a more difficult recovery down the line.

Do you have a question you’d like answered on the blog? Please email me at [email protected]. You can follow me on the blog by signing up here and on Twitter at @cynthiameyer_FF.

 

Sometimes It Does Take a Rocket Scientist

October 03, 2016

Portia Jackson believes that people should be able to design their finances around their lives and not their lives around their finances. A business strategy coach and former rocket scientist who is studying financial planning, Portia joined our team this year for a long term financial planning internship. I recently had a fascinating conversation with her about her world view and why she is pursuing her CFP® designation. The future for this mother and financial wellness evangelist looks bright!

Why did you become a personal coach? What influenced your decision to pursue the CFP® designation? How do you see combining those two paths?

I became a business strategy coach after many of my original podcast listeners (I used to host a podcast for working moms, Working Motherhood) kept emailing me and asking me how I was able to run a business, work full-time and manage my family, including a daughter with special needs. I loved my podcast and it gave me fulfillment, but as I started working with the members of the Working Motherhood, I realized I LOVED coaching so much more! I get to help people see an immediate difference in their lives? Yes, please!

I decided to pursue the CFP® designation after teaching a workshop course on tackling debt for many years. I loved the impact I was making on people’s lives and seeing the weight lifted off their shoulders after they realized they wouldn’t be in debt forever made my heart sing. I wanted that feeling all day every day so I decided to change careers and become a financial planner. I also wanted to do it right so I knew I had to be a CFP® professional. The two paths easily combine because I believe the combination of a solid financial plan (i.e. 6 months emergency fund, zero debt, fully-funded retirement and college plans, home ownership, estate plan, tax minimization and proper insurance coverage) with working at something you love to do is a complete path to financial wellness.

How does your background as an engineer influence your financial planning and personal coaching style?

My engineering background helps me as a financial planner and coach because I’m very data-driven. I work off of action, not just “what could happen.” If something isn’t working, I can course-correct. Planning a launch of a billion-dollar rocket and launching someone’s business or retirement plan are both very important so I use my strategic background to reduce some of the uncertainty that can surround those areas.

What’s your personal mission? Who do you most want to help?

My personal mission is to free people from financial stress and bondage so they can then pursue their personal mission in life. I feel that many times the amount of energy people put into worrying about money (even if they are doing everything “right”) can be put toward their personal calling in life. I believe everyone has a specific purpose in life and that purpose often goes unfulfilled because they are stuck in a job they dislike just to pay the bills and then they are too exhausted to do anything else or sometimes people are doing everything right and still can’t afford a decent lifestyle.

They aren’t trying to keep up with the Joneses. They just want to be able to own a home, have insurance, travel maybe 1-2 times a year and send their kids to college. In an expensive place like Los Angeles, that can easily add up to a lot.

What is the biggest mistake you ever made with your money, and what did you learn from it?

The biggest mistake I’ve ever made with money was buying a rental property at the age of 23 in a bad neighborhood with no money down in 2005 in Chicago right before I moved to Los Angeles for grad school. I really don’t know what I was thinking when that happened. Actually, I do. I was focused only on the POTENTIAL cash flow. Those late night real estate ads were apparently very convincing to me.

The property was a big pain the butt. It sucked up all of the money I won from a game show I was on and commercials I booked while I worked in Los Angeles. It also caused a LOT of stress for me during what should have been one of the most exciting times in my life.

What have you learned about money and marriage that you can teach the rest of us?

I’ve learned that communication is key and that understanding each other’s personality types is really important when it comes to family finances. My husband and I have monthly financial meetings, where we review our budget, our net worth statement, our financial goals and the financial mission statement we’ve written for our family. I’m the CFO of our family and while I can typically recite the budget down to the penny, he is the bigger visionary and wants to see where we are going.

When you got married and had children, did you feel prepared to deal with the financial aspects of partnership and parenthood? What do you wish you had known in advance?

We felt pretty prepared going into marriage because financial planning was part of the two pre-marital classes we took. (We like to be thorough, haha.) When our kids came (very soon actually, we had a honeymoon baby) it wasn’t too much of a disruption to our budget, although the budget for sending kids to daycare could feed a small country for a while.

How do you teach your kids about money?

Our kids are just 4 and 2 right now so we haven’t really had the money discussion yet, but we plan to use the envelope method that I used growing up — one envelope for giving, one for saving and one for spending. They will earn money through chores as they will not receive an allowance. As parents, we believe that we are to be mentors to our kids and train them for the real world and in the real world, there are very few handouts.

Is there anything that really surprised you about coming to intern at Financial Finesse?  Why?

Yes, I was surprised that workplace financial wellness as a type of  business actually existed. When I was searching for a place to complete my required experience hours for the CFP® designation, I came across many opportunities to sell products or gather assets, but I never heard anyone lead with the benefit of changing lives and offering unbiased financial guidance with no ulterior motive or sales pitch, which is what we do at Financial Finesse. The passion that everyone has here for helping people and for extending this vision to more people is truly amazing and a rare jewel in the financial services industry. Unlike in my brief wire house days of seeing people get excited to close a sale, people at Financial Finesse are excited about a great Financial Helpline call or one-on-one planning session.

Do you have a question you’d like answered on the blog? Please email me at [email protected]. You can also follow me on the blog by signing up here, and on Twitter at @cynthiameyer_FF.

 

 

How to Calculate the Value of Your Benefits

September 26, 2016

Are you overlooking the real value of your benefits when you think about your compensation? According to the Bureau of Labor Statistics, benefits accounted for 31.4 percent of employer paid compensation for U.S. workers  in June 2016, with salary making up the other 68.6 percent. It’s “open enrollment” season, the time of year when employees make decisions about their health insurance and other employee benefits for the upcoming year. While you’re weighing your options, it’s a good time to practice some benefits appreciation.  One way to do this is to estimate how much the benefits you choose are worth to you:

Health Insurance (typically $5,000 – $30,000)  – Your health insurance is a significant component of your benefits.  How can you value what your employer contributes for you and your family, as well as the discount you receive on coverage for participating in a large group plan? According to the 2016 Milliman Medical Index, the cost of healthcare for a typical American family of four covered by an average employer-sponsored preferred provider organization (PPO) plan is $25,826, with employers typically picking up 57% of the cost. That means that participation in their company sponsored health care plan is worth at least $14,721 for that typical family at the typical employer. Of course your insurance costs may be different, and your  employer may subsidize more or less of that.

More and more employers are also offering high deductible health plans in conjunction with a health savings account (HSA). In many cases, they’re contributing to the employee’s HSA as well. HSAs are a widely misunderstood and underrated benefit, and if you fully utilize your HSA, the long term tax advantages can be a benefit to you in retirement.

Retirement Plan (typically 3-6 percent of your salary in matching contributions) – While companies aren’t required to make matching contributions to what employees save for retirement, most companies with employer-sponsored 401(k) plans are offering this benefit. According to the Society for Human Resource Management (SHRM), 42% match employee contributions dollar for dollar up to a certain amount. 56 percent of companies require workers to save 6 percent or more in order to receive the full employer-matching contribution.

There’s also the value of having an employer-sponsored retirement plan in the first place. If you don’t have one as an employee, you won’t be able to save as much for retirement in tax-advantaged accounts. The consequence: employees without a work-sponsored retirement plan are far less likely to save for retirement. In fact, according to the National Institute on Retirement Security, 45% of working age households in the U.S. have zero retirement account savings.

Stock Purchase Plan (typically 10 to 15 percent of market value per share purchased) – In a typical stock purchase plan, the employer offers employees the opportunity, but not the  obligation, to purchase publicly traded company stock at a discount from the market value.

Disability Insurance ($2,000 to $5,000 per year) – Premiums for insurance that replaces a portion of your income if you can’t work due to a non-work related illness or injury can be paid for by the employer, employee or both. Purchasing this insurance as individual policies would be quite expensive. Group policies are much less expense per covered employee, so even if you’re paying some or all of the premiums yourself, you’re getting a good deal. That is if you have access at all. According to the Bureau of Labor statistics only 25 percent of U.S. employees have access to both short and long term disability insurance benefits through their employer.

Life Insurance ($250 to $500 per year) – Many large employers cover their employees with term life insurance at one times their annual salary. Supplemental term coverage is often available for a low, additional cost.

Employer Contribution to FICA (7.65 percent of salary) – What is FICA and why does it get so much money from my paycheck?! FICA stands for Federal Insurance Contribution Act, e.g., Social Security and Medicare, and your employer pays just as much as you do towards both programs.  The employer contribution adds up to total of 7.65 percent of your salary and bonus. When you are retired and draw Social Security and utilize Medicare for health insurance, know that your employers were partners in getting you there.

Unemployment Insurance (0.3 – 1.5 percent of salary) – Under the Federal Unemployment Tax Act (FUTA), employers pay your unemployment insurance, not you, as well as most states. If you lose your job through no fault of your own, and you meet your state’s requirements, you can file for unemployment benefits for some period of time (which varies by state). Like all types of catastrophic insurance, you hope you won’t have to file a claim – but it’s comforting to know that it’s there if you need it.

Other great benefits –  Your company may offer other benefits such as tuition reimbursement, pre-paid legal assistance, commuter benefits, health and wellness programs, access to group long term care insurance, etc. Before you make decisions during open enrollment, check and see if your company has a workplace financial wellness program. That is the benefit which helps you understand all your other benefits.

Do you have a question about workplace benefits? Please email me at [email protected]. You can also follow me on Twitter @cynthiameyer_FF.

 

Why You Should Roll Your 401(k) to Your New Employer

September 19, 2016

When changing jobs, what should you do with your employer-sponsored retirement account balance? Our blog editor,  Erik Carter, JD, CFP®, recently wrote a post titled What Should You Do With That Old Retirement Plan, in which he stated that if he left an employer, he would be very likely to roll over his retirement account balance to an IRA in order to have access to more investment choices. Erik outlined a job-changing employee’s four options: 1) leave the money in the former employer’s plan, 2) cash out your account, 3) roll over your balance to a new employer or to an individual IRA or 4) purchase an immediate income annuity (if it’s a feature of your former plan.)

Option 3, rolling over your balance, is by far the preferable choice for the large majority of retirement savers. For most people, it may make more sense to roll their retirement plan balance to their new employer’s plan rather than an IRA. Here’s why:

Lower Fees

Many 401(k) plans offer participants access to institutional share class mutual funds and very low cost index funds, especially those sponsored by large employers. Conversely, investing in your IRA can get expensive if you aren’t careful to monitor the mutual fund fees, trading costs and account fees. Before you make your distribution decision, compare and contrast the fees for all your options, including leaving your account with your previous employer, rolling your balance to an IRA and rolling it to your new employer. Not sure which option offers you the lowest cost of investing, given the type of investments your want to choose? Use FINRA’s free mutual fund fee analyzer tool.

Keep it Simple

While it’s true that there is a broader universe of investment options in a self-directed IRA account at a brokerage firm or mutual fund company than in your workplace retirement plan, many investors don’t need or want that kind of customization in their investment strategy. Keeping your retirement plan balances in one place allows you to see at a glance the investment mix of your retirement savings and how much you’ve saved simply by logging on to one site. If you’re a more “hands-off” investor, a target date fund in your plan with a date near your target retirement can offer you an easy, diversified, one-stop-shopping investment strategy.

Protection Against Lawsuits

Balances in retirement plans, such as 401(ks), are protected against civil judgments and bankruptcy. (But if you owe taxes, your 401(k) assets can be seized to settle the tax debt – and you’ll have to pay more taxes and a 10% penalty if you take an early withdrawal to settle the bill.) The higher your income and/or net worth, the more important it is to consider this factor. However, depending on where you live, your state may not extend that protection to IRAs.

Borrowing Power

Many 401(k) plans permit participants to borrow from their plan assets at a very low rate of interest. If you roll your old plan into your new plan, you’ll have a bigger base of assets against which to borrow. (A common borrowing limit is 50% of your vested balance up to $50,000, but check with your plan administrator for the specifics of your plan.)

While the disadvantages usually outweigh the advantages in borrowing against your retirement plan, there are times when it may make sense, such as preventing eviction, foreclosure or auto repossession, paying off very high interest debt or putting 20% down on a home purchase to avoid PMI. Keep in mind that you’ll repay the loan with after-tax dollars so you’ll end up being double-taxed on the interest when you eventually withdraw it, and those funds won’t have access to market performance during the loan repayment period. Also, if you leave your company for any reason before the loan is repaid, your unpaid balance becomes a taxable retirement plan distribution, subject to a 10% penalty.

Workplace Financial Guidance

More and more companies are offering workplace financial wellness programs, where financial education and guidance are offered to employees as an employer-paid benefit. Can you attend a workshop or webcast, use an online learning resource or work one-on-one with a financial coach? More 401(k) plan sponsors also offer access to robo advice, where an online investment adviser service sets your investment mix based on your risk tolerance and time horizon and regularly re-balances your portfolio.

How about you? What do you think is a better idea: rolling an old retirement plan into an IRA or into your next employer’s plan? Email me at [email protected] or let me know on Twitter @cynthiameyer_FF.

 

 

How to Teach Financial Adulthood

September 12, 2016

Sex education is required in public schools – and financial education should be as well, wrote CNN journalist Heather Long in a popular article recently. “The American Dream isn’t possible without understanding how to save, invest and use debt wisely,” she noted, “Yet we mostly leave it up to people to figure what to do with their money on their own.” Certainly anyone who’s tried to figure out what health insurance plan is best for them, is struggling with paying off student loans or saving for retirement, or tried to decipher the fine print of a credit card disclosure can attest that they were less than ideally prepared for the labyrinth of modern financial decisions.

While Long isn’t the first person to write about this important issue, the fact that she conflated money and sex ed helps raise the profile of an essential debate. Whose responsibility is it to provide financial education – schools, parents or both? What are the essential financial skills needed for adulthood?

Long writes that, “The reality is rich kids tend to be a lot more financially literate than working class kids. Wealthy kids learn about money at home — or at their private schools. Poor kids do not. It’s yet another reminder why the “friends and family” plan to learn about money is so flawed.”

I think she’s painted way too rosy of a picture. Most Americans, regardless of economic status, feel underprepared to navigate the complexity of financial responsibilities they must shoulder in the 21st century economy. As a nation, we are still a long way from having some kind of uniform financial education that builds financial capability and prepares kids for the economic realities of adulthood. The Common Core state standards adopted by 42 states do not specifically incorporate financial literacy (although certain math standards do have practical applications).

If you’ve got kids, you cannot afford to wait while society tries to figure this out in terms of public policy. The financial and economic world is only becoming more complex. What can parents do right now to promote financial education at school at and home?

Understand what it means to be financially literate

The non-profit Council for Economic Education has developed National Standards for Financial Literacy, a framework for teaching personal finance in kindergarten through 12th grade. The idea is that a young adult who has mastered these elements has a much better chance of making solid decisions about money and to understand the trade-offs between different choices they will face in their financial lives. The standards cover the basics of:

  • Earning Income
  • Buying Goods and Services
  • Using Credit
  • Saving
  • Financial Investing
  • Protecting and Insuring

The CEE has created lessons teachers can use in the classroom. However, you don’t have to be a classroom teacher to benefit from reading and understanding these standards. Parents can download the standards here and use them as a guide for evaluating your children’s financial capabilities and pinpointing where they could use some extra learning opportunities. Additionally, share them with your school principal and your children’s teachers, including the CEE’s suggestions on learning exercises by grade, which correspond to Common Core standards for language arts and math.

Chances are, if you are reading a financial wellness blog, you already have a good handle on the six categories contained in the standards. However, if you find that some are trouble spots for you, consider putting some attention into improving your own financial literacy. The best place to start is your employer, which may have a workplace financial wellness and/or retirement planning education program that you can participate in with workshops, webcasts, online resources and/or one-on-one coaching. There has never been a better time in history to be a student of personal finance. Free resources are everywhere, including helpful personal finance education sites like the AICPA’s Feed the Pig, FINRA’s The Alert Investor and the Khan Academy, just to name a few.

Don’t assume school-based financial education is enough

According to the CEE’s 2016 Survey of the States, only 17 of 50 states have mandated personal financial education courses for high school students, and only 5 of them require at least a semester of personal finance basics. That’s not nearly enough. Entering adulthood without adequate financial education can often lead to unwanted debt and overwhelming financial stress. According to Financial Finesse’s 2016 Financial Stress Research, 85 percent of employees surveyed reported some level of financial stress, and one in four (25 percent) reported experiencing unmanageable (high or overwhelming) financial stress levels.

Just like with sex education, the best way to communicate financial information to your children is to share your values in an age-appropriate way. This is something that should happen throughout your child’s growing up years. Be open about the financial decisions you make every day and spend time as a family talking about money and the economy. As a basic guide, try New York Times’ columnist Ron Lieber’s book about raising financially savvy kids, The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous and Smart About Money. There are also many online resources with age-appropriate personal financial games and lessons, such as kids.gov, the Consumer Financial Protection Bureau’s Money As You Grow and practicalmoneyskills.com.

Does your school district have a financial education program? If yes, what do you think of it? Email me at [email protected] or follow me on Twitter @cynthiameyer_FF.

 

Happy Labor Day!

September 05, 2016

According to the U.S. Bureau of Labor Statistics, there are about 151.6 million Americans in the workforce and another 7.8 million who are actively seeking a job. There are an additional 29% of mothers who provide valuable unpaid work caring for children and family. We salute your efforts and contributions to our nation with gratitude. Happy Labor Day!

Are HSAs Still a Good Deal?

August 29, 2016

A few years ago, my colleague Greg Ward wrote a blog post called Why I Max Out My Health Savings Account (And You Should Too). In the past, health savings account (HSA) eligible health plans were a lot less expensive than their traditional counterparts, but premiums for HSA-eligible plans have recently gone up, and as a result, the difference in the premiums is not always as great as it was in the past. This has caused some readers to question whether or not Greg still believes the HSA is a good deal. Here is his response to a recent inquiry he received regarding this issue:

The reader writes:

“I’m really struggling to understand all of this. You have to have an HSA insurance plan to have the HSA, but the premiums and deductible are still really high and it doesn’t cover very much so I feel like I’m missing something. Also, are you still suggesting that we max out our contributions to the HSA but then not use the money for qualified expenses or are you incurring the expenses and then having them reimbursed later? It seems that a person will have to be a meticulous record keeper or it just won’t work…or you’ll get audited…or penalized. Am I right to be this worried??”

Here’s my response:

Hi [Reader],

Thanks for your comments. It is true that you must be enrolled in a high-deductible plan in order to be eligible to contribute to a health savings account (HSA). In general, the higher the deductible, the lower the premium, so while your premiums for a high-deductible plan may seem “really high,” they should still be less than their lower-deductible alternatives. Since the participant bears more of the financial responsibility under a high-deductible plan, they are more appropriate for healthy families that do not incur a lot of out-of-pocket expenses for healthcare services.

For example, let’s say my HSA-eligible plan costs $600 a month and my traditional plan costs $1,000 a month. If I incur $3,000 of out-of-pocket expenses for the year, my total cost under the HSA-eligible plan would be $10,200 versus $12,000 under my traditional plan (assuming the traditional plan covered the $3,000 of out-of-pocket expenses). The less I incur in out-of-pocket expenses, the greater the savings under the HSA-eligible plan (and vice versa).

Since my need for healthcare services will likely be greater in the future, such as in retirement, I choose not to use my HSA funds for current healthcare expenditures. That way I can invest the money so that I have more of it in the future. As long as you are not using the funds for unintended purposes, you probably don’t need to worry about an audit or penalty.

I hope that gives you more confidence to use the HSA if you’re eligible, but don’t let the HSA tail wag the health insurance dog. You should choose your health insurance based on your anticipated need for services. If you have an ongoing need for health care that will meet or exceed your deductible under an HSA-eligible plan, then a traditional plan may be more appropriate.

As you can see, I still believe in the HSA. I recognize that with premium disparity, the decision may not be as cut and dry as it’s been in the past. That said, if you (and your family) are healthy, and you feel comfortable investing your HSA dollars for future healthcare expenditures, I strongly believe in the value of this health insurance option.

Managing the High Costs of Your Children’s Sports

August 22, 2016

All over the country during this back-to-school season, American parents are stocking up on school supplies – and on expensive sports equipment and team registration fees. Some are parents of gifted athletes who dream of athletic scholarships. Others just want to give their children the many benefits of regular physical activities or team camaraderie.

As more and more school districts charge families for participation in after school athletic activities, parents find themselves on the hook for an average of $671 annually. In fact, a recent TD Ameritrade survey found that one in five parents spends more than $1000 per child a month on sports activities. What are the consequences? According to the survey, many sports parents are showing greater commitment to their kids’ sports than to their own financial wellbeing:

One third do not contribute regularly to a retirement account;

19 percent have incurred credit card debt from sports costs; and

17 percent plan to work longer or delay retirement.

If you don’t have sports-age kids, it could seem a little nuts! I can tell you from personal experience it adds up. I’ve got one child who plays ice hockey and the other who is on an acrobatic dance team. Both take ice skating lessons.

The participation and lesson fees alone are more than $300 per month. That doesn’t include uniforms, costumes or equipment. However, we manage to keep the costs manageable by doing a few things:

You Can’t Be on Every Team

My kids are 8 and 12. They enjoy their sports, but it’s not reasonable that they play on multiple teams during any given season. Each child gets to pick one team and one additional type of lesson/activity per school term. If they choose a different activity, an existing one has to go.

For example, my son toyed with the idea of playing football this fall. We gave him the choice of sticking with hockey, which he plays now, or trying football for the season. He thought about it and decided to stick with hockey, but it was his choice.

Sports Consignment Shopping

Bats, sticks, pads, helmets, skates, cleats, etc. – all these things can be found used for less than half the cost. There is absolutely no reason to buy most kids’ sports equipment new anyway. Kids outgrow their sports equipment quickly.

Seek out sports consignment shops for big discounts on equipment and clothing. This can save you $500-1000 per season if your child plays an equipment-intensive sport such as football or hockey. When your child grows out of them halfway through the year, trade them in for store credit on a bigger size.

Swap with Friends

No sports consignment shop in your area? Set up your own sports gear swap event with friends or with your schools’ parents association. Each participant who brings an item gets to swap for another item to bring home. See instructions here.  Alternatively, you could set up a “replay” event at school, where you solicit donations of sports gear and then sell them inexpensively, with proceeds going to the team or the school association.

Seek School and Community-Based Options

While the travel baseball team may be right for your baseball-obsessed child who throws a mean curve ball, they can be very expensive. Fortunately, there are other options. For most kids, a local school team or recreational sports sponsored by community organizations like the YMCA offer a balance of learning, competition and reasonable cost.

Volunteer

Giving your time can help defray some costs and is a great way to share your child’s sports experience. You could coach, administer or help raise money for your child’s team. For example, my daughter’s YMCA dance team holds fundraising events throughout the year, which defray most of the costs of their competition entry fees (which would otherwise be close to $1000 per dancer). By volunteering at various events, the dance parents work together to make the program affordable for all the dancers.

Pick a Cheaper Sport?

It’s understandable that the parents of the more than 45 million American children who play sports want their children to succeed at their chosen game. We want our children to pick the activities they love to do and to have fun and grow as people doing them. However, if your child is aiming for a sport which requires a lot of equipment or expensive lessons, make sure it’s something they really, really want to do. If it’s just physical activity they require, consider an organized sport that requires less equipment.

How about you? How much do you spend on your children’s sports? Email me at [email protected] or tweet me at @cynthiameyer_FF.

Do You Know the Real Costs of Home Ownership?

August 15, 2016

How much does owning a home really cost? It’s more than you think it will. Owning a home requires more financial resources than just paying the mortgage. You must be prepared to make an ongoing investment in the care of your home. If you are thinking of buying a home or just want to plan better for the costs of keeping up your property, take this quiz to test your home ownership savvy:

1. What kind of damage does a standard homeowner’s insurance policy cover?

a) sewer back up

b) flood

c) termites

d) none of the above

Answer: d  Homeowner’s insurance is designed to cover events that are sudden and accidental, not things that could be prevented with routine maintenance, such as pest control or inspecting a sewer line for tree roots. In addition, standard homeowner’s insurance policies do not cover floods, but flood insurance may be purchased from the National Flood Insurance Program. Many homeowners find this out the hard way after a problem has already occurred.

Review your homeowner’s insurance once a year to make sure you’re covered for your risks. For an additional premium of $50-$400, you may be able to add coverage for certain perils to your standard policy. If you are considering buying in a flood region, keep in mind while flood insurance averages $700 per year, premiums can be exponentially higher if you live in a very high risk area.  Make sure you keep additional cash reserves in the amount of your homeowner’s insurance deductible as part of your emergency fund.

2. The average annual cost of a home repairs and maintenance is:

a) one half of 1 percent of the home’s value

b) 1 to 4 percent of the home’s value

c) $2500

d) $1250

Answer: b  What will you do when the furnace breaks, the roof leaks or you need to replace a washing machine? Don’t forget to look at maintenance costs before leaping into home ownership. For a $250,000 property, that means budgeting $2,500 to $10,000 for home repair and maintenance costs every year.

While it’s difficult to predict what is going to need repair or replacing during the year, count on the fact that something is going to require work. Have a brand new home with new appliances? You can probably get by for the first decade by reserving 1 percent of your home’s value in liquid savings to meet repair/maintenance expenses. Got a 150 year old house? You may find that maintenance and repair costs closer to 4 percent of the home’s value per year.

3. How much more will a mortgage cost if you have fair to good, but not excellent, credit?

a) .25 to 1.5 percent more than the rate of borrowers with high credit scores

b) .25 percent less than the rate for borrowers with high credit scores

c) the same as the rate for borrowers with high credit scores

d) people with fair credit scores will find it very hard to get a mortgage

Answer: a  The average FICO score for U.S. borrowers is good but not excellent, at 695. At current rates, a borrower with that score would pay about  four tenths of a percent more than a borrower in the highest tier of credit scores. According to this calculator for a $200,000 fixed rate 30 year term mortgage, the borrower with the average FICO score would pay $15,768 more in interest over the life of the loan given current rates – about  $44 more per month. Try this mortgage loan comparison tool to compare mortgages.

4. Maintaining the land and gardens surrounding my home is likely to require regular:

a) tree trimming and removal

b) lawn care, such as buying a lawnmower and garden tools or paying a landscaping service

c) investments in plants, bushes and other garden features

d) all of the above

Answer: d  If you have outdoor space, maintaining the lawn and garden is an important component of your home’s value. Doing all the work on the lawn and garden yourself is cost effective, but it will still cost money for equipment, plants and outdoor furniture, so make sure to include that in your annual budget. If you plan to hire help, expect to pay $40-$120 per visit for landscaping and lawn care, depending on where you live and the size of your property. Tree care is not something people can usually do on their own, so if you have large trees, make sure to budget for a tree service. The cost of trimming or removing just one large tree could be as much as $500 to $1000 because of the hazards involved.

5. When buying a home, homeowners generally spend how much on furnishing their new space:

a) $15,147

b) $3,895

c) $5,288

d) $9,733

Answer:  c   According to a National Association of Home Builders study, new home buyers spent $5,288 on furniture in the first year after buying a home built in 2004 or later. Many homebuyers fail to budget for what it will take to turn their house into a home that meets their personal aesthetic. It is unrealistic to think you won’t want to make changes. Expect that you will want to personalize your new space with paint, furniture and accessories and include those costs in your home buying budget.

Do you have questions or comments about the costs of home ownership? Email me at [email protected]. You can also follow me on Twitter @cynthiameyer_FF.

 

 

The DIY Financial Checkup

August 08, 2016

When is the last time you had a financial checkup? Just like physical exams, regular financial exams lead to better overall financial health. While you can’t give yourself a thorough doctor’s exam, you can give yourself a comprehensive financial checkup with today’s abundance of useful online financial planning tools.

The first step in your diagnosis is to get all your important information organized in a central place. Some of this may be in paper form and some of it online. Gather these resources in advance so you have them on hand:

-your employee benefits such as retirement accounts, health/dental/vision insurance, disability insurance, HSA account, flexible spending accounts, commuter accounts, etc.

-the last month’s bank and brokerage account statements, including taxable accounts, IRAs and annuities

-a recent paycheck and your W4 (YTD cash flow statement if you are self-employed)

-estate planning documents, e.g., will, trust, power of attorney, healthcare directive

-additional insurance policies, e.g., homeowner’s, auto, umbrella liability, life, disability

-mortgage statement

-credit card statements, student loans, car loans, etc.

-financial plan, if you have one

-your budget, if you have one

What’s your financial position?

Pull together a summary of everything you own and everything you owe. (Download an easy net worth and budget worksheet here.) Subtract what you owe from what you own. That’s called your “net worth.”

Is your net worth positive or negative? Has it increased or decreased since the last time you calculated it and by what percentage? As my fellow planner Kelley Long says, “Your net worth is the ultimate measure of your ability to weather financial storms and maintain financial choices in life. The higher your net worth, the more financial freedom you can afford.”

Next, calculate your debt to income ratio by dividing your monthly gross pay by your total monthly recurring debt payments (mortgage, credit cards, student loans, car loans, etc.) The lower your debt to income ratio is, the better your financial position. FYI, mortgage lenders often look for a total debt to income ratio of no more than 36% of gross income.

Do you have sufficient cash reserves?

According to our 2016 Financial Stress Research, good cash management is the biggest differentiator between those workers who have no financial stress and those who have overwhelming financial stress. The foundation of cash management is a solid emergency fund to deal with inevitable unexpected events that happen to all of us. While the common guidance is to have at least three to six months in living expenses in savings or money market funds, it’s also important to make sure you have enough additional cash on hand to handle health, auto and property insurance deductibles as well as home and auto repairs. Bankrate.com has a helpful emergency savings calculator to figure out exactly how much you should keep in liquid savings. If your emergency fund could use some work, use this daily savings calculator to figure out how small savings, like $5 or $10 per day, can add up to a big cash cushion over time.

Could you survive a financial earthquake?

The purpose of insurance is to protect you and your family against catastrophic loss. The big idea behind insurance is that people pool their risks of catastrophic events. If you do suffer a loss and are adequately insured against it, you can be restored to your financial position before the loss. Do you have the insurance you need? Here are some guidelines for determining if you are sufficiently covered:

Health insurance – Everyone needs it, no excuses. If you don’t have health insurance, get it right away.

Disability income insurance – How would you pay the bills if you couldn’t work due to injury or illness? Many employers offer short and long term disability insurance. Make sure you take advantage of them during your next open enrollment period. This is particularly important if you are single or if you are the sole breadwinner in the family. To determine how much coverage you need and whether a supplemental policy is in order, use this calculator.

Life insurance – If someone else depends on your income for their living expenses, you need life insurance. There are different methods for determining how much insurance is ideal. For most people, the less expensive term insurance meets their needs. Use this calculator or download this worksheet to see if your coverage fits your situation. Subtract the coverage provided by your employer to determine what you need to purchase on your own.

Homeowner’s insurance – Per the Wall Street Journal, your homeowner’s insurance should provide enough to rebuild and furnish your home if it were wiped off the map. Does your policy reflect the current value of your home, any improvements you have made to it plus the cost to replace its contents? Basic homeowner’s policies do not cover you for things like floods and earthquakes. If those are common in your region, you may need to add specific coverage.

Renter’s insurance – Not a homeowner? When I was a young professional in Washington, D.C., my apartment was burglarized twice. Only then did I purchase renter’s insurance. Renter’s insurance covers the value of the stuff in your apartment that belongs to you like furniture, clothing and electronics. If the value of all those items exceeds the insurance deductible, consider renter’s insurance to cover your valuables.

Umbrella liability insurance – According to fellow planner Scott Spann, most people facing a judgment from civil litigation probably assume that their homeowner’s or auto policy would cover them. Low cost umbrella liability coverage provides an additional layer of protection in the case of a civil lawsuit. Consider policy coverage that is at least twice your net worth – more if you are a high earner.

Are you on track to replace 80% of your income in retirement?

Running a retirement calculator is like stepping on a scale. It is best done regularly in order to compare your results to your goal. Download our easy to use retirement estimator here.

While you may have run retirement estimates before, results can change depending on economic conditions. Review and update your assumptions about your savings rate, inflation and rate of return. For example, a recent report from McKinsey and Company suggests that investors may need to lower their sights, projecting that U.S. stock market returns over the next two decades could be between 4 and 6.5% annually.

If you’re not on track, what can you do to increase your retirement savings? Can you increase your contributions to a 401(k) or other employer-sponsored plan? Sign up for the contribution rate escalator. Contribute to a Roth or traditional IRA. According to our CEO, Liz Davidson, you can set yourself up for success by automating a process that would otherwise require a lot of effort and sacrifice.

How are you handling your taxes?

Did you get a big refund or owe a large sum on your most recent tax return? It may be time to adjust your withholding. This IRS withholding calculator can help you figure out the right number of allowances to claim.  Additionally, are you taking full advantage of tax-deferred retirement accounts, your health savings account, and flexible spending accounts? Make a list of what you need to change during your next open enrollment period.

Do your investments fit your situation?

Do you have a written plan to guide your investing decisions? If not, consider putting together an investment policy statement using this easy guide. Start by updating your risk tolerance by downloading this worksheet.

Has anything changed with your willingness or ability to take investment risk, your time horizon or your required rate of return? What about your inflation expectations or the kind of investments you are willing to make? Evaluate your current portfolio to see if it meets your updated goals and make changes if it doesn’t.

How much do your investments cost you in fees? Calculate your fees both as a flat dollar amount and as a percentage of your portfolio. Do you think you are getting your money’s worth?

Hint: if they are higher than 1%, consider changing brokerage firms or moving to lower fee alternatives such as index funds. Thinking about doing it yourself? Check out this blog post from fellow planner Erik Carter on how to save and invest on your own without getting eaten alive.

What happens to all this when you die?

Has anything changed since you first put together your estate plan? Take a look at all your retirement accounts and insurance policies and make sure your beneficiary designations reflect your current situation. Second, review your will and other estate planning documents such as a living trust, durable power of attorney, healthcare directive and guardianship provisions. Are the documents current and reflective of your wishes? What needs to be brought up-to-date?

Don’t have an estate plan? Follow these simple seven steps. Even if you do have a current estate plan, you may still need to develop a digital estate plan to express your wishes about what happens to your digital life.

Did you give yourself a financial checkup? How did it work out? Let me know by emailing me at [email protected]

Financial Planning Tips for New Stepparents

August 01, 2016

Do you have stepchildren?  If so, you’re not alone. According to the Pew Research Trust, more than four in ten Americans have at least one step-relative in their family.

Recently several of my fellow planners and I who are stepparents were talking about financial planning and step-families. One thing was clear: we love our stepchildren and can’t imagine life without them! We also agreed that getting married to someone who has children from a previous marriage requires a certain money mind shift. What should stepparents expect? How can new partners set themselves up for a harmonious and prosperous financial relationship?

Full Financial Disclosure

A Money magazine poll found 80% of married couples with children under 18 argue about money. Take this very seriously. Frequent arguments about money are a top predictor of divorce.

This can get even more complicated when there are factors such as child support, alimony, or divorce-related credit issues that accompany one or both spouses into remarriage. Accept upfront that this will add a level of complexity to the financial side of your relationship. Set some parameters during your engagement for how you will communicate about money and make financial decisions.

One of the best ways to head off financial discord is for each partner to lay all their financial cards on the table before tying the knot. Have a “full financial disclosure policy” in your relationship, which includes sharing and discussing what you own, what you owe, your credit reports, any ongoing financial obligations and any pending legal or financial problems – before you get married. To minimize conflict, fellow planner Kelley Long suggests couples set up a money meeting to explore each other’s beliefs and attitudes about money and how you’ll communicate about them when you disagree.

Managing Combined Cash Flow

Discuss in advance how you’ll pay for ongoing living expenses. An easy way to handle this is the “yours, mine and ours” method of budgeting. Make a spending plan for all your anticipated joint expenses such as housing, transportation, insurance, food, vacations, etc.

Decide how much each spouse will contribute from their income, net of retirement savings, to a joint account to cover joint expenditures. You keep what’s leftover in your individual accounts to handle as desired. If there are big disparities in income, consider having each spouse contribute proportionate to their income.  .

They’re Your Kids Now Too

If only one spouse has obligations from a previous marriage, this can be a trouble spot, so work out in advance whether you agree that child support, tuition and other kid-related expenses are part of your couple budget or the biological parent’s individual budget. I favor the first approach. In my relationship, we’ve always agreed that all child-related expenses for all the children are part of our joint budget and we discuss them like any other financial decision.

Fellow planner and stepparent Tania Brown agrees. “When you marry, it’s not his or her child’s expenses. It’s both of your expenses. Although blended you are one family.”

“Consider each child in your household, regardless of who the actual parent is, as YOUR CHILD,” counsels fellow planner Paul Wannemacher. “Do all you can to treat each child equally as possible and love them as your own. Financial considerations should never, ever be the determining factor affecting that love and commitment.”

Create a New Financial Plan

Going through the financial planning process together will help you and your new spouse reach consensus on your goals and how you will work to achieve them. The financial planning process allows you to identify financial priorities such as saving for retirement, buying a new home, paying for college or helping an aging parent, as well as steps you can take to get there. Retirement and college goals often look very different after going through divorce and remarriage. A CERTIFIED FINANCIAL PLANNER™ professional can broach difficult topics, facilitate discussions and help you reach agreement on a unified vision for your financial health as a blended family.

Redo Your Estate Plan

Our director of planner operations, Linda Robertson, encourages new stepparents to update their estate plans. New spouses should update wills, beneficiaries and trusts as many concerns can be addressed through good estate planning. She proposed that couples in good health consider life insurance to even out estate planning needs between children. “A spouse who is the joint owner or primary beneficiary on most of the marital assets could set their partner up with a decent life insurance policy that is split between his/her children so they don’t feel as if the stepparent is taking everything if their parent passes away first” said Robertson. Stepparents could also consider adding stepchildren as the contingent beneficiaries on their retirement accounts.

Keep Separate Assets Separate

Whether or not you have a pre-nuptial agreement, consider keeping assets you each acquired before your marriage in separate accounts. This is particularly important where there is divorce-related conflict with an ex-spouse. For the stepparent, this helps safeguard your separate property from inadvertent loss in case of a legal dispute arising from your partner’s previous divorce

How about you? Do you have any other financial planning tips for stepparents? Please share them via email at [email protected] or tweet me @cynthiameyer_FF.