3 Financial Tips For NFL Draft Picks

April 26, 2019

I love the NFL draft! Admittedly I’m a huge football fan so it’s a chance to geek out on all things football for days, but it’s more than that. The pure joy and excitement those guys show when their name is called and they get to walk across the stage, knowing that their dreams have come true really gets me – I just love it.

It makes me so happy for all of those guys (except maybe the ones drafted by the Patriots). OK, even the guys drafted by the Patriots – as a Chiefs fan, I can even concede that.

What we tell all the new draft picks

As the Financial Wellness partner of the NFL Players Association as well as the Players Trust (which is powered by the NFLPA for qualified former players), I look forward to getting a chance to be a financial coach to some of these guys. Before they head to their first rookie mini camp, I’d like to offer these three tips for all of those players getting the chance to live out their dreams in the NFL:

Go Beast Mode

Two of the greatest players of this generation are Marshawn Lynch (aka “Beast Mode”) and Rob Gronkowski (“Gronk”). They have more in common than just Super Bowl rings – they both saved every penny they earned in the NFL! Beast Mode and Gronk lived off of their endorsements while they were playing and were able to save all of their take home pay from the NFL. That has set them up for total financial freedom now that they’ve retired.

If you get some endorsement opportunities, maybe you can do this too, but even if you don’t, you can still practice this in spirit by banking your signing bonus – or at least half of it – then set your life up to live below your means with your salary.

Former Lions player Ryan Broyles is a great example of what that means: he gave himself an allowance of $5,000 per month, then saved the rest. Vikings QB Kirk Cousins had similar habits and basically set his family up for life by driving a used car and keeping his housing costs down.

In other words, you don’t have to spend everything you’re making to enjoy a baller quality of life – make a plan right now to bank as much of your salary as you can and I promise you won’t regret it.

You can have anything, but you can’t have everything

This is one of my favorite quotes from my good friend Dana. What she means is that it is perfectly OK to spend some of your money on things you enjoy, but make it something that really matters to you and don’t blow it all trying to have it all. If you love cars, then getting a nice ride may be a good reward to yourself, but that probably means you won’t be able to travel the world first class and party like a rock star (at least not in your first couple seasons).

So before you start spending money, think about what is the one thing that brings you the most joy so you can splurge a bit there, then stick to your savings plan in other areas.

Take your money as seriously as your health

If you hurt your knee and you feel like it’s serious but the doc says, “you’re fine,” what are you going to do? Most likely you’re going to get a second opinion. Do the same thing with your finances.

You are going to need a CPA for sure to make sure you’re good with the IRS and other taxing authorities, and in many cases you may also need a financial advisor to help with investing and budgeting. Have the CPA take a look at your accounts and the transactions and vice versa so that those two partners in your financial life can keep checks on each other.

If you decide to work with a firm that provides both to you, or one referred the other, consider calling one of our financial coaches just to make sure that you have some unbiased guidance.

You also need to make sure that they explain things to you in plain English – do not accept intimidation because you don’t know the jargon – most people don’t! If you need a translator to help educate you on the terms and what they mean in your language, we can do that too.

Congratulations to all of the players drafted this weekend and their families! You have beat the odds and made a dream come true. Best of luck in your career, in life and make the most of this opportunity!

4 Steps To Perform Your Own Investment Analysis

April 03, 2019

Two of the most common questions that I get as a financial coach are, “Do my investments make sense for me?” and, “Am I paying too much?” Generally, those are questions that I can’t answer in one minute, but with the right tools and a few minutes anyone can figure out the answer. Here’s how you do it.

How to do a self-analysis of your investments

Step 1 – Take a Risk Tolerance Assessment

You must know what amount of risk makes sense for you. I don’t care about your friends, relatives or co-workers. Does your mix of investments make sense for you? 

To find out, this Risk Tolerance Assessment takes about 2 minutes or less, and will then offer you general guidelines as to how much money you should have in stocks, bonds and cash (aka money markets or stable value funds). If you have two entirely separate goals, such as a college fund that you need in 10 years and retirement in 25 years, then take the assessment more than once, each time with that specific goal in mind.

Step 2 – Figure out exactly what investments are held in your funds

Just because your fund says one thing in their objective doesn’t mean that it’s clear what your fund actually owns. If you really want to know, you can actually find out using a tool on Morningstar. Here’s how:

  1. Get a copy of your statement, then look for your account holdings. You are looking for fund names such as ABC Growth Fund Class R5. Even better, see if you can find the “ticker symbol” for each fund, which is a five-letter code such as “ABCDE.”
  2. Go to Morningstar.com and enter the name or ticker symbol.
  3. Once you’ve found the Morningstar page for your fund, click on the tab labeled “Portfolio.”
  4. This tab will break down the mix in the fund by stocks, bonds and cash – keep in mind that Stocks include both US and non-US stocks, while bonds will simply be labeled as Bonds, and cash or money market will be listed as Cash.
  5. You can really geek out if you want by digging into how much is in large company stocks compared to mid and small sized companies or look at what sector of the economy your fund focuses on (such as technology or manufacturing, etc.) You may even find some fun in looking at the Top 10 holdings in each fund to see if you have an overload in a certain company.

The most important thing is that when you add up all the money in stocks based on this analysis it is close to what your risk tolerance suggests. The other key thing to check is that everything doesn’t look exactly the same. So if all of your funds are mostly large companies or all of them are US Stocks, then you may be out of balance.

Step 3 – Analyze fees

Once you have determined that your investments are or are not matching up with your risk, the next step is determining how much you are actually paying the mutual fund companies through fees, which are also called “expense ratios.”

While Morningstar has good info on that, the FINRA Fund Analyzer is a more helpful tool for this purpose. Here’s how:

  1. Again, enter the fund name or the ticker symbol into the analyzer, and when you’ve found your fund, click on “View Fund Details.”
  2. Scroll down to “Annual Operating Expenses” to see how the expenses for your fund stack up against its peers.
  3. Also look to see if you must pay a fee to get into or out of that fund.

Obviously, the ideal is to invest in funds where the fees built into the fund are at or below the average fee for that peer group.

Step 4 – Compare your advisor fees to benchmarks (if you have an advisor)

If you are a do-it-yourself investor, you can skip this last step, but if you have an investment advisor who is helping you with your investments then the last step is figuring out if you are paying them more than average.

Commission-based advisor

If you are investing in funds that showed a lot of up-front commissions or “Contingent Deferred Sales Charges” or “CDSCs” in Step 3, then that means your advisor is paid by commission. If so, then the key here is to make sure that the commissions are comparable to industry averages and that you are holding onto the funds – or at least staying in the same mutual fund company options – for about 7 years or longer in order to realize the value of the up front fees. This allows you to minimize the overall fees paid and avoids paying commissions too frequently.

“Fee-only” advisor

If your advisor is “fee-only,” then they don’t charge commissions, and instead they charge a management fee based on the total value of your investments. Generally, this is a fee that is collected quarterly, so in that case each quarter the fee is applied to your balance and then divided by 4. So, if you have a 1% fee on your $100,000 account, your fee would be $1,000 per year or $250 per quarter. Keep in mind that this is in addition to the fees you explored in Step 3, and will show up as a separate fee on your statement.

How much is too much?

As for what your fee should look like, in 2018, the average advisory fee was 0.95% and many people use 1.0% as an industry standard. A good rule of thumb is that if you are paying close to or above the average, then you should be receiving value for that in the form of other services such as financial planning, tax planning, etc. to justify the higher fee.

That said, it can vary quite a bit depending on the size of your account. For accounts between $0 – $250,000, the average advisory fee was 1.1% and over $5 million that dropped to 0.7%. In other words, the more money you have, the lower the percentage, but probably higher the dollar amount of your advisory fee.

Ultimately, it’s up to you to determine if you’re receiving proper value for any advisor-based fees. If you don’t think you are, then consider shopping around.

What about robo-advisors?

Today, there are lots of robo-advisors out there that will do most of the same things when it comes to managing your investments that a typical advisor would do, but the fees tend to be lower, ranging from 0.25 – 0.35%. Does that mean everyone should be using robo? Like anything else, some people are very comfortable with using technology as a tool and getting planning or guidance somewhere else. If that is you, then a lower-cost robo advisor may make sense.

If, however, you are like many folks and prefer someone you can call when you have questions who is intimately familiar with you and your situation, then paying up to that industry average may be worthwhile. Lastly, if you like your advisor but their fees are above average then you can always try to negotiate with them for lower fees and/or additional services like financial planning, retirement or college planning, etc.

Common Financial Mistakes Parents Make By The Decade

March 05, 2019

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

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

A top mistake parents make in their 20’s

Placing kids before career

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

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

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

How we avoided this mistake

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

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

A top mistake parents make in their 30’s

Not putting limits on kids’ activities

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

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

How we placed limits without our daughters hating us

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

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

The moral of the story

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

A top mistake parents make in their 40’s

Not putting limits on kids’ college choices

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

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

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

How we’re balancing this in our family

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

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

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

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

A top mistake parents make in their 50’s

Helping adult kids at the expense of their own retirement

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

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

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

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

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

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

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

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

What Every Parent Needs To Know About Creating A Will

January 14, 2019

If you have kids, you have probably already heard various people say, “you have to make a will!” Some people may have even told you why you need a will, but have you ever heard what you need to make sure that your will actually says?

Why it is so important to have a will if you have children

OK, so in case no one explained why having a will is so important, it’s really very simple. Your will is your directions to the probate court, telling them who gets to care for your kids, who gets to handle the money for them, how that money can be used and when your kids can get it. If you don’t do that then the state you live in will make all of those decisions for you when you pass.

Here’s how to go about making those decisions, keeping in mind that you can change your will at any time as long as you’re of sound mind, so don’t let indecisiveness stand in your way any longer.

Who would you want to raise your kids if you weren’t around?

This is honestly the biggest reason that I’ve heard that people don’t have a will: they can’t agree on who would raise the kids if both parents pass away. It isn’t a fun or easy choice, but it needs to be made.

For us, when our oldest daughter was born we lived in Kansas, but my brother was in Dallas. He was single, working full-time and going to grad school for his MBA. My wife’s sister was finishing grad school in Mississippi. So neither one was really in a spot to become a parent overnight.

We also had our parents. We knew that they would all be great parents, but they had been there, done that. We wanted them to get to be grandparents. That left one of my cousins, Rob and his wife. They were recently married, settled down and planning on starting a family of their own. We felt that they were actually the most prepared and logical to raise our child(ren) if the worst happened.

Communicating your choice

Once we made this decision, we not only asked Rob and Gail, but we told our parents and siblings about it and why we made the decision. This made sure that there would not be any hurt feelings or legal challenges if something happened to us. So take the time to think about who is in a good place in life to raise your kids, keep the kids close to other family members and have similar core values to your own. Most importantly, who is going to love your kids as their own? (and remember, you can always change this as life changes)

What happens to the money?

You don’t have to have the same person who cares for your kids be in charge of the money you leave behind. My Uncle Bob passed away when his sons were just about 17 and 14. Their mom was still living so she was able to care for them, but the state appointed a conservator for each of them to handle the money they inherited from their dad. That meant that court costs, delays and just a general hassle.

More importantly, according to state law, when they became legal adults (18 in most states, 19 or 21 in some) then the money was all theirs, no strings attached. You can kind of guess what happened. Even though they were good, bright kids, they were still kids. The money was pretty much gone by the time they turned 21.

What can you do to prevent that from happening to your kids?

There is a simple tool you can use in your will called a testamentary trust that gives you all the control you want. In essence, you are using your will to create a trust that only goes into effect when you die. It determines who manages the money, what it can be used for and when your kids actually get the money.

For us, having seen what happened to two of my cousins, we knew that a testamentary trust would be part of our will. You can choose a person or a corporation – e.g. a bank or trust company – to be in charge of the trust (aka the trustee). Family members are less expensive and they are more tuned in to the kids’ needs, but a corporate trustee has the expertise and tools to make things much easier (and the ability to say no without causing family rifts).

We chose to name my parents and a local bank as co-trustees. Then we said that the kids could get any income the trust generated plus they could dip into the principal of the trust only for their health, education or to maintain their current standard of living.

Then we thought about when they should get the money. We decided to split it up – 1/3 at 25 when they are getting started in life and a little more mature, 1/3 at 30 when they may be buying a house or starting a family and the last 1/3 at 35 when they are likely to be established and having multiple demands on their finances. This doesn’t fit everyone’s needs or desires, but it made sense for us and our family.

Getting it done

This may sound like a lot, but this is really common, everyday planning that any estate planning lawyer or even a good will-making software program can help you with. Check with your employer to see if you can get online or live legal assistance through your Employee Assistance Program (EAP) or pre-paid legal program. Either one would make this a low cost and easy way to make sure that even if you aren’t here to physically care for your kids, you are still loving your kids and making sure that they have the emotional and financial care you want them to receive.

Is Your ‘Dream School’ Actually A Nightmare Waiting To Happen?

December 10, 2018

Last week two things happened that really drove home the true cost of over-borrowing for college or career training. First, I read a study that said parents spend twice as much on their ADULT children as they save for retirement. That statistic shocked me. Then I did a webcast sponsored by one of our clients for some local high schools. That helped everything make a bit more sense.

How parents end up financially helping their adult kids

In going through the webcast, we talked about goals for the next 5 years, a pretty reasonable time frame for 17 year-olds. Not surprisingly, the top two goals they had were completing college/career training and buying a car. Those are both very normal and reasonable for folks their age, so no problems so far.

Rule of thumb for college borrowing: no more than first year’s earnings

Then we got into what it would take for them to accomplish those things in a financially viable way. When discussing how much student loan debt is “too much,” we reviewed the rule of thumb that you don’t want to borrow more for your education than you expect to earn in your first year. In other words, if the average starting salary for college graduates is roughly $50,000, that means that the max in student loan debt you should accrue is $50,000. Graduating with that much debt would lead to a monthly payment of about $600.

Factoring in a car payment as well

To drive the point home, we looked at what you could pay for a car on a $50,000 salary. Factoring in that banks don’t like your debt payments to be over 36% of your pay (after paying rent in an average city), that means that with the $600/month student loan payments, the MOST you could borrow for a car would be about $13,500.

First of all, that was an eye opener for the students who felt like $50,000 a year would surely afford a much sweeter ride than a used Chevy Cruze. What registered with me though, is why so many parents are over spending to help their kids – they almost have to! Even with a less expensive car, there really isn’t a heck of a lot left over for other stuff like saving for a house, standing up in weddings, entertainment and all the other things we like to do in our 20’s. It’s manageable for sure, but it means those kids are making sacrifices somewhere else.

The problem – too much student debt

More importantly, this is an example of someone who followed the “rules.” What about those families that borrowed more than the first year of income? Obviously if you have a recent graduate who is struggling to pay their student loans, then a parent who probably feels guilty about not helping more with education costs in the first place is often going to overcompensate by helping pay for other costs like cell phone bills, medical or car insurance or maybe even the student loan payments.

What can we do about it?

It might be too late for those families where the kids are already on the struggle bus in their 20’s, but it’s not too late for my peers who are just getting ready to launch our kids. The earlier we prepare, the more options we have.

Obviously, if you start saving in a 529 college savings plan while your kids are still in diapers then you can help pay for more education expenses and reduce the amount they need to borrow. But time – and cash flow – may not be on your side. There are a few ways to address this (like this one from my colleague Teresa), but one way is to re-think where your kid goes to school. Regardless of how old your kids are, you can help them weigh the pros and cons of their “dream school.”

When it makes sense to stretch for your “dream school”

There are times where paying more for college may be worth it. Maybe there are no in-state schools that offer your child’s major (my daughter’s friend who wants to be a marine biologist just isn’t going to have many options here in Kansas). We have some close friends whose daughter wants to be an animator for Disney or Dreamworks. She has that kind of talent, but there are only a couple of schools that those companies recruit animators from, so she’s going there.

When it doesn’t matter what your diploma says

That said, the vast majority of students have majors that are common. My oldest daughter is a freshman in college and she is an elementary education major. As a teacher, your salary is defined by years of service and education level – they don’t care where your degree came from. So for her, it made sense to attend a state university to keep the costs down. The return on investment just wasn’t there for the private schools that sent her information and wanted her to attend their school.

How my youngest daughter is deciding where to go

My youngest daughter wants to be a business major. She also knows that she wants to eventually get an MBA and live in a major city – at least the size of Kansas City (where she has grown up) and probably much larger. Originally, she wanted to go to a private school in New York or the Bay Area. But after realizing that her college fund will only cover an in-state cost, she has rethought the ROI of taking on a ton of debt (I’m doing my job as a Dad there!).

She has visited three out-of-state schools so far, has a visit set for her in-state option and is looking at two more out-of-state schools and one private. She eliminated most of her private school options and is focused on schools that offer in-state tuition for a certain ACT score or offer enough scholarships to make it comparable. Two schools she is looking at are closer to Texas since companies in the Dallas area recruit there heavily.

The main reason to consider them is she could pay in-state tuition and likely end up in the Dallas/Ft Worth metroplex, which just happens to be home to several top MBA programs. If she picks the right company, she can likely even get her future employer to help pay for that MBA!

Focus on “dream life” versus just dream school for the best ROI

The bottom line is that it doesn’t matter what your kid is doing after school if they feel strangled by the debt they had to take on to get there. And you won’t be doing anyone any favors if you have to compromise your own retirement to help them survive those early years of their career. The best way to help will be to keep them from taking on the burden in the first place.

So help your kid focus on their dream AFTER school instead of their “dream school.” This can help them plan and understand the downside of excess debt. Your kids – and your wallet – will thank you later!

How To Use Tax Loss Harvesting To Reduce Capital Gains Taxes

December 03, 2018

No one invests to lose money, but there can be times when selling investments at a loss can be helpful. It’s a process called “tax loss harvesting,” but it’s nowhere near as complicated as it sounds.

When does tax loss harvesting make sense?

First of all, this strategy only works for investments that are NOT held in a qualified retirement account like a 401(k) or a Roth IRA. So if you have stocks, bonds, mutual funds or exchange traded funds (ETFs) held in a regular brokerage or mutual fund account you may want to consider this.

How does it work?

When I was a financial advisor, one of my favorite clients was Hugh (not his real name). He had a lot of stocks in his portfolio that he was hesitant to sell because he didn’t want to pay taxes on his gains, even when he was ready to get rid of them. We got around that by helping him take advantage of his stocks that were down.

First, we looked for any investments he had that were down since they had been purchased (aka they were trading at a loss). Sometimes he had stock that he had purchased multiple times, so some were at a gain and others at a loss. We focused on the shares that were purchased at a higher cost and were negative at the moment and sold everything we could that had lost money since they were purchased.

Paying attention to short-term versus long-term

After selling everything we could at a loss, we started looking at what type of losses they were. Anything that we had sold that Hugh had owned for less than a year were short term losses. That meant that if we had stocks that we wanted to sell that had made money in the short term (less than a year), we could generate the same amount of short-term gain and not have to pay any taxes because the short-term losses canceled them out.

Then we looked at the losses where the shares had been held for more than one year. Those losses were used to cancel out the profits that he had from stocks that he owned for more than one year. So again, that meant no taxes on those profits.

How a market downturn actually helped

Then 2008 happened. For several years leading up to that market crash, we had helped Hugh reduce the taxes on his investments by using tax loss harvesting, but during 2008 and the years before the market came back, unfortunately he had a lot of stocks he could sell for a loss.

The good news is that when you “harvest” a loss (aka you sell something for less than you paid for it), you get to carry forward anything you don’t use that year. So we were able to harvest a lot of losses in 2008 that Hugh was able to use in the following years of the market recovering while making money for him without paying taxes on those gains.

Getting a deduction for some of your losses

It gets even better though. If you have more losses than gains in any single year, you can use up to $3,000 of those losses as a tax write-off against your regular income. So Hugh was able to claim a tax deduction in 2008 and a few more years after that in addition to avoiding capital gains taxes, all while being able to sell the stocks he wanted to sell anyway!

Beware wash sale rules

One last thing that’s important to know. Like most things with the IRS, there is a catch. Since you are allowed to use losses to offset gains, the IRS wants to make sure you’re not taking advantage of the rules so they made a rule that says you cannot repurchase the same investment within 30 days of selling it for a loss, or you won’t be able to claim the loss. It’s called a “wash sale,” as in your loss is a wash aka it’s treated like you never even sold and re-bought the stock.

So if you’re really just looking to take the loss and “reset” your cost basis on a stock you ultimately want to keep holding, you have two choices:

  1. Leave the money in cash for 30 days and then repurchase the same stock or fund; or
  2. Buy a different but similar investment.

For example, if you are selling a tech stock to claim the loss, but you really want to still hold that stock, you could use that money to buy a technology ETF that includes the stock you sold. Or if you are selling a fund, consider a slightly different fund in the same category.

I hope that you make a ton of money on your investments, but when you have those inevitable losses, remember that a loss today could be your best friend on April 15th!

How To Be Mentally Prepared For Retirement

September 20, 2018

As a CFP® and financial coach, I talk to people every day to see if they are financially prepared for retirement. While that is extremely important, that is really only half of the equation. If you aren’t mentally and emotionally prepared for retirement, then you really aren’t ready.

Thinking about the why

I have seen several instances, including my dad, where people are financially ready to hang it up but they don’t know what it is they are retiring for. Do you know why you want to retire?

A changing landscape

First of all, retirement is changing. People are living longer,so lots of people do work longer, either full-time or part-time and that is OK. Even then, all of us will eventually cut back or completely step away so we have to know what we’re going to do with the rest of our life.

Asking the right questions

If you’re one of the many who find themselves financially ready to call it quits on the workforce, but not quite mentally ready, you’re not alone. To help get there, let’s look at two basic questions:

  1. What am I passionate about?
  2. What do I enjoy doing?

If you can answer those two questions, then you have the start of a plan.

Clarifying your passions and interests

When we look at what we’re passionate about, it is usually going to be anywhere from one to three things. It could be as fun and simple as investing in the lives of your grandchildren to getting involved in community service.

Translating what you love about work into retirement activities

For me, I’m blessed that one of my passions is helping people be financially well, so I get to do that at work. That also means I can do this after I retire. When I retire from getting paid to be a financial coach, I intend to volunteer with financial coaching ministries at our church and in financial literacy classes at our local high school.

To prepare for that, even though retirement is 15 – 20 years away, I’m doing those things at very small levels so that getting more involved will be an easy transition. So, think of the things you do at work and how they may translate to serving others when you don’t need to work for a paycheck.

It’s gotta be fun

We also want to know what we enjoy. Over the last few years I have gotten very interested in barbecue. I mean, I do live in Kansas City, where we may have a borderline unhealthy obsession with good barbecue. For me, it has been fun to learn a new skill, tinker with recipes, take pride in making a delicious meal and most importantly, it’s an excuse to be social. Hey, we can’t eat a whole brisket alone – we “have to” invite some friends over to share. So, whether I ever enter a barbecue competition or not, I’ve got a fun habit that can easily fill up one day a week.

Your hobby could even become a second career of sorts

Now my friend Jon is also into barbecue – big time. Someday I hope to be half as good with a smoker as he is. He started doing competitions years ago. For him, he had found a fun hobby too, but it has turned into much more. When a massive tornado hit Joplin, MO, in 2011, Jon was one of several BBQ competition teams that volunteered to drive down to Joplin and make meals for first responders and people impacted by the tornado. They ended up serving 120,000 meals over 13 days!

That effort turned into Operation BBQ Relief. They now go anywhere in the US that a natural disaster strikes. To date, they have served nearly 1.8 million meals to disaster victims and responders! It has become such a passion for Jon that he now rarely competes as so much of his free time is spent supporting disaster response.

It’s not likely that you’re going to get in on the ground floor of a successful charity, but the key is testing those passions now to see where it takes you.

So, keep saving and investing wisely, but also invest your time in figuring out what you are passionate about and what you enjoy doing. Now I’ve got to go figure out what is on sale for me to throw on the smoker this weekend!

You Probably Need A ‘Senior Year Fund’ In Addition To College Savings

June 07, 2018

While my friend Tania wrote about the surprise costs of senior year and my buddy Michael wrote about the wisdom of not having all your eggs in a 529 basket, the graduation of my oldest daughter Kate this month got me thinking, especially since my second daughter Rachel is going to be a junior. Parents of recent grads, I know you feel my pain — graduating from high school is expensive! I’m wondering if we don’t need to start also suggesting that parents save up a “Senior Year Fund.”

How much should you set aside for senior year?

In retrospect, having a fund for Kate’s senior year would have been extremely helpful to avoid busting the budget or even needing to dip into savings (luckily we didn’t have to go into debt, but some parents do) for those senior year costs. I’m going to be starting one ASAP for Rachel.

Post-high school plans matter

As I started to calculate what we’ll need for Rachel, I realized I’ll need even more than Kate. Kate is planning to major in Elementary Education, so her costs were a bit lower as she only looked at in-state schools. Rachel, on the other hand, is leaning towards majoring in business and is exploring private and out of state options – even though she will be getting the same 4 years of in-state cost assistance from us, the actual costs of applying will be higher.

Here is what my costs looked like for Kate and what I expect them to be for Rachel.

COST Kate (in-state) Rachel (out-of-state/private)
College entrance exam fees $46 $120
Kate just needed the standard ACT, whereas Rachel will need to take both the ACT and SAT, including the writing portions on both.
College entrance exam prep classes $600 $600
Kate didn’t need a great score, but she has test anxiety so extra prep was a big help. Rachel is a natural test taker but to get out of state tuition waived at a couple of her top choices she will need to score at least a 28, probably closer to a 30, on her ACT.
College application fees $85 $450
Again, Kate was looking at the two in-state options that excel at Elementary Ed. Rachel is looking at one in-state school, four private schools and five out of state public universities. Hopefully by the time of applications she will have it down to five but just in case…
High school tchotchkes $300 $100
Kate lettered in both softball and choir and she wanted her letter jacket ASAP. Rachel couldn’t care less about a letter jacket even though she could get one. There are still items that are “bundled” with the ordering of announcements that will add $50 – $100 to this total.
Senior trip $300 $300
We didn’t actually pay any cash for Kate’s trip to the west coast with a friend and her family but I used up airline points for a $300 flight. Rachel will probably get about the same. The total trip cost was at least double that, but those costs are on the kid in our house. If you plan to pay for a trip without your kid’s help – at least double that figure.
Official school events $400 $400
For prom we got a steal on Kate’s dress at a great local store but still easily spent $250 on that night. The “Project Graduation” party after graduation was about $50 and we spent $100 on reserved seating at the graduation ceremony. That would be frivolous for most people but it was the best way to get my parents into comfortable seats and near the elevator to be handicap accessible.
Graduation party $850 $850
The sad thing is that this was a low-key party and it still cost almost a grand. We hosted a reception for her guests and served dessert, but no meal. We did rent a room at a community center to reduce stress which cost about $80. We also had a family cook-out after the reception which was just grilling burgers, etc., but that isn’t cheap for 25 – 30 people. Plus, we hosted family at our home for several days, which meant more meals out to celebrate and more trips to the grocery store. Many of our friends had parties at home, but they served a meal so their total costs were similar.
Gift for the grad $475 $475
This is probably the most personal number of all, but we wanted to make sure that she had a new laptop heading off to school so we combined with grandparents to get her a new laptop. Thanks Mom and Dad!!
College deposits $400 $400
Just for the privilege of taking our money by the bushel over the next few years, we had to cut a couple of checks for admissions and reserving a dorm room months in advance.
Yearbook $50 $50
This was so early in the year that I don’t recall exactly how much, but this is about how much.
Yearbook ad $125 $125
Yes, in the brave new world of parenting, raising your child to adulthood isn’t enough. To prove that you love them, you must now buy an ad in the dang yearbook that they will probably only look at once, that I didn’t even remember writing by the time they were distributed. (can you tell I feel like this may be a little much?)
Senior pictures $200 $300
Kate has a friend who does photography, so we got a little bit of a price break. The good news is that with digital you can now get all the pictures and have more options, but then if you want to have a permanent keepsake… more $…
Gifts for friends $250 $250
We are blessed to have a great group of friends… and four of them have kids the same age as ours! So, with gifts for those kids and smaller gifts for the close friends or our daughter, it adds up.
College visits $400 $3,500
Again, Kate knowing she would stay in-state saved big bucks. Rachel will be a different story: we have 3 short drives, one medium drive and flights to NY, TX and CA on deck. Fortunately, I have hotel and airline points to cut those total costs, but then I won’t be able to use them for a family vacation, so it still counts in my book.
TOTAL $4,481 $7,920

So again, every grad and every family is different, but use my experience as guide to at least plan on the type of expenses you may run into.

Where should you keep this account?

I’d say that it’s best to just set up a separate savings account in your (the parent’s) name. This way it won’t be counted by college aid calculations as being as readily available to pay college costs, plus if your kid decides she wants to take off and backpack across Europe, you still have the savings to support other goals.

When should you start planning?

As soon as you can adequately estimate costs, I’d say start saving. Since Rachel is just finishing up her sophomore year, I only have about 5 months until the first costs start kicking in, but about 15 months til the actual senior year costs come up. If I want to have that account fully funded by the first day of her senior year, I need to start setting aside $528 per month today. Not to mention our continuing plan to provide her with some college funding assistance while also paying for Kate. The bottom line: date nights are about to get real cheap around the Spencer house!

It will be here before you know it

Whether your kid is a freshman or a toddler – setting up a dedicated savings account for those costs may be a real blessing by the time you see your child walk across the stage. Oh yeah, trust me, it will be here before you know it!

Rachel & Kate at Class of 2018 graduation – when did my babies grow up???

Should You Have Provisions For Your Pet In Your Estate Plan?

April 06, 2018

The idea of including your pet in your estate plan may sound odd or eccentric – like something a Hollywood diva would do – but it has started to become a more mainstream idea. I wrote recently about our beloved dog Nick and how we were wrestling with whether or not it was time to let him go with dignity.

Sadly, the time has come where the humane thing to do is to let him go and end his suffering. I was grieving with a friend when he pointed out that’s the unfortunate thing about pets: you have to live through the pain of them passing away before we do.

That got me thinking.

What happens to your pets when you’re the first to go?

What about those times where it isn’t true? How do you handle a pet when you pass away before they do? Is there a legal way to plan for this?

The simple answer is yes – there are several options for how you can make sure that your furry family member is loved and cared for after you are gone. But it does take some planning ahead. Here are three ways you can make sure your furbabies are cared for in case something happens to you.

Nick during better days

1. Have a written agreement with a friend or family member who loves your animal

This is the easiest and least expensive option – you can can do this yourself at home.

Things to know:

  • Draw up a letter or document specifying who should care for your pet in the event you’re unable to.
  • Have it notarized if you choose.
  • Provide a copy to the pet’s new “guardian.”
  • Keep a copy at at home and another copy with your Will and other estate planning documents.

Other important considerations:

The benefit is that this is obviously cheap and easy. The down sides are that there is no succession plan if something changes with your chosen guardian, and it may be awkward to change if you change your mind later. There is also a very real chance that your agreement would not stand up to a legal dispute.

2. Include instructions for your pet/future pets in your Will

This can be done at little to no extra expense if you are already going to create or update your Will.

Things to know:

  • If this requires a change to your plan, then there will be some kind of legal fees involved.
  • As always, check and see if your employer offers a free will through an Employee Assistance Program (EAP) or an optional pre-paid legal benefit to help reduce costs.
  • By using your will, you have the ability to name a guardian and successor guardian for your pet, just like you would your minor children.
  • You can even leave them extra money to care for the pet or have your will create a fund that can only be used for the pet.

Other important considerations:

This is a much more comprehensive approach than the first, but it can cost some legal fees to set up. If you use this approach, do be sure to notify the guardian that you’ve named and the executor of your will of this provision. Often the will isn’t read or filed for a few days or even weeks and your companion animals will need immediate care after your passing.

One of my colleagues worked with a Will that had provisions for the pet but because no one knew about it, the cat changed hands a few times and ended up with someone who didn’t want the cat… just the money that was provided for the cat’s care.

3. Establish a Pet Protection Agreement

This is a separate document from your Will — essentially it is a Trust established just for the care and maintenance of your pets.

Things to know:

  • A Pet Protection Agreements (PPA) allows you to name everything that you can think of, including:
    • Who cares for your pet(s) now and in the future
    • Whether any money is left for their care
    • What type of end of life care you do or do not want your pets to have
    • Even what happens to any money left over from caring for your pet
  • Most states (but not all) recognize PPAs as official estate planning documents
  • They can be distributed in advance so people know who has authority to take in your animals
  • The best news is that they don’t have to be expensive!

Other important considerations:

You can have your attorney draft this if you are already doing your other documents but there are also sites online such as LegalZoom and PetTrustLawyer that can help you create your own PPA for roughly $20 – $50. If you do create your own PPA and leave money as part of it, be sure that you either have the cash to fund it now or you at least create a provision in your Will or Revocable Trust to provide the actual cash to fund it.

Making it to the Rainbow Bridge first

Sadly, no amount of planning will bring back the cherished pets that have passed before us, but you can take some pretty simple steps today to give you peace of mind that any pets who outlive you will be treated with the same love, care and respect as if you were still with them.

What My Dog Taught Me About Estate Planning

March 06, 2018

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

Estate planning is more than just a will

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

The story of Nick

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

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

If Nick could talk

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

Letting your loved ones know what you would want

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

We can make our wishes known

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

Are You Planning For The Right Season In Your Life?

January 05, 2018

Just like the seasons change (and pretty much everyone on the East coast is being reminded exactly how bad winter can be right now),we all know that we go through different seasons of life. You wouldn’t wear shorts in January – at least not in the Midwest – nor would you enjoy the fall colors in spring time. To enjoy the season you have to adapt your activities (and your wardrobe). The same is true of your financial plan.

Are you planning for the right season?

Spring – Most people in the spring of their financial lives are in their early career and just getting started on their financial journey. It’s a time of learning and discovery and creating new habits and money mindsets.

Financial focus for this season: 

  • Establish a budget
  • Work to save up to the match on your 401k
  • Build an emergency savings
  • Pay off student loans
  • Work to be more aggressive toward other short and intermediate goals such as buying a home

Summer – Hopefully by about 10 years into your working life you’ll start to feel the sun peeking out from under those student loans and other debt. Just like summertime is busy, there’s usually a lot going on in the summer of your financial life — you’ll have many competing priorities. It’s important to enjoy this time of life while also making the most of the summer season.

Financial focus for this season:

  • Keep increasing retirement savings using the Contribution Rate Escalator, if you have it
  • Increase life insurance as your family grows
  • Make a will and establish other estate planning documents in case of tragedy
  • Start saving for kids’ education

Fall – As you head toward the last 10 years or so of your working life, you’ll be getting read for the harvest. Hopefully the kids are closer to being on their own and you’ll be looking to slow down with your spending.

Financial focus for this season:

  • Max out any and all retirement accounts
  • Pay off the house and do any work to get it the way you want it
  • Check your investment allocation to make sure it fits your actual retirement time horizon
  • Consider long-term care insurance coverage
  • Update your estate plan as your kids reach the age of majority

Winter – I’d consider the winter of your financial life to be retirement, when you’ll be living off the fruits of the previous seasons and enjoying a time of rest and turning inward toward family, friends and the things you hold dear.

Financial focus for this season:

  • Find your niche with family, friends, hobbies, etc.
  • Maybe work part-time to stay busy
  • Travel earlier in the “winter” while your health allows

I know it’s a bit of a cheesy way to look at it, but what can I say? My daughters would say I can be a cheesy guy. But my real goal is to point out that we sometimes get into ruts where we continue with old financial habits that may not be serving us anymore. Every once in awhile it’s a good idea to re-evaluate where we are in life to ensure that our finances are evolving and maturing along with our careers and lives.

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Meaningful Gift Ideas I Learned From My Grandmas

December 08, 2017

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

An evolution of gifts

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

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

Meaningful doesn’t have to mean lots of time

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

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

Using cash for longer-term impact

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

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

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

Gift ideas for bigger impact

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

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

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How Giving Your Money Away May Actually Improve Your Budget

November 28, 2017

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

Taxes

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

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

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

Going big

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

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

Scarcity often leads to better use of what we have

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

Giving leads to gratitude which leads to greater performance

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

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

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A Quick Guide To Open Enrollment

October 24, 2017

With most people in or near their open enrollment period this time of year, it’s a great time to take a look at how the trends in health insurance may impact you and your family. Congress continues to duke it out over whether or not (and how) to overhaul the Affordable Care Act and there is understandably a lot of uncertainty around how any changes will affect coverage for people NOT covered at work.

One ongoing trend is how employers are starting to either charge a steep premium to cover spouses that have coverage available at their employer or they are not offering coverage to those spouses with their own option at all. In addition to all of those, there is an undeniable trend towards high deductible health plans paired with a Health Savings Account (HSA).

Things to consider

This is not all necessarily bad news, but it does mean that choosing your coverage continues to require more time and study than before. Here are a few things that you may want to consider:

  • If you or a dependent have chronic health issues and one spouse has access to a plan with lower deductibles and co-pays, make sure that child or spouse is on that plan.
  • If you have traditionally had your entire family on one plan but both spouses have health coverage available, you should start looking into whether your doctors and providers are in the networks of both plans. If so, see if it may make sense to go ahead and put the spouses on different plans now. Even if your company isn’t charging a premium for “covered” spouses, it may be less expensive overall to be on different plans.
  • Max out your HSA(s). The money that goes into an HSA lowers your taxes today and comes out tax free as long as it is use to pay qualified health care expenses. The money that isn’t used stays in your account and continues to grow tax free, even if you leave your job or switch plans.
  • If you are married with children, compare the costs in each plan of one spouse on an employee only plan and the other spouse on an employee + dependents vs both spouses being on an employee plus child plan. Having both on an employee + child plan is likely to be more expensive but if the prices are the same or similar this approach may allow you to put more into each HSA account, lowering your taxes and increasing funds available for future health care costs.
  • As always, take a good look at any pending issues such as braces, lasik, etc. that are in your family’s future and plan accordingly.

Planning your health insurance may be a lot more time consuming than it used to be, but this is a case where 15 minutes could possibly save you a lot more than 15%.

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How To Cut Cable Without Giving Up Access To Live Sports

October 12, 2017

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

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

Make sure you have the right internet speed

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

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

You need:

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

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

Get the right equipment

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

Decide what programming you want

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

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

Sports and live TV

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

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

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

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

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

What I chose

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

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

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

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

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

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How I’m Teaching My Polar Opposite Daughters About Money

August 25, 2017

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

Polar opposite financial personalities

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

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

Work smarter, not harder

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

Letting perfect get in the way of good enough

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

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

Finding a way to keep the little things in check

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

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

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

When fashion gets in the way of function

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

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

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

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

Different girls, same end goal

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

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Financial Advice Every New Grad Should Take

May 19, 2017

I’m at that age where my oldest child will graduate from high school next year and several of our friends have kids graduating from high school or college this month.  It got me thinking about graduation speeches and what I wish someone had told me about personal finance when I was their age.  So here is the world’s shortest, 3 point graduation speech:

  1. Avoid debt, even student loans. My kids are blessed. We have scrimped and saved so that they will have enough to cover 4 years of costs at an in-state university. They know that if they go to a private school or an out-of-state school that any difference in cost is on them. My younger child is considering one out-of-state school but only because they offer in-state tuition if her test scores are high enough. I have a nephew from Texas who went to Kansas State University because the scholarships he received made it the same or less than in-state costs at the University of Texas.  This won’t be the reality for a lot of kids, but the point is to do whatever you can to avoid debt for anything less than a masters degree – apply for scholarships, take a year off to work, work part-time during school, look into the military if that interests you or consider community college. This way you have the freedom of being debt free when you finish or if you do need advanced education or training, you will have less total debt and hopefully more income to counter.
  2. Live on 2/3 of your income. The wealthiest relative I have was taught this at his small high school in southern Kansas decades ago. He always saved 1/3 of what he made. Today I translate that to putting at least 10% into the 401k – or at least what the company will match, then increase it by 1% each year until you hit 10% or more (automate this with the rate escalator if your employer offers it) – and then save 1/3 of your take home while living on other 2/3. If you do have student loan debt, I would count paying down your debt as part of the saving piece. This may mean some sacrifices such as getting a roommate, not buying a new car, not upgrading your phone every year, etc., but if you live this way from the start, you get used to it. Imagine how quickly your loans could be paid off or you could save enough for a house down payment or you could take that trip of a lifetime by dedicating 1/3 of your take home pay to these goals! This is also important for when you start a family. The challenge that a lot of younger Baby Boomers and Gen X’ers like myself faced is that for many of us our parents couldn’t tell us or show us how stressful life can be with two people working full-time, paying for child care, etc. This way, if you and your spouse/partner have each been living on only 2/3 of your income all along, you can much more easily afford child care or if one of you decides to cut back to part-time for awhile or take a couple of years off, it won’t blow up your budget.
  3. Have a side hustle. My best friend realized last year that he could no longer coach his kids’ teams since they were both in high school, and he found himself with a void in his life. For years he was busy but fulfilled from coaching kids – he loves sports and he loves being around kids. To fill the void, he decided to try officiating as a way to stay around youth sports and get paid and he LOVES it! He has an outlet for his passion and the extra money is going to help put his kids through college. It is ideal if you can find a hobby that pays, but even if it doesn’t pay, we all need something outside of work. One way or another, whether it is for pay or volunteer, your life will be richer and more rewarding and it will make those inevitable rough days at work much easier to deal with.

Congratulations to the class of 2017! There are a lot of other important life lessons in the real speeches you will hear but I hope that when it comes to your money you remember to avoid debt, live on 2/3 of your income and have a side hustle! May you never lose faith in yourself, your future or your fellow Americans.

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How to Save Your Kids $70k

March 17, 2017

My daughter had a flat tire and I went over to put the spare on and drive it to the shop. Unfortunately, the toy the manufacturer calls a tire iron was never going to get those bolts loose even with my extra pounds of “leverage.” Fortunately, two juniors drove by and asked if they could help. One of the guys was on his way back from automotive tech class and had a trunk of professional equipment. We had that tire swapped out in no time and I asked more about their plans.

The guy who wants to be a mechanic has plans to work out of high school while becoming an A.S.E. certified mechanic. His buddy is learning welding and plans to become a master welder. Because they started looking into these programs a couple of years ago, they have a plan for a career with minimal, if any debt. What a great situation for a 16 year old kid!

Think about it. A typical student who doesn’t do the work upfront could lose $65,000-$70,000 just from one extra year of college costs, student loan interest and lost wages!  So what can you do now to save your kids $70,000?

1. Meet with the high school guidance counselor when your student is in 8th grade. Find out what career exploration programs the school offers.

2. Encourage your child to take the aptitude tests and discuss the results with them. Ask them about what they enjoy doing in general terms.

3. Work with your child and the counselor to find the intro classes for a couple of their interests that can be electives during their freshman and sophomore years.

4. If your student has found something that excites them, now you can focus on their electives, job shadowing and school choices.

Look, not every kid will have it figured out by 16. I know that I didn’t and that’s okay. But if they do find a vision, whether they want to be a surgeon, programmer or a welder – those 4 simple steps may be your $70,000 graduation gift!

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Who Would You Trust With Your Money?

July 20, 2016

Would you hand a loaded weapon to someone you just met? No matter where you side on the gun debate, probably 99.99% of people would emphatically say “no!” Yet we are often asked to sign a power of attorney (POA), a document giving the power to make financial decisions on your behalf to people that you just met, and probably a lot more than 0.01% of us say, “yes” to that. Perhaps sometimes we should think twice about this.

I’m not saying that powers of attorney are a bad thing. It just means that financially speaking, they are like a loaded weapon. In the hands of someone with lots of training and experience and who you trust, they can be a lifesaver, but in the wrong hands, they can have disastrous results. So how can you make sure that you handle your POA properly?

First, decide if this is going to be a permanent agreement or conditional on certain things happening. A permanent POA is called a durable power of attorney and lasts until you revoke it. My wife of 23 years has my durable financial power of attorney because I trust her completely, and I travel a lot so I could be gone when an important document needs to be signed. That said, in today’s world of e-signatures, the “travel a lot” reason becomes less and less compelling. Because this kind of POA is the most powerful, it should also be used with the most caution.

A POA that kicks in based on certain conditions is called a springing power of attorney. This is often used in case you are ill or injured and unable to make decisions for yourself. A springing POA gives someone the ability to make those decisions instead of the probate court so it is a very important thing to have. Just remember that even though this POA is far less likely to be used, it still has the same power if it kicks in, so be sure to choose your POA wisely.

In terms of how to choose someone, it comes down to competence and confidence. Does this person have the education and experience to do the job AND do I trust them to look out for my interests and no one else’s, especially their own? You may choose your spouse or a close/trusted friend or family member, although these choices may change as you age. Just make sure that you let them know who your experts are – financial advisor, CPA, attorney – and vice versa. This way, they at least know where you prefer to get your expertise.

In some cases, you may need to give those experts a POA. This could be the case when it comes to a CPA who has to defend you from an IRS audit. That makes sense.

Again, just make sure that you have vetted this person. To properly vet them, you should probably interview 3 possible candidates for the job to see if your gut says that you trust them, but more importantly, you should check with the organization that gives them their credentials and with regulatory agencies to look for complaints before you give them a POA. If you have access to a service that does background checks, that would be ideal.

Financial advisors often get a limited POA to make investment decisions on your behalf if they manage your assets. This can be a good thing if it allows them to sell a stock about to tank while you are on a beach vacation, but make sure that it is very limited. Have an attorney review any limited POA or agreement giving an investment advisor “discretion” over your account.

Most of the time these are straightforward. You hired them to make the decisions on the investment choices within your risk tolerance, and this lets them do that. Beware, however, of an investing POA that allows them to invest in things like limited partnerships, LLCs, closely held companies, or basically anything that isn’t publicly traded. That is a big red flag and has often led to fraud.

Now you’ve had your “course in POA safety.” You should be ready to confidently appoint the right person to take your financial life in their hands. Who will you choose?

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3 Things You Can Do About Student Loan Debt

May 27, 2016

One of the biggest things that we see not only in our research but also in day to day conversations is the impact that huge student loan balances are having on people of all ages, especially younger employees or those who went back to school during the “Great Recession.” My biggest piece of advice to anyone would be to avoid student loans as much as you can by working first and/or part-time, going to a less expensive state school or community college for the first couple of years, or any number of things. But for those that have already rung up a hefty student loan bill, there is still hope. Here are a few things that you can try with little or no pain involved.

1. Focus more on your student loans now but contribute just enough to get the company match to the 401(k) and sign up for the rate escalator feature if available. By putting the majority of your money towards your debt, you can focus your energy and efforts on the here and now but also have your 401(k) running on autopilot in the background. This way, if it takes you 10–15 years to pay off your loans, you are still in a great spot towards retirement instead of being debt free but with no savings.

2. Make your own “matching program” for your student loans. Look at each bill that you have and research to see if you can find a less expensive alternative and then set up automatic extra payments to your highest rate or smallest balance student loan equal to what you will be saving. So if you cut the cable and just use streaming services and it would save you $50 per month, “match” that saving to an automatic increase to one of your student loan payments. This could be a great project on an evening or weekend when rainy weather keeps you inside. If you don’t have the time, look at services like BillCutterz to do the work for you but you have to share the savings with them.

3. Ask your employer if they have any programs to help with student loans. While many employers do not currently have a student loan repayment plan, more and more companies are offering special deals on student loan refinance programs like SoFi or  actual repayment plans like Tuition.io or Student Loan Genius. There is even a bill before Congress to make a certain amount of student loan repayment tax free to the employee, similar to tuition reimbursement programs, so hopefully this will become a common benefit in the future.

Don’t get me wrong. There may not be a magic solution to your student loan issues. However, these steps can help you not just survive but thrive while you balance paying off the debt and engaging in life along the way.

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