Build Your Own Financial Olympic Team

August 19, 2016

As I write this, Michael Phelps is about to hop into the pool in search of his last Olympic gold medal. He has one race left in this Olympics and has been as dominant in this Olympiad as he was 8 years ago. Throw in Katie Ledecky who has been smoking the field in her races, Chase Kalisz and Jack Conger (other Maryland Olympians who have medaled) and my home state has more Olympic medals than every country except the USA right now.

If Maryland were a country, we’d be #3 in the world in Olympic gold medals. That’s astounding that so much talent is concentrated in one area. I hardly think it’s coincidence. Kids here grew up wanting to be Anita Nall or Beth Botsford or Whitney Phelps or Michael Phelps, hometown kids who made the Olympic team and came home and encouraged others to work hard and follow their dreams, and some dedicated kids and parents put in the work required to continue the tradition.

Lots of talent, all in one place, performing at a high level – that sounds a lot like the team I’m a part of at Financial Finesse and the team I try to help people build in their personal financial lives. One person can’t know everything about the world of personal finances, so as I work with people to improve their financial lives, I want them to view the people in their “financial family” as Olympic-level advisors. If they can’t imagine the people around them as high-level performers, then maybe it’s time to find a new financial team! Here are some of the positions you should have on your high-performing financial team:

Primary care physician: I can hear the “What??? A doctor isn’t a part of a financial team!” thoughts going through your head. But if you’ve talked to as many people as I’ve talked to who are in financial distress because of serious medical bills, you might see your physician as a key to preventing financial disaster down the road. As a guy, I am not always the best at getting myself into the doctor’s office on as regular a schedule as I perhaps should. So I have people in my life who periodically remind me to take care of myself. Focusing on your health and having a relationship with your physician where you can ask questions, challenge “conventional wisdom” and manage your health in a way that works for you is a key step, and the physician is a critical part of your financial team.

Insurance advisors: This doesn’t have to be an insurance salesperson but someone (or someones) who understands the importance of insurance coverage.  Auto insurance – what coverage matters? How high can a deductible be and still be effective? What factors drive pricing?

Life insurance – for your life, is term or permanent better? Why? How much should you have?

Health insurance – which plan is appropriate for you and should you have a health savings account compatible plan?  Long term care – is it appropriate, and what factors drive pricing? This is just a small sampling of the types of questions your insurance advisors should be able to guide you toward answering.

Investment coaches: This can be a financial advisor who manages your money, a financial planner you hire on an hourly basis, or a friend or family member who knows their stuff and will put your interests first. While most people who discuss investments want to talk about which stocks are going to be amazing, that is not the most important investment conversation to have. The big driver of your overall investment picture is the very boring question: What percentage of your portfolio is in stocks vs. bonds vs. cash?

For those who were all cash in 2008, they earned a positive return of around 1% when those who were 100% invested in stocks lost about 40%. Top line asset allocation matters! If you can work with your investment coach, whoever that is, to be sure that your asset allocation is in line with your goals (here’s a quick risk profile for you), you will be better off than most of the individuals I meet who have no clue what their overall asset allocation is.

Estate planning attorney: For your estate plan, I’m a big fan of working with an attorney who specializes in trusts and estates. Even if you don’t have a large estate, it still makes sense. In fact, I recently wrote a blog post about why I left my estate planning to a professional, so I’ll let you read that rather than restating the case here.

If you put together your Olympic financial team and work with them on a regular basis, I’d give you greater odds of becoming and/or staying financially secure for the rest of your life than if you opt for a 100% do-it-yourself model. After all, few of us are Olympians in all areas of our financial lives. As I get older, I’m learning that sometimes it’s not just okay but preferable to ask for some help in an area where you don’t feel like your knowledge level is where it should be.

 

 

The DIY Financial Checkup

August 08, 2016

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

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

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

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

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

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

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

-mortgage statement

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

-financial plan, if you have one

-your budget, if you have one

What’s your financial position?

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

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

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

Do you have sufficient cash reserves?

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

Could you survive a financial earthquake?

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

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

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

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

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

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

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

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

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

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

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

How are you handling your taxes?

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

Do your investments fit your situation?

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

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

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

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

What happens to all this when you die?

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

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

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

Financial Planning Tips for New Stepparents

August 01, 2016

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

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

Full Financial Disclosure

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

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

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

Managing Combined Cash Flow

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

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

They’re Your Kids Now Too

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

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

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

Create a New Financial Plan

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

Redo Your Estate Plan

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

Keep Separate Assets Separate

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

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

 

Should You Buy Whole Life Insurance?

July 27, 2016

One of my favorite parts of being an unbiased financial planner is that I have the opportunity to answer questions for family and friends as well, with no concern as to whether there is a conflict of interest or a loss of earning opportunity. I love it when people ask me for help making their decisions. It’s what I do every day, and it’s why I’m in this business in the first place.

A friend recently asked for my thoughts on a whole life insurance policy that she was being pressured to buy after meeting with an agent to discuss disability and term life insurance. She was pretty sure that whole life was bad since that was the thing the agent was pushing the most, which is a definite red flag. If someone is trying to sell you something that you don’t understand, and they’re unwilling to take the time to educate you on why it’s the right thing for you, JUST SAY NO. However, in this case, the answer isn’t cut and dry. This is basically how I answered the question:

The big downside to whole life policies is that they tend to have high fees, especially in the first couple years, when the agent makes their big bucks off commissions. (This post explains a little more about the intricacies and the different types of life insurance.) Whole life insurance is most appropriate for higher income people who are wealthy enough that all their other tax-advantaged ways to save money are being fully utilized.This means that:

1. You and your spouse are both maxing out your workplace retirement savings plans. ($18,000 if you’re under age 50, $24,000 if you’re over. The limits can be higher for self-employed people who have a SEP-IRA).

2. If you have an HSA due to high-deductible health insurance, you’re putting the full $3,400 (for individuals) or $6,750 (for families) into those accounts.

3. You are maxing a Roth IRA (using the “back door” method, if necessary and applicable).

4. You have no debt besides a mortgage, car loan, and possibly student loans as long as the rate is 3% or less.

5. You have at least 6 months of expenses set aside in a savings account.

6. You feel like you have enough extra money every month to do the stuff you want to do within your lifestyle values like travel, caring for pets, entertainment, etc. and you can adequately fund things that might pop up like medical procedures, etc.

If all of those financial needs are either met or you’re on track to meet them, and a whole life policy premium wouldn’t derail them, then they can be a decent investment that can fulfill the “fixed income” part of your long-term investments. That’s how the agent I purchased my small policy from described it. I also decided to purchase my whole life policy because there was a strong chance I may not qualify for long-term care down the road due to blood clot issues (and ironically enough, I got a blood clot exactly one week after my policy was accepted for underwriting – timing was impeccable, and my policy had a cheap rider for that coverage). Here’s how we looked at it:

The annual premium for at least the first 5 years is equal to an amount that we would typically be saving in a bond fund or other less-risky investment anyway. The policy builds a guaranteed cash value and based on the projection of the cash value’s growth, we would break even (aka the cash value would equal and then exceed the total amount of premiums we’d paid in to date) after 13 years. The real question then was whether we would otherwise take that money and save it some other way.

Since the answer was yes, we went with making this a small part of our overall investment savings strategy. Once I’m 65, we no longer have to pay premiums and at that point, we could borrow against the policy and use the cash value as we needed. It’s actually a great way to invest tax-deferred, as long as it’s truly looked at as a long-term investment.

Could we take that money and invest it in a bond index fund for lower fees and expenses? Sure, but there’s no guarantee on the growth of that money, and should I meet an early death (heaven forbid!), my policy would pay its full face value starting from the day we made the first premium payment. It’s worth it to us.

Post was updated 3/9/17 for current savings limits.

Kelley Long is a resident financial planner with Financial Finesse, the leading provider of unbiased workplace financial wellness programs in the US. For more posts by Kelley or to sign up to have her weekly post delivered to your inbox each Wednesday, please visit the main blog page and sign up today.

 

 

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?

Want more helpful financial guidance, delivered every day? Sign up to receive the Financial Finesse Tip of the Day, written by financial planners who work with people like you every day. No sales pitch EVER (being unbiased is the foundation of what we do), just the best our awesome planners have to offer. Click here to join.

 

A Basic Estate Plan in 7 Simple Steps

July 15, 2016

What does your current estate plan look like today?  If you said you don’t have an estate plan, you’re not alone. LexisNexis says that 55% of adults in the U.S. don’t have a will in place, but you’re also probably wrong. Here’s why: the state you call home has a plan for your estate if you die without a will, trust, or other legal documents.

If your line of thinking about your estate is “What estate??? I don’t have anything left after my bills are paid” or “I’m single with no kids” or “I’m young and just getting started in my career,” understand that everyone has an estate (regardless of wealth) and should have an estate plan to make sure your individual, family, and financial goals are met. There are a few simple steps that can help you maintain control and protect the people (and organizations) that matter most to you. Here is a simple estate planning “to do” list to get you started:

Step 1: Set goals that matter to you. What do you want your estate plan to accomplish? Are you concerned about choosing a guardian for your children or protecting your kids’ inheritance from your spouse’s next spouse (remarriage happens!) after you’re gone?  Is charitable giving in your future plans? Give your estate plan more purpose and meaning by asking yourself these questions and writing down a list of the things that are most important to you!

Step 2: Evaluate your financial situation. Start by completing a net worth statement that includes a list of your assets and liabilities.  Once you’ve compiled a list of your financial resources, you are in a better position to determine who should receive your assets after you pass away. This step also involves reviewing your life insurance to cover your family’s needs for income, education costs and estate expenses. Reviewing disability insurance is just as important because it provides income protection for you and your family during your lifetime. For more information on life and disability insurance coverage, including needs calculators, visit LifeHappens.org.

Step 3: Have basic documents created. Here is a list of important documents that should be part of almost every estate plan:

  • Will
  • Advanced healthcare directive (living wills)
  • Medical power of attorney
  • Durable power of attorney

This is where your estate plan gets really personal. These important documents help you state your wishes for how to distribute assets when you die, name guardians for your children, and nominate someone to speak on your behalf if you can’t in a medical emergency. Get them done before you need them because by then, it will be too late.

Step 4: Update your beneficiary designations and title assets appropriately. Many people think that once a will has been created their estate planning work is done. That’s far from the truth, especially considering the fact that your will controls ONLY the distribution of assets that are subject to probate (the formal process of paying off debts and distributing property through the courts).

Not everything transfers through probate though. Any account with beneficiary designations such as insurance policies, retirement plans, IRAs, and annuities won’t go through probate. Any jointly owned property or accounts bypass probate as well as accounts designated as payable on death (POD) or transfer on death (TOD).

Step 5: Get organized. Have you ever been late for something and spent time frantically searching your house for your keys, only to find them in your hand? Not fun! Imagine searching for a family member’s bank account information, investment and retirement account statements, will, or key to a safe deposit box without any instructions or guidance during a time of grief.

It always makes sense to get your financial affairs organized. It’s also important to keep a list of online account passwords and digital assets in a convenient location for loved ones to access just in case something happens to you. I have a red folder in my desk labeled “When I’m Gone” with that list, and my kids and a few friends know where it is. Here’s a quick resource for what to consider about your online presence as it relates to your estate plan.

Step 6:  Communicate your plans to those involved in it. Discussing your intentions in advance can help avoid family conflicts and also minimize the potential for any confusion or questions regarding your true intentions. If you have a plan in place but nobody is aware of it, then your wishes may be ignored. If your plan is in place but no one knows about it, is it really a plan?

Step 7:  Review your plan regularly and as major life events occur. Life will undoubtedly throw a curve ball or two our way so it’s essential to review and adapt your plans periodically. Some situations that may require updates to your estate plan include marriage, the birth of a child (or grandchild), disability, the loss of a loved one, divorce, a financial windfall, or the creation or dissolution of a family business. If any of those life events occur, be sure to break out your documents, give them a quick read and highlight areas where a change is needed.

Let’s be honest. Estate planning isn’t always the most exciting topic (it’s quite morbid actually), but it is an important aspect of every personal financial plan. Be sure to personalize your goals and take action NOW so that you have a basic plan, at a minimum, to protect your family and people you care about the most. Some of these other steps are just good solid financial behaviors (not just for estate planning) to allow you to take control of your financial life.

 

Why I Left My Estate Planning to a Professional

July 08, 2016

Just a few days ago, we celebrated Independence Day by doing the traditional American thing – ate, drank and watched fireworks.  Fireworks are fun to watch and the 4th of July is always a great holiday as far as I’m concerned. Most years, I get to either be on a boat or near a marina and we watch fireworks over the water. There are usually two or three displays going on within minutes of each other, so the whole sky is lighting up, and it’s awesome to have some patriotic music playing from the speakers while enjoying the night sky lighting up. Family, friends, food, fireworks – a lot of good F words on the Fourth.

But all is not perfect even in the midst of celebrations. Last year, there were two NFL players who suffered significant injuries related to fireworks on the 4th.  Jason Pierre Paul of the New York Giants lost a portion of his hand in a grizzly accident and CJ Wilson of the Tampa Bay Buccaneers lost two fingers in a similar incident. Too many people are getting injured in at-home fireworks displays.

Not only are they getting hurt physically, financially, it’s a very expensive holiday! Americans will spend $800 million dollars this year. This is up almost $50 million from last year.

So let me wrap my head around this. Fireworks are expensive to shoot off at home (not to mention annoying to the neighbors who aren’t doing the same thing) and carry the risk of injury. Yep, sounds like a great plan! Maybe fireworks aren’t the best idea at home. Maybe it’s time to leave it to the professionals!

Another thing that I’m a fan of letting professionals handle is your estate plan. At one time, just about the only way to get your estate plan prepared was to visit your local attorney’s office. Today, there are a lot of low-priced software packages available at office supply stores,  there are countless free estate planning documents available on the Internet, and there are online companies like LegalZoom that can help you prepare estate planning documents.

Each of these alternatives can be a viable solution if you have very simple needs. But if your situation has more than a couple “moving parts” (kids, second marriage, second houses, owning a business, etc.) an attorney might still be the best option. Here are some basic documents and why I had a professional prepare them for me.

Will – This document lets the world know where you want “your stuff” to go after you die. My will was prepared by an attorney because my kids are still young (20, 17, 14) and if I die, there would be some money on the table from life insurance and retirement accounts. If they have my DNA, they may not become fiscally responsible until they are well out of their 20’s so my will creates a trust that doles out their inheritance at ages 25, 35 and 45 – with 25 being just a small (10 or 20%) dose, age 35 being a bigger slice of the pie and the balance paid out at 45. If they blow the age 25 payout, they will have a decade to live with that regret and the ability to make better decisions at later ages. Add in a divorce and not wanting my ex to get any assets after I die (she got plenty in the divorce), and you can see why working with an attorney was the right choice for me.

Living Will/Healthcare Power of Attorney – These documents nominate someone to talk to your medical team in the event you can’t and detail what life saving measures you want and don’t want taken in the event that you are in a grave condition. The reason that I had an attorney work with me on these documents is…Grey’s Anatomy!    When a patient gets rolled into Seattle Grace (early seasons, Grey-Sloan later) on a gurney, the ONLY thing the doctors are paying attention to is saving that patient’s life. Without getting into too much detail, my wishes aren’t to stick around if I can’t recognize my kids and friends so preserving life at all costs isn’t my plan. THAT is why it made sense for me to work with an attorney.

When it’s time for you to have your documents either prepared (NOW would be the right time if you don’t have them currently) or updated (if your life situation has changed or you have aged by more than a decade), consider the “moving parts” in your life. The greater the level of complexity in your life, the more likely it is that an attorney would be useful in drafting your estate plan. I’m not one who usually defends attorneys. I’m far more likely to make jokes about them, but when it comes to estate planning, let me be the first in line to say that they offer a service that is well worth the fee.

 

Can a Computer Replace Your Financial Advisor?

June 30, 2016

If driverless cars can replace your Uber driver, should a computer replace your financial advisor too? This isn’t just speculation. Automated investing services called “robo-advisors” are becoming more popular and even your 401(k) plan may offer an online investment advice program. Let’s start by taking a look at some areas that computers do well when it comes to personal finances:

Expense tracking. Many people use computer programs like Mint and Yodlee MoneyCenter to track their expenses. This can be very helpful if you don’t have the time or inclination to do it yourself.

Insurance needs. Since there can be a lot of variables, a computer program can be very helpful calculating how much insurance you need, especially with life insurance.

Debt payoff. Computers programs can also calculate how long it would take to pay off your debt and the effect of making additional payments.

Credit analysis and monitoring. Online programs like CreditKarma, Credit Sesame, and Quizzle can provide you with a free credit score, advice on improving it, and free credit monitoring.

Retirement and education funding projections. As long as the inputs and assumptions used in the calculation are reasonable, a computer program can do an excellent job here too. In fact, any human financial planner will probably NEED a computer program to calculate whether you’re saving enough for retirement or education expenses. Of course, there are a lot of unknowns but a good program can help you determine if you’re in the ballpark and allow you to measure your progress over time.

Asset allocation. Deciding how to optimize your investment mix is another task that financial planners typically use a computer for. It’s also the quintessential service provided by robo-advisors. The ability to customize your investments around not only your time frame but also your personal risk tolerance and possibly even to minimize your taxes and complement your other investments is one of the advantages of a robo-advisor over a more simple asset allocation fund.

Investment management. A robo-advisor can also add value to a portfolio by automatically rebalancing it periodically. Some robo-advisors even sell losing investments in a taxable account so you can use the losses to offset other taxes.

Simple tax preparation. Programs like TurboTax, TaxAct, and TaxCut are widely used for tax preparation. However, I would suggest using a professional tax preparer if you have a rental property or a business since there’s some judgment involved in knowing which category to classify various incomes and expenses.

Basic estate planning. If you just need basic estate planning documents like a simple will, a durable power of attorney, and an advance health care directive, you can use a computer to draft these documents and even store them online at little or no cost. If you have a more complex family or estate situation, you may want to hire an attorney to draft a trust though.

Account aggregation. Finally, if your financial life involves a lot of the above, you might want to use an account aggregation program to compile all the info in one place.

So what are computers NOT good at?

Getting you to use them in the first place. For example, our research shows that 76% of employees who are not on track for retirement haven’t even run a retirement calculator at all. The fanciest workout equipment won’t do you any good if you don’t actually use them. A financial planner can be like the personal trainer that gets you to go to the gym.

Motivating you to take action after the calculation. Many people run a retirement calculator but then never actually increase their savings enough to get on track. Some programs use a gamification model that can turn action steps into a game, but they aren’t always effective. A good financial planner can both get you to the gym and make sure you actually do the workouts.

Stopping you from sabotaging yourself. How many of us are tempted to overspend on something we don’t need, to make a risky bet with money we can’t afford to lose, or to bail out of our investments during a temporary downturn in the market? Just like a personal trainer can keep us from breaking our diet or over-training to the point of injury, stopping you from making costly mistakes is one of the most important functions of a financial planner. Even the most sophisticated investors can benefit from at least having a second opinion to bounce ideas off of.

This doesn’t necessarily mean that everyone needs a financial planner. You do need to be honest with yourself though. How disciplined and motivated are you when it comes to your personal finances? If you just need the right information to make decisions, a computer can certainly provide that. If you need more, you might need an actual human being.

 

 

Digital Estate Planning in One Day

June 20, 2016

Recently, a notice popped up when I logged in to LinkedIn asking me if I wanted to endorse my friend Larry for certain skills and expertise. I think so highly of him, and I would willingly endorse him. There’s just one problem. Larry passed away several years ago.

What happens to your digital life when you die? Who can pay your electronic bills, shut off automatic debits to your checking account, and let your Facebook friends know you’re gone or get into your email account? Digital estate planning is the process of answering all those questions in advance, so that your survivors can easily wind down your digital financial presence and continue or discontinue your online and social media presence according to your wishes. A digital estate plan is essential to a well-constructed overall basic estate plan, which also includes a will, guardianship provisions for any minor children, beneficiary selections, an advance medical directive (e.g., living will), and durable powers of attorney for healthcare and finances.

Choose a digital executor

An “executor” is the person who carries out the instructions outlined in your estate plan. You’ll need to identify a trustworthy – and computer-savvy—person to be your digital executor and name them in your will. That may or may not be the same person who is your overall estate executor (who will have final authority over how your wishes are carried out).

Who would you want to control your website, blog or social media accounts after your death? If for some reason they were not available, who would be your backup choice? Make sure your digital executor knows you’ve chosen them as well as whom to contact in the event of your death. Discuss your overall goals for your online presence.

Take an inventory of your digital assets

If something happened to you, what tracks would you leave in cyberspace? Pull together everything in a central list:

Financial:

  • Bank and brokerage accounts
  • Employee benefits accounts, such as 401(k), FSA, HSA, etc.
  • Credit card and loan accounts
  • Other bills you pay online such as utilities, car loan, mortgage or gym memberships
  • PayPal, Apple Pay, Starbucks and other digital wallets
  • Amazon and other retail accounts
  • Cell phone account

Online/Social Media

  • Your blog or website
  • Email
  • Facebook, LinkedIn, Twitter, Instagram, Pinterest, Meetup, Snapchat, etc.
  • Music and video websites (Pandora, YouTube, Vimeo, Sonos, etc.)

Home and Office

  • Security system, heating/cooling, etc.
  • Computer and phone systems
  • Voicemail

Organize and store login information and passwords

This can be nerve-wracking. The best protection against identity theft is not to write your passwords down. Where will you store access information for all these accounts?

Consider a password vault or password manager. This will allow you to create one strong password you can remember and will also prompt you to update your weaker passwords for each of these sites. You would then create a way to get the master password to your digital executor upon your death. Don’t know where to start? PC Magazine compares the top choices here.

In any case, don’t just give the entire account and password list to your attorney to store in their paper files. That is too risky.  Consider an encrypted digital estate planning storage system such as Everplan or Principled Heart. An alternative could be to write them down and then keep them in a safe or safe deposit box. However, make sure your spouse or executor knows the combination to the safe or has the key to the safe deposit box!

Leave written instructions

Take some time to write down clear and comprehensive instructions, especially for websites and social media. What should happen with these accounts if you die? Should they be closed or taken down or maintained in memoriam? Who inherits them? Who manages them?

Check the user agreements of those sites to make sure your wishes can be implanted. Make sure your choice of digital executor is named in your written will. Don’t have a will? Check first with your HR department to see if you have access to a will creation program or legal consultation through a prepaid legal plan or employee assistance program.

Have you created a digital estate plan? What was your experience? Email me at [email protected] or follow me on Twitter @cynthiameyer_FF.

 

The Father’s Day Gift That Keeps On Giving

June 16, 2016

Are you looking for a last minute gift for Father’s Day? Instead of another necktie that he probably doesn’t need, why not a gift that keeps on giving: financial wellness? Of course, none of us can actually give someone financial wellness, but the next best thing would be our CEO’s new book What Your Financial Advisor Isn’t Telling You.

Don’t worry. If your dad is like mine and acts as his own financial advisor, this book could still apply because much of it covers essential personal finance information that financial advisors typically don’t tell their clients like how to build wealth in the first place. (Advisors generally won’t work with you unless you already have some wealth for them to manage.) If your dad does have an advisor, the book discusses how to best work with an advisor, how to know if he has the right advisor, and how to find a new one if necessary. Specifically, here are some topics that would be particularly useful for dads:

Life Insurance and Estate Planning. These are important topics for dads because they’re still typically the primary breadwinners in their families, and men generally don’t live as long as women. To really see the value of estate planning for dads and what specific steps they can take, see this blog post by my colleague Greg Ward.

Basic Money Management:Money is often cited as a top source of stress and an issue that couples fight about. It can be particularly difficult for new parents. Among all the other challenges are the additional expenses and possibly a loss of income if one parent takes some time off work. Having a better understanding of money management can lead to lower stress and more marital bliss for both mom and dad alike.

Investing. In my experience working with couples, the husband usually manages the family’s investments. However, it turns out that most would probably be better off letting their wives handle this since research has found that on average, women are better investors than men. This is because hormones like testosterone and cortisol can contribute to more overconfidence and less patience in men, which leads them to invest more in things they don’t fully understand, take bigger risks, and trade more frequently (which costs more money). Learning more about investing from an unbiased source can help them overcome their biology and become better investors.

What Your Financial Advisor Isn’t Telling You or a similar personal finance book can be a great Father’s Day gift that benefits the whole family. At the very least, it will be sure to cost you much less than the $116 average that people spend on a Father’s Day gift. You can always use those savings to buy him a nicer tie next year.

 

 

3 Lessons I Learned About Insuring A College Bound Kid

May 03, 2016

I was talking to a group of friends whose kids were going off to college. Since I am a late-in-life parent, I was curious to see how they are handling being empty nesters. I expected some tears and sad stories about their kids leaving the nest. Instead, my friends were high-fiving each other that they survived the teen years and deciding what do with their kids’ rooms. They were even talking about going out and celebrating!

Of course, as the financial professional in the group, I had to burst everyone’s bubble. I asked the group if they had talked to their insurance providers about their kids going to college. I  brought this up because of all the lessons my family learned when my nephew went to college.

Lesson #1: Times have changed. When I was in college, my car, TV and computer were worth about $1,000. Today, a kid is going to college with thousands of dollars of electronics between their smartphones, iPads, X boxes and laptops. When my nephew’s dorm room was burglarized, my brother and his wife learned that their homeowner’s policy extended to my nephew’s dorm room but unfortunately, the extension did not cover the amount that was stolen. Contact your insurance company to make sure you have adequate insurance and consider adding additional coverage.

Lesson #2: Moving off campus is a game changer. The second lesson we learned is that when my nephew moved off campus, my brother’s homeowner’s policy did not provide my nephew with any coverage and in our case, a renter’s insurance policy may be needed. Contact your insurance carrier to see if your child will still be covered under your policy if your child lives off-campus. If not, consider renter’s insurance.

Lesson #3: Always update your auto policy carrier about any changes. If your child is leaving his or her car at home, ask about a discount since they will be driving it significantly less. This could have saved my brother and his wife hundreds of dollars in unnecessary car insurance.

Sometimes you may need to pay more though. After my nephew took his car with him to college, he was involved in a fender bender. When my brother contacted the insurance company, they refused to pay because my nephew was using the car for work to deliver pizzas part-time and we learned that he needed additional coverage.

So what’s the bottom line? Whenever you have a major life event, like a child going to college in this case, contact your insurance carrier to make sure that you have the best insurance for your needs. You don’t want to learn any of these lessons the hard way.

 

5 Areas That May Need Some Financial Spring Cleaning

March 31, 2016

With Easter weekend behind us and spring officially in the air, it’s time for some spring cleaning. Don’t forget about cleaning your financial life too. While it’s much easier to see the clutter in your home, the clutter in your finances could have much bigger consequences. Here are several areas that may need some cleaning up:

Your expenses. If you’ve never taken a look at what you spend money on, it can be a real eye-opener. Start by gathering at least 3 months’ of bank and credit card statements and record each expense. You can also use a tool like Mint or Yodlee MoneyCenter to track your spending online for free.

Then go through your expenses and see what areas of waste you can cut. Are there things you’re spending money on that you don’t really need? If you do need it, can you get it in a way that costs less? You can get some ideas for savings here.

Your credit report. It’s been estimated that about 70% of credit reports have errors that could be hurting your score. If you haven’t done so in the last 12 months, you can order a free copy of each of your 3 credit reports (TransUnion, Equifax, and Experian) at the official site: annualcreditreport.com and report any discrepancies. You can also improve your score by getting current on your bills and paying down debt. Just be aware that old debt falls off your credit report after 7 years and making a partial payment or even acknowledging the debt to the creditor can restart that clock so if it’s getting close and you’re past your state’s statute of limitations for being sued by a creditor, you may just want to wait it out.

Your retirement account. Do you have retirement accounts that you left at previous jobs? If so, your overall retirement portfolio may not be properly diversified or you may be paying more than you need to in fees. Unless you have employer stock or are taking advantage of some unique investment option in the plan, you might want to roll those accounts to your current employer’s plan or into an IRA to make them easier to manage.

Your savings and investment portfolio. Many people have accounts they’ve opened or investments they’ve bought for different reasons over the years and now their savings and investments are a cluttered mess. Having 10 different bank accounts or 5 US stock funds isn’t diversification. Here are some simple ways to make sure you’re properly diversified.

Your legal documents. Tax documents only need to be kept for 7 years at the most. After that, you might as well just shred them. Estate planning documents should be checked to make sure they’re still up-to-date. Once your spouse finds out that your ex is still listed as your beneficiary or your youngest child wasn’t included, it may be too late.

How about you? Have you spring cleaned any of your finances? If so, share your experiences in the comments section below.

 

Can Life Insurance Be a Retirement Plan?

March 28, 2016

Listen to the radio these days and you’re likely to hear a commercial promising tax-free retirement income with no stock market risk. If you call a toll-free number or sign up on a website, you will probably get a follow up contact from a life insurance agent who wants to show you how you can use whole life or universal life insurance for tax-free retirement income. Doesn’t that sound too good to be true? Can permanent life insurance really be a retirement plan?

Be very, very cautious. Life insurance is not designed for retirement savings. Permanent life insurance is primarily designed to protect people in your family who rely on your income to maintain their standard of living. The “permanent” aspect means that this insurance protection stays with you for your life, as long as you pay the premiums.

Both major types of permanent insurance — whole life or universal life — include a death benefit component and a savings component. The savings component consists of a policy cash value, the amount of accumulated policy value which would be paid out to the insured if the policy were surrendered early. The “life insurance as retirement cash flow” strategies are based on the insured person borrowing against the cash value of their policy. While it is correct that you may borrow against the cash value in some circumstances without taxes, and that invested premiums grow tax deferred, there are some significant disadvantages.

A Loan is Not Income

A policy loan uses the cash value of the policy as collateral, and the insurance company charges the borrower interest on the loan. The interest is paid to the insurance company, not back to you. The interest rate may be the same, higher or lower than the rate you are crediting on the growth of the policy cash value. Financial planning expert Michael Kitces aptly calls this borrowing strategy, “nothing more than personal loan from the life insurance company.” That’s not real income.

Policy Dividends Helpful But Not Guaranteed

What about dividends? While certain types of insurance companies pay dividends to policyholders (who hold a “participating” policy) when their annual results are good (those dividends can be applied towards future premium payments or used to purchase additional coverage), they aren’t always likely to make profits every year. You may or may not receive dividends.

Potential Tax Problems

If you are eligible to receive policy dividends from a participating policy, they are not taxable. However, strategies that recommend borrowing against cash value life insurance have potential tax problems.  Should you borrow enough of your cash value so that the basis in the policy goes down to zero, you would have to put in more cash or risk a lapse of the policy and having the total outstanding loans included in your taxable income.

No Free Lunch

Another disadvantage of using life insurance as retirement savings are the fees. You’re paying for the insurance component. If you died early, your beneficiaries would receive the full death benefit, so you’ll be charged underwriting costs and mortality charges, etc. Plus you are paying for the distribution of the policy, in other words, commissions.  Someone’s getting paid, and those fees and charges eat into the type of returns you might otherwise earn if you invested the money into buying and holding tax-efficient index funds.

The Bottom Line: Do You Need Permanent Life Insurance?

Consider a life insurance proposal primarily in the context of your estate plan, not your retirement plan. Lifehappens.org has an overview of insurance basics and a helpful calculator to figure out how much insurance you actually need. Does the proposed policy meet your needs of providing for your family should something happen to you? Are you comfortable with/interested in having insurance protection you can’t outlive? How do the costs of this policy compare to costs of policies from other companies with the same face value?

If the life insurance meets those needs on its own merits, then your ability to borrow from it later on is an extra bonus. If paying premiums on this kind of life insurance policy are preventing you from other, more effective types of retirement savings, such as maxing out your tax-deferred retirement plans like your 401(k) and IRA/Roth IRA, that could do serious damage to your financial wellness. If you are on track for retirement, have low/no debt and need permanent insurance, then there may not be any harm. Don’t think of it as a retirement income strategy, however. Think of it as life insurance with access to a personal loan.

Do Your Homework

If you are considering one of the currently popular life insurance cash flow strategies, here are some questions to ask the insurance agent about your proposal:

  • How do you get paid?
  • What are the other fees involved — mortality, underwriting, surrender charges, investment management, etc.  Where can I see them reflected on your proposal?
  • What is the interest rate I’d be charged if I borrowed against my cash value?
  • What is the rate I’ll be credited on my cash value?
  • If I borrow from my cash value, can I repay that at any time? Are interest payments deducted from the cash value, or do I write checks for them?
  • What happens to the policy if I borrow the entire cash value?
  • What is the actual return net of all fees?
  • What’s the worst case scenario? Are there any circumstances in which I could be taxed? Lose money?  Lose my insurance?

How about you? Do you have a personal finance question you’d like answered on the blog? Email me at [email protected] or follow me on Twitter @cynthiameyer_FF.

 

The Insurance Move I’m So Glad I Made

March 15, 2016

If you ever read any of my posts, you probably know that I am a “drive a car until the engine falls out” kind of girl. Unfortunately, that is exactly what happened. I was coming home from the gym, wondering why I keep competing with women half my age, and a car came out of a fast food restaurant without stopping and hit me. I was unconscious for a few minutes and when I came to and was able to think, I thought it was a little strange that the driver of the other car did not get out. When I noticed the car starting, I tried to get the license plate number but it was too late, the car had driven off. Continue reading “The Insurance Move I’m So Glad I Made”

Do You Need Financial Earthquake Insurance?

March 07, 2016

Think of a financial shock that could totally knock you off your feet. That’s a financial earthquake. Unemployment, an illness, divorce, the death of a spouse, the loss of a home or a business – a financial earthquake is unexpected, unpleasant and unwelcome.   Continue reading “Do You Need Financial Earthquake Insurance?”

One Step to Prevent Elder Abuse

January 12, 2016

When I was a financial advisor in private practice, my favorite clients were the elderly. They are so much fun to talk to and I learn so much from their life experience. My favorite group is the “World War II” generation. There is something special about the “generation that saved” the world. However, as they grow older, I realize that it is our turn to save them. Continue reading “One Step to Prevent Elder Abuse”

Financial Rules of Thumb: How Much Life Insurance Do You Need?

November 18, 2015

One of the less fun areas of financial planning is also one of the most important parts: protecting yourself against financial disasters with insurance. Life insurance is even more of a downer to consider because in order to have it pay off, someone has to actually die. Ugh.

Continue reading “Financial Rules of Thumb: How Much Life Insurance Do You Need?”

5 Things To Know About Group Insurance Discount Programs

November 04, 2015

You may not view it as an employee benefit, but discount insurance programs could be a valuable part of your overall benefits package. Employers and other large groups are often able to negotiate much lower rates simply because the risk is spread out over a larger pool than if you just purchased the policy as an individual. Examples of discounted insurance policies you may be able to realize through work include homeowners or renters, auto, umbrella and even pet insurance. Here a few things to consider about these perks: Continue reading “5 Things To Know About Group Insurance Discount Programs”

How I Coped With My Husband’s Unexpected Death

July 31, 2015

It seems like yesterday but I know that’s just my mind playing tricks on me. I’m approaching the ten year anniversary of my husband’s death but at times it still seems like it happened yesterday. I’ve learned so much about myself, other people and life these past ten years. My hope is that this has not been in vain and my story can help someone else.

My husband was only 40 years old and seemingly in great health when he suddenly collapsed and died on a hot summer afternoon. In the blink of an eye, I was a young widow with two little kids. I was working part-time since we had recently moved for his new job, which required him to travel for long stretches of time.

Not only did I lose my best friend and father of my children, but also our source of income and health insurance. The following years were dark and extremely difficult. I felt lost and alone even though many good people were around me. Now however I can look back and see some of the lessons that I’ve learned.

Hope for the best but plan for the worst

We knew several families where one spouse died unexpectedly and left the family financially devastated so we were determined not to make that mistake. Soon after our twin daughters were born, we met with an insurance agent and bought term life insurance for both of us. As my husband’s career and income grew, he increased the amount of coverage through his employer.

This strategy was a cost-effective way to protect our family against the unlikely odds that he would die young. Thankfully, we had the discipline to do this. Now our family has the financial resources to maintain our lifestyle and meet our goals of paying for our daughters’ college education.

Lesson: It’s never fun to talk about death but it’s something we all need to prepare for. If you have someone dependent upon your ability to work, buy enough life insurance to replace your income. This calculator can help you determine how much is needed then check with your employer to determine how much supplemental insurance you can purchase there.  Most times, it is more cost-effective to buy a standalone policy and then supplement the rest with your employer’s group coverage.

Get help

I have an engineering degree and had been in the financial services industry for 4 years, but I struggled to help my daughters complete their 5th grade math homework after Larry died. I was unusually forgetful and felt like I was in a dense fog. It was clear that I needed professional help, emotionally and financially, so I found doctors to help me and my daughters deal with our tragedy. Fortunately, I worked for some amazing financial planners and they helped me set up my finances for the long term.

Lesson: Don’t let pride stand in your way of recovery. We were never meant to do life alone. Sometimes we get hit with a curve ball and the smartest thing we can do is get assistance. Check with your HR department to learn about your employee assistance program. Most offer free initial counseling sessions and referrals to local professionals for longer term assistance.

Ask the local Salvation Army, Red Cross or large local churches for assistance with immediate financial needs. If you are overwhelmed with debt, contact a non-profit credit counseling service affiliated with the NFCC to help you develop a strategy for unloading that burden. And if you need financial advice, look for a fee-based CERTIFIED FINANCIAL PLANNER(TM) professional who has the credentials, training and experience to guide you towards your goals.

The journey begins with the first step

I didn’t want life to continue after my husband died. I couldn’t imagine how I’d make it through the week let alone Christmas, the kids’ birthdays and our anniversary. Those days were excruciating but I learned that it was better to face the situation than hide from it.

A friend suggested that I plan constructive activities on the tough days and create new, happy memories and so that’s what I did. My daughters and I choose to celebrate Larry’s birthday (and not his death) by baking a German Chocolate cake from scratch – his favorite. We then share the cake with friends and family and laugh the time away telling funny stories.

Lesson: Life can knock you flat on your back. Spend time there for a moment to gather your wits, then get up and take a step forward. If you are struggling with debt and cash flow, set up a budget using Mint or YNAB.  Then choose a debt repayment strategy such as the “debt snowball” method or paying the highest interest rate debt first. Even applying an extra $25 a month is a big step forward!

Be open to new adventures

Three years later, I was presented with an opportunity to go back to school. I was intrigued but didn’t think it was the right time. A good friend told me, “In five years you will be five years older but what will you be able to say you accomplished? Might as well say that you did this!”

Well, I took her challenge, completed my studies and earned my CFP® designation. Along the way, I have met so many new people and find myself doing what I absolutely love here at Financial Finesse. I found my professional calling and wouldn’t have been here if it hadn’t been for my friend’s prompting and my willingness to go in a new direction.

Lesson: Try something new today. Join a book club. Go to that belly dancing class. Determine if your employer has a tuition assistance program and take a college course. Prioritize your savings so you can nurture your passions and do the things you’ve always wanted to do.

I would never volunteer for the pain my family experienced with Larry’s passing. However, I know we are stronger and more compassionate because of our journey. We’ll open a bottle of fine wine, toast the man we knew and loved, shed a few tears and then laugh the evening away with old stories and talk of new adventures. Happy anniversary!

Want more helpful financial guidance, delivered every day? Sign up to receive the Financial Finesse Tip of the Day, written by financial planners who work with people like you every day. No sales pitch EVER (being unbiased is the foundation of what we do), just the best our awesome planners have to offer. Click here to join.