The Top 5 Mistakes People Make When Paying Off Debt

June 01, 2016

As someone who has dug myself out of credit card debt a couple times, discussing the best way to get out of debt isn’t just some academic exercise. It’s sharing what worked for me, considering the fact that nobody’s perfect. However, in the process of working with people who are struggling with credit card debt, I’ve noticed some common mistakes they make that if avoided, could really accelerate the arrival of their Debt-Free Day. Here are five ways people mess up their debt pay-off plans:

1. Neglecting to address the root cause of the debt first. Most credit card debt stories start one of three ways:

A job loss that doesn’t lead to any spending cuts
An accumulation of unexpected expenses like vet bills, travel for family emergencies, car repairs, etc
Reimbursable work expenses that come in after the bill is due and aren’t applied against the balance

Before you can really implement a debt reduction plan, you have to first address the reason you got into debt in the first place. This is typically a lack of an emergency fund compounded by living beyond one’s means.

First, you have to find a way to make sure you’re spending less than you make each pay period, while also setting aside an amount each month to build up that emergency fund. This might require temporarily canceling services like cable, taking a break from dining out or even selling a lesser-used car. Then find a way to stay within your means using something like the No-Tracking Budget.

2. Continuing to use cards while paying them off. I have seen so many people try this, thinking they would just pay off the new charges each month plus an added amount toward the old balance. It’s often driven by a desire to earn credit card rewards like airline miles or cash back. I don’t care what kind of record keeping system you try, this never works, and the resulting extra interest far exceeds any rewards you earn. You have to stop using credit cards in order to pay them off. No way around it.

3. Using low interest promo offers to pay off old cards, then running up the new card. When done correctly, using cards with promo balance transfer offers can be a great way to expedite your debt pay-off plan. Where it goes completely off track is when people either continue to use the card that was paid off or when they use the new card for purchases, thinking they might as well take advantage of the low promo rate. (See point number 2. If you really want to get out of debt, you have to stop using debt in order to get there.) Then use the Debt Blaster calculator to make your plan.

4. Worrying too much about their credit score. There are multiple factors that affect your credit score, but carrying a balance on your credit card is not required to boost your score. It’s the ratio of your balance to limit and the timeliness of your payments that matters. Besides, your credit score really only matters when you’re trying to borrow money and sometimes when applying for a new job. When working on a debt pay-off plan, the primary number you should be focused on is the total balance of your debt (and making it go down), which will naturally improve your credit score.

5. Making payments willy nilly. When little windfalls occur such as tax refunds, work bonuses or even income from a side gig, it’s a great idea to direct that money toward paying down debt. But I often see people just randomly throwing this extra money at balances without looking at the overall picture. When you find yourself with unexpected extra cash, first make sure that you have a little safety net in place to help in times of unexpected extra expenses. Once you have the safety net in place, go back to your Debt Blaster calculator and see where the payment will have the most impact on your pay-off timeline. That’s what the “New Lump Sum” field is for.

Above all, the most successful debt pay-off plans start with an actual plan. Figure out how much you can afford to pay each month toward the debt, then treat that lump sum amount like a fixed bill until all the debt is gone. Once you’ve paid it all off, you’ll already have a nice amount that you can direct toward saving for other goals.

The 3 Most Important Things Resident Physicians Can Do With Their Money

May 25, 2016

Updated for 2019 numbers

You’ve made it through eight grueling years of schooling, been accepted into a residency program, and you finally have a salary. Even though the average salary for a first year resident is a little over $50,000, it can still feel like hitting the lottery. It’s easy to start thinking about how you’ll spend that money on luxuries you’ve postponed like a nice car or an apartment in an upscale neighborhood while deferring your student loans until you’re making real money in your chosen field. After all, your friends who chose business or law have been living it up through their 20’s and you’re ready to join them.

Not so fast

Before you find room in your budget for things you may not be able to enjoy to the max while working 80+ hours per week, first make sure you’re setting yourself up for optimal financial success. I’m not saying you shouldn’t treat yourself to that luxury car you’ve been dreaming of ever since that first day of class, but first make sure you’re making the most of the savings opportunities you may not have available after residency.

I ran these past my physician husband just to make sure I wasn’t being unrealistic and he agrees. Here are three really important things you should set up before you make your residency budget.

1. Max out your Roth IRA. Take advantage of your lower salary by contributing the full $6,000 allowed into a Roth IRA. There are income limits that could eventually prohibit you from depositing to this account (they start at $122,000 for single people in 2019), so use it before you lose it. A Roth gets money into savings after tax, then allows the money to grow tax-free for life. For eventual high income earners, it’s especially critical to contribute while you can and you’re young, when the money has lots of time to grow.

2. Start paying your student loans. It can be tempting to postpone those payments as long as you can, but I caution against waiting until you feel like you can better afford it. First of all, you’re probably going to be working so much over the next three to four years that you won’t really miss the money, but second of all and more importantly, you’ll avoid throwing money away on interest. It’s all about making your money work harder for you, and using it to pay down loans with an interest rate of 6% or more in some cases can even exceed what you might earn investing the money.

3. Contribute at least to the match in your hospital’s 401(k) or 403(b) plan. Just because you don’t plan to stay at your residency hospital for the rest of your career doesn’t mean you can’t or shouldn’t participate in their retirement savings plan while you’re there. You get to take that money with you when you leave.

Most hospitals offer some type of match for employees who contribute and unless they have a longer than average vesting schedule, that match will be yours when you’re done as well. That’s free money, so don’t pass it up. If you can afford to save more than the match, consider doing so. Time is on your side right now and the more you can save while you’re young, the more the effect of compound interest will have on your future savings.

Becoming a physician in the first place is a great way to ensure a prosperous future for yourself and your family. But even doctors are prone to over-spending and under-saving, especially as the competing costs of real life (buying a house, kids, college, travel, etc.) set in after residency. By buckling down for these last few years, you can doubly ensure your long-term financial security. After all, I’ve never had anyone tell me they regretted saving more money.

3 Ways To Help Your Student Qualify For More Financial Aid

May 18, 2016

For parents with their eldest child just finishing their freshman year of high school, the end of the school year may not trigger thoughts of paying for college yet. After all, you’re more likely dealing with helping your child find a summer job or even more daunting – teaching them how to drive. However, for parents who may have large non-retirement savings that could have the effect of reducing their child’s financial aid package, the time to act is now.

The Free Application for Federal Student Aid, or the FAFSA, is completed using income tax information from two years BEFORE your student graduates (called the “base year”), which starts with the second half of your student’s sophomore year. In other words, parents of the Class of 2019 or later: there’s still time to protect some of your savings from being considered in the federal aid package. Here’s how:

1. Max out your retirement savings. Any money you contribute to your 401(k), 403(b), IRA, etc. during the base year is added back to your income for financial aid purposes, but if you can afford it, try to front load your retirement savings in the years leading up to it in case you have to dial it back in order to pay for college. Max out your 401(k) and even consider funding a non-deductible or “back door” Roth IRA. In other words, get used to living on less while turbo-charging retirement.

2. Transfer savings in your kid’s name into a 529 account. Savings held in your child’s name are counted at a higher rate on the FAFSA than funds held in a 529 plan, even if the 529 is in the name of your student. If your child is definitely headed to college and has money in a custodial account or their own name, consider transferring any amounts that would be used to pay for schooling anyway into a 529.

There are a couple caveats to this though. Keep in mind that earnings on money in a 529 that is withdrawn for anything besides qualified education expenses is taxable plus a 10% penalty, so it’s not a place to shield savings for the future. Only shift money that you will actually pay toward tuition. Second, 529 plans have fees associated with them, so make sure you evaluate that as part of this decision. We really like savingforcollege.com as a resource in comparing plans and options.

3. Use savings to pay down your mortgage. If you have non-retirement savings that don’t have a specific purpose other than long-term savings, you might want to use some of that to pay down your mortgage to reduce the Expected Family Contribution. Some schools will ask for the amount of equity in your home when evaluating institutional aid, but for federal purposes, it doesn’t count.

Granted, these moves probably won’t be the difference between qualifying for need-based aid or none at all. But if you don’t wish to use a large portion of your savings for college bills or if you’re prioritizing retirement savings over education funding (a good priority), these moves can help increase the amount of federal loans that your child is offered, even if you opt not to take them. After all, every penny counts.

7 Things I Didn’t Do When I Was in Debt

May 11, 2016

It may surprise you to know that since graduating from college, I’ve dug myself out of credit card debt not once, but twice. The reasons I got into debt are best saved for future posts, but both times I got out because I reached a point where I basically put the cards away and settled in for the long haul of paying it off. In both instances, becoming debt free again involved some significant lifestyle sacrifices. Here are 7 things that I do today, some big and some small, that I DIDN’T do when I had debt:

1. I didn’t take cabs. One of the things I love the most about living in Chicago is that there are literally at least four ways that I can get from one place to another. When I was facing a $12,000 credit card balance while trying to build a business and working a minimum-wage retail job in 2011, I rode my bike everywhere. If I couldn’t ride, I took public transportation. Riding in a cab was out of the question unless my personal safety was in question. These days I’m more inclined to hop in a cab to save time or if I’m tired, but I still try to avoid paying to get from place to place if I don’t have to.

2. I didn’t go on vacation. This is a tough one, especially since I had a sense of YOLO exacerbated by the fact that I have some pretty major personal travel goals, but part of the reason I was in debt was due to meeting some of those goals. Sure I went places. Friends and family got married and I didn’t miss that, but I’ll always remember the time a close friend got married in Florida and while I attended the wedding, I was unable to extend the visit into a real vacation because I couldn’t afford the extra nights in a hotel or the time away from work. These days, we plan ahead for travel and don’t go if we can’t pay ahead of time.

3. I didn’t shop at Nordstrom. I honestly didn’t even know what the inside of a higher-end department store looked like until I was debt-free. If I needed to buy clothing, I shopped at discount outlets or Target. It didn’t feel right to me to spend money on luxury brands while I was still paying down debt. Now I’m more of a Nordstrom Rack aficionado but only if I can turn around and pay off the charge card the day after I shop.

4. I didn’t drink $12 per glass wine. When I went out with friends, I usually stuck to cheap beer or limited myself to one glass of wine before attempting to move the party to a BYOB situation. Nothing sucks up extra money like alcohol and while these days I can afford to be picky about what I drink, I definitely couldn’t afford to be a wine snob when I was debt-ridden.

5. I didn’t get my nails done. To me, having manicured fingers and pedicured toes is a luxury. And while no one can make my nails look as nice as a pro, this was not a “need” in my book while I was in debt. I did my own or occasionally traded my mom for a good foot rub. (We still do that!)

6. I didn’t get massages. I am well-aware of the health benefits of a good massage and during my years of credit card debt, a fair share of birthday and Christmas gifts were massages, but it was not something that I scheduled on a regular basis. If I could afford a massage, I could afford to pay more on my debt.

7. I didn’t get my hair colored. I’ve been coloring my hair since the age of 25, and I really appreciate having a colorist fill in my roots every 6 weeks or so. Back in the day though, I did it myself with color kits purchased at BOGO sales at the drug store.

This is what worked for me and my values and it may not work for you. But if getting out of debt is a top priority, then I encourage you to take a look at where you’re spending your money and see if you can cut out one or two of these things in order to increase your payment. For motivation, plug it into the “New Monthly Amount” of the Debt Blaster calculator to see how much sooner you can be debt-free.

How to Teach Your Kids About Money

May 04, 2016

A recent survey on kids and money revealed that 4 out of 5 Americans believe that an allowance helps to teach children the value of money and financial responsibility but only 68% actually pay an allowance. With student loan debt growing at an average of over $2,700 PER SECOND, it’s essential that kids enter college with a baseline of knowledge so they know what they’re getting into with this debt. If you’re not modeling good behavior for your kids, you may be setting them up for financial stress down the road. I don’t have kids yet, but I have a lot of plans for how we will ensure that they set themselves up for financial success. Here are some ways to teach your kids (or nieces and nephews) about money before they have to start making important decisions on their own:

Start early: As soon as kids learn how to ask for things (or start throwing themselves screaming on the floor of the grocery store because you won’t buy candy), they can understand the concept that they have to wait to buy something by saving up for it. Instant gratification is a problem that plagues humans for life, but teaching kids how to delay it is a predictor of future success. Whenever your child receives money, have them add it to a jar or piggy bank and consider keeping a paper record to instill banking knowledge as well. Every so often, help her count to see how close she is to her goal. Help keep her eye on the prize by explaining how much closer she is to reaching the goal with each addition.

Explain trade-offs: Once your child enters school, he is ready to learn that when you spend money on one thing, you’ll have less to spend on another. Use grocery shopping as a way to demonstrate this. Give him a budget for his own treats, and then as he’s making his selection, explain how buying expensive yogurt might not allow him enough to also buy his favorite juice boxes. Share your own financial decision making as you’re shopping for the household as well.

There are also a bevy of free web-based money games out there. Try the Great Piglet Challenge or Kids.gov for a variety of fun games. Heck, try them yourself. (I’ve yet to conquer the Great Piglet Challenge!)

Consider an allowance: Whether or not you think kids should “earn” money through household chores or if you consider pitching in to be a part of family life, an allowance is a great way for kids to learn how to spend and save. You can also explain how compound interest works once kids reach the “tweens” stage. Use real numbers and say, “If you save $1 per day starting now, you could have over $26,000 by age 65. But if you wait to save until you’re 30, you’ll only have about $15,000.” This may make it easier to talk your tween out of buying a daily sugary snack at school and instead save the money toward a new video game.

Consider college costs: Whether or not you’ll be able to afford to send your kids to the college of their choice, discuss how their decision will affect you financially. If your child will require financial aid in order to pay for school, share your own struggles with debt as a way to explain the consequences of student loans. And don’t shy away from having them take a part-time job to save toward spending money in college. Understanding how hard it is to earn money will make them appreciate the value and think twice about blowing it all on beer and pizza…just most of it.

Drive their own decisions: Once your teen is ready to start driving, instead of just handing her the keys and crossing your fingers that she’ll drive safely, put some of her skin in the game too. My parents had me take care of my own car insurance when I got my first car, which was a great way for me to learn several money lessons. Instead of doing it for me, my mom had me call their insurance contact to ask to be added to the policy. The agent walked me through the additional costs and I handed over money to my dad each month to pay my share.

If I was late or short paying, my car was parked until I paid up. I not only learned how to budget for my bill, I was empowered to take responsibility and when it came time for me to get my own solo insurance policy, I knew what I was doing. Thanks, Mom and Dad!

Most importantly, it’s vital to model good money habits for your kids. We all have our own money stories – our personal frame of reference based on our own experiences growing up around money. For most of us, the biggest influence in our stories came from our parents. Set your kids up for success by rewriting your own story to one of success and financial security.

How to Get the Best Deal On a Car

April 27, 2016

My first car was a beat-up 1987 Ford Tempo that I called Shirley Tempo (nerd alert!). I paid cash to a family friend who had been using her as a loaner at his auto repair shop. Shirley got me around town in high school but when I went to Kalamazoo for college, my dad helped me negotiate for a slightly newer Geo Metro (aka “Ginny Geo”) – a car that could make the 200 mile trip without breaking down. By senior year, Ginny’s radiator was shot, the door locks didn’t work and my mechanic deemed her “unsafe to drive.” Needless to say, I was anxious to get a “big girl” car now that I had a “real job” upon graduation.

As soon as I returned from my graduation trip the summer after college, I found myself at the Saturn dealer test-driving a fully loaded coupe. Of course, I was in love and I signed a lease on the spot for Sally. Fast-forward a few months when my student loan payments kicked in and I was wishing I’d done a little more shopping around for that car. Sally was super fun to drive, but her payments were WAY outside my budget.

As my husband and I begin shopping for a bigger car now that his sedan is starting to wear out, we are being much smarter about this purchase. Here are some of the tips we’re using to find the best deal on a new ride:

Shop at the end of the month. The car sales guy actually told my husband this. They have quotas to meet, so if you head to the dealer toward the end of the month when the pressure’s on to meet that quota, you should be able to negotiate a few thousand more off the price. That could be a negligible amount to the dealer, but a nice chunk in your bank account.

Consider buying certified pre-owned. You’ve probably heard that a new car loses more than 10% of its value the minute you drive it off the lot. By getting in line as the second owner, you are paying significantly less for an almost-new car that still has warranty protection.

Know the wholesale price. If you just can’t resist a new car, at least know what the dealer paid for it. This is easy to find now by searching the make and model of your dream car along with the phrase “factory invoice price.” That way if the sales person tries to tell you they’re “losing money on this deal” when you’re negotiating (and you should at least try), you’ll know if they are trying to pull as fast one.

Remember that a car is NOT an investment. A car is what we CPAs call a depreciating asset. This is financial speak for it loses value over time and unless you’re a car collector, you will be selling the car for less than you paid for it. Remember that when you’re thinking about financing. (Try to pay as much in cash as you can).

Get full value for your trade-in. We took our car to CarMax and they gave us a trade-in estimate for no cost. This is just a best guess, but gives you a starting point when negotiating with the dealer. Edmunds and Kelley Blue Book are good online sources and you might also take it to a dealer to see what they will offer you. Depending on the make and model of your car, the dealer may be seeking used cars. SUVs are particularly hot right now due to low gas prices.

Don’t get cheap and choose an insurance deductible that’s too high for your savings. If you have a $2,000 deductible, you should have $2,000 on hand in case something happens. Use these best practices from my colleague Tania, who learned the hard way to make sure you’re properly covered.

Finally, as exciting as buying a new (to you) car is, try not to be impulsive. Take your time in researching and test driving to make sure you’re getting the best deal while also making a purchase that fits your lifestyle and budget. That new car smell fades pretty quickly. A too-high car payment takes a LOT longer to wear off.

Choosing Investments is Like Choosing a Pizza

April 20, 2016

When financial planners talk about how to invest your money in the market, we often discuss dividing it up among stocks, bonds and cash (also known as your asset allocation). But then when you actually go to make your investment choices, there’s a chance that not one of the options will have the word “stock” or “cash” in it. One of the most confusing things about investing and financial instruments is the fact that there are so many words that mean the same thing. For example: stock, equity, share, capital, blue chip, mid cap, small cap, large cap …they all generally refer to the same thing: ownership in a public company. Likewise, bonds, fixed income, municipals, T-bills, etc. are all referring to similar debt instruments used by companies and governments to finance operations and projects.

I often think that if more people understood that many of the financial terms we hear refer to the same thing that there would be a lot less stress around investing and everyone would feel more comfortable taking advantage of the growth that investing in the markets can offer. So I thought I’d try instead to describe a metaphor that is near and dear to my heart to try to make it easier to understand the different options out there: pizza. When it comes to pizza, there are four main options for how to get a delicious pie onto your plate (on a sliding scale of cost and effort) similar to the options available for investing for long-term goals:

Make your own from scratch
Buy pre-made frozen
Pay someone to deliver it to you, ready to go
Have it served to you at a restaurant

Each level requires a different amount of money and effort. Choosing how to invest money in the market is similar. Here’s how it compares:

1. Make your own from scratch. Making your own pizza requires skill, knowledge and practice, but once you know what you’re doing, it’s the least expensive and can be the most delicious. My husband has mastered the art of homemade pizza, starting with dough he makes from scratch, but it took a couple of years and LOTS of practice (and worthless pizza) to get it right.

To me, this is similar to researching individual stocks and mutual funds and buying them through a discount broker. You have to know what you’re doing or you can end up with nothing, but people who know what criteria to look for and how not to take too much risk can really grow their money. For investors looking to learn the art of DIY investing, start with money you can afford to lose and start reading. The book “Grande Expectations,” was what brought home to me how the stock market really works and why buying the hottest name stock or fund isn’t necessarily the best investing strategy.

2. Buy pre-made frozen. Putting a frozen pizza in the oven and knowing exactly when it’s done (and exactly how long to let it cool so that it doesn’t burn the roof of your mouth) requires some skill and it’s still a pretty cheap way to go. The investing equivalent would be using index funds or ETFs to create your own investment mix. This requires that you understand how to create an asset allocation that is appropriate for your timeline and risk tolerance, but with a little understanding of what the different indices are, it’s pretty simple to put together a decent mix. The trick is knowing when to make changes as time progresses and also knowing when NOT to make changes (for example, not selling when the market tanks and re-balancing even when the market is hot).

3. Pay someone to deliver it to you, ready to go. Minimal effort but a little bit more money. You have to pay to get it to your door, after all.

The investing equivalent would be target date funds. You don’t have to do anything but pick one and let it ride. No pizza or investing knowledge required, you just pick the one that fits you the best (for target date funds, that’s the year that you expect to need the money such as your retirement age).

4. Have it served to you at a restaurant. Paying for someone to make your pizza and serve it to you piping hot along with beverages is similar to paying a financial advisor to manage your investments for you. You can describe what flavors you like and your server will help you pick the best pizza combo.

It’s the same thing with your financial advisor. She’ll listen to your goals and risk tolerance and then suggest an investment mix that is appropriate for you. Along with that, your financial advisor should look at how your investments fit into your overall goals and make suggestions for any changes to support those goals, much like a server at a restaurant might suggest the best beer pairing or salad to start. This is definitely the most expensive option, but if you want a little more hand-holding with your investing, it’s worth it.

In my experience, most people are delivery-types (target date funds will do the trick) but because they’ve heard you should diversify and not just hold one thing, they often think that means they need to choose more than one fund. It’s important to know that a target date fund is already diversified. Just like a pizza is the perfect assembly of crust, sauce, cheese and toppings, a target date fund can be broken down into the perfect mix of large cap, mid cap, small cap, international, fixed income, money market and sometimes even commodities – the fancy way of saying stock, bond and cash funds. But instead of you having to figure out how much of each to select, that decision is made by experts who specialize in asset allocation – just like the pizza chef knows the best mix of ingredients according to the type of pizza you ordered. Now, who’s hungry for pizza?

5 Songs That Could Ruin Your Finances

April 13, 2016

I love how music can pump you up, calm you down, soothe a broken heart, bring back old memories and generally set the tone in any situation. Ever notice yourself singing along while grocery shopping? That’s not on accident. Those songs are strategically selected to make you stay longer and buy more.

There are lots of great songs out there that have positive money messages (here are 5), but there are also plenty that send the wrong idea to listeners. At the risk of sounding like a boring fuddy duddy, I came up with some financial guidance to help solve these artists’ money blues. Try not to make these mistakes with your money:

Last Friday Night – Katy Perry: There are plenty of things mentioned in this song that moms everywhere wouldn’t approve of, but the part about maxing out your credit cards is what gets me. First of all, you don’t have to max out your cards to have fun and second, you definitely won’t be doing it all again next Friday without some serious financial discipline during the week to pay down the balance. Just in case, here’s our Debt Blaster calculator to help reign in that debt, Katy.

Time Of Our Lives – Pitbull: I actually understand what it’s like to take a look at your bank account balance and know that there’s not enough in there to cover upcoming bills. What I’m not a fan of is going out to “get up in this club” and blowing what money you do have when you know your rent is going to be late. If Pitbull just used the No-Tracking Budget to make sure he has enough set aside to cover bills, I bet he could pay his rent on time AND still have a good time.

Mo Money Mo Problems – Notorious BIG: I said this phrase to a friend in jest once, and he shot back with, “I bet the panhandler down the street would disagree.” That really made me think. It’s true that lottery winners and other people who strike it rich tend to have people coming out of the woodwork asking for money, and the whole idea is that we wouldn’t have these problems if we didn’t have money, but let’s not confuse that with thinking if you didn’t have money, you would have fewer problems. They’d just be different problems.

One of my favorite bits of wisdom to share is that if we all threw our problems in a big pile and could pick any ones we wanted, we’d all take our own back. Remember that the next time you get stressed about your finances (even if it IS a lack of having enough) and remember that it could always be worse. Shift your focus to what you DO have and you just might be surprised at how you begin to see more of those good things in your life.

If I Had A Million Dollars – Barenaked Ladies: So if you actually had a million dollars, you probably shouldn’t buy a llama or an emu. Here are some things you could do though: pay off debt, establish your emergency fund, max out your 401(k), or do something fun and then save the rest for the future. DON’T quit your job unless you’re pretty close to retiring already.

Just Got Paid – ‘N SYNC: One thing I could conclude about this is that Friday night is a bad night for your finances! Seriously though, I know plenty of people who celebrate “Paycheck Friday” with a “treat yo’self!” attitude and then spend the rest of the week complaining that they’re broke. It’s fine to cut loose and celebrate the weekend. Just make sure you’re putting something aside for the future, paying your bills and saving for budget-breaking expenses before blowing the rest on Friday night.

What about you? What are your favorite money songs? Share them with me on our Facebook page or email me and I’ll include them in a future post.

5 Songs That Are Good For Your Money

April 06, 2016

I love a good playlist. I have one for driving, one for doing cardio, one for cooking dinner, and even one for blogging. So to celebrate National Financial Capability Month, I’ve curated a short playlist of money songs that have a positive financial message for your listening pleasure.

Thrift Shop – Macklemore: Obviously you can save money by thrifting as long as it’s not an excuse to shop and spend money but instead to buy things you need for less than full-price retail. Otherwise, it’s no different than loading up the cart at TJ’s on things just because they’re bargains even if you don’t need them. This song tops the list because it’s also a good reminder that if you’re donating to thrift shops, make sure you’re making the most of the tax deduction.

No Scrubs – TLC: This is in line with Chapter 6 of our CEO’s new book What Your Financial Advisor Isn’t Telling You. How a person handles money is a key indicator of how they do life, so good money management is a sign of personal responsibility and accountability. Want someone who makes excuses and complains but never buckles down and does what it takes to improve? Then go for a scrub.

Billionaire – Travie McCoy featuring Bruno Mars: Don’t we all wanna be billionaires pretty frickin bad? But seriously, you don’t have to be a rock star who packs stadiums in order to have a comfortable lifestyle. First, make sure you’re not pre-spending like you already are a billionaire. Then run the numbers.

One recent calculation says that Millennials are going to need $1.8 million to retire comfortably. At Financial Finesse, we prefer to base the amount needed on replacing a percentage of your income, as our Retirement Estimator calculator does, so don’t let that $1.8 million paralyze you. If you’re 30, you’d need to save about $800 per month at an 8% average annualized return to get to $1.8 million at age 65. That’s doable, and hey, you’ll at least be a millionaire! That’s not so frickin bad.

B*tch Better Have My Money – Rihanna: The lesson here? Don’t lend money to family and friends. And if you need to borrow, people you actually like or are related to should be a last resort. But if you must go there, make sure you protect yourself and your important relationships by making it a formal agreement.

Nothin’ On You – B.o.B. featuring Bruno Mars: I just can’t resist the line about “plus you pay your taxes.” I’ll be honest. I hate paying taxes just as much as the next guy and I take full advantage of any tax rules that minimize what we have to pay. But taxes are part of our responsibility as citizens of this great country and we all have to pay them, so no excuses. Pay your taxes.

How about you? What are your favorite money songs that send the right kind of message? Shoot me an email at [email protected] or send me a tweet at @kclmoneycoach. And stay tuned for next week, when I’ll share the top 5 money songs that are bad for your finances. Any guesses what they’ll be?

Are You On the ‘If I’m Lucky’ Retirement Plan?

March 16, 2016

The other day, a friend asked me if contributing 18% of her salary into her 401(k) was enough to be saving for retirement. Instead of giving a simple yes or no answer as was expected, I had to answer with a question of my own, “Are you on track to retire?” Finding the answer to that question can seem complicated, but it doesn’t have to be. And unless you actually know whether or not you’re on track, it’s tough to make other financial decisions that may compete for your dollars. Continue reading “Are You On the ‘If I’m Lucky’ Retirement Plan?”

Did You Contribute Too Much to a Roth IRA?

March 09, 2016

Updated June 14, 2017

One of the downsides of the Roth IRA is that there are income limits that preclude high income earners from contributing to these accounts. But for people on the cusp or for those who unexpectedly end up earning more than they planned (or who get married during the year and only discover after the fact that they now exceed the limits), it’s actually quite common to find out after they file their income taxes that they were actually ineligible to contribute the year before.

Luckily, the IRS understands that this can happen so there are ways to fix it, but you have to take certain steps to minimize the tax consequences and avoid penalties. Here are your choices if you contributed to a Roth IRA and then found out later that you were ineligible for the contributions because you made too much money in the year of contribution: Continue reading “Did You Contribute Too Much to a Roth IRA?”

Living Paycheck to Paycheck? Here Are 4 Places to Find Money

March 02, 2016

One of the things I love the most about living in a big city is that we are the first ones to have access to innovative products and services like Uber, Instacart and Flywheel. Whenever I start to daydream about moving back to the quiet of a small town like the one I grew up in, I have to remind myself that I’d be giving up things like the option of having my groceries delivered from Trader Joe’s or the variety of workout options I can choose from each week. (I currently teach BODYPUMP^TM and have credits at Zen Yoga Garage and Flywheel.) If I want to live where you can hear the grass grow and the need to carry Mace is laughable, I won’t be able to be so picky about where and how I get my sweat on. Continue reading “Living Paycheck to Paycheck? Here Are 4 Places to Find Money”

5 Ways You’re Messing Up Retirement in Your 20’s

February 17, 2016

I know how far off retirement seems when you’re bogged down with student loans and credit card debt while being more concerned about buying a house and having kids (let alone putting THEM through college) in the coming years. Retirement seems more like something your parents and your boss should be worried about. I’m right there with you! But I also know that whether or not you are actually able to retire in that distant-feeling future can be a direct result of your financial behavior in your 20’s. Here are the 5 things that I see 20-somethings do that can really mess up their chances for a comfortable retirement. Continue reading “5 Ways You’re Messing Up Retirement in Your 20’s”

The Number One Reason Couples Fight About Money and How to Stop

February 10, 2016

70% of fights within couples are about money according to a Money magazine poll, which really doesn’t surprise me. That’s one of the reasons our new book, What Your Financial Advisor Isn’t Telling You: The 10 Essential Truths You Need to Know About Your Money, dedicates a whole chapter to love and money. What surprises me is that so many people I talk to about this are unaware of the underlying issues that lead to these fights. Very rarely is it actually about the money. In my experience, it’s usually more about a difference in values relating to money.

Continue reading “The Number One Reason Couples Fight About Money and How to Stop”

5 Reasons You Shouldn’t Use Your Phone to Manage Your Money

January 27, 2016

A common request from users of our Financial Helpline is for money management app recommendations. I haven’t found one yet that I love, so I’m always on the lookout for new ways to make it simple and painless to track expenses, stick to a budget and save more money. In other words, I’m in search of the My Fitness Pal for money.

Continue reading “5 Reasons You Shouldn’t Use Your Phone to Manage Your Money”

The Easiest Way to Save On Your Taxes

January 20, 2016

I think one of the reasons these mid-January and February days are so dreary is that it’s also tax time. Your mailbox and even your email inbox these days are being graced with tax forms, reminding you that preparing your income taxes is looming over your head. One of the reasons I dread tax time is because I can no longer procrastinate getting my records organized, and in doing so, it inevitably adds a bunch more to-do’s to my list of things I’d rather not be doing in my free time. Continue reading “The Easiest Way to Save On Your Taxes”

Thinking of Adopting a Pet? Read This First

January 13, 2016

If you’re thinking that it’s time to give in to your kids’ begging or your inner Dr. Doolittle and join the ranks of pet parents, make sure you’re prepared financially to deal with your new fur baby. There are ongoing costs and other things to consider. The cost of a pet, particularly a dog or cat, extends well beyond the adoption fee, which is relatively small when you add up all the other costs that come along with pet ownership.

Continue reading “Thinking of Adopting a Pet? Read This First”

The Number One Budget Breaker and How to Avoid It This Year

January 06, 2016

Happy New Year! One important step in setting financial goals is establishing or reviewing your budget. After all, how can you tell your money where to go if you don’t know where it’s been? Continue reading “The Number One Budget Breaker and How to Avoid It This Year”

Start 2016 Right With This Reflective Exercise

December 30, 2015

As I reflect on the past year, I have plenty of personal milestones to celebrate (getting married and starting my career at Financial Finesse top that list), a couple things to mourn (my family lost two of our beloved pets), and quite a few more things to keep working on (this WILL be the year that I get back into those designer jeans!). Spending some time performing a “year in review” can be therapeutic. Recognizing how far you’ve come, even if you’re not quite where you want to be yet, is important to keeping you on the path to your goals. Continue reading “Start 2016 Right With This Reflective Exercise”