Beware Black Friday ‘Deals’

November 23, 2018

As we see the full retail advertising onslaught and stores open ridiculously early for Black Friday (some are even opening on Thanksgiving Day now, which I find appalling), please try to remember a couple of things:

1) This is the time of year when emotions can override logic and overspending can occur. I have spoken with countless people who end up with a sizeable chunk of credit card debt because of holiday spending. Go into the shopping season with a list (wow, I’m becoming my mother!) of who you are buying gifts for and set a budgetary target. Then, stick to those targets. Those Black Friday “deals” may not seem like such a deal if they have 19.9% interest tacked on to the balance next summer.

2) The people in your life, if they are anything like me, will be happier to spend time with you than they are with any gift that you might buy. I’d wager that if you think back over the last several years, you probably can’t remember what you bought for each person on your list or what they bought for you. It’s a season of friends, family and togetherness – not retail profits.

Drink some cocoa, enjoy your friends and family – and have a safe, fun, and financially secure holiday season.

Can Being Grateful Actually Make You Wealthier?

November 21, 2018

It’s my favorite time of year, and not just because my birthday falls amid the hubbub of the holidays (ok, maybe that’s part of it). I just love the coziness, the family time, the decorations, the traditions and of course, the food. One tradition that I look forward to every year is how my family goes around the table before the Thanksgiving meal to say what we’re grateful for – it was something my Grandmother started decades ago that we all carry into the homes we share for the meal today.

It’s always so renewing to spend time thinking about what I’ll say – there have been years when there didn’t seem to be a lot to give thanks for, but after focusing on what’s good, some of the bad stuff seems less impactful. It turns out that this family tradition could really be about more than a moment of family sharing. There is scientific evidence mounting that the simple practice of giving thanks can have myriad positive benefits in life. In fact, a regular practice of gratefulness can actually help with your finances.

What is gratitude?

First, it’s important to understand that gratitude is actually made up of two parts, according to Robert Emmons, Ph.D, who is considered to be the leading scientific expert on gratitude. The first is what most of us already know: it’s an affirmation of goodness in our lives, even when there are things going wrong. An example is giving thanks for the love of family and friends, even if you’ve recently lost someone close to you.

But the second part is where it can really manifest in more of what you really want. It’s recognizing that the sources of that goodness come from outside ourselves. It means we realize that the gifts for which we are giving thanks came from other people or in some cases, a higher power, should you believe in one. We can certainly appreciate the traits we have that help us in life, but real gratitude is the humble acknowledgment that much of what we have is due to the generosity and goodness of others.

How does it work?

Dr. Emmons has found that gratitude brings several benefits: increased happiness, stronger relationships, less anxiety, longer sleep, and better overall health and resiliency. It’s that final piece, resiliency, that can really help you find more financial success when you’re able to quickly bounce back from setbacks such as earning too little, spending too much or finding yourself overwhelmed with debt. Gratitude also helps block negative emotions and helps you to quickly find solutions and get working on them. With that in mind, here are three ways to add more gratitude to your daily life, all year long.

1. Keep a daily gratitude journal. My friend Ellen Rogin observes in her book Picture Your Prosperity that people who were overspenders in her practice talked a lot about what they didn’t have in their lives, while good savers talked about what they were thankful for. In one study, people who kept a gratitude journal reported increased well-being, better health, more exercise, and increased optimism. I know Oprah is a big fan of this!

When we acknowledge and give thanks for what we do have, instead of lamenting what we don’t, we open ourselves up to receiving more of what we want. As you’re keeping your journal, think of the positive aspects of your finances. Perhaps you are working to pay down debt, but you can still give thanks for the ability to make your payments on time each month.

2. Foster an attitude of abundance. Don’t just write about what you’re grateful for. Expect more of what’s good and it will appear. The Law of Attraction says that what we focus our attention and energy on will manifest itself in our lives.

I experienced this myself. When I was first working to dig myself out of credit card debt, all I could see was how long it was going to take me to pay it off and I was preoccupied with what else I could be doing with that money. I was on the financial struggle bus. But when I shifted my mindset to placing my debt payments in the category of “just another bill,” and trusted the plan I had put together, I was better able to enjoy the money I wasn’t spending on debt and actually found myself able to pay off the debt sooner than I’d planned.

3. Give some away. Hopefully you already know how great it feels to give to others, but research by Arthur Brooks, Ph.D., finds that as people give more, their incomes actually increase. Of course, people who make more give more, but Dr. Brooks found that as people’s charitable contributions increased, so did their income. A study comparing two similar families where one family simply donated $100 more than the other, found that the higher-giving family will earn an average of $375 more income that year than the other one!

It sounds a little crazy, but consider this: giving money away or spending it on others has a tendency to make you feel more wealthy. This causes you to feel happier, and greater happiness tends to lead to greater career success, so there you have it. Want to get promoted? Maybe it’s time to start giving more freely to those not yet at your level.

Why not try it?

The best part about all of this is that focusing on being more grateful really doesn’t take that much. And even if you don’t find yourself immediately swimming in abundance, I’ll wager you’ll feel better no matter what. Can you really put a price on that?

Why I Hate Black Friday

November 19, 2018

I admit it. I am a huge fan of Dr. Suess’ How the Grinch Stole Christmas. The original animated classic from 1966 narrated by Boris Karloff, that is. It is truly one of my holiday favorites, along with Charles Dickens’ A Christmas Carol; specifically the 1999 TV movie version featuring actor Patrick Stewart as Ebenezer Scrooge. Yes, I do own them both on DVD, and they come out of their cases each year right about the same time I trot out my favorite pumpkin pie recipe for Thanksgiving.

♫♪♪ ♫♪ You’re a mean one… Mr. Grinch! ♪♫♪♫

Based on this introduction, you might get the idea that Christmas is not my favorite holiday. That’s not true. It’s not the holiday that I hate. It’s all the needless, crazed, (over) spending that takes place, not to mention all of the “noise, noise, noise noise” (advertising), to quote my holiday hero, Mr. Grinch. Nor am I anti-capitalist. I love capitalism. I just love it in a calmer, more controlled, responsible way.

So, why my disdain for Black Friday – the day after Thanksgiving; the Super Bowl of shopping days? Here are a few reasons:

  • Low inventory of “deals,” or sometimes only one at that great Black Friday price.
  • Retailers who mark stuff up just to mark it down.
  • All of the pushing, shoving, and generally rude shopper behavior.
  • You probably have the day off (unless you work retail). Why get up so darned early on your day off?  (Unless you are going fishing).
  • Perhaps most importantly – getting ensnared by the sales hype can become a budget buster!

People get so caught up in the momentum that budget discipline often goes out the window, credit balances soar, and the New Year is considerably less happy when those bills start showing up. Last year, for instance, Americans on average ran up more than $1,000 in additional credit card debt due to holiday shopping. Worse, almost one third of them estimated they would be still paying for the gifts they bought well in to May.

Bah. Humbug. 

So, what are some alternative things to do instead of shopping, getting trampled, stressed out, and blowing your budget before you’ve enjoyed that last leftover turkey sandwich?

  1. Do absolutely nothing. It’s Friday AND a holiday. Enjoy the time off. You’ve earned it. (I plan to be fishing that day).
  2. Ring a bell next to a kettle. Help serve some meals. Feel good by doing good.
  3. Go camping. Unless you live where it snows (make a snowman?). I live down South, and November is perfect camping weather!
  4. Get a massage. No stress there.
  5. Get a head start on next year’s budget/financial plan/insurance review, etc. You’ll have it out of the way and you can enjoy the rest of the holiday season without that little voice in your head nagging you about how much you’ve neglected your personal finances. A good place to start is by requesting a free copy of your credit report from annualcreditreport.com.

Make regifting great again

I’m not suggesting we alienate friends and family and do away with holiday gifts altogether. Let’s just put a little more thought and strategy into it. For example, there is a group of people in Ashland, Oregon, who celebrate with an “Abundance Swap,” bringing things they don’t want and exchanging them for stuff they do want or need. It’s an interesting and fun twist  on socially acceptable regifting. And why is there so much stigma about regifting; don’t we recycle everything else already? For more great alternative and fun gift ideas, check out BuyNothingChristmas.org.

This year, let’s take a break from the nonsense of Black Friday sales and Cyber Monday online deals (you are supposed to be working, anyway). In the end, we will all be much wealthier, healthier, and happier. Now who wants another slice of pumpkin pie?

How To Manage Your Finances If You Hate Dealing With Money

November 09, 2018

Do you sometimes know what to do with your money but still don’t take action on that knowledge? A recent financial coaching discussion reinforced the influence of the “knowing – doing” gap. It also helped illustrate how the gap between our financial knowledge and actual money-related behaviors can sidetrack progress towards important life goals.

The story of Maria

Here was the situation. Maria (not her real name) is a recently divorced mother of two who was struggling to balance making payments on her student loans, car loan and credit card bills with a desire to begin saving for unexpected expenses and most importantly to her – retirement. She knew that despite the fact she still had enough income to meet her family’s basic needs, there wasn’t much breathing room and something needed to change.

Maria used spending tracker tools like Mint.com in the past and she understood that an emergency fund would help her break the cycle of living paycheck to paycheck. She also understood how important setting aside money for retirement and her children’s future education costs are during this season of life.

When we know what to do, but still don’t do it

Maria’s biggest obstacle wasn’t knowledge. It was avoidance. Money arguments are often linked to divorce and her prior marriage seemed like a constant wave of disagreements about how to best manage their finances. Avoiding money matters became her coping mechanism of choice. As a result, she put her credit card payments on auto-pay and didn’t really know how much debt she had accumulated since the divorce was final.

How we become money avoiders

In general, money avoiders tend to view money as negative and a source of fear, anxiety, or possibly even disgust. Money avoiders often have beliefs that wealthy individuals are greedy. They also tend to develop thoughts that they don’t deserve money or that money is bad (and quite possibly the root of all evil) so it’s not okay to accumulate more wealth during your lifetime than you will actually need.

Money avoiders may experience conflicting beliefs that having more money and wealth could improve their life satisfaction, self-worth, and social status, while at the same time believing all the negative things. This belief system can create a tug-of-war between feelings of contempt toward money and wealthy individuals to placing too much emphasis and value on the role of money during their life journey.

Money avoidance can involve both “doing” and “not doing” things. Not surprisingly, money avoiders have difficulty organizing financial statements and frequently struggle discussing money matters. It may seem like a no-brainer suggestion to simply get organized, but money avoiders are pretty darn good at…well…avoiding!

Are you a money avoider?

This financial coaching scenario isn’t unique. Money avoidance is a common obstacle on the path to attaining an authentic sense of financial wellness. You may be a money avoider if any of the following are true:

You have financial denial

This occurs when we tend to minimize our money problems or try to avoid thinking about financial matters altogether rather than accept and deal with our financial realities. People with issues related to financial denial have trouble opening bank or credit card statements. They don’t see the need for a financial plan. Money avoiders also struggle to communicate with their partner about money and have a tendency to avoid savings or building wealth.

Symptoms:

  • Frequent late fees
  • Regular overdraft charges
  • Accumulating significant debt
  • You don’t open your statements

You have financial rejection

Have you ever known anyone who appeared to feel guilty about having money? People who reject money, another sub-group of money avoiders, often feel that they do not deserve good things in life. Accumulating money is viewed as an undeserved gift. This is a common money-related problem that some people experience after inheriting large sums of money.

Symptoms:

  • Rapidly spending an inheritance
  • Actively avoiding the acquisition of wealth
  • Taking an unconscious vow of poverty
  • Giving money away to your own detriment

You have difficulty spending money

Living within your means and spending less than you make is considered a best-practice behavior. At the extremes, this can become a potentially self-destructive financial behavior. These spending difficulties common among money avoiders are often based on seemingly irrational feelings of fear or anxiety. They may also be accompanied by self-sacrificing tendencies and a sense of guilt whenever they spend money.

Symptoms:

  • Guilt over spending money
  • Excessive frugality even when you have money available
  • Spending money causes physical pain

You avoid risk to an excessive degree

Some people would rather do nothing than lose anything. Risk avoidance may come in the form of how people choose to invest. Risk avoiders tend to focus on things such as market risk rather than why they are investing in the first place.

Symptoms:

  • You keep your retirement savings in cash or the lowest risk option, even when you have more than 10 years to go
  • You have large amounts of cash set aside that are way more than enough to cover emergencies
  • You check your investment accounts daily and obsess over every market movement

How to overcome money avoidance

Let’s go back to the original financial coaching scenario. Maria acknowledged having a long history of trying to avoid money. Ignoring bank account and credit card statements and refusing to open statements from her 401(k) provider were just some of the symptoms. Maria was essentially sabotaging her financial success. Here are some steps Maria started taking to move into the direction of meaningful change.

1. Start talking about money and life. (Reframe how you think about money.) Maria was encouraged to think about her own money story and the experiences that helped shape her beliefs about money. She also started identifying ways to challenge money scripts that were supporting her avoidance of money matters.

2. Make a list of “SMART” life goals. In order to get Maria focused on her financial plans, the core focus of her coaching discussions centered around her life. She dedicated time in between her roles as mom and employee to establish meaningful goals that were Specific, Measurable, Achievable, Relevant, and Time-Bound. This helped her prioritize the things that mattered the most and filter out some of the noise and distractions.

3. Express gratitude. Maria began a gratitude journal and committed to writing down 3-5 things she was grateful for each day. Shifting her attention to the “gifts” that she was grateful for in life provided a new sense of appreciation of what was good about the world and her life. This was a refreshing alternative to focusing on what was wrong in her financial life.

4. Commit to daily check-ins and weekly check-ups. (Start small.) Reversing over a decade of financial avoidance doesn’t just change with the flip of the switch. Maria decided to use her bank’s spending tracker app to monitor where her money was going. After breaking through the fear of the unknown, she dedicated 45 minutes to reviewing where her money went over the last 3 months.

The next day, she used this information to begin setting some spending limits for the next 2 weeks. She set an alert on her phone to remind her to log into her online banking app at the same time each day during her lunch break. This helped her increase the overall awareness of her financial situation and made her weekly spending plan reviews easier to stick with.

5. Focus on the quick wins first. The last thing money avoiders like Maria want to worry about is a list of 20 things to do to take control of their financial life. That would be too overwhelming. Instead, she was encouraged to take small steps such as checking her credit report, logging into her 401(k) account and gathering her credit card statements. Small wins helped her build up the courage to start finding solutions to her lack of financial wellness.

6. Seek out professional guidance and social support. Maria had already started to seek out the financial wellness coaching services offered by her company as an employee benefit. Her financial wellness plan also included self-care for emotional well-being to help her deal with the aftermath of divorce. Maria is still working to build her social support network and gradually feels more comfortable talking about her finances in a proactive manner.

The best news is that Maria is no longer a money avoider. She is now turning knowledge and awareness into an actionable plan that will continue to improve her sense of financial wellness. What step(s) will you or the money avoider in your life take?

 

A version of the post was originally published on Forbes.

The Thing That Retirees Regret The Most And How To Avoid It

November 08, 2018

It is said that no one on their death bed ever wished they had worked just a little longer. The same may not be said for U.S. retirees, however. Among average earners, Social Security payments are likely to make up more than half of their retirement income. The odds seem pretty good that more than a few of them wish they had worked a little longer – or at least waited longer before claiming their Social Security benefits.

Maturity and Social Security

As a financial planner, I spend much of my time talking with people about their concerns regarding retirement. One of my favorite questions to ask is, “At what age do you plan to claim your Social Security retirement benefit?” More often than not, they tell me, “As soon as I can get it,” which is age 62 (unless you are a widow or widower, then it can be as early as 60). While earlier may not always be better, they have plenty of company. As many as 57% of recent retirees chose to claim this benefit prior to full retirement age, locking themselves into a lifetime of 25%-30% smaller Social Security payments.

Claiming Social Security early may turn out to be one of your biggest regrets in retirement.

A recent study conducted by the National Bureau of Economic Research concluded that early Social Security claims are linked to increased likelihood of living in poverty in one’s old age. Why do so many people willingly limit themselves to a smaller Social Security payment, when they could be receiving so much more by waiting a few more years to claim? Oddly, only about 4% of retirees delay collecting Social Security beyond their full retirement age.

Why people retire when they do

The reality is people retire and claim Social Security retirement benefits for a variety of reasons. A combination of individual circumstances, knowledge, economic conditions, and even personal emotions influence our decisions about retirement. While some factors are largely uncontrollable, two of them – knowledge and emotion – are well within our ability to master.

Employers downsize, family members require care, or our own declining health forces us to leave behind the world of work, company benefits, and steady paychecks. Not having sufficient emergency savings or a backup plan for retirement would be regrettable when these unforeseen events happen.

What they regret

Our personal economics also can drive retirement decisions. Waiting too late to contribute to a retirement plan can lead us to regret working longer than we expected. Hoping our health holds out long enough to catch up (and really regretting things if our health falters), or carrying large amounts of debt for many years can drag down our ability to save and invest, leading to more retirement regret.

The combination of what we do or don’t know about retirement can shape our decisions. For example, everyone “knows” the typical retirement age is 65, right (or is it 62)? Not so fast. The Social Security retirement age for full unreduced benefits has changed. Depending upon your birth year, it may be as late as 67. Accordingly, the age at which you claim Social Security can make a significant difference in your retirement lifestyle.

Getting in touch with your emotions

As you might imagine, emotions (positive and negative) also play a role in making regret-free retirement decisions. For example, the mere fact that Social Security is available at age 62 (though reduced by 25%-30%) can influence how we feel about working at that point. Work may suddenly seem optional – we now have a guaranteed way to receive money without working, which appears to encourage earlier retirement.

As with most major decisions, though, letting our emotions be our primary retirement guide can lead to more regrets later. What if I do live to be 95 years old, like the folks at Livingto100.com recently suggested? Do I want to be stuck with the smallest possible Social Security check for 30 years?

No regrets

The emotional or “affective behavior” aspect of retirement decisions has and continues to be of great interest to me; so much so that I made it the subject of my doctoral dissertation regarding the influence of emotional states upon Social Security retirement decisions. My own research concluded that a combination of both emotion and education can have a measurable effect upon when people choose to make important retirement decisions.

What you can do to make the best decision for yourself

Fortunately, among the many factors that influence retirement, our knowledge and our emotions are two conditions over which we also have some individual levels of control. Among the many retirees whom I’ve counseled and guided over the years, those who eased most successfully into retirement:

  • Made time to be as informed as possible, reading up on their own, consulting with trusted financial professionals, or utilizing their financial wellness benefits at work. They sought knowledge.
  • Tuned into their emotions. I’m not going to get all touchy-feely, but it is critical to recognize when our feelings begin to overshadow our logic and lead us down decisional paths that may not be in our best long-term interest.

The American Psychological Association encourages people to consider their psychological portfolios along with their financial portfolios when preparing for retirement. My financial planner colleague, Doug Spencer, also recently wrote about ways to be mentally prepared for retirement which includes even more tips on how to fill your retirement with more memories and fewer regrets.

Why I Will Stop Giving My Kids Money Once They’re Employed

November 07, 2018

One of the topics that comes up on our Financial Helpline is employees looking at options to provide financial support for their adult children. Often parents are calling to explore ways to get at their retirement savings (either through a 401(k) loan or other withdrawal) to help their kids navigate challenges they are facing. I guess I shouldn’t have been surprised then to learn that this study found parents spend twice as much on their adult children as they save for retirement. I knew they were helping them, but I was stunned!

I would never tell anyone how to parent and, as a father of two daughters, I get that parents would do anything for their kids regardless of the cost. However, it got me thinking and I thought I would share some of my own story to help shed some light on this issue.

Mom and Dad to the rescue!

As a young professional fresh out of grad school, I was living and working in Los Angeles. While I was making a livable wage, I found the cost of living in LA was putting me in a tight spot every month financially. I found myself using credit cards to pay for my entertainment (which was more than I care to admit as a single guy in LA) and even some necessary expenses. Before long I was calling the bank of Mom and Dad asking for a “loan” to help me get by each month.

As many parents would, they agreed to help me out. I wish they would have said no. Sounds strange, but by bailing me out, I didn’t have to learn how to manage my money. This became a real issue later as I had an emergency come up and I had to ask for a sizeable chunk of money that resulted in my parents dipping into a retirement account to cover for me. While I have since learned to manage money on my own and repaid my parents – the embarrassment I felt still is fresh in my mind. The last thing I wanted was to hurt my parents’ ability to retire, but I wasn’t mature enough at the time to think about the difficult position I was putting them in.

What it means for my kids

I would have been much better off had my parents simply told me that they could not help me out and that part of being an adult is to learn to manage my finances more responsibly. This would have made me a better money manager much earlier in life, because I would have had no other choice.

So, when I think about my two young daughters, I know it will be a different story. Instead of handing them money when they are adults, I plan to serve them now by teaching them about saving for the things they want, living below their means, and sacrificing what they want right now to have what they want most. Not because I don’t love them and wish to see them struggle, BUT because I do love them and want to see them start their own lives with the tools necessary to manage their finances.

My hope is this will help them be grateful for the things money can afford them AND appreciate the hard work necessary to earn a living. I know they will struggle as young adults just like I did (and like most of us do), but by helping them with a spending plan and healthy money habits rather than giving them money, they will learn earlier in life how to better handle their finances. While I am beyond grateful to my parents for their help, I wish they would have done the same for me.

As the old saying goes, give them a fish and they eat for a day, but teach them to fish…

If you are struggling with the tension of trying help your kids without damaging your own finances, hopefully my story will help. Believe me, helping them learn good habits will benefit them much more in the long run than any short term gift or loan can!

This Money Belief Is What Keeps Many People In Debt

November 06, 2018

One of the most interesting things I’ve learned from having the opportunity to discuss money with people from all walks of life is how much of an effect that our deep-seated money beliefs have on our financial outcomes. One of these beliefs is how we perceive whether or not we need to buy something – some people buy what they can “afford,” while others go with what they actually need. I know, because I used to embody this belief.

Little decisions that are actually a big deal

Every day we make little decisions like whether to take the bus or hail a cab or whether to cook dinner versus order delivery that aren’t really just about time and/or a willingness to go the “tougher” route – how you make these decisions is actually a key determinant of your financial situation. It’s how even people who make hundreds of thousands per year end up riddled with debt and with very little savings (true story, I know people like this).

What it looks like

This really struck home with me recently, when I met up with friends who had taken the subway and walked about a half mile to the place we were meeting – a minor inconvenience versus just getting dropped off out front. These are people who could easily afford the $10 it would cost to hire a ride, but their mindset is, “Why spend the money if we don’t have to?”

On the flipside, I’ve heard people joke that they’re “too poor” to own a car, but not “so poor” that they have to ride the bus. The irony is that I own a car and yet I take the bus all the time – finding the economical way to accomplish life is not just about whether or not you can afford it, it’s about spending according to what you need – it’s a mindset.

Why it’s a big deal

This may not seem like a big deal – saving $10 here and there on transportation around a city is not going to make or break your ability to retire, (although there is an argument that it might – see this calculator) but that mindset where your spending decisions are made by whether or not you can afford something, versus whether you really need to spend the money is what’s so dangerous.

Many people use the “affordability test” when deciding what kind of car or house to buy – just because you can squeeze $450/month out of your budget in order to make a car payment doesn’t mean you need that nice of a car. Likewise, the feeling of being “house poor” often originates from someone buying what they think they can afford, which is really much more than they need.

How this mindset had me living paycheck-to-paycheck until my 30’s

I can get a little lecture-y on this, but that’s only because I’ve been there – until about the age of 32, I was caught in a loop of saving and spending that was keeping me on the edge financially, no matter how much or how little money I made. I lived in the nicest apartment I could afford and bought my last new car based literally on what I had left over in my bank account each month, not based on what would allow me to work toward other goals of escaping credit card debt and building up an emergency fund.

What changed for me

The thing that revealed this psychology to me was when I found myself needing dental work that required an up-front payment in excess of $5,000, which of course I didn’t have. Without a second thought, I charged it to a credit card, then started aggressively paying $300 per month toward the balance until it was gone. My “aha” moment was when I realized that I was able to “find” $300 per month toward a payment, but prior to that I somehow didn’t feel like I could “afford” to save that same amount.

Once I paid that balance off, I immediately added an automatic deposit to my savings in the same amount, which eventually lead to a real emergency fund. Seeing the balance of that account hit $1,000 lead to a shift – having a comma in my savings account relieved a burden of financial stress I didn’t even know I was carrying.

The key take-away

It was a crucial lesson, that translated to literally every other payment I had in my life. In the past, whenever I had a payment end, such as paying off my car loan, I always found a way to replace that payment, like moving into a more expensive apartment. If I could go back in time, I’d stop 30-year old Kelley and tell her to instead stay in the cheaper apartment and stop paying for things just because she could afford them and instead talk to her about living within your means according to what you need, versus what you want or can afford.

The next time you find yourself making a financial decision with the reasoning that “it’s what you can afford,” stop and ask yourself if it’s also what you really need, or if it might make more sense to keep that money in your pocket. The way I talk myself out of spending in these situations today is to remind myself that every dollar I don’t spend today is a dollar that can help me stop working sooner.

3 Things About Halloween That Apply To Your Money As Well

October 31, 2018

While shopping for Halloween costumes for our kids recently, I started thinking about what we can learn from Halloween as it relates to our money (yes, these are the things I think about). Bear with me on this one. When you really think about it, it makes sense.

How Halloween & your money are related

There’s more than one way to do it

Do you have a neighbor that goes all out for Halloween with lights and decorations? (Maybe you are that neighbor.) Or maybe you really like going out with the kiddos or passing out candy to the trick-or-treaters. On the other hand, maybe Halloween just isn’t for you and you make a point to keep your porch light off on October 31st. The point is that there is no right or wrong way to enjoy Halloween – it’s whatever works best for you. And when it comes to your money, there is no wrong way to manage your finances either, as long as you’re on track to meet your goals.

The key is finding the tools and process that works best for you. Some people like to track every dollar spent and check their investments very regularly. Others prefer to track spending at a very high level and rarely check in on their investment accounts. Still others find a way to do it that requires very little hands-on activity. If you haven’t found a way that works for you, keep trying new ways. If you are living below your means and taking action to reach your goals, there is no right or wrong way to do it!

Don’t eat all your candy right away

As kids, it is really hard to have the discipline to not eat all of those Halloween treats right away. In my house, we take the candy haul and hide it from our kids and give it to them over time. As adults, we need that same discipline when it comes to our finances. Whether it is impulse buys, taking vacations we can’t afford, or just living beyond our means in general, we need to find a way to enjoy our money without spending it all at once.

Having a spending plan in place and sticking with it over time allows us to make the most of our income to reach our financial goals. Like any new skill, this takes time and practice. It is ok to have slip ups and setbacks – that is a healthy part of learning and is natural. Just like we know eating a lot of candy in one setting is not healthy, we can ensure our spending reflects what is most healthy for our finances in the long run. Perhaps the key for you is to find a way to “hide” money from yourself!

It’s usually more fun than scary

The excitement of a good scare in a haunted house is something a lot of us enjoy. Unfortunately, many people I speak to on our Financial Helpline are scared by the prospect of improving their finances. But once they start taking small actions, they find the progress they make to be empowering and fun. Reaching goals (and rewarding yourself when you do) leads to setting bigger goals.

Being in control of your money is fun and rewarding. And the best part is, no matter where you start from, you can do it! While it may be scary at first, getting started really is the hardest part.

Happy Halloween!

How To Escape A Financial House Of Horrors

October 30, 2018

Sometimes our finances become so scary they make us want to close our eyes and wish away all the monetary mayhem. Unfortunately, financial denial only makes things worse. Here are some ideas to help chase away those financial boogeymen for good.

When a financial nightmare becomes reality

I was speaking with an employee the other day who reminded me just how easily we can slip into serious financial trouble when we let a few things slide. In this case, what started out as seemingly good idea to consolidate some student loans a couple of years ago in exchange for a smaller monthly payment was later accompanied by creeping credit card debt, followed by some back taxes owed to the IRS, a short sale on the family home, child support payments slipping into arrears, and basically an ugly financial monster of debt, fees, late payments, low credit scores, and garnishments that became just too horrible to look at anymore.

Rather than face down these monetary monsters and escape the nightmare, the person became defensive and began to ignore the growing financial burden. Although he paid just enough to keep bill collector zombies at bay, he no longer had any idea of the balances owed, how much was being charged in interest, or when (if ever) he might be able to pay off these debts. He had become detached from financial reality, and who could blame him? He was trapped in a financial horror show.

Financial worries haunt us

Money worries in general are fairly common. According to the American Psychological Association’s (APA) annual Stress in America report, over one-third (34%) of adults are haunted by worries over unexpected expenses. One quarter (25%) of Americans feel stressed and tortured by the struggle just to make ends meet for essential expenses. While we cannot escape worrying about money from time to time, how we choose to react to financial stress can either help us or hurt us.

How you deal with it makes a difference

Some people manage stress by exercising, practicing yoga, or meditating. These are great ways to help us feel better and avoid letting stress overwhelm us to the point that we are unable to take action. Others turn to less healthy alternatives: smoking, alcohol or other forms of substance abuse, along with good old fashioned denial. Avoiding things that make us feel uneasy is a common and natural reaction, but not always a healthy one.

Denial doesn’t make the financial ghouls go away

Unfortunately, ignoring the financial boogeymen in our lives will not make the money problems go away and very likely will make them worse. How can you tell if you are only procrastinating versus denying your financial reality? Here are some warning signs:

  • Unopened bills and financial statements are piling up.
  • You consciously avoid thinking or talking about money.
  • You have no idea what your net worth might be.
  • You are afraid to check your credit score.
  • You blindly let your spouse handle all of the finances.

How to get rid of the financial issues that haunt you

Ultimately, financial stress is best resolved by eliminating the source of the stress. It’s time to face down those money demons and “G-Y-F-S-T!” – Get Your Financial Stuff Together. Some other ways to help you exorcise those pesky financial demons include:

  • Find a friend. This could be your spouse, significant other, family member, or someone else you trust. Talking things over can help you put things in perspective and take inventory of what you can do to turn things around. Plenty of professional help is available as well:
  • Create a plan. If you have several money monkeys on your back, don’t try to tackle all of them at the same time. Pick one to focus on for now, preferably the one that makes you most uncomfortable. Among the many things Mark Twain is famous for saying, his advice on eating frogs applies here (do it now, and start with the biggest one).
  • Grab some tools. Anyone who’s watched an episode of The Walking Dead knows not to take on a zombie bare handed. Technology makes it fairly easy these days to get free help with budgets, debt reduction calculators, retirement estimators, credit reports, credit scores, and more. Pencil, paper, and spreadsheets still work too.

Most importantly, keep at it. Once we are willing to shine a bright light on our financial monsters, they don’t look quite so scary and eventually you can make them go away forever.

Everyday Things You Can (& Should) Negotiate

October 18, 2018

Is everything negotiable? It’s not a part of the American culture to negotiate much, but you’d be astonished at what you can bargain for if you think outside the box. Negotiating prices is both an art and a learned skill. Those who do it the best often pay less than the rest of us for typical expenses.

Recently Katie Warren, a reporter for INSIDER, asked me for some ideas on costs you can negotiate, and I crowd-sourced responses from our team of CERTIFIED FINANCIAL PLANNERS™. I was floored by what they suggested: who knew you could negotiate so many things? Read Katie’s article for Nine Surprising Things You Can Negotiate To A Much Lower Price and check out these amazing money-saving tips from our planner team:

Auto repairs

When our blog/content editor and planner, Kelley Long, recently learned that she needed a new hose for her beloved MINI’s air conditioning, she debated making the repair versus trading in the car. When she took it in for the repair and before signing the estimate, she decided to risk asking, “is that the best you can do on price?” “I was pleasantly surprised when the manager stepped right in, played with some numbers and came back at about 75% of the previous estimate,” observed Kelley.

“I was at a dealership service center too, not a mom-and-pop place. I will never again pay the first price I’m quoted!”

“Mechanics regularly mark up parts costs from 10% to 100%. Challenge them on this mark up,” suggested fellow planner Teig Stanley. Stanley, who is a world-class negotiator, recommended, “If you do some research and find the same quality part elsewhere for less, offer to purchase it and have it shipped directly to the mechanic. Be sure the mechanic still honors their labor warranty, and that the part still comes with a warranty as well.”

Home improvements

Larger home projects are almost always negotiable, such as a bathroom or kitchen renovation, painting, landscaping work or building a deck. Make sure to get three quotes on any project.

If your preferred contractor has a higher bid on the project, see if you can negotiate with them by sharing competitor’s bids. Once you collect bids, let your decision wait for a week or two if you can. A contractor who is really interested in the work may come back to you with a lower bid. Don’t lower your overall budget, though, since you’ll need to create some wiggle room for contingencies. We’ve done several projects on our home and each one has had unexpected expenses.

Rental agreements

Are you willing to sign a multi-year lease? As a landlord, I’ve occasionally accepted negotiated offers from tenants who offer a rent lower than the listing, in return for signing a 3-year lease. Keep your offer reasonable (5-10 percent below listing).

Another alternative would be to propose a lower rent in the first year, with rent increases in year 2 and 3. If you’re in a rental unit which doesn’t accept pets but you really, really want that dog or cat, consider trying to negotiate with your landlord by offering to pay a non-refundable cleaning deposit (typically $250-350) and a slightly higher monthly rent ($50-75).

Elective medical procedures

Kelley wrote a moving blog post last year, Should You Go Into Debt To Get Pregnant? about how she and her husband made financial decisions around pursuing IVF. “It’s big business and everything is negotiable – the cost of the procedure, the meds, and even refunds in certain cases when the procedure doesn’t result in the wished-for outcome,” she shared. “It took tenacity, but we ended up being compensated not only for unused services when IVF failed, but we also got our clinic to reimburse us for meds they had us order that we never needed.” 

Teig insisted that medical and dental expenses are always negotiable. “I may not know the going market rate, but I start by offering up either a ‘here’s what I’ll pay for that,’ and/or request a long term 0% interest payment plan.” Teig added, “Remember, in the U.S., medical care is a business. It’s not rude to ask a business owner (usually the doctor or dentist in this case) what their cost is before profit and then offer a reasonable premium over cost.” He said he’s paid a lot less than others for medical and dental services over the years with this strategy.

Cell phone plan

Carriers are competitive and most of the representatives at the local store are on commission, so asking for everything the competitor is offering at a lower price is a good way to start, noted Teig. If your carrier can’t at least meet it, consider heading to the other carrier. That’s what our Think Tank Director, Greg Ward, does.

He negotiated his family’s satellite TV bill. “Basically, I called and asked to “cancel” my service,” he explained. “The customer rep transferred me to an accounts specialist who actually has the power to negotiate fees and expenses. I said I’d like to stay (having been a loyal customer for several years), but other service providers were offering me better deals. I gave them a choice: either decrease my bill, increase my level of service, or terminate my contract. They offered me more services at a reduced price to keep me loyal.”

One hiccup, he added, is that he must call every 3 to 6 months to request the same discounts. Greg said that’s a small price to pay for his $360 annual savings.

Credit card fees

Teig offered that he has yet to pay an annual fee on the points cards he uses for travel. “I call a month before the annual fee comes around and ask the company to waive it,” he described. “As long as I’ve been using the card and paying on-time (these are the reasons they give) I save myself at least a $100 per year per card.”

Big ticket purchases

“Always ask for at least 10% off at a “big-box” store whenever you shop there. It’ll take a few more minutes because a manager has to approve, but this approach never fails me and sometimes leads to even bigger discounts when I uncover hidden manufacturer incentives,” advised Teig. My husband, Steve, impressed me early in our relationship when he walked into a car dealer with a cashier’s check and announced that’s how much he was willing to pay for the make and model of car he wanted to buy. It worked.

Lessons and personal services

I’ve negotiated 10-20% discounts on personal training, language learning and sports lessons by being willing to pay up front for a package of multiple lessons. Teig says he does the same thing. “It annoys my wife sometimes, but I always offer to pay less when I’m buying products or services. For example:  My wife and I are ballroom dancers and occasionally engage in expensive coaching for competition. We recently bought a coaching package of lessons through a world-renowned studio system, and I offered to pay the company 20% less than they requested. They negotiated to 10% down, which saved me hundreds of dollars just because I asked!”

Give negotiating a try

What’s the worst that could happen? The person with whom you are negotiating could say, “no.” However, if you don’t ask, you’ll never know! For more tips on how to bargain, see this article. Do you have a successful negotiating story you’d like to share? Send it to me at [email protected].

 

How One Couple Survived 2008 & What We Can All Learn From How

October 16, 2018

It’s hard to believe it’s been ten years since we experienced the Great Recession – for some people, the events tied to that period in our economic history changed their lives forever. I think of all the people who were planning to work just a few more years so that they could pay off debts who found themselves out of a job and unable to get back in. Thousands of people were forced into retirement before they were ready simply because their jobs ceased to exist.

A story of survival

While the probability of another major recession like that is unlikely to happen again during my working years, I talk to plenty of people who have that fear. Going forward, whenever I hear someone express that fear, I’m going to share this story with them:

I talked with a couple the other day who are looking forward to retiring next summer. I’m glad I asked about how they accomplished their retirement plan – there were some bumps and unexpected turns along the way, but how they handled them is a lesson for us all.

A late career lay-off

The husband told me how he did not see the 2008 real estate crash as being anywhere as bad as it ended being. Then in 2009 he was laid off – the company he worked for was in the mortgage industry and eventually went out of business. This situation played out with thousands and thousands – there’s a reason that some people called it the Great “He-“cession. Many of those who lost their jobs where men in their final decade or so of working.

The good news is that he had limited his exposure to company stock in the 401(k) – he had always been told not to put too much in company stock within his 401(k), which turned out to be a very good thing. But while his retirement savings to date was as intact as possible, he was worried about his ability to continue saving for the future. He had worked for this company for a while and was not confident that he would find something that would pay anywhere close to what he was making.

Although their immediate future was uncertain, he and his spouse had done several things that put themselves in a good position.

  1. They always spent less than they made.
  2. Their daughters went to a public university and were able to graduate without any student loan debt. They were also both working and on their own financially at that point.
  3. They had only a small balance left on their mortgage.
  4. They had used some of their stock options (that they didn’t need for college) to invest in a rental property.
  5. They diversified their 401(k)’s; he only had 10% company stock in his 401(k) (see above).
  6. They had no debt and a cash reserve of 5 month’s expenses.
  7. His spouse’s job was not impacted, and she would be able to work remotely if they needed to move.

The first thing he did upon losing his job was to network aggressively. That lead to reconnecting with a former colleague, who told him about a position that paid less and would require him to move to another state. While it wasn’t ideal, they felt strongly that a bird in hand was better than two in the bush. He took the offer.

Making tough decisions

They sold the house they had raised their kids in, moved to another state and rented an apartment. Eventually they found a condo to purchase with the proceeds from their house sale. His spouse worked from home and after a few years he started getting promotions at his new firm. It wasn’t easy to make these decisions, but they kept the long view in mind.

The pay-off

Ten years later, they are moving to a town closer to their children, selling the rental home for a small family vacation home and looking forward to retirement. I asked if they missed their old home and he said, “it would be too much for us in retirement, we would have sold it eventually. No regrets.” Making concessions to their short-term life allowed them to stay on track with the long-term plan.

There is a lot of concern about the markets now, as there always is. If you’re worried about being a casualty of the next recession (should one happen soon), then now is the time to prepare. Here are the takeaways to prepare yourself if a layoff comes your way:

  1. Have a spending plan and spend less than you make.
  2. Make sure you don’t not have too much credit card debt and your mortgage is affordable.
  3. Diversify your investments.
  4. Remain flexible in where you live, which opens options that are not available if you are inflexible.
  5. Make room for a reduction in income – holding off for an income that matches your highest income means you may be without an income for a longer time.
  6. Maintain cash reserves of a least 6 months, more if you’re in a unique industry or have a non-earning spouse.

The best time to prepare for the worst is when times are good. Take some time this fall to make sure your financial house is in order. At best, things will continue as they are and you may be able to retire earlier than you think. At worst, you’ll be in a better position to recover from financial hits should they come. As we like to joke on our team, one of our favorite quotes is, “Gosh, I really regret making a budget and saving for emergencies,” – said no one ever.

Life Hacks To Make Life Easier For Working Moms (& Dads)

October 05, 2018

When you’re a typical working mom with school age kids, daily life can feel like a rush from one urgent task to the next. Balancing the demands of your job and your kids can feel like juggling cats and flaming torches at the same time. Your mastery of the two is richly rewarding, but it requires practice. I checked in with other working mothers at Financial Finesse to compare notes on what they did to optimize their time. Here are some life hacks that we use to make the day easier:

1. Keep a family calendar

Air traffic control of activities and schedules is essential. We all keep a central family calendar somewhere – and we are the ones who keep track daily of what’s in it. “An online calendar is an absolute lifesaver,” says fellow planner Tania Brown. Don’t forget to schedule money maintenance tasks like regular “money dates” with your spouse to review financial decisions and time to review and pay bills (see #5) and rebalance your retirement investments. Some calendar tools we use include:

Cozi Family Organizer: Tania suggested this genius, free app, which lets you coordinate schedules and activities across devices, track grocery lists, plan meals and manage shared to do lists. Since everyone in the family with a smart phone can use the app and manage shared calendars and activities, this is the perfect app for people with teenagers. One constraint: you can share a “read-only” feed from your work calendar into Cozi, (and your Cozi calendar into your work calendar), but you won’t be able to modify your work calendar from Cozi.

Outlook: Both my husband and I use this popular Microsoft tool at work, so after exploring other options, I settled on it for keeping all my work and family obligations color coded in my work calendar. My work version syncs with my Outlook phone app, so I always know what’s coming up. Steve uses Outlook at work, too, so we can send each other reminders for our travel and for kid events/chauffeuring that we need to track.

I also share my calendar with colleagues who need access to my schedule and can import my work assignments from our company planner schedule. The downside of this for someone who likes their privacy would be that others at work can see your family schedule. That doesn’t bother me, though.

This free online calendar and app allows you to share and update your calendar with everyone who has permission to access it. You can sync Google calendar with your Outlook calendar at work or Apple iCal as well as access it on your phone. If you’ve got a Gmail address, you won’t need any additional sign-on to start using it.

2. Give your kids chores and pay them for it

“Have the kids handle a chore and pay them for it. Even if they don’t do it perfectly, they are learning how to do it and participating in the family business,” said fellow planner Daphne Winston. She paid her twins (now adults) for doing extra chores, and her mother paid her when she was a child.

I grew up this way, too. Now my kids get an allowance, for which they have certain chores they must do like keeping their rooms tidy and helping in the kitchen or laundry – but there are some kinds of things we’ll pay extra for like pulling weeds in the garden. Paying your kids for chores can help them learn the value of money and how earning income relates to work.

3. Prep meals in advance

“Prep as much of lunch and breakfast as possible the night before to make things run extra smoothly in the mornings,” says Vekevia Tillman-Jones, who has two young children. Tania, who loves to find ways to save on food that don’t require extreme couponing, makes peanut butter sandwiches in bulk and freezes them. I swear by my slow cooker.

Planning and prepping meals can save you money (by not resorting as much to take-out) and time. Home cooking has secret financial power! We all make a little wiggle room for takeout on our busiest days, though, and don’t beat ourselves up if we order a pizza or take-out Thai food.

4. Hire a responsible teenager – or retiree

Daphne explained that friends hired her teenage daughters to drive their kids to after school activities. “My friends then could work and be around to pick their kids up afterwards,” she noted. “Of course, you must make sure you choose responsible teenagers to haul your precious cargo around, but it was a lifesaver for my friends.”

I’ve got a retired neighbor who will take kids back and forth to activities. She charges a higher rate than a teenager but she is a more experienced driver! Senior consultant Lisa Painter uses a student au pair to help with kids, which is more affordable than a nanny in pricey Los Angeles. Operations manager Jill McLane relies on her village. “We really depend on our friends and they do the same with us.”

5. Pay your bills on the 1st of the month

Auto-pay is wonderful, but it’s easy to forget to review your bills before they are paid. We’ve all got our utility and cell phone bills on auto-pay. Many of us travel for work, so reviewing expenses on key credit card bills before paying them is a best practice. If something on the bill looks weird, there’s time to check into it before paying.

6. Put a load of laundry in every morning

This is my go-to mom hack to keep on top of the never-ending laundry that comes with having kids. I work from home when I’m not traveling, but you don’t need to work from home to practice this. I put a load in the washer in the morning, switch it to the dryer before dinner, and fold clothes before bed. When I got my first bonus from Financial Finesse, I asked brilliant space maximizer Evelyn Cucchiara (The Toy Tamer) to redo my laundry and play rooms so they were easier to keep tidy (working mom priorities, right?!). Nearly three years later, I am happy to report that both rooms are still tidy.

7. Let the kids sleep in their clothes

If you have a child who has challenges getting ready in the morning, consider letting them sleep in their clothes. After a nighttime bath or shower, let your child pick their clothes for the next day. This can be quite helpful if you have a late sleeper or a very early start on school or childcare. We’ve used this life hack in our family and it works.

8. Buy birthday party and hostess gifts in advance

Buying gifts in advance can save money as well as time. Whenever I see a good birthday party gift on sale, I buy several. This way, I avoid that last-minute trip to the closest toy store, which makes my child a half hour late for the party.

I like to shop at my local toy store, where they will wrap them all for me, but I’ll also snag a bargain on Woot when I see one. If I’m heading to Marshall’s or Home Goods to browse and see a good deal on a great host/hostess gift, I’ll stock up and keep it in my gift closet. That way, when we get invited to someone’s house for a meal or a party, I’ve got something on hand.

9. Outsource grocery shopping

Going to the grocery store by myself can be a vacation, but bring along two kids and it’s an obstacle course. I try to shop with each of my kids individually at least once a month (so they know how to shop and to teach them about financial choices). The rest of the time, I’m looking for hacks.

“Use a grocery shopping service,” recommended Daphne. Services like Peapod or ShopRite From Home will delivery groceries for a nominal fee. This helps you stick to your budget (no impulse buying!) and saves lots of time. Vekevia likes to order groceries online and set it up for pick-up so all she has to do is drive there and they load her groceries into her car. Jill said, “we use an app, Grocery IQ, that syncs our grocery list so whoever runs out of something adds it and whoever shops has the full list.”

10. “No” is a complete sentence

Tania said “So many of my friends feel guilty for saying no to anything – school events, volunteering, their kid’s requests. PTAs can be relentless. I believe in the power of the word “no” and that it is a complete sentence – no explanation required. This includes saying no to a culture that believes your kids should be in 100 activities a week. We limit the number of activities so we have a life on the weekends.”

You can say no to financial commitments as well, not just time commitments. Make sure you have an up-to-date family spending plan so you can decide whether something is in line with your financial priorities. Then be willing to say no as a complete sentence.

The big idea? Aim for work-life integration, not work-life balance

On some days, work demands more from me than expected, and on other days, the kids demand more. I’ve learned through trial and error that the goal is where I’m creating synergies between my work and family life. Instead of trying to block my time proportionately between competing goals, leaving work at work and home at home, I am learning to weave the two together to optimize my time most effectively with lower stress.

I take an afternoon hour with my kids when they get off the school bus and when everyone’s in bed, I’ll write a blog post. It certainly helps that our CEO is a working mom herself and that she’s set up a business model where the planner team works from home. But there are ways to do this if you have to go to the office every day as well. It’s about making it work for you and your family.

 

A version of this post was originally published on Forbes

How Spending In Your 30’s Has Changed Over The Years

October 02, 2018

A recent article in AXIOS highlighted the difference in how 30-year olds today spend their money verses 30- year olds 27 years ago. This interested me because I was in the 25 – 34 age group 27 years ago and now have a child who is in the 25 – 34 age group. It’s clear to me that we have different priorities at this age, but I was never sure if it was because she’s a girl and I was a guy, so I had to check the stats.

How we are different

According to this, my child and her peers spend more on education, health care, rent and contribute more to Social Security than I did, and they supposedly spend less on reading materials and alcohol (I never smoked and rarely have bought new clothes), which seems to make sense to me (and makes them sound a lot more responsible than I remember being at that age!). The cost of items that have increased is greater than the cost decrease from items that have gone down, so her net cost is higher.

These are interesting facts that Cliff Clavin from “Cheers” would gladly quote while drinking beer (sorry I don’t have a reference for the 30’ish crowd), but how can we use this information?

The real takeaway

The thing I get from this is that while you have extremely little control over the economic environment you are in, you do have control over what you spend your money on. Don’t be discouraged because the economic environment you are in is different than before — it is always changing.

To cope with that reality, your spending plan must:

  1. Reflect the environment that you are in
  2. Always be cash flow positive (i.e. you have to spend less than you make)

To create a spending plan

Remember, current trends and economic realities don’t HAVE to dictate how you spend your money. As Cliff would say, “It’s a little known fact that the tan became popular in what is known as the Bronze Age.” Now I need to see if I can binge watch “Cheers” on Netflix.

Coping With The Financial Side Of Mental Health Issues

September 27, 2018

The more people I meet, the more I realize that so many of us are suffering in silence from things like severe anxiety, depression, and other mental health or stability challenges. I’m always grateful when people open up to me about what they experience and how it’s impacting their ability to function and give what it takes to make a living. This enables me to pass this wisdom on to others in my work.

You are not alone

The most important thing I’ve learned so far is this: You are not the only one experiencing this. It’s ok to talk about it. Give yourself the freedom to admit it doesn’t feel normal. Give yourself the attention you need and the time to take care of you.

It’s such a sensitive topic and many don’t reach out and talk to anyone about what they are going through. They say that are suffering and they have a hard time functioning in the normal day to day activities. It also impacts their ability to show up for work – not just physically, but emotionally and mentally. It can have negative effects on their ability to earn stable income and manage their funds in general.

Addressing the medical issue is something I’ll leave to that profession, but if you have reason to believe that you may need to take some time away to address your mental health in the future, here are some things you can do to keep your finances in order.

Keeping your finances together when it feels like your head is falling apart

1) Get ahead of any negative impact to your finances – Think about what would happen if things get to the point where you need time off work and plan for that just in case. How much time might you need and would it be paid time off? Will you have to transition to a different role at work to have a more balanced lifestyle? What if the pay is less? Do some research to find out if you need to start shifting some things around in your life to allow for a period or no pay or lower pay.

2) Make a plan for how you would keep afloat if you are unable to work – I spoke with someone who had multiple breakdowns at work that would not allow her to function, despite how much effort she put into doing so. Her doctor recommended she take a leave from work immediately. What if that was your situation? How would that impact you financially? The last thing you need to do is worry about how you are going to make ends meet, when you’re supposed to be taking time off to take care of yourself and get yourself to where you need to be.

3) Budget for what you need to help you cope or heal – Make room in your budget not only for that gym membership, travel, massages or whatever it is that helps you to balance your life, but also to build your emergency fund. If you must cut back on how many hours you’re working, it’ll ease the transition if you are living below your means and if you have funds set aside to buy you some time while you seek the medical assistance or take the break away that you need.

Consider saving closer towards 6 months or more in your emergency fund, so that you will be able to access those funds while you take time off work to heal and potentially still have some funds left in that account when you return to work.

4) Understand how Social Security Disability Insurance and Supplemental Security Income might help you – If you meet the eligibility requirements, these programs provide monthly income in the event you are unable to work for an extended period of time.

5) Find out if any short-term and long-term disability benefit you have at work covers mental health – Learn about the eligibility requirements and approval process under your plan at work. Most pay a portion of your salary, typically 50-70% of your income, while you are out of work due to a disability. Get clear on any waiting periods, and budget accordingly for reduced or no income.

6) Prepare for a potential unpaid leave of absence from work under FMLA – The Family and Medical Leave Act (FMLA) provides certain employees with up to 12 weeks of unpaid, job-protected leave per year. You may have to use your FMLA leave while receiving disability pay from work. Some employers require you to use up your paid vacation leave and paid sick leave or family leave for all or a portion of the time you’re on FMLA. Find out more about how that works here and be sure to know what your employer requires.

7) Look to your benefits at work for assistance – Your EAP can provide you with a referral to a counselor if you’re not certain how to address your mental pain – you typically receive a couple sessions free of charge, then have the option to continue via health insurance coverage (if available) or out-of-pocket.

If your employer offers financial wellness services, take advantage of it and get your questions answered and have a plan to cope with your situation before it becomes a strain financially.

8) Be mindful of medical costs by staying in-network and reviewing prescriptions ahead of time –  One challenge to many healthcare plans is that there are very few in-network psychiatrists and therapists available on some plans. Do what it takes to stay in-network if at all possible, and if not, then interview providers by asking if they offer a sliding scale for patients without insurance assistance – many do.

If your doctor prescribes you any medication, work with her to make sure that your insurance will cover it as well. Many plans require prior-authorizations or have alternate meds they prefer, which can save you a bundle. If your doctor feels strongly about prescribing something that doesn’t have great coverage on your plan, she may be able to offer you a coupon or suggest a pharmacy that offers it at a lower price. Shop around.

You are your most valuable asset and you have to be healthy to give the best version of yourself. Be sure to make room in your life to take care of yourself and remember that extends to your mental health. Take advantage of the resources around you and know that it’s ok to talk about it and get the help that you need. I understand and there are many others out there who will as well and who are standing by to help you through this. You’ve already taken a step in the right direction by reading this blog to help you or someone you know who’s going through this.

How To Be Mentally Prepared For Retirement

September 20, 2018

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

Thinking about the why

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

A changing landscape

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

Asking the right questions

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

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

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

Clarifying your passions and interests

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

Translating what you love about work into retirement activities

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

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

It’s gotta be fun

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

Your hobby could even become a second career of sorts

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

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

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

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

Having Trouble Letting Your Savings Account Build Up? Try This Life Hack

September 19, 2018

Modern banking is amazingly convenient. With the improvement of banking apps these days, you can pay bills, send money to friends and even deposit checks without getting up from your couch. However, this convenience can also make it too easy to get to our savings. (Anyone else remember taking your check to the bank to cash it before they close on Friday? Or forgoing a purchase because you didn’t withdraw enough from the drive-thru teller?)

When it’s too convenient

If you find that whenever you build up a balance in your savings account it somehow gets sucked into your spending account, convenience may be part of the problem. With a few touches on your phone you can move money from your savings account to your checking (i.e. spending) account, no pants needed.

The key to letting your savings build up

Rather than going old-school, there is a way to remove this temptation without deleting your banking app. It’s all about using a separate banking institution for your savings. To get started, search online for a high yield savings account. “High yield” is a relative term – these accounts are only paying about 1.55% to 1.85% right now – but that is higher than the 0.08% most savings accounts pay that are offered at more traditional banks. Most of these accounts have very low minimums to start (some as low as $1.00) and you can transfer money from your high yield savings account back to your checking (spending) account when you need it.

The downsides, which could be upsides

The downsides of most high yield savings accounts include no ATM fee reimbursements, no checking and you must establish the account online. Plus, there’s usually a lag of at least a couple days between requesting money and having it show up in your checking account. If you’re looking for a way to save your savings from yourself, then these “downsides” can actually work to your advantage in keeping your savings there.

Making it automatic

I recommend setting up an automatic draft from your current checking (spending) account into your new high yield savings account every time your paycheck hits your account. Use our Easy Spending Plan to compare where your take home pay is going to help you find a reasonable amount to set aside, then plug that amount into our Daily Savings Calculator to see how your account can grow if you actually let it alone.

Setting a ground rule for yourself

The key to success with this method is this: to prevent the easy swipe back to your savings account, do not access your high yield savings on your phone (or the device you use the most). Make it a rule that you will only access it on the device you use least frequently. So for example, I do most of my banking on my phone (paying bills, checking balances, transferring money to my kid’s accounts, etc.) and I rarely access my banking account on my laptop.

Therefore the only place I log in to my high yield savings account is my laptop. And it works. Getting up off my couch and walking to my laptop gives me time to think if it is really worth moving my savings to my spending account and allows that account to grow for what it’s intended – to be there when I need it, not when I want it.

Ways To Help Others Without Hurting Your Own Finances

September 06, 2018

One of the joys of working in my role is how many people I speak with who are wonderful, good-hearted people. They love giving back, whether it’s money they give to charities, religious organizations, or even family and friends. Sometimes I talk to people who volunteer so much to help a cause that it’s like they have a second job.

The caretaker’s connundrum

This is all very commendable. But what happens when you give so much money to others that you don’t have enough left to build your own emergency fund, save for retirement, or cover your own bills? Or when you spend so much time helping that you aren’t able to pick up more hours to help meet your own financial goals? Or what if your family and friends look to you to bail them out of financial trouble, help them start a business, allow them to come live with you for free, etc. but then leave you in the lurch with big bills?

This is a common situation I encounter, and I admire people with such big hearts, but I also feel for them because I know that the solution isn’t to just stop doing it. Here are some thoughts and ideas that I’ve shared with people who feel torn between a desire to give back to others versus taking care of themselves. The good news is that there are ways to be creative and do both.

3 ideas to consider about giving

1) Time is money

If you typically give cash donations or pay people’s bills for them, don’t forget that giving your time can be just as beneficial as giving actual cash. You can help serve food at the homeless shelter, volunteer for the kids’ ministry or another ministry at church or spend an evening cleaning at the local animal shelter. If you’re more inclined to help out people you know, the same concept applies: what about rolling up your sleeves to help someone repaint their house so they can save money, or be available to help them babysit while they go on a job interview?

2) If your situation has changed, your giving may need to change

It’s tempting to keep up a level of giving that you’re used to even after you may have had a drop in your income or even an increase in your overall expenses. You can still give at a level that works for your budget AND volunteer some of your time or services. If gift giving is the issue, plan ahead for birthday and holiday gifts and buy items on sale. Have a game plan for your spending, so you aren’t caught off guard.

3) Other creative ways to help that don’t require you to give up resources

If someone you care about comes to you with a need that would put you out financially, you don’t just have to say no. Be an ear to your friend or family member and offer them guidance or help them find resources available so they can be better equipped to help themselves. You may learn something for yourself in the process! Here are some ideas:

  • Are they unable to work due to physical or health issues? Perhaps they qualify for government assistance like food stamps or Social Security Disability. Help them do the research and apply.
  • Did they lose a job? They might be eligible to receive unemployment pay. Offer to wait with them at the office while they apply.
  • Do they make too little money in general and are struggling to make ends meet? United Way is a great resource to see what programs they might be eligible for within the county where they live. Some programs will give them funds towards paying bills. Beyond that, you can be a resource and help them figure out next steps when they can’t pay their bills.
  • Are they going through something that has them down emotionally, which also might be negatively impacting their performance and work and in other areas of their lives? Have them check with their HR department at work to see if they have access to a counselor through an Employee Assistance Program (EAP) at work.
  • Did they recently have a baby and are struggling with the added financial responsibilities? Here are some employee benefits that could help new moms/parents in general.
  • Is the baseline issue that they aren’t able to get a handle on how they manage their money? Help them create a budget and find ways to cut back and find extra money in their current budget. Be a good role model and show them how to do it, rather than just giving them money.

Sometimes all a person really needs is a caring friend to empower them to get on their feet and hold them accountable for taking the steps to helping themselves. Helping others and giving back can bring great joy and a sense of purpose, so keep that up but remember to make sure you are financially sound first. That puts us in a better position to best help others along the way.

Why It Irks Me So Much When People Joke About The Lottery As Their Retirement Plan

September 04, 2018

You don’t have to work as a financial planner long before someone jokes to you that their retirement plan is to win the lottery. I have a reputation of being an irreverent smart aleck, so this shouldn’t bother me – but it does. Here’s why.

Reason #1: The math

The first reason is just the simple math. If you spend $10 a week on lottery tickets (which is 260 chances to win if you’re buying five $2 tickets per week), that adds up to $520 a year. Granted, some of those tickets will win so let’s assume you win $4 nine times and $7 once for a total of $43 throughout that year. Adding it up, your lottery tickets cost $520 – $43 = $477.  If you do this for 10 years, you would have spent $4,770.

If instead you put that $477 per year into a mutual fund that earned an average 5% per year over those same 10 years, you would have $6,000. Taking it up a notch, let’s imagine you put that $477 into your 401(k) and got a 50% match. In that scenario, after 10 years you would have $9,000. Playing leads to a loss of $4,770 and investing leads to an account worth $6,000 to $9,000.

Reason #2: The dangerous money mindset

The second thing that bugs me even more is the mindset that often goes along with playing the lottery. To me it is a dangerous one — it’s the mindset that says: I’m never going to get ahead anyway, so in order for me to retire, I need to “get lucky.”

This takes the responsibility and accountability toward an individual’s own future and pins it on some unseen force that is out of their control. What irks me is that preparing for a comfortable retirement is, for the most part, 100% in the control of the everyday worker.

Sure, life throws curveballs and it’s tough to juggle the competing priorities of today versus the future, but at the end of the day, everyone is in control of their own money habits and if you have $10 per week to buy lottery tickets, then you definitely have $10 per week to save for your future.

What it really takes to retire comfortably

I’m really close to my 30-year anniversary in the financial planning industry, which means that I have talked with literally tens of thousands of people. With very few exceptions, the people who were in a position to retire did the following:

  • Spent less than they made
  • Invested their savings in things like their 401(k), income producing real estate, a business, etc.
  • When they did take on debt, they paid it off as fast as they could
  • They monitored their spending and investments at least once a quarter

While some of these people may have “gotten lucky” and bought Apple or Alphabet 20 years ago, or bought an investment property that really did well, they still followed these same 4 steps. And that’s what really matters.

Take control of your financial future today by working toward the steps that are proven to work, no luck required.

How To Fit Tithing Into Your Other Financial Priorities

August 28, 2018

There are a number of opinions out there on whether people who are paying off debt and/or under-saving should tithe (the practice by some religions of giving 10% of your income to the church) before paying off debt and saving. I’ve spoken with many people who struggle with this answer. Often, they have already gotten into a bit of debt and aren’t really sure how much they should or can afford to tithe.

I won’t get into whether or not you should tithe — to me that’s a decision everyone has to make for themselves and I’m not trying to make any religious statements here. But for those who decide that it is an important priority, there are ways to do it while also keeping your finances in order. The last time I was asked this question by someone struggling with making it all work, here is how I framed my guidance:

Think of it this way:

1) Commit to the idea fully – If tithing is a priority for you, write out your plan to make it happen. Be specific with how much you will give and how often.

2) Write it in to your budget – Once you know how much you are going to tithe, subtract that amount from your monthly income and create a budget to live off what’s left. It’s really the only way to make it work.

We mean well, but often, we make the decision to buy the car, purchase the home, etc., BEFORE considering how much we can afford after tithing. Things could be smoother if we account for the tithe and then decide how much of a car or mortgage payment we can afford.

3) Cut back on other spending  – If you find you can’t tithe at the level you wish, look for areas in your budget where you might be able to cut back in order to make it work. Think about your own personal priorities.

4) Find ways to increase your income – Explore opportunities to earn additional cash to help pay down your debt or save by working more hours, having a second job, etc.

5) Don’t tithe on credit – If you feel led to give more, go back to step two and make room in your budget to give more instead of putting your tithe on a credit card. Tithing on credit will add to the time it will take you to pay off your debt.

6) Make sure you’re getting your full tax deduction – If you itemize your taxes, you may be able to claim a deduction for the amount (or a portion thereof) of the tithe you give.

Remember that you are in control

You don’t have to feel guilty about tithing instead of paying off debt or saving. You just have to find a way to make it all work. If it’s important to you, add tithing as a line item in your budget and make your financial decisions based off what is remaining.

Recognize that tithing while in debt could take you longer to pay off your debt or save. You have the control to work more hours, cut back on spending elsewhere, or slowly increase your level of giving overtime as you free up more cash and start giving the amount you ultimately want to give.

The 5 Biggest Financial Mistakes People Make In Their 40’s

August 24, 2018

Those mid-life years can be crazy. Between growing your career, raising a family, dealing with aging parents, paying off debt and saving for college, all while trying to just enjoy life while you’re still young, it can seem like you’ll never be able to retire.

But trust me. Eventually, you’ll want to.

Here are the five biggest mistakes I see people making in their 40’s that will limit their options in their 60’s and how to avoid them.

Mistake #1: Buying the biggest house they can afford before maxing out retirement.

I remember the excitement of getting my own apartment in my 20’s and making trade-offs so I could afford to live in a cool downtown loft, even though it was a big financial stretch for me. It’s easy to get into that mindset and adopt it as a lifestyle, but it’s important that it doesn’t become your long-term modus operandi. Eventually your housing expenses should feel very manageable and allow you financial wiggle room to work on other goals like retirement, college savings or even paying off your own student loans.

Upsizing your home

If you’re upsizing your home to accommodate a growing family or just want a nicer place to live, don’t just take it as a given that increased income should equal increased square footage and the latest kitchen remodel. Yes, it’s important to live in a good neighborhood and you want to have space for everyone to feel comfortable, but maxing out on housing when you’re not maxing out on retirement* is a huge long-term mistake.

Consider how busy your family is during these years and how little time you may actually be spending at home, relatively speaking. Buying a less expensive home that meets your needs but nothing more will give you financial choices that your house rich but cash poor neighbors won’t have in the future.

* maxing out on retirement = contributing the maximum allowable amount to your 401(k), 403(b), SEP-IRA, Roth IRA or other retirement savings vehicle.

Mistake #2: Under-insuring.

Most people think of health and life insurance when the topic comes up, but arguably the most important insurance you’ll need in your 40’s is disability insurance. According to the Council for Disability Awareness, more than half of Americans who are classified as disabled are in their working years (18-64). And while most of us think of an accident causing a disability, you’re actually much more likely to become disabled by something as common as a back injury or cancer.

Disability insurance

If you have disability insurance through work, awesome. Check to make sure what it covers though. For instance, if you only have long-term disability coverage, the benefits usually don’t kick in for about 3 months so you need to make sure you have short-term disability coverage, savings or accrued PTO that would cover those initial 3 months without pay. If you don’t have any coverage, this should be the next insurance you look into purchasing.

Life insurance

Life insurance is also important if you have a family who would suffer financially from your untimely death. Lifehappens.org has a great calculator to help you figure out how much you need, and you may be able to plug any gaps pretty cheaply through a group policy at work or even through your college alumni association. The majority of my life insurance coverage is through a group term policy I bought through my membership in the AICPA, an organization that supports CPAs.

If you have a pre-existing condition or other factor that would typically cause you to miss out on the lowest rates, then the best time to buy term life insurance is when you start a new job. Many employers’ group plans allow new employees to enroll without any type of underwriting, but only if they enroll immediately upon hire. Check with HR to see what your options are there.

Mistake #3: Trying to time the market.

If you funded a Roth IRA or other savings account recently, were you tempted to just let the money sit in cash while you wait for a market dip? Waiting to invest due to fears of a short-term loss ignores one of the key fundamentals of investing, which is that you’re in it for the long haul. You are trying to time the market and much research has shown that it doesn’t work. In fact, even people who get it 100% wrong by investing on the highest day before a crash are still better off than people who stay out altogether.

Just do it.

The best way to take advantage of the long-term growth of the stock market is to just get in. A popular phrase in the investing world is that the best time to invest was yesterday, the next best time is today and the worst time is tomorrow. Pick your investments according to your timeline and risk tolerance, pull the trigger, and then let them ride.

If you need the money in 5 years or less, you should not be putting it in the market in the first place. So if you’re investing into a 529 college savings plan for your college senior, you’re wise to keep that in cash. But if it’s for your toddler or even a 7th grader, get it in the market. Even if there is a big dip in the near future, by the time your kid is looking at college admissions, any market crash in this decade will be old news.

Mistake #4: Allowing kids’ activities to take priority over other goals.

I don’t have kids yet, but I can tell you right now that when the time comes, we will be doing our darndest to encourage our kids to find activities they love that DON’T involve expensive fees, regular weekend travel for competitions and outrageous costs for costumes and uniforms. I remember our next door neighbors complaining about the cost of travel hockey for their son growing up. Looking at where he is now, I know for certain that those years of expenses did not have any effect on their son’s chances of future success.

By the time your kids are hooked on soccer, cheer, dance, gymnastics or whatever activity they love, it will probably feel like it’s too late to say no. If you’re already on that path, you’ll have to find other areas in your life to cut back on so that the costs of the activities don’t take away from your long-term savings goals. And whatever you do, avoid credit cards to plug the gaps. Putting just one $10,000 season on a 17% rate card could cost you almost double that amount in interest by the time you pay it off.

Mistake #5: Over-withholding on taxes then spending the refund on spring break.

As interest rates begin to rise back to more reasonable levels again, letting the IRS serve as your savings account is an even worse idea than it was before. If that’s the only way you can find to save money then try this: Drop your withholdings to break even as much as possible at tax time, then take the increase in your paycheck and have it automatically deposited to an online savings account.

Why an online savings account? Two reasons:

  1. They generally pay higher interest rates than your standard “bricks and mortar” bank.
  2. The lag time between requesting money and having it arrive in your checking account is typically several days, which is deterrent enough to keep most people from impulse-spending their balance.

Remember, the little things add up, and that goes both ways in accumulating debt and savings. That’s why it’s not impossible to catch up if you’re behind in saving for retirement in your 40’s, but the longer you put it off, the more severely your options will be limited in retirement. What are you waiting for?