What Losing 30 Pounds Taught Me About Achieving Goals

January 04, 2018

Last week, I wrote about setting goals. Let’s face it. That’s the easy part. What about actually achieving them?

Losing 30 pounds last year

Two of the most common topics for New Year’s resolutions are weight loss and finances. At the beginning of last year, I set a goal to go from 222 pounds to 185 pounds and 8-10% body fat. I knew this would be a stretch goal but also doable because that’s what I was about 10 years ago. I haven’t quite hit my goal yet, but I have lost 30 pounds to get to 192 and 11% body fat. Here’s what I learned along the way and how it can apply to achieving financial goals:

1. Track your progress. Measuring my weight every day was probably the most important factor for me in staying motivated. If the number went down, I was encouraged to keep going. If the number went up, I was jolted back on track.

Find similar ways to measure your financial progress. It could be your debt or savings levels, credit score, retirement projections, or overall financial wellness. (Just realize that many of these financial metrics require a longer time interval to see progress than my daily weigh ins.)

I realize that weight isn’t the best metric for measuring fitness. (I also did more comprehensive full body composition tests at my gym every couple of weeks) However, it was the only one I could measure every day, which was important for my motivation. Something is often better than nothing. This bring me to…

2. Don’t make the perfect the enemy of the good. This can happen in several ways. If you’re like me, you may find yourself paralyzed into inaction by analysis paralysis of the “perfect” diet and exercise routine. When you inevitably fall off the horse, you may also feel discouraged to keep going. I had to accept that pursuing “perfection” is an ongoing process with many ups and downs and the key was to focus on doing the best I could at the time.

Your financial progress will likely be the same way. You will have unexpected expenses that will bust your budget. Your investments will decline from time to time. There will be moments when you make financial decisions you regret. Just stay focused on what you can do now to get back on track.

3. Get help. About halfway through the year, I hit a plateau and decided to join a boot camp style gym. I quickly discovered that my previous workouts weren’t as diverse and my form often needed correcting. I also found myself enjoying the workouts more and probably pushed myself harder than I would have on my own. As a result, I started making progress again.

A good financial planner can be like a personal trainer for your money. They can help you set reasonable goals and find the best way to accomplish them. At the very least, they can help hold you accountable for doing what you know you should do anyway.

Like hiring a personal trainer, a financial planner can be expensive. Many also sell overpriced financial products and services like the many dubious supplements and exercise gadgets out there. Fortunately, financial wellness is becoming as common an employee benefit as physical wellness programs. See if your workplace offers access to free financial education and guidance through an unbiased workplace financial wellness program.

4. Do what works for you. I read a lot about diet and exercise and talked to several friends about what they did. But in the end, everyone is different. Through trial and error (see #1 and #2 above), I had to find the right balance between doing the “right things” and what I could actually tolerate/stick with. For example, I try to be super strict with my diet during the day so I can be a bit looser (but still within reason) when I go out on evenings, weekends, holidays, and vacations.

Just like the best exercise or diet is the one you’ll actually do, the same is true for the best money management strategy. Experiment with different ways to manage your money and then make adjustments. (This is why measuring your progress is so important.) Some people keep detailed spreadsheets of their spending, some use apps like Mint, and some give themselves a fixed cash allowance. They’re all different paths to the same place.

Every day is a new day

Whether your resolution for 2018 is to pay off debt, save more or simply be more mindful of spending, I wish you much success. Be kind to yourself and remember that even if you fall away from your intentions, each day is a new day to start again.

Happy New Year!

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

How To Do A Spending Cleanse

January 03, 2018

After the gluttony of the holidays, it’s no surprise that the word “cleanse” is floating around my world. While my waistline wouldn’t mind a little food cleanse, I’m more apt to try a spending cleanse after the spend-y days of December.

You don’t have to go cold turkey

Going on a spending cleanse doesn’t mean you don’t get to buy anything, it just means you’re limiting financial outlays to the bare necessities. There’s a difference — buying is picking up the things you need, like groceries, transportation, paying bills, etc. Spending is a choice to purchase something you don’t really need at that exact moment.

Examples of ‘spending’

  • Going to Home Depot to purchase replacement blinds for the ones in your bedroom that broke, then taking a detour down the clearance aisle to see if you can score any deals on holiday items after wandering through the succulents and picking out a few cute ones for the living room — that’s spending.
  • Heading to Costco fill up on gas, then stopping into the store and stocking up on that shirt your husband’s mom got you for Christmas that you’ve literally been living in ever since — that’s spending.
  • Stopping by the pet store to buy cat food and walking out with a new bed and toys for said cat — that’s spending.
  • Bagging the plan to make the meal you planned for dinner and ordering sushi instead — that’s spending.

The bottom line is that mindless spending is a habit. It’s not to say that I’ll never buy myself anything fun again, I’m just trying to reign in the stuff collecting and instead set that money aside for my bigger 2018 goals.

The rules of a spending cleanse

  1. Timeline: one week.
  2. Make sure you have necessities taken care of, like gas in the car, bills paid, etc. It’s not about not buying anything, it’s about avoiding unneeded spending to break a habit.
  3. For that week, when you leave the house, take just your ID and twenty dollars max. You can tuck a card away somewhere in case of emergency, but the point is not to use it unless you’re literally stranded or starving.
  4. If you have to dine out for work, that’s fine, just make sure you stick to any per diem rules you have so that you’ll be reimbursed.
  5. No online shopping or in-app purchases.

It’s supposed to feel extreme

If it feels weird to go out without any real money, that’s the point — it’s supposed to be a bit extreme, just like drinking juice for three days makes it feel like three months since you’ve last chewed anything. I’m going to try it — I’ll be traveling for work, which will actually increase the challenge as I tend to engage in retail therapy when I’m stressed. Obviously I’ll have to take my credit card with me in order to rent a car, pay for my room and eat, but beyond that, I’ll be keeping it in my wallet.

Join me?

 

How To Get Started On Your 2018 Goals

January 02, 2018

Last year Business Insider reported that 80% of News Years resolutions fail by February. If you are a gym rat like me, you see it all the time: in December you have your pick of gym equipment. Then by the second week of January, the gyms are so packed that you are lucky to get one 3-lb. dumbbell. Fast forward to February and you once again, have your pick of gym equipment. I don’t know about you, but I am determined not to be a statistic. So how are we going to do this?

How do you eat an elephant? One bite at a time…

To paraphrase a famous quote, we do this one bite at a time. Instead of tackling everything at once, start slowly. Consistency, not perfection, is key. Find one small way, no matter how small, to be consistent in your goals. Commit to sticking to it for at least 21 days so it becomes habit. Here are some ideas, no matter what your 2018 goals might be.

If your goal is to…

Manage money better

Try this: I find that most people know the area they tend to overspend. Choose one area — clothing, entertainment, eating out, etc. — and commit to using cash only in that one area.

Eat healthier

Try this: My nephew told me that it’s too expensive to eat healthy. Keep in mind he said this sipping on his second Venti Pike Roast. I told him that water is free. Commit for 21 days to drinking only water (to answer a question from my friend, no, Scotch with water does not count).

Make kids’ lunches easier

Try this: I stole this awesome idea from Pinterest. One mother made a bunch of peanut butter and jelly sandwiches, froze them, then placed a frozen sandwich in her kid’s lunchbox  each day. (She says it’s thawed by her son’s lunch time). What if your kids hate sandwiches? As crazy as this sounds, try flattening the bread with a roller pin, then putting PB&J in the middle of the bread, rolling the bread, then cut into PB&J sushi rolls — I had a friend that tried this and she said it works.

Save more money

Try this: First, use your bank’s programs to help you save money. This may range from budgeting and savings software to programs that round up your purchases to the nearest dollar with the difference automatically transferred to savings. You can also use savings apps to painlessly save money. Remember, saving money initially is about consistency. Choose an amount, no matter how small, that you are committed to saving for at least a month, then increase.

The key is to start small — it’s typically the small steps that help you to build the momentum you need in to reach your goals. Now I’m off to the gym!

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

 

3 Tips For Setting Goals You Can Actually Achieve

December 28, 2017

Note from the editor: As we round out 2017, many people will be setting goals and intentions for the year ahead. To help with that, our blog team will be sharing their take on goals throughout the week — we all have a different opinion! We hope you enjoy hearing how each of us approaches the idea of goal-setting and New Year’s resolutions. From Erik:

It’s that time of year again when many people make New Year’s resolutions only to see them become a source of disappointment and disillusionment. Is there anything you can do to set goals that you’re more likely to achieve? Here are 3 tips that I’ve seen work for financial goals and can be applied to other goals as well:

1. Set the right goals. Make sure the goal you’re setting is actually important to you and not just something that you’re “supposed” to do. Otherwise you won’t feel motivated enough to take action.

  • What are the things that most bother or worry you?
  • What would bring you the greatest amount of happiness?

Focus on the outcome that you want rather than what it will take to get there. For example, one of my top financial goals is to spend less eating out in order to achieve financial independence earlier. The goal is financial independence, not just spending less eating out.

2. Break each goal into achievable action steps. We often start with an ambitious, exciting goal and then feel too overwhelmed to take action. For the goal of financial independence, don’t just calculate how much money it will take. Break that number down into how much you need to save per year and per month. It will look a lot more doable that way.

3. Figure out the price you’re willing to pay. My grandmother used to say that you can have anything you want as long as you’re willing to pay the price. While not literally true, almost every goal does have its price.

Once you’ve broken it down into the action steps, ask yourself what price you’d have to pay and whether you’re willing to pay it. If not, don’t just give up. Instead adjust your goal until the price is right. If the price of financial independence at 50 isn’t worth it, try 60. Otherwise, you may end up waiting until 70 by default.

The 3 important questions

So what goals are most important to you? What steps do you need to take to make them happen? Finally, what price are you willing to pay?

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

Why I’m Calling My 2018 Intention ‘The 3 T’s’

December 27, 2017

Note from the editor: As we round out 2017, many people will be setting goals and intentions for the year ahead. To help with that, our blog team will be sharing their take on goals throughout the week — we all have a different opinion! We hope you enjoy hearing how each of us approaches the idea of goal-setting and New Year’s resolutions. From Kelley:

I’ll admit that I’m the Queen of failed resolutions, although I also know that I share that throne with countless others. Regardless, I still believe in the power of goal-setting and optimism that comes along with New Year’s resolutions. As always, many of my intentions for January are health-related, but for 2018 I also have three more concrete goals that will require financial trade-offs and intentional action. I’m calling it the “3 T’s;” here they are:

1. Tennis

I took tennis lessons as a teen and played a little in college and enjoyed myself, but I’ve always felt like tennis is a bit like golf: you have to play often or you lose your skills. I’m at a place in life where I’d like a more committed activity, so my first goal for 2018 is to get back into tennis.

Financial implications: It may seem like tennis is a relatively inexpensive sport, right? You just need a racket and some balls to hit around. I’ll wait until I’m certain that this is a sport I’d like to play regularly before I invest in all the cute clothing and a fancy racket, but for me the financial commitment will be my husband and I joining a club that offers indoor tennis plus a few lessons to make sure I’m doing it right. As you can imagine, clubs that have indoor courts are not the $30/month places, so in order to afford a relatively high-end athletic club, we have to make some trade-offs.

The trade-off: Assuming we find a club that we like, we’ve decided to forego our weekly Friday date night, which is typically a meal out at a nice restaurant, and instead have Saturday morning tennis dates. We’ll have to pay to reserve courts during the winter, so I’m a bit embarrassed to admit that it will be a pretty equal trade-off.

2. Travel

One of the only upsides to our failed attempts at IVF this year is that we achieved a Companion Pass on Southwest Airlines for all of 2018, and we intend to make full use of it. One of my life goals is to visit all 50 states, and I still have 14 to go. My goal for 2018 is to check 3 more off that list, starting with a ski trip to Utah in February.

Financial implications: While we will be able to fly for free anywhere we go, we still have to account for all the other costs of travel such as lodging, local transportation, meals, etc. We like to stay in Airbnb’s when possible, which helps with the costs, and then we take many staples with us such as coffee supplies and snacks, which helps us avoid paying for 3 full meals each day.

The trade-off: We usually take a “big” vacation every year, either to an international destination, or somewhere a bit more luxurious, but in order to afford our increased travel via Southwest, we will be skipping an extended trip in lieu of several shorter vacations. I’m also going to be going on a clothing cleanse, which I’ll be detailing in a future post, in order to balance our household budget for the year.

3. Tail

To keep with the ‘T’ theme of my 2018 goals, my third goal is all about adding a tail to the family — one that’s attached to a dog. Adopting a dog is a catalyst for several other things that have to happen first, so the goal for 2018 is simply to get those wheels in motion.

Most importantly, since we live on the 3rd floor of a walk-up condo building, we have to move. That seems relatively simple, but we agree that when we move from our current home, it will most likely be to another state, which is not so simple.

Financial implications: Beyond the obvious financial aspect of buying and selling a home, the most important financial aspect of such a decision is my husband’s work. I’m privileged to be able to work from anywhere that’s within a reasonable drive of an airport, but my husband would have to find a new job. Luckily he’s in a field where that’s not a problem, but he loves his current job, so finding a replacement could prove more of a challenge. Therefore we need to be in a financial position to allow him time to find the right position.

The trade-off: Obviously traveling a lot and having a dog don’t go hand-in-hand, so the 2018 aspect is to simply put a plan in place and begin preparing for a move. Once we figure out where we want to go, the rest includes setting money aside for him to possibly go without pay for a month or two. We’ll also begin to prepare our home for sale in hopes that we’ll sell it for enough to afford a down payment on a home with a yard, a garage and a basement — the three major things missing from our lovely condo in the city.

Sticking to it

I realize that these are pretty lofty goals — realistically, in order to achieve all three, they will have to be my primary focus outside of work and daily life. However, I’m hopeful — when you set intentions that are in line with your values, then put pieces in place that set you up for success (such as scheduling ahead and having someone to hold you accountable), it’s easy to stick to it. That’s one of the reasons I came up with a dorky catchphrase — it will be easier to recenter myself around what’s important when the busy-ness of daily life takes over.

How do you set and stick to your intentions? I’m always interested in hearing what others do. Please send me a note on Facebook or tweet me @kclmoneycoach.

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

 

Why My 2018 Intention Is To ‘Always Be Me’

December 25, 2017

Note from the editor: As we round out 2017, many people will be setting goals and intentions for the year ahead. To help with that, our blog team will be sharing their take on goals throughout the week — we all have a different opinion! We hope you enjoy hearing how each of us approaches the idea of goal-setting and New Year’s resolutions. From Cynthia:

Every New Year, I set intentions for the coming 12 months. I’ve been doing this for more than half my life. When I first began doing this, I set personal guidelines, such as “use the power for good,” or “express my gratitude.” More recently, I’ve set annual themes for qualities I wanted to cultivate, such as patient or acceptance. This approach of setting intentions has always worked for me – there’s a magic power in writing down my goals.

Keeping it simple

This year I am simplifying. I’m not setting multiple intentions. For 2018, my primary goal is to, “always be Cynthia.”

Finding myself again

What does that mean, exactly? Aren’t I myself already? Well, sure I am, but lately I’ve been thinking that I’m no longer the most interesting version of myself. I spend a lot of time fulfilling external expectations – work, family, etc. That’s certainly no surprise from someone who’s an Obliger. Not to mention that balancing competing priorities is a challenge for working parents of school-age children everywhere. Flexibility and compromise are essential. I’ve been balancing competing external priorities, but I’ve lost track of some of myself in the process.

Here’s how I plan to return to what feels more “me.”

Focus on strengths

When I use my strengths at home and at work, I’m in the flow: I get more done with less effort, and have more fun doing it. Life’s too short to spend the majority of time doing things I don’t enjoy.

That’s why in 2018 I plan to make some changes in how I manage my money and investments:

  • I can get bamboozled by the pile of paper which arrives in my mailbox every day (see the story of my paper struggle.) How to be Cynthia? Don’t sweat the pile on my desk in my otherwise tidy office. After all, a messy desk can be sign of genius.
  • I’m considering moving my investments from a mostly active to a mostly passive investing approach. I may have the CFA® charter, but I don’t like to watch the market every day, so I am highly unlikely to beat market averages. Does this mean I will move my accounts from the full service brokerage firm where they are now? Maybe. I’ll keep you posted.
  • I like to put together detailed budget spreadsheet where every dollar has a specific job. My husband likes a shorter one, with broader categories, as he easily keeps track of our financial life in his head (he’s a math guy.) The solution? Discuss the summary together but keep a more detailed one for my own use. That way we can put together a spending plan that fits both our personalities.

Don’t wait for permission

I shouldn’t need permission to be Cynthia, so why do I sometimes wait for it? Is it all those years of Catholic school? Is it a generational thing (I’m a younger Boomer, part of Generation Credit)? Carl Richards calls the difference between things you’ve done and the things you’ve always wanted to do the Permission Gap.

What would I do if I gave myself permission? I’d certainly prioritize things that get me out of the house (feeling cooped up is a hazard of working at home): walking in nature, yoga classes, plays and concerts, dinner out with friends, language classes, etc. What does this mean for our finances?

  • I need to set aside more money for babysitting expenses. That should be relatively easy to do. I have wiggle room in our food budget, especially by cutting down on sushi or Chinese takeout orders. I can also try Kelley Long’s absolutely brilliant hack for saving on food expenses.
  • I have to budget more time for fun and exercise. This is such a hard one for me. Kids, husband and work always seem to come first. My colleague Doug Spencer (a fellow Obliger) holds himself accountable by prepaying/prescheduling his workouts at Orangetheory. My goal is to find a similar hack which works for me.
  • Where can I find more time to write? I keep a running list of blog ideas, LinkedIn posts and book topics just begging to be written. Where can I find writing time in a day crammed with responsibilities? What about the hour or so I spend reading 3-6 news outlets daily? While that habit made sense when I worked in politics, the world does not depend on me being up to the minute on current events. It’s time to give up this habit.

Expect to be challenged

Now that I’ve set my intention to always be Cynthia for 2018, I expect that the challenges to living that intention will increase in volume! For example, when I turned forty I decided that my theme for the year was “be patient.” Needless to say the year will filled with unexpected challenges to try my patience. I was given many chances to practice patience. I did, in fact, learn to be far more patient, but it was a hard year.

The upshot? By the time I had my first biological child at age 41, I was a patient person – a useful quality for parenting. Well, patient for someone who’s from NY, anyway. This year I don’t know what’s coming to challenge me, but embracing the challenges will help be me.

How will I stay accountable?

Author Gretchen Rubin, who writes about happiness and habits, recommends setting up outer accountability. She’s got some good ideas here, including creating an accountability group. I know some other time-stretched moms who might want to support each other in being ourselves. As I’ve written before about Rubin’s work, understanding your personality can change your life. One of the ways I’ll stay accountable to this intention is by writing about it, thus letting everyone know I’m working on this.

Don’t hesitate to hold my feet to the fire!

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

Think You’re ‘Not Good With Money?’ How To Change Your Outlook

December 20, 2017

One of the most impactful personal finance books I’ve ever read is Brent Kessel’s It’s Not About the Money. In it, he shares eight different financial archetypes — most of us embody a couple of them, but one that I see a lot in my work is the Innocent.

Innocents, whether they have money or not, have the common thread of being unable to master money. Either they weren’t taught the skills, are confused by money or their natural gifts are not economically valued in our society. Innocents aren’t necessarily against money, they just have a hard time hanging onto it and dealing with it. We probably all know someone who is an Innocent, if we aren’t one ourselves.

“Not good with money”

Many of the other financial archetypes develop their relationship to money in response to fear, anxiety or frustration. Innocents don’t have a coping strategy, so the pain they feel about their financial situation is often deeper and less obvious for others to see. They might feel like they should have the ability to be better with money, but when it comes down to trying, the response has historically been to shrug and say, “I guess I’m just not good with money.”

Living paycheck to paycheck even on a high income

Even if they earn a high income, Innocents don’t have the know-how to secure their financial futures, so at the end of the day they find themselves living paycheck to paycheck. Innocents are far more likely to be regular lottery players and fall prey to get-rich-quick schemes, looking for a quick fix. When these endeavors fail, it just adds to their lack of confidence and feelings of inadequacy when dealing with money.

Being innocent doesn’t mean you’re not guilty of hiding from the truth.

Innocents usually spend everything they have and sometimes more, without any idea where the money is going. They are often people with no earnings of their own and depend on a spouse, family members or the government for support, which further adds to their financial distress. The first step of getting their financial house in order is to look at the numbers.

Moving from innocent to empowered

If you’re an Innocent and you don’t know how to look at the numbers, get help. If you have a workplace financial wellness benefit or EAP, use it to talk to a financial coach. You may also want to start by talking with a financially savvy friend. Work on these steps to get a better grasp on your money:

  1. Find out where your money is going, then start living within your means immediately.
  2. Find ways to simplify your lifestyle so that you can become self-sufficient.
  3. Prepare a debt pay-off plan and stick with it.

It won’t be easy at first, but ignoring your financial situation won’t make it go away. By paying attention and gaining the skills necessary to be financially independent, you’ll experience a great amount of relief and empowerment. Get after it!

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

7 Steps To Prepare For A Potential Layoff

December 19, 2017

Editor’s note: This post has been updated to reflect current events due to the COVID-19 pandemic.

Of late, one of the biggest questions I have gotten from friends is, “how do I prepare for a layoff?” When I ask for the reason behind the question, they tell me of a friend or a relative that recently got laid off or worse, their company has had recent layoffs and has warned that there may be more.

If you find yourself in this position, I am sorry. A layoff or even the possibility of a layoff is scary. The good news is that there is a lot you can do in advance to prepare, just get started ASAP.

1. Get your savings account fat.

You may be aggressively attacking debt or saving for a vacation, but if you are facing the possibility of not having a paycheck, keeping a roof over your head and food on the table becomes your #1 goal. You may need to temporarily pay the minimums on debt, cancel upcoming vacations and focus all extra money on fattening your savings account. Best case, you don’t get laid off and you can resume your plans. Worst case you are in a better position to pay the bills while you look for work.

The average length of time to find employment is just over 6 weeks. This can be shorter or much longer depending on your career, industry, and location. Start saving enough to cover at least at least three months of expenses, with six being a reasonable stretch goal.

2. Get your spending plan skinny.

Trimming down your spending is the easiest way to create extra money that can go towards savings. Start with the things that you’ve had to go without during the shelter-in-place orders anyway: gym memberships, entertainment expenses, dining out and shopping. Create a “Basic Needs” budget to determine how much you need monthly to survive — this includes food, shelter, transportation, your creditors and possibly childcare while interviewing for a job.

3. Prep your creditors.

I have learned from experience that the earlier you contact your creditors about a hardship, the more likely they are to work with you if later find yourself struggling to pay your bills. Even if you are paying your creditors on time, contact them to let them know about the potential layoff and ask about your options if you no longer have a paycheck. This would also be a great time to ask for a reduced interest rate! Most businesses are offering increase flexibility around hardship procedures during the pandemic, but those rules could revert back to previous rules by the time you are out of work, so be clear on how long certain provisions are in effect.

Get the name of the department, oftentimes called the hardship department, you would need to call for help. Also, ask for their procedure — do you have to write a hardship letter, produce a budget, etc. to get help? Then if you do find yourself pinched, you’ll already have a plan.

4. Understand your unemployment benefits.

Read up on the qualifications for unemployment, which typically have to do with your lack of employment not being your fault. Each state has its own requirements, length of time you will receive benefits and even benefit amounts. You can even estimate your potential payment. Knowing what you might receive can help you gauge how many months you can make it when you factor in your savings along with unemployment. As of right now, the federal government is supplementing all unemployment checks with $600 per week, regardless of previous income. This relief is in place through December 31, 2020.

5. Suck every benefit out of your job before you leave.

Missed your annual physical or dental checkup? Need glasses or contacts? While you are employed with a paycheck and an employer subsidized healthcare plan, get every medical need taken care of if you’re able.

If possible, also find out how your health insurance will be covered during a layoff. Some employers will subsidize healthcare for a certain period of time, while others stop subsidizing on the last day of employment. You may also be offered COBRA, a continuation of your healthcare coverage at your expense. Know that you can use your HSA to pay for healthcare premiums when you are claiming unemployment.

6. Find out what happens to other benefits when you leave.

If you have an outstanding 401k loan, find out how the loan is treated once you are laid off. Some employers allow you to keep paying, while others may give you a grace period, but require you to pay the balance rather quickly. If you’re unable to repay the money within that period of time, the remaining balance is considered a withdrawal and could be fully taxable. In addition, if you are under the age of 59 ½, you may have an additional 10% early withdrawal penalty. Make a plan to avoid this, if at all possible, by brushing up on the temporary rules for hardship withdrawals that could help you avoid the penalty and even taxes.

If you have life insurance and/or long term care through a workplace plan, find out if you can take those benefits with you and how much they may cost so you can factor that in to your budget.

7. Clean house.

Being laid off can be emotionally traumatizing. While you are in your right mind, get copies of key documents such as performance records or work samples. Get the contact information of potential references. Also, offer your information to fellow colleagues who may need to use you as a reference.

It’s also a good idea to find the contact information for payroll (you may have to request your W-2 or update your address if you move), the best HR contact for former employment verification and benefits contacts. If your layoff is imminent, start removing your personal items from your workplace.

I mentioned it before, but getting laid off can be a traumatic event. The more prepared you are for the layoff, the easier it will be to find a job and the less impactful the layoff will be on your finances. A little bit of preparation can go a long way.

How Bankruptcy Changed One Couple’s Life For The Better

December 15, 2017

After a recent client meeting, I realized just how impactful financial conversations can be. It is truly amazing to see positive changes in a family’s life after what seems like a relatively straight forward, simple conversation. I met with this couple almost a year ago and they followed up a few times after that conversation with some quick questions. Then, 10-11 months went by and I saw them on my calendar. I was interested to hear what had developed in their life.

The situation:

She works for a big company that offers Financial Finesse services to their employees. He is a self-employed medical professional.

Back when the recession hit, his business took a turn for the worse. His patient visits declined annually and his expenses climbed. He kept taking on more debt as his rent increased and he tried to enhance his marketing efforts to attract new patients.

No savings and no debt, except…

When I first talked to them, they had no liquid savings and zero personal debt outside of their mortgage, but a mountain of business debt. We talked about their situation and their goals. They are very close to 60 and she would like to retire by age 65. He would love to work as long as his body will allow him to continue.

We looked at multiple ways for them to address their situation and with over $100,000 in business debt and a practice in decline, they were facing some less than pleasant potential solutions. Here are some of the ideas we bounced around prior to them making a decision and running with it.

  • Home equity. There was no reasonable hope the business could help them earn their way out of debt, so we looked at their personal assets as a potential source of funds to pay down the debt. Because the business had been “hemorrhaging dollars” for a number of years, they had exhausted all of their liquid finances along the way. The only real asset they had left was their home and they were considering a home equity line of credit to pay off as much of the business debt as they could. The downside of this option is they would end up collateralizing their home for business expenses.
  • Private lending. We looked at refinancing his debt through a private lending opportunity that was presented to him. The upside was that the interest rate was incredibly low. The downside is that the payments were still greater than the income his practice was generating.
  • 401(k) widhdrawal. Her 401(k) was gaining momentum and becoming a sizeable asset, with almost a $250,000 balance. We talked about the pros of taking a large hardship withdrawal from her plan – paying the debt off completely. We also talked about the downsides – a huge tax liability and needing to work an additional 5-10 years to recover the lost ground.
  • Bankruptcy. I very delicately waded into the waters of bankruptcy. They had very clear concerns. What would that do to their credit scores? What would that do to his reputation? He took on the debt, so isn’t he morally obligated to pay it off?

A textbook case

All of the debt was in the business name and not their personal names.  Much of the debt was owed to a real estate management company that itself was in bankruptcy proceedings. They had trepidations about this path, but from a purely financial viewpoint, their situation was a textbook case of when bankruptcy makes sense.

Those were the options we talked through and we also discussed the ongoing operations of his practice.  His biggest expense was rent and with a declining revenue stream, I questioned the level of rent. He was already a few steps ahead of me and was in the process of joining forces with other providers and moving into a space that was already operational and in use.

When talking specific numbers, this move lowered his rent by about 80% and made staying out of debt a relative certainty. Our first conversation and follow up emails confirmed that he was leaning toward moving into the new space and assessing his options for the debt once the move was completed.

Last week, we had a conversation about what they did and how they are progressing toward an eventual retirement. They let me know that they in fact went through with a Chapter 7 bankruptcy filing. It was approved and their business debt was forgiven.

On the personal side, they moved out of their house and bought a much smaller one since their kids are away at college or out on their own post-college. The net proceeds from the downsizing allowed them to reduce their mortgage payment by about $750/month and that is allowing them to build a substantial cash cushion and her to contribute the full $18,000 to her 401(k) as well as the $6,000 post-50 catch up contribution. He is going to fund a retirement plan for himself and we discussed multiple options for that during our follow up conversation.

The turning point

The moment that I will remember for a very long time in our most recent conversation was when they told me that they were totally opposed to pursuing bankruptcy because they felt morally obligated to pay off every penny of that debt. When I told them that they were a “textbook” example of bankruptcy, they looked at each other and in that moment, knew that they had to look at it. They went to a library and looked at a number of financial textbooks. When they read about bankruptcy for businesses, they saw themselves in a lot of the examples.

That quick conversation changed the trajectory of their financial future.

Why bankruptcy exists

The bankruptcy isn’t bailing them out because they have poor financial management skills. It’s helping them “hit the reset button” and get back to being the fiscally responsible couple they had been up until the recession and geography (their town is growing smaller by the year as people move to other local areas) hit with a force greater than his practice could handle. Bankruptcy exists to help people who have faced situations very similar to this. But bankruptcy can’t be a cure all.

Not a cure-all

Some people should absolutely not consider bankruptcy. Some of those types would be people who need a high-level security clearance, as bankruptcy could disqualify you from receiving that clearance level. Public figures and those in professions that require reporting/disclosing bankruptcy proceedings would be candidates for whom bankruptcy might not be suitable.

This couple’s debt was business related so that made bankruptcy a great option. Debts that are generally NOT able to be discharged in bankruptcy are IRS debt and student loan debt. It also wouldn’t be a great option for those who wouldn’t necessarily be considered “financial stewards” and have a lot of consumer debt because of living way beyond their means and not wanting to change that. If the behaviors that create a credit card heavy lifestyle aren’t changed, bankruptcy would only be a short term fix. It might even make things worse.

Not as bad as they thought

Postscript:  The new arrangement with the other practitioners is working extremely well. He has had four consecutive months of increasing revenue and can see a point in the next 6 months when he will be able to fund a retirement plan for himself for the first time in over a decade. The bankruptcy didn’t impact their credit scores much at all. He went from 805 to 750, but is now back at near 775.

For the first time since the recession started, they feel like they can breathe. The incredibly stressed couple I talked to initially had magically transformed into a relaxed, fun couple. There was laughter and optimism in our most recent call when during the first call all I heard was self-doubt, negativity and zero hope for the future. For me, seeing that I made a difference in the lives of a couple and the potential ripple as they interact with the rest of the world is exactly why I do what I do.

This post was originally published on Forbes.

The Trouble With More

December 13, 2017

If you just picked up on the concept of hygge, you’re behind. The new design trend in homes this year is called Lagom. It’s the Scandinavian concept of having just enough, as in a sufficient, perfect amount. And I think it applies just as much to money as it does to designing a trendy home. As a society we have an obsession with more, but many are starting to realize that more is not always better.

More stuff does not equal more happiness

As I contemplated this trend (which would be a struggle for me to personally embrace, as I love a cozy home), I was reminded of an interview I watched several years ago with Tom Shadyac, the filmmaker behind the documentary “I AM,” but also the director of films like “Liar, Liar” and “Bruce Almighty.” He said something that really struck me about the excess he had accumulated during those successful years.

He said, “I was standing in the house that my culture had taught me was a measure of the good life, and I was struck with one very clear, very strange feeling: I was no happier.”

He went on, “I had a full-time housekeeper, I had a full-time gardener, I had a landscape architect, … I had a house manager, a business manager, a money manager, a career manager. I needed a manager for my managers.” He had tapped out on the more equals happier scale.

The trouble with always wanting more is that eventually it gets to be too much.

The Universe says that great joy leads to great abundance but that this is not true in reverse. I fully believe that — we can get so caught up in making sure we have an abundance of stuff or money, but that doesn’t lead to joy. However, when we pursue joy for the sake of pure joy, we often find that the things we really need are there in abundance anyway.

Lagom = more joy?

How much of our focus in life is about accumulating more? More money, more clothes, more toys, more square footage, more car. But do we ever stop to consider whether the moremoremore is bringing more happiness? Often it just brings more obligations that cancel out any added enjoyment.

Breaking the cycle

The next time you find yourself caught up in the cycle of wishing for more and therefore not enjoying the current enough, stop to consider whether the added responsibility of more will be worth it. You may just find that enough is enough. And that wouldn’t be such a bad thing now, would it?

 

4 No-Cost Ways To Give Back During The Holidays

December 12, 2017

The holiday season is one of my favorite times of the year. I get to enjoy endless samplings of every chocolate dessert imaginable, while spending time with the people I love. How can it get any better?

Paying it forward

I feel so lucky to have my wonderful family, friends, a place to sleep and food to eat. Many people do not have these luxuries. I encourage everyone to take the time to slow things down, spend more time with the people you love and consider these ways to give back during this holiday season:

1) Start in your own backyard. For people without friends or family, the holidays can be lonely. Consider inviting your elderly next-door neighbor or co-worker without family over for dinner. The dinner could be simple, even pizza, but it could mean the world to someone who has no family or friends.

2) Consider visiting a nursing home. When we visited a nursing home, just the presence of our children brightened their day. Have the kids make homemade Christmas cards. You would be surprised by how much this means to people who have not gotten gifts from kids in decades, if ever. If you have no kids, sitting down and having a conversation with someone in a nursing home can make their day just as much.

3) Send greeting cards to soldiers. So this one may cost you a few dollars for a card and/or stamps, but if you already send holiday cards, just add a few soldiers to your list. When I was in the Army, some of the hardest days were during the holidays when I could not go home. Getting a Christmas card from anyone made my day. Contact Operation We Are Here, The Red Cross, or your local military base for more information.

4) Volunteer to help a neighbor. Do you know of a struggling single parent? Volunteer to watch their children and give them a break. Do you live near an elderly person or someone that has mobility issues? If so, I am sure there things you can help them with like household projects or even shopping.

Don’t think you have nothing of value to offer. For many, a kind smile and words are priceless. However you can, consider giving back during the holidays.

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

Are Your Money Beliefs Holding You Back?

December 11, 2017

Have you ever stopped to take inventory of how you arrived at your current financial state of affairs? I don’t mean simply thinking about how you ended up in your career, what your net worth is or how much money you make. I’m referring to your early lessons about money that you picked up either through observation or activities during childhood and adolescence.

It starts early in life

These life experiences are often passed on from our parents or extended family and may represent overall cultural events. Money beliefs can be extremely stubborn and are difficult to change since they can become a part of our ongoing “money script” or life story that follows our financial behaviors. No matter where you are on the journey to reach your financial life goals, it’s always helpful to be aware of your past experiences with money whether they were positive or negative.

Four types of money beliefs

Money beliefs play a major role in guiding your current and future financial behaviors. These beliefs help explain key differences between savers, spenders, and people who try to avoid money matters completely.  According to research performed by Dr. Brad Klontz and Dr. Sonya Britt, professors at Kansas State University, three out of four primary money beliefs (money avoidance, money status, and money worship) are linked to destructive financial behaviors. The other money belief, money vigilance, was not linked to problematic financial behaviors.

Which are you?

Generally speaking money avoiders tend to view money as negative, think the wealthy are greedy, and that they don’t deserve money.

Money worshipers believe that having more money will solve all of their problems, money leads to power and life satisfaction, and money is a scarce resource and there will never be enough of it.

People with money status belief systems tend to define their self-worth by net worth and place a great deal of emphasis on buying the hottest new items with leading brand names and quality.

Money vigilance is typically associated with themes of frugality and people with these money beliefs tend to focus on importance of saving, use discretion when discussing financial matters and express anxiety about saving for emergencies.

Are your beliefs a support or roadblock?

Are your money beliefs helping support your financial behaviors or are they creating roadblocks for your financial life plan? If you are having trouble following a budget, eliminating debt, or saving, your money scripts may be holding you back. You can take this quiz, which is the Klontz Money Script Inventory (KMSI) if you want to complete your own self-assessment to examine your own money beliefs.

It’s never too late to rewrite your script

The good news is that you have the opportunity to rewrite these money scripts. By learning what your belief system is, you can begin to examine how that may translate into your financial situation, then take mindful, deliberate steps to change.

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

Meaningful Gift Ideas I Learned From My Grandmas

December 08, 2017

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

An evolution of gifts

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

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

Meaningful doesn’t have to mean lots of time

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

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

Using cash for longer-term impact

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

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

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

Gift ideas for bigger impact

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

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

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

Your Obsession With Being Perfect Could Cost You Six Figures

December 06, 2017

As a recovering perfectionist, I feel slightly hypocritical even writing about this — perhaps I should title the post “How I’d Be Wealthier If I’d Gotten Over Perfectionism Sooner,” but either way, I need to call out something I’ve noticed more and more in my conversations with peers and colleagues who are 40 and younger. There’s an obsession with perfect that is getting in the way of a lot of things (read Brene Brown’s Gifts of Imperfection if you really want to get into it), but when it comes to money, it’s costing real dollars.

Perfect as a goal

There’s nothing wrong with striving for greatness in life, and that desire to get things “right” serves us well throughout our school years in terms of getting good grades and therefore better college and eventual career opportunities. But once we get into the “real world,” there are benchmarks we use to measure certain areas of personal finance that can mislead people who put “doing it right” ahead of all other criteria.

When it comes to your financial outlook, getting it perfect in the short term could actually lead to missed opportunities in the long-term. The worst part is that you probably won’t even know if you got it “wrong” until it’s too late. Here’s what I mean.

What is “right?”

The biggest issue here is that “right” is a moving target when it comes to things like investing, your credit score and even building a cash nest egg (also known as the emergency fund).

Investing

When it comes to investing, getting it “right” doesn’t actually mean you never experience a loss of value in your portfolio. If you make it through your entire career without once seeing your 401(k) balance drop, you actually got it wrong because it means you invested too conservatively and missed out on the greater growth that comes with greater risk.

It may feel better because you never had that pain of “loss,” but you’ll never actually know what you lost out on in missed opportunity. In fact, investing too conservatively over a 30 year career could literally cost you a half million or more.

When it comes to investing, there is no perfect, but generally speaking, the longer your time horizon, the more chance that taking risk will pay off. When the market drops, think of it as a buying opportunity — the cheaper you buy into your 401(k) and other investments, the better the long-term outcome. Even investing on the worst day in the market (aka going all-in the day the market peaks before an extended down period) leads to a better outcome than not investing at all — don’t wait.

Credit score

I like that people want to have a great credit score and it’s kind of cute how some of my more competitive colleagues compare scores all the time, but trying to get it perfect may actually hurt you in the long run. For example, I’ve talked with people who are hesitant to explore refinancing their debt or even apply for a mortgage because they were afraid of the “ding” from applying. What’s the point of having a great credit score if you’re not going to use it? Anything over 750 is enough, heck even 720 will be good enough to offer you great credit options. Obsess less about your score and more about these things.

Nest egg

When you’re first starting out, getting some cash in place to handle the things that come up in life like job losses, cat surgeries and car engines needing replacing (all true stories in my life) is super important. A great guideline to shoot for is 3 — 6 months of expenses, but as life goes on and hopefully cash flow becomes a little more … flow-y, it’s important to reassess that balance.

We can get to a point where we’re so used to putting cash in a savings account that we may be missing out on other opportunities for that money, whether it’s using it to increase HSA contributions, invest in something else or even pay down your mortgage faster. There is no perfect number that applies to everyone, actually. The amount you need in your nest egg depends on several things:

  • job security (the more secure your job or in-demand your skills are, the less likely you’ll face prolonged unemployment)
  • family situation (the more mouths you have the feed, the more you need)
  • housing situation (the person who could get out of a month-to-month lease and move in with mom and dad in an instant needs less than someone who owns an historic old home in a transitional neighborhood that might take several months to sell)
  • other sources of cash available (not that you want to use these things, but they can be a part of your emergency plan as time goes by)

If you find yourself the sole breadwinner with a spouse and 4 kids at home, you probably need up to a year’s worth of salary set aside, while a DINK couple (dual income, no kids) could get by with 3 months as long as they would be able to trim back on spending quite easily upon a job loss or accident.

Getting this one wrong on either side could cost you — have too little saved (perhaps because you were focused on spending money on making your house look perfect first?) and you could find yourself in serious debt or losing your home should something come up. Having too much in cash could cost you investing opportunities (see above). It’s best to re-evaluate how much you need at least every 5 years or so, and definitely when you have a big life event such as the birth of a child, significant increase in income, new home purchase or change in marital status.

Where you should try to get it perfect:

Avoiding high interest debt (or debt at all) — Interest, whether it’s tax deductible or not, is money wasted. The less you can spend on it, the easier it will be to achieve financial independence, which I view as having choices in life.

Minimizing taxes — I don’t mean spending money on mortgage interest to get a deduction, but making sure you’re taking full advantage of all tax savings opportunities. Some examples:

Choosing your life partner — You won’t find a perfect human and you can’t be perfect (sorry!), but you can find someone who’s perfect for you and that makes a huge difference in your long-term finances. My CEO Liz wrote about this in her book What Your Financial Advisor Isn’t Telling You and it’s true — who you marry could be your best or worst financial decision ever.

 

 

Time May Be The New Money, But Only If You Already Have Money

December 04, 2017

What would you rather have: more money or more time?

In an article, “Being Part of Generation Rent Doesn’t Have to Be a Bad Thing,“ Marisa Bate asserts that millennials are playing by new rules that reflect real economic changes. “If time is our chief commodity (perhaps our only), then we want it as much as possible – and that means outsourcing things so we can get more,” she wrote. “Once, we saved money; now, we save time.” Millennials don’t own anything and outsource everything, she contends.

Should an entire generation give up on financial security?

Bate, a British journalist who counts herself in the millennial generation, says that cash-poor twenty-somethings need a marker of success beyond the traditional home purchase and retirement savings. If millennial employees can’t find an easy path to home ownership and a pension, she observes, then they will look for experiences and flexibility. “We millennials,” she writes, “by all accounts, love experiences and not things anymore.”

Really? An entire generation should give up on financial security in favor of time flexibility? I wondered if that opinion was broadly shared, so I posted the article on social media and asked my younger connections to weigh in. Is time really the new money?

Student loans cause money and time debt

“What’s the point of time if there’s no money to enjoy it?“ was a common response. The burden of student loans caused some to feel like they had experienced a bait and switch. They followed the rules for a good education to be competitive in the job market, but someone changed the rules without telling them. People shared examples of working multiple jobs to pay the bills and stay current on astronomically high student loan balances.

For those early career employees, especially those with graduate school debts, their student loans weren’t just financial obligations. They felt like debt was a drag on their time in all areas of their lives, leaving little free time or financial resources to enjoy life now. The bigger the loan balance, the more their future time was already pledged to activities to make their loan payments. These workers used some time-saving services, such as Amazon Prime or Blue Apron, but not to create work-life balance. They used them so they had something in the refrigerator when they got home from their second job.

Urban strivers will do what it takes for work/life balance

Those with higher-paying careers or lower student loan balances were more enthusiastic about doing everything they could to create extra time in their lives to spend with family and friends. Those less financially-stressed urban professionals are prioritizing extra time over personal economy.

“I do everything in my power to save time in everything I do,” explained one 28-year-old. “I use Stitch Fix, Lyft, Amazon, Netflix and more because I’m working 60+ hours per week (and on call 24/7). I need all the time I can get if I’m going to spend quality time with my family, work out, eat healthy, take care of my mental health, socialize with friends, travel, volunteer, read, etc. I need more time so if I can save an hour here and there by avoiding a crowded mall or grocery store lines, I will do it.”

Another who favored time-saving services wrote, “I’m not a huge fan of shopping in stores and my free time is valuable to me. Working Monday – Friday, I’d rather spend my weekends doing the things I truly enjoy and that really doesn’t involve shopping of any sort.” This subset of younger employees, who have corporate jobs with good benefits and lower financial stress, are more open to incentives which give them time to focus on life outside of work.

Marriage and kids change everything – especially in the suburbs

Some of my social media friends in Generation Y (born in the early to mid-eighties), now in their early thirties, had a different perspective. They worked and played hard in their twenties, got married, bought homes in affordable suburbs and had children for which they were financially prepared (“the success sequence”).

Although many had student loans still outstanding, especially those with advanced degrees, they had not borrowed so much money that the debt impeded reaching life milestones. These friends are prioritizing homeownership and saving for goals and were more likely to own multiple cars, cook for themselves and shop locally.

Marriage and kids changed their perspective on financial issues, catapulting them into the natural focus on good financial habits that is necessary to be a homeowner. “I’m struggling to think of any friends who didn’t purchase a home within a year of having their first child,” noted one reader. “I don’t know too many people who rent now that we are in our 30s,” commented another.

Both had left more expensive urban areas to live in less expensive towns. (The opposite is true for one young, married parent I work with, who sold a home in a southeastern city to become a renter in mega-expensive Los Angeles.)

The takeaway: if you’re broke, money is still more important

My conclusion is that time is the new money only for those who already feel on track financially. Those who have a strong sense of financial possibility and faith that they will eventually reach their goals are more likely to spend money to create more time. For those millennial employees who are working multiple jobs just to pay the bills and repay student loans, money is much more important than time.

This post was originally published on Forbes.

The 3 Risks Of Saving Too Much

November 29, 2017

There’s no shortage of headlines in the personal finance world telling us how poor Americans are at saving money, particularly when it comes to saving for retirement. It’s easy for people who have an unhealthy obsession with saving money to justify their habit since it’s culturally supported for the most part. But there is such a thing as saving too much.

Does it pain you to spend money?

One sign that you may be too obsessed with saving money is if it actually causes you pain to pay for things like buying new clothes, a nice dinner out with friends or a gift for a family member, even though you have more than enough money in the bank to pay your bills and then some. You may have a fear that any type of spending that can be classified as frivolous is the beginning of a trend of needless spending that could ultimately leave you penniless.

Are you afraid to retire?

Another sign of an unhealthy need to save money is if you’ve reached an age (and a savings level) where it would be reasonable to retire, yet you insist to friends and family that you can’t afford to take time away from work to travel, even when your spouse or children are begging you to see the world with them. People with a saving mentality like this often only feel relief from their fear of financial ruin when they are actually physically depositing money into their savings.

It’s not about greed

People who over-save are usually doing it out of fear of never having enough or to fulfill some other need that is temporarily met when they see their net worth grow. They’re rarely greedy. Rather, their behavior is more about self-preservation than self-promotion. They have trouble ever enjoying the fruits of their labor, even when logic tells them that they can safely afford to.

You could be hurting yourself more in the long run

The personal finance industry generally supports this unhealthy mindset. The problem is that there are real risks to being overly obsessed with saving money. Here are three:

  1. Poor investment performance due to overly active trading. People who are unhealthy savers tend to pay too much attention to their investment performance, which can often lead to losses due to failed attempts at market timing or investing too conservatively due to a risk-averse orientation. To overcome this habit, resolve to only check your accounts quarterly, and consider using a pre-mixed investment strategy like target date funds, where the asset allocation decisions are made for you. Ask a financial planner to run a few projections showing you different outcomes based on more aggressive versus more conservative investment mixes to show you what you may be missing out on by being too vigilant about market risk.
  2. Inappropriate levels of insurance. You may be tempted to skimp on insurance because the cost of the premiums may seem too high, but being underinsured could easily lead to realizing your biggest fear of losing everything. On the other hand, you may be way over-insured to protect you against any loss at all. Your best bet here is to consult an independent insurance broker and request a review. Obtain a couple of opinions if you’re concerned about being sold or if you have access to an unbiased financial planner through your workplace financial wellness benefit, use it. Some of my favorite conversations with employees are what we call “second opinion” calls.
  3. Deathbed regrets. The mantra of many over-spenders applies here: You can’t take it with you, and it’s true. Too many people who spend their entire lives accumulating cash find themselves at a point when they realize they’ll never see the benefit of all that sacrifice and immense regrets ensue. The best way to avoid this tragedy is to sit down with an independent financial person you trust. Maybe it’s your financial advisor or maybe it’s your accountant, but ask them to help you ease your grip on your money so that you can spend some of it on yourself, family, travel, a vacation home – whatever will fulfill you besides the feeling of saving money.

Look at the numbers

Whenever I have the opportunity to encourage an over-saver to spend, I give them comfort by showing them in real numbers what they need to keep in the bank in order to feel safe. A savings account with enough cash in it to pay six months’ worth of bills is more than enough unless you are the primary income earner with multiple dependents. Next, run a retirement projection to see that you’re saving enough. If it all looks good, go out and enjoy some of that money guilt free.

Don’t get me wrong. Saving money is definitely a necessary aspect of achieving financial security. But there’s a balance that we all need to achieve in order to find that sweet spot of seizing the day while also setting our future selves up for financial independence.

This post was originally published on Forbes.

Does The Billboard Top 10 Mean The Market Is Heading For A Crash?

November 24, 2017

In my 20 years or so as a financial planner, I’ve heard some pretty wacky theories about things and events that allegedly have an influence on the stock market. They all have interesting and catchy names too like the “Santa Claus Rally,” the “January Effect,” or the “Super Bowl Indicator.” According to market folklore, each of these seemingly unrelated conditions or outcomes is supposed to determine the future direction of the U.S. stock market.

For example, according to the Super Bowl Indicator, a win by the American Football Conference (AFC) team is supposed to bode negatively for the stock market in the coming year, whereas a win by the National Football Conference (NFC) team is supposed to foretell a rising stock market for the next twelve months or so.

Balderdash! Correlation does not indicate causation. Everyone knows that, right? Entertaining as those correlations might be, there isn’t much (okay nothing) in the way of practical scientific support to back them up.

Can Billboard predict the next market crash?

However, some new research suggests yet another seemingly unrelated indicator that may actually have a hint of scientific support behind it. According to recent research conducted by Dr. Philip Maymin, then assistant professor of finance and risk engineering at NYU’s Polytechnic Institute, the public’s choice regarding popular music may indeed be closely tied to forecasted movement within the U.S. stock market.

Based upon Dr. Maymin’s findings, people tend to prefer softer, calmer musical beats when they anticipate a more volatile stock market in the coming months and faster, livelier music in anticipation of calmer markets. He based these findings on observations of variance in standard deviation of returns for the S&P 500 index in comparison to average annual beat variance in songs tracked by the Billboard Top 100.

Market timing – investing with two left feet

If making your investment decisions based upon who wins the Super Bowl or whether the song in your head sounds more like “Despacito” or a Mariah Carey tune comes across as a rather silly way to manage your money, you are probably right. Imagine trying to dance at a club or wedding where the DJ changes songs every few seconds. Investment choices based on changing market conditions can feel the same way.

Nevertheless, investors of all stripes frequently do engage in attempts to time the market based upon their thoughts, feelings, fears, hopes, dreams, etc. regarding a whole host of events, including election outcomes, the weather, how long the market has been up or down, chitchat among coworkers, and more.

Humans, it seems, are just not wired to handle uncertainty very well, and investment markets are the definition of uncertainty as they can be down one day and up the next. Much has been and continues to be written regarding human psychology and the uncertainty of investment markets.

Even market trend timing guru Paul Merriman applies mechanical market trend timing strategies to only half of his own investment portfolio, and he is adamant that timing in general is not suitable for the majority of individual investors. As Mr. Merriman and I tend to agree based upon our collective experience, most investors lack the psychological fortitude, discipline, and stamina to stick to a timing strategy during periods of short-term financial losses that will inevitably happen.

Why? The simple fact is we hate to lose money, and when we see values drop, we feel obligated to do something, even when the best course of action is often to do nothing. As a result, market timing doesn’t work and often serves to do nothing more than make a bad decision even worse.

Stick with the same old song

As with dieting, exercising, and balancing your checkbook, there are no reliable shortcuts to success with disciplined long-term investing. Diversify your investments appropriately across stocks, bonds, and cash. Buy and hold even when it feels wrong and continue to invest regardless of whether the market is up or down that day. Be mindful of fees and commissions.

It’s not sexy and it doesn’t make for riveting conversation in the lunch room or around the water cooler, but a consistent, disciplined approach to your investments will ultimately leave you humming a much happier tune.

This post was originally published on Forbes.

4 Offbeat Hacks To Stay Within Your Shopping Budget

November 22, 2017

One of my favorite parts of gift-giving is shopping for the perfect item, so avoiding the stores this time of year is not an option for me. To control my inner Santa, who’s prone to buying lots of “To: Me, From: Me” gifts, I’ve found some non-traditional hacks. Try them for yourself:

1. Calculate how many hours you’ll have to work

In the book Your Money Or Your Life, the authors describe the process of calculating your “true hourly wage,” where you add up ALL the time you spend related to work then divide it into your earnings. Beyond just time spent at work, add in the time you spend getting ready for work, commuting, answering emails after hours and even “vacating” work — it adds up to far more than the standard 80 hours we typically use.

When you’re tempted to buy something you hadn’t planned on, take a moment to figure out how many hours of work it will cost you. Suddenly a $25 sweater at Old Navy doesn’t sound so cheap when that means 3 more hours of work!

2. Go to yoga first

A Brigham Young study found that when you’re focused on physical balance (such as attempting tree pose in yoga), you’re more likely to weigh your shopping options and often choose the lower priced item. Don’t have time for yoga? Just wear high heels instead!

3. Only spend big bills

If you’re prone to rationalizing small purchases as “only” so much money, this one’s for you (those things add up). Go to the bank first (you’ll actually have to go inside to the teller) and get your shopping money in large bills — 50’s and 100’s. Psychologically, this will give you that moment to pause and think twice about an impulse buy, or even just that quick stop at Starbucks for a $6 latte. You will probably find yourself resistant to breaking a $50 bill for a cup full of sugar and might even think twice about a large purchase that requires you to lay out more than one bill.

4. Keep your hands to yourself

My ex used to work at the now-defunct Circuit City, and he was always telling me that one of the ways he got people to buy stuff was by suggesting that they pick it up and play with it. Another study backed that up, finding that merely touching an object creates perceived ownership, which makes you want to take that thing with you. If you’re serious about sticking to your list and not over-spending, keep your hands in your pockets or on your cart.

If your holiday rituals also include plunging headfirst in the bustle of the mall or the Magnificent Mile, try these tips and let me know how you do — I know I’ll be pulling out all the stops to enjoy the season without draining my bank account. Have some fun, but not so much that you’re hating yourself going into the New Year.

 

Don’t Let Black Friday Put You In The Red

November 20, 2017

It’s official. The Holiday shopping season has begun. If you are like me and my family, spending for the holidays is one of the biggest budget busters you will face. Even if you have done a great job controlling your spending up until now (and I hope you have!), the desire to splurge during the holidays is all too real.

To help, I’ve put together some tips on how to manage your spending while keeping that holiday cheer:

Create and execute a detailed budget

I know, it sounds cliche, but it works. Start by breaking your spending down into categories. I suggest:

  • Gifts
  • Décor
  • Entertainment
  • Travel
  • Food
  • Last minute miscellaneous

Then, write down how much you are willing to spend in each category. Consider using a spreadsheet with a separate tab for each category or envelopes – the more detailed the better.

For every person you want to buy a gift for, record their name and the amount of money you want to spend on them. If you feel like it’s “you against the world” when you are budgeting, don’t create your budget in a bubble – include your significant other or a close friend to serve as both a reality check and an accountability partner.

Finally, beware the impulse buy – don’t make any holiday purchases before confirming that it fits in your budget or that it’s already in your plan.

Be careful of Black Friday and Cyber Monday

If you’re planning to be one of the over 154 million consumers expected to make a purchase on Black Friday, this one’s for you. The sales can be great, but don’t buy something unless it is specifically covered by your budget and in your plan. So, if you find that 70-inch TV at 50% off, but the price still exceeds your budget, consider not making the purchase – especially not for yourself.

If you feel like you spend more on yourself than other on Black Friday, you’re not alone. Studies show that 60% of the people who make purchases on Black Friday are “self-gifting.” If you can’t find the perfect sale on Black Friday to fit your budget, don’t worry – you still have about 4 weeks until the end of the holiday season and there will be other sales.

If you fall into the category of feeling obligated to shop on Black Friday because it is a family tradition or you like the rush, consider starting a new tradition such as volunteering in your community. Helping others while sticking to your budget sounds like a win/win situation to me.

Find creative ways to save money

If you are getting nickeled and dimed to death by buying a small gift for several people (teachers, neighbors, not-so-close friends, etc.), think of ways to spend less and still provide a personal gift.

If you are a baker, consider making a huge batch of your favorite cookies or pastries and pass them out (just don’t defeat the purpose by going crazy on cute packaging). A good sweet gift can go a long way toward putting a smile on someone’s face while keeping you on budget.

If you are hosting a family dinner for the holidays, consider baking a lasagna or using a more budget-friendly cut of meat, rather than prime rib, and ask your guests to bring their favorite beverage. You will still be serving a great meal and your guests will have the drink of their choice – that makes for a festive and affordable evening.

Managing your money effectively during the holidays does not mean you have to be a Grinch. Just sit with your accountability partner and write down a realistic budget that will still allow you to enjoy giving to others. Start some new traditions that are fun and affordable, and always remember that spending time with others is more valuable than spending money on others.

Happy holidays!

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

How To Find A Bargain When Making A Big Purchase

November 10, 2017

Over the last few months, I’ve been on a quest to add a new skill into my life. Living in Maryland, near the Chesapeake Bay with marinas galore, and as a former boat owner – I decided that sailing is a skill that I should learn.

I grew up spending lots of time on the bay and lived on a boat for a number of years after my marriage ended. But I’ve always been a power boat guy — fire up the engines, get out into open water, throttle up and head to wherever we wanted to go. I always admired the simplicity and beauty of sailboats, but have never spent much time on them. I’m going to change that now. But, the journey hasn’t been easy.

Finding the perfect sailboat with a limited budget

I had some parameters that made buying my boat a bit difficult: I had a fairly low budget because I bought a house about a year and a half ago and used a large chunk of my savings for that. With a new mortgage and child support, cash flow is still relatively constrained. As excited as I am about learning to sail, I’m not willing to compromise my other goals like retiring on time in order to have a boat today.

So within my small price range, I got to work looking and I saw a lot of boats. Usually, my first thought was, “I can maybe make this work,” or “Is this a boat or a crime scene?” Everything I saw needed A LOT of work and I’m not opposed to that, but some were going to be lucky to not sink when they hit the water. None of them struck me as “this is the one,” though.

Adding up all the costs

I kept looking, kept searching, and then… boom: in the same week I saw 2 that were within my price range and felt like “home,” although one had a higher “sticker price” than the other. That’s when I started doing the full blown calculations of what this will cost me. Things I included:

  • the price of the boat
  • monthly cost of a slip at the marina
  • insurance
  • repairs & upgrades I’d want to do, etc.

After factoring in all of that, the full cost of each boat was roughly the same.

How to choose

So, it came down to preference – when I gave each boat a score from 1 to 100 based on what I wanted from an old sailboat, they both came in at about 90. Which is awesome because the others came in at around 10-15 on that 100 point scale! These were 2 serious outliers, and perhaps a bit mis-priced.

What I later discovered is that both were owned by people trading up to much larger and much more expensive boats and they wanted to unload their boat quickly to avoid paying for insurance and marina costs. With 2 boats that I valued equally, my “buying strategy” was to put in an offer a bit lower than the asking price on each one and see what happened.

What happened?

I lost out on one boat to another buyer and on the other, they gave me a counter offer, which I accepted. So by the time you read this, I’ll be out on the Chesapeake Bay learning how to sail. Wish me luck!!! I’m just hoping I keep my head low enough not to be hit in the head by the boom (some of my early sailing terminology at play here) as it swings from one side to another, knocked overboard and unconscious. If that happens and I’m out on the boat alone…this may be my last blog!

The big takeaway for everyone

When you are planning a major purchase, whether it’s a car, boat, household appliance, house, etc., the best way to go about getting the most value for your hard-earned dollars is to have a plan and have a strategy. I went into this with a definite maximum spending limit. It was low! Patience was required because I looked at over a dozen boats in person, and hundreds online and only found 2 that were acceptable given my goals.

Factor in all the costs

Don’t just look at the price of “the thing,” look at all the associated costs. For example, when my daughter bought a new car, her insurance rates went way up. When buying a major appliance, there are delivery and installation costs to figure in. Don’t forget closing costs when evaluating a mortgage.

Control your emotions

Don’t let your emotions make you “buy up.”  When looking at 1 boat that had a dirty smelly frat house vibe, I walked past another that had a “For Sale” sign on it & I looked at that one the next day. It was several thousand dollars above my maximum price, but it was NICE and my emotions told me that I could somehow make it work. I had to talk myself down from that emotion and stick to my plan. Emotions can sometimes be the enemy of good decision making.

How I kept my head in the game

In the end, I had a little index card where I wrote down the things that I wanted from a boat, including my maximum price and some things that would be deal breakers. When in doubt or I was tempted to stray from my plan, I’d look at my handy dandy index card and it would help bring me back to rational world. This way I know that I’ll always have smooth sailing, at least when it comes to financial side of this new hobby.

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