How to Evaluate an Early Retirement Offer

November 07, 2016

You’ve received an offer from your employer with financial incentives to retire early. You’ve got to admit you’re intrigued. Should you consider accepting it? Before you say “yes” or “no,” ask yourself these questions:

Am I ready to leave?

Before running any numbers, be honest with yourself. When you received the offer of early retirement incentives, were you excited, somewhat interested or depressed? The more interested you are emotionally in moving on, the less likely you will regret your decision if you decide to accept the offer.

It’s also important to assess the state of the company. If you decide to stay, are there any reasons your job might be in jeopardy in the near future? Be clear-eyed about all the possibilities, and factor them into your decision.

Can I afford to completely retire now?

Run a retirement calculator to see if you could retire now, based on what you’ve saved so far and your estimated income from Social Security and any pensions and/or other investments.  Make sure you run the worst case scenario, not just the best case scenario. For example, model scenarios assuming a 2% return, a 4% return and a 6% return, and consider running the scenarios through ages 85, 90 and even 100. If the model shows you can retire with a reasonable lifestyle, keep pace with inflation and not run out of money in old age, you will feel more comfortable that you are ready.

What will I do for health insurance?

Health insurance is expensive. Up until now, you’ve participated in a group health plan, with your employer picking up a large part of the cost. If you have family coverage, the typical full cost of coverage is $17,500 per year. If you accept the offer, you’ll need to find and pay for new health care coverage until you are age 65 and can participate in Medicare. Review your options:

  • Continue your group coverage under COBRA for 18 months. You would pay the full premium yourself (or with retiree health plan dollars if you are fortunate enough to have one). If you have funds in your health savings account (HSA), you can use them to pay for insurance premiums for health care continuation coverage through COBRA.
  • Get coverage from your spouse’s employer-sponsored plan, if applicable. A spouse losing their coverage is a  qualifying event and they will be able to add you to their insurance.
  • Seek coverage under the Affordable Care Act. Even if you retire outside of the open enrollment period, losing your employer-provided coverage is a qualifying event. Start at healthcare.gov to see what is available in your state. Depending on your new family income after early retirement, you may qualify for a subsidy of your insurance premiums. In any case, you cannot be turned down for coverage.
  • Look for coverage on the private market. An insurance broker or online marketplaces such as eHealth or GoHealth are helpful places to start comparing plans and prices. Even if you are considering coverage under the Affordable Care Act, it’s a good idea to shop around and compare.

When will I claim Social Security?

The earliest eligible retirees can claim Social Security benefits is age 62. Most workers receiving early retirement incentive offers now would not be eligible for full Social Security benefits until age 66 to 67, depending on current age. If you claim early, benefits will be reduced based on the longer payout period.  Delaying Social Security to full retirement age or even as late as age 70 will increase your monthly benefits.  Factors to consider include:

  • Will you need the money? If you will need the income to make ends meet, you have your answer. However, if you can get by with some additional income from part time work, you’ll be able to receive higher monthly benefits by delaying claiming Social Security.
  • Is your spouse still working or do you anticipate any employment income? If your spouse is still working, you’ll be taxed at their marginal tax rate on your Social Security benefits. Plus, if your family earnings exceeds $15,720 for 2016, you’ll lose $1 for every $2 you earn above the limit. (Note that the benefit isn’t truly lost. You’ll be able to recoup that once you hit full retirement age).
  • How’s your health? If you have health issues, you may decide to take Social Security early. If you don’t, delaying may make more sense.
  • Do you have longevity in your family? Do you have someone in your immediate family who lived to 95 or 100? If folks in your family generally live long lives, consider delaying Social Security benefits
  • Do you have other assets you can tap? Does it make sense to tap your 401(k), pension, Roth IRA or brokerage accounts first? Model different scenarios to see which offers you the highest total lifestyle in retirement.

As you can see, there are a lot of factors to consider in deciding whether to take an early retirement offer. There is no right or wrong answer for everyone. Just make sure yours is an educated one.

 

Do you have a question you’d like answered on the blog? Please email me at [email protected]. You can follow me on the blog by signing up here, and on Twitter @cynthiameyer_FF.

 

Do You Really Know What You’re Investing In?

November 04, 2016

My kids, some coworkers, and it seems like the whole world around me are big fans of Twitter. In fact, some of the podcasts I listen to mention Twitter as the hosts’ #1 source for breaking news. I guess I haven’t ever seen that platform as one that works for me and when Twitter became a publicly traded company, I chose not to buy the stock because I couldn’t figure out their revenue model.

I also thought “speaking” in 140 characters or less was a way to degrade the way people communicate. I already despise “text speak.” Character limitations have given us degradations of the English language like UR, BRB, LOL and the worst of all possible things…emojis! (And while I’m at it, get off of my lawn!)

I am a big fan of words and grammar and punctuation. There’s a huge difference between “Let’s eat, Grandma” and “Let’s eat Grandma.” Punctuation can save lives!

With this mindset, I have been watching the world of technology companies and see that Yahoo was for sale recently and the price paid was far less than it would have been when Yahoo was one of the kings of the technology hill. Now Twitter is for sale and potential bidders keep opting out of the deal.  There are fewer suitors as time moves forward and the potential sale price keeps dropping. The moral of the story for me is that just because something is cool and trendy and “everyone loves it”, it doesn’t always translate into a wonderful business model.

I’m a huge fan of Sirius satellite radio and have it on constantly. Just because I’m a loyal customer, doesn’t mean I want to be an investor. Again, cool stuff is awesome as a consumer, not always wonderful as an investor.

As you think about investing your hard-earned dollars, be very aware of the “cool effect” (not a real term, I’m making it up for this blog). Sometimes in situations like Apple and Google, a “cool effect” translates well into a cool investment that produces great returns for an extended window of time. But those are far more the exception than the rule.

One of the rules I use when evaluating if I want to invest in a particular company (which I rarely do anymore) is that I absolutely MUST understand what the company does and how they earn their money. I’m still mystified by Facebook! Do people really buy that many ads or pay for that many games? No one I know has ever spent a dime on that platform, so either I know the wrong people or I just can’t grasp what they’re doing to generate revenue and profits.

Do you know what you’re investing in? Most people I meet don’t really know where to begin to answer that question. Even at the top level of stocks vs. bonds vs. cash, most people I meet are unaware of their asset allocation. Many have no idea what it “should be” for their stage of life and goals.

If you’re like me and don’t understand how Twitter makes money and why anyone would want to buy it, let that thought make you dig into what you really do own and invest in. I’ve heard the phrase “no one will care about your money more than you” used a lot recently. Take a few minutes over the next several days and figure out what your current asset allocation is and what you’d like it to be and then take a look at your current holdings to see if there are investments that might not fit with your goals.

This investment risk profile can help you determine where you might want to be from a top level asset allocation standpoint. To dig a layer deeper, here is a fairly technical article and a practical one as well to help you evaluate your investment holdings.  Remember, you aren’t investing to own the “cool stuff.” You invest for one reason and one reason only: to make your money grow over time.

 

 

Are You Disheartened By This Election Season?

October 28, 2016

After watching all of the political debates, I am both disheartened and encouraged. As much as I am disheartened at this point, I’ve always been a big fan of finding reasons for hope and optimism. Don’t let obstacles outside of your control impact your life. Here’s why:

Stock markets rise. Stock markets fall. We know this (or we should).

Yet every time the stock market has a rough week, I field calls from nervous investors. People who see their 401(k) balance go down every day for a week or two tend to want answers. We talk with them about their long term goals and their current asset allocation. At times, they are invested in a way that is either way too aggressive for their stage of life and their goals and at other times (and fewer in frequency), they are invested more conservatively than their stage of life and goals would indicate is appropriate.

Most of the time, though, they are invested in a way that is perfectly suitable. In those cases, we talk about patience and allowing the market to do the rising and falling that it always does without getting too emotionally invested. They can’t control the markets, but they can control how they react to changes in the markets.

Similarly, whether the economy is great (remember when that used to happen?) or lousy or just muddling along like it has for the last 7-8 years, no one individual (not even Janet Yellen) can control the overall US economy.  Even less control can be exerted over the global economy. The one thing that we can control to a large extent is our “personal economy.”

How much are you contributing to your 401(k)? How much are you saving in other accounts on a regular, automatic basis? What’s your level of spending in relation to your income? These are things we can totally control.  

Those who examine their financial habits and lifestyle will find that their personal choices control a great deal of their financial life. The great thing about choices is that they aren’t permanent (kinda like elections) so if we’ve chosen to spend 102% of our income over the last few years, we can decide to spend less, move to lower cost housing, drive a lower cost car, cut the cable cord, etc. If we haven’t saved enough in our 401(k), we can increase our contribution every year. If we don’t have a solid emergency fund, we can direct deposit $5, $10, $20 or more to our savings account with each paycheck. The amount isn’t as important as the momentum.

So let’s use this season of disheartening political shenanigans to focus on our own personal economies and make progress on our goals. My challenge to you is to pick one area in your financial life, one where you DO have control, and before election day, make one change to your current habits. We can’t change the national economy, but we can change our own.

What To Do Before You Say “I Do” Again

October 11, 2016

As I anticipate all of the upcoming marriages, I think about two of my friends who are getting married for the second time. Second marriages make up 1/3 of weddings. One of my recently engaged friends getting married for the second time told me the first time she went into her marriage blinded by love. This time, the blinders are off and she wants to walk into her second marriage with her eyes wide open. I told her that this means having a tough, but loving financial conversation with her fiancée.

One caveat my husband asked me to include is this: I live in the south where the men eat and sleep college football so please respect the football or whatever your fiancé’s favorite sport season is and have the meeting at a time when he or she will not get distracted by scores. When you find the best time for a meeting consider reviewing the following:

1. Consider pulling up each other’s credit reports using websites like Annual Credit Report.com so you know what you are financially marrying. Ask about his or her plan to repay debt and their thoughts about the debt. Do they consider the debt to be a shared responsibility or just yours to take care of separately once you marry?

2. Review each other’s spending plan or at least your ideas on how you will spend money once you get married. If you are coming into the marriage with children, what financial obligations or promises do they have towards your child that will affect the household income now and in the future? Will you keep everything separate, together or have one joint account and two separate spending accounts? Discuss current and future financial obligations and a plan for how these obligations will be met.

3. If you have assets you are bringing into the marriage, consider a prenuptial agreement that can state how the assets will be divided in case of a divorce. As optimists, we want to believe our second marriages will last forever, but the fact remains that the divorce rate for second marriages is higher. Your EAP or prepaid legal plan may provide legal benefits to help you create your documents.

As you think of remarriage, remember that you are bringing a lot into the second marriage. Assets, kids, a credit history and money management habits can make or break your future marriage if they’re not discussed. Taking a few hours to talk about your finances with your future spouse can go a long way to building a strong foundation for your marriage.

Don’t Ignore Your Symptoms

October 10, 2016

“…the upside of painful knowledge is so much greater than the downside of blissful ignorance.”― Sheryl Sandberg

Do you ever get that nagging feeling that something isn’t right with your finances? Should you brush it off or dive deeper? On the blog today, my fellow planner Cyrus Purnell, CFP writes an intriguing guest post about the importance of not ignoring your financial symptoms:

Are you getting that nudge that things are not working the way they should in your finances? Don’t wait until a problem shows in your credit report or as a shortage in your checking account. Take the time now to diagnose where that nagging feeling is coming from.

I came into 2016 not feeling my best. I was tired all of the time. I was always cranky. My kids were walking on eggshells. I was sick more often.

I went in for my annual physical and there was no sign of anything wrong in all of my tests. But the way I felt told me something was wrong. When I would talk to my doctor and peers about it, their answer was pretty simple, “Oh Cyrus, you are just getting older.”

Thankfully, that answer was not good enough for me. I took steps to investigate why I was not feeling well. I began looking into everything from what I was eating to what time of day I was eating it. I started tracking my sleep. I plunged into reading blogs and listening to podcasts about health.

I finally figured out the culprits and gradually felt several years younger. I am convinced that if I stayed on the road I was on, the way I felt would eventually show up in the form of a bad diagnosis. While I did not enjoy feeling the way I was feeling, the discomfort probably saved me a lifetime of issues.

On paper, you may not be financially sick. Your income may be more than your bills, your credit score may qualify you for anything you want to purchase and when you compare your financial situation with your friends and family, your circumstances may look fine. In spite of all of this, you may still have anxiety about where you are financially. You may be experiencing financial stress.

In our own 2016 Financial Stress Research, we uncovered that 85% of us are experiencing some financial stress. Our research also showed that unmanaged financial stress can result in problems like depression, hours of lost sleep, and overeating. It is at the onset of financial stress, before it becomes unmanageable, that you want to take steps to do something about it. You can start to alleviate financial stress by taking a C.A.L.M.™ approach to cash management:

Create a plan. Create a new plan to manage your cash, calculating necessary expenses and establishing a way to track them. A financial coach, such as a CERTIFIED FINANCIAL PLANNER™ professional, a financial or credit counselor, or an employee assistance program counselor, can provide assistance as needed.

Automate bill payment and savings. Put everything you can on autopilot, setting up automatic bill payments for monthly expenses and transfers to emergency and other savings.

Lower nonessential spending and debt. Track expenses for several months, looking for opportunities to reduce spending on nonessential items and to make extra payments on debt.

Make progress. Make progress by focusing on small, achievable goals, accomplishing one before moving on to the next.

Don’t ignore your symptoms. Look at the early stages of financial stress as a gift. By paying attention to the early discomfort of financial stress and following the C.A.L.M. approach, you can meet the source of your financial stress head on and save yourself from a more difficult recovery down the line.

Do you have a question you’d like answered on the blog? Please email me at [email protected]. You can follow me on the blog by signing up here and on Twitter at @cynthiameyer_FF.

 

How To Network Your Way To A New Job After A Lay-off

October 05, 2016

I’ll never forget the date October 5, 2001. It was the day I was called into HR at my very first job after only one year and one month to be advised I was being let go as part of a firm-wide staffing decrease. I was given a generous separation package, including an assigned mentor, Steve, to help me find a new job.

After I scraped my pride up off the ground, called my mom to cry and accepted that it was time to move on, I called my mentor Steve to get started. His first and most emphatic piece of advice was, “Let your network know. Tell them you’re looking.”

Finding your network

I was clueless to what he meant. I was a lowly staff accountant at a Big 5 accounting firm. We didn’t network. That was for partners and salespeople. My “network” consisted of other second year staffers who went out drinking together on Thursday nights and played flag football on Mondays — in other words, my friends.

As the years went by and my network naturally expanded due to co-workers leaving for other jobs and even led to me being recruited to a new job, I started to understand what Steve was talking about. When I moved to Chicago in 2010 and didn’t know a soul, I took to networking to make friends and find clients for my coaching business. That eventually led to a post as the president of the Professional Women’s Club of Chicago, the premiere networking organization for women in all industries in Chicago.

Networking is just making friends for business

What I’ve realized is that networking is really just making friends in a business setting, and the truth is that the best time to build your network is when you don’t need it. When you’re in a position to help someone else out before you need help, you’re much more likely to receive the help you need when it comes time to ask, even if it’s not from the same people you’ve helped. Basically, it’s karma. So how do you use networking to find a new job? Here’s what’s worked for me and my network:

Reach out to former colleagues. Who knows your work self better than people who have actually worked with you? Connect through LinkedIn or just send them a note to let them know you’re looking and see if they know of any opportunities.

Use those professional associations. Almost any professional career has some type of association that posts jobs and other networking opportunities. CFP® professionals have the CFP® Board, CPAs have state societies as well as the AICPA, lawyers have local, state and even the national bar associations, marketing people have the AMA, and IT specialists have AITP. The list goes on. Even if you’re not a member, check their website to see if they have job postings or upcoming events where you can meet others in your field.

Look to your alma mater. Pretty much every major city has an alumni group for larger universities. Look on your school’s alumni website to see if they have any local events coming up that you could attend to make new connections.

Even if there is no local chapter, you may still find job postings or at least a listing of other alumni in your area. Reach out and ask for coffee or lunch. You never know who your fellow alumni may know.

Just show up. Virtually any situation where you’re meeting new people can offer networking opportunities. The next time you’re invited to an event where you feel like you might not know anyone besides the host, consider going anyway and set a goal to meet three new people. That takes the pressure off from feeling like you have to work the entire room and even if you don’t find your next job, it’s good practice for networking at events designed for job seekers in the future.

Be specific about what you want. My friend Marcy wrote in her brilliant book You Know Everybody!: The Career Girl’s Guide to Building a Network That Works about how to zero in on exactly what you’re looking for before asking for help. Make it easy for people to connect you to others by being very clear about who you want to meet or what you want to do. It’s much easier to flip through your mental Rolodex and offer an introduction when someone says, “I’m seeking introductions to sales managers in the hospitality industry,” than when you hear, “I’m looking for a job in sales.” Unless I’ve just spoken to someone who said, “I need salespeople!” it’s unlikely I’ll be able to help you find what you need in that situation.

Above all, remember to be yourself when networking. It can be nerve-wracking to introduce yourself to strangers, especially if you’re desperately seeking a new job opportunity. Keep in mind that pretty much everyone else in the room is probably equally as uncomfortable and find your common ground there. Then just work on making friends. You never know where it might take you!

 

Sometimes It Does Take a Rocket Scientist

October 03, 2016

Portia Jackson believes that people should be able to design their finances around their lives and not their lives around their finances. A business strategy coach and former rocket scientist who is studying financial planning, Portia joined our team this year for a long term financial planning internship. I recently had a fascinating conversation with her about her world view and why she is pursuing her CFP® designation. The future for this mother and financial wellness evangelist looks bright!

Why did you become a personal coach? What influenced your decision to pursue the CFP® designation? How do you see combining those two paths?

I became a business strategy coach after many of my original podcast listeners (I used to host a podcast for working moms, Working Motherhood) kept emailing me and asking me how I was able to run a business, work full-time and manage my family, including a daughter with special needs. I loved my podcast and it gave me fulfillment, but as I started working with the members of the Working Motherhood, I realized I LOVED coaching so much more! I get to help people see an immediate difference in their lives? Yes, please!

I decided to pursue the CFP® designation after teaching a workshop course on tackling debt for many years. I loved the impact I was making on people’s lives and seeing the weight lifted off their shoulders after they realized they wouldn’t be in debt forever made my heart sing. I wanted that feeling all day every day so I decided to change careers and become a financial planner. I also wanted to do it right so I knew I had to be a CFP® professional. The two paths easily combine because I believe the combination of a solid financial plan (i.e. 6 months emergency fund, zero debt, fully-funded retirement and college plans, home ownership, estate plan, tax minimization and proper insurance coverage) with working at something you love to do is a complete path to financial wellness.

How does your background as an engineer influence your financial planning and personal coaching style?

My engineering background helps me as a financial planner and coach because I’m very data-driven. I work off of action, not just “what could happen.” If something isn’t working, I can course-correct. Planning a launch of a billion-dollar rocket and launching someone’s business or retirement plan are both very important so I use my strategic background to reduce some of the uncertainty that can surround those areas.

What’s your personal mission? Who do you most want to help?

My personal mission is to free people from financial stress and bondage so they can then pursue their personal mission in life. I feel that many times the amount of energy people put into worrying about money (even if they are doing everything “right”) can be put toward their personal calling in life. I believe everyone has a specific purpose in life and that purpose often goes unfulfilled because they are stuck in a job they dislike just to pay the bills and then they are too exhausted to do anything else or sometimes people are doing everything right and still can’t afford a decent lifestyle.

They aren’t trying to keep up with the Joneses. They just want to be able to own a home, have insurance, travel maybe 1-2 times a year and send their kids to college. In an expensive place like Los Angeles, that can easily add up to a lot.

What is the biggest mistake you ever made with your money, and what did you learn from it?

The biggest mistake I’ve ever made with money was buying a rental property at the age of 23 in a bad neighborhood with no money down in 2005 in Chicago right before I moved to Los Angeles for grad school. I really don’t know what I was thinking when that happened. Actually, I do. I was focused only on the POTENTIAL cash flow. Those late night real estate ads were apparently very convincing to me.

The property was a big pain the butt. It sucked up all of the money I won from a game show I was on and commercials I booked while I worked in Los Angeles. It also caused a LOT of stress for me during what should have been one of the most exciting times in my life.

What have you learned about money and marriage that you can teach the rest of us?

I’ve learned that communication is key and that understanding each other’s personality types is really important when it comes to family finances. My husband and I have monthly financial meetings, where we review our budget, our net worth statement, our financial goals and the financial mission statement we’ve written for our family. I’m the CFO of our family and while I can typically recite the budget down to the penny, he is the bigger visionary and wants to see where we are going.

When you got married and had children, did you feel prepared to deal with the financial aspects of partnership and parenthood? What do you wish you had known in advance?

We felt pretty prepared going into marriage because financial planning was part of the two pre-marital classes we took. (We like to be thorough, haha.) When our kids came (very soon actually, we had a honeymoon baby) it wasn’t too much of a disruption to our budget, although the budget for sending kids to daycare could feed a small country for a while.

How do you teach your kids about money?

Our kids are just 4 and 2 right now so we haven’t really had the money discussion yet, but we plan to use the envelope method that I used growing up — one envelope for giving, one for saving and one for spending. They will earn money through chores as they will not receive an allowance. As parents, we believe that we are to be mentors to our kids and train them for the real world and in the real world, there are very few handouts.

Is there anything that really surprised you about coming to intern at Financial Finesse?  Why?

Yes, I was surprised that workplace financial wellness as a type of  business actually existed. When I was searching for a place to complete my required experience hours for the CFP® designation, I came across many opportunities to sell products or gather assets, but I never heard anyone lead with the benefit of changing lives and offering unbiased financial guidance with no ulterior motive or sales pitch, which is what we do at Financial Finesse. The passion that everyone has here for helping people and for extending this vision to more people is truly amazing and a rare jewel in the financial services industry. Unlike in my brief wire house days of seeing people get excited to close a sale, people at Financial Finesse are excited about a great Financial Helpline call or one-on-one planning session.

Do you have a question you’d like answered on the blog? Please email me at [email protected]. You can also follow me on the blog by signing up here, and on Twitter at @cynthiameyer_FF.

 

 

How to Be Better With Money

September 16, 2016

The NFL season is underway, and I’ve seen more purple in Baltimore recently than I have in months. Everywhere I go, I’m seeing enthusiastic fans getting ready for the upcoming season. Before the first game of the season, fans of every team believe that THIS is the year that their team is going to win the Super Bowl. 31 of 32 fan bases will ultimately be disappointed. But at this time of year, hope springs eternal everywhere (except maybe Cleveland!)

I see the same “Let’s Get Started” level of enthusiasm from people who tell me that they have been a bit of a mess financially in the past but are ready to make progress now. I’ve heard countless people say “I’m bad with money” or “I have no clue what I’m doing financially.” I refuse to believe that they can’t, in a few quick and easy steps, develop lifelong habits that will take them to a place of financial security. I refuse to allow them to speak poorly of their financial habits.

I ask if they have ever played an instrument or a sport or any type of art. Almost everyone has tried something like that at some point in their life. I ask them to go back to their very first day of playing the clarinet or saxophone or whatever it is, and they laugh at just how terrible they were on that first day.

After I get them to talk about how they went from horrific to actually having a clue about what they’re doing, they understand that managing money is merely a skill that they haven’t practiced yet, and today is day 1 of their new talent coming to the surface. At that point, there is an enthusiasm that tells me they are ready. When I see and hear that level of enthusiasm, I know that they are serious about making progress.

The secret to building a foundation of financial success is keeping things simple and automating as much of it as possible. With automation, simplicity and just a little bit of work, managing your personal finances is rather easy.  Here are some steps to take:

Step 1: Get some basic facts together so that you have a starting point. 

  • This financial organizer will help you see the aerial overview of your financial life on one page.  What do you own vs. what do you owe?
  • This expense tracker can help you see how much money comes in during the month and how much goes out. With these two worksheets, you have a lot of useful data, and if you update these quarterly, you will start to see progress.

Step 2: Automate things.  

  • Contribute to your 401(k) at an amount at least up to the company match. Then, enroll in the rate escalator feature to increase your contribution by 1% annually – either on 1/1 or on your anniversary or your birthday. Just pick a day and enroll in it.
  • Open a savings account at a credit union or online bank, one that is NOT where your checking account is and get a direct deposit going there. The amount isn’t important. A $5, $10, or $20/pay deposit will suffice. It’s the momentum that’s important and the speed bump! When you have your savings account at the same bank as your checking account, it’s way too easy to log in and slide money from one account to the other.
  • A great tool for “accidental savings” is the Acorns phone app. It rounds your transactions up to the next dollar (so if pay $1.86 for a coffee, it adds $.14 and slides it over to Acorns, where you can invest in a very conservative portfolio). I “accidentally saved” a couple thousand dollars that were used as a part of my down payment on the house I just bought.

Step 3:  Stay alert and updated.

  • For your credit score, CreditKarma.com and CreditSesame.com are great free tools to stay on top of any changes in your credit file.
  • AnnualCreditReport.com allows you to get a copy of your credit reports at no cost once/year. Make sure that everything there is actually yours!
  • Mint.com can show you on a daily basis all of the transactions in all of your accounts from the prior day. (I launch that app from my phone every morning while I’m still half asleep and before I hop out of bed.) This is a great way to make sure that no one is accessing your accounts without your knowledge.
  • The financial organizer and expense tracker above are excellent tracking tools. Keep a binder full of reports that you can look back on in the future to see where you started and where you are. You’ll be shocked at the progress, and when you see it, you’ll want more of it.

For anyone who has ever said “I’m lousy with money,” I say “You are no longer allowed to say that! EVER!!!” Your new phrase is “I’m always learning to be better with my money.”   With that new phrase and these tools, you can transform your financial life in relatively short order.

What Our Planners Would Tell Someone Just Starting Their Career

September 02, 2016

Last week, I wrote about conversations I had with some newly hired recent college graduates. That post was about steps I talked about with them in our one-on-one coaching sessions   (all good stuff, if I must say so myself…and I must!) After I had written that and before it went live on our blog site, one of our other financial planners sent an email to the planning team to ask what advice they’d give someone starting their career today – a “what would you tell your 22 year old self” kind of email. Here are some of the responses from our planning team along with some of my editorial commentary (in italics):

Create a budget. I despise the word “budget.” I prefer “spending plan.” Figure out how much money is coming in and develop a spending plan that comes in well below the cash inflow.

Create a plan to move up or out of your current position in 3 years to stay relevant and in control of your career and salary. Always improve your skill set and fight for your own career. No one else will do it for you.

Start a side business based on your passion to help accelerate your debt payoff, increase savings and fund other financial goals that your salary might not cover. That side business could turn out to be what becomes your full time pursuit and source of greatest wealth in the long term, but you won’t have that chance if you don’t ever start it.

There is no need to show off to your friends because you are the one that landed the new job with cool title. The people with the flashy cars and lifestyle are usually either getting support from family members or are fueling that lifestyle with lots of debt.

Build friendships with those that are financially like-minded and encourage each other. It’s hard to be the only one that orders water instead of drinks almost every time you go out because you are the only one that has a spending plan. Don’t let peer pressure cause you to lose your spending discipline.

Use the same creative mindset you had in college as it pertains to money. If you could figure out a way to have a great weekend and only spend five bucks back in school, why should it change now that there is income. I joke that I had more cash flow when I was a starving college student than when I was a professional financial planner with a great job.

Get on a plan ASAP to pay off any student loans. It definitely needs to be a part of the budget. A time frame for them to be paid off would be best. Don’t just elect deferment or forbearance because it’s an option. Truth.

Set up an intentional savings account, even if it’s just $25 to start. Set up a transfer of at least $25 a paycheck to get in the habit of seeing how painless it is. Then boost it to get to $2,500 within the next year. An emergency fund can prevent the need to tap into credit cards when the car needs brakes and tires.

Don’t take on a deluxe apartment or mortgage until the student loans have been dealt with. They’re a mortgage in their own right. Live way below your means. Americans spend way too much on housing as a rule.

Get the match at work at the very least if you have student loans and try for 10% or more deferral if you don’t have student loans or after they’re under control. Early saving is HUGE in your financial future.

Be thoughtful about what you spend your money on. You work hard for it. Set a 30 minute weekly money meeting with yourself to go over your finances. Whether you’re just starting out or have been in your career for decades, this is just flat out solid advice.

This is a lot of info, but it’s an especially useful list for recent grads just getting started. The decisions they make now will have a huge impact on the rest of their financial life. My daughter is beginning her senior year of college so in less than a year, she’ll be graduating, and I’ll be printing out this blog post and last week’s to help her get her financial life started in the best way possible.

 

 

Why I Do What I Do

August 12, 2016

As my kids and friends are far too familiar with, I’m a bit of a news and political junkie. That’s why it’s so surprising to everyone I’ve shared this with that I didn’t watch a single minute of either the Republican or Democrat conventions this year. I saw some “highlights” the next day on the news and heard people talking about highs and lows from each convention (depending on which side of the aisle they most consider their political home). I just couldn’t do it this year.

So many people that I talk with (and judging by the scroll on my Facebook home page, most of America) will be upset with our next President regardless of who wins. Both candidates from the major parties have greater than 50% negative ratings. A recent poll had Clinton disliked by 55% of voters and Trump disliked by 63% so either way we slice it, over half of the country will be unhappy on the day after Election Day. The overwhelming sentiment on my Facebook scroll is “THIS is the best we can do???”

One of the other areas of life where there is overwhelming agreement that we need to do better is in the world of banking and financial services. There is a lot of distrust of the big banks. Wall Street is unpopular with Main Street and criminals like Bernie Madoff give the financial advisory world a big fat black eye. When I look at the world through the political lens right now or through the lens of how most of America feels about the overall financial industry (painting with a very broad brush here), it’s easy to feel like there isn’t much positive to hang on to. But then I get up every morning and do what I do for a living, and my soul gets restored. Here’s why:

I’ve spent the last 3 weeks on the road and have spent only a sparse few nights in my own bed in the month of July. I’ve been at our client company sites and at our home office in California for some internal meetings on how we can do what we do better.  While the travel and hotel beds had me a bit out of my workout rhythm, I’ve been able to meet dozens of individuals in one-on-one settings at their employer and talk about their lives.

I wasn’t there to sell them anything, manage their money, or offer them a loan. I was there simply to talk to them, hear their story and suggest a few ways that they can get closer to their goals. Some have been in great shape financially, others on the verge of disaster. But the thread that weaves them all together is that they were all in search of progress.

In the last several weeks, I’ve heard about engagements that are about to happen (before the future fiancée is in the loop!) and have recently happened, weddings, births, job changes, promotions, significant pay increases, and happy retirement decisions. I’ve also heard about massive credit card debt, huge student loan burdens, ugly divorces, and layoffs. It’s been a time of highs and lows emotionally.

Regardless of the issue, it appeared to me that each person I met was truly happy that their employer offered a financial wellness benefit. The feedback I’ve gotten via email has made me realize how much they valued a person who was there to help them and not sell them anything. It’s also made me realize that I am doing exactly what I was meant to do. The ability to help people, see them change their lives for the better and be there along the way to coach them as they hit speed bumps is about as close to perfection in a role that I’ll ever find.

I usually like to close out a blog post with a bit of a financial lesson, so I’ll give you this: At different times in our lives, we are going to need help. Knowing where to go for that help before it’s a crisis situation can be incredibly valuable.

Line up your experts and trusted advisors now. If you don’t have access to a financial wellness program at your employer, ask them to investigate one. If you don’t have someone that you can trust to help you reach your goals and coach you along the way without their interests coming before yours, ask your family, friends and colleagues if they do. You can also search for a financial advisor through the CFP(R) Board, and here are some questions you can ask any prospective planner. Most importantly, find someone who loves what they do for the right reasons.

 

 

 

If It Sounds Too Good to Be True…

August 05, 2016

The Consumer Federation of America (CFA) and the North American Consumer Protection Investigators released a study based on complaints to local consumer organizations. This article discusses the top 10 categories of complaints. At number 10 is “Scams.” To quote the article, here are some of the top scams:

  • Tech support: A caller claiming to be with a well-known company such as Microsoft seeks access to your computer, warning you will lose files or suffer other harm if you don’t allow it.
  • The grandparent scam: A “grandchild” calls an older person, claiming to need quick cash for an emergency in another state or country.
  • CEO email: An email that appears to be from your company CEO asks employees to wire money to a foreign supplier for a deal that needs to close immediately — promising you’ll be reimbursed, of course.
  • IRS scam: A caller “from the IRS” wants money you owe, now, often in the form of a prepaid card (iTunes gift cards are also being used this way). The caller may warn that you’ll have to pay even more or that law enforcement officers will come to your home if you don’t comply.
  • Tax ID theft: In this case, the scammer poses as you and scoops up your tax refund. In many cases, taxpayers don’t find out about it until they can’t file their tax returns because someone beat them to it.

The common thread in these scams is that the scammer preys upon one of two emotions – fear or greed. By either promising something for free or using fear and pressure, the scammer hopes to use your emotions against you and in his favor. I’ve talked to quite a number of people who have fallen victim to a scam and have seen the financial distress that it caused.

For example, one of my friends has been out searching for a new job recently, and he was telling me about an offer he received from a company. They were offering a much higher salary than other companies he had interviewed with recently and definitely made him feel special throughout the interview process. It was almost as if they were telling him exactly what he wanted to hear. They offered him a role, and he was strongly considering accepting it, but there was a nagging little voice in his head that said something didn’t add up. He was contacted by a recruiter and hadn’t known much about this firm other than what they told him.

So we broke out the laptop and started doing some research. What we found was not spectacular. The leaders of the organization had a very checkered past, and while they treated their employees well, their customers were overcharged and charged for services never performed (at least in prior companies). He politely declined their offer, but he nearly accepted it because they used his emotions against him. It was the same modus operandi of the scams but with a different end goal.

If confronted with a situation like these scams, don’t ever give personal identifying information to anyone over the phone. Take a deep breath and a mental step backwards. Break out Google and do some research. Call your local consumer protection agency to see if others have reported scams.

As you go through your life and engage in potential transactions either as a consumer or a potential employee, remember to try to strip emotions from the deal (if it’s significant) and don’t allow anyone to manipulate your emotions against you. No one will be or should be as protective over your money as you. And remember the old phrase, “if it sounds too good to be true, it probably is.”

 

 

 

7 Signs You’re Living Beyond Your Means Even If You Can Pay All Your Bills

August 03, 2016

I’m pretty sure most people understand that the first step in achieving financial security is to spend less than you make. Sometimes easier said than done, but it’s the only way you can save any money and avoid high interest credit card debt. What a lot of people don’t get though is that just because you’re able to pay your bills each month, it doesn’t mean you’re not living beyond your means. If your bank account balance gets dangerously close to zero right before payday, you’re not “getting by,” even if you don’t overdraw and are technically making ends meet. Here are 7 other signs you’re living beyond your means, even if you are able to pay all your bills on time, and what you can do about it:

1. You’re not paying off your credit cards every month or you don’t have a plan in place to pay them off. Use the Debt Blaster to get a plan going and then stick to it.

2. You don’t have an emergency fund. This is your first line of defense against long-term financial issues. Get started on this ASAP.

3. You say you can’t afford to do that thing you really want to do. This was actually the wake-up call for me to realize that I was living beyond my means even though I was making ends meet. I really, really, really wanted an iPad and a new bike, which added up to about $1,000. I said I couldn’t afford it and yet I was spending that amount monthly on dining out and booze. If you tell yourself you can’t afford something you really want, and that thing would be reasonable for someone of your income, lifestyle and life stage to have, that’s a sign you need to examine your spending and start living within your real means.

4. Unplanned expenses like a traffic ticket or a family member’s destination wedding send you into a tailspin. If the first thing you think of when you hear a cousin is getting married at an all-inclusive resort in the Caribbean is, “How rude! I don’t have the money for that!” you are not “making it” financially. There needs to be wiggle room in your cash flow for things like this. Here’s a good way to plan for it.

5. You’re taking out 401(k) loans to pay off other bills. Even though you’re paying interest to yourself, this is still a form of debt. If you’re borrowing against your savings, you’re not living within your means.

6. You’re not on track to retire at 65. Ideally, you’d be financially able to retire before you are mentally ready, but 65 is a good age to shoot for if you’re still in the earlier parts of your career. Here’s how to find out if you’re on track. If you’re not, the earlier you start saving, the sooner (and easier) you’ll get on track.

7. A job loss or medical emergency would severely alter your future. If going without even just one paycheck would send you into late fees with all your bills, it’s time to get a system in place that helps you save for these unexpected events.

The best and easiest times to escape the paycheck-to-paycheck lifestyle is when you experience any type of windfall like a tax refund, an unexpected bonus or even just your annual single-percentage increase at work. Be strategic with that money and use it to find some space in your finances, rather than just adjusting your spending to match. You don’t have to wait for a windfall to do this though. Even just a small change each day that you mindfully use to put away a little extra adds up.

 

Are You Taking Good Things Too Far?

July 29, 2016

The latest craze that has swept my family is the Pokémon Go app. My kids run around trying to “catch” Pokémon at different locations. I’m happy they are outside and active, but I have to admit that I don’t have the foggiest idea why they consider this even remotely fun. They walk around and occasionally ask me to take them to a nearby neighborhood so that they can catch these things. (I use “catch” liberally because it’s all virtual, with no one really catching anything.)

They can catch their Pokémon thingies while I sit at an outdoor table at a local coffee shop. I find it a little strange, and in a horrible twist to this silly game, criminals are now setting up shop near Pokémon characters and robbing unsuspecting game players. What started as a fun thing has turned into a fun thing that needs to be used with caution because of some unanticipated consequences. A lot of things that start out as a purely positive have some unintended consequences that create some negativity.

I’ve seen that with a few people recently. I’ve had two meetings with people who are doing a wonderful job of saving for retirement. They ran retirement projections and learned that they needed to pick up the pace as it relates to saving for retirement. They cranked their contribution percentage WAY up so that they could catch up to where they think they should be. That is 100% admirable, and they are operating with the best of intentions.

Their unintended consequences? Both of them are saving so aggressively in their 401(k) that they are struggling with day-to-day cash flow. One is depleting his savings account on a monthly basis just to cover basic living expenses, and the other is using a credit card for groceries in the last few days before her paydays. A noble effort to save for retirement has taken a somewhat sinister turn in these examples, and I’ve had to have a few “I applaud your effort, but maybe it’s one step too far….” conversations.

The good news is that they realized that they may have gone a bit too far, and when we talked about bringing the 401(k) contributions down just a bit in order to make day-to-day cash flow a bit more manageable, they were completely receptive. In each conversation, we had a nice laugh at how some good things can be taken too far. (If you don’t believe that, see how many chocolate chip cookies you can eat before you start to feel like it’s been one too many.)

The lesson here for all of us is that after a few cookies, it makes sense to stop and catch your breath. The other lesson is that some great financial behaviors can be taken to an extreme. Are you saving so much for retirement that you aren’t able to enjoy the here and now? I’ve heard so many stories about people depriving themselves of life experiences in order to save for retirement, only to die just prior to retiring. Are you spending so much in the here and now and enjoying life experiences that you are woefully behind the curve for your retirement goals?

Neither is a good place to be. What’s the old phrase? ”In all things, moderation.”

Even good financial behaviors should be used in moderation! If you’re wondering if you’re taking something just a bit too far, chances are that you are. Whether you ask a financial professional or just hit our Facebook page and ask, get another perspective on your situation to make sure that you have all of the moving parts in your financial life working together.

 

What To Teach Your Kids Before College

July 26, 2016

This time of the year is brimming with the excitement of future college freshmen over their new adventure. Talking to them is fun – hearing about their hopes, dreams and expectations of their freshman year. The more I started listening, the more my excitement wore off and disbelief settled in. I started to realize that some parents have this expectation that they can teach their kids zero about finances, give them an account with a few thousand in it and expect their kids to become financially responsible and budget properly. Here are some tips to follow instead:

1. Summer jobs are great economic teachers. If your student has a summer job, use it to teach your child invaluable lessons such as what their future careers may be for life if they drop out of college with no plans, that the gross vs. net difference in a paycheck is big and guidance on how to budget their money. Use websites like Mint, YNAB, or even the budgeting tools where you and your family banks to help your child create a budget.

2. Show your child the economic realities of college. Most people think about tuition, books and room and board. To some degree, that is only the beginning.

Every organization, fraternity or sorority your child is thinking about joining may have a fee, some to the tune of over $600 a semester. There are also those pesky fees like student health center fees, student activity fees, orientation fees, new student fees, technology fees and whatever other fees the college thinks up to charge. Use checklists like this one as a guide to possible costs.

3. Come up with an “oops I screwed up plan.” Okay, let’s be honest. None of us were financial wizards when we went to college. A lot of us overspent in our attempt to fit in and alleviate home sickness. Talk to your child before they mess up about how you will handle it the first time and come up with what you will do if they make the same mistake twice.

One of my friend’s parents told her daughter that she would consider the first time she makes a financial mistake a lesson learned. The second financial mistake will result in the “Bank of Mom” shutting down. My friend figured that at worst, her daughter would still have food from the cafeteria to eat, a dorm room bed to sleep in and feet to walk to class.

Don’t wait.Working on a contingency plan now will save you from unnecessary and probably emotionally charged conversations in the future. Take the time to work with your kids on a financial plan for college to not only save your wallet but to save your sanity.

Meet Our Newest Planner: Cyrus Purnell

July 25, 2016

Cyrus Purnell, CFP® is driven to take the mystery out of why some people thrive financially and others don’t. Recently, I had the privilege of sitting down with our newest planner. We discussed his money story and how this Gen X father aligns his personal mission to help others get the information they need to make better financial decisions with his work at Financial Finesse and his role as a husband and father.

Why did you want to earn your CERTIFIED FINANCIAL PLANNER™ designation? What does it mean to you?

I earned my CFP® designation because my primary reason for joining this industry was to help families plan for their futures. When my mom would pick me up from school, she would have the radio on Larry Burkett’s radio show “How to Manage Your Money.” After listening to him help people work their way through financial situations day after day, I thought to myself, “I would like to do that.” Looking back on it today, I was struck by how effectively a short conversation can help relieve someone of stress and set them on a positive road.

What’s your money story – what your parents taught you about money, etc.? Did you hold any negative beliefs about money that you had to overcome?

In hindsight, my parents had a very well balanced view on money. They had very consistent positive money habits when it came to paying bills on time and maintaining low debt levels. They definitely lived within their means, but they would occasionally splurge on things like vacations for the family.

Growing up, I felt like they said “no” to everything, but as an adult, I realize they were very balanced in their yes’s and no’s, and that balance allowed me to walk away from undergrad with zero student loan debt. My perception of being deprived of certain luxuries growing up has always given me a slant toward spending on one event or item and then doing a 180 and spending nothing for a while to make up the difference. It took time for me to learn to plan for those special items and live in balance.

What is the biggest mistake you ever made with your money, and what did you learn from it?

When I started out on my own after college, I picked up what I call “pet debt.” I seemed to carry around some credit card debt and never really took the initiative to completely pay it off. My wife had a similar level of debt when we married, and while were very aggressive on paying off student loans and car loans, we still kept our “pet debt.”

After the birth of our first child, we took a hard look at what the debt was costing us in interest. We got on the same page and attacked the debt and paid it off aggressively. This allowed me to get my MBA without picking up new debt, and my wife was able to start her own business.

What have you learned about money and marriage that you can teach the rest of us?

You can accomplish a lot more working together than you ever could individually. Anytime my wife and I had individual agendas, it always produced tepid results. When we work together on something, we would have better-than-anticipated results.

I know how to run an amortization schedule and how quickly something can be paid down. When we work together, it was faster than any pay-down plan. We would have the wind at our backs.

How do you teach your kids about money?

While my kids are still young, we have felt it was important to begin conversations with them on the value of money and saving. We’ve wanted them to be very involved in the savings process, going to the bank and opening their own savings accounts. Now with any Christmas or birthday monetary gifts they receive, we have the conversation on what we will give, spend and save. My 8-year old is now earning money with doing extra chores around the house. I have been impressed that while he has enough in savings to get the toy he wants, he’s yet to ask for it but has a plan to continue saving $5/week.

If you could wave a magic wand and reform the financial services industry, what would you do?

I would shift cost from the products to the advice. I think there are many very intelligent and ethical people in the financial industry, but they are trapped by the fact that so much of the industry is product-focused and not solution-focused.

Tell me about your personal investment philosophy?

My study and experience with investments has shown that almost all investment return is based on asset allocation. The biggest obstacle to realizing the return from that allocation is fees. In my personal portfolios, I endeavor to build allocations well suited to my time horizon with an eye to keeping fees low.

Is there anything that really surprised you about coming to work at Financial Finesse? Why?

I did a fair amount of research before joining the company so there haven’t been many surprises. I will say the company is exactly what it says it is. Most companies tend to over-hype the strength of their culture and their dedication to mission. It is not hype here. All of that is real.

Have a question you’d like answered on the blog? Please email me at cynthia.meyer@financialfinesse. You can also follow me on Twitter at @cynthiameyer_FF

Anatomy of an Investment Mistake

July 22, 2016

I saw an email from a soon-to-be-retired employee recently, saying that he thought that he made an investing mistake and was looking for some help in correcting it. Here’s the mistake he made. When the stock market tumbled for a couple days because of the British exit from the E.U. (Brexit), he jumped out of the stock market. He moved his portfolio from 60% stocks/40% bonds and cash to 100% stable value because he was afraid the market would continue to drop like it did in 2008.

Well, after two days of going down, the market went back up and within two weeks, it was higher than it was the day before Brexit. The question he asked was “When should we get back in: when it drops to the level when we got out or lower?” There are a few flaws in his thought process.

Issue #1: Selling (or buying for that matter) based on emotions and news events usually ends poorly. In not too distant memory, we have seen the dot-com bubble burst, 9/11, Enron, the housing market collapse, the stock market collapse of ’08 and an economy that is 7+ years into one of the most lackluster recoveries ever, and the stock market is near all time highs! Markets go up. Markets go down. But over time, there has historically been an uptrend given enough time.

One of the things I tell people when they are worried about how the market will respond to a news event is “emotions are the enemy of good decision making.” Yeah, it’s not inspirational. It doesn’t rhyme, and it’s not all that compelling as a standalone statement. But it’s true, and I’ve seen it have horrible consequences for people time and time again.

If you are thinking about changing your investment mix based on a news event, don’t! Go take a nice walk, turn off the TV, play your favorite tunes and let some time pass. Markets overreact…in both directions. If there is a huge sell-off on Monday, chances are that logic and reason will come back into the market, and there will be a few up days after a massive sell off.

Cool your jets and maintain your long term asset allocation. Talk with a financial professional if you have one in your life. Don’t let your emotions be the enemy of your decision making process.

Issue #2: In his question, he assumes that the market will, one of these days, be lower than when they sold off the stock portion of their accounts.  It may never be that low again. People who sold in ’08 and wanted to buy back in when the market got that low again are still sitting around waiting for that to happen. Their wait may be eternal (or not).

The logical flaw in this argument is a lot like the “sunk cost fallacy.” You’ve already made the sell decision and are now tied to the results of that decision emotionally. Looking into the rear view mirror isn’t helpful in this case. Look forward. It’s a difficult skill to apply, but don’t allow yourself to fall into the sunk cost fallacy.

Issue #3: The reason he sold off a big chunk of his 401(k) and went to stable value is that he is considering retirement in the not too distant future. It makes sense to want to be more conservative in that case but it’s too drastic of a change. If he had been considering retirement for some time now, maybe a few years ago would have been an appropriate time to start making small changes to his long term asset allocation.

For instance, I meet annually with someone who has a retirement goal of 12-15 years. She was 100% stocks and 0% bonds and cash when we first met 5-6 years ago. Rather than selling her existing holdings, she changed her future 401(k) contributions to 75% bonds/cash and 25% stocks. She recently moved future contributions to 100% bonds/cash, and when she hears that the stock market hits a new high, she moves 1% of her account to stable value. Her goal is to be at 50% stocks, 50% bonds/cash at and during retirement.

Do you know your long term asset allocation preferences? Do you have a plan in place to shift from where you are now to where you want to be when you’re 98 years old? Review your asset allocation today, see if it’s consistent with your investment risk tolerance and then develop a plan to get from point A to point B over the course of time. Remain patient and don’t let emotions get in the way.

Over the course of time, we all make mistakes. I have, you have, and the odds are high that we’ll make even more in the future. But some mistakes are preventable, and we can hopefully learn from the mistakes of others so that we don’t make them as well. If you can remain emotionally detached from your investments when bad news is happening, avoid the sunk cost fallacy and have a clear vision about your long term investment strategy (and stick to it), you will put yourself in a great position for long term financial success.

 

 

Five Fantastic Summer Money Reads

July 11, 2016

 

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What if you headed to the beach this summer with a great book that could change your life? Would that be worth a few afternoons of reading (especially if you’ve got your feet up, drinking the beverage of your choice)? I am a voracious reader of finance books, some for the blog and some just for my own learning. Many of them just rehash the same old content – not the books on this list! Consider stocking up on some of these perspective-changing, personal finance page-turners for the summer months:

Pensionless: The 10 Step Solution for a Stress-Free Retirement

Before I picked up U.S. News and World Report editor and columnist Emily Brandon’s excellent book to read, I was struck by the title, Pensionless: The 10 Step Solution for a Stress-Free Retirement. That term, “pensionless,” summarizes exactly where millions of Baby Boomers and Generation Xers find themselves in the age of disappearing defined benefit plans and having to shoulder the entire burden of saving for retirement. Brandon breaks down this elephant into bite-sized pieces, with a chapter each on the ten most important steps to funding a secure retirement and avoiding actions that could blow up that security. Her journalist’s eye for making it clear and simple serves the reader well, particularly her guidance on Social Security and Medicare. Follow her guidelines, and while you may still not have the endangered species of the company-provided pension, you’ll have a solid retirement nest egg.

Smart Mom, Rich Mom: How to Build Wealth While Raising A Family

The other day we received a glossy, die cut, colorful solicitation from a global insurance company informing us of their comprehensive homeowner’s insurance for fine homes. Did my husband want a complimentary lifestyle and insurance review? Wait a minute! We own this home together. Why did the insurance solicitation address him independently?

There’s still the assumption that men make the important financial decisions. In her new book, Smart Mom, Rich Mom: How to Build Wealth While Raising A Family, financial journalist Kimberly Palmer turns that assumption upside down. Her no-nonsense, funny personal finance guide for moms offers wisdom for women in every life stage.

This is, in many ways, a book about being in a relationship while navigating both your personal and your family economy without losing yourself. Palmer takes on some tough subjects with wit and humor, like how couples can split up financial responsibilities, the terror that can accompany a choice to be a stay-at-home parent, and the pull of saving for your children’s college while you are also saving for retirement. Each chapter includes useful action steps to put your decisions into practice.

Feel Rich Project: Reinventing Your Understanding of True Wealth to Find True Happiness

Financial Life Planner and columnist Michael F. Kay, CFP® is out to inspire you to feel rich. He believes that if you feel truly rich, e.g., your actions are aligned with your deepest values, you’ve got a much more realistic shot at setting the right financial goals for you – and knowing when you achieve them. Unlike so many financial authors who offer you the money version of a fad diet book, Kay dives deeply into the way personal beliefs and values drive financial behavior. The Feel Rich Project: Reinventing Your Understanding of True Wealth to Find True Happiness offers 10 chapters of thought-provoking exercises designed to uncover and reboot your beliefs about money. This book is best accompanied with a blank notebook and a good pen, as you write your way to your true north.

As I write this post, my eight year old son is looking over my shoulder, begging me for a new pair of $80 Steph Curry high top sneakers because, “everyone is getting new shoes for the end of the school year.” He’s eight! I’m not surprised, though. Our kids face a tsunami of consumer messages that tell them they must buy something now.  How can parents keep materialism at bay?

The Opposite of Spoiled: Raising Kids Who are Grounded, Generous and Smart About Money

New York Times columnist Ron Lieber, a parent himself, has written a practical guidebook for teaching kids about money and values, The Opposite of Spoiled: Raising Kids Who are Grounded, Generous and Smart About Money. In it, he takes on modern parenting behaviors, such as giving extravagant tooth fairy gifts or discouraging teenagers from working, as ways parents inadvertently give their children messages which undermine their financial success as adults. Lieber covers everything your kids are asking about: allowances, designer clothing, part-time jobs, cell phones, birthday parties, etc. in a witty and approachable way.

If you’ve got kids or are thinking of having them, The Opposite of Spoiled will change the way you think about your own money habits and what you’re teaching your children. As for my son, the answer on the sneakers was no (despite my admiration of Curry’s talent). He’ll have to save for them on his own with his allowance.

What Your Financial Advisor Isn’t Telling You: 10 Essential Truths You Need To Know About Your Money

Did you know that with a modest income, you could become an automatic millionaire by taking full advantage of your employee benefits at work or that your choice of partner is the most important financial decision you’ll ever make? In What Your Financial Advisor Isn’t Telling You: 10 Essential Truths You Need To Know About Your Money workplace financial wellness pioneer and our Financial Finesse CEO Liz Davidson shares ways to find your own financial security, maximize your employee benefits for your unique situation and practice financial self defense. The book comes with a companion website, where you can find the resources cited in the book, as well as ways to join the Financial Independence Day Community and create your own peer-to-peer learning group.

What’s your favorite summer money read? Send me your suggestions at cynthia.meyer@financialfinesse .com. You can also tweet them to me @cynthiameyer_FF.

Use These 5 Tricks to Keep Online Shopping in Check

July 06, 2016

When was the last time you indulged in a bit of retail therapy? Even the most financially savvy of us are prone to impulse buys at times. Considering the fact that we often end up regretting those splurges, it’s wise to explore this leak in our budgets and try to keep these guilty pleasures from turning very quickly into shameful regrets.

One way I avoid impulse buying is by shopping with a list and avoiding stores like Target when my emotions are high. I’ve noticed that even when I go into certain stores with a very specific buying mission, I find myself wanting to buy something else, even if I have zero needs. Marketing gurus have figured out how to trip our psychological need to consume and those stops are fully pulled out when you walk into any retail outlet. I’m mindful of this and it helps.

My Achilles heel of impulse buying, however, is the Internet. The “avoiding it” option doesn’t exist, so I’ve had to implement other techniques to quell the shopping. Here are a few tips I use to keep online shopping sprees in check:

1. Create a filter for emails. There’s a reason that stores are so generous with discounts offered via email. They work!

Just this morning, I found myself browsing skorts from Athleta because they sent me an email about their semi-annual sale, even though I didn’t wake up thinking, “Hey, I need a new skort.” I don’t want to give up on the opportunity to enjoy coupons and discounts when I DO need something, so I created a filter that directs all my shopping-related emails straight to a folder aptly titled, “Shopping.” Then when I actually do need to buy something, I just check that folder to see if there are any current coupons or discounts in effect (note to self to add a filter for Athleta).

2. Don’t save your card. Make it one step harder to complete a purchase by opting out of storing your credit card information on a retailer’s site. Not only does this hopefully make you think twice if you have to get up and get your card, it could potentially save your card number from hackers. Win-win.

3. Beware the lure of free shipping. If you find yourself going back to shop for one more thing to put you over the mark and qualify for free shipping, stop for a second and do the math. If the one extra thing you buy is less than shipping would cost, then it’s worth it. Otherwise, you’re just spending money on stuff you don’t need to avoid paying less total money. Pay the shipping or skip the purchase altogether.

4. Realize that Facebook isn’t all-knowing. It’s no coincidence that the pair of shoes you were contemplating on the Nordstrom website suddenly show up in your news feed on Facebook. That’s part of what you signed up for when you agreed to Facebook’s terms. They track everything you browse, not just on their site. For this reason, I try to remember to sign out of Facebook when I’m done so that I can both maintain my privacy and avoid temptations the next time I log in.

5. Only shop sober. Do I really need to explain why shopping online after a few glasses of wine is a great way to blow your budget? If you can’t resist the pull of shopping after happy hour, then at least make an agreement with yourself that you’ll leave everything in the shopping cart and complete the purchase in the morning. Deal?

I’m not suggesting that you cut out all online shopping, but if you spent more money last month on purchases that you don’t really need than you saved for retirement (assuming you’re not on track to have enough to retire by age 65), then a change in priorities is necessary. Consider increasing your savings and opening a separate shopping account where you direct deposit a set amount of money you can afford to spend on splurges each month. Just make sure you don’t go beyond that and find yourself in unnecessary credit card debt either.

 

 

Can a Computer Replace Your Financial Advisor?

June 30, 2016

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

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

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

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

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

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

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

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

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

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

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

So what are computers NOT good at?

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

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

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

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

 

 

3 Reasons We Spend Beyond Our Means

June 29, 2016

While the US personal savings rate is higher these days at 5.4% than it was a year ago, Financial Finesse’s research shows that 34% of people are living beyond their means or spending more than they make. Some of this overspending is due to factors beyond their control like medical expenses or other emergencies. But in many cases, it’s more from a lack of planning ahead combined with rationalizing what one can “afford,” a measurement that is often more emotional than based in reality.

For example, when it comes to meeting up with friends after work for happy hour, I’ll go to great trouble to avoid paying $15 for parking or a taxi cab, but don’t think twice about ordering a glass of wine that costs the same. When I stop to question this logic, it sounds nuts. How can I mindlessly afford $15 for a glass of wine but schlep for several blocks from the bus to avoid spending the same amount for more convenient transportation? We make the same kinds of bargains with ourselves all the time. If you’re looking to save more money by cutting back on spending, it’s important to be aware of these three reasons that often cause us to compromise our savings goals:

1. It feels good. Emotional buying is a lot like emotional eating. When we’ve had a bad day or are tired, sad or sometimes even ecstatic, our emotional mind tends to rule out our rational thoughts. But while a purchase may temporarily lift your spirits, it won’t solve the emotional need you’re seeking to fill.

One way to overcome this trap is to build a “bad day” spending amount into your monthly budget. I have a friend who keeps a fifty dollar bill in a hidden fold of his wallet for those days. Another way is give yourself visual reminders. I keep a sign in my office that reminds me, “Until you make peace with you are, you’ll never be content with what you have.” Rather than trying to buy your way to happiness, think about what’s really missing and take the baby steps to get closer to that.

2. The Pinterest effect. Social media has taken celebrations like weddings and even simple backyard barbecues to a whole new level of creativity and even competition to have the prettiest, the hippest, and the most impressive decorations and ideas. I cannot believe the themes some of my friends pull off for their kids’ birthday parties. To me, it’s a modern day version of keeping up with the Joneses times ten.

If your 5-year old’s classmate has a farm-themed party complete with pony rides, there’s an element of peer pressure to match or better that with your own kid’s party. That’s fine if it’s part of your budget, but if it stresses you out to think of what you’ll have to pay for a bouncy house or to have a live Elsa show up to the party, take a step back and assess your priorities. Your child won’t miss what’s NOT there, and you can use the money you save toward their education. “I wouldn’t mind taking out student loans if it means my parents had thrown me extravagant birthday parties as a kid,” said no college student ever.

3. We all love a good “deal.” It’s a proven fact that when large retailers go out of business, they often hire liquidation firms who come in and actually mark up prices so that they can “discount” them in an effort to clear items out of the store. They’re banking on buyers’ perception of getting a deal and it works. Same goes when you’re shopping online and buy more simply to qualify for free shipping.

When you find yourself buying something that you weren’t actually seeking out, take a pause and first consider whether it’s something you need and can afford. Try to fast-forward in your mind to the next time you’re cleaning out your closet or packing up to move and whether you’ll be glad you have that thing or wish you hadn’t purchased it. If you do decide it’s something you need, then do a quick check on your smartphone to make sure the price is actually a deal. Stores call this “showrooming,” which means they hate it when people do this, so try to be inconspicuous, but if you do find a lower price online, see if the retailer will honor it.

Finally, when you do find yourself overcoming the urge to spend, don’t let that money find itself being wasted somewhere else. Consider turning that victory into actual savings by transferring the amount you were considering spending into your savings. It adds up and you’ll never regret saving more.