When “None of the Above” Isn’t an Option

June 17, 2016

As I type this, Hillary Clinton is giving a speech after winning the California and New Jersey primaries and becoming the Democratic party presumptive nominee. This is merely weeks after Donald Trump gave his speech after wrapping up the Republican primaries as their presumptive nominee. Most people I’ve talked to and seen commenting on my social media accounts wish that they had a “D – None of the above” option like there is on standardized tests.

I don’t think I’m going out on a limb by saying that, as a country, we should be able to do better than these candidates.  A lack of great available options isn’t just an issue in politics though. It’s a problem in the financial lives of many people that I’ve talked to recently.

If you are confronted with a bad situation, there are some things you can do. First, try to think of as many potential solutions as you can. Consider consulting with people you know and trust or an unbiased financial planner for ideas. You might be able to come up with a better solution this way. If not, make a list of pros and cons for each potential solution and prioritize what’s most important to you.

For example, one person I talked with was in a bit of a financial jam, and my goal was to help her find a way to a better place.  She had recently gone through a divorce, and her budget included receiving child support from her ex-husband. He has chosen to change jobs and now works “under the table” for cash so that it is not reportable. If it’s not reported, she can’t collect, and now her living expenses exceed her income.

The child support would have been deposited into savings for her kids’ education and for emergencies. Instead, she taps into savings for about $100/month to maintain her current lifestyle. We talked through a few options:

  • Sell the house and downsize. Reduce the mortgage by several hundred dollars per month so that there is wiggle room. (She just refinanced when she bought the ex’s portion of the house, so a simple refi is not an option.)
  • Get a part time job and work when the kids are with their dad in order to generate some income to cover the gap.
  • Cut the cord and get rid of her high end cable package.
  • Get rid of her car with a $500/month payment and get something less expensive.
  • Hire an attorney or investigator to track her ex-husband’s financial life and then go to court in order to get child support dollars flowing in.
  • Suck it up, hope for the best and continue to grind forward as is.

Each option has its downsides and she viewed all of them like many Americans are viewing Trump v Clinton. But just like in politics, there is no perfect solution, and trying to find one can prevent you from choosing a good one or at least the “least bad” one. I don’t know which option she’ll end up picking, but she’s now in a better position to make a decision. After all, sometimes making no choice can be the worst choice of all.

 

 

10 Steps to Jump Start Your Earning Power

June 13, 2016

Are you consistently earning less money than you are capable of, given your education and experience, in a way that negatively impacts your financial health? If you took the Quiz: Are You Underearning? from my recent blog post and it raised questions for you, don’t despair. Underearning is a behavior, not a character trait. You can change it. In this post, I offer ten steps people can take to begin to challenge limiting financial beliefs and earn an income that corresponds to their capabilities:

Step 1: Measure the problem. Set aside some time when you won’t be interrupted and do this exercise by hand. Fold a sheet of paper in two lengthwise. On one half, make a list of all your income that you earn during a typical month: salary (use the net take home, not the gross salary), consulting fees, investment income, etc. Add it up.

Next, on the flip side, list all your mandatory monthly expenses: mortgage/rent, utilities, transportation, insurance, taxes (if self employed), student loans/credit card payments, groceries, etc. Don’t forget to add 15% for retirement savings, even if you’re not currently doing that. Download this Easy Spending Plan as a guideline. Now add another 10% for wiggle room, things like vacations, gifts and donations. Add that all up too.

Open the paper and compare both sides. Is there a gap? How wide is it?

Step 2: Unmask hidden beliefs. Review your income and expenses from Step 1.  What’s your money story? Fee-Only CERTIFIED FINANCIAL PLANNER™ Michael Kay writes in his new book, The Feel Rich Project, that in order to overcome money misery and “feel rich,” you have to examine “your beliefs around money and values, that in most cases stem from your childhood and how you see yourself in the world.” Spend some time writing your money story in a journal.

Kay offers several writing exercises with powerful questions to help you uncover your beliefs, fears and attitudes about money. If money is a source of struggle for you, it’s particularly important to uncover your hidden belief system, which is guiding your actions now. This is likely to bring up uncomfortable feelings, so treat yourself gently.

Step 3: Write your new money story. Now that you have uncovered your money mindset, it’s time to write a new money story. For thought-provoking exercises, I like Kay’s chapter on “Stoking Your Money Mojo.” Take your money story from Step 2 and craft a new message for each of the beliefs which are limiting you and contributing to your underearning. For example, the old message might be, “people who earn money are greedy,” and the new message could be, “I am well compensated for my talents and abilities.”

Kay also suggests developing a Money Code. This is “a statement of who you are and what you believe when it comes to your financial life.” Summarize the key points and post them somewhere where you can read them several times per day.

Step 4: List 100 ways you can earn money. This simple exercise comes from Jerold Mundis’ Earn What You Deserve: How to Stop Underearning and Start Thriving, which brought the phrase, “underearning,” into the modern financial vocabulary. Make a list of 100 ways you could earn money: full-time jobs that fit your education, experience or skills, part-time work or side-gigs (e.g., coffee barista, drive for Uber), asking for a raise, freelancing, selling investments, holding a garage sale, etc. Don’t stop until you get to 100. This will be a more powerful exercise if you do it by hand.

When you’ve finished, review your list. Are there any surprises or “ah ha” moments? Pick something on the list that you can take action on this week.

Step 5: Sell something you no longer need. People who underearn often have a poverty consciousness and doubt that money they spend to take care of themselves can ever be replaced with future earnings. (It’s the opposite of the overspender, who doesn’t see any connection between what they spend today and their future earnings.)

Pick an item/items from your home or garage that you no longer need and that’s worth at least $20 and sell it. Perhaps you have books you can bring to a secondhand book shop, designer clothes you’ve never worn that you can consign, or unused exercise equipment. Here’s the kicker. After you’ve sold your items, take $20 and spend it on yourself doing something fun you wouldn’t normally do.

Step 6: Identify a financial role model. When I was working through my own financial issues, one of the things that helped me navigate the rough terrain was identifying a financial role model. As inspiration, I chose a friend who worked in the same field, always earned a good salary, managed her money wisely, and bought her first home at a young age as a single woman. Although I didn’t tell her she was my role model, every time I faced a tricky financial issue, I would ask myself what my friend would do in the same situation. If I wasn’t sure, I’d ask her directly.

Later on, after I had made financial progress and had more surplus income to invest, I studied clients in my financial planning practice. What financial habits and behaviors did they show that would teach me something I could use in my own life? In part because of inspiration from clients, I became a successful real estate investor. Now I look to our CEO, entrepreneur Liz Davidson, so I can learn to think even bigger!

Step 7: Read a book about investing. Remember the famous line from the film Field of Dreams, “If you build it they will come.” Act as if you will earn a comfortable income that offers you the opportunity to save and invest a generous percentage. What would you need to do to prepare to manage that money wisely? Start building your financial infrastructure by learning more about investing fundamentals. Beginners can start with The Wall Street Journal Complete Money and Investing Guidebook. Those who already know basic concepts can move on to the Forbes/CFA Institute Investment Course.

Step 8: Track your income and expenses daily. Creativity coach Julia Cameron, author of The Prosperous Heart, calls this practice of tracking your daily income and expenses, “counting.” Whatever you want to call it, it’s a way to be mindful of the constant flow of money in and out of your life.

If you’re kinesthetic, you may prefer to keep a notebook or ledger on your kitchen counter to track your money. Smartphone and computer users may prefer an application like Mint or Yodlee. I saw from decades of personal experience that tracking income and expenses is a powerful way to gain awareness of financial imbalance and align your spending with your values and goals.

Step 9: Say thank you. Are you thankful for the financial resources you already have in your life? If you focus on lack, you are likely to get less than you need. If you focus on gratitude, you are likely to get more experiences for which to be grateful.

Watch the short video, If the World Were 100 People, whenever you are feeling like you don’t have enough. Whenever you earn money or receive it as a gift, take a moment to feel grateful. This will help you keep your eye on the goal of increasing your earnings.

Step 10: Start a Financial Independence Day Group. Can your friends help you become financially independent? As I wrote in a previous blog post about my own experiences with peer-to-peer learning, having the support of a group of like-minded seekers of financial balance is like having a personal cheer-leading squad. The structure of the group learning experience creates confidence, and many of us are more successful when we are accountable to others. Visit our Financial Independence Day website to download an FID community guide on how to use our book What Your Financial Advisor Isn’t Telling You to create a powerful group learning experience.

Is there a topic or a question you’d like to see addressed on the blog? Send me your thoughts or questions at [email protected]. You can also follow me on Twitter @cynthiameyer_FF.

What Our Dads Taught Us

June 10, 2016

Since Father’s Day is right around the corner, I asked some coworkers what the best piece of advice their father gave them was. I’ll share their responses and add a bit of commentary with each one:

My dad is from Guyana and he stressed the importance of education in the U.S. He told me that my ability to grow my income will be based in part by finishing my degree- the rest is up to how hard I work.

As a dad who stresses the importance of education AND hard work (either one alone will not suffice), I totally agree with this dad’s advice. My kids have heard countless times that they are expected to do well in school and expected to put forth effort in all things they attempt to accomplish. This dad’s advice should be universally accepted as true wisdom.

Dad didn’t always say a lot, but he set a great example with how he prioritized his time.  He got to work early, was home on time for dinner with the family and helped us with homework if we needed it, then he went back to work until the job was done. If we had a ballgame or a concert, he adjusted his schedule to make sure to be there and he loved going to sporting events with me and my brother so he made that a priority as well.

Again, this is timeless wisdom from a dad who put family first. If more dads followed this path, perhaps we wouldn’t have many of the issues we see in this country today.

Don’t trust a man or get pregnant before having a job.

Well, this is certainly advice that served my coworker well. She’s a very independent and successful woman, and she’s raised lovely daughters as well. The principles of self reliance and good decision making that her father instilled, in his own unique way, have served her well. The lesson here, at least as I see it, is to find ways to communicate your financial lessons to your family members in ways that they will receive.

Mostly about being in a desperate situation or feeling down-trodden: 1 – You can’t fall off the floor. 2 – They can’t take away your birthday.

One of my favorite sentiments, this dad was all about the power of resilience. Resilience is a key trait in those who I’ve seen reach a high level of success. It’s what can keep a person moving forward toward a goal when most rational people would fold.

Have a firm handshake as it shows confidence.

A timeless pearl of wisdom, right there! A firm handshake and the ability to look someone in the eyes when holding a conversation sometime feel like “the way things used to be” rather than what I see in today’s higher tech world.

My dad was the one who taught me about how little changes add up. For example, when our credit union introduced debit cards back in the late 90’s, they were paying members $.25 PER TRANSACTION to encourage use of the card over checks. My dad was like, “Hot diggity, this is free money for spending money you’re already spending! You have to do this!” This was my first foray into taking advantage of rewards programs, discounts, etc, but ONLY on things I was going to buy anyway. I learned to be practical and frugal from my dad.

This dad should be a Financial Finesse blogger!!!

Your work ethic is something nobody can ever take away from you, so work hard and let it speak for you. It will take you further than your talent alone can and past the majority of people who aren’t willing to work as hard.

This reminds me of the first dad’s advice about education and effort. It kind of brings the list of dad tips full circle.

What I love about this list of tidbits from dads is that the children who received this advice ended up being successful adults and working here at Financial Finesse. Every single item on the list is also reminiscent of either what my grandfather taught me as a child or something that my kids have heard from me. None of these items seem like a “get rich quick” kind of message. It’s definitely a lot of tortoise and not much hare. If you absorb the messages from Financial Finesse’s dad squad, you are certain to be thankful this Father’s Day.

 

 

How to Teach Your Kids About Money With An Allowance

June 08, 2016

Do you remember the financial lessons you learned from your parents or other close adults while growing up? No doubt your own financial habits and mindset are influenced to this day by the actions and attitudes you observed as a child. This is a good reminder that your adult behavior around money will most certainly affect your children and other young people who look up to you.

One great way to have a positive influence, even if you’re still on your own personal journey to financial security, is by paying an allowance. There is an ongoing debate about whether an allowance should be tied to household chores or not, but many people agree that it’s a great way to teach children about money and financial responsibility. Regardless of whether you believe children should work for their allowance or whether it should be a gift, here are some tips to make the most of this lesson for your kids.

Be consistent. One of the greatest things an allowance can do is teach your kids how to budget, which requires consistency of income. Whether you pay weekly, biweekly or even just monthly, do it on the same day and in the same amount so they understand the value of making their money last. Caving and paying kids early could be akin to payday loans, which is the exact opposite of what you want to teach your kids.

Help them set goals. This can help them see the value of skipping short-term wants, like candy, in exchange for reaching longer-term goals like a video game. One suggestion is to require kids to put one-third of their allowance into savings and one-third toward a charitable need like an animal shelter or church, with the remaining third available for immediate spending.

Introduce them to banking. Open a savings account for your child’s longer-term savings and show them how to check their balance online, pointing out how interest (however miniscule) accumulates, allowing their money to compound. This is also a great way to demonstrate that the ‘M’ in ATM doesn’t mean “magic.” That cash gets in there somehow!

What if you don’t have the money to pay an allowance? This was sometimes the case in my earlier years, but there are still ways to pass along the lessons even if you can’t pass along cash:

1. Use a grocery allowance. Allow your kids a certain amount of the grocery budget that they can spend on special treats or even for their breakfast foods, which you need to buy anyway. I’ll always remember watching a mom do this at the store. When her son selected an expensive yogurt smoothie, I heard her explain how that was a fine, healthy choice, but if he wanted that instead of the less expensive store brand yogurt for breakfast, he would have to put back the juice he had already chosen. The trade-off was tangible and clear.

2. Keep a written tab. If you don’t always have the cash available on allowance day, simply keep a written record by adding that week’s amount to your child’s tab and then when you buy something for them, subtract it from the tab. This isn’t a bad way to go even if you do have the funds as it’s closer to the way we are paid and spend money in modern times anyway.

3. Remember that it’s often more about the practice than the amount. Perhaps you can’t afford to pay the average $67.80 per month that’s the current going rate. Even just $5 a week can teach the lessons.

These are some great ways to use an allowance to raise financially responsible adults, but I know there are others out there. How do you teach your kids about money? Please let me know via Twitter at @kclmoneycoach or post on our Facebook page.

Life Lessons to Help Your Kids Start to Value Money at an Early Age

June 07, 2016

One of the greatest gifts I have been given is to be what is called a “first generation American.” My dad came to the U.S. over 45 years ago from Guyana to pursue a degree in law. The financial lessons I learned sandwiched between my American and Guyanese cultures have helped me to understand the value of money at an early age.

Money is earned, not given.  I do not remember ever getting an allowance. I worked and earned money, starting at about age 4. My dad was very clear on what work was. Work was helping out with household chores, cleaning my room without being asked, and getting good grades and reports from my teachers.

When I did these things, I earned money. If I did not, dad deducted the money I earned. I learned that I have to work to earn money and not to expect anything for free. Consider having your kids earn money instead of an allowance and hold them accountable when they do not do their work. You will teach them the value of money and to have a strong work ethic.

The pain of discipline or the pain of regret – my choice.  The money we earned was to pay for school activities, clothes and any extra expenses from a family outing (a balloon, toy, food, etc.) My dad held us accountable. Once the money was gone, so was our ability to pay for school activities and buy anything for an event. This taught us to think about the future and to budget our money for things we want to do.

When you give your children the money they earned, come up with a plan for it. In our home, our children give 10% and save 10% ,and we work with them to plan for how they will spend the rest. We make it clear, just like my dad, that once the money is spent there is no “Bank of Mom or Dad” to bail them out.

Be generous. My family were givers from as early as I can remember. We gave of our time but also our money. We gave money to our family in Guyana, to causes we cared about, and to our church.

This taught me from an early age that money is a tool that can be used to get the things you want but also to help others in need. It also led to feeling gratitude for the things you have. Teach your children the true value of money by having them donate some of their earned money to someone in need.

Of course, not every family is like mine. Your family and values may be different. Whatever they may be, come up with a game plan to set a strong financial foundation for your child(ren) so they can build a successful future.

One Great Reason to Be Optimistic About Millennials and Money

June 06, 2016

Can millennials avoid the financial mistakes of the baby boomers, like not saving enough for retirement and taking on high consumer debt? Our recent 2016 generational research report shows there are some reasons for optimism. For a first-hand account of why, I didn’t have to look any farther than Financial Finesse’s own Maneeza Hasan, our marketing manager.

Maneeza is 29 and single and recently rented her own apartment in the LA area after living overseas for a few years. She paid off her student loans early, has an emergency fund, and has made good progress in her retirement savings. Maneeza has certainly got it together more than I did when I was her age. Here’s what she told me when we sat down to talk about her financial life:

What do employers need to know about what is important to millennials?

Millennials have gone through one of the most brutal recessions in history. They desperately want to have financial stability so they can start having families, investments, houses, and more. Helping them get out of student loan debt and paying them a great salary would keep millennials at the job. Otherwise, there are a ton of other ways to make money these days, and millennials will take on all of them if that would result in the stability they are seeking.

What are the biggest financial challenges that people your age face?

I think getting a financially stable job that is enough to provide a good life is the biggest challenge. It’s very easy for millennials to be “underemployed”, and this causes a lot of necessities and luxuries to go out the window. In addition, most people get into serious levels of student loan debt trying to acquire this stable income.

When you got out of college and started working, did you feel prepared to deal with all your financial challenges? What do you wish you had known?

I was fortunate in finding a very well-paying job (even though I had to move halfway across the world to find it) right out of college. This allowed me to take care of everything (student loans, savings, traveling, etc.) very easily. I wish I had known more about taxes before I graduated. I feel like I never got any real education on how taxes work.

What’s more important to you personally, enjoying life now or saving for the future?

Saving for the future. Enjoying life now happens regardless due to birthday parties, holidays, etc. with friends and family. For me, my savings are the only thing that will help me level up into a better and better life.

Do you want to own your own home? If yes, when would you like to buy?

I would like to own my own home, but I’m wary of being tied down. The world is constantly changing these days, and it is scary to sign up for a 30 year loan. I’d pretty much just want to do it if it was a really good investment. Ideally, I’d want to buy a home once I was married, but if I was stable enough to do it on my own, I would.

How does being multilingual and multicultural influence your financial decisions?

Well, growing up in New Delhi for the first 7 years of my life exposed me to a lot of dire poverty. My family wasn’t poor, but you can see it every day in the city. Being an immigrant to ambitious parents taught me to sacrifice a lot and do what needs to get done to reach that next goal, so I’ve been raised to save, save, save.

Ironically, this saving/investing mentality has resulted in incredible experiences. Living and visiting so many countries has given me a great perspective on the financial reality most people in this world face. That keeps me humble and focused on spending my money on the things that are really important.

If the blog authors could speak directly to people in your generation, what should they say?

Just really help them develop a good game plan for gaining that stability. Most people come up with some really bad ideas that they end up having to pay for years and years. Find low cost ways to get a good job or job training, go to college, etc. Also, be patient when it comes to having their own place, marriage, kids, and helping out family.

Most people want to do these things before they are financially ready. Share basic knowledge like Roth IRAs (I’m a big fan), high interest checking/savings accounts, cheaper options for TV/Internet. Great blog posts can help get them in that mentality of looking for the next financial “hack” until it becomes a habit and a natural part of their lifestyle.

What is the biggest mistake you see twenty-somethings make with their money?

I don’t see them focused on their finances in general. Some think money is just a bad thing, and some just don’t prioritize it. They just live on what they earn and focus on other aspects of their lives. Having an “investor” mentality would make a huge difference in their lives and set them up for their thirties very well.

Do you agree with Maneeza’s assessment of millennials? Email me your comments at [email protected]. You can also follow me on Twitter @cynthiameyer_FF.

 

 

How to Manage Financial Stress in a Chaotic World

June 03, 2016

Periodically, there are times I look at my daughter’s life and think it’s a great time to be her. Right about now is one of those times. She is doing a study-abroad session in Italy, and since I travel for work a lot and know my way around airports, she asked me to take her to the airport.

We live in Baltimore and we use BWI as our “home airport” so I am there quite frequently. I knew that her flight was booked from Philly instead of Baltimore, but when I put the trip into my calendar I simply typed “Take Jordan to Airport” in Outlook about two months ago. As time moved forward, the Philly part slipped my mind, and when I put her bags into my car, I immediately headed toward BWI. 

As we got to BWI, my daughter’s face went white, and she gasped “Why are we here?” (She had been texting her classmates and making sure that she had packed everything.) It was at that moment that I realized my error.

I needed to get to Philadelphia and FAST! I fired up my Waze app, drove well in excess of the speed limit and got her to Philadelphia well in time to get through TSA and customs well for her flight. It was not a stress-free endeavor, but all’s well that ends well. It ended well, so now I’m looking back wondering if there was anything that could have prevented my “stupid human tricks” or a lesson to be learned.

Once she was safely at her gate waiting to board her plane, we had a chance to recap our crazy mini-adventure and think about how it could have been a quicker and less stressful event. She could have reminded me that it was Philly because she knows I sometimes go on “auto pilot” because of a busy calendar. I could have been more descriptive in my Outlook calendar and done a quick check-in with her before leaving the house, saying “we’re off to BWI…correct?” Just a little bit better communication could have prevented a mini-crisis.

I see this with couples that I talk to on a regular basis. They are both working hard to earn their incomes, raise their kids and plan for the future – but sometimes things get missed in the chaos that is life in today’s world. Financial stress is one of the leading causes of marital disagreements and when it becomes too much to bear, it can frequently lead to divorce.

When one spouse handles the financial affairs and the other is completely disinterested and uninvolved is when I see the stress level being the highest with couples. The financial manager often feels unsupported and the financially uninvolved partner can feel powerless or at the mercy of the financial manager. There’s a simple way to avoid that. Weekly, bi-weekly or monthly financial meetings are a great financial management tool, can be done quickly and can keep two people on the same page.

Here’s all you need for a successful family financial meeting: a calendar (I love the ones from the mall kiosks that you see every year around the holidays), 10 minutes and a pen. Since I’m single, I schedule a financial meeting with myself every other Saturday. I pull out my calendar and using June 2016 as an example, will write my “Payday” on the 15th and 30th. I’ll write “mortgage” on the 1st, “utilities” on the 22nd and every other recurring bill that I have on the date that the bill is due. There are sometimes random bills that come up and aren’t in my monthly budget like car insurance, which I pay quarterly or doctor bills if one of my kids has had a visit recently.

When I see it all laid out on my financial calendar (I don’t put anything else on that calendar and I use my phone for all of my other calendars), it helps me stay on track. I’ve shown this system to some of my married friends and some couples that I’ve worked with to help them solve their financial stress. When they see how easy it is, they promise to try it.

I’ve heard from quite a few couples that both partners, the financial manager as well as the uninvolved one, feel much lower stress levels and the “fights about money” go away or are tremendously reduced after implementing this system. For anyone who is struggling with how to reduce the level of discord around your financial life, try this easy way to engage either yourself or your partner in a discussion about money. A calendar, 10 minutes and a pen are WAY less expensive than a divorce!

Quiz: Are You Underearning?

May 23, 2016

Are you constantly scrambling to make ends meet? While there can be many causes to budget problems, including sudden unemployment, overspending and big credit card or student loan balances, one frequently overlooked trouble spot is how much you earn. “Underearning” is the persistent state of earning less money than you are capable of earning, given your education, experience and the economic environment, in a way that negatively affects your financial health.

What’s the difference between underearning and living the simple life…or underearning and choosing to work in a lower paying non-profit or public service job in your field? The key is whether or not you are earning as much money as you need to meet basic living expenses. Underearning is not the same as poverty, although persistent underearning can lead to poverty. Underearning is a type of self-induced deprivation of financial wellbeing.

It is not dependent on profession or income. The medical school graduate who takes a job making less than she needs to pay her rent and student loans is underearning. People can appear financially successful, but still live paycheck to paycheck with a negative net worth. If you can meet all your basic expenses (housing, food, transportation, clothing, health insurance, etc.), save enough for retirement, and have some money left over for enjoying life now without going into debt, you aren’t underearning, even if you don’t make a high wage.

Underearning behavior is a symptom of an underlying belief system. It generally comes from a personal sense of unworthiness and/or lack of self regard, which manifests as an inability or unwillingness to seek appropriate compensation for one’s efforts. Underearning can include active activities such as the PhD in computer science who works in the bicycle shop and lives at home with his parents or the mother who spends all her time volunteering at her children’s’ private school while building up a huge credit card balance paying the tuition.

It can also include passive activities such as failing to turn in rebates after purchases, forgetting to submit benefits-related expenses for reimbursement, or paying excessive brokerage fees for investment management – areas where many busy professionals fail to fully maximize. According to Barbara Stanny, author of Overcoming Underearning: a Five Step Plan to Lead a Richer Life, those who underearn, “devalue themselves, giving away their time, knowledge, skills.” The good news is that because underearning involves some level of self-sabotage, bringing self-awareness and compassion to changing behaviors that deflect money can lead to a full turnaround.

Do you think you might be underearning? Take the quiz below to find out. Rate your answer to each question by assessing how often you engage in that behavior:

Never                   0 points

Rarely                   1 point

Often                    2 points

Almost Always     3 points

____I regularly accept lower-paying work which does not reflect my education and experience.

____I only work part time.

____I don’t think employee benefits are an important part of my compensation.

____I work all the time but I never seem to have enough money.

____I spend most of my week volunteering for causes and organizations.

____I believe most people who have money are greedy.

____I believe most people who have money are unethical.

____I resent people who have money.

____I believe that people who have money only have it because they are lucky.

____I don’t think my skills are worth much.

____I have never asked for a raise.

____I don’t make as much money as I think is fair.

____I feel poor.

____I would be embarrassed to tell my friends how much I really make.

____My income does not cover all my basic needs (food, clothing, shelter, transportation, healthcare).

____I do not save for retirement.

____I have trouble maintaining an emergency fund.

____I only pay the minimum payments on my credit cards and don’t pay them off.

____My income is not enough for me to pay down my debts.

____My student loans are in forbearance or on an income-based repayment plan.

____I incur library fines for not returning books or movies on time.

____I forget to use available coupons or discounts for things I usually purchase.

____I forget to submit rebates or expense reimbursements for which I am eligible.

____My salary is less than 90% of the median salary for those in my profession.

____If I am self-employed, my business is losing money.

____If I own a business, I do not pay myself a sufficient salary.

____Once I find a new job, I want to leave it soon.

____I believe that if I spend money on myself, no more will come in to replace it.

____I believe I will never have enough money.

____I have an advanced degree (e.g., graduate school or professional) but generally earn less than the median U.S. income (about $54,000 for 2014).

____Total Score

How did you do?

0 – 15 points                      Underearning is not a big problem. Congratulations!

16 – 35 points                    Some underearning behavior or limiting beliefs around money

36 – 55 points                   Underearning behavior contributing to financial challenges

55 points or higher           Serious underearning limiting financial wellness

Is underearning something you would like to address? In next week’s post, I’ll write about steps people can take to begin challenge limiting financial beliefs and earn an income that corresponds to their capabilities.  In the meantime, start with the two books listed above. Send me your thoughts or questions at [email protected] and follow me on Twitter @cynthiameyer_FF.

 

How Financial Wellness is Like Weight Loss

April 28, 2016

I always like to say that financial wellness is a lot like weight loss. When I came across this article in Vox about “surprisingly simple tips from 20 experts about how to lose weight and keep it off,” I realized just how true that is. Here are the weight loss tips and how they apply to financial wellness:

1. There really, truly is no one “best diet.” Scientific studies have found that all of the various diet plans have about the same modest long term results. What matters is finding one you can actually stick to. The same is true of money management systems and asset allocation strategies.

2. People who lose weight are good at tracking – what they eat and how much they weigh. They tend to count calories and weigh themselves at least once a week. In the same way, you need to track or otherwise limit spending, continually re-balance your investments, and periodically run a retirement calculator to make sure you’re still on track.

3. People who lose weight identify their barriers and motivations. Like with diet and exercise, we usually know what to do with our finances. The hard part is actually doing it. Start with knowing the “why” that motivates you. Then look for the barriers that are standing in your way of taking action.

4. Diets often fail because of unreasonable expectations. People tend to overestimate what they can achieve in the short run and underestimate what they can achieve in the long run. Don’t try to save too much too fast. Instead, set big long term financial goals that motivate you and then see how much you need to save to achieve them.

5. People who lose weight know how many calories they’re consuming – and burning. Similarly, you need to know how much income is coming in and going out. Making sure the latter number is lower than the former is the only way to increase your wealth.

6. There are ways to hack your environment for health. For example, don’t surround yourself with unhealthy foods. Simple things like where your food is served from and what size plate it’s on can also affect how much you eat. For your financial life, don’t put yourself in situations where you’re likely to spend more and try to automate your savings as much as possible.

7. Exercise is surprisingly unhelpful for weight loss. More accurately, exercise alone isn’t very effective since people often eat more to compensate for the calories they burn. Earning more income can have the same effect when we automatically spend more as well.

8. Weight loss medications aren’t very useful. Neither are “metabolism boosting” supplements. Complex, sophisticated, and high-fee investments are the weight loss medications and metabolism boosting supplements of the financial world. Stick to the basics.

9. Forget about “the last 10 pounds.” If they’re that hard to lose, people generally gain them back. Most of the health benefits came from the other lost pounds anyway. Likewise, trying too hard to save more can backfire if it starts to feel like too much deprivation. Allow yourself to splurge now and then too.

So what’s the main thing that weight loss and financial wellness have in common? They are both about making small changes over a long period of time. Instead of looking for the quick fix, find an approach that you can stick with.

 

5 Songs That Could Ruin Your Finances

April 13, 2016

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

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

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

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

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

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

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

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

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

 

 

5 Songs That Are Good For Your Money

April 06, 2016

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

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

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

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

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

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

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

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

If At First You Don’t Succeed…

April 01, 2016

Over the weekend, my youngest (he’s 14 now) built a computer all by himself. He saved up money from odd jobs and birthdays and bought a bunch of computer parts. Eventually, he had enough parts to build the computer and on his first attempt at turning it on, it didn’t work. He looked terribly defeated and thought he had completely messed it up.

I have some friends who work in the I.T. field and I was texting them to get thoughts on what was wrong. Everything they suggested appeared to be in good order. So he and I made a trip to the store where he purchased the parts and we were able to get a tech to look at his computer.

There was one very small connector that wasn’t fully engaged, and the problem was fixed within seconds! We took it home, fired up the computer and it worked!  But it didn’t have Internet access. To a kid who just built a gaming computer, that’s a deal breaker.

So we spent the next hour installing an updated operating system and working on his network connection to no avail. Once again, he looked defeated. I suggested that we step back for a minute, grab a bite to eat and think.

While we were having dinner, we started talking about the parts he bought and what each part was for. I asked the simple question “did you buy a wireless adapter or wireless card?” and he started hysterically laughing. We had just wasted time on a task that was NEVER going to be successful because we had no wireless network adapter.

So we went back to the store and spent $15 on a wireless card and once he installed it, the computer worked perfectly, even better than he expected. The look of happiness on his face when he was able to hit the “on” button and know that he took something from idea, to effort, to final product was pretty cool. He was very pleased and I was very proud.  There’s something about seeing someone reach a goal that is so very rewarding.

I saw the same look on someone’s face today. She and I have been meeting for about 5 years now on a yearly or sometimes quarterly basis. When we met the first time, she thought at age 50 that retiring at age 55 was a ridiculous and impossible goal. But she wanted to tackle it and if she “failed” in that goal, she’d at least be ahead of her current pace.

So she radically altered her lifestyle and started cooking more and going to restaurants less. She compromised and decided to buy only $14/bottle (or less) wine, as opposed to her $30-$40/bottle norm. She started using the “fluff” in her budget, which was now totally removed, to pay down debt and increase her 401(k) contributions. She got rid of her BMW 7-series lease and bought a nice, reliable, used Honda Accord.

Every quarter, we would meet again and go over her expenses and her debt reduction. On the annual reviews, we would do retirement projections and what started out as “You’ve got some SERIOUS work to do” projections turned into “You’re making some serious progress” conversations. The last two years have been “You’re almost on track” and “You could actually pull this off.” It won’t be the lifestyles of the rich and famous, but it will be a life that she would find enjoyable.

When we last ran her numbers, she realized that she could – if she wanted – walk into her manager’s office and call it a career. There would be not a lot of cushion or margin for error, and she may opt to work part-time or do some short term assignments, but she walked out of the office feeling confident that she had the capacity to retire. She isn’t making any quick decisions, and it might make sense to work a bit longer to build a bigger margin for error, but I wouldn’t be shocked if we have a conversation in the next month or two and she tells me that she is writing her letter of resignation.

My son’s first few attempts at turning the computer on turned out to be not so spectacular. My “frequent flyer” didn’t see success when we ran retirement numbers the first time. Neither one got discouraged. Both kept looking for ways to get closer to their goals.

What are your goals? Whether you’re looking to build a computer or make plans to retire earlier than you may think you’re capable of, don’t let the first attempt get you down. As you find yourself coming up short on a goal, which we all do periodically, go back to the beginning, remember why you set the goal and let that drive you toward your next attempt, which will inevitably be closer to success.

 

How to Trick Yourself Into Better Financial Behavior

March 29, 2016

A friend of mine once told me that any goal you want to achieve is about 80% behavior and about 20% head knowledge. We all know what to do to take control of our finances – spend less, dump consumer debt, and save more. However, as simple as it all sounds, it is not easy. Life and our emotions can get in the way of your goals.

I say if you can’t beat it, trick it. With April Fool’s Day just days away, take the following steps to trick yourself into better financial behavior: (Some may sound crazy but they work.)

1 . Can’t get the ball rolling on saving? Consider saving by setting up a payroll deduction into a savings account. That way you save it before you even have a chance to spend it.

2. Struggling to keep your hands off your savings? Try to use the hide feature on your online account to hide your savings account. If it is out of sight, it might be out of mind.

3. Still feel like you can’t trust yourself if the savings is at the same bank with your checking account? Consider moving your savings account to a different bank where you do not have immediate access to funds. Just don’t forget it’s there for when you do need the money.

4. Do you have a budget but have a hard time actually following it? Consider identifying areas where you overspend (eating out, groceries, clothes, etc) and using cash for those items. It makes you more mindful of your spending and it creates an automatic boundary.

5. Do you want to increase your retirement plan contributions but feel nervous about the increase? Consider contacting your retirement plan provider about a feature called auto-escalation. This gives  you the option to automatically increase your contributions annually, in many cases by as little as 1%. Tip: If you typically get an annual pay increase, consider timing the automatic increases a month after your pay increases so you won’t feel the difference.

A lot of times, we know what we need to do with our finances. The hard part is actually doing it. These steps may seem simple but they could be just the boost you need to help you reach your financial goals.

 

 

 

Follow These Steps To Stop Making Bad Decisions

March 25, 2016

In a world where things can “live forever” on the Internet, we all need to be careful when posting things to Facebook, Instagram, Snapchat or any other social media platform. A funny, in a not very funny way, example of that happened with the rapper 50 Cent before he appeared in bankruptcy court recently. He posted a photo of himself sitting on the floor with stacks of money spelling out “B-R-O-K-E.” His creditors were NOT amused. (Note to self – when trying to show impoverishment, it’s best to not have a flamboyant display of wealth posted to social media.)

We’ve all made mistakes or put our foot in our mouth or done something to help someone else point out the error of our ways, but this is one of my all time favorites. It’s not quite as colorful as a story in my local paper when I was a kid about a guy who tried to rob a gun store at knifepoint (I’ll let you do the math and figure out how that ended) but the concept is the same. I wonder if at any point before having that photo snapped, 50 thought “this just might be the worst idea I’ve had in a long time?”

Again, we all do silly and not brilliant things from time to time, and I’m no exception. I’ve pushed myself too far too fast when recovering from injuries and ended up needing surgery. The worst part is I knew that surgery could be a result if I didn’t dial back, but I didn’t listen to the little voice in my head that said “this is really stupid!”

This week, I spent the majority of my time talking with people in financial coaching sessions and I heard a lot of people acknowledge that they made very dumb (their word, not mine) financial decisions when they KNEW it was a mistake before doing it. It made me wonder how often that happens and why we do it. Why do we make bad decisions?

I’ll let you read that article and hit Google to do more research, but regardless of the “why,” it’s something we humans do. And I’m noticing it everywhere now. The more people I talk to, the more admit to knowing before they made a bad choice that it was a bad choice. We willingly disregard our instincts and move forward to make regrettable choices.  My challenge to myself and to you:  STOP IT!!!

When you are about to spend way too much money buying something that you don’t really need – don’t do it! When you are thinking about reducing your 401(k) contributions for a short term reason – walk away from your computer and don’t allow yourself to do it! When you are about to buy a car and the payment is almost as much as a mortgage on a small house – be like Nancy Reagan and “Just Say NO”

Prolific business authors Chip and Dan Heath have a book about decision making. Decisive: How to Make Better Decisions in Life and Work is a great read. It goes into the “4 villains” of bad decision making:  1 – Our focus it too narrow  2 – We have confirmation bias 3   – Short term emotions get in the way 4 – Overconfidence hurts us.  If you can understand why you are about to make a bad decision (I recommend reading the book so you get a full explanation of each of the 4 villains), you’ll be less likely to follow through with it.

Where the book gets even better is when it moves from diagnosing why we make bad choices to building a good decision making process.  There are a few simple steps there that we can all use to help us make better choices in life. They call it the WRAP method:

W – Widen your options. Move from “this or that” to “this AND that.” Don’t limit your view.

R – Reality test your assumptions. Try to see the decision from your point of view, the points of view of your friends and family, and people who would disagree with the decision. The more angles you see, the better your decision becomes.

A – Attain distance before deciding. I love the 10/10/10 rule. How will you feel in 10 minutes, 10 months, 10 years about this decision?

P – Prepare to be wrong. Build in time for the unexpected. Anticipate problems and don’t let a bad decision linger.

There is a lot of info packed into each part of the WRAP process. (Here is a great summary of it.) If you are looking for a way to improve your decision making process, whether it’s already good (like I claim mine is!) or if it needs some work, head to your local library (trying to be financially sound) or hit your local bookseller to look for this book. Maybe it can awaken your inner “is this a good idea?” voice. When managing your financial life, slow down, take a deep breath, and try to listen to that voice.

 

 

 

 

What Philosophy Can Teach Us About Our Finances

March 14, 2016

I recently asked my fellow planner, Brian Kelly, CFP®, to tell me about his personal financial wellness story. I expected a compelling tale. Brian has a dry sense of humor, a big heart and strong opinions, and I wasn’t disappointed. What I didn’t realize until he sent me this post is that Brian is also a philosopher who connects the dots between financial wellness, a 19th century movement and eighties music sensation The Talking Heads.  Here’s what Brian shared with me: Continue reading “What Philosophy Can Teach Us About Our Finances”

How Do You Make Financial Decisions?

March 04, 2016

For the last week, I’ve read a lot about Apple vs. the U.S. government regarding the request of the government that Apple build a back door into the phone of one of the San Bernadino killers. The case is very controversial and I understand why both sides feel so strongly. The government wants to break into the phone to see if there is evidence that can help understand and track down anyone who might have helped the killers. Apple is concerned that an important part of their products, a strong encryption that makes them very secure, could be no longer a strength if the encryption code they would write gets into the hands of the wrong people. Both sides have strong arguments, and I will keep my opinions out of this.  Continue reading “How Do You Make Financial Decisions?”

The Four Pillars of Making Habits That Stick

February 29, 2016

How important are daily habits to financial wellness? In my own financial wellness journey, they’ve been crucial. By changing my own habits, including my inner dialogue about myself and my income, how I managed my cash flow and how much I saved and invested, I altered my own trajectory. The primary reason I became a financial planner is that I believe other people can do it as well. Continue reading “The Four Pillars of Making Habits That Stick”

How Understanding Your Personality Can Change Your Life

February 22, 2016

I’ve written frequently about how I changed my financial behaviors over time. Once someone who spent her paycheck down to the last penny, I became a successful saver and investor over time. That all happened because I changed both what I believed about money and what I was worth, as well as what I did in my everyday life to align my daily habits with those beliefs. Continue reading “How Understanding Your Personality Can Change Your Life”

4 Things An Actuary Can Teach Us About Money

February 08, 2016

In a post last week about how choosing the right life partner can be the most financially wise choice you ever make, I wrote about how my husband Steve is my financial inspiration. He truly is a “financial hero,” who’s made wise choices about money his entire life. I am continually impressed by his natural talents as a money manager. I came to my financial beliefs and behaviors the hard way, learning from missteps I made in my 20’s…not Steve. He was born this way – a sensible, long term, evidence-based investor.  Continue reading “4 Things An Actuary Can Teach Us About Money”

Are You Lip Syncing Through Your Financial Life?

February 05, 2016

I’ve recently become a huge fan of the show Lip Sync Battle. Seeing celebrities “sing” the hits of their favorite artists while doing some very entertaining dances is absolutely hilarious. While it’s one of my guilty pleasures and has led to some world class laughter (“The Rock” as Taylor Swift, Anne Hathaway as Miley Cyrus, Channing Tatum vs. Jenna Dewan Tatum), in one of my odd “connect the dots” moments, I realized that I was having a conversation with someone who was lip syncing her life. Continue reading “Are You Lip Syncing Through Your Financial Life?”