How To Evaluate Your Financial Aid Award Letter For The Best Choice

April 12, 2019

College financial aid award letters are rolling in, and along with it, the confusion of helping students decide what to do next. Financial aid packages can be tricky to decipher. There is no standard for the financial aid award letters and the terminology can be confusing.

There are award letter comparison tools like this one from Finaid.org as well as sample financial aid award letters that can help, but here’s what you want to pay attention to as you compare and ultimately decide which to accept:

Calculate your own total college costs

Your letter will list the total costs of college, but you will need to put on your detective hat to find out the true cost. Going with the costs listed on the award letter could lead to under or over-borrowing.

Verify the cost of tuition, books, fees (enrollment, lab fees, etc) and room and board (including the different meal plans) through each school’s website that you’re considering. Don’t forget the fact that the student may need money for personal care, fraternities/sororities, sports teams, etc. Finally, to get the full cost, contact the department the student’s major to learn any additional costs for things like specialized computer software they’ll have to purchase, graphic calculators, etc.

Don’t forget transportation

Factor in transportation since this can add up to thousands of dollars a year depending on the distance between school and your home as well as the method of transportation. These are all things to consider as the true cost of college, and knowing them ahead of time will not only help you evaluate the true value of the award package, but it can help you anticipate unplanned costs like a lot of airplane rides for a homesick child or an empty nester parent.

Know the difference between net price and net costs

While award letters focus on the net costs, you’ll want to focus on the net price in making the decision. The net price is the difference between the total college costs and the total non-loan aid (scholarships and grants). In other words, it is the amount that your family is on the hook to pay either through savings or loans. The net cost is the difference between the total college costs and the entire financial aid package (including loans and work study).

The net costs are typically closer to the expected family contribution (EFC). Sometimes you may see a net cost of $0. This does not mean the cost of college is free, it just means that you may not need to dig into savings to pay tuition – but you will probably have to borrow.

Some award letters will throw in a ton of loans, including a PLUS loan, to get the net cost to zero. A financial aid award package with a $6,000 net price may be a better deal than a package with a $0 net cost if most of that $0 net cost package is made up of student loans vs. grants.

Learn how to evaluate the actual award

Compare how much free money each college is actually offering. As you read the award, carefully track the offers of free money, free money with strings attached, forgivable loans disguised as free money (grants) and actual loans. Some colleges will front-load grants and scholarships in the freshman year to entice enrollment, but then those go away, meaning you may not get as much aid in future years.

Are awards renewable? Find out if the awards are renewable each year until graduation (or at least for 4 years) and what strings are attached, if any. Some of the strings may be maintaining a certain GPA or a certain course load.

Work study considerations: If the plan includes work study, ask if the programs have a post-graduation employment requirement. Not fulfilling the employment requirement can turn your free grant into a loan.

Basically, you don’t want a bait and switch financial aid award package that sounds great enough to get you hooked into accepting the college until you read the fine print and find out you may not be able to afford the second year.

Get ready to negotiate

Many people are surprised to learn that a financial aid award package is not written in stone. If your desired school offers an anemic financial aid awards package, consider appealing the award – competition is fierce for students, especially at smaller schools, who would rather have enrollment numbers than tuition.

Tips for appealing your financial aid

Put it in writing. If you are appealing based on need, contact the financial aid office to understand the appeals process, get the correct points of contact for an appeal and state your case in writing. Be specific and state if you had a drop in income, a medical crisis, more than one child attending college, or are suddenly single.

Get creative. You might ask for an unsubsidized loan to be upgraded to a subsidized loan or even for a clothing allowance for kids moving to very different climates (think LA to Boston).

Followup with an appointment. Give it a week and then call your point of contact or make an appointment. If your making a case based on merit, consider directing your letter to the enrollment or admissions office and start bragging.

Create competition. Use the better award letters to ask for more money and show off your child’s stellar academic record, especially if their grades or aptitude test scores improved since their college application was submitted.

The choice of college is an important one, particularly when financial aid needs vary widely between choices. Don’t make a hasty choice that you may later regret. Even in the 11th hour, these steps can help you evaluate your financial aid award packages to help you make the most informed decision for your family.

Too Busy To Manage Your Investments? Here Are Two Possible Solutions

March 08, 2019

I don’t know about you but there are days when I am so busy that I have to look at my iPhone to figure out the day of the week. When you throw picking investments into the mix and most people stick their heads in the sand (probably to take a nap) rather than deal with it (unless, of course, it’s something you’re interested in!). As much as I would love to encourage taking a break, I do not encourage one for your investment accounts. As hard as you work, your money should be working for you.

Luckily, the investment world understands this and has created simple, low-cost methods for managing investments. The two most well-known options are investing in an asset allocation fund and investing with a robo-advisor. Which approach you pick depends on your goals, your investment strategy, how involved you want to be in the investment management process, how much of a say you want with your investments, and how much you’re willing to pay. Here’s a review of both.

Robo-advisors

Robo-advisors provide automated online portfolio management advice, typically without a human financial advisor. Many robo-advisor companies use the same software as human advisors but only offer portfolio management advice for generally lower fees. Most of their investment choices are low cost ETFs, although a few offer stocks and other types of investments as well. Some robo-advisors also offer features to help you minimize taxes in accounts outside tax sheltered accounts like a 401(k) or IRA.

Robo-advisors are popular in part due to the minimum amounts needed to invest. Some companies have no account minimums while others require as a little as $100 a month to invest. This makes them a great option for those who want investment advice but may not have the minimum assets to work with a human financial advisor.

For those who want a human touch, don’t worry. Many investment management companies these days are offering robo-advisor options with a dedicated human financial advisor for a slightly higher fee, but less than what you’d pay to work with someone who might come to your house or invite you to their office.

A robo-advisor might be a good fit for you if…

A robo-advisor may be a good fit for hands-off investors who enjoy low cost investment management and are comfortable using online services. This is also a great option for those who may not have the minimum assets to work with a financial advisor but want the quality of financial advice. If you want a more customized portfolio based on a brief risk tolerance questionnaire, robo-advisors may offer the best solution for you.

Asset allocation funds

Asset allocation funds are mutual funds that are usually pre-mixed with equities, fixed income, cash equivalent and sometimes alternative investments, giving you instant diversification. The fund can be mixed in various ways and typically rebalanced to maintain the desired mix of stocks and bonds.

The title of the fund often gives you clues as to how your funds are mixed. A balanced portfolio is generally a mixture of about 50% stocks and bonds. Lifecycle or target-date funds start off with a higher percentage in stocks and gradually become more conservative as the investor approaches a pre-determined date, which is retirement in most cases. Lifestyle funds are allocated based on risk level (e.g., conservative, moderate or aggressive).

An asset allocation fund might be a good fit for you if…

An asset allocation fund may make sense for those who are in retirement plans such as a 401(k) or IRA and want a fund that does all of the work for you. If you are looking for a true one-stop-shop then asset allocation funds may be for you. If you are not comfortable with online services but want a similar hands-off level of portfolio management you would get from an advisor or even a robo-advisor, an asset allocation fund may be a good alternative.

Reviewing the pros and cons of each

Both asset allocation funds and robo-advisors have pros and cons. The key is to evaluate your needs and wishes to make the best decision for you. Some of the questions to answer are as follows:

How comfortable are you using online services? Robo-advisors require a certain degree of computer literacy and comfort not needed with an asset allocation fund.

How customized do you want your portfolio to be? Robo-advisors typically base their advice off of a questionnaire and you may be able to tweak the asset allocation or change the answers to the questions asked to modify the portfolio. On the other hand, an asset allocation fund is setup based on very broad criteria such as your retirement age and basic risk tolerance level, which may not give you the best allocation for your investment needs.

How much are you willing to pay? Since many robo-advisor firms use ETFs or index funds, the cost can be cheaper than some asset allocation funds, particularly the funds that are more actively managed, although you may find an asset allocation fund in your company’s 401(k) that is cheaper than any robo-advisor.

What type of investments do you want to have in your portfolio?Most robo-advisors use ETFs, although some use stocks. An asset allocation fund is a mutual fund.

What level of service do you want? Some robo-advisor firms can help you maximize tax savings. An asset allocation fund generally does not offer ways to save on taxes.

Once you have decided if you are going to choose to invest with a robo-advisor firm or in an asset allocation mutual fund, do your research to choose the best firm for your needs – this can go a long way to helping you find the right investment strategy to help you reach your goals. Then you can spend more time on the rest of your life!

How One Woman Survived The Government Shutdown Without Payday Loans

February 05, 2019

As the wife of a federal worker who actually got paid during the last shutdown, we developed a new appreciation for actually seeing a paycheck every two weeks. Unfortunately, this was not the case for a lot of my husbands’ friends and our neighbors. Since we live in the same area as a lot of federal government workers, it’s hard not to run into people who were impacted by the most recent government shutdown.

I asked one of my friends Kate, who was furloughed, how she handled the shutdown. She had said her ability to handle the financial impact came down to the financial planning she did before and during the shutdown, as well as her plans after she gets paid. Here’s how she did it.

Before the shutdown: planning

She had 3 months of expenses saved for emergencies

Kate has worked for the federal government for over 15 years. She said like many federal government employees, she initially saw her paychecks as guaranteed income, so she spent like her paychecks would never stop. The 16 day government shutdown in 2013 was her wake-up call. She realized that there are no guarantees to receiving pay and immediately started saving for emergencies.

She opened a savings account at a different bank (she wanted to remove the temptation to dip into it) and set up automatic payroll deposits into that account. She said having emergency savings made the shutdown an inconvenience instead of a financial hardship.

She created a crisis budget

After the first shutdown, Kate created a second budget she called a “crisis budget.” This budget eliminated any non-essential spending and drilled down to exactly how much she would need for the essentials like food, shelter and transportation. Kate said that knowing how much she needed to survive prevented her from panicking, because she knew exactly what to cut back and how long her savings would last.

She lived below her means

Throughout the years she tracked her spending monthly to ensure that she was living below her means. She used the budgeting software through her bank, but also researched other budgeting software programs like Mint.com. She said tracking her spending helped her to understand exactly where her money was going so she could stay on track with her financial goals.

During the shutdown: implementing

She contacted creditors immediately

Even though she had an emergency fund, Kate realized she had no idea how long the shutdown would last. As a safety measure, she contacted her creditors and informed them of her status. Luckily (depending on your perspective), all of her creditors were well aware of the government shutdown and offered to work with her if she got to a point where she could no longer pay her bills. She realized the more she communicated with her creditors, the more willing they were to work with her.

She immediately adjusted her lifestyle

She implemented the crisis budget and immediately adjusted her lifestyle to her new circumstance as soon as she was furloughed. Basically any expense that did not involve the essentials such as food, shelter and transportation came to a halt.

After the shutdown: recovering

She’s resisting the urge to splurge

Interestingly, Kate pointed out that how you handle finances immediately after a crisis is important. She shared that the temptation for her is to immediately go back to her prior spending, but doing that will prevent her from rebuilding her emergency savings. She plans to stick to her crisis budget until her emergency savings is rebuilt. She said she also encouraged her fellow co-workers to keep their spending to a minimum until any debt accrued is paid off and their emergency savings is rebuilt.

Surviving the ‘stress test’

Overall she said she used the last shutdown to “stress test” her financial stability and worked on improving her finances. That decision 5 years ago helped to make this shutdown a minor blip on her finances rather than a life-altering crisis. Her overall guidance to anyone is that no one’s financial situation is guaranteed, so we all must plan for unforeseen circumstances by:

4 Red Flags To Watch Out For Before Buying An Annuity

January 25, 2019

Annuities – the word itself can start WWIII in a room full of financial advisors. Some advisors think of annuities as the financial instrument of Satan and other advisors believe it is the Holy Grail for anyone in retirement. I am in the middle.

For the right person in the right situation, they work

I think for the right person, the right annuity can help someone generate the income needed to maintain his or her lifestyle in retirement. For the wrong person, an annuity can tie up money unnecessarily for years. The key (and the challenge) is for the consumer to fully understand both the benefits and risks of an annuity and to assess if the benefits outweigh the risks for their particular needs.

Does anybody really know how these things work?

The problem is that annuities are so complicated that most consumers and most advisors do not completely understand them. The training on annuities at most financial institutions centers on selling them. When I first became an advisor, my company assigned me to an area with a high elderly population. Big surprise – this area also had many annuity sales people.

After a few months in my new location, a client would stop by with a friend who wanted a second opinion on an annuity. Most of the annuities I reviewed were good and a great fit for the owner. Unfortunately, there also annuity contracts I reviewed that did not match the benefits the annuity owner thought they were getting.

Other annuities I reviewed did not match the needs or even long term goals of the annuity owner. These experiences gave me a unique window as to the “red flags” of a potentially bogus annuity salesperson and new perspective on how to help consumers.

Red Flag #1

Your advisor pressures you to sign an annuity contract before fully explaining the contract to you

When you get the annuity contract to sign, have the advisor go over all of your discussed benefits in the contract. Make sure that all of the promised benefits are listed in your contract (your advisor should be able to point them out). If anything that was promised is not in the print of the contract, do not sign. If needed, your advisor can have the contract redone to include your discussed benefits.

Once you sign, no matter what you thought you were getting, you are pretty much stuck with the annuity. Most states have a “free look” provision that gives you the option to get out of your annuity within typically 10-30 days (varies by state), but once that period has passed, it’s yours, even if it’s not what you thought it was.

Red Flag #2

You do not know your advisor’s background

There is an inherent trust people have in anyone presenting himself or herself as a financial professional. One of my friends was told by an aspiring financial advisor that, “All I really have to do is put on a tie and show up, and people are willing to trust me.” The only qualification needed to sell an annuity for most is an insurance license, which requires 20-40 hours of general insurance courses, 6-12 hours of ethics courses and passing an exam. No financial or retirement planning knowledge required.

To sell variable annuities, an advisor would also need at a minimum a Series 6 license. The qualification to getting a Series 6  is for the advisor to be affiliated with an organization that will sponsor them to sit for the exam and for them to pass the 100-question exam with at least a 70% passing score. In most states, an advisor may also have to pass a Series 63, which I personally studied for and passed within a 48-hour period.

This means someone can graduate from high school June 1, go through all of the training, pass the exams and hang a shingle outside of an office as a financial professional by July 1 with absolutely no experience. Ask about the professional experience of anyone managing your money and do background checks by going to your state’s Department of Insurance website and/or by using the Broker Check website.

Red Flag #3

Your advisor did not clearly explain to you why the annuity he or she wants you to purchase is a good fit for you

If you are switching annuities, make sure you understand exactly why switching is such as good idea. I reviewed an annuity sales proposal from a woman who was getting ready to switch from an old annuity to a new one (called a 1035 exchange). The advisor told her it was a good idea, but the client could not explain to me why it was.

Upon reading the proposal, I knew it was because there was no good reason for the exchange except for the commission the advisor would receive. The change would increase her surrender period and cost her more money in fees and the annuity actually had fewer benefits. Make sure you clearly understand how and why the annuity purchase meets your financial goals.

Red Flag #4

The advisor tells you that it is a “no risk” investment

No matter how good an investment is, there are always risks. The risk may be your money being tied up or your money going up or down with the market or getting a low rate of return, or it could be the risk that the annuity company goes out of business. The key is for the benefits to outweigh the risk and for some, the risk may be a deal breaker.

I reviewed an annuity for a friend of a client who wanted to withdraw the money for his child’s education. His advisor told him about all of the benefits but left out the 10% surrender charge for withdrawing his funds. What angered him about this is that he told me that he explicitly told the advisor that he planned to use some of the funds for his child’s education.

The bottom line

Do not sign anything you do not understand. If you don’t understand an annuity, ask questions until you do. Just like Smokey the Bear’s famous quote, “Only you can prevent wildfires,” you are your own best defense against bogus financial professionals.

The Lessons I Learned From Having A Brother With Special Needs

January 18, 2019

One of the greatest joys of my life is my brother, Michael. Despite the fact that he has special needs, he always has a smile on his face every time I see him and the excitement in his voice when we talk warms my heart. Recently, my mother and I were reflecting on what we have learned in the almost 40 years she has been taking care of my brother. Below are some of the lessons we learned:

Infancy

1. Trust your instincts. My brother was way behind on the average baby milestones and my mother took him in for several visits before his doctor diagnosed him as having special needs. Her advice is that no medical degree or certification can come close to a parent who has daily contact with her child.

If you feel something is wrong, trust your gut and keep asking. Change doctors if needed. The earlier your doctor can diagnose your child, the earlier your child can be treated.

2. Apply for benefits. Do not assume you won’t qualify for benefits. Contact your state to find out about Medicaid benefits for special needs children. You may be entitled to Medicaid benefits, regardless of income, often in the form of a Medicaid waiver for special needs children.

3. Choose the right medical plan. Evaluate your employer healthcare benefit options to choose the plan that will provide the most benefits. Consider using medical savings plans like an FSA or an HSA to save money pre-tax that you can use tax-free for qualifying medical expenses.

School Age

1. Understand your rights to school services for special needs children. There are three federal laws that apply to children with special needs: the Individuals with Disabilities Education Act of 1975 (IDEA) that ensures your child can get a free education, section 504 of the Rehabilitation Act of 1973 to protect students from discrimination based on disabilities, and the Americans with Disabilities Act of 1990 to give reasonable accommodations to children with disabilities.

2. Get your child evaluated. In most cases, an evaluation is the first step to enrolling your child in a special education program. Consider contacting your local school to find out about the process of entering your child into a special needs program.

3. Explore school options. Review the special needs programs your school offers to see if your child will get the care they need through a public school or if a private school may be a better option. Special needs services also extend to pre-schoolers. Contact your local school system to find out the programs offered and local support organizations for your child’s diagnosis for guidance on finding the best program for your child.

Adulthood

1. Decide where your child will live. Will your child live in your home, a group home or an independent living community? Some group homes and independent living facilities may have a long wait list, so find out the details. Will your child need a day program or will they be able to work? If your child can work, start thinking about government and other nonprofit job search programs for adults with special needs.

2. Get guardianship or a power of attorney. My brother’s day program had an art program and soon an art association presented his artwork and his art started selling. Because my mother did not apply for guardianship and she did not have a power of attorney, she found that she had no say in how the art association presented or sold his artwork.

Luckily, I had a legal plan through my employer that extended to family and my mother was able to get guardianship of my brother. If you feel your child may need assistance making decisions as an adult, consider getting guardianship or a power of attorney. Contact your employer about group legal plans or legal services to help you create the legal documents.

3. Consider protecting your child’s benefits with a trust. In most cases, if your child has more than $2,000 in countable assets, they may not qualify for government benefits. A special needs trust can be a standalone document or part of a last will and testament. The trust generally can hold assets for the benefit of your special needs child without disrupting your child’s benefits. Depending on the type of special needs trust you set up, the trust funds might be used to pay back Medicaid, so consult with an attorney to see if and what kind of special needs trust is right for you.

We did not learn about many of these things until after the fact. Don’t make our mistakes. Consider using the resources above to help you make the most informed decisions in the care of your special needs child.

What A Veteran Wishes She Could Tell Every New Soldier

November 12, 2018

If someone were to ask me what I am the most proud of, next to my family, I would say that I am the most proud of having served in the military. The military is where I developed a strong work ethic. I also learned to think of others before myself and I learned to lead even though I may not have had all of the answers. I enjoyed every crazy moment in the military (well, if I am honest, the port-a-potties were not fun, yuck!) and I grew close to many of the servicepeople I served with.

Twenty years later, I am proud to call some of the soldiers I served with my dearest friends. Many of my friends went on to have wonderful careers both in the military and as civilians but others left the military early and struggled as a civilian. Some left on their own; others were forced out of the military.

The one thing that determines success after military life

If I had to name the number one thing that differentiated the people who were successful from the ones that struggled, I would say it was how they managed money in the military, particularly debt. During my military career, I worked in security and human resources and I was nothing short of shocked at how many careers and, unfortunately, lives ended because of badly managed finances. What made me angry were the predatory lenders that I felt preyed on soldiers.

I understand that ultimately people make their own choices but keep in mind, when I was in the military at the age of 22, soldiers called me mom. I was the oldest of all of my female friends. I think sometimes people forget how young people are when they join the military. Most aren’t even old enough to legally drink!

What was your money situation after high school?

Think back to your late teens and early 20s. How knowledgeable were you about money management or debt? How would you have reacted if everywhere you turned people were offering you credit cards, car loans, payday loans, and every other financial vehicle that can tie soldiers to an insane interest rate?

You combine the impulses of people barely out of their teens with easy credit, a steady paycheck and a lack of money management skills, and you have a mixture that only leads to broken hearts and dreams. Worse yet, the decisions some of the soldiers make in their teens and twenties impacts their future. Bad money decisions can lead to reprimands from senior leadership, garnishment of wages (commercial lenders can garnish up to 25% of a soldier’s paycheck), lost careers or even future careers, lost security clearance and some lost the will to live.

How our society contributes to the financial mistakes of our soldiers

Outside of just about every military base I have ever visited were payday loan companies, title pawn shops, rent-to-own stores and questionable car dealerships, ready to take a young soldiers’ future from them. I, like most soldiers, had no money management skills when I joined the Army and I quickly found myself in debt. Lucky for me, I had only gotten into a little debt (under $1,500) before a colleague with excellent money management skills got ahold of me.

How I got control of my situation

Under his tutelage, I was able to quickly pay off the debt and I was able to save a good portion of what I made. Because I was not burdened by debt, I was able to make the choice to leave active duty, join the reserves, finish college and ultimately fulfill my dream of helping people manage their finances. If I had not had the intervention from my colleague, I probably would have continued to accumulate debt, I would not have been financially able to leave the military and if I had gotten into enough debt, I would have to had to declare bankruptcy – ending both my military career (I had a position that required a security clearance) and my dreams (it is virtually impossible to find a position as a financial advisor with a bankruptcy record.)

I am grateful that the military is beginning to acknowledge that there is a serious problem. They have started mandating financial education classes for soldiers. I do believe that the programs need to go further, with a focus on true financial wellness though.

Financial wellness is a state of well-being that encompasses all facets of financial planning with a focus on behavioral changes. It goes beyond simply telling people what to do and guides them by showing them what to do. Ultimately, financial wellness is about empowering individuals to take control of their financial lives and goals.

What I would tell all new soldiers if I could

If I could talk to new soldiers, I would tell them that the future is theirs for the making or destroying. I would tell them that debt for many is leveraging their futures on circumstances and events for which they have no control over. I would tell them that every financial decision they make is mapping a future for them – it is their choice where that future leads.

I would help them to understand that budgeting is simply directing money ultimately in the direction of their dreams – a cheaper car payment may free up the cash to save for a home or a college savings plan. I would tell them that a financial plan is a process of making sure that all areas of their financial life are working in harmony with their deepest values, hopes, and dreams.

Mostly, I would want to give those that sacrifice their lives for our freedom, the freedom from feeling burdened and lost in a sea of debt – to give them hope for the future that they have earned.

How To Make Early Retirement A Reality For You

October 19, 2018

Retirement means different things to different people. For some, retirement means a second chapter of a “fill in the blank” opportunity. For others, it’s the choice to work or not to work.

In any case, retirement is a destination we all aspire to reach. The age we want to reach retirement varies though. The US Census Bureau calculates the current average age of retirement to be 63. But there are always the overachievers who want to retire by 55.

Early retirement is possible with the right plan

If this is your dream, it is possible. It just requires a lot of planning. Use the list below as a starting point to create a strategy to retire early:

Create AND test drive your retirement budget

Do a reality check on your savings by creating a retirement spending plan to account for all of the projected expenses and spending you may have in retirement. Be honest with yourself when doing this. If you can’t live below your means now, what makes you think you can do it once you retire? If your new budget includes big drops in expenses like eating out, clothing or entertainment, test-drive the changes now to see if you can stick with them into retirement.

Don’t forget to factor in travel

Thinking about travel? Great, first think of how often you want to travel. Next, use websites like Travelocity to estimate how much your dream destinations will cost annually, divide that number by 12, and use that amount in the vacation category of your spending plan.

Make a game plan for healthcare

First, make sure you understand your estimated health insurance costs until you qualify for Medicare. According to ehealthinsurance.com,the average cost of health insurance for an individual aged 55-64 years old is $790/month in 2018. This number can change dramatically depending on where you live. For some, it’s a pretty big financial gap to cover if you plan on retiring at 55.

Second, contact your HR department regarding retiree healthcare benefits and the rules to use them. The last thing you want is to retire at 54 only to later realize you could have gotten healthcare benefits if you’d waited to retire at 55. If you retire without healthcare benefits, consider working part-time. More employers are offering healthcare benefits for part-time workers.

Finally, consider maxing out your health savings account. Contributions are pre-tax and qualified medical withdrawals are tax-free. After age 65, you can withdraw from your HSA for any reason and avoid penalties, but you will pay taxes on non-qualified withdrawals.

Run and review your retirement estimates

Now that you have an idea of your expenses, run a retirement estimate to gauge how on track you are to replace your income when you retire. If there is a gap, consider bumping up your 401(k) plan contributions. Also review your investment mix to make sure your money is working as hard as you are. If you are married, review each other’s 401(k) plans.

If you have a pension, run an estimate to see the difference in the amount you’ll receive if you retire early, by 65, or later. The difference can be substantial depending on where you work. If you are married, find out how much of a pension your spouse gets at retirement and how much you are entitled to if they pass away.

Lower your expenses

If you have debt, consider using a debt calculator to come up with a debt payoff game plan prior to your retirement. In addition, make it your mantra to not take on any new debts or expenses within 5 years of retirement. This may sound obvious, but I’ve worked with so many employees that have actually increased their debts prior to retirement.

I spoke to one woman who treated herself to her “retirement car,” which was an expensive luxury car. She told me that she thought the purchase was a good idea since she planned on having the car paid off by the time she retires. First, I told her that she missed out on an opportunity to add an additional $45K to her retirement plan by making the car payments instead.

When I tacked on premium gas and the extra maintenance that came along with the car, I told her she could have knocked out the remaining balance on her mortgage. Additionally, she now has to factor in the additional cost of maintenance into her retirement plan.

If you find your expenses exceed your retirement income, consider moving to another state. States tax retiree income differently so look for retirement tax friendly states. If you are thinking of moving, compare the cost of living. Also factor in possible additional expenses like traveling to see the family and friends.

Map out your life game plan for the next 30 years

There are only so many golf games and naps you can take before you are bored out of your mind. Our careers are so entwined with our identities that you may find it harder than you think not having a career. Take some time and create a plan for life after retirement.

For example, now you can have the job you always wanted but could not do because it paid so little. Volunteer your time and talents to causes you care about. You have decades of talents most nonprofits cannot afford. Your experience is valuable and desperately needed.

Early retirement can be planned for. The name of the game is to stretch your income for as long as you can. Use the strategies above to not only get you to early retirement, but keep you retired.

 

What It Was Like To Buy A Home Through The NACA Program

July 06, 2018

If you have read any of my former posts, you probably know that at one point my husband and I were what you would call in the South, a financial “hot mess.” In order to get out of it, we decided to sell everything but the kids (trust me, at times I was really tempted) and rent until we became debt free (about $150K in debt).

Getting started on buying a home

After our debt payoff we knew we wanted to buy a home. Once we built our emergency savings and saved enough for a 20% down payment, we explored our options. We researched home-buying programs in our state (Georgia) and learned that the definition of a “first home-buyer” varied. It could mean you have not owned a home in the past 2-3 years or it could mean that you do not own a home at the time you enter the program. We also learned that some home-buying programs do not have an income cap.

Exploring NACA

As I explored programs, a few friends of mine mentioned the Neighborhood Assistance Corporation of America (“NACA”) program. NACA is a nonprofit, HUD-approved community advocacy and homeownership organization. NACA partners with banks such as Bank of America and Citigroup to provide affordable homeownership with a focus on low to moderate income people and communities, particularly those who are credit challenged.

NACA criteria

In general, the potential home-buyer (oftentimes called a “member”) is required to meet the following criteria:

  • You must not own another property when closing on the NACA mortgage
  • The home must be occupied by you, the buyer, for the life of the NACA loan
  • You must volunteer to help with the program (there’s lots of flexibility in what is considered volunteering)

NACA perks

Some of the perks of NACA are:

  • No down payment
  • No closing costs
  • No points or fees
  • At or below market interest rate (everyone receives the same terms)
  • Ability to buy down points to virtually zero (the points a member can buy down typically depends on the buyer’s income and chosen mortgage – 15 year or 30 year)
  • No income maximum or minimums
  • No perfect credit required
  • No credit score consideration (approved based on individual circumstances)
  • No Private Mortgage Insurance (PMI)

Our friends were honest about the fact that the process is slow and the paperwork is huge. Since my husband and I were flexible on the date we wanted to own a home, we said what the heck, and started the NACA process.

Our personal NACA experience

You can talk to 10 people who went through the NACA process and you will hear 10 different perspectives. This was our personal experience, which I understand may vary from other people who used NACA for a home purchase.

Getting started: the first home buyer workshop & working with your MC

First, you must attend a workshop to get into the NACA Program. After the feedback from friends who went through NACA before, we went ahead and attended the workshop a year before our desired home purchase date. Luckily we got there early, as there were over 300 people in attendance.

The presenter did a great job going over the good, bad and ugly of the process. He mentioned the process can take a year or more depending on the financial stability of the member. You get a workbook explaining the process. Afterwards, I had to fill out paperwork and I was told that we would be contacted for our first meeting.

In my case, I had to reach out to NACA to schedule our first meeting with a housing counselor (sometimes called a Mortgage Consultant or MC). The first available meeting was a month later.

Meeting with the Mortgage Consultant (“MC”)

The main job of the MC is to ensure you are ready for homeownership. We had a huge list of required financial documents. We also needed to get a tax transcript of our last two tax returns. We had to have ours sent by mail, which took about 2 weeks, so in retrospect, we would have ordered our transcript before that first appointment. We also needed employment verification information.

Our MC combed through all of our financial information to verify our monthly savings, income, expenses and on-time payments. We had to explain any unusual deposits, including tax refunds. The MC entered our financial information and gave us an action plan of additional information needed to move forward. Our MC also discussed the mortgage options and we were told our maximum home purchase price. The total meeting time was about 2 hrs.

Working with your MC

I had read so many comments about how difficult it is to communicate with an MC, so I asked when was he typically at work (including upcoming vacations), the best way to communicate with him (email, through the NACA portal, by phone, etc) and the most efficient way to send him requested documents. From what I understand, most NACA offices are understaffed and the MCs are typically overworked. That basically means your MC may not have time to consistently work on your file.

Being persistent

Consider scheduling appointments, even if by phone, to block out time for your counselor to focus on your file. Review all paperwork to make sure all information is accurate. Follow-up at least weekly with your counselor on the status of your file (this is why it is so important to understand how to best reach them and their schedule).

If you cannot reach them, contact the NACA office. The staff may be able to access your file and give you an update. Unfortunately, my first MC quit, and our file was lost. We had to start the entire process over again with a new MC. We asked her the same questions to understand how to best work with her and she was very efficient. We were NACA Qualified, preapproved for a mortgage, about a month after she took over our file.

Once you’re NACA qualified

Once we were “NACA qualified,” we had to attend another workshop on purchasing a home. We received a qualification letter before the meeting that we were told was good for 90 days, so we attended the first workshop available so that we could get started on buying. If there is one time in your life to be 100% alert, it is at the purchasing workshop.

The workshop presenter went over the entire NACA homebuying process and he was very blunt about how difficult and time consuming the process can be. He warned that if anyone was under a tight deadline, that NACA may not work. Do not leave with any unanswered questions – I asked questions for about an hour afterwards.

Choosing your Realtor

At this point, it was time to choose a Realtor. NACA pushed hard for us to work with an in-house NACA Realtor, but we decided to work with an outside Realtor who had NACA experience. I cannot overstate how critical it is to choose a Realtor who is knowledgeable about the NACA process. Our realtor, Nicole, ended up being a lifesaver in guiding us through the process.

Once you’ve found your home

Once we found the home we wanted to purchase, we started the process of getting the house under contract. NACA is very specific in the language that must be used in the Purchase and Sales contract for your future home, which is one way that Nicole helped tremendously.

Dealing with the NACA inspection

The home inspection must be done by a NACA approved home and pest inspector, and once complete, the inspector sends the report to NACA for review. At that point, we received a list of required repairs that had to be addressed in order to purchase the home through the NACA.

This process can be difficult. The reason why NACA is so stringent is that they want to ensure that the buyer is not going to move into a home with so many issues that it puts the buyer into financial peril.

The stringent NACA home purchase criteria is part of the reason that some Realtors will talk a seller out accepting an offer from a potential buyer using NACA, which almost happened to us. Nicole understood the concerns and was able to address this privately with the seller’s Realtor. This settled her nerves and she and the seller agreed to work with us.

We worked with our Realtor to decide which repairs we would address and which repairs we wanted to ask the seller to address. A buyer has the choice to pay for repairs out of pocket or potentially wrap the cost into their mortgage. Again, I cannot overstress the importance of working with an experience Realtor. Nicole saved the deal.

Verifying that you’re still qualified

After we were approved to moved forward after the inspection, we had to be approved for NACA credit access, which verified that we were still NACA qualified. (did I mention the loads of paperwork?) Once we were approved, we completed the NACA loan application. This process went extremely quickly for us in large part of the upfront work we did:

Making the loan application easy:

  • We organized all the required information in Google Docs ahead of time
  • We made sure that we remained NACA qualified throughout the process
  • We made a point to understand the way our housing counselor wanted to receive information
  • We kept our files up-to-date with the latest account and pay information
  • We quickly provided any requested documents
  • We obtained an efax number to send documents that had to be faxed
  • And again, we had an experienced Realtor.

Getting to the closing table

At long last, our file was transferred to a closing coordinator. I immediately contacted her and asked her the same communication preferences I asked the MC. She was very efficient. At this point the seller had finished the repairs he had agreed to and the home inspector re-inspected the house.

We also had to find a contractor for the repairs we were required to fix. To speed up the process, I choose a few contractors from the NACA approved list and luckily, they were able to provide bids on the needed work quickly. In fact, because these contractors understood the NACA process and were quick with their responses, we received our “Clear to Close” ahead of schedule!

After closing

At closing, we learned about the NACA Post Closing Program, which offers free comprehensive counseling, including financial and credit guidance, short-term financial assistance to help pay the mortgage and even assistance with a loan modification if needed. This was nice to know – they really do want to help build great neighborhoods!

Worth it in the end

The process was long and tough, but for me it was worth it in the end. We ended up with a 15 year mortgage with an .65% interest rate that easily fit into our budget. (no, that decimal is not out of place – our interest rate is really less than 1%)

Deciding if NACA is right for you

If you are interested in doing a loan with NACA, you have to have a lot of flexibility on the date you want to be a homeowner, a lot of organizational skills to balance the process, and patience not to scream as you are being asked to send in a document yet another time. Chocolate was the best coping mechanism for me. If you can make it through the process, it’s a great deal.

 

How To Best Prepare Your Kids To Manage Money After High School

June 15, 2018

When I went away to college, I was completely unprepared to handle my own money. My family never discussed it with me, so when I went away to school, the peer pressure of having to look a certain way and the desire to hang out with friends quickly left me broke, no matter how much money I had.

If I could go back to 1990 when I graduated from high school (don’t do the math, I can’t believe it’s been that long either), I wish my parents would have better prepared me for managing my money in college by doing the following:

Give an allowance that includes ALL monthly expenses

How it went wrong for me: My parents gave me money as I needed or wanted while I was in college, which was a mistake. Typically, I would ask for money for the movies or to cover my expenses for being on the track team such as travel, hotel and sneakers…oh and I forgot – the money to get my hair done. I learned in college that I was high-maintenance and could not afford my own upkeep.

Do this instead: Add up how much you spend on your kids’ activities, personal care and outings and giving it to them to manage themselves in the months before they move out. If you’ll be continuing to support them in college, stick to that amount. Then if they run out, it’s up to them to figure it out.

Teach them to plan for upcoming expenses and budget the money they have

How it went wrong for me: One of my favorite quotes about budgeting is from John Maxwell: “A budget is telling your money where to go before wondering where it went.” My way of budgeting in college was more like my money telling me where it wanted to go as soon as I got it. I had no concept of planning ahead and therefore was always feeling like I didn’t have enough.

Do this instead: Walk your child through the budgeting process to get them thinking about upcoming expenses and how to create and stick to a budget. A friend of mine opened a checking account for her child when he was in high school.

She deposited money into the account monthly for his expenses, then helped him to create a budget using online software like Mint. To stay on top of it, she had a weekly budget meeting with him where her son had to show her how he spent his money for the past week and how much he had left.

She did this while he was in high school so that the money management habits would kick in by the time he went to college. Consider doing something similar with your child to help create the habit of budgeting and thinking through their financial needs.

Don’t forget to teach about credit

How it went wrong for me: When I was in college, it seemed like every credit card company known to man was on my college campus, and I took full advantage. (you can read more about that here) Even though it has gotten better, credit card companies still market to college students who have no idea what they are signing up for.

Luckily, the CARD Act of 2009 provides some level of protection to college students by cracking down on granting credit cards to students under the age of 21, but eventually, they will be eligible for a credit card.

I thought credit cards offer “free” money that I could take my time paying back. I had no idea that in addition to paying for the items I bought, I was paying an additional 25% in interest.

Do this instead: If you decide to give your child a credit card, first make she has good money management skills. Control the credit limit and check in weekly at first to make sure the credit card is being used wisely. Then switch to monthly meetings.

The last thing you want is for your child to start life out buried in avoidable credit card debt and with bad money management skills. Help your children understand that the money is not free and that the less they pay each month toward their credit card balance, the more money they will pay in the long run.

A long-term pay-off

Nobody wants their kids still relying on them financially once they’ve flew the nest. By investing some time before they head off into the real world to make sure they are clear, you could save yourself years of stress. Not to mention, having financially responsible adult children saves you money! Who knows, by helping to teach them better, you may learn something about yourself as well.

 

How To Put Your Finances On Auto-Pilot

March 26, 2018

Years ago, I had a friend who was a single, recently divorced, full-time working mother of four, with three of the kids under the age of 5. To call her life busy would be an understatement. She asked me for help organizing her finances and I agreed — I knew whatever strategy we developed had to be easy and automated. Here’s what we did:

Automating the budget

The first thing we worked on was her budget. We looked at a variety of budgeting websites (there are many great money management websites), and she decided on Mint, which she said was the easiest to learn. She also liked that it helped her to keep on track without her having to input a lot of information.

Putting some rules in place

Once we got her information loaded and categorized her expenses, we made sure to put rules in place in Mint to continuously assign each expense to a particular budget category. We then changed some of the budget categories to ones that matched her needs.

What she loves most about this step

What she loved most was that Mint created the initial budget based on her current spending, was able to tell her when she got off budget, and it alerted her to high withdrawals or when she was close to maxing out her credit cards. This made her aware of her spending so she quickly developed a plan to pay off her credit cards. It also recorded all her credit card transactions, including an unapproved charge that she was able to get taken off.

Automating bill payment

Next set up electronic bill payments through her bank. She was a little nervous about just setting up automatic payments with the vendors, so we decided to go this route, but make it as easy as possible. To get started, she entered each of her bills, including the account numbers and passwords to her online account, then selected the ebill option through her bank.

Most of the bills took about one billing cycle to show up, but soon she was able to see all of her bills online. She also set up email reminders through her bank so as soon as a bill arrived, she got the email. Once the ebills were set up, she was able to log on to her bank and pay her bills in about one minute.

When e-billing isn’t an option

For the bills that did not have an ebill option, she set up the bills manually and was able to still pay online except the bank would issue a check rather than send the funds electronically. This is how she set up her childcare and mortgage payments, including reminders so she would not forget them. Instead of her having to mail a check or go to each child’s daycare to make a payment, she could quickly go online to pay the bills.

Automating emergency savings

The next thing we did was to set up a savings account for emergencies. She recognized that she did not have the discipline to save with an account attached to her checking account so we opened an account at another bank and linked it to Mint instead of opening it at her bank. Then she contacted her payroll department to automatically have a small amount withdrawn and put into savings. Because she was still working on her budget, we choose an amount small enough for her to do continuously.

Automating retirement

We then looked at her employer benefits and realized that she had not increased her 401k plan contributions in about 4 years. We did an auto escalate — this is a feature that allows you to automatically increase your 401k plan contributions annually, up until you reach a certain amount. She initially was a little nervous about doing this until I told her that she can choose an amount that she is comfortable with and she can always stop it if it gets to be too much of her paycheck. We chose to auto escalate 1% annually up until she got to 10%.

Automating investing

My friend is about as hands off as you can get when it comes to investing. She had not opened her statements in years. We talked and decided that a target date fund based on her retirement date was the best option for her. The fund itself does the re-balancing and adjusting, giving her a sigh of relief.

Automating tax savings

Between my friend’s four kids, she joked that she spent a quarter of her month at either a doctor’s or dental appointment. She then complained about the co-pays and always feeling blindsided by an unexpected medical expense. I mentioned doing a healthcare FSA, an account that allows you to put money aside pre-tax and then use the funds tax-free for medical expenses. She also set up a dependent care FSA for her childcare expenses as well. Both of these steps will save her tons of money in taxes, while also allowing her to use payroll deductions to set the money aside.

With all of these features in place, I told my friend that she is now a money management ninja ready to conquer all of her financial goals. The best part is that her time and effort spent on money will be minimal going forward.

Now if only there was a way to automate parenting…

How To Make The Most Of Your Tax Refund

January 16, 2018

I was hanging out with a friend last week when I noticed that she had an unusual amount of magazines and sales ads around her. Knowing that she is one receipt away from being a shopaholic, I asked her what was going on.

She told me that in anticipation of her the tax refund she thought she was going to get, she had started creating a list of the things she was going to buy. I mentioned her New Year’s Resolution to save more money and pay off debt and reminded her that the refund can serve a greater purpose than buying stilettos. Maybe she needed to put the catalogs away, but let’s not go to extremes.

There are ways to use your tax refund to achieve your goals while also having some fun. Here’s what I suggested to her:

  1. Give yourself permission to spend (with limits). I told her to give herself permission to spend a percentage of her tax refund. Because she had practically nothing in savings, I suggested limiting her spending to only 10% of her refund.
  2. Save some. I know it may seem counter-intuitive to someone paying off debt, but put some of the money in savings. When I talk to people who cannot seem to get out of the cycle of debt, I find this is the stumbling block. If you do not have at least $1,000 in emergency savings, you are just one unexpected financial need away from getting kicked back into debt.
  3. Pay off debt. Finally, yes, you should use some of it to jettison debt a little faster. What’s the best way to pay off debt? The best answer I have to offer is the method that you will stick to until you are debt free. If you feel defeated and need quick wins to stay motivated, pay off the lowest balance first (an exception to this is taxes – always pay past due taxes first). If you want to save the most money on interest, pay off the highest interest rate first. Use a Debt Repayment Calculator to come up with a debt repayment game plan.

Taking a balanced approach to spending an anticipated refund gives you some wiggle room to enjoy the refund, but still gives you the ability to meet your other financial goals.

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How To Repair Your Credit On Your Own

January 09, 2018

As we embark on a new year, one of the top goals I am hearing about is improving one’s credit. If this is one of your goals, just remember that as you look for help with this goal, that all that glitters is not gold.

One of my cousins came to see me excited over a meeting she recently had. She was excited because she had just met with a credit repair company that promised that they could get all of the negative credit items taken off her credit report and could get her score high enough so she could buy a home.

Owning your credit mistakes

Knowing that my cousin was not the most fiscally responsible person in the world, I suspected most of the negative information on her report was hers. I told her under most circumstances, no one can remove negative information that is accurate — if you did the deed, you owe the money.

A shady plan

So I asked her how the credit repair agency was going to do this. She outlined the plan they gave her, which is almost a textbook example of how to know when you should run from a credit repair agency. Here’s what told me that this plan was a scam:

The red flag that should send you running

In order to have the negative items removed from my cousin’s report, they told her that they were going to report her negative debt as fraud. Which is ironic, because by doing this they are committing fraud. I told her that this is a lie, it’s illegal and all a creditor would have to do to disprove the fraud claim is to go into her closet, which looks like an exclusive shopping mall, to know that she is responsible for every purchase.

Red flag #2

She was also told to get an Employer Identification Number from the IRS and to use the Employer Identification number instead of her Social Security number when applying for credit. This is also fraudulent. I told her that unless she wanted to live the “Orange is the New Black” life, she probably shouldn’t try that move either.

Once she realized that she was basically being asked to lie, which she knows is wrong, she asked if there are credit repair companies that aren’t scams. I told her that yes, there are legitimate credit repair agencies out there, but there is nothing that they can do for you, if you aware willing to put in the effort, that you can’t do for yourself.

How proper credit repair works

Obtain your credit report. The first step is to review your credit report from the three main credit reporting agencies. You can obtain your credit reports for free from all three credit agencies by visiting annualcreditreport.com

Look for inaccuracies or errors. Review each of your reports for information that is inaccurate, incomplete or contains information that should not be reported. Check out Nolo’s credit report checklist for information that should not be on your credit report.

Dispute actual items that are incorrect. If you do find something wrong, you can dispute those items yourself online at each of the major credit reporting agencies’ websites. Experts recommend also sending a detailed letter to the credit bureau with the error, as well as the creditor listed, telling why the information is wrong with the evidence to back up your claim. Under the Fair Credit Reporting Act, a credit reporting agency has to respond to every dispute it receives within 30 days.

Check your benefits for help. Consider contacting your EAP or legal benefit program at work to see if you are eligible for free legal services to help you clean up your credit.

Take care of other detrimental items. If your credit is bad due to legitimate items like past-due bills or high credit card balances, then the solution won’t be as simple and will require a little more discipline and follow-up.

For past-due accounts and items in collection. Once you’ve verified you actually owe the money in collection, follow the CFPB’s guidance on what steps to take to negotiate a settlement.

For high credit card balances. First, call your card company and ask for a limit increase. BUT DON’T USE IT. What you’re trying to do is decrease your credit utilization, which will give your score an immediate boost. If you’re maxed out, an increase probably won’t going to get you all the way to where you need to be for your best score, so it’s time to make a plan to pay down the cards, starting with the accounts that have the highest utilization. Then stick to it.

It won’t be easy, and it will take time, but with a little bit of work you can clean up your credit report on your own, without having to worry about scams.

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How To Get Started On Your 2018 Goals

January 02, 2018

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

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

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

If your goal is to…

Manage money better

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

Eat healthier

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

Make kids’ lunches easier

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

Save more money

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

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

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

 

2017 By The Numbers

January 01, 2018

Happy New Year!

As we launch into 2018 here at Financial Finesse, we are reflecting on a successful 2017 — a year of tremendous growth in our business as well as in the number of lives we’ve had the privilege and honor to change for the better. We hope that this blog, written by our own financial planner team, has helped you to have a more prosperous year. Here’s a breakdown of what our readers loved this year, by the numbers:

Total pageviews for the year:

157,121

Most popular posts from 2017:

  1. What Are Your Health Insurance Options When Retiring Early? – 1,378 views
  2. How To Have The Money Talk – 1,250 views
  3. How To Avoid Borrowing From Your Retirement – 1,037 views
  4. Do You Need A Cohabitation Agreement? – 805 views

Most popular posts from previous years:

  1. Is Paying Off Your Mortgage Worth Losing The Tax Deduction? – 8,106 views
  2. What An Accident Taught Me About Car Rental Insurance – 5,939 views
  3. How To Be Financially Independent In 5 Years No Matter What Age – 5,275 views

Most shared on Facebook:

  1. Even Jay-Z Has Investing Regrets
  2. The Trouble With More
  3. How My Money Attitude Was Keeping Me Poor
  4. 3 Important Adulting Lessons I Taught My Daughters

Most shared on LinkedIn:

  1. Should You Go Into Debt To Get Pregnant?
  2. The 5 Things You Should Do Right Now To Protect Your Identity
  3. Why You Shouldn’t Worry About Investing At The Top
  4. How Much Will A Hybrid Car Actually Save You?

Readership by city:

New York: 5,638 readers

Chicago: 4,032 readers

Los Angeles: 3,995 readers

Hartford, CT: 2,248 readers

Golden Valley, MN: 1,686 readers

Lives changed:

Countless

Thank you for being a part of our amazing year! Here’s wishing us all a happy, healthy and financially well 2018!

The 5 Things I’m Not Going To Do In 2018 To Keep My Sanity (& My Money)

December 26, 2017

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

It’s confession time. I started off the year awesome. I entered 2017 as a “woman with a plan.” I had everything planned from my meals to kids’ chores, house cleaning and workout schedules. I walked into 2017 with my head held high.

Fast forward to December and our meal yesterday was courtesy of a fast food drive thru, our home looks like a tornado hit it, and the only thing I have done with my gym membership over the last few weeks was to use my membership card to scrape ice off my car windshield.

Down but not defeated

I am down, but I am not defeated. I will rise again above last minute fast food runs, climbing over piles of laundry and my quickly expanding waistline. Our recent home purchase and move (at least this is the excuse I am using), coupled with several family emergencies, spiraled my plans into non-existence. So now that the dust has settled, I am working on getting back on track.

Taking time to reflect

As I looked at the shattered ruins of my 2017 goals (I gotta admit, I forgot how amazing Hershey Sundae pies taste), I immediately started reflecting on what happened. When I looked at my schedule over the past 11 months, I started to see how over-scheduled I was and my goal for 2018 became clear.

Making a ‘do-not-do’ list

For 2018, my goal is a more of an “un-do” list than a to-do list. It is a list of those things that I am not going to do to help me stop setting unrealistic expectations around the following:

1. Feeling bad about eating out. One night when I could not sleep, I binged on “perfect mom” YouTube channels. You know what I mean — the ones who never eat out, cook every meal from scratch, all organic, on a budget of five dollars. I initially thought, “if they can do it, I can do it.”

No, I can’t. I have good days and I have lazy days, and I have a life. So, for 2018 I am budgeting a few nights a week of eating out on our busiest days. For the other days, I am going back to meal planning using websites like Emeals, TheFresh20, or even using meal kit delivery. The lesson I learned from 2017 is that when things get crazy, maintaining my mental sanity trumps the spending on eating out a few times a week.

2. Wasting energy on emotional vampires. I know this is not a financial one, but all the money I spend on chocolate after talking to an emotional vampire (my drug of choice when overwhelmed, although Starbucks is a close second) puts this into a finance-related category. My lesson learned for 2017 is that I cannot want someone else’s happiness, success or goals more than they do. My 2018 goal is to release people (stop talking to them and/or enabling them) so they can experience the consequences of their life choices.

3. Volunteering for everything. The problem is that I want to be actively involved in just about everything, but I have to officially wave the white flag of surrender — I give up. I just can’t do it all. My plan for 2018 is to limit my volunteering and giving to those causes that are the most meaningful to me in order to keep my sanity and my funds straight.

If this is also something you struggle with, think through your year — if you have periods of major activity such as a busy work schedule, that’s when you have to say no to volunteering for additional activities. I tell my kids hearing the word “no” (which is a complete sentence) is character building. If you are like me and struggle to say no, tell yourself you are helping that person build character by getting them used to hearing the sentence, “No.”

4. Overly complicating money management. Believe it or not, this was an area that was unnecessarily complicated for me. I always say to choose the easiest way to do things in order to stick to your goals. So I finally took my own advice and started using my bank’s financial budgeting tools, instead of the budgeting system I was using. This small step has saved me so much time — I no longer have to reconcile my bank account with the budgeting website I was using.

If you struggle to do something, such as exercising or budgeting, look for the simplest way to get it done. For working out it may be downloading an app with workouts you can do anywhere; for budgeting it may be starting with your local bank. Struggle to get groceries? Use grocery pickup services like the ones at Walmart or delivery services like Amazon Fresh to make buying groceries a breeze.

5. Letting my kids do too many sports/activities. It only took a few activities before I found my days crammed with kids’ events and my wallet drained. To gain balance, we will be limiting activities and using the money we’ll save to increase our college savings. This will also give us back several hours in the week that were spent in the car or sitting at practices, games, etc.

“Un-resolutions”

I guess you can look at my goals for 2018 as an “un-resolution list:” a list of things I am resolving to dump or get rid of in order to maintain my sanity so I can focus on the things that are important to me. As you think about your year ahead and what you’d like to accomplish, maybe think about whether there are things that need to come off your 2017 to-do list in 2018.

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7 Steps To Prepare For A Potential Layoff

December 19, 2017

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

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

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

1. Get your savings account fat.

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

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

2. Get your spending plan skinny.

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

3. Prep your creditors.

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

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

4. Understand your unemployment benefits.

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

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

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

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

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

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

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

7. Clean house.

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

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

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

4 No-Cost Ways To Give Back During The Holidays

December 12, 2017

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

Paying it forward

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

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

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

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

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

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

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Try This Gifting Strategy To Stay On Budget Without Being Scrooge

December 05, 2017

I was so excited the first Christmas when my daughter was about 1 year old. I scoured the ads to find the latest “must haves” for the toddler in your life — it was the year of Elmo. I carefully mapped out all the stores that carried the exclusive Elmo gift; I was determined to get her that toy, no matter how many other desperate parents I had to mow over.

After finally getting the Elmo (I only knocked over one parent and she already had one Elmo doll — greedy!) and other presents for her, I spent 20 minutes on YouTube learning how to create award-winning gift wrapping designs and carefully put my awesomely wrapped gifts for her under the tree. I was so excited.

When Christmas came, I had the camera ready to take pictures of her anticipated excitement over the gifts. When she saw the wrapped Elmo, she clapped her hands and started playing with the bows — it took me a second to realize that she thought the box was the gift. Understandable, I guess, for someone’s first Christmas. So I helped her unwrap the gift and showed her the Elmo doll.

She held Elmo for a second, then literally threw it at her dad and climbed in the box, laughing with glee over her newfound toy. As I watched her happily play with the box, I learned very quickly the value of taking the time to think through gift-giving.

Mapping out a strategy

Now that I’m older, much more seasoned, and living on a budget, we sit down months before Christmas to map out a gift giving strategy. First is our budget — we decide exactly how much we are going to spend overall on gifts for everyone (friends and family). We create a budget for the kids and how much my husband and I will spend on each other. When my husband and I were on a “debt- payoff mission” we even decided not to give each other Christmas gifts those years.

Next we decide how many gifts each child gets (we typically give 3-4 per child) and decide on the type of gift we will give our kids. The younger the child, the smaller the budget. (Boxes are pretty cheap!)

One article I read had a great idea to not only limit the number of gifts to your kids to 4, but to have the following strategy for the types of gifts:

  1. Something they want
  2. Something they need
  3. Something to wear
  4. Something to read

Brilliant! A tweak to this can be if your child is a tween or older. If there is an expensive gift on their want list (as long as it’s within your budget), talk to your teen about receiving less gifts so they can have their one big “want” gift — a powerful way to help them understand the need for trade-offs in life.

Creating gratitude

A few of my friends have mentioned a struggle to reduce the number of gifts when their kids are so used to receiving several. I’ve found that the greatest way to help your kids appreciate the gifts they do receive is to engage them in an act of service. My family donates our time to homeless shelters with children and donates gifts to the families. Over time, our kids have begun to ask for less gifts and are far more appreciative of the gifts they do receive.

Having a budget and a gift giving strategy can make the holidays a lot less stressful. And sticking to the plan makes the January aftermath much less painful.

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6 Steps To Treating Christmas Shopping Like A Military Operation

November 21, 2017

My husband says I treat Christmas shopping like a military operation. And as a proud Army veteran, I can’t really argue. As we gear up for yet another season of decking the halls and letting the wrapping paper fly, here are my tactics to survive the season:

Step 1) Evaluate available resources. In the military, the goal is to win wars. In shopping, it is to not go broke by January 1. Evaluating your resources means understanding exactly how much money you spend on gifts and creating a limit on how much you will spend on Christmas gifts.

Step 2) Triage. In the military, triage is assigning a degree of urgency to wounds. In shopping, it is who is going to get the good presents vs. who will get a $50 gift card. Decide this in advance. Typically children, spouses, and immediately families are first. Everyone else gets a gift card — you can make your life easy by stocking up on a bunch of coffee or restaurant cards, which will make anyone happy. Even coffee haters can find a treat at Starbucks.

Step 3) Have a plan of attack. In the military, this would mean you are going to map out what maneuver you are going to use to surprise the enemy. With Christmas shopping, the enemy are other shoppers ready to take your gifts.

Start early and slowly start buying Christmas gift bags/wrapping paper at the dollar stores (they go quickly) and take advantage of all of the “pre-Black Friday” sales. If you are brave enough to do Black Friday, enjoy. I can’t deal with the craze and I am normally done with my holiday shopping by November.

If you are taking kids, have a bribing strategy because that is the only way you are going to survive shopping with children. My favorite is ice cream at the mall or cake pops at Starbucks. Give stipulations as to what behavior you expect in order for them to get their treats. I know they should behave no matter what, but I need cooperative kids while finding deals and I will use any means necessary, including a sugar rush, to finish shopping.

Step 4) Plan for the unexpected. In the military, you are always told to be prepared for the unexpected. In Christmas shopping, leave room in your budget for that unexpected gift you received, which means you now have to buy a gift — maybe keep a supply of champagne on hand for this purpose (see the next tip for why). Plan for last minute holiday parties and days where you are too tired to cook and want to eat out by leaving some wiggle room in your dining out budget.

Step 5) Know your surroundings. In the military this means you’re constantly surveying your environment for potential threats and escape routes. With gift buying, that means shop around. After you’ve done some looking around and decided what you want, comparison shop for the best prices.

Instead of driving all over town or spending hours on the internet, make use of some specific websites or apps that do all the work for you. Try Pricegrabber, Nextag, or even Google Shopping if searching the web. If you’re at the store and want to compare prices instantly, download the RedLaser app to your smart phone and use it to get a price check against other nearby stores. Then either ask the store to match the price or head to the one with the best deal.

Step 6) Timing is everything. In the military, this means obeying the rules of engagement and knowing when to fire and when to hold. With Christmas shopping, it means understanding that certain times of the year are better than others to make purchases. A study by Lifehacker determined the best time of year to buy everything from Broadway tickets and computers to tools and wedding supplies.

It turns out that December is a great time to buy champagne but a lousy time to buy a gym membership. Who knew?

The bottom line is, with a good battle plan, you can make it through the holidays without going into “sticker shock” in January. Get your strategy set today!

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The 5 Different Ways To Address Identity Theft

November 14, 2017

The only silver lining I can think of to the Equifax breach is that it has expanded awareness of credit fraud, moving people to look for ways to protect their credit. But for many, the options to protect your credit may seem overwhelming. Ultimately, the best option is the one you will actually do and one that gives you peace of mind. As you start searching for options, you can use the following as a guide to help you make the most informed decision:

Credit Freeze: A credit freeze, sometimes called a security freeze, restricts who can access your credit report. This,  action can help prevent new credit from being opened since most creditors will want to view your credit report prior to opening a new line of credit. Existing creditors and collection agencies can still access your credit. One thing to note: a credit freeze only applies to getting new credit. Your existing credit may still be susceptible to fraud.

Generally, a credit freeze may be ideal for someone who is already a victim of identity theft and/or someone who has no plans to apply for anything requiring a credit check. To place a credit freeze, you must contact each credit reporting agency – Equifax,  Transunion and Experian. The cost associated with the credit freeze varies by state. Look for you specific state information here. In most states, the credit freeze stays on your report until you contact the credit reporting agency to temporarily or permanently remove the freeze, while in other states, the credit freeze will expire after a set number of years.

You may need to “unfreeze” for these events

Keep in mind that if you do a credit freeze, the freeze applies to any request that may require your credit report being pulled such as switching phone carriers, renting an apartment, getting utilities turned on, a background check for employment, or even changing insurance carriers. You can unfreeze your credit report temporarily though. The cost to temporarily remove a credit freeze varies by state.

Fraud Alert: Fraud alerts are less restrictive than a credit freeze and are free. A fraud alert places a notice on your credit report to creditors to take additional steps, like verifying identity, prior to issuing credit. Since a creditor may call to verify your identity, it’s important to make sure your contact information with credit reporting agencies is current. Unlike a credit freeze, you only have to request the alert at one credit reporting agency and that agency will contact the other agencies. Typically, the alert will be forwarded within 24 hours.

The initial alert lasts for 90 days. If you are a victim of ID theft, you can extend the fraud alert for 7 years. In order to file an extended fraud alert, you must generally file an identity theft report.

If you are in the military, you can request an active duty alert. This type of alert stays on your credit report for one year. Even better, bureaus will remove your name from pre-approved credit offers for 2 years. You can even renew if your deployment lasts longer than one year. You will have to provide proof of identity in order to get an active duty alert.

Credit lock: Similar to a credit freeze, a credit lock will prevent your report from being viewed and prevent new credit from being opened. The big difference is that a credit freeze is under state law and a credit lock is under a contractual obligation between you and the company locking your credit. An article by Consumer Reports suggests that a contractual agreement may not be as strong as having protection under the law.

With a credit lock, you can receive alerts from credit bureaus if someone applies for credit in your name and you can unlock or lock your report immediately. You have to sign up for a credit lock at all three reporting agencies. The price for a credit lock varies with each credit reporting and monitoring agency. One thing to note, your credit lock is based on the contract you sign with the credit reporting agency so you want to read your contract carefully to make sure the service you want is actually the service you are getting.

Credit Monitoring: Credit monitoring is periodically checking your credit, looking for signs of fraud and identity theft. You can self-monitor by pulling up your credit report for free and checking it. Be honest with yourself though. If you know you are not going to diligently monitor your credit yourself then consider a credit monitoring service or at a minimum, placing alerts on your accounts.

You can step this up a notch by signing up for free alerts at your financial institutions. These alerts are worth their weight in gold. We have alerts on all of our accounts and were immediately alerted of suspicious activity which turned out to be fraud. Because we found out as soon as it happened, we were quickly able to resolve the fraud and have the funds returned to our account.

Beyond free

If you want more comprehensive credit monitoring, you can sign up for a service. Contact your bank and creditors for credit monitoring services. But before signing up, do your research. Compare different plans to ensure you are getting your desired level of monitoring.

One important thing to note: these services alert you if you may be a victim of fraud. They do not prevent it. The key is the earlier you are aware of possible identity theft, the quicker you can stop any further theft.

Identity Restoration Services: Credit freezes and alerts makes it harder for criminals to steal your identity, credit monitoring alerts you if your identity may had been stolen and identity restoration services clean up the mess after identity theft. Typically, a counselor walks you through the process of dealing with creditors after your identity has been stolen. The level of help you get depends on your contract. Identity theft recovery may be ideal for someone who recently experienced a home invasion, auto theft, or anything in which your personal information may had been compromised.

As with everything, do your research, compare different programs for level of service, cost and customer reviews. If you are thinking of getting identity theft restoration services, consider asking the carrier of your homeowner/rental insurance for coverage. If coverage is not offered, ask if it can be added.

Ultimately, you are your best defense. Shredding documents with your personal information, carrying as few documents with personal information on you as possible, safeguarding personal information at your home, having two factor authentication for online banking, emails and any accounts with sensitive information, and choosing passwords that are difficult to hack is the first line of defense. These steps along with the options listed can go a long way to safeguarding your identity.

 

This post was originally published on Forbes.