Should You Jump on the Bitcoin Bandwagon?

April 18, 2013

Last week, I was asked what I thought about investing in the new digital currency  “bitcoin.” This got me thinking about what successful investors do in general when deciding what to invest in and how to make a rational decision as opposed to being caught up in a herd mentality. Here’s a great process to go through before investing your hard earned dollars in the latest investment trend (or fad): Continue reading “Should You Jump on the Bitcoin Bandwagon?”

Can Your 401(k) Be Part of Your Emergency Fund?

April 11, 2013

One of the results from our recent research report that has gotten a lot of attention is that we saw an increase in the number of employees’ accessing their 401(k) balances through loans and hardship withdrawals from about a quarter in 2011 to about a third in 2012. The conventional wisdom is that this means employees need to do a better job with money management and in particular, building an emergency fund of at least 3-6 months of necessary expenses and maybe even more. For someone just starting out, I think this is absolutely true.  Continue reading “Can Your 401(k) Be Part of Your Emergency Fund?”

What We Can Learn From 2012

March 13, 2013

Last week we released our 2012 Year in Review research, and there were several troubling statistics that came out of the report.  For starters, only 51% of employees reported having an emergency fund, which means there are 49% that are vulnerable to a financial setback should some unexpected expense come along.  Another troubling statistic was an increase in the percentage of employees that reported taking money out of their 401(k) as either a loan or hardship withdrawal.  Such early distributions can greatly impact if and when these employees will be able to retire.  As a result of sending out our research, we received the following three questions from a reporter: Continue reading “What We Can Learn From 2012”

Preparing For the Next “Fiscal Cliff”

January 02, 2013

The fiscal cliff may be resolved but the deal only makes our “national debt cliff” even bigger. While we all hope our politicians can find a way to implement the necessary changes to reduce our national deficit AND national debt, we all must be prepared for how these changes will affect our lives.  It’s been said that if we don’t learn from history, then we are destined to repeat it.  We should not let the valuable lessons of our most recent recession and now current financial pickle go unlearned.  These are some steps I encourage you to consider taking as a way to prepare for what lies ahead, no matter how things unfold: Continue reading “Preparing For the Next “Fiscal Cliff””

How a Lost Monkey Can Give Us Financial Hope

December 28, 2012

I saw this article about a monkey lost at an IKEA furniture store when I was doing my morning news reading the other day.  There were some  videos of the monkey on some of the news channels as well and it was pretty entertaining.  The monkey definitely got my day started with a smile.  But the more I came back to thinking about the monkey, my thought process changed a little bit because of a conversation I had… Continue reading “How a Lost Monkey Can Give Us Financial Hope”

How Can You Avoid Being a Slave to Your Mortgage?

November 16, 2012

Lately I have talked to a lot of people who are interested in buying their first home and with a combination of today’s low interest rates and a housing market that does not have prices appreciating rapidly, this might just be a great time to be in the market to buy a house.  They understand that part of it but then don’t know how much house they can afford.  They are getting different opinions from different people in their lives.  So, are there any objective measures by which we can figure out how much house someone might want to consider buying?  Sure… Continue reading “How Can You Avoid Being a Slave to Your Mortgage?”

Check Your “Financial” Smoke Detector

October 31, 2012

We all know it’s a good idea to check the smoke detectors once a month to make sure they are working properly, but let’s be honest; how many of us actually do?  If you’re like me, you probably don’t even know the smoke detector is there until you burn the toast.  It’s not that we don’t care about safety (although I do like to live on the edge).  Most likely it’s simply because it’s out of sight and therefore out of mind. Continue reading “Check Your “Financial” Smoke Detector”

What to Do With a Windfall of $10,000

October 22, 2012

Ten thousand dollars is a lot of money but certainly not enough to make you independently wealthy. I remember watching the California lottery television show when I lived in Sacramento. The lottery ticket scratcher winners were chosen randomly to be on the show.  Then a few lucky people were pulled from the audience and got a chance to spin a wheel so a ping pong ball would determine whether they won  a million dollars all the way down to a minimum $10,000.  Most people actually won $10,000 but every single one of them had high hopes of winning the million. Continue reading “What to Do With a Windfall of $10,000”

What to Do with $100

October 15, 2012

People often ask me what to do with $10,000 or $100,000 because they have saved those assets in their 401(k) and want to make sure they are invested appropriately for their retirement.  I can’t recall anyone ever asking me what to do with $100, but that question may actually be the key to financial security and building wealth. Continue reading “What to Do with $100”

Why I Don’t (Always) Hate Debt

July 26, 2012

In his blog post last week titled “Why I Hate Credit Scores,” my colleague Michael Smith wrote about his aversion to debt and why he wants to get to a point where he doesn’t care about his credit score. I generally agree. Debt can really get people (as well as businesses and governments) into a lot of trouble. We see that all the time in the people we help. That being said, I don’t think all debt is bad debt. Instead, I would argue that there are circumstances where debt can be a good thing. Continue reading “Why I Don’t (Always) Hate Debt”

Should You “Ditch Your Retirement Plan?”

July 19, 2012

I’ve written before about the Early Retirement Extreme concept, in which people save as much as 75% of their after-tax income in order to become financially independent in as little as 5 years. I recently came across a post in Forbes called Why You Need to Ditch Your Retirement Plan that was surprisingly written by another financial planner who argues essentially the opposite: that people should stop worrying about saving for retirement and enjoy life now. That could mean taking a lower paying job that you like more or working fewer hours, even if it means saving less and retiring later. He points out that working longer wouldn’t be so bad if you love what you’re doing. Continue reading “Should You “Ditch Your Retirement Plan?””

5 Financial Planning Moves for Women in Their 20’s

July 16, 2012

Whoever said, “Life is short” did a disservice to thousands of people.  Life is not short.  Life is long.  Research on longevity shows that in married couples that live to age 65, life expectancy for at least one of them is age 94.  When you think about it, 94 years is a very very long time. Someone who is 94 years old this year would have been born in 1918 – does anyone know what was going on in 1918? We were in the middle of World War I, Mississippi was the first state in the Union to ratify prohibition, and Woodrow Wilson was the President of the United States.   In the 1910s, only 14% of homes had a bathtub, only 8% had a telephone and the speed limit in most cities was 10 miles per hour. Continue reading “5 Financial Planning Moves for Women in Their 20’s”

Proper Mortgage Planning Helps Avoid Financial Challenges Later On

April 25, 2012

Financing a property is considered to be a good investment. If you plan properly and take out a mortgage for your home, down the road, it may turn out to be a great asset for you. However, if you make a wrong decision, then it can lead you to face severe financial challenges later on. So, proper mortgage planning is very important so that you can lead a stress free life after you take out a loan. Continue reading “Proper Mortgage Planning Helps Avoid Financial Challenges Later On”

7 Steps To Financially Prepare For Your Own Business

March 22, 2012

While most of what we do at Financial Finesse centers around helping employees, we sometimes get questions on our financial Helpline from people who are interested in starting a business on the side. We recently received a question on our blog about how to start a poultry farm. While I’m certainly no expert in poultry farming (or anything remotely like farming), there are some basic financial steps you can take before you start any type of business.

Take charge of your cash flow

As important as budgeting and saving are, they will become even more important if you’re self-employed. That’s because without a steady paycheck, your income could see lots of ups and downs and probably a lot more downs than ups in the early years.

The key will be discipline, not just when times are bad but also when times are good. I remember that when I first started working on commission and had a big payday, I tended to celebrate by splurging and buying something expensive that I really wanted. When the good times were followed by the not-so-good times, I quickly learned the importance of saving that extra cash for the next rainy day. See some of my earlier posts for ideas on how to minimize your expenses, pay off any high-interest debt you may have, and…

Beef up your savings

Speaking of saving extra cash, having lots of cash will become even more important. In an earlier post, I wrote about how the size of your emergency fund should be based on how risky your income is. Well, few things are as risky as starting your own business. Not only may you need to cover personal emergencies and income shortfalls, you may need to pay for some business emergencies and other costs out-of-pocket too.  Aim for at least 1 year of expenses and ideally 3-5 years somewhere safe and accessible.

Buy health insurance

This is one personal expense that’s likely to go up when you’re self-employed. Under COBRA, you can keep your group health insurance for about 18 months after you leave your job (but generally without your employer’s subsidy so the rates are likely to be higher than what you’re used to paying) and then after that, you’re on your own.

One way to reduce your premiums is to choose a high-deductible plan, especially if you’re in good health and have enough savings to pay for that high deductible. On the other hand, an individual plan could be out of reach if you have pre-existing conditions or are in poor health. In that case, as much as you may come to dislike the President’s health care plan as a future employer, you may love it as someone who may benefit from the regulations and the subsidies that could make individual health insurance more affordable.

Get a handle on your credit

In addition to savings, you’ll probably need access to credit of some kind. The trouble is that it will be harder to get once you don’t have a regular income. If you can benefit from refinancing your mortgage, do it before you leave your company. The same goes for signing up for a home equity line of credit. You might also want to start developing positive relationships with your local bankers.

Since you won’t have much income to show, more weight will be put on your credit score. If you haven’t gotten a free copy of your credit report in the last 12 months, order one from each bureau at annualcreditreport.com and fix any errors you find. You can also use sites like creditkarma.com and quizzle.com to get a free copy of your credit score and see what other steps you can take to improve it.

Learn as much as you can about your future business

When Warren Buffett was asked why he didn’t invest in tech stocks before the dot com bubble burst, he said that it was because he didn’t understand them. This is even more true when it comes to investing in your own business. Study the industry you’re entering into as much as you can and find a mentor that you can learn from. You can also get general information on starting a business from the Small Business Administration. It’s good to learn from your mistakes but it’s even better to learn from someone else’s.

Know the rules

Even if you know everything there is to running your business, you can easily get tripped up by taxes, lawsuits, and regulations. You’ll need to decide whether to set your business  up as a sole proprietorship, partnership, LLC, or corporation. The LLC has become particularly popular as a way to shield you from both the personal liability of a sole proprietorship or partnership and the double taxation and regulatory burdens of forming a corporation.

You’ll also want to get a tax identification number from the IRS, register your business name with your state and find out about your state’s tax, worker’s compensation, unemployment, and disability insurance requirements, check local zoning laws before choosing a location, make sure you have the proper licenses and permits from all those various levels of government, and keep your personal and business finances separate.

Depending on the complexity of your situation, you may want to hire a business attorney and/or an accountant to help you with all this.

Look for ways to shelter your income from taxes

Once your business becomes profitable, you’ll want to start protecting those profits from the tax man. If you have a high deductible health insurance plan, you can contribute to a health savings account. In addition, there are a myriad of tax-sheltered retirement accounts for small business owners like SEP-IRAs, Simple plans, and Individual 401(k)s. These accounts will also help diversify your wealth away from your business.

Starting a business is exciting but as I’m sure you realize by now, these initial steps can be a lot of tedious work. After all, we’re just scratching the surface here. (We didn’t even get to talk about the chickens!) Just remember that your sacrifices today can save you from catastrophe tomorrow and eventually make your dreams come true.

 

 

Married With Debt? How to Manage Your Money When the Honeymoon is Over

March 09, 2012

We just received the following question on our website:

“I’ve recently gotten married and both of us have entered into this marriage with our own debts. We are having a hard time, even with combined incomes, making ends meet. I would like to learn more about money management and what needs to be done to pay bills and still have enough money left for savings and cash reserves.” Continue reading “Married With Debt? How to Manage Your Money When the Honeymoon is Over”

Five Money Moves to Make When a Recurring Payment Ends

March 05, 2012

My youngest son is graduating from college this spring — I can’t tell you how excited I am. Not only as a proud mother who gets to see her son accomplish a goal that is important to him and that he has worked very hard for, but because soon I will be free! I’ll be free from paying tuition and room and board! His tuition at the University of California has nearly doubled in four years so my husband and I have been paying out of pocket for his expenses each month. We are feeling the same way many people feel when they are close to paying off a car, their house or any other recurring bill — very excited AND since he is the last one, this is a bill that won’t be coming back. Continue reading “Five Money Moves to Make When a Recurring Payment Ends”

What Going to the Shooting Range Can Teach Us About Financial Planning

February 15, 2012

Recently, some colleagues and I visited the local shooting range to practice firing pistols at paper targets.  I hadn’t fired a pistol in years, but I remembered that the last time I did I had fun. I was excited to go, but at the same time I was a little nervous.  What if I miss the target and my friends laugh at me? What if I do something wrong and somebody gets hurt?  What if I hurt myself?  What if, what if, what if? Continue reading “What Going to the Shooting Range Can Teach Us About Financial Planning”

Your Annual Money Review: The Best and Worst of 2011

January 09, 2012

What incredibly good money decisions did you make last year?  In their book Switch, Dan and Chip Heath suggest for organizations that want to change to look for the “bright spots” in the organization and study them.  In a sales organization, if you have someone who triples their sales or in the audit department, you notice someone catching errors that save the company tons of money, study them.  Find out what they are doing that is different.  Take the concept and apply it to your own finances. Continue reading “Your Annual Money Review: The Best and Worst of 2011”

Emergency or Disaster?

November 18, 2011

I don’t know how much the rest of the country paid attention to a very early snowstorm in the Northeast, but I had to pay attention to it.  It was a big part of the last week or so of my life.  I travel to Connecticut a lot and nearly the entire state was without power for a few days.  Those days happened to coincide with the dates that I was supposed to be there.  Have you ever tried to call a hotel that doesn’t have power to confirm your reservation?  I hadn’t until this storm hit.  And, since I couldn’t reach them I kept my travel plans because I didn’t want to be a “no show” for the meetings that I was supposed to attend.  And, when I got within about an hour of my hotel, I got an email that my reservation was cancelled.  Perfect!  Here I am, far from home, close to where I’m supposed to be for work, and nothing in the area has electricity.  Fortunately, I have a phone full of contacts and I scrolled through my list to see who I could call as my Plan B.  Eventually, I found a place to sleep that had electricity, which means HOT water for the shower! Continue reading “Emergency or Disaster?”

My Car is a Lousy Hotel Room

September 30, 2011

I can say a lot of things about my car.  It’s old (1998).  It’s high mileage (~200,000 miles).  It’s got enough dings and dents and stuff to give it “character.”  But, it’s been a great car for me.  Very reliable.  Very much like my 2nd home considering how much I drive.  First, a little back-story on my life:  I live ~300 miles from a company (one of our client companies) where I routinely spend 2-3 days/week, and it takes roughly 5 hours to drive there.  I can get from my front door to my hotel room door in about 5 hours, 15 minutes if traffic isn’t an issue.  (My best-ever time is 4 ½ hours without a stop.) Continue reading “My Car is a Lousy Hotel Room”