Are you age 22 and have $10,000?

Question: I am 22 and have $10,000 to use for whatever I want. What could I do? My first reply was to say contribute $3000 to a Roth IRA. If this gets an average of 7% per year and you make 40 contributions of $1.20 each, (in other words, never contribute any more money) you will have just under $45,000 at age 65. In addition, the $3,000 will meet many minimum mutual fund investments. (1-3 funds, depending on fund custodian.) 

Use the remaining funds to get a passport and go on an adventure. At 22, you could make $5-7k last a few months, traveling either in this country, or overseas. (Depending on inflation and your chosen lifestyle.) Check out books and stories like http://www.oneweekjob.com/,  or volunteerism. If you prefer not to leave the US, there are many ways to learn, earn a stipend, and make contributions to society. Visit this site for more details: http://www.nationalservice.gov/serve-your-community/how-get-involved . A stipend from Americorps can be used for additional education.

Photo by Gustavo Fring on Pexels.com

If you are not a high school graduate, get yourself to a community college and find a degree or certificate program you can afford. In two years or less, you can graduate from high school, and get an associate’s degree and/or industry certification in order to support yourself with a better than minimum wage job in the very near future. Then do some traveling. With a college degree, or on a gap year between semesters, your can often arrange to take a break for work, love, education, or public service.

Photo by Element5 Digital on Pexels.com

This answer is predicated on you not owing any money to anyone personally , and that you “are free to travel”. The reason I say place some funds in a Roth IRA is in reply to a question “Is this is a good age for you to set aside funds for your long term well-being?” Absolutely. Keep a journal and track what you learn. Exposure to people different than you in the US or abroad will only help you get your next job. (A version of this answer was originally posted on Nerdwallet’s Ask anAdvisor page.)

“I think you travel to search and you come back home to find yourself there.”

Chimamanda Ngozi Adichie, novelist.

Pumpkin Spice Latte Financial Planning

Yes, I am exploiting the PSL (Pumpkin Spice Latte) seasonal bandwagon. I’m not the first in the financial business to do so. One of the weirdest was a link from a credit union offering Pumpkin Spice Loans. In the years since, media outlets are hijacking the seasonal treat to link to their own brands. You can also follow the PSL at Twitter-@TheRealPSL.

Now, we all know that there is just a little pumpkin (used to be none at all) in this drink, so I can use pumpkin photos to spice up this post.

Ingredients in this latte:

Pumpkin: Vegetables and Fiber (Needs)

Dairy/Dairy Substitute: Protein (Infrastructure of the Plan)

Sugar: Energy and Taste (Motivation to Act)

Seasonal Spices: Extra excitement (Yes, you can have Wants!)

Whipped Cream: the initial exposure, getting a fresh credit card in the mail, a new job or a raise or (Treats and Rewards.)

Needs

What are your monthly financial needs? Consider the Maslow hierarchy, in which his original definition consists of “air, food, drink, shelter, clothing, warmth, sex, sleep”.

1. Rent or Mortgage (cost of shelter)
2. Utilities and Communications
3. Groceries and Food (Groceries are needs-meals out are wants)
4. Clothing (jeans, er pants, are a need-a specific brand is a want)
5. Time to rest and sleep (hopefully no double shifts)

Financial Plan Infrastructure

1. Spending Plan
2. Income and Expense Monitoring
3. Revise and Adjust
4. Musts:
   1. Data Security (online banking and credit accounts)
   2. Credit History Report Maintenance and Annual Monitoring
5. Financial family meetings or date nights
   1. A family meeting can be a useful way to involve everyone in planning a summer or winter vacation.
   2. I am a big fan of financial date night. It doesn’t have to be expensive, but it is a terrific way to catch up with your sweetie on monthly goals and progress to date. It is also a way to have a planned conversation about cash flow, credit use, and new expenses. Proactive chats, not reactions are, in my experience, easier on a relationship.  This is especially important if financial tasks are divided between a couple or you handle your own money separately from each other.

Motivation to Act

1. 1. External events: job change or loss, promotion, relationship status change, current events, goals achieved, change in incentives from work or hobbies, marketing convinced you, peers or affinity group, family member asked 
   2. Internal events: ruminating, growth, illness or treatment for same, goals achieved, goals or needs changed (See Maslow)

Financial Checklist Fall 2022

Five Tasks for Fall Finances

• Quick and Dirty Tax Planning Check your W4, review your year to date retirement contributions, update year to date business expenses, check for any tax losses in your taxable investment accounts
  • Catalysts for Action: Did you welcome a new family member? New job? Second job?
• Speaking of Retirement Contributions: what about planning to Save More Tomorrow^TM ? This simply means to up your retirement deferral percentage next time you get a raise or COLA. Or you can increase your automatic contributions to savings in a similar manner.
  • Catalysts for Action: new job, promotion, COLA, side hustle
• Organize Your Files for yourself, your business, your family. If you are hit by the proverbial bus, where is everything kept? Online in a folder labeled _____, in a home safe, safety deposit box, behind a password vault, under the mattress etc. This means life and death papers, but also the financial minutiae of daily life.
  • Catalysts for Action: a broken shredder, new caregiving tasks, becoming self employed, working from home
• Mitigate Risk Did you have a big life event this year? (marriage, divorce, birth or adoption, commitment, new business etc.) Check for proper insurance coverage (s) and confirm that your written beneficiaries match your wishes. Retirement accounts and life insurance policy designated beneficiaries take precedence over a different designation in your will. (meaning they will supercede your written will wishes)
  • Catalysts for Action: How old is my will? Do I have a will? Do my children have guardians?
• Check Your Spending [Plan] Winter family holidays can be expensive, as they can involve family obligations (real or perceived), special food and drink, travel, and gifts. What is your spending plan? Experiences, gift cards, or wish list items from an online shopping cart? Practical, homemade, high quality, fast fashion? Do you tithe or make additional charitable donations at the end of the calendar year? Are any of those decisions made by the entire family? Some families involve their children in their charitable choices, which allows for immersion, learning, and connections to the world around them.
  • Catalyst for Action: What holidays are celebrated on your family calendar?

Want the experience or the items?

Pass the Turkey and the Aging in Place Planning Please (2021 update)

Grandpa, Mom, please pass the sweet potatoes; pass the turkey; pass the financial/aging planning? Welp-the holidays are upon us. Next up are Hanukkah-begins November 29, school concerts, pantos, Christmas, and other winter holidays. Kwanzaa begins December 26 with Unity day. January brings Epiphany and Orthodox Christmas (6-7) The Super Bowl is February 13, and Chinese New Year is from February 1-15, 2022. 

Will you be seeing a lot of family in the next 8-12 weeks? I reckon, so let’s plan for it! Call it Family Sleuthing 101.

(Photo by Pixabay on Pexels.com)

Some family members you’ll see once a year; others you see more regularly and then there are the chosen family that ‘pop in’ for a Turkey/Black Eyed Peas/KaleSlaw dinner. Much can change with your parents or other family elders in a year, even six months. Since the pandemic started, it may have even been longer since you’ve seen each other IRL.

Some things to consider:

1. 1.If your relatives are asking for some help, or ruminating about how they are having trouble “keeping up with the paperwork” this year, pay attention. Broken things, burned out light bulbs are additional clues.
2. Listen carefully to any stories about telephone fundraising for groups you have never heard of. Be patient so you can get the entire story.
3. Urge relatives to never give to groups they are not familiar with, or who have called them first, or groups that sound like established non-profits (but aren’t). Do ask them about their favorite charities, and why they are important!
4. You can help check groups out here at give.org or at Charity Navigator  or another charity evaluator organization.Do share this link from the Federal Trade Commission on avoiding scams.
5. if you can, take a look at the mail, the bills, and the online accounts (if you have access.)
6. Save and Invest.org has an informative PDF called Fighting Fraud 101 that you may wish to read or share this year.

Another family dinner topic is a family member’s health, or deaths of other loved ones. This can also be a good opportunity for you to ask some hard questions of your elders. (It is often hard for both parties, but you are doing it because you wish to respect their values as much as possible).

1. Where is your will located?
2. Who is your doctor and do you have a current Health Care Directive (they are different for each state-here is the WA one)  or POLST on file? You can upload them to a patient portal.
3. Do you have a Long Term Care (LTC) insurance policy and what company is it with? Did you purchase the inflation rider?
4. What are your thoughts on “heroic measures”, “ventilators”, quality of life and palliative care?

Please take the time to add a financial planning course to your holiday meals and visits this year.

Your family members will  thank you (perhaps not right away!) and it is time well spent.

Related articles

• POLST – A better way to die (bangordailynews.com)
• Death in the Family-More Transparency Please (this blog)
• Have a Caring Conversation This Holiday Season (nhpco.org)
• I Ate Thanksgiving Dinner With My Identity Thief For 19 Years (ABC.com)
• https://endoflifewa.org/ 
• Book: A Year to Live: How To Live This Year As If It Were Your Last by Stephen Levine

From the Roundhouse, Mt. Baldy. 2014 photo credit: Dana Twight

Love Means…Check Your Beneficiaries

Love means that you should check your beneficiaries. Establish a regular time of year to do this. Between February 1-14 sounds good to me. Maybe in alternate years, but begin soon, if you don’t already do this.

What documents should you review?

Employment Related Documents

Your current company retirement plan: 401k, 403b, 457, pension, HSA, or company provided life insurance. If self employed, your SEP, Profit Sharing, SIMPLE, solo 401k, IRA, Keogh plan (for older readers), or Defined Contribution or Defined Benefit plan.

Your previous employer’s retirement plans, if not consolidated into a new Rollover account. Reminder: don’t lose track of old retirement plans! Here is one link to try if you have lost track of one.

Which payout did you select for the retirement plan, the joint and survivor or the single life payout? I knew someone whose monthly income dropped 66% after their spouse died, due to the spouse taking ‘single life payout’, on not one but two different pensions. Please schedule a robust conversation with your spouse about this, well ahead of your deadline to choose a survivor benefit. Enter the conversation with good intentions and an ear for the emotions involved as well as the numbers.

Personal Documents

Documents from the last century, related to a previous marriage, or that first IRA you opened up right out of college. (You did that, right?) Life insurance you hold that was purchased for you originally by your parents (when you were single). Life insurance purchased while in your child-rearing years. Or, now that you are single again, dig out the list of things you were going to change after the divorce was final.

Here’s a link with suggestions for finding an old life insurance plan. This article from Consumer Reports also highlights the popular site www.missingmoney.com where.  you can search for reported abandoned property. People I know have found utility deposit refunds, last employer paychecks, old bank accounts, uncashed dividend checks etc.

Transition Related Documents

Did someone else pass away and leave you assets? This could mean changes of your beneficiaries, or changes in your wills. Did you become a parent, or parents for the first time, or for the fifth time? Did you blend two families?

Was there a layoff or period of unemployment? You may wish to redirect your assets closer to home.  Was there a windfall? Did you win the lottery or get a very large bonus? Do you wish to give to charity or become a first time philanthropist?

Love means you are willing to review what would happen to your family when you are gone. Give your beloveds (and you) the gift of a review and doing some homework regularly to ensure your assets are distributed correctly. Remember, it’s great to have your intent known verbally,  but also review your beneficiaries to see that your goals and your documents match.

Mending Your #SafetyNet

Edwin Harris – Mending The Nets (Photo credit: Wikipedia)At the end of the season, it’s a good time to mend your nets.

Updated Jan 2019.
Originally posted 2013.
Given today’s lengthy, record-setting US government shutdown and the hashtag #shutdownstories, this post needed an update. As a friend told me when we hit 40; “Exercise is no longer a luxury.” A safety net and emergency funds are no longer a luxury. This shutdown illustrates with stories the numbers about Americans living paycheck to paycheck.



When we reach the financial adult stage (your chronological age may vary); you may wish to mend or create a safety net. Safety nets are different from person to person; so feel free to select the pieces that match your own situation. 

Security Risk management: often solved with insurance products. Car, renters, condo, house, flood, fire and theft, cell phone, jewelry, business continuation etc. Even if you think you don’t have expensive things, you probably do. How much were your electronic gizmos? Can you afford being without [insert category here]? Many rental complexes now require renters to have insurance, which will also shield you from many liabilities (kitchen or electrical fire, water heater or tub overflow, leaky toilet, disposal failure, to name a few.) Check your specific policies for new exclusions based on the sharing economy, such as AirBNB or or using your car for ridesharing.

Savings (also known as cash these days due to barely visible interest). Rates are rising and one can earn more than whisper of interest One person’s emergency fund is $500, another’s is $10,000 and I have met someone whose security needs are met by one year’s income in the bank ($65,000). I like to suggest thinking of this fund in terms of months of income or expenses (whichever is greater). There’s a joke in there, sort of. What should be the minimum? My audiences are well informed and I hear 3-6 months from many when I ask this question. I suggest making the fund real by linking it to your insurance deductibles, the cost of 4 new tires, or even your family OOP, out of pocket limit for annual health care costs.

Residence  Home is where the heart is (and the bills) and your fridge. (see my earlier post called Clean One Refrigerator Shelf at a Time here)

Friends and Family Shoulders to cry on or celebrate with. Who can help you stay accountable to yourself? Who will understand and support your goals? Which of your friends or other loved ones can give you an assist with tangible or intangible help? Do you need to move into someone’s spare bedroom for three months while you save up for XYZ goal? (Tip: set a deadline for being in-residence-the relationship is something you don’t want to lose).

The Future What does your future hold? What’s on your bucket list?

• Encore Career
• Additional or ongoing education or professional development
• Retirement
• Caregiving for family member (s) now or in future
• Travel both domestic and foreign
• Volunteering (Peace Corps, Volunteer Vacations, International Red Cross)

Tools
Education, knowledge or wisdom (not to be confused with advertising, too many data points, endless supply of new products, Squirrel!),
Wisdom comes from mistakes, mistakes come from experience.  Or,

There is only one thing more painful than learning from experience, and that is not learning from experience.  ~Laurence J. Peter

Emotional IQ  Know yourself. Are you a DIY (do it yourself) person? How resilient are you? Can you reframe an experience and move forward? Do you want to bury the memories? What makes you feel shame (if anything) ? What are your money values ? Status or security, self fulfillment or self indulgence? Are you a planner, spontaneous spender, or celebrator?

How do you like to learn new information? Are you a lifelong learner? I have always enjoyed the opportunities I have had in my career to ask other people about their questions, or to consider what the important questions are for me when making a decision. Getting help with the right questions can be better than only searching for the answers.

Before You Quit Your Job-Five Factors to Consider

Personal Goodwill in 2019

The “holidays” are over. Whether you call it the 12th day of Christmas, 6 January, or the Feast of the Three Kings, those days have passed.

• Did you survive or thrive?
• What traditions did you keep, or eliminate?
• What are your resolutions and goals for 2019?

Photo by freestocks.org on Pexels.com

These are questions grabbing the headlines on Twitter, your local newspaper (all the sections), and perhaps your favorite podcastBut wait! What is your real goodwill for 2019? In financial terms we call it your balance sheet. For businesses, goodwill is an intangible which represents real value.

“The goodwill of a company increases its value, as qualities such as the company’s customer base, its brands, products, location, workforce and reputation demonstrate the company’s proven track record of generating income.” via Investopedia https://www.investopedia.com/ask/answers/010815/how-does-goodwill-increase-companys-value.asp

In a 2014 post on this subject , I urged readers to consider their true balance sheet. This goes beyond the numbers to include personal goodwill, relationships, intangible assets, and experiences.  In 2019, with the 24 second news cycle (no longer 24/7) , market volatility, increasing interest rates, and a government shutdown, I believe it is ever more important to total up our non-financial assets.

A friend recently learned her skills were worth 12% more annually in the job market, but that it would require a heavy loss of professional autonomy. She chose to keep her autonomy and turn down the position. I recently was able to attend a birthday party for a family member where 15 relatives were in attendance; we ate, we drank, and we all enjoyed the surprise live music delivered to her door. It included Happy Birthday, on the bagpipes! As some of us mostly attend funerals, it becomes a priceless family memory.

If you have beloved family members who no longer travel for any reason, you have the experiences of travels with Mom, Aunt Susy, Uncle Sergio, or attending a cousin’s outdoor wedding (cupcake tower!)

Author and her mom at Fort McHenry National Monument. Photo credit to kind tourist.

During a time of job loss, or even getting home from a doctor’s appointment, do you have friends, family or faith institutions who can help you? That goes on your true balance sheet. Do you and your children talk or spend time with other over vacations, holidays or during stressful times? That is worth a lot. For those who have furry kids, same question. For singletons with an extensive chosen family beyond your family of origin, I hope that you find humor,  comfort, and support in these relationships.

Add those to your own bank. Research tells us about how our brain enjoys them more than the acquisition of things. Experiences generate three times the memories, from the anticipation, the actual event, and then the retrospection afterwards. I have a series of #UnfortunateEvents, for example, that comprise many of my personal vacations. They are funny now… but were not at the time. (River rafting accident, drunk guy in the aisle at 30,000 feet, and crying on an expensive Venetian gondola ride to name a few).

Personal and professional resilience count on your balance sheet. Deep breathing during stressful moments counts. (For some, that would be before public speaking. I find yoga more difficult than public speaking, but that’s just me!) Being intentional about your spending adds up. Decreasing debt is important as it leads to greater financial flexibility. Financial resilience and investing in personal attributes (reliability, integrity, courage and caring for others and yourself) loom large on the true balance sheet and are important for both personal goodwill and goodwill towards others in 2019. #IRL

Back to School: D’s in Personal Finance

Let’s help you get 3 D’s in personal finance this month. As on Sesame Street, this post is brought to you by the letter D, because we’ve been trained since preschool to get A’s. Are you a personal finance slacker? This post is for you!

Get a D+ here!

Let’s consider these 3 D’s: Decluttering, Disaster and Discussion.

Decluttering

• Three things you can do today! Financial decluttering- included here are things like unsubscribing from shopping site emails, from Groupon to  misleading requests for your bank account number or to “verify” your order from BigBoxCity.com Unsubscribe, delete and mark them as spam until they disappear.
• Spreading the wealth is not always a good thing. Do you have multiple financial accounts spread around town, or the country? Do you still have an old 401(k) account with a former employer? If you had had a life changing event-did you change your beneficiary? Beneficiary choices always trump your will.
• Are you still receiving multiple credit card or insurance offers?                                   You can stop them, you know.

Disaster Planning

• What to have in the house in case you are stuck for 3-7 days, and what to take with you for an evacuation (say, for a wildfire or a hurricane)
• You might think of your children first, or maybe not….Quick, what are the first three things or people you are going to grab? Start there and then add to the list throughout September, which is National Preparedness Month. #NatlPrep on Twitter
• Practical digital tasks you can accomplish quickly. Load up an 8G flash drive on a lanyard with scanned important documents and photos-I got this tip from a friend who is a trained Urban Disaster Responder. Place in your disaster box or backpack.
• Upload these same documents into your regular cloud storage.
• Complete this handy document created by the Consumer Financial Protection Bureau of the US.
• Actual cash somewhere ($10 in quarters, in case you find a working washing machine) and small denominated dollar bills. Remember the comedian David Brenner’s last wish here-“Bury me with $100 in dollar bills in case tipping is suggested at my final destination”.

Old Habits & New Resolutions July Update

July can be a time to review those New Year’s Resolutions. Did you make any for 2018? 

Even if you didn’t,  now is a good time to revisit the subject, as the year still has five months to go!

             Aauugghh!                                   Photo by Pixabay on Pexels.com

 

 

 

Often the calendar can help create structure for you. Bills get paid after payday; retirement plan contributions occur on paydays, etc. If you can itemize on your taxes, you may have dropped off many bags in the last week of December at your local thrift store. In my home town, Macklemore helped us out one year. Parents of college bound students have a date with the revised FAFSA; and by the end of January, you’ll have some thoughts about your past year’s tax return. For a quick read on what you can learn from your 2017 tax return from Morningstar, check here. Also, with that 2017 tax return near your screen, take a few minutes to run through a paycheck “checkup”. The IRS wants to help you with this, so you can withhold more in taxes if you need to, or loosen up those purse strings due to the increase in your standard deduction for 2018.

 

 

As mentioned in a previous post, Fidelity and others generate helpful suggestions for our annual resolutions. One study indicates that financial resolutions are easier to keep than those about food or exercise.

Let’s begin with the one geared for success! Financial tasks and affirmative statements.

In five months you can:

• Make 5 Roth IRA contributions
• Set up and fund an emergency savings account with $500-$1000
• Check all your accounts with beneficiaries- retirement, insurance and banking
• Increase your charitable giving in order to get that company match or set aside funds for a non-profit, instead of the IRS.

What do you want to improve during the balance of 2018?

 

Tax shelter or just an espresso?

 

Intimidating: Opting In

Personal finance is intimidating for many people. While we all love to seek out media which is scary, from movies, books, TV, to live theater and other works of art, those are things we generally opt into. Personal finances are a complicated part of modern life and sometimes we feel as if we don’t have the tools to deal with the situations we find ourselves in.  Can you opt out? Sometimes not. 

I meet people who tell me that their own finances scare them. They find it daunting to sit down and confront their balance sheet, regardless of how many digits are to the left of the decimal point. Professionals bandy about words and phrases like tax burden, cash flow, budget and the scariest phrases of all,

“Where do you spend your money?”

“If you have an unexpected bill of between $400-$2,000, how will you pay for it?”

“Have you begun to save for your retirement?”

and in Seattle, “Do you want to buy a house?”

This can be enough to send you screaming from the scene, while nervously looking over your shoulder, while thinking “I never want to see THAT again!”

I read this article in The Atlantic this week, about how people live paycheck to paycheck, even as they live a middle-class life. The online comments were mean and full of blame. To be sure, there is shared and personal responsibility to be had. No, maybe the author shouldn’t have drained a 401 (k) to pay for a wedding; no, he shouldn’t have missed a writing deadline and had to pay back the advance, but let the person out who has never missed a deadline in her life cast that stone. I don’t qualify.

Financial advisors are here to help and support people to make good decisions about their cash, their future and their piece of mind. We also want to help you move forward from bad decisions you own, or which were forced upon you. I believe my job is to meet you where you are, and help chart the path forward. For you do need a path, a vision, or some goals; otherwise you are just looking at your feet, not where you need to travel.

This path leads to a well-defended castle. Photo by Dana Twight

Opt out of the intimidation, and opt in to a new path for your finances. Collaboration might reduce the fear factor and even generate some satisfaction.

Zombies and Zinfandel: Handling Your Financial Monsters is tonight!