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.

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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!

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Handling Your Financial Monsters

Join me behind the reinforced walls of Office Nomads for
a glass-in-hand look at financial monsters and how to OUTSMART them.

We all know that tackling our finances can take lots of preparation, and sometimes, a little wine to grease the wheels. So does the Zombie Apocalypse. That’s why I’m hosting a tax-season recovery event to turn you into a Financial Apocalypse Prepper – Zombies and Zinfandel.

Zombies and Zinfandel is Thursday, April 21, 2016

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Come at 6:45 to mingle with other Zombie Fighters. Art courtesy of Michael Adrada

Together, we’ll talk about survival through planning (for your tax refund), creating strong safety nets (like managing credit), and the allies you’ll need (just as much as those fences) to preserve your resources.

Although this is a fun excuse to hop on the zombie zeitgeist bandwagon, it also strikes at the heart of my mission at Twight Financial Education – to empower clients to break through money taboos and meet your financial goals on your own terms. This is the third class in my wine series, after Mutual Funds and Merlot and Riesling and Retirement. Please pre-register here through Brown Paper Tickets.

Don’t like zinfandel? No problem – there will be some alternative beverages on hand.

This just in! Office Nomads is now accessible via light rail. The entrance to the Capitol Hill Station is 3-4 blocks from Office Nomads. Additional parking details at the event site.  Reserve your spot in the shelter before it’s too late!

Shoutouts

Thank you to my main collaborators Christopher Mathias, Andrea Carey, along with Casey Middaugh.  Seattle artist Michael Andrada designed the really cool poster you can see here.  Also to Chateau Diana (creator of Zombie Zin), who gave us some giveaways.

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Old Habits and New Resolutions

January 1-31 is traditionally a time of making [and breaking] New Year’s Resolutions. Is it  crowded at your gym? Apps and online tools abound. Books and blogs on decluttering, tidying and organizing can easily be found in your inbox. It is said by some that a habit takes at least 6 weeks to create and people such as Gretchen Rubin and Beth Dargis have multi-day programs on offer. Behavioral economist Dan Ariely has a short program out now too-to participate in his winter 2016 research, visit this blog post.

PowerofHabit.book-cover

by Charles Duhigg

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 2015 tax return. For a quick set of tax facts and limits from Morningstar, check here.

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.

So let’s begin with the one geared for success! Financial tasks and affirmative statements. What do you want to improve in 2016?

Where to begin:

Meta Topics: There are meta topics, like what you learned from your family of origin about money, and if money represents the same thing to you and your partner (freedom or security for example).

Or

Nitty-Gritty Topics: There are also the nitty-gritty topics such as how to cut spending on meals out or groceries, am I saving enough for retirement,  and the ever popular  “am I spending too much on fill-in-the-blank ?”(e.g. coffee, furniture, clothing, wedding stuff, organic food, books).

This will be a series on how make the incremental changes which can be permanent, instead of the ‘cold turkey’, ‘all or nothing’ ‘you should do this’ framing which is [mostly] guaranteed to fail. Think of financial wellness, and small successes. Avoid binary thinking, see your progress on a continuum, and remember that like the stock market, it is time not timing, which makes the difference. Get set…

wikimedia-16_1_go-sign

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Filed under Be Prepared, Financial Wellness, Habits, January Financial Tasks, Uncategorized

Tax Planning

The Chinese economy is beyond our control but you can look ahead to your own tax season. Here is a great tax planning sheet from Morningstar to review now or set aside until March (if that is your routine). Remember that you can still send in estimated taxes-even if you missed doing so on January 15th (the day for 4th quarter 2015 estimated payments).

The Bait

Which method  gets you to work on your taxes – a carrot or a stick?

Small Business Links

Small steps to success will be a big theme for this blog in 2016. What can you do right now to be better prepared to do your taxes for 2015?

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It’s that time of year again!

Visit the IRS Small Business & Self Employed Division or the Small Business Administration (SBA) for tools to estimate your taxes.

Have you heard of SCORE? It’s a national organization dedicated to help for small business owners, whether you are just thinking about a business or have had one for several years. They have low cost classes, free webinars and centers all across the country. More information on their tax programs is available here.

 

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After Mutual Funds & Merlot

German wine humor postcard

German wine humor!

Mutual Funds and Merlot was so much fun last Friday. We drank a great Merlot from Columbia Crest (Grand Estates). Topics included your objectives for your investment funds and how those should match up to your mutual fund choices. We looked over the Vanguard portfolio allocation charts (seen here) from 1926-2014 to learn how asset allocation adds to or decreases average return.
One question asked,”what would it look like if the Depression (1930’s) years were left out”? Those years have the largest declines. Declines were pretty dramatic in 2008, a popular Standard and Poor’s 500 fund from Vanguard (VFINX) was down 37.02 that year. When looking at mutual funds returns now, be sure to check the ten year as well as the five year returns; as the 2008-2009 numbers have dropped out of the five year averages.

We also reviewed fees and terminology (no-load, load etc.) and I shared that when I began in this business (mid 1980’s) the highest front end mutual fund charges were 7.75%!

We did not cover all of the types of mutual funds; only open-ended mutual funds and index funds (a subset of open-ended funds). I also reviewed a decision tree of sorts:

  • Money to Invest (how long)
  • Tax Treatment (Taxable or non-taxable)
  • Diversification (individual issues or pool of securities e.g. mutual fund)
  • Objectives for your funds (growth, income, combination)

My next class will be Riesling and Retirement

(February 3, 2016)

2015-06-06.Winegrapes.blossoms.

German wine grapes in June 2015 by DCT

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#NotBuyingIt: Anti-Black Friday

During this season of Black Friday, and holiday sales, I’d like to offer some thoughts on an alternative-Not Buying It. Ways to change your behavior so that you can take a step back from consumer culture. This topic has interested me for years and authors and bloggers keep coming up with new ways to…buy nothing. Most recently in 2015, outdoor retailer REI decided to close on Black Friday, pay their employees for the day, and encourage all of us to #OptOutside .

Remember Amy Dacyczyn and The Tightwad Gazette from the 1990’s? In 2009, she was interviewed by New Hampshire Public Television. (5 minute video)

2001 After 9-11, President Bush is rumored to have said just go shopping-he really didn’t say it that way; his statement was more highfalutin’-he suggested ‘continued participation and confidence in our economy.’ It was Mayor Giuliani who actually said go to restaurants and go shopping-on Sept 12th. Then the American public was practicing patriotism at the mall, and the ball games….and then the bubble happened…

2006 was when a funny piece in the Atlantic  by the writer and actress Sandra Tsing Loh, was published.  It was called Cheap Thrills: American Women in Financial Jeopardy. It was about women and money, Individual Retirement Accounts  (IRA’s) and shopping. Tsing Loh wrote about her friend Carolyn, who wanted to lose weight and proceeded to lose 12.5 pounds in three months. She also lost a lot from her wallet. Fees and food from Jenny Craig, some nice running shoes-only $100, a new haircut, a gym membership at $40/month etc. And last but not least, the new $300 distressed jeans in two sizes down-only $300.

It cost her $196.50 per pound.

I can distress anyone’s jeans for less than $300, just sayin’.  By the way, by her own admission, Tsing Loh comes from a very cheap immigrant family-her sister once gave her a library book for Christmas with a time limit on it for return.

2006 Judith Levine in her book,  Not Buying It: My Year Without Shopping, links her shopping memories to Sept 11th as well-“Buy that big screen TV or the terrorists will have won!”

Not Buying It Judith Levine

Not Buying It Judith Levine (Photo credit: Gauravonomics)

2008: Remember September 15th 2008 when Senator McCain was feeling Presidential and said “the fundamentals of our economy are basically fine, despite tremendous turmoil…just before Lehman Brothers declared bankruptcy. Recession and many people have struggled with their finances-fair, fowl or fun money. Still are-According to Al Lewis’s Emporium WSJ column, the people wrote in to say two words: We’re broke.

“We want to maintain our financial strength, not transfer it to the mass market retailers.”

— “I already own 50 neckties, three cars, four TVs, etc. Why should I blow money on Chinese junk at Target and Wal-Mart when I can save money for retirement?”

2008-2010 For many of us, the Great Recession changed our buying habits, albeit involuntarily.  However, there have been many enlightening stories written in the last 15 years about people’s voluntary changes in their relationship with consumer culture, stuff and even patriotism. Before that it was Voluntary Simplicity, a movement pioneered by authors Cecile Andrews , Janet Luhrs, and Duane Elgin, among others.

In summary, whether you  reduce your things down to 100 for a year, (2012 link to TedX video from author Dave Bruno) or some other number, go cold turkey like Judith Levine and her husband did for one year, stop spending $200/pound to lose weight or some other self-improvement scheme, try something new this holiday season. Maybe you have gotten very good at substitutions (library for bookstore) (brand declines-Nordstrom to Macy’s to Marshall’s to thrifting)  You can observe Buy Nothing Day on Black Friday – and on Thanksgiving.

You and your family could even introduce these ideas around the Thanksgiving table for some lively conversations. I’d love to hear how that works!

What to talk about, besides football and turkey?

What to talk about, besides football and turkey?

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Understanding Mutual Funds: More than a roll of the dice

Each month I meet people, including clients, who own mutual funds, but either aren’t sure what they are or what role they can play in their retirement planning. I blame 401(k) and 403(b) retirement funds for this. One opportunity to learn more is via my new class Mutual Funds and Merlot!

What I mean is that very often, companies of all kinds (including employers, financial services reps and the information you receive from your Benefits department leads you towards the decision tree of “We have these 20 funds for our plan – pick one now”  – and go!  By the way, you have five minutes. Whether it is five minutes or five days, sometimes; indeed many times, the information is not understood by the employee.  Despite everyone’s best efforts, employees may not understand the foundation of how mutual funds work. And without wine!

Mutual funds are more like the Monopoly houses than the dice. Photo via Flickr woodleywonderworks

Feel like the market is just a roll of the dice? Mutual funds are more like the Monopoly houses than the dice. Photo via Flickr woodleywonderworks

I’ve created an opportunity for you to spend some time with me and a glass of Merlot, in order to better absorb the information about what mutual funds are, (yes, an index fund is a type of mutual fund), how to use them, and why they can lower the risk in your portfolio (retirement or other investment account). Like wine, mutual funds are both simple and complex, full of sin-or part of daily life, global and local, and some are meant for holding a long time in your cellar (or your retirement accounts).

Please join me at my office for an after-work, pre-weekend, informative way to put some fun in mutual funds!

More information and registration is here.         

Registration via Brown Paper Tickets.Logo.BPT_small_black

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Hoarding: Finding Treasure in Your House [and Inbox]

Are you a hoarder? I don’t mean with pots of gold or stacks of Benjamins  in your house. What about your rebates, Groupons, Living Social purchases, dividends and other financial gifts? Is your entertainment or shopping budget under attack?

Gift Cards Spa Pass Museum PassIt’s October, so now is a great time to look around your home for some of the following items you may have forgotten about. Do you buy these and then forget to use them? Or do you buy things like this because they are ‘such a deal’, and then have no time or inclination to use them at all?

Gift Certificates: Did you receive a gift certificate to a very nice Seattle restaurant as a thank you from someone?

Gift Cards: What about those gift cards you received at holiday time? Have you used them yet? They are not as apt to expire now or have annual or monthly fees attached to them, as in years past. As an example, when I went shopping for a basic wardrobe item – a new cardigan sweater. I realized that I had a gift card that would lead me to a new sweater. (I also shop at consignment stores but this one was from Christmas, so it needed to be spent). I found one marked down 40%. Whew-a definite bargain. If I hadn’t remembered the gift card, I might have spent cash unnecessarily.

Day Passes for museums and attractions: Looking for a new place to visit on a rainy day, or to take visiting relatives? What day passes do you have in your possession that you may have forgotten about? Oops, I have one for the nearest science museum that’s been posted on my fridge for awhile. Will they still accept it? Better find out soon. The Burke is the local holder of some cool mammoth tusks.

Auction/Pledge drive items: Here are some auction items that I have paid for and not used:

Sit in on a local public radio show for two hours and watch the hosts at work.

Guest DJ at the local national award-winning dance radio station (run by high school students).

Salsa party night for 10 at a nearby ceramic painting studio-sigh. Maybe they are not all expired…

Deal of the Day sites. Have you ever bought a class, or a one night wonder event, or a discount gym membership from one of these? Mine was towards a Red Cross certification that I usually get for free. Not my smartest purchase.

I’m curious about why me and others might not use things like this immediately. Are you forgetful; do you think you ‘shouldn’t’ use these gifts; or is linked to the thrill of the hunt instead?

Since the fourth quarter is upon us (I won’t yet mention the names of all the holidays approaching), take some time for yourself and enjoy a past purchase or discovered treasure; or prepare to share ‘found’ items so that others can enjoy them!

Are there past shopping and bidding treasures in your house or inbox?

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5 Reasons Your Credit Report Matters

5 Reasons Your Credit Report Matters More Than You Think

Think of your credit report as giant file cabinet and the score as a point in time.

Your credit history here!

Your credit history here!

The report summarizes a lifetime of using credit and your score is a snapshot of your current situation plus your accumulated use of credit experience.

  1. The contents could be inaccurate (did you really live in Minnesota?)
  1. Not all creditors report to all three credit bureaus

What if you have something that is affecting your score, but you don’t know what it is. Pull reports from all three bureaus once a year to see how they are the same and what shows up on only one report.

  1. Is it really your credit report?

Two situations I’ve seen recently:

  • a dad and son with the same first and last names ended up with [unintentionally] shared debt on credit reports
  • a mom and daughter are co-signers – what if one person’s credit goes south?
  1. Inaccuracies/errors and outright falsehoods need to be fixed

Your report has contact information for creditors and the place to make a consumer statement about certain aspects of the report.

  1. Only looking at your scores, (available through Credit Karma, Discover, USAA to name a few) doesn’t help you improve them as fast. Without pulling the reports, you may not know the reasons your score is depressed, or the reasons your score is excellent. 65% of your score is derived from paying on time, every time and your credit utilization ratio (how much of your available credit are you using).

For example, one client I knew had an item from another state on her credit report, so she ignored it, as she had never visited that state. Turned out it was the billing headquarters for an old medical bill incurred in her home state. She needed to contact that creditor to resolve that item.  Another example, you and your spouse agreed to split debt payoffs in your divorce, but one of you has not lived up to that bargain. Make a consumer statement to that effect on your credit report.

Pulling your report is free if you use the legislatively created www.annualcreditreport.com.  For the last month I’ve been able to pull credit reports for service members and their families via http://www.saveandinvest.org. These reports include free scores from all three credit bureaus. FINRA  established this site which also includes calculators and how to check out a financial advisor.

Home

Bonus: New version of FICO  [9] will be treating old medical debt differently http://bit.ly/YH9cMJ

Related Link: Getting and Changing Your Credit Report from Debt Slapped Grad: http://bit.ly/1JfbLtb

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Employer Retirement Plans: The Power of 1%

Did you fail to grab some cash last year?

Here’s the scoop on how many people left employer matches on the table last year. I read this study from Financial Engines and was astounded at the billions of dollars unclaimed.

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What if you can’t set aside even the minimum for the employer match? Then what?

I would not be living up to this blog’s title, if I didn’t address this issue. Here are some reasons I’ve heard for not participating in an employer retirement plan:

  • I can do better on my own.  Really? Tell me about it then.
Wring out your own retirement dollars....and show me the money

Wring out your own retirement dollars….and show me the money.

  • The plan is too complicated. That could be true, but there is no excuse for not asking for guidance in order to figure it out. Sometimes the guidance, advice, information is free. Begin with your company resources, then go outside the company if their resources and/or people cannot help you make sense of it all.
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Seek assistance, whether it is virtual or from a live human!

  • I don’t have enough money. If you are living in a basement, eating noodles and drinking Mountain Dews [for the calories] , this could be true. However, even 1% in the traditional 401(k) or federal thrift savings plan (TSP) will lower your taxable income and you might not miss it. At $15.00 per hour, or $30,000 per year gross income, let’s see what that looks like over 45 years (67-22) until retirement, with minimum salary increases (1% annually). See chart below:
Results Summary
Current 401(k) balance $0
Years to invest 45
Annual rate of return 7%
Annual salary $30,000
Expected annual salary increase 1%
Percent to contribute 1%
Your 401(k) contribution* $300.00 per year
Your employer’s 401(k) match $0.00 per year
This is a 0% employer match to a maximum of 0% of your annual salary.
Total you will contribute over 45 years $17,113.77
Total your employer will contribute $0.00
Total at age 67 $100,836
(chart constructed with Index of Retirement Calculator)

With minimal effort, while not making much money, you could save $100,836 for your future. Note: this example assumes an average annual return of 7%, which would mean not being in a bank account, but at least in a mutual fund composed of a combination of stocks and bonds. (Posted rate for illustration purposes only. Not FDIC insured…)

Start saving now!

Visit your company intranet or HR department now. No time like the present to begin saving!

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