Family Lessons about Money – Layoffs

This post was to align with the America Saves Week (#ASW2015) day for family communication and financial education. Gather the family around the virtual campfire and prepare for the conversation of your life. Now is the time to let go of any family taboos around discussing money.  This is especially true if you have children living at home. You can adjust your talking points, depending on the ages of your children, but you need to be in on this as a team. Before we get to the five things, two suggestions for framing:

Your Family - Working Together!

Your Family – Working Together!

  • Be truthful-mom or dad is going to lose her/his job and we have to prepare for that soon.
  • Be reassuring – mom or dad will be getting a new job after that, and we need your help now to get there.

You could also set up the discussion and introduce some crucial concepts like this: “In our family, we have needs and we have wants. Our needs include food for everyone (we won’t forget our pets!), a roof over our heads (explain the difference between rent and a mortgage to older kids, be more abstract with younger ones), paying for the heat, lights, phone and Internet service, child or after school care that allows parents to work outside the home, and transportation to get family members where they need to go. We will keep our health insurance so everyone can stay well and get their teeth cleaned.”

Wants will be different from family to family and be prepared to give examples at the campfire. High-speed Internet may be a legitimate need for business purposes, but several sports channels are going to be in the want column, unless you’re a sportswriter. Adults and kids can make changes in different ways.

As Benjamin Franklin might have said, the following three activities revolve around being healthy, wealthy and wise.  I’m adding two more intangibles: go actively towards the next destination, instead of away from what you’re doing now, and be sure to use your own roadmap.

Health: Know what you’re up against!  Is health insurance part of your severance agreement? Do you have severance? Tip: If your last day of work is early in the month, your group coverage usually extends through that month.  So a last day at work of May 1st is better than April 30. Post-layoff choices could include COBRA, a group plan through your professional organization or union, a family policy from your state’s exchange (using the Affordable Care Act) or going without coverage. Going without health coverage could derail your family finances in a hurry if an emergency comes up. If a large layoff is rumored or several months out, immediately catch up on any work-related reimbursements for transportation, child care, parking or flexible spending accounts (FSA).

Tip: Make those routine appointments ASAP.

Wealth: Do you have at least nine months of income or expenses set aside? A year or even 15 months of expenses would be better, or a working spouse who can supply the income and benefits to cover you or your family as you move forward. List all loans, debts and upcoming fees and rank by amount and interest rates. Two schools of thought on retirement deferrals: Keep making the minimum contribution to get the company match—the thought being that it might be awhile before you can resume contributions; or cancel your salary deferral in order to boost your emergency fund or pay off debt. Paying off debt will require some serious family discussion. What makes you feel more secure—a larger rainy day fund or less debt?  Can you stop adding to any debts, and reduce credit card use while you prepare? If so, move forward with that. here is a link to a free budgeting tool.

Tip: Automate all minimum payments so that your credit history is not harmed.

Wisdom: How well prepared are you to meet the intellectual and emotional challenges of being laid off and seeking new employment? Who will be on your kitchen cabinet, helping to advise you as you move forward? What about that LinkedIn profile? What about certifications, or continuing education? Can you use a tuition reimbursement benefit? Who will be part of your new work community? (Check out local co-working spaces for some ideas).

Tip: Create a family gratitude list, so you can keep in mind the non-material riches you already have.

Embracing the Hunt What are your strengths? Create a list of what your preferences are in a career, (often harder than the deal breakers) to leverage those in the next position. Do you have a side job that is begging to sit at the grown-ups table? A friend of mine is tired of teaching, but she is a talented quilt designer.  Perhaps that is her next career.

Tip: A good career counselor can save you lots of time.

Roadmap Draw your own! I cannot stress this enough. It’s ok to have a tour guide though-that means you can ask for help. A map made for someone else can be seductive.  But your brother-in-law’s map may not work for you.

Does this map belong to your family?

Does this map belong to your family?

As George Harrison sang, “If you don’t know where you are going, any road will get you there.”

Your next position has to come from what is best for you, so that when you are stuck at the side of the road, whether in Tacoma, Toronto, or Timbuktu, you have created a map to the best destination for you and your family, after the layoff and beyond.

Note: An earlier version was published on Nerdwallet’s Advisor Voices page.

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How Do I Love Thee (Post Valentines Day Edition)

How Do I Love Thee? On Paper, Online and On Time

In life and in death, let me count the ways that I love thee.  Let’s review the beneficiaries, the online accounts, and the papers.

Rosemary is for Remembrance

Rosemary is for Remembrance. Wikimedia

To paraphrase Meghan Trainor, modern philosopher:

It’s all about that signature

It’s all about survivorship

It’s all about that heir, no trouble.

When you love someone, you are told you should have “your affairs in order”.

This is much harder to do than say. What affairs, what is order?

When you have a family, you want to look ahead into a future where you may not be in the picture.

“Yikes, this means I have to pretend I am dead; that makes me uncomfortable and I’ll just hope nothing happens.”

It’s going to happen, trust me. Photo credit: http://www.pdpics.com 4211

This is a common reaction, due to your present, your past or reluctance to look too far into that uncertain future. I have met many people who think that they don’t need to consider these things, because “they don’t have any assets”, “they don’t have any children”, or all they have are the photos on their Facebook and Instagram pages. But you do, you do! You have your organs, your online life and photos, and your entire financial life to care for and secure.

You may have missed the opportunity to send roses or a sentimental card this past weekend, but here are several steps to take in this next week, to say “I love you” to those special people in your life. I’d like to help you move into action!

On paper: Check your retirement plan beneficiaries at work and for your personal retirement accounts. Do the beneficiaries match up with your current sweetie and family? Just sayin’. By the way, for those of you with older pension plans (could be frozen, or discontinued), check those too and keep a copy of the beneficiary page.) You can keep a paper copy, scan or photograph, then store in your cloud somewhere.

Real life story: This just happened to a friend-her husband hadn’t updated his old pension plan documents when he got married. When he passed away suddenly in 2014, his cousins were still his beneficiaries, not his wife. These cousins were sympathetic, but not all relatives would be as thoughtful.

It is important to create, review, or update important documents (will, power of attorney, health care directives) before any major life transitions. This probably also applies to people who take part in extreme sports, marathons, and those races in the mud. If you are in the military, they will place you in a workshop with your significant other to cover many things like this before deployment.

Online: However, online access may still be a problem. In real life, (IRL) your loved ones do not have the access to your emails, online accounts and photos that spammers or identity thieves do. In the Terms and Conditions of our online accounts, there is usually a line or two which explains this privacy policy. Google has tried to fix this with their Inactive Account Manager, and just last week Facebook offered the opportunity to set up a Legacy Contact after your death is proven. Yahoo Japan launched a service to manage your digital profile after you die. https://ending.yahoo.co.jp/ See if you want to set up one of these contacts.

Real life story: http://cnet.co/1Mn3RPO Yahoo denies family access to dead Marine’s email.

 On Time: This has to do with matching your documents and decisions to your actions. Wedding coming up? Do you need to alter your current will and property distribution? Would the laws of your state (and your family) allow your loved one to make medical decisions for you and visit you in the hospital?

Real life story: a relative with a terminal illness lived into the last month of his car loan, so his wife didn’t have to  worry about that last payment. This relative also hadn’t changed two pieces of property to be jointly owned with his [second] wife, so altering those property deeds occupied some stressful hours of his last days.

Love in a box, or a document, or in your will...

Love in a box, or a document, or in your will…

PS For those readers who may have several kinds of pensions (military, Social Security, employer plans), it is important to check the pension payouts with your spouse. For example, will you choose a single life or joint and survivor payout? A single life payout goes for one person’s (the retired employee) life. A joint and survivor payout is calculated over the joint life expectancies of the couple. It is usually less than the single life payout, but it provides a lifetime income for the survivor. See definition of joint life payout from Investopedia here.

If this post inspires you to take action, from creating new documents to reviewing existing ones, you will feel better afterwards. It might feel uncomfortable at first, but the relief generated upon accomplishment will feel wonderful. Plus, your family members will thank you for remembering them.  Get from To-Do to To-Done! (Shout out to https://transmutable.com for my first To-Done experience.)

Related links

http://organdonor.gov/index.html 

http://www.usa.gov/topics/money/personal-finance/wills.shtml

http://www.nlm.nih.gov/medlineplus/advancedirectives.html

http://www.investopedia.com/terms/p/powerofattorney.asp

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New Year’s Resolutions-How Are You Doing?

As a nation, we are making fewer New Year’s Resolutions each year. Usual categories are in the areas of smoking (less), eating (less and better), and finances (all the things). Which ones are easier to keep?

General_Work_Out According to a study by Fidelity: financial resolutions are easier to keep than the ones about smoking and eating differently!

42% of people surveyed find financial resolutions easier to keep than smoking less or exercising more.

And, the top three financial resolutions continue to be:

  • Saving more (55%)
  • Paying off debt (20%)
  • Spending less (17%)

After six weeks, many of us give up forget revise our resolutions (you can ask me about my goals for planks!)

Very different from planking! By the way, I would be most likely to be seen planking in a public library.

"Planking on a people mover" by Danielleevandenbosch - Own work. Licensed under CC0 via Wikipedia - http://en.wikipedia.org/wiki/File:Planking_on_a_people_mover.jpg#mediaviewer/File:Planking_on_a_people_mover.jpg

“Planking on a people mover” by Danielleevandenbosch – Own work. Licensed under CC0 via Wikipedia – http://en.wikipedia.org

Continue reading

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Do Your Taxes (FAFSA Edition)

This tax post is for FAFSA filers old and new; includes parents of this year’s college seniors and parents of students in college now.

It’s a good day to…”Do Your Taxes”. Or at least generate a decent estimate.

Tax Forms 1040

Who should do an estimate by January 1st?

1. Parents of high school seniors off to college next year
2. Parents of current college students
3. Self employed people
4. Taxpayers with a change in income, plus or minus 20%+ over last year.

This post focuses on FAFSA filers…
Experienced FAFSA (Free Application for Federal Student Aid) filers know the joy of spending a part of the upcoming holiday weekend on personal finance and disclosing your finances to another government agency. I invite you to include your high school senior/college student for part of this exercise so that they understand that they aren’t the only ones who have to fill out forms so that they can go to a post-secondary educational opportunity. Some reasons to do so:

Funding college can feel like this!

Funding college can feel like this!

  1. If the family won’t be eligible for college aid due to the family income or assets, they need to see why.
  2. If the only way they can go to college is due to a lack of resources, they need to understand the forms and their importance.
  3. This is a good time to remind them to seek scholarship applications-many open up January 1st of each year.
  4. Review your in-house rules for having “skin-in-the-game”. For instance, We expect you to earn/contribute $5000/yr towards this cost. Or you need to apply for X number of scholarships.

Note 1: The FAFSA asks for many pieces of financial information and despite the requests for early completion, most people have not even thought about their tax filings on New Year’s Day of any year. For divorced parents, it is good to communicate in advance about the required information.

Note 2: It is always recommended to complete the FAFSA, even if you think your family will not be eligible for any aid. In the coming year, there might be some program that requires the FAFSA, despite no financial aid award now.

Deadlines

Complete the FAFSA as soon as possible-your place in line matters for aid awards. This applies to federal and private sources of funding. A list of deadlines are here.

You can order a PIN to sign the FAFSA now at https://pin.ed.gov/PINWebApp/pinindex.jsp .

Print some tax forms. (for notes and listmaking) Choose an online tax calculator such as http://www.ownersmanualdownload.net/moneychimp-tax-calculator-2014 or http://www.bankrate.com/calculators/tax-planning/1040-form-tax-calculator.aspx. Please note, these are for illustrative purposes only. The idea is to choose one that is easy for you to work with. Please use your favorite search engine to select one for yourself.

 

Get 'er Done!

Get ‘er done!

 

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Your True Balance Sheet

Most times I work with a client, we make a balance sheet to show their net worth. This shows what you own, what you owe and shows the difference between them. Some years in life (with mortgages, business, car or education loans) it may be negative; other years it will be positive (with a good trend line).


But these numbers do not not capture your life’s true balance sheet.

  • Some elements of that here:
    Your dreams-what dreams of yours have come true? What dreams so you still have?’
  • Your relationships-family and friends, your business community, receiving a smile from a random person as you walk down the street, seeing a beautiful image, created or from nature; other moments of artistic bliss.
  • Your education and that of others-not your formal education, but the education from being a lifelong learner and seeing lessons shared with loved ones bear fruit in their lives. Being able to continue to grow.
  • Your capacity for love, empathy and compassion for others.

Those cannot be measured by mere numbers, but in the delight, joy and compassion you receive [or give] in your life.

All the best to you and your families, with best wishes for a joyous, abundant year to come.

Seattle's  Victrola Coffee 2012. Photo Credit Dana Twight

Seattle’s Victrola Coffee 2012. Photo Credit Dana Twight

 

Related Link: Share your values with your children; either in late night/early morning chats, stealthy emails or by writing an ethical will. Ethical wills have been used for 3,500 years. http://nyti.ms/1JS0tLv

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12 Days of Christmas: First 4 Days

My first four days of suggestions for your holiday learning and enjoyment are below.
Our brains love experiences more than stuff, (#1) but some of us (1 in 4) also have a gene which may stimulate the wrong impulses (#2). It feels good to give, so help a friend or family member find missing money (#3). Learning about personal finance, our brains on money and planning ahead isn’t boring; and can be done in less than an hour (#4).
Great program to watch with the family, including the middle schoolers with allowances or the college kids home for the break.

#1 For more anticipation and satisfaction Buy Experiences Not Things. http://theatln.tc/1xJSKtw

Baseball on the road-2013

Phillies Baseball-2013

 

 

 

 

 

#2 Better Living Through Chemicals? Why Buyagra might be impacting your shopping style…http://ti.me/1HCMGqZ

#3 Help someone else with an unexpected gift (or return of their own long lost money)  this season. Seek unclaimed funds in any US state here. I’ve known people who located $75 to $134; and $4,000-$6,000 on one of these sites. Search on behalf of a nomadic relative, old friend, or even yourself. Utility deposits, last paychecks or uncashed dividend checks…http://bit.ly/YDCwkw . Also, this link will take you to a page where you can hunt for uncashed savings bonds (issued after 1974). http://www.treasuryhunt.gov/

All electronic now, but they used to look like this!

All electronic now, but they used to look like this!

 

 

#4 Put this one on the calendar http://youtu.be/Sv0cyyhAc7k This two-minute trailer for the new documentary Thinking Money will air on KCTS (Western Washington) on Sunday, December 28th, at 2pm.

Seattle's Original Victrola Coffee 2012

Seattle’s Original Victrola Coffee 2012 by DCT

Related blog post: https://nodollarleftbehind.wordpress.com/2012/12/03/bright-shiny-objects-2-holiday-traditions-or-shoulds/

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I have Six Figures of Income…and Debt

The question below on how to handle six figures ($354,000) of debt with an incoming check for $500,000 was answered by me on October 30th at Nerdwallet.com. Since last spring, I’ve been answering questions from real people at Nerdwallet’s Ask An Advisor platform. Those of us on the platform answer real questions from real people without knowing all the relevant information, only what they tell us. Other answers as well as mine can be found here.

Q: I will soon get a check for $500,000. I have $354,000 in student loans. Should I pay those off first?

A: (Dana Twight) Great that you are asking about how to handle this windfall. This is exactly the situation that financial planning is made for – balancing competing priorities and improving your short and longer term financial situation.

5 Points to Consider

1.Other debts: Do you have any other non-mortgage debts? If you do, they may very well have higher interest rates than your student loans. Consider paying those balances down first.

2. Emergency funds: Do you have an emergency fund-are you employed? In addition to the fund portfolio suggested by my colleague, I would consider setting aside a fund with six months income or expenses in it from this check. Or you could set aside the amount of one year’s health insurance premiums and deductibles. This could be the base of that fund-keep it in insured CD’s or accounts.

3. Insurance: This is also a great time to build an umbrella liability insurance policy into your annual budget. This type of policy covers you above other liability limits (say on a residence or a vehicle). Investopedia has a definition which mentions that it also includes libel, slander and invasion of privacy.

4. Tricks: Be careful about how you share this news with others. Resist the opportunity to open new credit accounts. Visit the opt-out website to opt out of new credit card offers https://www.optoutprescreen.com/?rf=t so that you don’t get oceans of new email or regular mail offers. Your financial institution may see your funds deposited and offer to help you invest them-stick to a fee-only planner and get hourly advice instead.

5. Treats: It’s ok to let yourself do something fun with a small part of the money, if you have waited for a vacation or a newer vehicle, or a really cool bike. Also treat yourself to fully funding your 2014 and 2015 retirement plan contributions, if you are still under retirement age.

Last but not least: Do you have your estate documents in order? A will, a durable power of attorney and health care directives as required for your state are a must. Take the time and the nominal percentage of this windfall to make sure that your documents match your intentions, now that you have more assets.

 

oakleaves2Best wishes for your success in your chosen field!

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Hire a Professional: 6 Steps to Prepare

One of the most common questions every financial adviser hears is,”What shall I bring to a meeting?

In order to maximize your time with a professional (visit www.letsmakeaplan.org to find a CFP® ), I suggest six steps to take first:

 

1. Pull a truly free copy of your credit report at www.annualcreditreport.com  (your scores are based on the report information)

2. Pull a copy of your accrued Social Security Benefits ( Yes, you will be able to receive a benefit in the future)

3. Gather up your employee benefits books or intranet site, last year’s tax return (first two pages is a good beginning) and any company retirement plan/bank/credit card/student loan statements.

4. Write down some family lessons that you learned about money (take 5 minutes and see what you come up with). For example, never borrow money, save 10% of everything, always buy on sale, etc. Walking up and down every grocery aisle was one of mine.

5. List your expenses (all of them), and then your income. See how they match up to the 50/30/20 rule. 50% needs/30% wants/20% savings.  (from the book called All Your Worth by Warren and Tyagi)

6. What are your financial hopes and dreams? Retire at 50, travel around the world for one year, start your own business…do share those with your adviser as well.

wikimedia-16_1_go-sign

Now you are more knowledgeable about your financial past and present, so that you can use a professional to discuss your financial future.

PS: You may decide to interview more than one person. Prepare these items and see who asks questions on any of the topics.

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Spending – It’s Handled

How do you handle your spending? Is it an aimless stream of expenses, or do you have a plan for each month and year? Sometimes  a budget is hard to follow, especially if it is inspired by a particular event, such as a move, a raise or a layoff. Or, as happened to me once-it was someone else’s idea that I have a budget. First: words matter. I prefer the term spending plan, as I think when you are planning your spending, it implies more forethought and care for yourself. Be proactive!

The hardest part for people is to record all income and spending. No, I am mistaken – the income part is usually easier than the spending. When recording income, include wage income, as well any other sources along the way (rental income, refunds, rebates, gift cards, checks from any side gigs etc.).

Now, you are ready to record your spending (you can use online tools such as mint.com) or check your bank or credit union-they may have a free online solution already integrated into your accounts. Or use a notebook, a napkin or your bank statement. Low tech is better than no tech.

Stop and review your spending first.

Stop and check your spending first.

Which expenses are fixed? These may include rent/mortgage, insurance, tuition, commuting costs (tolls, parking, gas), groceries, utilities, loan payments (student loans, car payments, minimum on your credit card bills, if any), tax withholding, child care, pet care or babysitting costs, condo fees.

Which expenses are variable? These may include eating out, any phone/internet/cable costs above the basics, paying extra on any loans or credit card bill, clothing, gifts, personal care, charitable contributions, and entertainment. How do you handle vacation spending?

Next, look at some ratios and categories more closely: Continue reading

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New Job New State

Here is a response which some found helpful at Nerdwallet.com’s Ask AnAdvisor platform. This question was about accepting a transfer and the salary impact when changing states for your job.
Someone I know changed states recently but not their job title or responsibilities. In this person’s case, there was a new state tax withholding requirement which will impact cash flow until the next tax return is filed.

STOP.sign

Some practical points to check before seeking or accepting a locale change:

  • What are the taxes in your new town or city? In some large cities there will be three levels of income taxes.
  • Is there a local sales tax?
  • What are they paying new hires for that job function in that town or city?
  • What other factors will impact your cost of living?  Nice neighborhoods, schools, public transit

 

Other considerations for changing jobs include but are not limited to a change in your 401(k) salary deferrals (increase them if you can); the financial impact on your spouse or partner and which costs of living will change in your new place. (Housing, child care, education, transit, and for foodies – availability of organic produce or gluten-free products). Proximity to family could be important for grandparent involvement and vacations.

 

 

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