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

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 created  a short program in this  blog post.     To see the results of his research, visit this link from WYNC.

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 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. Ready, set…

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).

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?

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.

 

After Mutual Funds & Merlot

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)

German wine grapes in June 2015 by DCT

#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 12^th. 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 11^th as well-“Buy that big screen TV or the terrorists will have won!”

Not Buying It Judith Levine (Photo credit: Gauravonomics)

2008: Remember September 15^th 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?

Related articles

• 11/16/2013 Shopping Log, Or the First Anti-Shopping Log (extremecheapness.wordpress.com)
• Thanksgiving shopping ruffles Facebook readers (pressrepublican.com)
• http://www.pbs.org/kcts/affluenza/ 
• http://www.zipcar.com/ziptopia/around-the-bend/10-things-to-do-on-black-friday-besides-shop 

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!

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.

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!

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?)

2. 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.

3. 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?

4. 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.

5. 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.

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

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.

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.

• 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.

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…)

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

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!

• 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 1^st 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?

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.

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. 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…

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