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.

Advertisement

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

Pro Athlete Losses Part 3 (updated 4/2014)

In 2013, I wrote two posts on professional athletes handling their money poorly. Thanks to Nerdwallet.com, where I have begun writing on their Ask an Advisor platform (I am not compensated for this), there is finally a good story to read. Nerdwallet interviewed Eric Sogard of the Oakland A’s.  Eric and his wife work with a CFP(R) financial planner. Since joint the MLB, their big splurge on his $510,000 annual contract was a beagle for $1700, purchased at the mall. Plus a house. (not from the mall, I presume)

Eric’s salary is $10,000 over the MLB minimum for 2014, as he is not yet eligible for salary arbitration. In 2013, the average salary was $3,386,212. For those who do not know, players are eligible for salary arbitration after year 3 and before year 6 in the League.

 

Here is the piece fromNerdwallet.  Written by Cliff Goldstein on April 2, 2014

“The face of major league baseball wears glasses? That was very nearly the case when, over the winter, the Oakland A’s bespectacled second baseman Eric Sogard finished second in an online fan poll for the #FaceofMLB—besting the likes of former league MVP Buster Posey. Not bad for a guy who broke into a regular starting role just last year.

Eric caught our attention at NerdWallet for two reasons: his wearing glasses gave rise to the nickname “Nerd Power,” and it turns out he’s a great example of a professional athlete who’s financially responsible. On the eve of the 2014 season, we chatted with Eric and his financial planner, Brett Dimas from OFS Wealth, about the lessons he’s learned about money, some of the first big purchases he made (including one pricey pup), and how he’s working today to set his family up for the future. “

 

NerdWallet: When you were a kid, how did your mom and dad first teach you about money? Do you remember your first money lesson growing up? Read more 

America Saves Week Begins February 25th

“WE ARE SAVING THROUGH PAYROLL SAVINGS” – NARA – 516067 (Photo credit: Wikipedia)

In Washington state, there are multiple activities this week to help citizens “Build Wealth, Not Debt”.

From our Governor’s Office:

“Understanding that having emergency savings, retirement funds and being able to manage one’s debt are crucial to Washington residents’ personal financial security, Governor Jay Inslee has proclaimed Feb. 25-March 2, 2013 Washington Saves Week.” www.dfi.wa.gov/financial-education/wa-saves/pdf/2013-proclamation.pdf

“The campaign theme “Set a Goal. Make a Plan. Save Automatically.” is aimed at reminding consumers to utilize the automatic payroll deduction options at their place of employment to begin building an emergency fund, create a retirement fund or develop a targeted savings fund for their future.”

This ties in with my business philosophy, and using the automatic options available to you is a refrain my clients hear often. We all need a little boost to get the money in the right place, whether you call it a jar, an envelope or a savings or retirement account. In the past, many people were encouraged to use payroll savings to buy US Savings or War bonds.

Right now, your choices can include:

• your savings account linked to a checking account,
• a savings account at the  “First National Bank of Inconvenience” * [location varies],
• a stock mutual fund
• or even a charitable destination.

One well-known financial writer [and former wealth manager] David Bach trademarked the phrase “The Automatic Millionaire”.

Here is one way to begin: Set up an automatic transfer to from your paycheck to an account. It can be a savings account and the transfer can begin at $5 per paycheck. The habit is the first priority. After you have saved some emergency funds (everyone’s number is different), from $100 to $500 to a minimum of three months expenses, then you can set a new goal.

You might be surprised at how accommodating your HR department can be. One company that I work with will send funds to as many as ten different destinations on your behalf.

America Saves has programs on homeownership, surviving a financial crisis, and free tax assistance offered this week in our state. For an event near you, check this calendar.

*No disrespect for banks here, just a label created for keeping your funds in the bank or credit union.

Related articles

• A 50-Something’s Guide to Starting to Save for Retirement (community.ally.com)
• America Saves Week (unionstatebank.wordpress.com)

New College Grads: Money to Invest?

This post is about investing long-term funds if you are just beginning the post college journey and  are not too worried about debt to income ratios.  Here’s one way to begin.

Do a little reading. I like to recommend several books. None of these are boring (you’re here aren’t you?) , they are all well written, and feel free to read small portions.

Your Money or Your Life – 9 Steps to Transforming Your Relationship with Money (first published in 1992, a NYT  best seller and recently revised)

The Wealthy Barber [The first 50 pages or so of The Wealthy Barber are a great introduction to mutual funds in general. I got my copy from the library.]

The Little Book of Common Sense Investing by John Bogle is good for a beginner. It has the story of index funds from the pioneer in the field.

I also enjoyed reading All Your Worth, by Professor Elizabeth Warren and her daughter Amelia Warren Tyagi. Here’s a review from The Simple Dollar blog.

Identify your investable funds.

Here’s what funds are not investable-just to review-funds allocated for short-term goals, such as a laptop upgrade, a used  car, a bicycle, or a trip overseas. Those funds need to be kept in a savings or money market account, or a short-term Certificate of Deposit, to shelter them from stock market ups and downs.

What are your investment goals and how far out are they?

1. short-term (less than one year)
2. medium-term (1-5 years)
3. long-term (5 or more years)

For the long-term funds: choose a taxable investment account or consider funding your first Roth IRA.   The Roth allows you to save on a tax-free basis, up to a $5000 annual limit (or the amount of your earned income, which ever is less).

For 20-somethings that have earned income either from a small business or employee wages (and you are already getting the match from your employer 401(k) plan) you can deposit your investable funds inside the tax-free structure of a Roth IRA. That way-when you remove funds later-there will be no taxes due on the income. (Please do take part in your employer’s retirement plan if they offer one.)

Roth IRA (Photo credit: Philip Taylor PT)

• Here is a good blog post on Roth IRA’s from the Get Rich Slowly blog
• Be sure to check with your tax advisor or the IRS on any deduction limits for higher earners
• Choose asset classes to invest in. (Stocks, bonds, and their sub classes-socially responsible stocks, dividend paying or smaller companies, global funds, corporate bond funds etc.)
• What will keep you awake? Check this link so you can see how different combinations of stocks and bonds have done since 1926. Source: Vanguard

How to begin – lump sum and add to the fund monthly (a great habit to get into), or select a couple of funds (there are usually minimum investment requirements) to begin with and invest $1000 in each one, for example.

Educate, Allocate, and Accumulate, that’s my motto!

Related articles

• Investing: Young? Working? Start a Roth IRA. Here’s how (usatoday.com)
• 5 Reasons to Consider a Roth IRA (money.usnews.com)
• Nine Compelling Reason to have a Roth IRA

Coffee with Warren

Another annual report package in yesterday’s mail  hidden in a plain blue wrapper. Which one would it be?  It’s as if the ‘invisible hand’ of my portfolio is created by my letter carrier.

Finance wonk excitement ensues –  it’s the Berkshire Hathaway report! I made a cup of coffee (high-test), grabbed my yellow highlighter and made myself comfortable. Time to read with Warren Buffett, the CEO of Berkshire Hathaway. (See all shareholder letters at their website.)

 

Warren (aka The Oracle) Buffet, is known for his annual letters to shareholders. Results  are explained in plain English and it feels as if he is sitting on the proverbial couch with you – explaining capitalism.

Warren Buffett speaking to a group of students from the Kansas University School of Business Image is cropped and flipped. See original image http://commons.wikimedia.org/wiki/Image:Warren_Buffett_KU_Visit.jpg (Photo credit: Wikipedia)

Some things to keep from this year’s letter:

Page 4: “I totally miscalculated…when I purchased the bonds.” admits Mr Buffett. [How many CEO’s say they failed so directly?]

Page 5 “Housing will come back…living with in-laws can quickly lose its allure.”

Page 7  “The logic is simple: If you are going to be a net buyer of stocks in the future, either directly with your own money or indirectly (through your ownership of a company that is repurchasing shares), you are hurt when stocks rise. You benefit when stocks swoon. Emotions, however, too often complicate the matter.

[Remember the Nordstrom anniversary sale suggestion here] Mr. Buffett reminds all of us to pay attention to company earnings, not the stock price.

Page 19  His discussion of gold vs another purchase with a comparable value is fascinating.

Someday, I will attend ‘my’ annual meeting in Omaha, aka “Woodstock for Capitalists”. This year, in addition to the furniture sales, there will be a blindfolded US chess champion, Brooks “Berkshire Hathaway Running Shoes” (to outrun the S & P maybe) for sale,  and at least 54 questions answered by Mr. Buffett and Mr. Munger. Next year!

And please be happy that your tax return is not 17,839 pages.

Note: I own ‘B’ shares of Berkshire Hathaway and do not contemplate any trades in the near future.

Related articles

• Surprise… Buffett & Berkshire Hathaway Underperforming Again in 2012 (BRK-A, BRK-B, DIA, SPY) (247wallst.com)

$40 Story-Shortchanging U.S.?

For the math alone, I agree with the extension of the payroll tax cut. It is a great way to place 160 million times $1,000 into the economy, automatically. For most people, the periodic extra $40 will go right back into their neighborhood businesses, or maybe just to their gas stations.

However…

This is a short-term fix for a long-term problem.

What are the long-term losses for the rest of us?

 

• Now both houses of Congress know that the payroll tax (Social Security can be played for political gain.  Is the “third rail” gone? As Senator Harkin said yesterday,

“I never thought I would have to see the day when a Democratic president of the United States and a Democratic vice president would agree to put Social Security in this kind of jeopardy,” exclaimed a visibly agitated Harkin from the Senate floor. “Never did I ever imagine a Democratic president would be the beginning of the unraveling of Social Security.”

• Restoration of these contributions (or payroll taxes) is now positioned as a tax cut on the middle class (as opposed to a contribution to a valuable old age and retirement insurance program).

• If you don’t need the $40 now, are you saving this money for the long-term? Did you increase your contributions to your 401(k) this year?

• How does this cut affect the health of the Social Security program as a whole? According to the White House, it doesn’t.

Alicia Munnell, of the Boston Center for Retirement Research (BCRR) has a sensible suggestion for restoration of the cut here.

As a financial advisor, I can tell you that the retirement age clients I have met with in the last six months are extremely grateful for their Social Security income. If you look at it as a proxy for a pension or annuity, the perceived value in your portfolio goes way up.

When you compare your Social Security income to the downs and ups of the stock market in the last 3-4 years, a staid stable, guaranteed, income for life, for part of your retirement planning begins to look pretty awesome.

Americans are already not saving enough for retirement, and this payroll tax cut doesn’t help us “eat our peas”.