Intimidating: Opting In

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

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

“Where do you spend your money?”

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

“Have you begun to save for your retirement?”

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

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

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

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

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

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

Zombies and Zinfandel: Handling Your Financial Monsters is tonight!

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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

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.

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.

Resist this Faux Fall Color: Pink!

A shopping  item from The Detroit Free Press ran in my local paper this weekend, touting the inevitable pinkwashing that goes on during October – Breast Cancer Awareness Month. As a survivor myself, I fully support awareness, mammograms and health insurance that covers annual exams for women. However, like a good annual physical, it pays to cover all the bases-including faux philanthropy by corporations.

The title was ‘pink’ products that really give back. It began with a brief note to check out any charity recipients of product sales on charitynavigator.com, then went on to highlight 5 products to that “caught the writer’s eye.”

I want to single out one of the suggestions in particular-for True Religion Halle Super Skinny Breast Cancer Awareness Jeans retailing for $198 a pair. Again, quoting from the “article”/marketing puff piece, “The company will donate 10 percent from the sale of each pair of these skinnys to Susan G Komen for the Cure, with a minimum donation of $35,000.” That means they are willing to give 10 percent of the proceeds from 1,767 pairs of jeans to Susan G Komen, a company still reeling from branding problems of its’ own. How many hours of sales is that?

$35,000 is a shockingly low number for a donation from a corporation with $467 million in sales last year (2012). In July 2013 True Religion was acquired by a hedge fund,  aka a ‘private equity fund’, called TowerBrook this year for $824 million. (The stock had traded under the symbol TRLG until the merger.)

A donation of .0042% of the sales price-824 million dollars! Very generous indeed, True Religion!

(As 82% of the funds at Susan G Komen go to the “cure”, the real number going to “support breast cancer” is $28,700.)

Note: To my knowledge, I have never owned any shares of TRLG in the past, as individual shares or in a mutual fund. I am not now invested in any private equity funds.

Related articles

• Pink envelopes Metropolitan Park during Susan G. Komen Race for the Cure Saturday (jacksonville.com)
• WTF Internet? A tweeting bra is not helping cure breast cancer (digitaltrends.com)
• The PinkSploitation of Breast Cancer Awareness Month (upperstclair.patch.com)
• True Religion Breast Cancer Awareness Jeans – The Halle in Pink Ribbon (denimblog.com)

 

Uncomfortable Conversations: Zero Left in the Food Budget

It’s the end of the month and here is what could be an uncomfortable conversation with your family: Zero money in the food budget-what to do next?

Here’s what happens: creativity, improvisation and community. This post focuses on what happens if you run out of money in the food budget and creative ways to make do. Please add your ideas to the stew in the comments.

Did your family do any of these things?

• Buy groceries on a credit card
• Scrounge around in the freezer, fridge and cupboards to see if you can make a casserole with what is on hand-even if it is with something unfamiliar
• Make “stone” soup
• Throw a potluck with your neighbors
• Get invited over to someone else’s house
• Eat instant noodles or peanut butter sandwiches until payday
• Create one meatless dinner night (or more?)
• Have “breakfast for dinner”
• Search for all of your restaurant coupons, eat out, then box up half of dinner for lunch the next day?
• Skip meals
• Skip the coffee shop  and buy Folgers instead (number one coffee brand in America)
• Cruise the local big box grocery at free sample time
• Join the local grocery online club to get preferred pricing or free items
• Use a federal or state government program such as SNAP
• Transfer funds from another account to cover food until payday

Do you have any childhood memories like these? Did your family  make it more of a game? If there was scarcity of some kind, how was it handled by your family?

Please leave your stories in the Comments.

English: A brick of Instant noodles as they are commonly available in Europe. Deutsch: Ein Block Fertignudeln (Photo credit: Wikipedi

Related articles

• Cash Grocery Update August 2013 (stayingonbudget.com)
• A celebrity chef on $16 a week (macleans.ca)
• http://www.frugalconfessions.com/save-me-money/how-we-fed-our-family-of-two-on-288-78-last-month.php

Clean One Refrigerator Shelf at A Time

Maybe you can see the connection now. There are a couple of ways to look at the personal finance “refrigerator”, if you will.

Is your fridge full of beer, mustard and party leftovers [from last month]? (Lots of party, no emergency fund)

Is it full of impulse buys like pizza (short-term pleasure) , four types of sauce for chicken (too concentrated), or very few vegetables (not enough diversification), or just not enough real food to make a meal?

Refrigerator (Photo credit: nickfarr)

Or are you the fussy parent who makes sure that the fridge only has healthy, organic, locavore stuff in it?

Enough with the food analogies-let’s get to work.

Empty Personal Finance Plan? 5 things to do immediately

Check your credit at www.annualcreditreport.com

Get Social Security questions answered here:  http://bit.ly/tTkcoK

Check the status of your emergency fund-how many months of income/expenses are in there?

Add up your debts (yes, all of them) Need a worksheet-check here .

What’s in your retirement plan? How much do you need?

Is your Personal Finance Plan too cluttered, too complex?

Find your old, left behind, retirement plans-assemble statements and account numbers to prepare for transfers

Rebalance portfolio asset classes and match up to your remaining years of work (aggressive, moderate, or conservative funds?)

Time to break up with some financial institutions? http://sm.wsj.com/QD4MwE    or   http://bit.ly/nbNn1W

(Be a financial locavore)

Check your beneficiaries, account titles and make sure that someone else knows where your records are http://bit.ly/tTkcoK

As it said in the blog post that inspired this one:

“Clean off one refrigerator shelf each week so you don’t have to do it all at once.”

Related articles

• Clean Out Your Refrigerator Day is today (lunaticoutpost.com)

Personal Budget or Plan? Words Matter

Words matter.

A picture is worth one thousand words.

It has been said that it takes from 4-7 positive comments to overcome 1 negative one.

How can we use these three statements to improve our spending habits?

If you made a visual spending plan and tried out new self-talk each month, would that make a difference? Might that keep you from derailing yourself? I challenge you to make it so.

For example, you could find a photo of your financial goal and place it in a prominent position-where you can see it every day.

• Try a sign that says $500 savings balance/emergency fund. (save this in one year<$10/week!)
• Take a photo of your full refrigerator-for someone trying to cut down on eating out.
• Post an image of your public library card-so you have the visual trigger for downloading music, book reading or borrowing a movie from the library instead of purchasing  any of those items online. Or send yourself a text message to that effect!

I have three points here that go beyond the usual budgeting tips.

1. How you talk to yourself about your spending matters
2. Use visuals as well as words to make the point to yourself (and your family, if need be)
3. Use affirming language, praise and encouragement to support your behaviors.

Instead of, “I wish I could pay my bills on time”, say to yourself, “When I pay my bills on time, I feel good and I will have more money to spend, because I won’t be paying late fees.

Instead of, ” I must have that new song from iTunes right away”, remind yourself of your online music spending plan, and figure out if you have the funds this week. When you match up your plan with your spending, it is a powerful feeling and you can reinforce it. Oh-“I don’t have more money in that bucket this week, I’ll place this song on the top of the list next week”.

iTunes (Photo credit: ʇhamin – free lancer)

Instead of saying to yourself, “I’ll add to my emergency savings account at the end of the month, or at the next pay period”, say,”I will send a sum each pay period to my emergency fund via direct deposit, so that I am able to meet small unexpected expenses without using my credit card”. Doesn’t that feel more powerful?

Save Money (Photo credit: 401(K) 2012)

When you do something right, affirm that behavior in your head and heart to reward yourself. It is important to acknowledge these smaller steps as you build new habits.

Say, “Wow, I did that”; or “It will be so cool to see my savings account grow”; or even, “I didn’t know that homemade sweet potato fries would be so tasty”.

Related articles

• Free Music From The Public Library To Your iTunes Library (denver.cbslocal.com)
• Little Known Ways to Stop Busting Your Budget (enoughtimemoms.com)

In the Mood: Music for your Money “Workout”

What gets you in the mood…for money management?

Money Money Money Mooooney (Photo credit: Ahmed Rabea)

Blues for budgeting?
Polkas for planning?
Rap for retirement funding?

Jason Zweig has a great list here .  My personal list also includes a few titles not on Zweig’s list.

• For a calm session of financial sorting, filing and shredding, how about “To Everything There is a Season” by The Byrds?   
  

• When thinking about the Great Recession, there are many versions of “Brother, Can You Spare a Dime?” I enjoyed the late Daniel Schorr’s impromptu version on NPR, and am also fond of the song as sung by Broadway and TV star Mandy Patinkin. Here’s a link to a  rendition on David Letterman .

• This lively song “Money, Money, Money” (I prefer the Meryl Streep video) reminds us despite the movies, a rich man may not be the best solution.

• Last but not least, listen to some classic Aretha

Aretha Live at Fillmore West (Photo credit: thejcgerm)

to remind us it is good to:

spend your money in line with your values,

respect the hard work of others

and above all, respect yourself with  your spending.

Guide on the Side vs. Sage on the Stage

Recently I was speaking with a small group and mentioned that my style was to be the “Guide on the Side” instead of the “Sage on the Stage”. This is a phrase I picked up from my time hanging about with classroom teachers. The source for this phrase is from  1993 article by Professor Alison King.

Here’s what the phrases mean. Well, really what I mean, within the context of financial education and learning. Feel free to chime in by making a comment below.

Sage on the Stage: In the old days, the teacher was the only one talking and spent all of her/his time in the front of the room talking offering knowledge to their students. Very little feedback was sought and was often punished if unwanted comments or questions were asked. Did you have any educational experiences like this?

As with other institutions, there was only one perspective shared and/or valued. You had to conform to the teacher’s style.

Students were expected to listen, take notes, memorize, then regurgitate upon request.

Guide on the Side: Using this style, the educator/leader walks along side the students, instead of leading from the front. I am reminded of Paulo Freire when I think of this:

“It should not involve one person acting on another, but rather people working with each other. Too much education, Paulo Freire argues, involves ‘banking’ – the educator making ‘deposits’ in the educatee.” (Source the non-profit site infed.org)

Ô Homi (Paulo Freire) (Photo credit: paulicasantos)

When I work with clients, I want to be their “Guide on the Side”. Sometimes people say to me, ” I don’t know anything at all about money/investing/finances”. Well, of course you do. That is a given. How much do you need to know? That is a subject for a first meeting…And a two-way conversation.

First, I like to learn about your family lessons about money, finances and savings, plus how you have implemented those lessons-or not.

• Are you a spender or a saver?
• How much financial news do you consume?
• What worries you?
• What do you take pleasure in doing?

My job is to help you move forward from where you are; after understanding about how you got there. It is an interactive experience, where your perspective matters-a lot. If we don’t move forward together, we go nowhere.

education (Photo credit: Sean MacEntee)