Finance with Chocolate Sauce

When you sit down to handle your money, all alone at your computer, you may feel as if you are the only person worrying about the financial issues that concern you. You are probably NOT alone in your concerns. Here are the top 8 financial concerns:

Number #8 – No financial plan – So you know some of your goals, and you aren’t even sure they are the ‘right’ goals. But you have no plan to achieve them. According to one study, only 40% of Americans even have financial goals and only a small percentage have them written down. If you have financial goals, you and your spouse may not even AGREE on what to do next. Having a professional improves your chances of finding agreement and making a unique financial plan suited for your family.

Number #7 – Volatile markets – When the economy is moving along and any investment you make grows, life seems better and you feel smart. But when economic cycles turn your world upside down, or disrupting events cause years of downturns, it can make you wonder if you will ever reach your investment goals. Many individual investors pull completely out of the market when there is a downturn and then miss the recovery. If you know your risk tolerance, understand your investments, and use wisdom, even though no one knows the future, things generally turn around.

Worry Number #6- Crushing debt- If you have little cash remaining after paying bills and opt to use credit cards, your situation will become more difficult. You CAN get out of debt. You CAN stop adding to the debt and begin to take control of your life. Aiming your efforts at one small debt and gradually paying that off, to then add all that money paid monthly towards the NEXT debt. It may take a long time. But eventually, you will be in a better situation than you are now and free. Imagine how wonderful that freedom will feel!!!

Number #5 – Housing – In many markets housing has recovered from 2008 lows. Wages may not have kept up. And many are not preparing for home ownership with a disciplined savings plan.

#4- The fourth most concerning financial worry is no emergency fund. If you take money for saving right out of your check – either automatically, or getting cash out of the bank to put in a safe place, before you pay your bills, and you make a discipline of it, you will have an emergency savings account. For EMERGENCIES. Like a fire extinguisher is for emergencies. A real emergency. Not, oh, that’s nice and it’s on sale. Not, well I want to get that thing and look at this account full of money. Emergency savings.

#3rd top financial worry is college- To some making a decision about where your precious baby will go to school based on money seems cold. But it’s not cold. It’s amazingly practical. State schools tend to be less expensive. Local colleges mean that you don’t have to pay for four years of room and board. Scholarships, a 529 college savings plan, working while in school are all ways to help make college costs less onerous.

#2 Planning for Retirement- About half of people over 55 have nothing saved for retirement. Starting late to save is better than not starting at all. But starting early, and having the awesomeness that is compound interest work for you is even better.

#1- SPENDING- The top worry according to this article that plaque people about money? Undisciplined spending. Feeling like they ‘need’ more and more stuff and things. Eating out many nights a week. Spending when they are tired, feeling out of sorts, or entitled.

If you work hard for your money, you should definitely be the boss of it. Take it by the throat and get out of it what YOU want. Security. Freedom. A future. It’s all in your hands.

Budgeting is one of the things I discuss often with just about everyone who comes into the office. Even with folks close to retirement, we discuss again what their retirement budget might look like and how to expand or contract things based on cash flow.

So let’s talk about budgets. I prefer to deal with this starting with FIXED expenses and always as a percentage of what you have, even if you practice charitable giving or tithing, the money you have left is the 100% from which we begin calculations. If in any of these calculations you find yourself over the recommended percentage, that’s fine. But it is the reason why spending for things besides bills, or the category called LIFE, feels tight.

1. First and most substantial fixed expense is HOUSING. This accounts for 35%. It includes more than your mortgage and insurance. This 35% also includes utilities, such as electricity, gas and water. It also includes a savings category call ‘maintenance,’ which equals 1% of the value of your home set aside each year for repairs. Ex. If you house appraises at $100,000, save $1,000 a year for maintenance.
2. Second largest fixed expense, at 15%, is TRANSPORTATION. As with housing the category does not only include car payments. It also covers insurance, gas and ‘maintenance.’ I would say that means estimating the cost of tires, oil changes and registration. Add up you annual expenses, then divide that number by 12- since our payments are usually on a monthly basis.
3. Next, also at 15%, is debt repayment. If, in learning the hard lessons of life, your debt repayment far exceeds the 15%, you have probably figured out that that’s the reason there is little fun money.
4. The last fixed category is SAVINGS at 10%.
5. The rest of your money, 25% in this example, is for LIFE. That covers allowances for the kids, vet visits for the pest, food and eating out, clothing, gifts and vacations.

If you are not saving and you have little money for LIFE using this percentage budget you can more easily see what is causing the squeeze.

What is important to you about money?

I ask this question of every client so I can better understand what motivates them in their decisions. Each person’s unique concerns sets the foundation for their financial plan.

Security – What’s important to you about money? Happiness or security are the most common first responses to this question. What drives you? What’s your underlying reason for working hard for your future? Understanding your primary values concerning money helps you and your advisor be on the same page in creating the best financial plan for your specific needs.

Family – Why is security or happiness important to you? Why are those values important? And a common answer to the query is that people want to make their families cozy and safe. They want to spent time with them, relaxed and not feeling stressed by the hectic work world. They realize that every day that goes by cannot be relived and they want to be strong, not fretful, and content and not harried, when they are with their wee ones.

Giving back – What else is important to you about money? For many, giving back is seemingly part of their DNA. They hate to see others suffer if they can do something to help. They may not be millionaires, but they feel compelled to give. These are people who want to use their resources, their money, compassionately in the community, meeting needs. These givers care about men, women and their children, down on their luck, those who are homeless or hungry, and animals who are abandoned.

Making a difference- What’s important to you about money? Often having enough money to share means being able to make a difference, to change the world even if it is on a small scale. The importance of money is not just for self, in the minds of many. Money’s import is further exemplified by making the world a better place, whether it means giving of yourself as a volunteer or with your checkbook.

Understanding what’s important to you about money is a critical element in setting up your financial map so that your money’s activities are consistent with your heart’s desires. (CR10780)

In my practice a common and growing concern is building order in YOUR finances with the pressure of adult children and their unexpected financial needs. Parental emotional concerns and financial issues collide. What can you do?

Unexpected beginnings – Everything was fine until…something happens that causes an adult child who was living on their own to come back to their parent’s house. It could be job loss, injury, divorce. Of course you want / need to help your baby when they are hurting. Who else should they be able to rely upon? The problem becomes a more apparent concern as the days turn into weeks and weeks and then into months with no clear plan of normalcy.

Time to draw the line – Eventually, and preferably earlier than later, well before everyone loses their cool and the financial drain takes you all down, parents recognize the need to set the little birds free and get them BACK OUT on their own. To get clarity from the chaos emotions need to be politely kept in check and your most excellent raising-responsible-adult-parental hat needs to be firmly affixed upon your sensible head. Set a goal that in two months this situation will be changed and your ‘baby’ will be moved back to their own place and out of yours. Then figure out how to get to that goal.

Make a plan- This adult is overwhelmed and they have no idea where to begin. This life event is new territory for all of you and they have much less life experience than you do. You have seen others experience this problem. You know a thing or two about how to proceed to make a new path.

Once again, as a parent your life experience is the best help of all. What is the cost of housing in the area? Will roommates be needed to move to the preferred area of town? If that is the case would renting a house be a better idea so there is adequate room? Is subsidized housing a part of the plan? If so, get on the waiting list NOW.

Will they need financial help in the transition? Is that something you are able or willing to provide so they can get out and on their own feet? Can you subsidize their rent payment in a place prior to the more permanent housing arrangements?

You taught them so many practical and important things in life. Now teach them how to budget. Do YOU know how to budget? Get online and get some tips. Or get them, and possibly you as well, some financial counseling from a local non-profit financial counseling agency or a wise friend.

Introduce them to people so they can network for job opportunities. Introduce them to people who can give them tips on their job hunt. Help your son or daughter know that more than one job may be necessary or that a change in their education may be a help.

Help them get information regarding refinancing school loans or the repayment provisions based on income.

Ultimately, you and your adult child who benefit from helping the ‘little birds’ be free. It is for your sanity as well as theirs that this be a time only of TRANSITION and not a new lifestyle. (CR10642)

With a growing population of wealthy women financial service professionals are looking to win your wonderful selves over to using their expertise with your asset management.

Some advisors, like me, have always known your value. But others are now noticing you because of your growing wealth.

Here are the reasons advisors want you and some of the transitions that usually prompt a visit.

Wealthy – You may be a woman who is in transition. You may be a widow or divorced, or perhaps you just had a baby.  That is typically a time when getting a second opinion for your finances is wise. You may have shared in the family’s money management. But with life’s changes perhaps you are managing alone. Instead you may prefer to have a coach who can help you as you reassess your goals and make sure your financial plan is up to date. You may not have a plan at all. The busyness of life may have made the planning of finances something you meant to address but it just never got done.

Loyal – Women customers invest in stocks and relationships. To a woman a work relationship is not considered merely ‘transactional.’ Women make friends with their advisors so tend as a group to be loyal clients.

Perhaps because of this close bond women are generally wary giving their trust and are very careful in committing to a professional. They do research and have an idea of what’s important to them and their family. But once they have decided on you, they are very loyal.

Refer – And loyal women clients are eager to help their friends and relatives know about their professional. When speak to each other, as they research and consider important characteristics, they tend to refer to one another.

If you are a woman, you are just the person the financial services industry is seeking. Be on the lookout for their wooing because, to quote from a famous poster, ‘they want YOU.’  (CR10607)

So many retirement plans! And when it’s not your area of expertise…yikes, it can be overwhelming. So what do all the letters and numbers mean? Let’s discuss!

Step ONE- Pre-tax contributions – Most retirement plans are funded with what are termed ‘pre-tax contribution.’ Taxes are NOT removed from that contribution now but will be owed later, when the money is removed from the tax-deferred protection of the particular account. So if you are twenty years old and begin to save, the money contributed to the account is pre-tax, and if you didn’t begin removing it until age seventy, for example, the money grows protected from tax, or tax-deferred, until you remove any or all of it. Each amount withdrawn prompt the taxes due.
First a caveat: all of the accounts mentioned below have additional benefits and restrictions that cannot be addressed in this short post. You should know that the information provided here is a very general overview of these plans and you should seek more detailed information from a financial advisor.

Account TYPES- Here are a few of the types of accounts frequently held.

403(b)– Used by public schools and some hospitals this is a pre-tax retirement account for eligible organizations with a non-profit tax status. The plan allows for interested employees to contribute some of their money and also allows for the employer to contribute.

Traditional 401(k)– is a pre-tax retirement plan for business and their employees. It allows eligible workers to contribute pre-tax money into a retirement savings account. It also permits a ‘profit-sharing’ contribution for the firm to contribute to your account. The money is tax-deferred while it remains in the account or another account allowed, such as a Rollover IRA and taxes are not due until money is removed.

 IRAs – Speaking of IRAs, there are many types. SIMPLE IRAs are retirement accounts for employers with less than one hundred employees. Traditional IRAs allow individuals to save pre-tax money on their own, or with an advisor. Rollover IRAs, which I mentioned, allow qualified monies to be rolled out while maintaining the tax-deferred status. These funds are most often rolled at separation of employment into a rollover IRA account.

But then there’s this.

Roths – One other type of IRA and retirement plan is the Roth IRA. THIS plan is different than the other plans mentioned as contributions are made with AFTER tax contributions. Distributions are tax free if taken after age 59 ½ and the Roth account has been open for at least five years.

As I mentioned earlier, there are many more details about the pros and cons of these accounts and for your particular situation you should speak to your financial advisor about the best plans for you. (CRCR10168)