Money and Family; Deciding to Give

So, you’ve decided to go forward with loaning money to a family member or friend. We covered basic steps to take in previous blog posts so be sure to go back and review those. You especially want to be careful with making sure your agreement (remember, get it in writing) contains a specific term and that it is not a demand loan. You also need to at least charge the IRS applicable federal rate or you could end up in a sticky tax situation.

Now that you have taken care of the basic mechanics, you need to prepare yourself.  To do so, remember to keep in mind not to lend money you need soon, or to lend money that you cannot afford to lose. That’s right, keep the worst-case scenario in mind – that you won’t be paid back! You need to be prepared for this because you don’t know what the future holds for your recipient. If they have truly fallen on hard times, they may not be able to recover. If the loan is for a new business venture, market risk is always a consideration. Be prepared to never see your money again.

You also need to let go. Once the money is out of your hands, you need to stay out of the recipient’s hair. The money has been given to the recipient and it is no longer yours. Trying to be involved and shepherd what’s done with the funds is not your place. Give the borrower some space and don’t meddle in what they are using the money for. No one likes being monitored and constantly hounded about they should be doing or how they should be using the money. If you cannot distance yourself from the loan and usage of the funds, you are likely not prepared to lend the money.

There are a lot of practical steps you can take to lending money. In the end, it comes down to your interpersonal relationship with the borrower and whether you value the relationship more than the money. If that’s the case, you can make a best effort to recover your money but you may have to be comfortable with just lending the money and knowing you are not going to ever see it again. If you are being asked repeatedly to lend money, and never receiving it back, be strong and say no. Your generosity should never be abused. Your head can set the terms, but sometimes your heart may overrule the best financial steps you can take.

As an independent Certified Financial Planner™, I can help you decide if you should lend money. Contact me and let’s discuss your situation. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #familymoney #lender #CFPPro #savemoney #borrowmoney #lendmoney

Money and Family; Two Key Precautions

This month I am focusing on lending money to family or close friends. Family dynamics generally are fraught with more conflicts than lending to a friend. Regardless, this week I am giving you two key precautions to take if you decide to go forward with lending money.

First, be willing to charge interest. This is not so you can profit off of someone’s misery, but it could prevent you owing gift taxes (depending upon the amount you are lending) and the need to file a gift tax return. For 2019 you are allowed to gift any individual up to $15,000 without the need to file a gift tax return if indeed you intend for the money to be a gift. If you are going to be lending more than this amount, seriously consider charging interest. However, be sure it is a fair interest. Interest will also indicate that you are serious about being paid back and that the amount is not a gift. It will also show that there is an opportunity cost to lending money.

Second, get it in writing. If you truly expect to be paid back, get all of the details and terms in writing. This is a good way to outline all of the guiding principles and discuss the loan and terms in detail. Getting it in writing will help prevent disputes later on. Otherwise, your loan and the terms could become a matter of your word against the borrower’s. Getting the details regarding amount, timeframe, interest, and default can help resolve misunderstandings later should anything arise. Having the terms in writing is the best way to protect both parties.

Charging interest and getting the agreement in writing is both practical and smart. It documents that the loan is truly a loan and not a gift, and it clarifies the arrangement between lender and borrower. This will help protect both parties and provide a starting point for resolving issues that may arise.

As an independent Certified Financial Planner™, I can help you decide if you should lend money. Contact me and let’s discuss your situation. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #familymoney #lender #CFPPro #savemoney #borrowmoney #lendmoney

Money and Family; 3 Tips to Keep in Mind

Last week I wrote a blog post about lending money to family and friends. If you recall, my first tip for you was to discuss the need for the money. Ask questions and don’t be shy about doing so. This week, I’ll give you three more tips to keep in mind.

The first is to consider lending cash. By this, I mean that you should not co-sign a loan or provide a credit card or charge account to a family member or friend in their name based on your credit worthiness with you as the responsible party. This will protect your good credit score and limit your potential loss to the amount of cash you hand over.  It will also keep your credit options available should you need a loan for yourself.

Second, consider the impact that lending the money will have on both your immediate and extended family. Once other family members find out that you have lent money, they may feel emboldened to ask for a loan as well. If you are unable to comply with this additional request, it could end up driving a wedge between you and the family member. Depending on the family dynamics and who you are lending to, it may be worthwhile to call a close family meeting and be open, honest, and upfront about who you are lending to and why. It could be that another family member is willing to help, thus easing the burden on you. Either way, you need to consider the impact that making a loan to one family member will have on the entire family.

Third, do not lend more than you can afford to lose! That’s right, it may seem obvious, but do not lend more than you can afford to lose because there is a good chance you will not see this money again. And, if you are going to help a loved one, you need to be comfortable with this possibility. You do not want to drain your own emergency fund or put your only savings at risk to help someone if there is a good chance you will never see the money again, or at least not for a very long time. Despite their good faith and best intentions, your family or friend may fall on hard times and not be able to repay the money.

There you have it: lend cash, consider the impact, and don’t lend more than you can afford. So far, I’ve covered some of the more dire points of lending money. Next week, I’ll cover practical tips if you do decide to lend money.

As an independent Certified Financial Planner™, I can help you decide if you should lend money. Contact me and let’s discuss your situation. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #familymoney #lender #CFPPro #savemoney #borrowmoney #lendmoney

Money and Family; To Give or Not to Give?

This month, I’ll be writing tips for you on how to handle family and friends who either ask to borrow money, or seem to always need help with their money. Before you think I am being cold and just downright mean, you need to stop and consider each situation very carefully. Keep in mind that a bad decision on your part could dramatically affect your own financial future! This week, you’ll receive your first tip, so read on!

Money, is an emotionally charged topic. It’s not that we should immediately say no to family or friends who ask for money, or other forms of financial assistance, it’s that we should have some ground rules in place. We also need to understand the ramifications of our actions. It’s not uncommon for money issues among family and friends to sour relationships.

So, before you say yes and dive in, you need to consider all aspects of lending money. You also need to know whether you can truly afford to extend help.  After all, money is a topic that generates a tremendous amount of stress for all of us. Let’s face it, whether you have too little, or even too much, money causes us stress.

To kick off this month’s topic, the first tip you should keep in mind is that it’s ok to ask questions and to think about whether you want to lend the money. As the lender, you should feel free to pursue your own due diligence so ask away! Go ahead and open dialogue with your family member or friend who has asked for money. After all, they started the conversation by asking you in the first place.

Don’t be shy about hashing out the why, what for, how much, etc. Don’t be general, be specific! Ask what they need the money for, and why they don’t have their own emergency fund. You can and should ask if they have considered a part-time gig, if they have tried a loan, or even peer-to-peer lending. Feel free to say you need time to think about it and don’t let yourself be pressured.

That’s the first tip for this week – open dialogue, ask questions. Check back next week as we continue our discussion about family, friends, and money. We’ll dive into even more tips and guidelines to help you tackle this topic and decide if you can, or should, lend money to someone close to you.

As an independent Certified Financial Planner™, I can help you focus on your finances and make decisions that are comfortable for you. Contact me and let’s get started. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #familymoney #lender #CFPPro #savemoney #borrowmoney

Five Key Financial Planning Steps You Must Know

This is the last post for National Financial Planning Month. I’ve been writing about financial planning for quite some time now, and I think it’s good to periodically review the meaning of the term. Remember, financial planning is a process. It’s a living process and it evolves and changes. It’s not just investing. Financial planning helps you make sensible, sound financial decisions determining how to meet your goals through proper management of financial resources. Here are the five basic steps to know.

First, get organized. Gather your documents so that you know what you have. Be sure to look for everything you can think of like bank statements, investment statements, insurance policies, mortgage or lease, and work benefits just to name a few. You should keep all of your vital documents together in one binder. That way, if you have to evacuate your home you can just grab your binder and go.

Second, you need to know what you owe and what you own. This is key in establishing your goals and determining how long it may take you to reach your goals. Prepare a basic cash flow statement to determine your net worth. List all your assets and total them up. Next, list all of your liabilities and total those. Your assets minus liabilities equals your net worth. Ideally, this is a positive number!

Third, conquer your cash flow. You need to add up all money that comes in every month, and all of your monthly expenses. This cash in, cash out, is your cash flow. Your goal is to always have more inflow than outflow. This means you need to examine your wants and needs and truly grasp the difference. Further, you need to be intentional about where you spend your money so that it works harder for you, rather than you work for it. Remember, always pay yourself first!

Fourth, mitigate your risk! Risk can be a wealth killer. Review your insurance for proper coverage (don’t buy too much, don’t buy too little), tackle your debt, build an appropriate cash emergency fund, and have your estate planning documents in place. Rich or poor, single or married, everyone needs to manage their risk. For help, reach out to a Certified Financial Planner™.

Fifth, it’s time to put it all together. Set your goals, be specific and write them down. Determine what steps you need to take to put your plan in action. Finally, do just that – implement your plan. Keep in mind that you need to monitor your plan and be flexible.

These are just the basics. Each step above can encompass many aspects and is very specific to your situation. Don’t know where to start, call me! As an independent Certified Financial Planner™, I can help you establish and maintain your financial plan. Let’s get started! #talktometuesday #education #Hireaplanner #FinancialLiteracyMonth #NationalFinancialLiteracyMonth #financialsavvy #financialplan

Increase Your Financial Savvy!

As you know, April is National Financial Literacy Month. April is a perfect time to get started establishing and maintaining healthy financial habits for yourself. If you are afraid of anything financial or don’t like numbers, and not sure where to start, here are some easy ideas.

Pick one article or short video per week (or month) that deals with a topic area you want to learn more about. Make sure it is something relevant to you. Pick anything from basic budgeting, to savings tips to reach a goal, retirement, Social Security, real estate, charitable giving, personal taxation… you name it. It’s your choice!

Read the article or watch the video and if you don’t understand everything the first time through, no problem! It’s not about grasping all the details the first time; it’s about making the effort to learn more. You can always re-read, look up terms you don’t know, or ask a professional. 

Another idea, pick a favorite finance app, social media site or blog (like mine), website, magazine, or even look for broadcasts on your cable package dealing with personal finance. Find what resonates with you, in a format that you like, with content that is manageable and that you enjoy. Approach the content in small doses so you don’t get overwhelmed.

To recap: take the first step and decided to learn more, make it personal, take it slow, and start with a topic of interest to you. Commit to learning one new concept at a time and don’t overload yourself; pick an area that is interesting and applicable to you; use technology if that helps, or go old-school and find a magazine, book or newspaper. Put the personal back in personal finance and make it enjoyable.  Once you do, you’ll be on the road to establishing and maintaining savvy financial habits.

Once you get started, make it a habit. You can apply this new skill beyond National Financial Literacy Month and make it a year-round activity. This will really help you build your financial literacy savvy and put you on the path to establishing and maintaining healthy financial habits.

Remember, you can always reach out and ask a professional. As an independent Certified Financial Planner™, I can help you establish and maintain better financial habits. Contact me and let’s get started! #talktometuesday #education #Hireaplanner #FinancialLiteracyMonth #NationalFinancialLiteracyMonth #financialsavvy

FREE Resources for National Financial Literacy Month

Yesterday was Tax Day so I hope everyone who hasn’t filed for an extension managed to file on time. Now that we have our taxes out of the way, here are a few FREE resources for National Financial Literacy Month that you can use to learn more about personal financial planning. These links are provided solely for educational purposes and I recommend no source over another. If the link is broken, please search by name in your browser. If that doesn’t work, contact me and let’s talk.

For financial terms and concepts, I find Investopedia (https://www.investopedia.com/dictionary/) to be a great source. You can search terms, concepts, get articles and sign-up for email customized to your area of interest.

Expecting a new baby? Want to find out how much it will cost you? Try BabyCenter.com (https://www.babycenter.com/) for all things baby. Specifically, the site offers a First-Year Baby Costs Calculator that will help you budget for your new baby. You can calculate the cost of items such as breastfeeding for free, childcare, and diapers vs. disposable diaper service vs. cloth diapers you wash yourself! Cloth is the cheapest and can be the greenest way to go, but will you have the time?

Do you suspect elder abuse? If so, the Administration on Ageing (https://aoa.acl.gov/Index.aspx) has lots of information for you and it’s also free. There is a locator that you can use if you suspect elder abuse. If you do, please use the locator to find out who to notify.

What about saving for college? Check out SavingForCollege.com (http://www.savingforcollege.com/). The site is geared specifically to 529 plans, but it has lots of tools, articles, and support if you want to learn about college costs, 529 plans, and other college funding issues.

Need help saving? America Saves (https://americasaves.org/) has 54 Ways to Save Money to help you out. They also have lots of tips and strategies to get you started and to involve the kids in your life.

The above sources are just a light sampling of personal financial sites on the Internet that you can use to boost your financial literacy. For every financial aspect of your life, there are dozens of websites that provide information. As expected, some sites are better than others and most will provide only general information and may not answer your specific question. 

When you need more in-depth information and personal service, reach out to me. As an independent Certified Financial Planner™ I can help you establish and maintain better financial habits. Contact me and let’s get started! #talktometuesday #education #Hireaplanner #FinancialLiteracyMonth #NationalFinancialLiteracyMonth #callme

What are RMDs and Why Should I Care?

For those of you who just read my quarterly newsletter, this post will be a bit of rehash. If you don’t receive my quarterly newsletter, you can sign-up here! For National Financial Literacy Month, I’m going to cover Required Minimum Distributions (RMDs) and why you should care about RMDs.

So, what is an RMD. The simplest definition is that it is an amount of money that the owner of a traditional IRA, SEP IRA, or SIMPLE IRA account, and qualified plan participants (think 401(k), 403(b), and 457 plans), must begin withdrawing from their retirement account by April 1 following the year in which they reach age 70 1/2. Got that? To complicate matters, some qualified plan participants may be able to delay taking their RMD if they are still working and older than 70 1/2 but you really must read your plan documents carefully. Many people only think of RMDs in relation to their IRA, but RMDs can be much more complicated. If not handled properly, they can also be very costly and that is why you should care. Let's take a closer look at RMDs.

When do RMDs begin? As mentioned, once you reach age 70 1/2 RMD rules require that you take a distribution from retirement accounts that are covered by these rules by April 1 following the year in which you turned 70 1/2. Remember, there are multiple types of accounts that are covered by the RMD rules (IRA accounts, qualified 401(k), 403(b), and 457 plans) and in some cases, you can aggregate account types, but not in all cases.

Another wrinkle to keep in mind, a Roth IRA does not have any RMD requirement. However, a Roth 401(k) does have an RMD requirement if the funds are still in your Roth 401(k) account! See, it starts to get confusing. Further complicating the RMD rules, you cannot pull a single distribution from one account type (say, an IRA) and have it cover all account types (for example, if you also had a 403(b) account). Distributions need to come from each account type if they cannot be aggregated.

This is important and you should care because if you miss an RMD, the fine is 50% of the missed RMD amount. This is a very steep penalty and could affect your annual spending plan. Let's look at an example and assume you have the following:

Traditional IRA $500,000

Self-directed IRA $50,000

Roth IRA $85,000

401(k) $350,000

403(b) $125,000

In our example, we will use round numbers for the sake of simplicity. In reality, to calculate your RMD you use what is called a distribution factor based on age which ranges from 27.4% down to 1.9%. We are using a round 4% only as an example. Pretend you are age 74, and your RMD withdrawal rate is an even 4% (for simplified math purposes only, NOT your real rate). You would need a total RMD of $41,000 from the above accounts.  That would be made up of $20,000 from the IRA, $2,000 from the self-directed IRA, $14,000 from the 401(k), and $5,000 from your 403(b). Further assume that for simplicity you ask your IRA administrator to send you a check for $41,000 thinking you have satisfied your total RMDs for the year for all accounts. You would be subject to a fine of $9,500 (plus any additional penalties and interest) for not taking the necessary RMD from your 401(k) and your 403(b). Ouch! Remember, your penalty is 50% of the RMD distribution that should have been taken from each required account. The check from the administrator would have satisfied both your IRA and self-directed IRA distribution because those two accounts can be aggregated so it doesn't matter which account the distribution comes from. The overage amount of the check, $19,000, would not satisfy the RMD for the 401(k) and 403(b) amounts, hence the $9,500 penalty. There is no required distribution from the Roth IRA. Remember, however, that Roth 401(k) plans are subject to penalties if an RMD is missed. This is especially harsh because Roth distributions are not taxable (if meeting all other Roth requirements for tax free distributions).

When it comes to RMD rules, don't wing it, don't ask your cousin, and don't trust everything you hear. Get sound advice and be sure you are pulling the correct RMD amount from the correct account. A 50% penalty for an overlooked distribution is a terrible thing!

As an independent Certified Financial Planner™, I can help you with your RMDs. Contact me and let’s get started. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #RMD #RMDs #IRS #CFPPro #savemoney #penalty #financialliteracymonth #financialliteracy

It’s National Financial Literacy Month!

For personal finance geeks like me, this is an exciting time of year. April is Financial Literacy Month! If you are not quite sure what that is, you are not alone. Financial Literacy Month launched in 2004 as National Financial Literacy Month. According to Wikipedia, the US Senate passed Resolution 316 to officially recognize April as National Financial Literacy Month with the goal of helping Americans establish and maintain healthy financial habits.  It all dates back to 2000 and The National Endowment for Financial Education which originally envisioned a youth financial literacy day. That idea grew and by 2004, April became known as National Financial Literacy Month in the US. Our neighbor, Canada, recognizes Financial Literacy Month in November.

Mention anything finance related and most peoples’ eyes glaze over! Finance is a wide-ranging topic area with many specialties and at times can require a focus on rather dry, intense details.  For personal finance, it doesn’t need to be painful or boring. We all have our strengths and weaknesses when it comes to personal finance. Maybe you are an expert investor, but not so good at budgeting. National Financial Literacy Month is the perfect time to challenge yourself to learn a new topic area.

Over this month, I’ll post more about financial literacy and personal finance topics. For now, you can read more about personal finance on my blog.  For additional information and tools to help you get started, check out the nonprofit work at FinancialLiteracyMonth.com and get started. 

You can also ask me your questions. As an independent Certified Financial Planner™, I can help you establish and maintain better financial habits. Contact me and let’s get started! #talktometuesday #education #Hireaplanner #FinancialLiteracyMonth

Is Buying a Home Right for You?

We’ve been pitched on the American Dream for decades – buying a home. Buying a home may not be in the cards for everyone. If you are one of those people, don’t stress over it. Buying a home can be a wonderful feeling, possibly a great investment, and even make you sleep better at night. It can also have the opposite affect for many people.

Buying a home can have multiple effects on your cash flow. To buy a home, you generally need to have a substantial down payment and a really good credit score to qualify for favorable loan terms. If you have both, buying a home could put you in a position where you are paying the same or less than you were paying in rent. The result, however, may mean that you have severely drained your cash savings. This is particularly true if you live in an area with very high housing costs like the San Francisco Bay Area, Seattle, or New York City. Conversely, if you live in an area with affordable rent, your home mortgage may end up costing you more per month than what you pay in rent.

Renters generally have a fixed monthly rent, may be responsible for utilities, and likely have renter’s insurance. These are a renter’s primary fixed costs and planning your monthly expenses is rather predictable and it’s easy to project your annual budget. With a home, you have your mortgage, real estate taxes, homeowner’s insurance, and you are responsible for maintenance. If you live in a cold climate and your HVAC system breaks, you are on the hook for paying to have it fixed. This is especially true if your home is older and not covered by any type of warranty. Keep in mind that your homeowner’s insurance doesn’t cover systems and appliances breaking down.

So, what should you do? How do you decide? First, is to do a self-assessment and see if you might be a candidate for home ownership. You want to primarily consider your overall cash flow and debt picture and make sure you are ready to buy. If you pay your bills in full each month, don’t carry credit card balances, have a strong, stable income and potential earnings ability coupled with the desire to put down roots in your community and enough cash to comfortably close on the home and still have a safety cushion, you are likely a good candidate.

If, however, you are not wanting to stay in your community, plan to move within five years, have a shaky job outlook, and are saddled with more debt than income, or you simply don’t want to be responsible for your own home maintenance, home ownership may not be for you. It’s not for everyone and if you are happier being a renter and sleep better at nigh not being responsible for the care, maintenance, and cost of home, be happy and resolve to rent.

Positive aspects of home ownership can be a sense of security, rising equity, and fixed monthly expenses in a rising cost of living area. Renting, may afford the same aspects (minus building equity) if you live in an area with low-cost housing. Buying into the American Dream is a very individual experience for each person. Take the time to determine if it’s really for you.

As an independent Certified Financial Planner™, I can help you plan for a new home purchase and decide if it fits into your goals.Contact me and let’s talk! #talktometuesday #rentvsbuy #Hireaplanner #tax #realestate #stressfree #homebuyer #savings #equity

Do Your Homework, Buy Quality When You Shop

Shopping can be a lot of fun. No matter what you are shopping for, we all are influenced by our past experiences, marketing, and legacy advertising. What is legacy advertising? Think of any brand name that you have heard and seen since your personal day one on this planet. For many of us it’s the two big soda companies, a few domestic car producers, and a couple of blue jean manufacturers. You already know their names and iconic brand logos without me telling you.

When it comes to the big purchases, like a car, we are influenced whether we admit it or not. But there are a few things you can do when you need to make a big purchase.

First of all, slow down… take some time to really think about whether you truly need the item. If the answer turns out to be yes, start your research. Jump online, read reviews, talk to friends and family who have purchased the same item. Share with others what you are thinking of buying and elicit their feedback. Be open to hearing divergent opinions and experiences. You can usually tell if the comments are just grumbling or if a true complaint pattern starts to develop from person to person. Sometimes, a negative comment turns out to be more of a personal disgruntlement than an actual fault of the product. But if you keep hearing “it broke on the fifth use” it’s not disgruntlement.

Consider not buying brand new. Great bargains can be had on high-end items if you know the item, it’s history, and its value in the resale market. Cars, boats, RVs, and athletic equipment come to mind. Sometimes people buy too early or change their mind about wanting the item and they put it up for sale.

When I moved to Oakland, I realized I had a desire for a car. I was influenced by marketing from Volkswagen, Audi, and Volvo. I started narrowing the choices down and reading what I could about those cars. I also asked people who owned those cars if they were happy with their car. Surprise! Most people are. However, there was the occasional complaint and I made a mental list of these complaints. I also test drove a few of the options to see if I liked them. I have always had a fondness for Volvo and in the end, I bought a slightly used, two-year-old Volvo that a woman was selling due to a divorce. That was in 2006 and I am still driving that car to this day – and I am happy with it.

Go to trade shows before making a big purchase. See what all is really available in the category. Spa, RV, auto, and boat shows almost always have new and slightly used models. Talking with dealer reps may at times garner you a personal discount you can use after the show.

Look at the annual calendar. Watch for model cutoffs such as 2019 models being discounted at year-end to make room for new 2020 models. Consider shopping in late December or early January when stores are desperate to clear merchandise and old models.

Slow down, do your research, share what you want with others, and keep an eye on the annual flow of merchandise and you can acquire quality items at a good price. For bigger items such as leases or real estate, let’s talk. As an independent Certified Financial Planner™, I can help you. Contact me and let’s get started. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #CFPPro #savemoney #buy #shop #quality

Points Programs are Valuable - Maximize Them!

After focusing for the past few weeks on serious topics like saving, debt management, and what to do with that tax refund, I decided to write about something a little more fun. All you road warriors, this one is for you!

The family enjoying a retirement dinner at Michel’s, Honolulu.

Many folks who travel for work, and travel a lot, accumulate large amounts of hotel, airline, and even preferred credit card points. If this is you, be sure that you are aware of the value these points add to your life. You also want to maximize your points any time you can.

Randy’s sister, Leesa, enjoying her balcony on Kauai

In our family, we have used points for ourselves and for family and friends. When my parents retired, I cashed in a block of air mileage points and got my mother and step-father first class tickets to Honolulu. My husband cashed in hotel points and got them a nice room at one of those swanky hotels on Waikiki Beach. We went along with them, on points of course, and even flew my sister-in-law over to join us. This fall, we are staying on points in Italy for my fiftieth birthday trip. Hawaii has been a popular draw. All told, we have taken ten family members to Hawaii – all on points!

Here are some points accumulation tips:

Know the rules of your particular hotel, airline, or credit card points program. Airlines, for example, are notorious for allowing points to expire and that is actually money lost! If you know you won’t fly, can’t use the miles, at least donate them to charity or cash them in for a product. For hotels, knowing your membership level and the benefits that come with that level is key. You may be entitled to additional points depending upon the category of room, or hotel, you book. It all adds up!

Take advantage of bonus programs. Programs may involve booking a certain number of nights per period to earn bonus points, or flying a certain number of flights per period. Make sure to understand and fulfill the terms of the bonus program offering and book accordingly. If you are not sure, always ask if the hotel booked or flight reserved meets the bonus program requirement.

Monitor flight sales and hotel offerings for bonus points destinations. Be sure to confirm you are booked in the proper ticket class or hotel to earn the bonus. If you travel a lot for work, the destination may already be on your schedule so get the extra points!

To build status and points fast, choose one company and stick with that company. Often times, members can earn extra points after attaining certain reward levels. However, if you must fly an alternate airline, or stay in a non-preferred hotel, be sure to join that points program as well. You never know when your needs may change or where your travels will take you.

Know your preferred hotel and airline partners and all properties or services in their respective portfolios. This will also help you build points fast. For example, did you know that St. Regis (luxury), Le Meridien (premium), Aloft (select), and Element (long-term stays) are all part of Marriott’s Bonvoy points program?

Only use a rewards credit card tied to a particular hotel or airline if you are always going to use that service provider. Using the card can help build points fast, but many branded cards come with hefty annual fees or large spending requirements.

Your points are hard-earned and very valuable. Never underestimate the positive impact acquiring points can have on your life. After all, you’re on the road for work and that isn’t always pleasant. Save your points, maximize them, and reward yourself accordingly.

As an independent Certified Financial Planner™, I can help you focus on your finances in more ways than just looking at salary, investments, and benefits. Contact me and let’s get started. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #points #vacation #CFPPro #savemoney #rewards #airmiles #mileage #travel

Tackle Your Debt!

We have just wrapped-up America Saves Week. If you are struggling to get a grasp on your finances, there is a lot of free help and resources out there like America Saves Week and of course April is financial literacy month. With all of these resources, why do folks still struggle to save and pay down debt?

First, don’t beat yourself up over your debt and lack of savings. It is what it is and fixating on it is just stressful. Do, however, acknowledge your situation. That’s the first step above all to change your situation – acknowledge what you owe. 

Your next step is to self-assess. This may require help so be open to working with a person such as a Certified Financial Planner, debt counselor, or even working with technology (think spending app). These professionals can provide you with a debt analysis and guiding plan to help you out of debt. Get a firm figure on what you currently owe by learning your balances, interest rates, payments, and any other relevant terms around your debt. Don’t bury your head and estimate; really look at it.

The next step requires brutal honesty. Take a look at your monthly spending and money behaviors that got you to this point. You may need some time to accept that you are indeed going to have to change your spending habits. Acceptance is a difficult step.

Start turning your ship. It took a while to get into debt, it will take time to get out of debt. Scale back in areas where you are spending “just because” or on items and services that you truly don’t need. Stop memberships and subscriptions you no longer use. Have a sale! Raise some quick cash by selling books, art items, sports equipment, collectibles – anything you no longer need.

This is a good time to mention that you should take this step-by-step. Set achievable goals with a timeline. Acknowledge your situation, accept it, start moving forward! People often ask if they can save while paying down debt. YES! Saving and paying yourself first is a pillar of financial fitness and success. Be sure to pay yourself first even as you tackle your debt. Let’s say you come into some unexpected money. Apply the one-third rule: one-third toward paying debt, one-third to savings, and one-third to your monthly living expenses.  

These steps over time will put you on the road to recovery. You just have to get started and keep going! As an independent Certified Financial Planner™, I can help you focus on your month-to-month finances. Contact me and let’s get started. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #debt #debtreduction #CFPPro #savemoney

America Saves Week

February 25 through March 2 is America Saves Week! America Saves motivates and encourages people to save money, reduce debt, and build wealth. This is a week you can access free resources and focus on your saving, spending, debt, and wealth building.

I am providing a link to a free digital toolkit, Save With a Plan, that you can access and share with friends and family. If you cannot access the toolkit online, email me and I’ll send you a copy. You can also explore the America Saves Week website for more information and free resources. I’ll also be posting savings tips on our Engage Advising Facebook page all week, Facebook.com/EngageAdvising.

Your future self will thank you!

As an independent Certified Financial Planner™, I can help you start saving, manage debt, and begin your wealth-building journey.  Contact me and let’s get started on a savings plan! #talktometuesday #education #Hireaplanner #AmericaSaves #AmericaSavesWeek #savings #ASW19

Three Tips for Using Your Tax Refund

Many folks are about to come into a mini-windfall of cash. For these same folks who often complain about not being able to save money, fund an IRA, add to investments, or pay down debt, this is an opportunity. That mini-windfall is a tax refund. Instead of envisioning all of the lovely, disposable, soon-to-be-forgotten things you could buy with your refund, consider buying some financial peace of mind. Here are three things to do with this windfall that would be financially beneficial.

First, pay off debt. Look at your debts; is the refund you are getting enough to completely payoff a debt. If it is, this could be a good choice. Use the monthly payment amount you were making on that paid off debt to make a larger payment on another debt. Work with your financial planner and pay off the debt that gives you the greatest bang for your buck and you’ll be debt free in no time. Your financial planner can tell you which debts and in what order provide the shortest payoff time, or saves you the most money.

Second, build an emergency fund. If you are a two-income household, the emergency fund should be, at minimum, the equivalent of six months total expenses. This includes all discretionary and non-discretionary spending. If you are a single-income household, you should really consider having nine to twelve months of total expenses as an emergency fund. Your tax refund can add nicely to your cash stash.

Third, start or add to investments. If you have your debt under control, and your emergency fund is sufficient, now is the time to add to investments. Your tax refund could be just the ticket. Consult your financial planner and decide whether you should be starting, or adding to, an IRA, a taxable fund, or topping up an existing investment account.

A note about tax refunds; if you are receiving an unusually large refund (and tend to do so every year) now is a great time to meet with a financial planner to figure out why. You should be receiving a smallish-to-zero refund. That way, you are enjoying the benefit of your funds all year and not making a free loan to Uncle Sam.

Keep in mind that using your refund for one of the recommended tips does not have to be an “all or nothing” approach. Be sure to use a small amount to reward yourself and do something like a nice dinner, a day retreat, a spa, or take a cooking class with a friend or significant other. Just don’t blow your windfall on things you don’t need and won’t notice in a few weeks.

As an independent Certified Financial Planner™ I can help you decide how to put your windfall to work for you. Contact me and let’s get started! #talktometuesday #refund #Hireaplanner #bonus #income #cash #CFPPro #tax

Can I Contribute to a Roth IRA?

This week’s post will be a spotlight on the Roth IRA. As with all information, be sure to ask a professional before making any financial decisions. This post will cover just the highlights of the Roth IRA and may not represent your situation.

Recently, a friend called and wanted to know if she could contribute to a Roth IRA with a contribution date of 2018 to start her five-year clock. What she is referring to is the five-year holding period on a Roth IRA, generally known as the five-year rule. Basically, at age 59½ you are able to withdraw both contributions and earnings with no penalty, provided your Roth IRA has been open for at least five tax years. You can make a contribution for the tax year up until the tax filing deadline and start the clock (as of the tax year) if you have not finalized and submitted your taxes. That is, she could have started her five-year clock dated 2018 for the 2018 tax year, being filed this 2019 season, but unfortunately, she had already finalized and filed her taxes for 2018. Keep in mind, if you are under 59½, you can withdraw your contributions with no 10% penalty, but not your earnings. There are other five-year rules depending on whether you are a beneficiary, or made a Roth conversion. We’ll save those for another time.

Another problem this friend encountered is that she is a SHE, Successful High Earner. She is fortunate to have a good income, but unfortunately being single she earns too much to contribute to a Roth IRA. Her modified AGI (defined in Publication 590-A for Roth IRA) was well above $137,000. When thinking about a Roth IRA, keep in mind the following contribution limits from the IRS:

If your filing status is Married Filing Jointly or Qualifying Widow(er), and your modified AGI is less than $193,000, you can make a full Roth IRA contribution for the year. Between $193,000 but less than $203,000, you get to make a reduced contribution. However, once you earn $203,000 or more, your contribution amount is zero!

Married Filing Separately? Oh, dear…not good news. If you are married filing separately and you lived with your spouse at any time during the year, and you earned less than $10,000, you can contribute a reduced amount. If you earned $10,000 or more, your contribution is zero.

For Single, Head of Household, Married Filing Separately (and you did not live with your spouse at any time during the year), and your modified AGI is less than $122,000, you can make a full contribution. Between $122,000 but less than $137,000 you can contribute a reduced amount. If you earned $137,000 or more, your contribution is zero!

What are those contribution amounts? For 2019 your total contributions to all IRA types cannot exceed $6,000. If you are age 50 or older, you can contribute an extra $1,000 for a total of $7,000.

Now, about those aforementioned reduced amounts. You will need to follow the formula provided by the IRS to calculate your contribution. There is an explanation and a worksheet provided in Publication 590-A (go to IRS.gov and search the most recent Pub 590-A). A quick summary is provided here:

Step 1 – Start with your modified AGI.

Step 2 – Subtract from the Step 1 amount either: a) $193,000 if filing a Married Filing Joint return or Qualifying Widow(er), or b) $0 if Married Filing Separate, and you lived with your spouse at any time during the year, or c) $122,000 for all other individuals.

Step 3 – Divide this result from Step 2 by $15,000 ($10,000 for filing a Married Filing Joint return, Qualifying Widow(er), or Married Filing Separately and you lived with your spouse at any time during the year).

Step 4 – Multiply the maximum contribution limit before reduction by this adjustment, and before reduction for any contributions to traditional IRAs by the result in Step 3.

Step 5 – Subtract the result in Step 4 from the maximum contribution limit before this reduction. This final result is your reduced contribution limit.

For example, Susan’s modified AGI for 2019 is $135,900 and she is age 47 and single. What is her maximum contribution? Ignoring other tax factors and simply considering the formula, Susan would calculate her contribution as follows.  Step 1 – $135,900 - $122,000 = $13,900. Step 2 – Step 3 – divide $13,900 / $15,000 = 0.92666, or 0.93. Step 4 – multiply $6,000 x 0.93 = $5,580. Finally, Step 5 – subtract $6,000 - $5,580 = $420.  Susan can still make a Roth IRA contribution of $420 for 2019 prior to finalizing and filing her 2019 taxes.  

It seems like a small amount, but keep in mind, every bit helps when building your retirement nest egg. Plus, this amount may be the year Susan starts her five-year clock which is very valuable! Or, it could be an unusually high earnings year for Susan. Either way, know the amount each year that you can contribute, and if a Roth is right for you – contribute!  

Yes, I love this stuff! As an independent Certified Financial Planner™, I can help you focus on your retirement finances and many other financial planning issues. Contact me and let’s get started. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #CFPPro #savemoney #Roth #IRA #RothIRA #IRS

Why Tax Time is a Great Time for a Financial Review

For the majority of folks who file taxes, it’s now crunch time. Between January and the filing deadline in April (for the majority of filers), we will all be hit with W-2s, 1099s, 1095-Bs, 1098s, annual giving statements, investment statements, and many other forms. All the statements arriving by post and online can be overwhelming.

This can also be a benefit. It’s around tax time that people focus on their financial situation. With all of the forms arriving, it’s a good time to organize and take stock of your situation and schedule a meeting with your financial planner. Here are a few things you can do.

Organize and setup your filing system for the current tax year! While you are receiving all of last year’s tax documents, go ahead and make files for the current tax year. That way, as you accumulate tax documents during the current year, your file is ready. This makes next year’s filing easier.

Identify what you owe and what you own. Tax time is a great time to review and learn about what expenses you have going out monthly and annually. It’s also a great time to take a look at your investment holdings. Most likely you are receiving bank, brokerage, or investment statements so give them some attention.

Make changes if needed. If, for example, you find you owe taxes for the past year, and you owed a similar amount the previous tax filing season, identify why. In many cases, you may simply need to adjust your W-4 withholding allowance through your employer. Early in the year is a good time to do this if you need to have additional taxes withheld.

Schedule time with a Certified Financial Planner™ to get started aligning your goals and resources and putting yourself on-track to a new financial year. The advice can be invaluable and today, CFPs offer a wide range of services and pricing.

Tax time is a great time to meet with your CFP.

Having so many financial documents arriving at one time and preparing to finalize your taxes is a great time for a financial review. You’ll have most of what you need readily available. As an independent Certified Financial Planner™, I can help you focus on your finances month-to-month and not just at tax time. Contact me and let’s get started. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #CFPPro #savemoney #tax #taxtime

Cash is Still King – Build Your Savings!

Over the past few weeks, the government shutdown highlighted the lack of savings in America, the number of folks living paycheck-to-paycheck, and the inability or general aversion to saving for a goal. Last week, I wrote a post Government Shutdown Highlights Need for Emergency Fund that you should read if you don’t have an emergency fund.

This week, once again I want to focus on savings. Too often I hear people half-jokingly proclaim, I can’t afford to save. I say half-jokingly because for some, their earnings compared to what they need to spend on living is truly a struggle. Especially when what they want to spend is added to the mix. Therein lies one of the biggest culprits of cash savings in America today – lack of delayed gratification for wants, versus paying for current needs. Saving for a goal is a concept that seems downright foreign in today’s world of zero-money-down, same-day-delivery, and buy now! It’s time we get back to understanding the difference between true needs and our wants to de-stress our lives.

Save, save, save! Savings add up faster than you think!

If you are one of the people out there struggling to save, you can’t afford NOT to save! Witnessing friends and family go through the shutdown should be a wake-up call to kick you into gear to becoming a savings pro! Let’s start with the basics.

First of all, we need to embrace saving cash just as much as our desire to shop, be on social media, or any other fixation. Saving cash can lead to a lot of positivity in life. It can help reduce anxiety over money, help you sleep better, fear less, and be prepared when a financial disaster – or opportunity, arises. Delaying a purchase goal also provides time to assess if you should really be spending the money, really need the item, or whether it will truly add value to your life. If it does, delaying will make the purchase much more satisfying and meaningful.

Remember to pay yourself first. You are the most important person in your earnings world. Without you, there would be no earnings! Take care of yourself and remember that you are debtor number one!

Start saving 15%, or more, from the first job you ever have. Get into this habit of paying yourself 15% first and saving will be second nature to you. Saving 15%, or more, from your first job until your last job in your Golden Years will likely ensure that those years are truly golden.

Remember, you are probably not alone when it comes to your 15%, or more, savings target. Many people have access to a qualified retirement plan such as a 401(k) or 403(b) through their employer. If the employer offers matching, this match is basically FREE money going into your retirement plan account and the employer’s matching amount can count toward your 15%, or more, savings target.

There are ways to boost your savings immediately. All of us have very nice, usable items around the house that we no longer need. Sell them! It’s a quick cash boost. You can hold an old-fashioned rummage sale, or step it up and use an app. Whatever works for you. If you have a side-gig, save money from the side-gig. Are you hitting up the local coffee shop a couple of times per day? Eliminate just four visits per week and that is approximately $20 in immediate savings. Translation, $1,040 per year! How many of us set the coffee machine at home on automatic to brew a pot of coffee, have a quick cup, dash out the door and leave nearly a pot full of coffee behind? We complain about the office coffee or end up buying premium a few times per day. Coffee we make at home is probably much better and more to our liking so dig out that thermos and start taking it with you!

Another activity to boost your savings immediately is to review your cash flow monthly. Check for items such as memberships, subscriptions, home delivery, or any auto-pay item that you are not actually using. Cancel it!

Make micropayments on your credit cards. Over time this will not only reduce your debt faster, but it will boost your credit score and put you into a better qualifying position for lower interest rates on borrowed money. Read more on How to Improve Your Credit Score here.

Set up separate savings and checking accounts. Have a savings amount automatically transferred on payday directly into your savings. If it’s not in your checking account, you likely won’t miss it and be tempted to spend it.

Use a spending app on your phone to get alerts when you are close to budget limits you have setup. Sometimes just a reminder will do the trick to keep savings in line. Find an app that works for you and put it to good use.

As an independent Certified Financial Planner™, I can help you focus on your finances month-to-month, set goals, and assess cash flow. Contact me and let’s get started. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #CFPPro #savemoney

Government Shutdown Highlights Need for Emergency Fund

Financial gurus all over America recommend having an emergency fund. But in our hyper-consumption society and ten-plus-year Bull market, this advice seems to have either fallen on deaf ears, or out of fashion. The government shutdown does shine a light on the savings crisis in America telling us that 78% of Americans live paycheck-to-paycheck according to a report by CNBC.  

First of all, what is meant by an emergency fund? Your emergency fund should be readily available cash savings, not at risk, to cover all monthly living expenses. Total up your monthly expenses such as rent/mortgage, utilities, transportation, insurance premiums, groceries, prescription co-pays or out-of-pocket treatments, entertainment, membership dues, credit card payments – anything that you pay during the month. Don’t forget annual payments. Those are divided by twelve and you include one-twelfth in your monthly savings amount. That total of all expenses is your monthly spend, the amount of cash outlay you need to cover to maintain your lifestyle.

So how much do you need? This varies depending on whether you are a dual-income household, and whether you are married or single. For my clients, I recommend six months minimum as a basis. For married couples, dual-income, six months should suffice if both couples are high-earners. If not, build to six months and then work toward nine months of emergency fund. Married with one income, you should have nine months saved. If you are single, you should have a nine-month emergency fund regardless. If others rely on you, such as children or adult parents, stretch your goal to twelve months emergency fund.

How did we get here? How did we get to a point where missing one paycheck creates a financial disaster? Those answers are beyond the scope of this blog post. But, I suspect it is safe to say at least two contributing factors are the lack of financial literacy being taught in schools or at home, and the growing inability of people to separate needs from wants. We live in a society that outright discourages delayed gratification and saving cash for a goal.

Take action! Turn this on-going shutdown crisis into a personal action plan.

First, tally up your expenses as described above. Review them for services, memberships, subscriptions, etc., that you are no longer using and cut those. Your goal should be to cover the monthly costs for items that you do use and need.

Second, determine how many months you need to have by examining your situation: married, high income, single, dependents, etc. Set your first goal to save a one-month emergency fund, and build from there.

Next, resolve to start! That’s the BIGGEST hurdle in getting an emergency fund together. If you are a lower earning worker, it is a challenge, but starting now is key. Always pay yourself first! Follow that mantra for every job you ever have in your life. Ideally, we should all be saving at least 15% from every job over our lives starting with our first job – but that’s another blog post! If you have zero in savings, start by putting a twenty-dollar bill in an envelope or container each week. That’s about four coffee drinks per week – your latte factor! By week 52 you’ll have saved $1,040. Even at $1,000 you are better off than when you started. For those with greater means, examine your cash outlay every month and work with a financial planner to help you cut expenses and get on-track to savings.

Cash is a key component of financial security and an asset class that should be included in every financial plan. It’s time we remember that.

As an independent Certified Financial Planner™, I can help you plan for cash goals.  Contact me and let’s get started on a savings plan for your personal emergency fund! #talktometuesday #education #Hireaplanner #stressfree #emergencyfund #savings #crisis

Three Ways to Teach Children Good Money Habits

Many parents seem to be unsure about how to teach their children good money habits, unwilling, too busy, or some combination thereof. Teaching your child good money habits early on can have a positive, lifelong effect. Don’t be shy about bringing up the topic. Here are few tips to get you over the hump.

No doubt I was imparting vital knowledge to my youngest nephew, Kendall.

Set up an account just for them! Visit your local bank with your child and find out what is available for minors. Many states and banks offer various account types and have differing regulations covering accounts for minors. Generally speaking, banks may require at least one parent or guardian to be a joint account holder. Teach them how to use their account, how to safeguard their account, and why it is important to have an account and be responsible. If your child is a teen, and already working or about to start work, they will likely need an account.

Develop a strategy. Be it allowance, earnings from work, odd jobs, or even gift money for holidays and birthdays, start early teaching your child to save part, spend part, and share part. Many children in our consumerist society will spend every penny they receive unless this lesson is taught early.  Reach an agreement that your child will for example, save 70%, spend 20%, and share 10% of their income. You and your child have to reach the right percentage, but try to get them saving the bulk of their money early on. The spend category can be just for them and let them spend it on what they feel they need. When it comes to sharing, this can be as simple as letting your child buy the family a pizza for pizza night, or treat their friends to a movie ticket, or making a contribution to a charity. It doesn’t have to be extravagant, but instill the concept of sharing.

Talk about money. Encourage your child to be curious and ask questions about money. At the same time, be honest if they come up with a particularly difficult question to which you don’t know the answer. Tell them you are not sure and say, “let’s find out” and teach them how to seek advice or research the answer. Show them the different forms of currency we use today. If they encounter a variety of money from physical cash, gift cards, electronic transfers, etc., they will have a better understanding and know that it all has value although it is in different forms.

There are lots of ways for children to learn about, and earn, money these days. Allowances are still common, but so is working odd jobs or even part-time jobs once they are old enough. Once they get the basics down, move on to more advanced topics like investing, qualified plans through employers (like 401(k) plans), and even stock. Some families teach this lesson by explaining their own employer’s retirement plan. You can also offer your children a chance to earn more money by setting up your own 401(k)-style matching plan for their allowance. I don’t mean a formal, qualified plan, but let your kids know that if they, for example, complete additional chores or improve grades they can earn a “match” to their allowance. Agree on a percentage in advance and document it. This extra match amount should go into their long-term savings.

There are many activities you can use to teach children and teens great money habits. If you are stuck, give me a call and let’s work together. As an independent Certified Financial Planner™, I can help you pick topics or activities to guide your children. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #kidsandmoney #teensandmoney #teens #CFPPro #savemoney #bank #bankaccount #401k