11/8/18 - The Holidays
December is usually a financial drain for folks. Gift giving, parties, and sometimes having slow business activity can all contribute to the year end being a tough financial time. Avoid the impact of the financial strain by planning for it. After all, it’s not as if you don’t know when December will happen. Consider putting some extra money in savings to cover the holiday expenses. Perhaps buy gifts throughout the year. Or have a solid plan for spending as you go into the holidays and stick to it. Small things can have a big impact on your budget during the holidays so make sure you're prepared!
11/1/18 - Holiday Spending
10/25/18 - Financial Tips for Fall
As we’re enjoying the Colorado fall colors, we’re also heading into the last financial quarter of the year. There’s plenty of time to look at where you are financially and make some changes before the new year.
Assess your tax situation. Whether you’re self-employed or you get a W-2, you don’t have to be shocked each year when you file your tax return about whether you owe, get a refund, or broke even on taxes. Contact your tax preparer and ask for a tax planning appointment. You’ll need to bring in the documents asked for and you can adjust your tax withholding or quarterly estimates accordingly. Remember, no one likes to pay lots of taxes in April, but a big tax refund is just an interest free investment you made with the IRS, so don’t see it as a great idea for you.
Be sure you’ve contributed to your favorite charities. Non-profits are accustomed to getting a surge in contributions toward the end of the year. Many people use the last few months of the year to contribute because it allows them to assess their ability to give. If the charities you give to help those in need around the holidays, the sooner they get your cash contributions, the better they can assess their ability to help at that time. So feel free to get out your checkbook now.
Maximize your retirement plan contributions. There are some retirement contributions – IRA, Roth IRAs, SEP and some others if you’re self-employed – that you can make for this year after December 31 and before you file your taxes for this year. But if you work for a company with some of the more popular plans – 401k, 403b, 457, and several others – you can only contribute to the plan through paycheck withholdings and must do it for this year before December 31. So take this opportunity to contribute as much as you can. If your employer does a match to some of your contributions, make sure you put in that much.
You can reassess your finances any time of year and now is always a good time.
10/18/18 - Student Loans
10/11/18 - Smart Student Loans
It’s a bit ironic that higher education sometimes results in uneducated and unwise decisions around debt. There has been media outcry at the level of student debt in our country. It’s true that the aggregate outstanding amount of student debt is at an all time high. But part of the reason for that is positive. More people are pursuing education beyond high school through colleges, universities, and trade schools. And many of these people are using debt to pursue educations that they believe will enhance their earning capacity. The average student debt for each individual isn’t substantially higher, after inflation adjustment, than historical levels. But some individuals do have high levels of debt.
The first thing to consider when borrowing for higher education is the type of loan. There are subsidized loans, unsubsidized loans, and private loans. Subsidized loans are available to full time students with income below a level specified by the government program offering these loans. Once a student is age 24 or older, the student’s income, not the parents’ is the income taken into consideration for these loans. Subsidized loans don’t start to accrue interest until the student is no longer a full time student. Unsubsidized loans do accrue interest while the student is in school. Both subsidized and unsubsidized loans must be taken in the year offered (you can’t wait until your last year and take all the loans you’ve been offered in these categories) and begin payments after a student is no longer in school full time. Private loans are generally at higher rates and some require payments to start immediately after the loan is received. Based on terms, it’s optimal to have subsidized loans be the first to pursue, with unsubsidized and private loans taken if additional funds are needed.
In terms of how much debt a student can afford, a good rule of thumb is to have all loan balances at the time of graduation be no more than the annual salary in the chosen career. So someone with a medical degree might be able to comfortably pay more in student debt after graduation than someone with a degree in education. That’s not a value judgement on the careers, but it does square with the earning power of each degree.
Many people believe they are better off taking longer to finish a degree than borrowing and finishing sooner. That’s not necessarily the case. If debt is kept at reasonable levels, borrowing at a reasonable level, graduating sooner, and having more high earning years in a career might be a better payoff than taking longer to get to those higher earning years.The Department of Labor data continue to show that average earnings are higher for greater levels of education. Pursuing an education that will allow you to be in a career you love – even if you borrow to do so – may be a great investment in your financial future as well as your happiness.
10/4/18 - Costs of Addiction
9/27/18 - Financial Impacts of Addiction
The understanding of addiction as a health care crisis is growing in society. For purposes of this article, we’ll define addiction as a compulsion to use a habit forming chemical, such as alcohol, heroin, cocaine, meth, or prescription drugs, and drugs will be considered to include alcohol. In addition to the emotional trauma that addiction can bring to an individual and family, monetary impacts can be huge.
Chemical habits can be expensive. Money intended for household expenses might be diverted to buy alcohol or drugs. With intensive drug use, assets might be sold, accounts deleted, and credit cards charged to the limit. If someone other than the addict isn’t monitoring finances, financial repercussions can be devastating. Regardless of who is in charge of day-to-day money decisions and investing, both spouses should be familiar with how to access accounts and check them regularly. Even after an addict is drug free, it’s wise to keep a close watch on accounts and potential theft. Addicts occasionally relapse – sometimes more than once.
Another potential impact of addiction or chemical abuse is poor job performance. While some addicts are relatively high functioning or don’t use drugs at work, if there is impairment that negatively effects their job, it can result in missed work, lost promotions, reduced wages, or ultimately job loss. This can impact the individual as well as the entire family.
There are various forms of treating addiction. Several twelve step programs are free, although donations are accepted. There are counselors and therapists who specialize in addiction treatment. These services, generally with appointments at least weekly to begin, can cost a few hundred to thousands of dollars per month. If inpatient treatment is appropriate, a 21 to 30 day stay is often recommended with follow up treatment after discharge. This intensive treatment may cost tens of thousands of dollars, with health insurance policies under the Affordable Care Act generally covering some of these costs.
With extreme use, an addict might resort to illegal acts to obtain drugs. Stealing from others, selling drugs, and violence to get money or drugs can result in arrest. Only individuals of limited monetary means are eligible for a public defender and legal fees to defend from charges can easily run to thousands of dollars. Any criminal record can impact future earning capacity and limit job eligibility. Some employers, through legal limitations or corporate policy, won’t hire an individual with a felony record.
Ignoring or denying a problem is one of the most expensive mistakes you can make. If you’re suffering from addiction, get help. Many people operate in our Happy Hour and Party Drug Society without drinking or using drugs. If you care about someone who is an addict who’s succumbing to the compulsion to abuse drugs or alcohol, encourage treatment. You can’t make an addict stop using, but you can set your own boundaries. And you can emotionally support your loved ones as they fight to overcome challenges.
9/20/18 - Can debt be good?
9/13/18 - Tackling Debt
There are a couple of things essential to keeping your credit score solid while you’re prioritizing cash flow and debt payments. One is to make minimum payments by the payment due date on all credit cards and loans. An easy way to make sure this happens is to set up minimum payments for automatic debit from your bank account. That doesn’t prohibit you from paying an additional payment in any month. The other is, don’t cancel a credit card with an outstanding balance. Failure to do either of these will have a negative impact on your credit score.
The next steps in reducing your debt involve setting priorities for your debt. For most of consumers, credit card balances are the ones that cause the most problems. Ideally, stop using cards while paying them down. If you tend to make impulsive purchases with your cards, leave them at home and don’t have the credit card information needed for online purchases easily accessible. An old trick to force thinking through use of a credit card is to put the card in a bowl of water and put the bowl in the freezer. If you chip the card out, you might damage it and if you microwave it, the card can melt.
Make goals of how much you can pay on your credit cards. Some say that paying a small credit card completely off is a good first goal. While the most cost efficient way to prioritize payments is to pay the most on the card with the highest interest rate. But there is a sense of accomplishment from paying off a small card and it simplifies how many payments to keep track of. Generally, you should pay the minimum payments on all cards and use the rest of your monthly card payment budget on the card with the highest rate. Once that card is paid off, start applying your extra payment amount to the card with the next highest rate. Eventually, you’ll be down to one card and can make one big payment until that card is paid in full.
Generally, you don’t need to pay additional payments on “good debt”. This is usually anything that might have tax deductible interest – your mortgage, home equity loans, and student loans. These debts typically have low interest rates and the tax benefit makes those debts less urgent. Also, if you have vehicle loans that aren’t too large, with reasonable interest rates, those can be paid according to their terms. Also, don’t buy another new car as soon as you get your loan paid off. You can put the amount you were paying toward that loan into savings. Continuing to save while paying down debt is important, so work for a balance between saving and debt reduction.
9/6/18 - Learn more about Linda Leitz
8/30/18 - Good Credit or No Credit?
There is quite a bit of debate about building good credit. Some advise to avoid any kind of credit card completely. Some advise to manage all your finances around building your score. Let’s look at what is involved in having good credit.
Some people say they have perfect credit because they have no credit cards and pay everything with cash, check, or a debit card. This isn’t perfect credit, it’s no credit. That’s not to say this isn’t a responsible way to manage your cash flow, but if you need to borrow money for a big purchase like a home, it’s much more difficult. Major mortgage lenders – including government programs – use a credit score to determine if a borrower can have a loan. You don’t have a credit score if you pay for everything with cash, check, or credit. Lori Sorrels, a loan consultant with Caliber Home Loans explains, “In reality, if a lender can’t determine your ability to pay back long term debt, they won’t feel comfortable lending.”
So what are some good ways to establish credit? If you’ve never had a credit card, you might not be able to get one of the major cards – Visa, MasterCard, or American Express – without a guarantor. So it’s often easier to start with a store card from a department store or a specialty store. If you don’t have bad credit, these types of cards can only be used at that store will often grant you a small line of credit. Another potential avenue to get a card is a secured card. That’s where the financial institution allows you to have a line of credit that’s equal to a savings account balance you have with them. Two or three cards are probably enough for most people.
For any card you get, use it a few times a year and pay it off on time. That shows you can borrow and pay it back. It’s best to pay the balance in full each month. If you pay the balance over several months, it won’t necessarily hurt your credit, but paying interest on credit cards is a waste of your money. If you can’t pay for something when you buy it, you probably shouldn’t buy it with a credit card.
Some people take the stance that they don’t need credit any more. They own their home. Their needs are simple. But it’s better to have good credit and not need it than to need to borrow and not have the credit history to show you’re capable of repaying.
If you have bad credit, it’s not the end of the world. Sorrels says, “Bad credit doesn’t have to stay bad credit. There are ways to repair credit.” She recommends talking to a credit expert to know the best actions to take to get credit back on track to be positive.
8/23/18 - Meet Garrett!
8/17/18 - It's not about the money
There’s a saying that when someone says “It’s not about the money”, then you know it’s about the money. Unfortunately, money is often a gage that people use to assess other people. There are those who will try to surround themselves with people who have lots of money. Others will say that rich people are greedy and evil.
Money is part of everyone’s life. Having lots or a little doesn’t determine a person’s character. Like the other elements of an individual’s life, the role and priority of money says more about the person than how much they have.
We human beings are all a work in progress. So coming to a comfortable place in your life with money may be a lifelong journey. As you make this your journey, ask yourself, if you were suddenly gone from this earth tomorrow and someone had only your financial records to get to know you, what would they learn about you? Would they see a story of debt, expensive vacations, a huge home, designer clothes, and impressing others? Would your finances tell of massive amounts of money hoarded and never shared? Or would your records tell of responsibility, caring about loved ones, giving to charitable causes, and a life well lived?
You might be frustrated with your lack of financial alternatives. That can range from being unhappy with investment returns to feeling that you never have enough money to do what you want. But we all have some choices available and can do our best to take control. Make conscious decisions about the role money plays in your life. How you use money reflects your values, your discipline, and whether you plan for the future.
Many people monitor spending or set up a budget. You can assess whether your spending and saving is accomplishing what you want it to. For instance, are you spending on things that aren’t necessary or important to you? A financial counselor shared that she’s developed an education exercise that she calls the $800 snacks. The initial reaction of people is that $800 for snacks is ridiculous! But spending about $3 a day on snacks five days a week for a year adds up to around $800. It may be worth it to you to have the convenience and selection of getting something from the snack machine during a break. Or you may say that you’d rather buy snacks in bulk and bring them with you. Another example is giving to charity. Do you respond when you get a request, or do you pro-actively decide what causes you want to support and budget to give them money every year? For many of us, money can give us experiences we value. Personally, I don’t mind spending money on a vacation with my kids. To me that’s priceless. Decide what your money can do and say about you.
8/9/18 - Money and Dating
8/2/18 - Money and Dating - #2
Use discretion in your money matters. Be true to who you are – financially and otherwise – but don’t share financial specifics with people unnecessarily. In a new relationship, you don’t need to reveal your finances until things start to get serious. So what does that look like from a monetary perspective?
People who are in a dating relationship often want to do special things together and impress each other. But it’s not a good idea to have your couples activities break a reasonable budget for you. That’s part of being honest with the person you’re dating. It’s a problem to start a relationship being someone you’re not financially. If your income supports a fast food budget, don’t lead a significant other to believe that fine dining is a regular expectation. And it’s certainly acceptable to say that a particular activity is too pricy or to suggest a less expensive activity.
A trip together, which is often a step in getting more serious, can be telling in terms of how you each prioritize financially. What type of lodging, meals while you’re traveling, and activities do you each want? How do you divide expenses? Equally? Maybe one of you pays for the hotel and the other buys meals. It’s a good indication of how you each handle finances.
When a relationship turns serious, think about sharing financial details. I you’re going to get married or move in together, you definitely need to know if your significant other can responsibly manage joint finances. If you both work and will share expenses, you need to know each other’s income. If you make substantially different incomes, you need to decide how to share joint expenses. Will you split housing costs proportionate to income or equally? For instance, if you make $5,000 a month and your significant other makes $2,500 a month, you could split big expenses with you paying two-thirds and your partner one-third, you could divide the expenses equally, or some other method. Perhaps you pay housing and your significant other pays utilities and buys groceries.
While it might seem unromantic, documenting financial obligations before you move in or get married is wise. If you can’t talk about difficult financial issues when the relationship is growing, it’ll be more difficult if you aren’t getting along later. If you decide to sign a financial agreement, be prepared to share information in the form of official documents – account statements, tax returns, pay statements. You should each have advice from an attorney and sign your agreement in front of a notary.
Relationships aren’t about money – or they shouldn’t be. You don’t want to buy affection. If you impress a love interest with expensive dates and gifts, you won’t know if the attraction is to you or to the money. And if you get into a relationship for money, you might just end up earning every penny.
7/26/18 - Vacations and Money
7/19/18 - Financial tips for your vacation
Unless you’re doing a last minute trip, you’ve probably already booked flights and hotels for a summer vacation. But even if you’ve already paid that money, there are still some opportunities to save money on an upcoming trip.
One is meal planning. If your household is like mine, even a very eventful vacation almost seems to flow from one meal to the next. But eating without a plan can add up. Find out what restaurants you’d like to go to, see if there’s a better or worse time to eat there from a price perspective, and plan some of your events around that meal. I’m not suggesting that you catch the Early Bird Special instead of enjoying a luxurious dinner. But a mid-week dinner might be just as enjoyable as going at peak times. And a leisurely lunch might be just as nice as a dinner and less expensive. Also, set a budget for a meal. Perhaps you can share an appetizer and dessert instead of each getting both.
While thinking of food, snacks and drinks can be another expensive outlay if you don’t plan. Take some snacks for the plane or car, including some non-perishable snacks for the trip home. Airline food and side of the road eateries can be much more expensive than snacks you buy at the grocery store. You can also plan to eat a bit healthier if you bring these goodies with you.
Buy some of your tour and event tickets ahead of the trip. This can save money – perhaps going at less popular times – and also help make sure you get to see what you want to. Spur of the moment decisions on what to do sometimes mean having to stand in a long line or missing a sold out event, so besides saving money, you might save your vacation.
Give the kids a trip budget. Instead of dealing with multiple cases of whining, tell them up front where you’ll be going, what you’ll be seeing, what some of the things are they can purchase (or won’t be allowed to purchase), and how much they will be allocated. Older kids can do some online research on what they might be able to buy. You can have some teachable moments with younger kids. If you hold on to the trip budget until they are ready to spend it, you can have a fun discussion about the purchase. That’s better than arguing that you won’t buy them something else.
If you’re looking for a last minute getaway close, you might be able to find some good bargains. Hotels that have empty rooms may have lower rates for last minute stays. There are even some reduced airline fares if you can go on a moment’s notice.
You can plan enough to save a little, but let go enough to have some fun.
7/12/18 - Money Smart Kids - #3
7/6/18 - Money and Dating - #1
If you’re dating with the hope of being in a committed relationship, it’s a good idea to be aware of signals about how your companion handles financial matters. In a long term relationship, your individual finances will impact both of you, even if you keep your finances separate.
In the early stages of dating, you’re enjoying getting to know each other and doing special things on dates – even trying to impress each other. So you’re probably spending money on entertainment and trips that aren’t necessarily affordable long term. When the two of you start talking about a future together, it’s time to pay attention to finances, too. Many people are uncomfortable talking about money, but you don’t need to start with a big, serious discussion. Maybe it begins with giving some ideas of cost efficient activities – making dinner together instead of eating out, watching a movie at home instead of going to a theater, a day trip instead of going away for a weekend.
At some point in a good relationship, you’ll be able to have some discussions about money. If you plan to be together long term, you’ll want to be able to both stay financially sound and plan activities together that take that into consideration. You both need to have an emergency fund, save for retirement, and avoid consumer debt. You don’t necessarily need to disclose to each other what you make, but you can benefit from a discussion about what you can each afford to spend. This may be a moving target so keep the lines of communication open.
Many relationships work well even if both people don’t have the same financial situation. But you do each need to do what you can afford. Don’t try to match what your significant other spends if you can’t afford it. You can both benefit from agreeing on how to structure things.
Some people feel like it keeps things simple to just live together rather than get married. Marriage does formalize things, but that can have positive aspects. If you move in together without getting married, consider having a co-habitation agreement. Even if you don’t intend to own a home together or have joint accounts and want to take a “what’s mine is mine – what’s yours is yours” approach, a simple agreement document your intentions can simplify things if you break up. Ideally, you each have an attorney help draw it up or look over what you’ve written.
Any committed relationship needs to have good communication and honesty. There are multiple aspects to being involved with someone – intellectual interests, common values, and enjoying similar entertainment. Money issues are part of any relationship and shouldn’t go unaddressed. If you can’t be true to your own financial situation and open with the person you’re dating, perhaps it’s not the right relationship for you, or at least not the right time.
6/28/18 - Money Smart Kids - #2
6/21/18 - A Realistic Investment Philosophy
Pick one of these statements that describe your investment outlook. (1) I want an investment that is really safe. I don’t want to lose any money! (2) I want my money to work hard. I want to see some great returns! If you really only picked one, you’re already more realistic than many people. Many smart individuals believe they should be able to have completely safe investments with no potential loss (or even temporary downturns) and get consistently fabulous returns. So let’s look at the different types of risk.
Loss of investment is a risk, especially in markets where you take an ownership position, like the stock market or stock mutual funds. Sometimes, though, a temporary decline in an investment is mistakenly seen as a loss. Historically, the stock market has performed better than investors in the stock market have. It’s because people tend to panic and pull money out instead of riding some of the downturns back up. When it comes to this type of risk, there is definitely a relationship with return. High risk investments – if they succeed – should anticipate high returns. Low risk will have lower returns.
Another risk is purchasing power. If you have a really safe investment, it may have a “guaranteed” rate of return, but it won’t be as high as a return on an ownership investment. In some cases, it won’t even stay ahead of inflation. That’s especially true when you take taxes into account. Your money will be completely stable, but not be able to meet your needs. Inflation has eroded your purchasing power.
The need for liquidity can also pose risks. If you don’t have money when you need it for emergencies, you might end up paying high interest on a credit card or simply not being able to deal with the financial impact of the emergency. So, if you have your money in the stock market and the stock market is down, you can get to your money, but you’re selling at low values. If you lock your money up for a long period of time to get a better rate on a guaranteed investment, you’ll probably have penalties if you need it.
Taxes can pose more than one type of risk. If you’ve saved for retirement with tax deferred accounts, you might have to pay taxes and penalties if you need it before you turn 59½. Also, the tax code is constantly changing in an effort to meet the needs of providing government services and drive the economy. You might have a good budget today, but if taxes change, you might have less cash flow than you have had in the past.
The solution for finding the perfect investment is to stop thinking there is one. The reason financial planners beat the drum of diversifying investments so much is to avoid one of these risks taking away your financial security. There is no single, perfect solution. But the right combination can serve you well.
6/15/18 - Dad's Advice
Many of us are a product of our upbringing. Even as a financial planner, some of the best common sense financial ideas I ever received were from my parents. My dad had some life experiences that impacted how he approached things and the way he lived demonstrated many ideas through example. Here are a few of my favorite gems of my dad’s wisdom.
Choices – I grew up in a small town and there wasn’t really anything that I wanted that my parents wouldn’t have been able to afford. But periodically when I asked for something, dad would tell me I couldn’t have it. When I asked why, he’d say it was because we can’t have everything we want. These experiences taught me that sometimes I don’t get everything I want, but I can still be happy and have a good life. This may not seem like a huge financial insight, but people who don’t understand this often have a sense of entitlement. They also sometimes end up with too much in credit cards, houses they can’t afford, and trips that are great, but not affordable.
Record keeping – Dad never had a computer. He kept wonderful records that anyone could figure out. The family tax preparer told me once that dad took in his tax information every year in a shoe box, but it was organized in the box. Some of his records were typed, but many were written by hand. Several years after he retired he showed my mom how he kept the records and she started sharing some of the record keeping. So a good system of organization doesn’t have to be fancy, it just has to be organized and logical. And anyone who needs to know the system needs to have access to it.
Discretion – Dad often told me not to discuss our finances with people outside our family. He wasn’t talking about professionals. He was always completely candid with his financial advisors. When you talk to people about your money that don’t need to know your financial situation, it can sound like bragging or whining – depending on your situation. Also there can be unintended consequences. You may not be sure, going forward, if those people like you for your money or like you for you.
Charity – Dad gave generously and privately to the causes that supported his values. He didn’t assume others would step up. He walked the talk with his actions and his money.
Life Happens – Dad’s family lost their farm in the depression, they then moved to where they could get work. He’d work a couple of hours before going to high school each day. His hard work resulted in a successful business, early retirement, and financial support for his widow – my mom. Don’t feel entitled or downtrodden when circumstances turn against you. Hard work and humility will make up for a lot of bad situations.
6/14/18 - Money Smart Kids - #1
6/12/18 - Giving Kids Allowance
Giving your kids an allowance is a great way to begin teaching them about money. It’s also a good way to cut some spur of the moment spending out of your budget.
Kids can start learning about money surprisingly young – sometimes even preschool age. But for most kids, it makes sense around the first or second grade. Before you give your children an allowance, talk to them about what they can use it for and what they are not allowed to use it for. Maybe for your family that means your children can buy candy (as long as it’s not right before a meal) or toys, but not a pocket knife. Tell your children that they get to choose what they spend it on within the boundaries you’ve set and that they can ask you if something is in the approved category. If your children spend it on something they are not allowed to, you’ll take what was purchased and they don’t get the money back. And – this is important – after the allowance starts, you won’t be buying those things for your children when they ask. This is where the savings come. Instead of arguments at the checkout counter about whether your children can have some candy or the new toy they saw advertised, the discussion turns to them using their own money for it.
How much to give depends on your situation. A good rule of thumb is about one dollar per week for every year of your child’s age. So if your daughter is six, she gets six dollars a week. That might seem like a lot, but remember that you’re not buying some of the things you usually buy for her. If in doubt, it’s better to go too low and increase as she gets better at making decisions.
Having your child’s use of the money as a teaching opportunity is key. You can ask questions, but without criticizing decisions. For instance, it’s better to ask if your son is sure he wants to spend his money on that water gun and perhaps point out that it doesn’t look like it’s very sturdy, than to tell him it’s a stupid thing to buy. And if it breaks, don’t say I told you so. Gently ask how he feels about it or tell him you feel badly that it broke. That’s a better lesson than his parent gloating over his defeat.
It’s important to resist the temptation to bail your child out of their mistakes. Many of us parents would rather endure a negative outcome than see our child go through it. But that’s how the child learns. So discuss financial victories and defeats, but don’t be the safety net. That’s a poor practice to start and it can get really expensive as your child grows older.