Review Category : Personal Finance 101

5 Ways You Are Wasting Money Without Even Realizing It

The truth is that more people are struggling with cash flow issues in their finances than they do with their investment assets.  The challenge is that we often blow our money in places where we don’t even realize it is going out the back door.  $20 here…$100 there…it can seem at times that we are nothing more than our own ATM machine.    It’s hard to define the difference between spending money and wasting money, but making quality decisions as the CEO of your family finances is paramount to having a successful personal financial picture.  Here are five ways I see that people waste money. Buying Too Large A House – We can convince ourselves that buying a large home is a great idea because we expect long term growth of the value of our home. Remember that primary residence should never be considered an investment, but rather your home.  The place you will raise your family or use a source ...

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Is It Time To Consider I Bonds

I was reminiscing the other day about the gifts that my grandmother used to give me for my birthday and at holiday time.    She wasn’t a great gift giver, especially when I would get a sweater vest with the big letter “T” etched right in the middle of the sweater. Oh yeah, I also got socks a few years which is a swell gift if you want to end up on the loser list at middle or high school.   But, the one gift that didn’t mean much to me at the time and paid dividends later were the series EE savings bonds that I stuck in an envelope and let sit in my drawer until they matured.   Those very bonds helped me be able to put a down payment on my first car so I can thank my grandmother for that. With interest rates hovering at an all time low over the past seven or eight years, hardly anybody talks ...

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Why Your Teenager Shouldn’t Have A New Car

If it is your idea, as a parent, to help your teenagers set realistic financial goals and be financially successful in life, one of the worst decisions you can make is to buy them a new automobile. When my daughter was ready to drive, I bought my mother’s 2008 Hyundai Tucson. Funny thing is that it gets my daughter to school and her jobs just as well as any other vehicle. We focus more on teaching her how good the inside of her bank account looks than how the outside of her car looks. She is already well on her way to financial independence–and not making this mistake will help your children get there quicker as well. Specifically, here’s why a new car is such a colossal mistake: The laws of depreciation vs. appreciation. The fact is that cars are guaranteed to depreciate. And the financial lesson you want to teach your children is to buy assets that can appreciate ...

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The 15 Minute Plan

Have you seen those commercials for fitness programs that say all you have to do is spend 15 mins a day in their program and you will get lean and fit.  You know, they show a before and after picture of someone that has been through the program.  Now, I do not know if they work, but I do know if you stick with any kind of plan you will see some kind of results. It is no different with your finances.  You have to have a plan and stick to it.  Here are some steps to your 15 minute plan. The start of any plan revolves around cash flow management.   In the 17 years that I have been in financial planning, I have found that the most successful people are those that can create, manage and read an Income-Expense statement.  You start with a system for collecting your data.  You can use pen and paper; an Excel spreadsheet; a ...

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Don’t Get Social With Your Social Security Number

If someone gets their hands on your social security number, they can wreak havoc on your life by using your social security number illegally and assuming your identity to create numerous financial problems.   When it comes to protecting you against items such as identity theft and tax fraud, keeping your social security number sacred is in my opinion the number one priority for confidentiality within your records. Tax Returns- We have seen this type of theft escalate in droves over the past five years.  Someone who grabs your social security number can file a tax return in your social security number and get your refund before you even file a tax return.  In fact, you won’t even find out until you actually try to file your own return. Getting Credit- Once a thief has your social security number, they can easily complete an application for credit.   Retailers make huge money off of store based credit cards, so this is a ...

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10 Questions To Ask Your CPA

If you are hiring an accounting or tax and business firm, it should go without saying that you have a CPA involved in looking over all of the work.   However, not all accounting firms are created equal.     Some accountants are aggressive, some are conservative, and some care about nothing more than just preparing your taxes.   With the tax bomb right coming right around the corner over the next decade, isn’t it time you asked your CPA these important questions? Question #1: Do you believe I’m paying too much, too little, or just the right amount of tax? Beyond simply preparing tax forms, an accountant should be involved in business planning throughout the year. Typically, you should be planning a tax review in the beginning of the year to ensure you create the most efficient tax strategy possible.   If your CPA just gives you the “we are doing great” speech, it could be time for a move Question #2: Do you ...

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Three Financial Moves To Make When You Get Promoted

There are few things in life that deserve a glass of champagne more than a well-earned promotion.  After years of blood, sweat, and tears, your company has finally recognized your efforts and decided to move you into a more meaningful role within your company.  Sometimes, only title are associated with these promotions, but more often than not there will be financial rewards as well.   This is exactly your time to fall into the lifestyle inflation trap and make some really smart financial moves that will pay dividends down the road. The Pay Raise– Generally, a new promotion will also mean more responsibility which often equals more pay.  If your salary jumps by $10,000 or even $50,000 dollars this will mean a significant bump in your cash flow for your family.   What should you do with this money?  Is it best to add to your 401(k)?  Start paying down the mortgage?  Or time to purchase that new vacation home?   With pay ...

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Does Jim Cramer Run Your Portfolio?

About a week ago, Marketwatch (www.marketwatch.com) ran story called, “The Most Dangerous Stock Market Since 2008.”   In the past six years of bringing you my Your Smart Money Moves Column, I have shared with you how media can influence what happens in the markets in a very significant way.  Without even reading a lick of this column, would it be any stretch of the imagination to say that if the market hits all time highs that the potential danger gets higher and higher for some type of market pullback? If you really want to see something funny, spend eight minutes today watching this 2009 video of Jon Stewart’s The Daily Show.  This particular program poked fun almost five years ago at Jim Cramer, Rick Santelli, and other financial pundits for telling people to continue to buy stocks in a raging bull market before the bottom fell out (http://bit.ly/1aZk5rZ).  The video is particularly amusing with one of Stewart’s great quotes “I ...

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Don’t Forget To Protect The Golden Goose

I have delivered insurance checks in my career and nobody has ever told me they have too much life insurance after a loved one dies. It’s really ironic because there are many media pundits who beat up on having unnecessary life insurance, but those writers don’t have to pick up the pieces after a major breadwinner dies in a family. Recent studies still say that the odds of dying are 1 out of 1. LOL. Even though I think that most families are woefully underinsured when it comes to life insurance, the greatest gap I see amongst Generation X and Generation Y is an apathetic amount of disability insurance. Most people who work for companies believe that the amount of disability insurance they get through work will be adequate to cover their situation should they sustain a long term disability. The stark reality is that most Gen X’ers an Gen Y’ers don’t even read the benefits manual to understand the ...

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Get Educated On One Word: RISK

You are a big spender and she’s a mattress stuffer. You like the idea of house flipping and she prefers a money market. You’ll go for the IPO and she’ll go for the blue chip stock that has been around forever. Now that you are newly married or living together, how can you ever see eye to eye on the best way to manage the family investments? Here are three quick young couple tips to deal with opposing investment styles. Get educated on the meaning of the word RISK. It’s likely nobody ever explained all the types of risk associated with investing to a young couple. Did the money mattress person realize they could be safely going backwards each year with the risk of inflation? Did the IPO investor realize the risk of losing all of their money with the latest social media stock? The young couples of today need to get informed on what risk really means. Get educated ...

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Uber For Seniors?

Uber for seniors?   I have no idea if this will ever be a business model, but I did have a laugh and an awakening moment the other day at one of my client’s homes over a cup of coffee.     In Fulton County (Atlanta), I was completely unaware of the amazing car services that are available to seniors to get around town.  With all of the new restaurants, shopping, and entertainment venues, even those that can’t drive or don’t have family to help them can get access to these cool services. The first of these services is the DART S Service.  It was started back in 2010 and to be eligible for the program you must: Be a Fulton County resident 55 years or older Have limited access to transportation Doesn’t own a car Permanently or temporarily cannot safely operate a vehicle Has no consistent means of transportation Has no access to services within reasonable walking distance To apply for the ...

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Do Ivy Leaguers Get Better Rates For Loans

As most of know, student debt is becoming the new silent killer for generation Y.   People in their 20’s and 30’s may need to find different alternatives on how to pay off their student debt or even how to refinance the debt.   Programs seem to be popping up all over the internet and I recently had the chance to interview Mike Cagney, CEO and Chairman of SoFi which is a company who can help with figuring out your student debt and more. If you need to refinance your student loans, SoFI (www.sofi.com) has some really cool programs: Fixed rates can start as low as 3.63% and variable rates even lower.  SoFi has its own specific underwriting process that allows them to be more selective with the types of students it loans to currently.   Think about it.  Better school, consistent job, etc. might mean you have a much better ability to pay back the lender. Unemployment protection is an excellent feature ...

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Can You Ditch The Debt Collector?

An estimated 1 in 3 adults with a credit history — or 77 million people — are so far behind on some of their debt payments that their account has been put “in collections. “That’s a key finding from a new Urban Institute study. It examined non-mortgage debt, including credit card bills, car loans, medical bills, child support payments and even parking tickets. The debt in collections ranged from as little as $25 to a whopping $125,000. But the average amount owed was $5,200. (source money.cnn.com).   So, what happens when the debt collector comes calling for you? Don’t Ignore Them-  Look, it can be incredibly disheartening to have to deal with a debt collector, but at some point you will need to face the music.  These aren’t the days of BMG/Columbia 6 CD’s for a penny and then change your P.O. Box. (Although admittedly I got a ton of CD’s this way).  Changing your name, address, or phone number might help you ...

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Five Vices That Could Ruin Your Financial Future

We all have vices.   For some people it is biting their nails when they are stressed out.  For others it is taping and watching every single episode of the Real Housewives on Bravo TV.   Some vices are innocent while others can get you in big trouble.  Here are five financial vices you want to avoid if your goal is to become rich. Gambling- I am not talking about placing a $5 bet on the NCAA basketball championships.   The lottery for most people (especially scratch off tickets) can be a very addictive habit and one that is tough to break.  Spending $40 a week on lottery tickets vs. $40 a week saving in an IRA could mean a large differential in your ability to be able to retire one day.  The odds of your numbers coming up are slim to none. New Cars- I know that there is nothing like the smell of a new car.   There’s also nothing like the ...

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Listen To What The Baby Has To Say

I am a complete marketing junkie, so I have to give props to financial companies that take risks to launch edgy marketing campaigns.  Historically, investment companies are boring advertisers showing couples taking a bicycle ride, smelling the roses on their front porch, or some actor looking all serious on camera about the ‘serious’ investment company.   I was a bit melancholy this year to see the last installments of the E*Trade baby commercials which completed a tremendous six year run of ad spots. For a marketing campaign to be successful, it has to leave a mark etched in our mind that will last for many years to come.  Think about slogans like Nike’s Just Do It or Wendy’s Where’s The Beef that you can remember just like it was yesterday.   When the E*Trade baby aired during the Super Bowl in 2008, the commercial made us all laugh while at the same time beginning the drip the ideas of what we could ...

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Your Earnings Power Is All About Supply And Demand

Really? Doesn’t my formal college education matter?  Or whether or not I have an MBA?   Could the simple economic principle of supply and demand really dictate how income is earned in America?   Let’s take a look inside at what you desperately need to know if you want to earn more money in your career. I’ve been practicing financial advising for over 23 years and the people who truly build up extremely high level of incomes typically fall into three categories: Business Owners Sales People who rise in companies for staying in the same place more than 10 years What does this have to do with earning income? Well, there are certain skills in business that are trainable and certain skills in business that are learnable.  Gaining a keen understanding about which ones can make you money and why will dictate whether you too are successful in making lots of money. THOSE EARNING UNDER $100,000 The lowest general form of earners ...

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Selling Jewelry to Help Pay for College

Over the years I have met people who have sold their jewelry for hundreds of different reasons from saving the rain forests and donating to charities, to paying medical bills and forming a new business. We have helped clients pay for weddings and divorces, debt relief, retirement and to help family members in financial need. I can relate to all of these life events, but as a father, the one I relate to most easily is paying for my children’s education. We have helped many graduates pay off the debt that they have acquired while getting an education. We have also helped many parents and grandparents contribute to 529 plans – a tax-advantaged savings plan designed to help save for future college costs. Jewelry proceeds that are invested early have the time to grow tax free within a 529 plan and jewelry sold today, to pay down debt that could’ve accrued over the years, presents a much better financial footing ...

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Why Is It So Hard To Spend Money In Retirement?

The number one concern for most people approaching retirement age is that they will run out of money. It is such a great fear amongst individuals and families that many people actually deprive themselves of the number one objectives they had for retirement. Having fun! When you are working 40, 50, or 60 hours a week and raising a family, you often dream about what you will do when work is optional. You daydream about taking the vacations to destinations you have never seen like Australia. You ponder the idea of spending three months sitting beachside and purchasing that cool convertible you always wanted your whole life. So, what’s stopping you? It isn’t the kids. It isn’t the work. It isn’t the weather. Why is it so hard for retirees to enjoy the money they saved for that very purpose of enjoying when work becomes optional? Without proper planning (and even sometimes with proper planning), the fact is that most ...

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My ATM Receipt is My Check Register

If you make 50k, 100k, or 500k, you might still be living paycheck to paycheck.  With more and more people using their ATM receipt as their check register and not reading their bills before clicking yes from online bill pay, this problem continues to grow in American.  What’s neat about oXYGen Financial is that we believe each family is the ‘CEO’ of their family finances and should treat it as a business. No family has an infinite amount of revenue, so what is the smartest way to run the family profit or (lossL) statement to maximize cash flow to reach your financial goals? Thus, we like the language of spending plan for the profit and loss versus budget. Make sure you calculate your family revenue- include not just salary, but if you are going to earn overtime, bonus, raise, commissions, stock options, etc. Build a strategy to minimize income taxes.  Of course, the more you are able to keep the ...

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How Does LeBron Become A Billionaire?

There was no way to avoid the news this past week that LeBron James decided he was coming home to Northeast Ohio to return to playing basketball for the Cleveland Cavaliers.    It has been widely shared in the news that LeBron James wants to become the first billionaire athlete.   Is this gutsy move actually designed with the thought in mind to win championships or created in the next set of career moves to forge the path to becoming a billionaire? “It’s my biggest milestone,” he says in a story with GQ. “Obviously. I want to maximize my business. And if I happen to get it, if I happen to be a billion-dollar athlete, ho. Hip hip hooray! Oh, my God, I’m gonna be excited.” (source: GQ) With a reported $250 million dollar net worth, (source: celebritynetworth.com) just what smart money moves does LeBron need to do to get himself to a billion dollar net worth. Win Just One Championship In ...

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Getting Investment Advice Online: Be Clear About Your Expectations

In order for individual investors to get the most out of their online relationship, they should avoid the colossal mistake most individuals make. The biggest mistake is simply not being clear about expectations. There are many really high quality online investment advisors and overall financial planning offerings on the internet. Some of the online investment advice companies will offer financial planning or other services in addition to money management. Some of them will offer you no customization whatsoever of your portfolio. While others, will allow for some degree of customization based upon your overall situation. However, if you aren’t really clear about what you want out of the relationship, you may become quickly disappointed in what the online provider is going to do for your portfolio. Just like any face to face relationship you would engage in for financial planning or investment advice, do your homework about the organization. Is it venture capital backed and possibly going to be sold ...

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A $5,000 Watch Doesn’t Make You Look Cool

Have you ever met someone who you would classify as a wine snob? Someone who knows all the best wines and will tell you why that $50 bottle of wine is superior to the two buck Chuck you get at Trader Joes? In the world of watches there are also people who you will meet who are watch snobs. The people who will assure you that the Rolex they spent $5,000 for is the best that money can buy, and can give you all of the brand name watches you should own over your lifetime if you really want to show people you have hit success. The dumbest purchase I ever made was spending $5,000 on a watch. I wore two watches over the course of a year, one that cost $5,000 and one that cost $79. The $5,000 watch was a Panerai and the $79 was a Diesel. I generally messed with people when they asked me about the ...

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Does “Flow” Really Matter To The Average Investor?

To be successful as an investor, it is important to grasp certain basic economic principles including the law of supply and demand. As inflows and outflows are reported within the mutual fund and exchange traded fund industry, the average investor should start to pay closer attention to these numbers when it comes to making their portfolio decisions. Evidence strongly suggests that watching inflows and outflows can quickly demonstrate that the average investor chases performance. How many people have bought at the top of the market and tend to sell at the bottom of the market? Or they end up being a day late and dollar short when it comes to making the right investment decisions. Examining these inflows and outflows can help you spot raw trends of where the mass money is moving and may also present you with opportunities in certain asset classes that may become undervalued. What is decidedly more important than watching the macro trends of money ...

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Are You An Irresponsible Investor?

If you aren’t a socially responsible investor, does this explicitly imply that you have become an irresponsible investor? LOL. When I first saw socially responsible funds hit the market, most of the initial strategies were fairly straightforward. Avoid the “sin” stocks such as alcohol, tobacco, and gambling. What you need to know today is that socially responsible investing has taken on an entirely different meaning in today’s investing world. You’ve got mutual funds today that invest in undervalued equity securities of large-cap companies with outstanding workplaces. You have funds that invest in common stocks and foreign stocks where investment decisions are made in accordance with Islamic principles. There are others that will address the ecological risks and opportunities of the investment process for the 21st century. My point behind this is that like any other investment you would make with your money, it is incumbent upon you to do the due diligence to determine whether the fund matches both your ...

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The Roth 401(k) Conversion: Pros and Cons

Since the Pension Protection Act, Roth 401(k)’s are becoming more popular amongst investors through their employer sponsored retirement plan.   If you have been investing in a 401(k) for some period of time, it’s likely you’ve chosen the pre-tax option and maybe it is time to consider whether or not a Roth 401(k) conversion makes sense for your individual situation. PROS: If you believe you’ll be in a higher tax bracket in the future when you distribute these funds, then converting your existing 401(k) to a Roth 401(k) could make sense. Roth 401(k)’s are subject to Required Minimum Distributions, but you can easily roll your Roth 401(k) into a Roth IRA and this can continue to allow you to defer dollars within your retirement accounts if you don’t need to distribute the money. If the market has another depressed year like it has twice in the past fifteen years, that particular year could be a really good time to convert your ...

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Could A Coffee Infused Donut Make Your Kids Money?

In the past few weeks, several of my clients have asked me about how to get their children started with investing.   As generation X parents are watching their children grow up, they are realizing that educating their kids about how the stock market works is an important lesson, which they unfortunately don’t spend enough time in school systems teaching.   We do not tell our kids now that money doesn’t grow on trees, but we do tell them that i-phones don’t grow on trees.   Rather than getting frustrated, you should take advantage of this by helping them get excited about investing their money instead of spending their money.   At oXYGen Financial, we are soon considering launching a course for our clients’ children to teach them these very important techniques. www.computershare.com–   This is was the first place that I got my oldest daughter into stock investing.    When she was learning about topics like percentages in school, I thought being able to track ...

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$250,000 And Struggling

When the fiscal cliff went into effect in the beginning of 2013, the country declared a new baseline for a married couple by defining $250,000 of household income as being ‘rich’ or ‘wealthy’.   Even though making $250,000 of household income for most families in America seems highly unattainable, talk to someone who lives in a top 20 major metropolitan market and you’ll find out a wildly different set of circumstances.  Could it be that a family who makes $250,000 is actually struggling?  Yes, Yes, and Yes.   Let’s break down the numbers for family that has three children (this is a hypothetical scenario, but I’ve seen plenty that look just like this) Save For Retirement-  If 10% comes off the top (you’ll need at least that to make a decent work optional scenario, but probably a heck of a lot more) that will equal $25,000.   Now you are down to $225,000 assuming it goes into a pre-tax 401k plan. Health Insurance ...

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Are The Elite Private Colleges Worth The Price Of Admission?

It is apparent that college education costs and health insurance are the two arenas that have defied gravity over the past six years through this recovery. With college tuition escalating at a much faster rate than normal information and continued pressing coming on family savings, the average household today may wonder if getting a diploma from an expensive prestigious private college is worth the ticket of admission. If your son or daughter is lucky enough to have the qualifications to get into the ultra-elite schools (such as Harvard), then my answer is yes. There is a short list of impressive schools that have a strong alumni base stretched out across the United States or have the really high end credentials necessary to help a student make a major impact with their career in the short term. There are many very good private colleges that cost $50,000 to $60,000 a year beyond the short list of these prestigious school, and these ...

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Living Paycheck to Paycheck is Not Living At All

Are you one of the many young professionals making good money but have little or nothing to show for it?  It’s ok to fess up because you are not alone.  A matter of fact, based on a study by Reuters 68% of Americans live paycheck to paycheck http://www.reuters.com/article/2012/09/19/us-usa-survey-paycheck-idUSBRE88I1BE20120919.  Yes, you’re reading correctly: over two thirds of people surveyed find it hard to make ends meet each pay period.  So how does this happen? First, let’s start with some simple math. Salary (total compensation) = $80,000 Annual After Tax Take Home Earnings (amount left after  taxes and health care costs are withheld, assuming a 25% tax bracket and $5,000 for healthcare  = $55,000 Paycheck (amount paid bi weekly) = ~$2,100/paycheck or ~$4,200 each month Now that we understand some basic numbers we can begin to realize where your true take home pay begins.  And just like any CFO of a large corporation, it’s equally important to focus on what cash is ...

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What To Do When You Come Into A Large Sum Of Money

Coming into a large sum of money is a game changer for people of all ages.  Unfortunately, there are lots of different decisions to consider upon receipt of these windfalls which causes most individuals and families lots of consternation on what are the smart money moves.  Whether these dollars are received from inheritance, cashed out stock options, or a gift, it is imperative that you make a smart plan or you can easily squander your newfound fortune.  Recently, I helped several folks from different walks of life when Airwatch was bought out by VMWare.  This instantaneously created a new set of millionaires.   Here are the ‘your smart money moves’ ideas to make when you come into a large sum of money. Do Nothing For 60 Days (unless you are right at the end of a tax year)–  When people inherit property, cash out stock options, or receive a gift, far too often I see people immediately buy themselves something or ...

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Stop Trying To Impress People With Your Money

If you are really trying to get wealthy, there are important life lessons to learn that will make you a smart money moves person.   It’s very difficult to pull down your guard when it comes to money.  You might be ashamed or embarrassed around poor financial decisions you made, and then tend to overcompensate by spending too much money just to prove that you can keep up with your friends or neighbors.  Here is a great post on how to build up your bank account and leave the right impression on others. You don’t have to dress for success anymore– Has anyone seen Mark Zuckerburg as of late?   Jeans and a hoodie will do just fine.  Don’t worry about the label on your clothes or your pocketbook. It just doesn’t matter. Be a leader– Perhaps you can be the one to suggest walking around a local fair or flea market, or even going to a free park to throw a ...

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Is It Time To Take A Sabbatical?

The corporate treadmill is pushing people to the point of breaking. With longer hours, more responsibilities, and 24/7 access to your e-mail through technology, you achieved your dream of making it up the corporate ladder. Only one problem. You don’t like it. You like the money, the perks, the benefits, but it is killing you and it’s hard to talk about it because nobody wants to hear your story. Well, I do. Imagine escaping the 8 to 8 (since 9 to 5 isn’t even available anymore) daily grind and spending a month in Tuscany, taking a cruise around the world, or simply tucking your feet in the sand without a care in the world. Wouldn’t that be unbelievable? Can you feel the sun beating down on you while you kick back and have a Corona with lime? The phrase sabbatical is actually derived from the biblical Sabbath which in ancient times allowed people for periods of rest and rejuvenation. Admit ...

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Financial Considerations For The First Marriage After 40

You almost gave up hope that you would meet Mr. Right.  Or maybe it is Ms. Right.  However fate struck lightning and you finally met the person that you are convinced you were meant to spend the rest of your life.    At some point, reality sets in as the wedding date gets closer and it starts to dawn on your that there may be real discussions that need to be had around money and financial goals.   Not something you typically discuss when you are enjoying fine dining, front row concerts, and swanky hotels on the beach. Remember, everybody has a financial story.  Especially the person that you are about to wed.   It is important to peel back the artichoke to better understand your partner’s attitudes and feelings around money and planning for overall financial goals.   Here are my five smart money move financial considerations for those that are getting married for the first time after 40. Should you get a ...

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Should You Ever Borrow On A 401(k)?

For some of you a dreaded financial question may stare you in the mirror at some point in your life. Should you borrow against your 401(k)? While all initial responders in your body say no, there could be a few instances where borrowing against a 401(k) may actually make sense. Here is my smart money moves take on when to make yourself a loan. In general, it is not a smart financial move to borrow against your 401(k) plan. There are many individuals who are quitting their job and considering starting up a new business. In order to start their new entrepreneurial venture, they will likely exit from their current employer. The additional problem is where will the new entrepreneur find the capital to open up their new business? Instead of cashing in your old 401(k), one tremendously creative option to potentially fund a new business is to set up your new corporation and create a Solo 401(k) plan. Solo ...

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Five Financial First Time Homebuyer Mistakes

In all of the financial transactions we make in our lives, there are few that pale in comparison to the excitement of making the purchase of your first home.   Many years ago, the first time homebuyer merely began with a starter home, but expectations have significantly increased today with new homebuyers wanting all of the modern up to date amenities included in their first home.  Oddly enough, the first time home purchase is often made with as swift a decisions as buying a new car although the purchase may be ten times the size of a new car.   Here are your five smart money moves to make so you can avoid the pitfalls and traps that most new homebuyers make. Falling In Love With Your Mortgage Pre-Approval:  Just because you are pre-approved for a $400,000 loan doesn’t mean you can actually afford a $400,000 loan. “Listening to the mortgage lender when they tell you that you are pre-approved for a ...

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Girl Scout Capitalism

Who’s got a case of the munchies? Purchasing a box of Thin Mints®- our round, mint-flavored cookies with a delicious chocolaty coating- helps a girl learn money management.  She handles money, keeps records, tracks orders- activities that are essential to running a successful business. (girlscouts.org) Well, 13 year old Girl Scout Danielle Lei and her mom recently showed us all a thing or two about American capitalism when they had some Tag-A-Longs® and other Girl Scout flavors in tow for sale at a San Francisco medical marijuana clinic. We can all learn a thing or two about business from Danielle Lei.  Talk about the notion of free enterprise.   Danielle typically sold her Girl Scout cookies outside of a Safeway, but with her mom’s approval they set up shop in front of the Green Cross which is a medical marijuana clinic in San Francisco.  What happens when supply meets demand?  Within two hours on President’s Day, Danielle sold a whopping 117 ...

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Don’t Forget the $150 Drivers Education Tax Credit

Who knew? The Driver School License Training Act actually exists.   This is why Your Smart Money Moves is a top ranked blog.  We stay on top of these things so you can improve your bottom line.   You’ll be filing taxes soon, and if you live in the State of Georgia and have a child who took drivers education you can be eligible for this nice little tax credit.   As long as you took courses from a private school, you’ll be eligible for this 2013 state tax deduction. O.C.G.A. 48-7-29.5 (2010) 48-7-29.5. Tax credit for private driver education courses of minors; required documentation; rules and regulations (a) A taxpayer shall be allowed a credit against the tax imposed by Code Section 48-7-20 with respect to the amount expended by such taxpayer for a completed course of driver education for a dependent minor child of such taxpayer at a private driver training school licensed by the Department of Driver Services under Chapter ...

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5 Tax Tips Before You File

It’s the beginning of February and your tax documents will be piling up by the day as a new mail from your mortgage companies, banks, and investment companies are sent out to you.   As you begin to stack up your pile of information to bring to the CPA or accountant, did you ever wonder if there are still ways you can save money on your 2013 income taxes before you hit the SEND button to the IRS?   Here are my 5 smart money moves on tax tips before your file away for another year. Contribute To An IRA- Whether this is a Traditional IRA or for small business owners/freelancers a SEP-IRA, these types of IRA contributions could still potentially be tax deductible for the 2013 calendar year even though the contributions and accounts were opened in 2014.   The biggest mistake individuals make is not investigating how these vehicles work or the adjusted gross income limits that would make things like ...

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How Much Time Do You Really Waste?

As the age old adage says, ‘time is money and money is time’.   If you consider this for a moment, time is really the great equalizer in life.  In actuality, it is the one commodity that we all have exactly the same amount of each and every moment of our lives.  While we all have varying levels of responsibilities, we have the unbelievable power to make choices every single day on how we invest, spend, or just simply waste our time.   However, most people don’t fully appreciate how much money they may be wasting when they don’t have an idea where their time really goes. One calculation worth going through is to figure out what an hour of your time is worth.   If you get paid a salary (and bonus) through work, one quick analysis would be to take your annual income and divide it by 2000.  In this case, I just used 50 work weeks at 40 hours a ...

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The Simplified Home Office Deduction

We have seen a monumental shift to more and more individuals who are freelancers, consultants, or starting some type of home office business over the past five years.  The home office deduction has often been bandied about as the dreaded ‘red flag’ that will surely cause you an audit.   When you file your 2013 taxes here in 2014, the IRS has now offered you a simplified version of the home office deduction so you don’t have to break out your spreadsheets and start doing a set of massive math calculations. The new optional deduction is $5 for each square foot of home office space up to a maximum of 300 square feet.   Instead of filling out the usual 8829 form, you’ll use a new worksheet in the Schedule C instruction book and enter your simplified home office deduction in Schedule C.   Of course, the regular rules around home office deductions will still apply, but here is some guidance the IRS ...

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10 Ways To Cut Your Food Bill

Is your family what I call an equal opportunity grocery shopper?   When you look at your debit or credit card statement, do you wonder the reasons why Kroger, Publix, Trader Joe’s, and Whole Foods all show up as a line item?  For individuals and families alike, the ‘food’ bill has become one of the largest line items in the household budget.   Food can include groceries, dining out, and even meals on vacation.   Here are my ten your smart money moves tips on how to trim the ‘fat’ from your food bill this year. Make A List– I picked up a cool list pad from Urban Outfitters.   You can snag a list by searching for grocery list under images in Google if you want one for free. Sunday Night Grilling– It’s hard to prepare all of your meals for the week.  Consider grilling up a bunch of chicken or steak in bulk on a Sunday night and keeping it to add ...

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How To Organize Your 2014 Budget

Even though exercise and diet remain the top two New Year’s resolutions that most Americans have, the next few days might provide you with some opportunity to visit your overall 2014 spending plan.  It can be a painful process sometimes building out a spending plan (or budget) as your self-reflection may often reveal ugly spots that you just don’t want to see. The first and most important step toward a financially successful 2014 is to get a reality check around where your dollars and cents were actually spent in 2013.   Here are my six tips on how to organize and set up a household budget.  This is the bedrock of what has created a successful personal financial plan for my household for many years. Gather The Last 12 Months Of Fixed Expenses– Fixed expenses are generally expenses that do not change much over the course of the year.  An example of this would be your rent or mortgage.  Most of ...

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Three Small Things That Can Make A Big Difference This Year…Really!

By: Genna Jenkin The Your Smart Money Moves Mom “It was the best of times, it was the worst of times”, also known as the beginning of another calendar year full of plans and expectations of a new and improved you. For some this blank slate may be very appealing, for me however, it is rife with pressure. I’m panic-stricken by the thought of all these huge goals looming before me. The weight-loss, the exercise regime, the healthier diet, the super-organized, always patient and wise parent, and ofcourse the supportive and sexy wife. Could anything be more daunting? And more importantly, could anything be more unrealistic? We are constantly being told to “stop and smell the roses”, translated as taking time to enjoy the small moments in our lives. So why not employ this philosophy when making the inevitable New Year’s resolutions? This is what I’m thinking, sometimes it’s the small things that can make the biggest difference. #1: Diet ...

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How Long Can I Carry Forward My Capital Gain Losses?

We are almost two-thirds done with 2013 and some of you haven’t even completed your tax returns.  For those of you who filed and finished your tax returns in April, most of that paperwork is neatly tucked away in your home filing cabinet.   Since the stock market has run up over the past year most investors have made gains in their stock and stock mutual fund positions.   However, the majority of tax payers never look at their capital losses from prior years to do effective tax planning.  So just how long can you carry forward your capital gain losses? First, you should be aware that you can sponge up capital gains year to year against any capital losses or carry forward losses that you have on your tax return.   This means if you have a carry forward loss of $30,000 from a prior year and had $30,000 of long-term capital gains here in 2013, you would essentially have a wash.   ...

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Is It Time To Call Mr. Handyman?

Like many of you, my home is filled with different types of small appliances. When something major goes kaput in our homes like the air conditioning, the refrigerator, or the stove, we don’t really think twice about the cost of calling a repairperson. Many of us had some type of mini refrigerator in our college dorm rooms or possibly our first apartment, and many homes today carry lots of small appliances, whether in tricked out basements or in the master bedroom. This past week, we had a mini refrigerator die on us and became confronted with this very simple question. Should we get someone here to fix it or just buy a new one? What do mere mortals like us who can’t play Tim The Toolman, nor do they want to on a Saturday afternoon, do to fix the problem? I haven’t written a blog post on this yet, but it has occurred to me that some serious analysis should ...

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National 529 Day

Today is National 529 Day.   Just another day on the calendar to get you thinking about how you will support your children’s college education.   I have noticed over the past several years that college education is one of the areas that people in their 40’s and early 50’s are WAY behind in when it comes to planned savings.   I’m also seeing much more discrepancies between spouses and partners alike about what is the best way to plan for this goal.  Should your kids go to an in-state school?  Should they go to the college of their choice?   Should you plan for an ivy league private school?   What happens if they just cross the border and go to a state school in a bordering state?   Imagine you get home from work one day and your child has the magical letter from that college or university that you both always dreamed they would attend?     Will you have a plan in place that ...

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The Drug Of Buying ‘Stuff’

The weather is warm and in the United States we are about to start enjoying some of the national pastimes of our country.   We love things like baseball, apple pie, the 4th of July, and grilling out in our backyards.    Oh yeah, and we also LOVE spending money.    In recent years, I’ve noticed that spending is more than just making a purchase here and there.  It’s almost a ‘crack’ like addiction, whether you wait for that Amazon package at the door or to take a photo of your tricked out new ride to post up on Facebook.   Like it or not, many Americans are addicted to the drug of buying ‘stuff’.    Why is this and how can you get your patterns changed on the home front? It seems pretty apparent that ease of access to drugs can make a user want more of them.  In our spending patterns, the ease of credit, access to our cash, and online transactions with ...

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Financial Literacy Takes More Than A Month

I’ll bet that most of you don’t know that April is officially National Financial Literacy Month #finlitmonth.  In fact, almost a decade ago in 2003, the U.S. Senate designated April Financial Literacy for youth Month.   In March of 2004, the Senate passed Resolution 316 that officially recognized April as National Financial Literacy Month.    I almost thought for a minute that we had run out of months since every month seems to have designated some cause for us to heighten our sense to for the next 30 days. It’s ironic because I’ve been doing this for almost 22 years and I can tell you that I’m still constantly learning new strategies and techniques around planning for money.   Many Americans are highly educated but still not well informed when it comes to their money. Here are five smart money moves to focus on if you want to become more financially literate. Mutual Funds or Index Funds–  Many of the large mutual funds companies ...

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Why Are You Mad At Your Accountant?

Here is a question to ask yourself after tax season is over.  What really happens during a typical tax season for a family or business? I have been doing this for over 20 years, and so let me describe to you the typical outcomes. The first thing that we see is that most people cross their fingers and say three Hail Mary’s hoping for a refund.  Does this sound like you?  You gather all of these documents that you get from your employer, your investment companies, and real estate you own, then you hand them over to somebody (an accountant or CPA) and pray that they’re going to get you some money back so you can go on that vacation or remodel your house.  Most individuals that we meet who get a federal refund during tax time think that their CPA is the bomb.  They are assumed to be the smartest, brightest, and most unbelievable individuals in the world.  It’s ...

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Five Items To Buy During March Madness

This past week we witnessed the beginning of “March Madness”.  It’s the time of year where we pick our college basketball brackets, hope for no upsets, and see teams like Oregon and Florida Gulf Coast become instant bracket busters.   I thought it would be fun to do a little March Madness of our own here at Your Smart Money Moves by giving you five items that are must buys in March.   Far too often, we make purchases for items that we need but buy at the wrong time of the year.   This can be very costly when it comes to managing your overall household spending plan.   Here are five bracket busters for you to look for this March. Winter Clothes And Coats–   Now that winter in winding down, most of you will be putting your winter clothes away in the back of the closet or shoved into boxes in the basement.   If you were thinking about getting that really cool ...

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$917 million will be gone in a month

We all like the idea of being able to get FREE money. Whether it’s when we find a few bucks of loose change in our couches, or it’s Fall and we pull out that jacket we haven’t worn in almost a year only to discover a $20 bill lodged in one of the pockets; then there’s always that moment you find a gift card stuck at the bottom of then dresser drawer and now have $25 bucks to spend at your favorite store. Additionally, in less than a month, the IRS has put a special group of people on notice that their tax refund will “fly away in the wind” if they don’t file soon. The IRS claims that refund, which will total over $917 million nationally, may still be waiting for a rough estimate of a million taxpayers who did not file a federal income tax return for 2009. The IRS estimates that half the potential refunds exceed $500. ...

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Did Your Broker Move For A Bonus?

In the major sports world, we see elite athletes sign multi-million dollar contracts to move from one city to another all the time.    In the past decade, we’ve seen contracts to superstar baseball players like Alex Rodriguez and Albert Pujols get paid over $250 million dollars to sign a long term contract.   When financial advisors decide to move from one brokerage house to another, many clients aren’t aware that cash may have exchanged hands to get the broker to make the move.    The financial advisor business isn’t much different than major sports.   Banks, brokerage, and financial advisory firms alike are looking for the upper echelon of talent, and will pay large sums of money to get players to change teams.  So, how does this all work? Let’s use the brokerage world as an example.    If your financial advisor or broker works for a UBS, Morgan Stanley, Ameriprise Financial, Merrill Lynch, or any of the main brokerage houses, they are being ...

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College Education Or Entrepreneurship?

Generation X parents continue to face the challenging uphill climb of saving for their children’s college education.   For a Generation X couple that has their first child here in 2012, the cost for a private college at $50,000 a year will cost over $518,000 of total dollars at a 5% inflation rate.   As crazy as that sounds, a parent would have to save $1,085 per month in today’s dollars to be able to reach that goal.    For most parent’s the thought of saving this much money to pay for the cost of education for just ONE child can be downright daunting.  Many of us believe that the cost of college education cannot defy gravity forever, but to this point there has been no stopping the rising costs for a four year degree. During the formidable teenage years, many parents help guide their children toward getting excellent grades in school, playing some sort of athletic sports, and filling their resume with ...

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I Make $100,000 And Live Paycheck To Paycheck

I’ve been practicing financial planning for over 21 years, and there is a new financial phenomenon spreading like cancer.    I haven’t come up with a name for this group yet, but there is a growing population of people between the ages of 30 to 50 who make more than $100,000 per year and are literally living paycheck to paycheck.   Are these people lacking a college education? No!    Are these people lacking a comprehensive set of benefits from their employer? No!   Are these people who are having lots of money garnished from their paychecks every two weeks? No!   So how is this group getting so far behind financially while making so much money? According to a report from the Consumer Federation of America and the Consumer Planner Board of Standards, Inc., 38 percent of household live paycheck to paycheck.   In 1997, this figure was 31 percent.  (source: huffingtonpost.com)  A report from earlier this year found that 43 percent of Americans don’t ...

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Personal Finance 101: Generation X – You Just Turned 40: Last Time To Get Life Insurance?

Generation X is classically defined at people born between the years 1965 and 1979.    Pretty much those of you in your early 30’s to the mid 40’s.  However, having given personal financial advice to thousands of people, I can tell you that many of you who were born 1960 to 1964 fit within the Generation X type of financial and personal attitude. In the last six months, I’ve seen both friends and family who are in the 40 to 45 year old range dealing with major medical issues.   I’m 42 and when people told me about 10 years ago the aches in my joints would be just a little bit worse . . . well I hate to admit but they were correct.    Recently, I had three different people I know who drove themselves down to the emergency room thinking that they might be having a stroke or heart attack.    I know three different people who were diagnosed with some ...

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Personal Finance 101: Generation X Series – Marriage And Medical Insurance

Generation X is classically defined at people born between the years 1965 and 1979.    Pretty much those of you in your early 30’s to the mid 40’s.  However, having given personal financial advice to thousands of people, I can tell you that many of you who were born 1960 to 1964 fit within the Generation X type of financial and personal attitude.   Since I am 42 and have had a good deal of financial success, I’ve noticed some big mistakes that I see my generation making with their money and how they think about money.    This week I wanted to discuss what to do about your medical insurance after you get married. One of the questions I’m getting a lot from Gen X’ers as of late (especially those recently married in their late 30’s/early 40’s) is around what to do with medical insurance after being married.   Since the medical plans and financial contribution from each individual employer may vary, this ...

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Personal Finance 101: Generation X Series – Three Simple Steps To Managing Your 401K

Generation X is classically defined at people born between the years 1965 and 1979. Pretty much those of you in your early 30’s to the mid 40’s. However, having given personal financial advice to thousands of people, I can tell you that many of you who were born 1960 to 1964 fit within the Generation X type of financial and personal attitude. Since I am 42 and have had a good deal of financial success, I’ve noticed some big mistakes that I see my generation making with their money and how they think about money. This week I wanted to discuss three simple steps to help you better manage your 401k plan at work. For most Gen X’ers who are not business owners, the 401k plan offered through your workplace will be one of the mainstays for you to build up enough money to make work optional. Next year in April, you will begin to be able to transparently see ...

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Personal Finance 101: Generation X Series – A kid’s birthday party for $500 (or more)?

Generation X is classically defined at people born between the years 1965 and 1979.    Pretty much those of you in your early 30’s to the mid 40’s.  However, having given personal financial advice to thousands of people, I can tell you that many of you who were born 1960 to 1964 fit within the Generation X type of financial and personal attitude.   Since I am 42 and have had a good deal of financial success, I’ve noticed some big mistakes that I see my generation making with their money and how they think about money.    This week I wanted to discuss the mistake parents make that have two, three, or four children, and the crazy amount of money they spend on birthday parties. As a Gen X parent with a 14, 12, and 10 year old, I got caught up making some of the mistakes other Gen X parents make.   As you compete with your neighbors and friends for which ...

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Personal Finance 101: Generation X Series – A Vacation Or College Education

Generation X is classically defined at people born between the years 1965 and 1979.    Pretty much those of you in your early 30’s to the mid 40’s.  However, having given personal financial advice to thousands of people, I can tell you that many of you who were born 1960 to 1964 fit within the Generation X type of financial and personal attitude.   Since I am 42 and have had a good deal of financial success, I’ve noticed some big mistakes that I see my generation making with their money and how they think about money.    This week I wanted to discuss the mistake of spending too much on vacations and not enough saving for college education. Where do you think we should take the kids away for spring break this year?      Should we go away for Thanksgiving or would it be better during the holiday season?    I know the children have sports and camps over the summer, but wouldn’t it ...

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Personal Finance 101- Generation X Series- You Won’t Make Hay Forever

Generation X is classically defined at people born between the years 1965 and 1979.    Pretty much those of you in your early 30’s to the mid 40’s.  However, having given personal financial advice to thousands of people, I can tell you that many of you who were born 1960 to 1964 fit within the Generation X type of financial and personal attitude.   In week two, I wanted to share with you the attitude you need to have as the CEO of your family finances called  – you won’t make hay forever. Since many of you either just celebrated your 20 year college reunion or your 20 year high school reunion, it is always a life moment that gives you a chance to pause and reflect.   Could you remember those days in high school or college where you didn’t have any money, and worked just hard enough to afford some beer money for the weekend or a tank of gas for ...

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Personal Finance 101: Generation X Series – 5 Big Mistakes Gen X’ers Make With Their Money

Generation X is classically defined at people born between the years 1965 and 1979.    Pretty much those of you in your early 30’s to the mid 40’s.  However, having given personal financial advice to thousands of people, I can tell you that many of you who were born 1960 to 1964 fit within the Generation X type of financial and personal attitude.   Since I am 42 and have had a good deal of financial success, I’ve noticed some big mistakes that I see my generation making with their money and how they think about money.    Over the next five weeks, I’m going to pull one subject at a time to help those of you within Generation X get your personal finances on track so you can achieve financial independence, purpose, and freedom. MISTAKE #1– Not paying off your mortgage (and getting it done quicker) For many homeowners today it feels like Christmas time with thirty year mortgages available for under ...

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Personal Finance 101 – Running Your Family Profit and Loss Statement

For three years now, we have been teaching individuals and families to begin thinking about their family finances like they were running a business. We know that in every business the two major dashboards are the balance sheet and the income statement.   These two metrics over time develop a real sense of the stability of any company, and those factors will ultimately be a large determinant of the value of the business.  Running your family income statement efficiently (or profit and loss statement) will be the main factor in your long terms success or failure in helping create your own financial security. The next few weeks of articles will help shape some context on how to develop a framework of success running your family profit and loss statement. The balance sheet is simply everything you own versus everything you owe or what some people call your net worth.  This includes assets like real estate, collectibles, furnishings, and all of your ...

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Personal Finance 101 – College Education Planning – What kinds of money are available?

Last article we talked about FAFSA forms, federal student loans, and the process of when you should be filing for financial aid.   Many people get confused from the multitude of different loans that are available to them.   In my opinion, the massive federal deficit we are in now will only shrink the available amount of loans for students in the future.   It is important to understand how these loans work so you can set up the very best program for money that will need to be borrowed during your children’s college years. It is important to remember that this is a major difference between a grant and a loan.   A grant is something that does not have to be repaid whereas a loan is something that does have to be repaid.   Since there are a half dozen different types of grants and loans, do your own due diligence on how much free money you can get.    Here are some highlights ...

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Personal Finance – 101 – College Education Planning – The timer is winding down

A few weeks ago I wrote two articles outlining the types of assumptions you should consider for college education within your overall financial plan.   I also shared a number of different savings vehicles you could use to park away dollars for this goal.    As you get closer to this goal, remember it is important to pull back on the risk in the investments you take.   Several years ago in 2008, many parents got hurt because the funds they saved for college were nearly cut in half when the stock market dropped by 50%. Beyond your savings, your other consideration is to decide how you might fill the gap between what you saved for your kid’s college education, and what it will cost between tuition, room, board, fees, etc.   While all of us can only hope our child wins an academic or athletic scholarship, it is best to plan conservatively and assume you will have to design a strategy to save ...

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Personal Finance 101 – College Education Planning – What Types Of Savings Vehicles Can You Use? —

Last week I discussed some of the assumptions you should be thinking about when it comes to planning for the goal of paying for your children’s college education.    Once you figure out the important metrics for each child on how much money you need to save monthly, the next step is to determine which of the myriad savings vehicles out there will serve you best in reaching your goal.   Since the tax laws and legal laws are different from state to state, I highly recommend you consult a financial advisor and/or a CPA before you make any final decisions as each of vehicles have tax and/or control implications down the road.    Here are few types of options that you may consider when investing your lump sum or monthly savings. 529 Plan Or Prepaid Plan – 529 Plans are usually where I get the biggest questions when it pertains to college planning.   Essentially, 529 plans are a way to save after-tax ...

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Personal Finance 101 – College Education Planning – What Are Your Assumptions?

You get home from work one day and your child has the magical letter to open from that college or university that you both always dreamed they would attend.   It’s possible the school is your alma mater or perhaps it is the Ivy League university you always thought your child was possible of being a part of for the next four years.   As you open the letter, you read that your child has been ‘accepted’ into the new freshmen class.  You begin to realize that maybe you haven’t done your homework on how you are going to pay for the college education.  Over the next four weeks, I will examine some of key areas you need to be thinking about when you plan for this type of financial goal. Many financial plans that I see done on families often use blanket assumptions.   When you start thinking about college education planning, it is important to have lengthy discussion with your financial ...

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Personal Finance 101 – Your Benefits Package At Work: The Extras

One of the most overlooked parts of an overall financial plan is the benefits package you receive from your employer.   Last week I reviewed the area of disability insurance and how to best protect your overall income.    Depending on the size of the company where you are employed, you will find many different types of unique benefits.   Each of these benefits can be easy to gloss over come open enrollment season, but analyzing your overall budget and how these benefits fit in with your plan can be paramount to reaching overall success.  Here are handful extra benefits you may have that should be examined. Legal Plan – A basic legal plan through your employee benefits package can cover many items including legal consultations, wills (including certain types of trusts), living wills, powers of attorneys, deeds, and potentially more based upon the type of overall plan.   If you carefully consider the years you may need these types of legal services, it ...

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Personal Finance 101 – Your Benefits Package At Work: Disability Insurance

One of the most overlooked parts of an overall financial plan is the benefits package you receive from your employer.   Last week I reviewed the areas of life insurance.    For younger employees, the area of income protection can often be far more important than the area of life insurance.   This week, I will cover how to analyze the group protection you have at work for disability insurance.  If your employer doesn’t offer this coverage currently, it should be at the top of your list to get yourself some individual disability insurance coverage.   Disability coverage can be some of the most confusing coverage to understand, and the real details about your policy are within the benefits manual you receive from your employer. You will generally have two types of coverage through your employer.   Your short term disability (STD) coverage will normally take effect somewhere from 0 to 14 days after your disability, and may last somewhere up to six months to ...

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Personal Finance 101 – Your Benefits Package At Work: Life Insurance

One of the most overlooked parts of an overall financial plan is the benefits package you receive from your employer.   Two weeks ago we talked about health insurance and the decisions that you should be thinking about within your overall benefits package.   Life insurance is an election that you will have to make every year within your employer’s benefits plan.   I have found that often people don’t ask themselves the tough questions when it comes to this election, nor do they understand what the coverage will take care of in the event of a premature death in the family. Remember, that your overall life insurance election will generally include individual group life insurance, spouse/partner life insurance, children life insurance, accidental death and dismemberment insurance, and sometimes a group universal life insurance option.   Understanding the nature of what these cover and their overall portability are a critical part of making sound financial decisions. How does my group term life insurance work? ...

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Personal Finance 101 – Funding Your Buy-Sell Agreement

Part of any good business plan is an exit strategy if the unexpected happens.  A good Buy-Sell Agreement should anticipate certain unfortunate but foreseeable events, and make sure a fair and reasonable plan is in place. When a triggering event occurs, everyone should be fully comfortable and prepared to move forward with the plan. The most critical detail of the Buy-Sell Agreement to the company’s survival is how to pay the purchase price for a departing owner’s interest.  If the company or other owners do not have adequate assets, cash reserves, or credit available to fund the payment obligations, then they cannot fulfill their side of the agreement.  This isn’t good for anyone – the departing owner (or his estate and family), the company itself, or the remaining owners. Insurance. Since death and disability are two of the most basic triggering events in any Buy-Sell Agreement, life and disability insurance can be the most attractive methods for funding the payment ...

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Personal Finance 101 – Buy-Sell Planning: Trigger Events and Payment Terms For Buyout

The most fundamental detail of any Buy-Sell Agreement is defining what circumstances will trigger a buyout.  Buyout payment terms should be carefully tailored to each triggering event.  Here are a few common triggering events and some considerations for payment terms. Death. An untimely death is almost universally included in any Buy-Sell Agreement.  Despite being the worst of all possible triggering events, death is actually the easiest event to plan for in a Buy-Sell Agreement.  Life insurance policies in connection with a Buy-Sell Agreement allow an immediate source of liquidity to fund a buyout obligation without burdening the assets or ongoing cash flow of the business.  Given the immediate source of insurance proceeds, a death buyout often occurs as a lump sum payment within a certain time period after the death of the owner.  Immediate payment can also be important for estate tax purposes if the value of the business interest will be included in the deceased owner’s taxable estate and ...

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Personal Finance 101 – Who Buys The Business?

Part of any good business plan is an exit strategy if the unexpected happens.  A good Buy-Sell Agreement should anticipate certain unfortunate but foreseeable events, and make sure a plan is in place that is fair and reasonable for the owners and the business itself.  One important detail to include in any Buy-Sell Agreement is: Who has the right to buy an owner’s interest after a triggering event occurs?  There are a few main options discussed below. Redemption. In a Buy-Sell Agreement using the Redemption structure, the business agrees to purchase (“redeem”) the interest of an owner after a triggering event.  The owner agrees that he, or his estate, will sell the business interest back to the business for the agreed price.  The main advantage of the Redemption approach is that it is usually the simplest form of buy-sell transaction, and when there are many owners involved, the simplest structure can sometimes be the best. However, there are certain key ...

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Personal Finance 101 – How To Value Your Business

One of the trickiest details of a good Buy-Sell Agreement is determining the purchase price to be paid for a departing owner’s interest in the business.  Most Buy-Sell Agreements create a formula to estimate the business’s actual “fair market value” and then derive a purchase price for an owner’s pro-rata share of the business.  Sometimes the Buy-Sell Agreement requires the business to be appraised by an independent qualified appraiser with special certifications.  Whether there is a formula in the agreement or an appraiser will be involved, the goal is identifying “fair market value” of the business and the interest to be transferred.  “Fair market value” is often defined as the price that would be paid between willing and independent buyers and sellers, assuming neither is being forced to buy or sell and both have good knowledge of the facts.  If a minority owner’s interest is being acquired or there are restrictions on subsequent transfers of an ownership interest (e.g. in ...

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Personal Finance 101 – What Is A Buy-Sell Agreement?

For many business owners, the value of their business is one of the largest components of their overall net worth, and the business itself is the result of years of hard work and investment.  Most business owners want to preserve the built up value of the business for themselves and their family while also ensuring that the business legacy they have helped create continues for years to come.  The best solution is a well-considered Buy-Sell Agreement. A Buy-Sell Agreement is a contract entered by owners of a business that specifies when and how ownership in the business will be sold or transferred.  The agreement can be a stand-alone agreement or incorporated into a partnership or operating agreement for your business. Buy-Sell Agreements are not “one size fits all”, so careful attention should be given to the details. Most business owners have heard of the importance of a good Buy-Sell Agreement, but many push this planning to the “back burner” to ...

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Personal Finance 101 – 5 Deductions Taxpayers Overlook

Part of putting together an effective tax management strategy is gaining an understanding of what you can and cannot deduct from your tax return.  Every CPA or accountant seems to have a slightly different slant on the tax code, but here are a few that may be able to help you increase your bottom line. Charitable Mileage – Most taxpayers are very good at keeping receipts of their cash donations that they make to the organizations they donate to during the course of the year.   One of the deductions few taxpayers pay attention to is the charitable mileage deduction.  For 2011, you can deduct .14 cents per mile driven in service of charitable organizations.  Don’t forget fees and tolls as well (www.irs.gov)  Think about the time that you give gratuitously during the course of the year for your religious organizations, charitable causes you support, or possibly coaching a one of your kid’s teams. Non-Cash Charitable Contributions – Most taxpayers literally ...

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Personal Finance 101 – The Tax Management Triangle

Don’t you wish that you had a crystal ball to know what the tax rates will be 20 years from now?   In 1970, the top tax marginal tax rate was at 70%.   In 1980, the top marginal tax rate was still at 70%.   In 1990, the top marginal tax rate hit a historical low of 28%.   In 2000, that top marginal tax rate had moved back up to 39.6%.   Just one year ago in 2010, the top marginal tax rate settled at 35%. (source: taxfoundation.org)  With all the uncertainty going on with our debt and taxes, how can you best plan your finances for the certainty of uncertainty when it comes to income taxes? Over the years, we’ve adopted a tax triangle methodology around taxes and investing.  This allows an individual investor or business owner to think about where they place their investments and tax strategy upon the accumulation and distribution phase.  Here are the three sides to the triangle. ...

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Personal Finance 101 – Retirement Planning – Getting Income From The Water Faucet

Last week in Retirement Planning 101, I discussed the different types of investments used in retirement plans. If you do a good job saving during your working career, the most difficult phase of retirement planning in my opinion is the distribution phase. Since most people who think they are ready to financially retire worry about running out of money, figuring out the right way to take income from your investments is crucial during retirement.  I think about retirement asset distribution much like the water faucet you have at home. You need to know which spicket to turn on in order to minimize taxation while you take home the most net income possible. Remember that the first couple of years of retirement will generally result in a slightly larger amount of income needed before you settle into your regular expense mode for retirement income.  We have found over the years that clients will spend more in the beginning of retirement filling ...

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Personal Finance 101 – Retirement Planning – Types Of Retirement Investment Vehicles

Last week in Retirement Planning 101, I discussed what kind of assumptions you can use to figure out the island we call ‘your number’.  Once you figure out your number, there are really two very important ships that will get to that number.  First, how much money do you need to save on a monthly basis to get to your number?   Second, what rate of return on an after-tax basis do your assets need to earn to reach the retirement number?  This week, we will review some of the vehicles you can use to work toward your retirement goal. Employer sponsored retirement plan (401(k), 403(b), 457) – Most employers whether they be companies, schools, hospitals, or government agencies will have a retirement plan they sponsor that allows you to save for retirement.  The 401(k) plan is probably the most widely known of all of these plans.  401(k) plans allow employees to put away dollars on a pre-tax basis into an ...

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Personal Finance 101 – Retirement Planning What Are Your Retirement Assumptions

You often see the commercials on television today asking the question, “What’s Your Number”?   What they are really referring to is the notion of how much money do you need in order to be able to retire.  It’s funny that most people I talk to today don’t really call it retirement.  They really think about the term of making work optional.  This means having the ability to do what they want when they want irrespective of money.   Over the next four weeks on Your Smart Money Moves, I am going to share with you how to really think about the personal financial area of retirement planning. I have always thought about my ‘work optional’ number being the amount of money I actually need on a debit card when I retire to maintain my standard of living the way I want it when I go ‘work optional’.   The mistake that I see in many financial plans is that the assumptions made ...

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Personal Finance 101 – How do I protect assets for my kids?

How do I protect assets for my kids after my spouse and I die? If your kids are still minors, then the laws in your state likely prevent them from owning property until they reach a certain age (usually 18), so a legal representative must be appointed to manage the assets left to the kids. There are a couple options you can choose from that can protect assets for the kids. First, you can nominate a “Conservator” (sometimes called a Guardian for property) to manage assets on behalf of any minor children inheriting property from you. You can nominate the Conservator in your Last Will and Testament, or, if you don’t have a Will, the courts will appoint a Conservator since someone must manage property for the minor children. While the assets are held by the Conservator, they are generally protected from creditors, but state laws can also limit how easily the assets can be accessed for the benefit of ...

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Personal Finance 101 – This Week: Do I need a Living Trust?

First, a Living Trust is a trust you set up to hold your property and to govern the use and distribution of your property during your lifetime, during any period when you are incapacitated, and even after your death (when it acts much like a Last Will and Testament). You can amend or revoke a Living Trust at any time during your life making it a very flexible planning tool. Due to their broad scope and flexibility, Living Trusts are often viewed as one of the most comprehensive estate planning documents. But do you really need a Living Trust? If you answer YES to any of these questions, you may want to consider one. 1. Do you own property in multiple states? After you die, your family or other legal representatives must go through the probate process in each state where you own property in your name. The time, hassle and expense of probate in multiple other states can be ...

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Personal Finance 101 – This Week: Dying Without A Will

What happens if I die without a Will? First, a little context is required. If you own any property when you die, then your surviving spouse or family will need to go through a legal process called “Probate” in order to legally wind up your affairs, pay off your debts, and transfer your remaining property to surviving family. The Probate process applies whether you have a Will or not. The only way around the Probate process is to own all of your assets through a Living Trust, but that’s a whole different story… If you have a valid Will, then the Probate process plays out according to the specific wishes in your Will, which should include details about who is responsible for administering your estate (the “Executor”), who is guardian for your minor children, who gets your assets, and whether those assets are left outright to people or in creditor protected trusts, just to name a few considerations. After that ...

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