5 Pieces of Money Advice No One Ever Wants to Hear From Me

You know how adults always told you to “eat your veggies” and greens when you were a kid? Well, that nagging advice doesn’t necessarily stop in adulthood. As a financial planner, I’m constantly giving people good advice they don’t want.

I know no one wants to hear this kind of money advice. But those who do listen — and more importantly, implement these ideas — tend to have better control over their cash flow, higher savings rates, and more financial power.

You might not like it, but much like eating broccoli and kale, taking it in is often for your own good.

1. Don’t buy so much house

Buying a home is rarely a data-driven decision. It’s an emotional one, and for good reason. For many people, homeownership represents stability, security, and even status.

These are not unimportant things, but too many people use their emotions as excuses to throw financial reality out the window when it comes to house hunting.

Set a budget and stick to it. We often recommend keeping your total annual housing costs to no more than 20% of your gross annual household income.

This helps ensure you retain flexibility in other areas of your cash flow so that you can own your home and keep pursuing other important goals or have money available for your other priorities.

2. And don’t assume your house is a good investment

I often caution people against thinking of their home as an investment. Again, that doesn’t mean buying is a bad idea or your house isn’t worth as much as you think it is. But an investment should provide a return.

A single-family home that serves as your primary residence (and does not provide rental income) may be an excellent utility. It is not, however, what I would consider a good investment.

Home values do tend to rise over time, but the cost of ownership, maintenance, and upkeep often erode most of the “gains” you might see when just looking at the transaction of buying and then selling your home on paper.

A reasonable, real return on single-family homes runs about 2%. That’s not nothing, but it’s also not something you can assume will fund your full retirement, either (especially when you have to live somewhere, retired or not, and most people put the equity from a home sale into their next purchase).

3. Save more than you think you need to

It’s really important to me that I help my clients strike a balance between enjoying their lives in the present while also building assets and future financial security. This would be much easier to do if we had a crystal ball and could accurately predict what life would be like in 10, 20, even 30 years.

We’d know your budget. We’d know what kinds of emergencies you’d have to deal with, and prepare accordingly. And we’d understand what your life would look like (including how long it would be).

With that clarity, it would be possible to say, “you need $X. Save just that and feel free to spend the rest.” That is, obviously, not how life works.

The solution? Save more than you think you need to, because then you give yourself a margin of safety. By saving more than you necessarily must save to “be OK,” you can better:

  • Handle emergencies
  • Take advantage of opportunities when they come up (either to spend on an unexpected trip, for example, or to use money on an investment you feel passionate about)
  • Incorporate new goals into your planning over time

Saving more that you think you need today also buys you more choice and freedom in the future. The usual guideline I give to clients to help them achieve this is to save 25% of annual gross income.

4. Have a backup plan

It might sound like a doom-and-gloom approach to finances, but I preach about always having a backup plan — or those margins of safety, or wiggle room, or contingencies.

No one wants to imagine a worst-case scenario, but if something actually went sideways in your financial life, you’ll be glad you had multiple levels of safety net built into your overall plan.

You can do this in a number of ways, including some we’ve already talked about, like saving more than you think you need to save.

Other ways of building in backups is by maintaining an emergency fund, using conservative assumptions around income, and overestimating your expenses when you do any kind of long-term financial projection, and not counting on any kind of windfall (from bonuses and commissions to inheritances) to make your plan work.

5. Stop trying to time the market

It is so tempting to think we can successfully time the market. Why? Because drops and spikes in the stock market look stupidly obvious with hindsight.

It’s very easy to look back at something like 2008 (or maybe even the spring of 2020 at this point) and feel like you know when the best times to buy and sell would have been… because they already happened. 

Guessing what comes next without the benefit of knowing how things played out is not the same thing. Data shows us that even professionals fail to time the market repeatedly. You may get lucky once, but repeating that performance over and over again for the next few decades is virtually impossible.

Build a strategic investing plan — and then stick to it, regardless of current events.

It’s probably not as fun and may not be as sexy as bragging about your stock picks on Robinhood, but it works a whole lot better in the long run.

By:

Eric Roberge, CFP, is the founder of Beyond Your Hammock. He helps professionals in their 30s do more with their money.

Source: 5 Pieces of Money Advice No One Ever Wants to Hear From Me

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Your Financial Year-End Checklist

2020 is over, and for many of you, it can’t end soon enough. There will be plenty of time to celebrate the end of one year and to hope for better days in the one ahead. But before we get to that, take these steps to get financially ready for 2021.

1) Review your goals: The end of the year is a great time to review the goals you made at the beginning of the year and set new ones for 2021. How did you do this year? Is there anything you’re proud of accomplishing? I like to start with bright spots because they can guide you toward success as you set new goals. But let’s be realistic, too; 2020 threw us a lot of curveballs.

Was there anything you wish you could have done better? You can also learn from any potential stumbling blocks and figure out how to use them as stepping-stones next year. You may also want to take time now to review your net worth. That’s one way to gauge the progress you’ve made in your financial health this year.

2) Update your budget: Did you save the money that you wanted to? Pay off the debt that you needed to? The end of the year gives you a solid end point to assess whether met the goals you set at the outset of 2020. What if you didn’t have a budget or financial goals? You’ve got a blank slate ahead. Why not create a budget that works? 

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3) Create a holiday bucket: Holidays can be budget breakers, so why not incorporate them into your spending goals right from the start? Christmas may look a lot different this year. But you can still create a separate bucket for holiday spending and when that money is gone, stop spending. You’ll thank yourself in January when you don’t have an unusually large credit card bill.

4) Use it or lose it: Some of your benefits—like vacation days or a medical or dependent care flexible spending account (FSA)—expire at the end of the year. Take stock of what you have left and use these benefits to your advantage. MORE FOR YOUPPP Loan Forgiveness Application Guidance For The Self-Employed, Freelancers And ContractorsSBA Approving Economic Injury Disaster Loans (EIDLs): What You Need To KnowWhat You Can Do Now To Maximize Paycheck Protection Loan Forgiveness

5) Make any last charitable contributions: December 31st is the last day your charitable contributions can be deducted on your 2020 tax return. If giving to charity is a part of your spending plan, you can use these questions to help make the most of your charitable giving.

6) Pump up your 529: Just like charitable contributions, contributions to your 529 college savings plan must be made by December 31st to count for this tax year. Find out if your state is one of over 30 that allow you to deduct your contribution. You can find the specific deduction here. If your state is one of the four that allow an unlimited deduction, keep in mind the yearly gift-tax and super-funding rules.

7) Max out your 401k: While you have until April to make contributions to your traditional IRA, Roth IRA and HSA, you can only contribute to your 401k through December 31st. So, if you have extra cash and are looking to boost your savings, consider contributing your last couple of checks entirely to your 401k. Business owners can do the same with the employee portion of your Solo 401k contributions.

8) Find your tax return: You’ll be doing your taxes before you know it, so use this time to get prepared. Review last year’s return and make a mental list of records you’ll need to assemble. Year-end is also a good time to decide whether a Roth conversion makes sense for you.

9) Review your business structure: Evaluate your business structure and the QBI deduction to identify any changes you need to make to your business. You might want to set up a solo 401k, for instance, and if so, you’ll have to act before December 31st (although you can make employer/profit sharing contributions up to the business tax filing deadline).

10) Defer income and incur expenses: If you’re a business owner, you may also want to look at ways to defer income into 2021 or pay for business expenses you anticipate for early next year. This is any easy way to reduce your tax liability for 2020. However, remember not to spend money on business expenses that you wouldn’t otherwise incur just for a tax deduction. Spending a $1 to save 24 cents still costs you 76 cents.

 11) Will and trust review: The end of the year is a good time to take stock of changes in your life—like getting married or divorced, having children, starting a business or retiring.  Your estate plan should reflect these changes. Get out your will, documentation for trusts you’ve established and powers of attorney and make sure they match your current situation.

12) Insurance documents: Insurance documents also need to cover your current situation. Take a look at your life and disability insurance policies to make sure they protect your current income and those dependent on it. Your renters or homeowners insurance should cover any additional big purchases you made during the year. And lastly, you should review your health insurance policy for any upcoming changes for 2020. For those of you enrolling in the Market Place, you have until December 15th to pick your plan.

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My last bonus task is to enjoy this holiday season. I love the holidays because you can reflect and appreciate what you have. We’ve been tested a lot this year, living our lives through a pandemic, racial unrest and a contentious election. I hope the end of the year brings you comfort and peace. Follow me on Twitter or LinkedIn. Check out my website

Brian Thompson

Brian Thompson

As both a tax attorney and a CERTIFIED FINANCIAL PLANNER™, I provide comprehensive financial planning to LGBTQ entrepreneurs who run mission-driven businesses. I hold a special place in my heart for small-business owners. I spent a decade defending them against the IRS as a tax attorney and have become one as a financial advisor. It’s a position filled with hope and opportunity. It gives you the most flexibility to create the life that you want. I also understand the added stresses of running a business while being a person of color and a part of the LGBTQ community. You may feel like you don’t have access to the knowledge that others do. I’m here to help lift some of that weight from your shoulders.

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Critics:

A personal budget or home budget is a finance plan that allocates future personal income towards expenses, savings and debt repayment. Past spending and personal debt are considered when creating a personal budget. There are several methods and tools available for creating, using and adjusting a personal budget. For example, jobs are an income source, while bills and rent payments are expenses.

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The Best Employee Benefit That You Are Likely Not Getting – Megan Gorman

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Like many parents, Alisa Metcalf was focused on making sure her son Charlie was prepared for the college process. She started saving when her son was young and felt that she was on track.  But as the years went on, despite doing all the right things, she didn’t feel completely prepared. “The application process can still be very daunting,” she says. “There is so much more to this process than how to pay for school.” Luckily for Metcalf, her employer, DaVita, an international provider of kidney care services, had already thought about how to help her through the college process with her son…….

Read more: https://www.forbes.com/sites/megangorman/2018/10/30/the-best-employee-benefit-that-you-are-likely-not-getting/#4817d9c47375

 

 

 

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21 Little Ways to Save Money Every Day

21 Little Ways to Save Money Every Day

Saving more money is one of those broad goals everyone sets for themselves at the start of a new year. But with so many tips and tricks out there, it can be hard to know exactly where to begin, especially when the temptation to buy a new pair of sneakers is always looming in the back of your head. Fear not, budget newbies! The tips below are so doable, even a shopaholic can accomplish them on a daily basis. Get ready to save some major dough.

1. Skip out on your daily skinny vanilla latte. “Sorry, Starbucks, but we’re taking a break. It’s not you, it’s me.” This one may be hard, especially if you rely on caffeine to jump-start your day, but a coffee maker is a worthy investment when you realize how much this seemingly innocent cost can add up. And if you simply can’t go your separate ways from Starbucks, try out one of its cheaper drink options.

2. Start painting your own nails. Sure, sometimes a salon mani-pedi is just what you need to unwind and treat yourself, but those visits add up. A bottle of nail polish can cost anywhere from $4 to $15 and will last you years, whereas a pedicure can cost as much as $20. The math says it all.

3. Cook your own dinner most nights. You don’t have to be a whiz in the kitchen to prepare an enjoyable meal. There are plenty of simple dinner recipes out there that are easy on the wallet. Bonus points if you cook enough to give you leftovers to take to work for lunch the next day!

4. Speaking of lunch, make your own every day. This one’s a no-brainer, but the temptation of a fancy $10 salad often cancels it out. Sticking to this tip throughout the year will save you major bucks.

5. Discontinue your cable subscription. Unless you’re really utilizing your cable every day, it may be time to consider a more affordable online-streaming option like Netflix or Hulu.

6. Stow away a dollar a day. Invest in an adult-approved piggy bank and stash away a dollar (or your loose change at the very least, if you can’t stand to part with your precious Washingtons every day). At the end of the month, you’ll have around $30!

7. Buy a reusable water bottle and actually use it. Investing in a high-quality water bottle will save both the environment and your budget. The cost of those plastic water bottles adds up, and Mother Earth will give you a pat on the back for this one.

8. Sip on some drinks at home before hitting the bars. College students had the right idea with their beer-chugging “pregames.” Enjoying a few drinks at home ensures that you won’t fall victim to buying one too many overpriced drinks once you get to the bar or club.

9. Always remember to turn off your lights and air conditioning. Those little expenses can add up to a whopping utilities bill at the end of the month. Get in the habit of hitting the light switch every time you leave a room in your house or apartment.

10. Consider selling your random knickknacks. Though this is technically a money-making tip, the end result is still having more cash in your wallet. Set up an eBay account and finally get rid of that random dog figurine that’s gathering dust in the back of your closet.

11. Seek out discounts. Whether you become a coupon champ at the supermarket or start taking advantage of sites with heavily discounted clothes, it’s best to think twice before paying full price for something. Examine all your options before swiping your card. The website RetailMeNot is a great resource for tracking down discounts from some of your favorite stores and websites in real time. It does the legwork for you!

12. Make a shopping list before stepping foot in a store – and don’t stray from it. Precisely planning out your meals, down to the exact ingredients you need each week, is crucial for saving some green. Venture down the aisles with a written checklist of items in hand rather than aimlessly browsing your options. The same goes for when you hit the mall for clothes.

13. Speaking of groceries, try to only buy versatile staples. OK, that random exotic vegetable may look cool, but is it really worth $5? Stick to those adaptable and affordable essentials like eggs, canned beans, and pasta.

14. Roll up your sleeves and become a DIY pro. When it comes to DIY projects, the options are endless. You can make your own cleaning products, holiday gifts, and decorations. Before throwing away things like old jeans or books, consider how you can upcycle them.

15. Think twice about your transportation options. This is mostly dependent on where you live. If you reside in a car-reliant city like Los Angeles, consider carpooling to split the cost of gas. In a bustling city like New York, try walking or taking the bus or subway instead of an overpriced cab. And if you’re traveling somewhere like the airport, opting for UberPool instead of UberX is always the way to go.

16. Quit smoking. This one’s pretty self-explanatory. Your wallet (and your lungs) will thank you.

17. Go for the generic brands at the store. With goods like toothpaste and soap, the generic brand is usually just about the same as the more expensive, well-known brands. We all have that one brand we’re loyal to, but is it really worth it to pay an extra $3 for body wash if the off-brand version is just as effective at getting the job done?

18. Take an inventory of your monthly subscriptions and cancel the ones you don’t need. Unless you’re really reading every single page of that one magazine or constantly listening to music from that one streaming service, it may be time to nix that monthly cost.

19. Buy your home staples in bulk. Purchasing toilet paper, laundry detergent, and paper towels – aka those pesky items we hate lugging home from the grocery store – in bulk will always pay off in the long run.

20. Suggest free activities when hanging out with friends. Those happy hours and dinner dates add up over time. Instead, research fun and free activities like doing outdoor yoga, checking out a museum with free admission, or watching the sunset.

21. Take five before making impulse buys. Ask yourself, “Is this something I want or something I really need?” Your response should reveal if it’s a worthy purchase or not, so try your best to answer honestly. And if anything, reach out to your mom or a trusty friend who will give their honest opinion about whether it’s something you should really spend money on.

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