10 Ways to Be A Better Client
For many financial advisors, client service is paramount. They live it, they breathe it, they instill it in their own employees. Really good financial advisors are always trying to be better at client service. So I am always astounded when I talk to someone who has been with an advisor for years and never hears from him, doesn’t think he or she is a very good advisor but they’ve never moved on to something better. Family legacy? Maybe. Inertia? Likely. As a client, you deserve better!
If you really don’t like your advisor, by all means – pick a new one. There are plenty of brokers/advisors/planners out there that want your business. But before you start asking the standard interview questions of different advisors, ask yourself this question first _
Have I been a good client?
I’ll let you in on an industry secret – Advisors spend more time on their good clients. Shocking, isn’t it?
Of course, some advisors will define “good client” by the dollar amount of assets they bring to the relationship. There’s only so much you can do about that. But most advisors have a broader definition. If you want to have a meaningful and rewarding relationship with your current or next advisor here are essential actions you should take:
1. Trust
You need to trust that your advisor does have your best interest in mind. Certified Financial Planners are held to a fiduciary standard that requires this, but what I’m suggesting here is more subtle than that. Do you really trust your advisor to give you the advice that is best for you and your situation? Don’t be taken in (or put off by) sales pitches. Do you trust the person or not? Because you should. And if you don’t – then why not? I’ve seen many people mesmerized by an advisor’s reputation, size of office, client list (does the name Bernie Madoff ring a bell?) but they didn’t trust their own instincts. Remember, to get the most out of this relationship, you are going to be divulging your innermost financial secrets, hopes and dreams for your money. If you don’t trust the advisor, then you won’t tell them all that and then they may not give you the most appropriate advice and then you are going to be disappointed that things aren’t working as well as you ‘d like and come to a conclusion that the advisor steered you in the wrong direction. See how this works? You have to trust your advisor enough to give them your complete picture.
The flip side of this action item is that if you can’t muster up some trust for your advisor – you need a different one. That you do trust.
2. Listen
At some point your advisor is going to ask you to do something with your money that you may not agree with. That’s okay. But until that time comes, listen to her advice and ask questions if you don’t understand. Good advisors spend time thinking about what their clients need, researching the options and summarizing the action items. That’s why you are paying them. If you are not willing to listen to their advice, why are you there? If you argue about every recommendation, even the best advisor will eventually give up. Notice I didn’t say FOLLOW, I said LISTEN. Acknowledge the work and experience behind the recommendation being made. Advisors love clients that ask questions and strive to understand their advice. It’s a dialogue, but it’s not an argument.
3. Return their phone calls
Most advisors have many clients. If they are calling you, it’s for a reason and usually one that is time-sensitive. If you wait to call them back, an opportunity may be lost, a deadline may have passed.
If you feel you are being pestered with phone calls, set some parameters with your broker. No one likes sales calls, so tell your super salesman of a broker that you only want to hear about certain investment ideas or you only want to hear from him once a month…As long as he knows the boundaries, he will usually respect them. If he doesn’t – get a new broker.
The flip side is if your advisor NEVER calls you and you’d like to hear from him more often. What do you want to know? How frequently? Fee-only planners tend to call clients less than commission-based brokers. Discuss those expectations with the advisor and make sure it works in their type of practice.
4. Go to your review appointments
Advisors don’t want to chase you down month after month to discuss their recommendations. If you are not prompt, the recommendations get stale and lead to disappointment. Again, understand the expectations up front. Are you meeting quarterly, semi-annually, or just once a year? Does the advisor’s review schedule work for you? Or do you really need someone who meets more or less frequently? Whatever timetable you decide upon, stick to it.
5. Don’t wait until a crisis to ask your advisor to jump through hoops
If the only time you call your advisor is when you needed something yesterday, guess what? Ever hear of The Boy Who Cried Wolf? If you are following the advice in 1-4 above, however, chances are the advisor will stay up all night to help you. Remember, the advisor has other clients, other work, vacation and oftentimes a family. If you repeatedly call with a “must have immediately” need at 6:00 pm on a Friday, the advisor will stop answering the phone.
6. Pay your advisor – fairly and on time.
A simple but effective way to stay on the “good client” list.
With fee only advisors, the bill comes when the work is done. Pay it. But this action item also applies to relationships with commission-based and Assets Under Management (AUM) brokers as well. You may not have to write a check, but find out how much compensation your advisor has received from you each year. If you work with a commission-only broker and you aren’t doing any investing, chances are they aren’t going to have a lot of time to spend with you.
A general rule of thumb – if you pay your broker/advisor/planner between 1-2% of the value of your investments over the course of the year, the cost of their advice is probably reasonable. If you haven’t spent 1% or you are spending more than 3%, you might need a different fee arrangement. Do you really know how much you are paying your advisor?
7. Refer them to your friends
Advisors love these type of clients. If you become a good referral source, an advisor won’t care if you ever do another trade with them. Carry a couple of her business cards, follow up on the referrals and generally be a vocal ambassador for your advisor. You will move to the top of the “good client” list in a hurry.
8. Separate the quality of the advisor from the quality of the market environment
Even the best advisors can’t control the stock and bond markets. Make sure you don’t blame them for market movements. Unless you are specifically with an advisor that specializes in market timing, your advisor is probably focused on the longer term. Therefore, the advice he gives should weather multiple market cycles. Read #1 again.
9. Don’t rate shop.
If your broker performs the research and provides you a prompt answer, don’t shop for a slightly better rate somewhere else. You may find a better CD, a better insurance quote, a better performing fund. But if you’ve asked the advisor to spend time researching that investment and taking care of your financial well-being, don’t put your money somewhere else for a tenth of a percent.
If you’re inclined to want the best deal no matter what, then do the research yourself and consider the impact on your commission-based broker. Maybe you’re better off with a product-neutral, fee-only advisor who charges for time spent doing the research, not products sold.
10. Say thank you.
So simple, but so effective. Advisors usually have a pretty thick skin. They are steeled for rejection and can usually handle upset and angry clients with aplomb. But they are human too, and need a little positive reinforcement once in a while.
To have the most rewarding relationship with your advisor, make sure you are a GOOD CLIENT.
Add comment August 28, 2010
5 Documents You Need Before A Divorce
Just when it was safe to go back in the water….The news of Al and Tipper Gore’s impending divorce after 40 years of marriage has made a lot of old married couples look at each other in a new light. Unspoken is the question – Could it happen to us?
I, for one, surely hope my spouse and I can continue to travel through this hectic life and arrive at retirement ready to implement all our grand plans together. After all the ramen dinners, scraping for that first down payment on a house, playing rock-paper-scissors to see who changed the next diaper, I’d like to think when we reach 40 years of marriage we would be high-fiving each other….not turning our backs.
But, given that 50% of marriages end in divorce, I guess it’s best to be prepared. And thus, in the next few posts, I’m sharing a few gems I’ve learned from my divorcing clients. In this week’s post, I’ll give some tips for those of you, female or male, who may be thinking about divorce, worried about divorce or who just want some motivation to get more organized…
Get Your Financial Papers in Order
In many ways, this is actually the easiest step in any divorce process, and yet is often left too late. Everyone should have their financial papers in order, no matter what their marital status. Of course, there’s usually one spouse that knows where everything is already and one that has no clue. Don’t be the one that has no clue…
1. Find the bank, brokerage and retirement account statements.
And I mean, ALL the accounts – not just the ones with your name on them. If you’ve never seen a statement for your spouses’ 401k, now’s the time to get a copy. I know, I know, this could actually be a sensitive conversation, so now is also the time to make a list of items you think might exist but can’t verify…it will come in handy later.
And if you’re just doing this to get organized….
THE ORGANIZING BONUS? You can now easily provide the total value of your assets when you buy that vacation home in retirement.
2. Find the tax returns.
Assuming you filed jointly, you had to sign these returns. Where are they? If prepared by a CPA, they can get you a copy. If done in TurboTax or filed by hand, the IRS certainly has a copy! The tax return is usually where the rubber hits the road in terms of spousal income, so you want to know this number ahead of time.
THE ORGANIZING BONUS? You can now respond quickly to the IRS when they audit your return from five years ago… (Okay, not exactly a happy bonus, but a time-saving one nonetheless)
3. Request credit reports.
For various reasons divorce is often damaging to your credit score. Make sure you know your score pre-divorce and scour (and I do mean scour) the credit report for any red flags, unfamiliar accounts or delinquent payments. Make sure you resolve any discrepancies or issues on your own credit report pronto. You can request a credit report from www.experian.com
THE ORGANIZING BONUS? Improve your credit scores so lenders expedite that low-interest loan on your vacation home in retirement.
4. Inventory your physical assets.
Ugh. This might take a while, but knowing what you own, the estimated value of each, and identifying which assets were brought into the marriage versus bought after the marriage will facilitate an equitable split (notice I didn’t say equal) when the time comes. Oh, and by physical assets I mean things like furniture and cars and the Fiesta ware you inherited. Inventorying your other type of “physical” assets comes later, post-divorce and is a blog post for another day and probably a different kind of writer.
THE ORGANIZING BONUS? This comes in VERY handy for insurance purposes when your house burns down and you have to move to the vacation home early.
5. Understand all of your Employee Benefits.
Especially if you are on your spouse’s plan. This would include health insurance plans, pension plans (who has those anymore anyway?), flex spending plans, life insurance coverage, etc. These things cost money if you have to provide them yourself in a post-divorce world.
THE ORGANIZING BONUS? Wouldn’t you want to know this anyway?
Maybe after you do all of these steps to get your financial papers in order, the temptation to divorce your spouse is lessened (hey, the majority of divorces happen because of arguments about finances). But if you’re still on the fence, watch for the next post on Preparing a Divorce Budget….
Add comment June 10, 2010
5 Things to Do With Your Tax Refund
It’s that time of year where dreams come alive – the season of tax refunds. The one day a year we feel a strange gratitude to the IRS for holding OUR money and finally returning it to us. Each year the list of ways to spend the money gets longer – new curtains, new windows, new vacations. But this year, consider turning that tax refund into the gift that keeps on giving. Here’s how to spend your refund wisely:
WISE IDEA #1.
Pay down your credit cards. If you carry a balance from month to month, pay it off with the refund, tear up the cards and start living within your means. Harsh, yes – but you’ll get a clean slate and a load off your mind. If you just commit to going six months without carrying a new balance on your cards, you will have kicked the spending habit.
Can’t quite bring yourself to write that check? Download your credit card statements and take a look at the interest you paid the credit card companies last year. Those $100 shoes may have turned into $200 shoes… If not now, when?
WISE IDEA #2.
Fatten up your emergency fund. Credit card balances are what happens to people without emergency funds. Calculate 3-6 months of living expenses and make sure you have that separated into an interest-bearing checking or savings account ONLY FOR THIS PURPOSE. You need it to be liquid, safe and accessible, but not too accessible. And no, being the first to own an IPAD does not constitute an emergency.
WISE IDEA #3.
Contribute more towards your retirement. Make a Roth IRA contribution if you are eligible. Make a non-deductible Traditional IRA contribution if you’re not. Buy an annuity. Very few people have saved enough for retirement and all of those ways to save come with tax benefits. If you happen to get your refund before April 15, you can make a 2009 contribution AND a 2010 contribution at the same time.
Why delay your gratification? The power of compounded growth pays for a lot more than just one new vacation when you are older – oh, and have time to enjoy it.
WISE IDEA #4.
Send your kids to the college of their choice by making a contribution to a 529 plan or a custodial account. They won’t thank you now, but someday they will…hopefully. With tuition costs increasing 6% or more a year, don’t count on financial aid covering all your college costs.
WISE IDEA #5.
Make your year end charitable contributions now. Many non-profits get the majority of their donations in December, so contributions now are usually pleasant surprises and much appreciated. You still get the deduction and have more to spend on gifts for the holidays! Everyone wins!
And one more -
Treat yourself to a comprehensive financial plan or at least a quick financial tune-up with a fee-only financial planner. Getting a better plan in place for your financial future is definitely money well-spent.
What are you doing with your tax refund?
Add comment April 1, 2010
The Cost of Aging Parents
When we were 18, our parents couldn’t wait to get us out of the house. But at 81, those same parents are needing us to move back in. For more and more mid-career adults, the retirement picture is starting to include care for one or more aging parents. And very few people are planning for this when they envision their own retirement.
According to the US Department of Agriculture (not sure why THEY were doing this survey, but so be it) it costs the average household approximately $15,000 per year to house, feed & clothe a healthy, active 17-year-old. So imagine what the cost might be to house, feed, clothe, bathe, drive and medicate a frail parent. Are you adding at least $15,000 a year to your projected annual expenses in retirement?
What Exactly Are the Costs You Need to Consider?
1. Basic living expenses
Food and Shelter are the minimums, but think of all the other incidental increases in cost that happen when another body lives in your house, eats your food, uses your utilities. For example’s sake, let’s use that $15,000 per year. If you need to move your parent to an assisted living facility, the costs go up exponentially. Check out the various types of housing available for seniors at the AARP.org website: Housing Options.
2. Health care
Routine visits to the doctor are probably covered by Medicare, but who takes care of grandma when she’s got the flu or a broken leg? What about the non-prescription extras she may need every week? Does she have private medical insurance to cover the gap with Medicare coverage? Even seniors with Medicare and private health insurance may not have all their medications covered on an annual basis. The cost of your time aside, let’s add another $2,000 per year for incidental medical expenses not covered by insurance. For more on Medicare coverage and out-of-pocket costs, visit Medicare’s website, www.medicare.gov.
3. Transportation
Most elderly lose their ability to drive at some point. So who’s going to get them to all those doctor appointments or the Senior Center? Do you need a third car, a car service or just some extra gas? Add another $1,000 for help with transport. For senior transportation services in your area, check out the National Association of Area Agencies on Aging website.
4. Paperwork
For some, the financial matters of aging parents are pretty simple. They may have a couple of sources of income and minimal expenses, but I’ve yet to meet an older person who doesn’t feel overwhelmed by the amount of paperwork they have to complete on a regular basis. Again, just paying the bills & filing a tax return takes time. Do you hire someone or take the time to do it yourself? Cost of tax preparation/bookkeeping= $500 per year. Many local senior centers offer simple tax filings for minimal or no charge, but if you need more help consider a Daily Money Manager. Find one at www.aadmm.com.
5. Accessibility of Your Home
Many elderly get unsteady on their feet as they age. Do you need to build a ramp or grab bars in the bathroom? Will you need a Personal Emergency Response System (pull cords in case they fall)? These costs range from a few hundred dollars to six figures for a complete renovation. Let’s budget $500/year for renovations, security systems and routine maintenance. Everything you need to know about modifying your home for an elderly parent can be found at www.homemods.org.
6. Time
Ah. The hardest to quantify. Many of the items mentioned above may not require cash out-of-pocket, but will require someone’s dedicated time. Is that going to be you? Do you have the flexibility in your workplace to take off for all these activities? If you are already retired, how does this responsibility fit in with your long-awaited travel plans? If you do plan to travel, you’ll need some coverage – add another $500/year. A great service I have used with my own aging mother is Right At Home, located in most states. You can contract for a few hours a day, a weekend, overnight care or round the clock supervision.
Total Potential Costs? An extra $20,000 per year is not unreasonable when your parent moves in with you.
Wait, you say! But my mom can pay her own way. Yes, your parent’s Social Security and Investment Income may cover all or most of the incremental costs, but many parents who move back in with their children are doing so because they may not be able to afford all the help they need living independently or in a managed care facility. Make sure you really understand your parent’s finances before you are faced with this decision on the eve of your own retirement.
In the meantime, run those retirement projections with an extra $20,000 or so in additional living expenses in mind!
Add comment March 5, 2010
Where There’s A Will, There’s A Way
Proper estate planning is like a parachute -
when you finally need it, it better work.
As you ponder that long overdue meeting with an estate planning attorney, what is it that you really need and why do you need it?
Why Do You Need It?
Ignoring the obvious – an orderly distribution of your money – for a moment, I’d like to appeal to your emotions. Imagine your death. Who will be sad? Without some basic estate documents in place, you will be asking the very people who are trying to grieve for you to also take on a messy responsibility. They will have to pay for your funeral. They will have to pack up and distribute your things. They will have to pay your final bills without access to your money. They will have to take care of your kids. The list goes on. Smart estate planning doesn’t make those things go away, but it does provide a road map and a smoother road to accomplishing them. And, in times of grief, your loved ones need all the support they can get.
Everyone Needs The Basics:
The Will
Oh, the fun your family will have fighting over your vast collection of Beanie Babies or the costume jewelery you inherited from Aunt Sally if you don’t have a will. You may think the distribution of your earthly possessions will be orderly and fair, but don’t count on it. Do your family, however extended they may be, a big favor and tell them who gets what. Many people don’t bother with a will until they get married or start to have kids, but single adults need one as well. Imagine your assets floating around probate court for years on end, while someone you don’t know gets paid to figure out who should get your stuff.
Don’t feel like designating specific items for specific people? At least name someone you trust as the executor of the will and then trust they will distribute your things in a fair and reasonable manner.
BEST WAY TO DO THIS- see an estate planning attorney. Check out estate planning attorneys in your area at your local Bar Association’s website. Find that at the American Bar Association’s website - www.abanet.org.
QUICK WAY TO DO THIS- draft your own using Quicken Willmaker Plus software.
The Power of Attorney
Lots of things can happen before you actually die and the will kicks in. Because of these things (car accident, incapacity, stroke, Alzheimer’s) wouldn’t it be nice if someone you trust could make the decisions you are no longer capable of making about your money? Imagine having a stroke and not being able to pay for your care immediately because no one but you can access the necessary funds. There are different types of powers of attorney, but they basically name someone to conduct your business on your behalf when you are incapable of doing it.
Check out the complete list of types of powers of attorney in this aarp.org article.
The Health Care Proxy
And what if you need medical care? This document allows someone you trust to talk with the doctors and make those difficult decisions about your care when you aren’t able to do so. It can also be called a health care power of attorney and often pairs with a living will (which speaks to your willingness to end your life support)
State requirements may differ, so check out your specific requirements at this excellent legal website, www.nolo.com
And One More that you can take care of yourself -
Make sure you have named beneficiaries on all your accounts. Most of us are pretty good about naming beneficiaries on our 401k or IRA accounts when they are set up but here’s something a lot of people don’t do:
Name beneficiaries on your bank and brokerage accounts. This is especially critical if the account is in your name only.
Banks call these Payable on Death (POD) agreements and brokerages call them Transfer on Death (TOD) agreements. They simply allow you to name beneficiaries for the account so the money or investments can be transferred immediately to your heirs, bypassing probate.
These are just the basics to get you started toward a more orderly estate plan. There are other estate planning documents you may need, such as revocable living trusts, irrevocable life insurance trusts, charitable remainder trusts, etc. that should be discussed and handled by a good estate planning attorney. And while you aren’t going to benefit personally by doing a single one of them, just think of the potential legacy you will be leaving without them: financial confusion, bitterness & protracted court proceedings.
It’s not just about the money you pass on, it’s about the work you leave behind.
Add comment February 25, 2010
Lessons From the Couch
So, how are you doing on those New Year’s Resolutions? Regretting the commitment to get some financial advice and change your spending habits? Join the rapidly disappearing crowd outside my door. Full of resolve in January, we often revert back to our old habits by Feb.1. So I’ve been thinking about this lately. Over the years I have talked to countless people who have come to me for financial advice when what they really needed was some therapy. Feeling good about your relationship with money has to be one of the most difficult accomplishments for most people. And therefore one of the hardest behaviors to change.
Here’s where the problem lies: Most financial advisors are not therapists. They are motivated & driven by numbers. Numbers don’t lie (they can be manipulated, but they don’t lie.) How many times have you heard your financial advisor say “do the math”? So why do you ignore all those performance metrics and retirement calculations and go out and buy a boat?
Personally, having grown up in a land-locked state, I don’t know why anyone would buy a boat. But if you want to understand your motivations and really change your relationship with money, it might be time to consider a different kind of financial advice. It goes by a few different names, Financial Life Planning, Money Therapy, Money Coaching…but the idea is basically the same. Understand how you grew up relating to money, be honest about your money habits now and be realistic about your future.
Now, I am not a Life Planner, Money Coach or anything more than an old-fashioned CFP (love those numbers!) but I think one of these alternative approaches would help a lot of people out there who can’t get past January – so here’s a list of gurus, books and websites that might provide a lesson or two from the couch:
The Kinder Institute -
George Kinder is probably the most well-known person in this field. Author of Seven Stages of Money Maturity, he coined the term ” Life Planning” and now trains other financial advisors to be life planners. If you are not ready to invest in personal counseling sessions, this book might be a good place to start. Using Buddhist wisdom as its base, it helps you go from the first stage of innocence about money to the last stage of “aloha” or being able to give it away. While his website, www.KinderInstitute.com is geared more to the training of financial planners, you can find out more about his approach to “the human side of financial planning” and even find a planner with the “Registered Life Planner” designation.
Mitch Anthony-
Mitch talks about having a “Return on Life” versus Return on Investment with your money. His motto is “How to Get the Life You Want Out of the Money You Have”. I like this idea, as it flips the conversation a planner can have with a client on its head. Instead of asking about what you want for the future, it focuses on where you are today. There are multiple websites associated with Mr. Anthony, but one worth checking out is www.NewRetirementality.com where you can get a free profile of your own mentality around retirement.
OnSite -
Based outside of Nashville, TN, Miles Adcox and Julie Norton, co-owners, offer a variety of therapeutic workshops for all that ails you. Two related to money are Financial Recovery and Healing Money Issues. The workshops are run by a combination of clinicians and experienced financial planners. Just going to the horse country where they’re located feels like a start in the right direction. Check out all their programs at www.onsiteworkshops.com .
The Money Coaching Institute-
A former financial services exec, Deborah Price now runs the Money Coaching Institute. Rather than looking at stages of money maturity, she and her coaches focus on identifying and coming to terms with your specific “money type”. Evidently there are eight and understanding which one you are will help you better manage your finances. The thing that intrigued me about the Money Coaching Institute is that it has programs for individual and couples coaching. Because, after all, you are inevitably one money type and your honey is another, usually opposite, type right? Two books written by Ms Price are Money Magic and Money Therapy. Her website is www.moneycoachinginstitute.com.
And, as in everything else in life, the first step to financial well-being is recognizing when you’ve got a problem…
2 comments January 29, 2010
New Year’s Resolutions-Part Deux
Kick off those snow boots and slip on the flip-flops….here are six more more resolutions that can be accomplished in just a few hours this year:
July – Learn One New Thing
- It’s summertime and the livin’ is easy. So, read a book, subscribe to a blog, push yourself to understand one more thing about the stock market, bonds, commodities , ETFs, mutual funds, you name it. Women – try Manisha Thakor’s Get Financially Naked for some juicy summertime reading. Men – read it over her shoulder (you know you will…)
August – Create A Long-Term Plan
- This is the time when companies start their strategic planning discussions, so why don’t you? Have a heart-to-heart with your spouse while your both lounging on the beach, fruity drinks with umbrellas in your hands (reading a book about Nakedness). What do you want to do when you grow up? Where do you want to live out those golden years? Knowing where you want to be or what you want to do will make all that saving for retirement a lot more meaningful.
September -Teach Your Kids About Money
- Back to school time means new routines. Incorporate just one change around allowance, savings, investing, donating for your children. This is the single biggest issue facing the next generation – they graduate from college and are financially illiterate. Check out Money Savvy Generation for tips on talking about money with your children.
October – Have A Conversation With Your Parents
- The only thing harder than talking to your spouse about money is talking to your parents. What happens when they need care? What happens when they die? If you are over 40 – YOU ARE NOT A KID ANYMORE. And someone is going to have to deal with the inevitable aftermath if your parents aren’t sharing critical information with you or your siblings. Step up, speak out, take charge.
November – Do A Simple Estate Plan
- Everyone needs three documents – a will, a health care proxy, a power of attorney. Many people may need more than that, but if you don’t have those three items – your own kids are going to be bugging you some day (see October above). If you are really inspired, get all your documents in order – as if you went poof tomorrow and someone else had to keep the house running, pay the bills, service the cars, buy the groceries, get into your computer, etc. A great online tool to help you organize: Executor’s Resource.
December – Book an Hour with A Financial Planner
- Just in case you didn’t get through your January through November resolutions….
Add comment January 14, 2010
Feel Fabulous in 2010
Does anyone know the average time it takes to abandon a New Year’s Resolution? I’m guessing two weeks, a month at most. By February 1 I should be able to get a parking space again at the gym…
Maybe it would be easier if we had a different resolution for each month? That way we would only have to forego chocolate and be on time for a mere 4 weeks, not a whole bloomin’ year! (Okay, now you know my resolutions….)
If you, too want to feel fabulous this year because you actually accomplished your resolutions (note I did not say LOOK fabulous – hey, I’m a financial planner, not a personal trainer), here are my suggested New Year’s Resolutions for the first 6 months of 2010. Next week I’ll give you the last 6 months (don’t want to scare ya):
January – Set up an automatic savings plan.
Yes, I know that many of you are doing this in your employer’s retirement plan already. That is great. But what about all the other spending you are going to do between now and then? Wouldn’t it be great to get to December 2010 and have your holiday presents paid for with a nice little stash of moolah? Or what about that anniversary trip or that in-law apartment or your 11 year old’s braces (oh yea, no dental plan on earth will cover that cost).
Setting up an auto savings plan at your bank or brokerage takes about 2 minutes and then you can check this one off your list.
February – Protect Yourself.
No one ever reviews their insurance policies. Ever. Until it’s too late. So, take an hour or two around Valentine’s Day (after all, this is really about your loved ones, not you) and make sure your property coverage AND your life insurance coverage have kept up with the times. If the only life insurance you have is through an employer-paid plan, you might want to explore some supplemental coverage, JUST IN CASE YOU LOSE YOUR JOB…
March – Plan and Budget For That Summer Vacation.
In the Northeast we actually do this in January, but it’s really more about pining for warmer climes, than being organized…. Don’t wait until June to figure out what you are going to do for vacation. Take two hours, investigate the deals out there and then set aside the money (or up your automatic savings plan-see above)
April- Examine Your Spending.
Now that the 1st quarter of 2010 is out of your pocketbook, see where you spent your money and figure out if there’s anything you want to change about your spending habits. I did NOT use the word “budget” here, but this is a good time to see if you are on track…
May – Create a Debt Repayment Plan
If your credit card is still trying to swallow the beast that IS holiday spending, stop now and figure out how you are going to get that thing paid off before you start all over again. And now is as good a time as any to check mortgage rates, your ARM that’s about to explode or any other debt you are carrying. Run some projections at your current payoff rate and see how many years you will be owing someone else. That should scare you into action.
June -Max Out Your Retirement
You are almost halfway through the year. Are you going to max out what you can put away for retirement? If not, adjust your contribution percentages at work or make your IRA contribution now.
The 401k contribution limit for 2010 is $16, 500 with a 50+ catch up of an additional $5,500.
IRA contributions for 2010 are $5,000 with a 50+ catch up of an additional $1,000.
Total time to accomplish your first 6 resolutions: 6-10 hours. How efficient is that?!
Add comment January 7, 2010
All I Want for Christmas…
I still have my two front teeth (although the same can’t be said for my youngest…), so here’s my Financial Wish List for Santa this year:
1. The stock market to go up by 10% in 2010.
Bernie Madoff made 10% into a dirty word, but the reality is, if the market went up just 10%, it would outperform 99% of financial advisors’ projections for retirement, college and everything in between.
2. College costs to mirror inflation,
not some crazy Jimmy Carterish 80′s big hairdo double-digit increase. We are so over the 80′s, despite some fashionistas, so it would be nice if the colleges kept up with the low-inflation times, baby.
3. Elimination of all income tax.
Hey, I can wish can’t I?
4. Simple insurance products.
All those riders need to make like Roy Rogers and ride away into the sunset, never to be seen again. Dale Evans might be sad, but the rest of us would be a lot happier.
5. A new phrase for “retirement” – and it’s not “still working”
It’s hard to do retirement projections when you spend all your time trying to define retirement.
And one more: health, happiness and a tennis win or two. They all help keep costs down around my household.
Add comment December 24, 2009
Vet the Vets: Lessons in Charitable Giving
The ghost of Ebeneazer Scrooge is having a field day at our house. Every night, seated at the dinner table, fork poised in mid air on it’s way to my mouth, the phone rings. And just like Pavlov’s dogs, I jump up to snatch the phone from its cradle before it rings again. What is it exactly I’m hoping for on the other end? Do they ever call lottery winners on the phone? For each time I say ‘hello”, I am disappointed. Inevitably at that time of night it’s a telemarketing service calling for yet another charitable contribution.
I used to listen politely, decline to contribute, hang up and feel guilty. But why? We make charitable contributions every year to worthwhile causes. Just not the ones who hire & pay telemarketing firms to call us….So to get the most bang for my charitable buck and have something new to say to those pesky callers, I’ve adopted a more business like approach to my charitable side. This holiday season I’ve decided to become a “Charity Venture Capitalist” .
Whether you have $100 or $100,000 to give to charities of your choice, you, too, can be a Charity VC. You just have to perform a little due diligence:
5 Questions to Ask Yourself First
1. Do I want to give locally or globally?
Giving locally, of course, has a greater impact on a smaller number of people. Philosophically, are you more interested in supporting causes around the world, where the money may help those in dire straits, or are you committed to your local community where you can see the direct impact of your giving? This discussion has sometimes been a heated one in our own household, but over the years we’ve learned to compromise and do both.
2. What is my total amount I am willing to give this year?
Ideally, this amount is determined when you are doing your annual household budget, but if not, add up what you’ve done willy-nilly so far and figure out how much more you want to give before the end of the year. Those $25 and $50 contributions to every solicitation you receive in the mail can really add up! Budgeting ahead of time also helps reduce those times you succumb to a plea from a co-worker, friend, telephone call, etc. You can reply with confidence, “I have already allocated my charitable donations this year, maybe we could consider it for next year.”
3. Do you want to concentrate your giving or spread the wealth?
Again, whether you give locally or globally, decide if you want to have a greater impact on one organization or if you will feel better by giving a little bit to a lot of charities.
4. Do you prefer to establish a long term relationship with your charities of choice or is this a one-time shot?
Some things are so important you may want to establish an annual gift amount to the same organization year after year. Or you may even decide on an escalated giving approach ($25 this year, $50 next). Other worthy causes cross your radar only because of something you are doing today. When you choose your charities, consider which type of relationship you want to have with each of them.
5. Do you want to entertain those phone solicitations or not?
With rare exception, those phone calls are made by professional firms hired to solicit your money. Consider what the organization is paying out of your dollars to hire the callers. Since you will get many calls through the year, consider what your response will be and stick to it.
5 Questions to Ask the Charity
1. What is their mission (and do you understand it?)
If they can’t articulate exactly what they are trying to achieve, how are they going to spend your money? Can you explain to someone else what they do? Most charities should be able to provide a written mission statement, which you should request. But, just as important, what kinds of programs and activities are they actively doing to support the mission?
2. How much of my money goes to operations vs programming?
Ask for the Annual Report. Any VC investor would. How much of your hard earned dollar will actually pay for programming and how much goes to pay salaries, fundraising costs & other overhead? A good rule of thumb is the 75/25 rule. At least 75% to programming, no more than 25% to overhead.
3. What are their long term goals and what are their short term needs?
This is kind of like investing in public versus private companies. Many organizations are heavily focused on current needs & short term projects, similar to quarterly earnings reports. Quick results keep investors happy. But it is also critical for charities to have well defined long term goals that can’t be accomplished in a single year. They have spent the time defining a long term goal and a plan to get there. The best charities have both.
4. What kind of progress are they making?
An organization can have the best mission statement and lots of ideas, but are they making any progress with your money? Over the years, anyone can establish a 501c-3 non profit organization and solicit donations, but are they successful at what they are doing? The ultimate long term goal of many charities would be to be so successful at their mission that they put themselves out of business, I suspect… Make sure your dollars aren’t going into a giant sinkhole.
5. What is their charity rating?
And finally, you’ve narrowed the field to several qualified candidates. Do your final bit of due diligence by going on one of the charity evaluation websites that have proliferated in the past few years. One of the best is www.charitynavigator.org. They rate the charities on several different attributes, so you can get the best results for your worthy contribution.
Charles Dickens would be proud!
Add comment December 3, 2009
