Lori Atwood
FINANCIAL pLANNING

On November 29th, 2017 by Lori Atwood

Holiday Financial Hangover… 5 Tips to Prevent It

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Financial Fitness

If you were like me, last weekend, you spent way more than you should have for the month and chalked it up to the “holiday season” and pre-buying holiday gifts when the sales are on. From a practicality standpoint, that may make sense, but from a financial one, it may not.

I’m not going to act like scrooge by telling you to not buy things your loved ones (and you) want for the holidays and rain on everybody’s happiness (I do that all year round in my practice). What I am going to do is give you 5 tips for staying out of credit card debt this holiday season.

  1. Don’t count on money you don’t have today – don’t make your gift list assuming you will get a year end bonus or tax refund (that’s all up in the air!). Set your limits (#3) and make your list (#4) based on money you have NOW.
  2. Manage the rest of your life – this month is not the time to replace towels, or running shoes or anything else that is not a safety issue and not holiday related. Spread those non-essential, non-holiday expenses over the winter when things are calmer. Or turn those replacement needs into holiday gifts!
  3. Set some limits – generally families of 4 in an urban area can spend $500-1500 on the holidays including decorations, gifts, clothes related to the holidays and food for get-togethers. Pick an amount that fits your household finances and get other family members to agree.
  4. Make a list – sounds familiar – but there’s a reason why all those holiday songs talk about making a list. It works. Do not go into a store or online and just buy things that seem okay. Think about what your loved ones want and write it down. This doesn’t mean you can’t be spontaneous, but try not to be ONLY spontaneous.
  5. Track IT! - It’s not hard. Use a spreadsheet, this Iphone app, this Android one or even a pencil and paper and write down what you’ve bought. Believe it or not, it’s not that much to track and the mere act of tracking it will make your financial judgment better. Stay within the limit you set in #3.

Bonus tip: 'Tis the season to think sustainably financially and otherwise. Reuse décor from last year, make more than you buy, do a Secret Santa, or set a price limit for gift giving. I guarantee a lot of loved ones will appreciate you suggesting a limit. It takes the pressure off.

Try to do the suggestions on my list and you will see that your holidays will be less frantic, riddled with guilt and pressure and importantly, less apt to give you a financial holiday hangover in January. Credit card debt is like walking into a cob web, it takes just a second to get into it and a long time to get out.

Next year, make a resolution to save each month for the holidays. If you need $800 for holidays, save $65/month. You will feel great once December comes. Happy holidays and I will be back in the new year!

On October 16th, 2017 by Lori Atwood

So Many Voices on Personal Finance – 3 of My Favorite Money Podcasts

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Financial Fitness

It may be because I’m in personal finance that I feel like everyone and their cousin is podcasting, writing books, and doing videos about finance. There are a lot of voices out there and it’s hard to sift through them all, but I have found a few podcasts I really like.

First, personal finance is a huge subject area. I try to focus on the information I can use to help my clients (and my own household) save money, reduce debt, increase earnings or stay better organized. I like specific recommendations that regular people can implement because they can see how the recommendations fit their specific lives.

I know liking a podcast is by definition subjective, and can be hard to define. I tried break down what I value in a personal finance podcast and came up with the following:

  1. subjects relevant to my clients' or my life – no hot stock tips or discussions about the yield curve
  2. specific tips my clients or I can use right away
  3. keeping my interest - the podcaster is charismatic enough to keep my interest for 20, 30 or even 60 minutes.

With that in mind, here are my top three podcasts for personal finance in no particular order, because they are very different types of podcasts:

  1. Freakonomics Radio – I find myself quoting some of their research on index fund investing all the time. They also take up non-financial topics like medical trials, language and philanthropy and look at the economic implications. Good dinner party fodder.
  2. Easy Money with Elisabeth Leamy – she helps you actually find money. I took her tip on searching for my own unclaimed money and found over $400! Her podcasts are also shorter (20-30 mins) and very to-the- point, which is something I highly value.
  3. Who Knew? – life hacks and money saving tips you can use right away. Did you know you should buy plane tickets on a Tuesday or Wednesday, because studies show fares are lowest on those days. It’s also about 20-30 minutes, which is great.

I also like Planet Money from NPR, but did not want to fill my list with NPR entries, which I could easily do. Take a listen and let me know what you think. Let me know if you have a favorite podcast or blog about personal finance or saving money. I’d love to hear it.

On September 6th, 2017 by Lori Atwood

Back to School, Back to Meal Planning: Try to Keep Your Groceries Bill in Check

Posted In:
Financial Fitness

Hi all,
I hope you had a great summer and are ready for Back to school, and back to "normal" schedules. It is the perfect time to discuss one of the biggest areas we all tend to overspend: Groceries. My top 5 tips for reducing your groceries spending are the following:

  1. go with a list
  2. leave the kids at home
  3. do some basic meal planning before you write your list (e.g. "pasta Tuesday, chicken Wednesday...")
  4. do a quick inventory before you head to the grocery store
  5. MOST IMPORTANT: Go only 1 or 2 times per week! Don't go whenever you need one thing, you will come home with 10 things, 9 of which you did not need.

Although all 5 tips will help reduce your groceries spending, number 5 is critical. If you can stop yourself from running out every day or every other day for "a few things," you could drop your spending by a couple hundred dollars per month. Using Instacart or Peapod can help reduce overspending by impulse buying, too.

When my daughter says we're out of whatever she MUST have that minute, I tell her it takes 2-3 weeks to starve and mommy will go to the store within that time frame. Done. It may be harsh, but patience is a good life skill for all kids to learn.

To help you with item #3, I recommend a recipe planning site like 6 O'Clock Scramble, an online meal planning service that provides quick, easy, and delicious meals recipes. To make it as easy as possible, The Scramble sends you a weekly email that links you to your customizable meal plan. From there, you can pick which recipes you want and generate a shopping list. Recipe sites are a LOT cheaper than meal kit services that deliver meal ingredients like Blue Apron.

I recommend 6 O'clock Scramble because you are doing the cooking, which means you saving money. I am NOT AFFILIATED with 6 O'Clock Scramble and do NOT make a red cent if you decide to try it. I just like the service and they were kind enough to give subscribers to my blog a discount code. If you want to try it, use this subscription discount code GL30031 and get $3 off any term of subscription. Let me know what you think!

Lastly, from a financial perspective I recommend people try to stay away from meal kits services e.g. Blue Apron, Hello Fresh and Purple Carrot, etc., if possible, because it's easy to get hooked and it's expensive over the long haul. If you decide to use a meal kit service, consider it "training wheels" to teach you good cooking techniques. These services are far more expensive than cooking, because in addition to meals you buy from a meal kit service, which may have a decent per meal price tag, you still have to buy toilet paper and snacks and everything else. If you must, try a meal kit service for 6 months at most and see if you learned enough to cook for yourself without it after 6 months.

Remember, you want to spend $250-300/person/month on groceries (any child eating solid food is a full "person" for this). If you are a family of 4, you should be spending $1000-1250/month on groceries including non-edible items like laundry detergent and plastic wrap. If you are over that amount, there's more than the typical amount of waste unless someone in your house has diabetes or Celiac or another condition that requires a special diet.

We all like to eat well, just make sure you are eating smart financially, nutritionally, and environmentally.

On June 12th, 2017 by Lori Atwood

3 Pieces of Great Advice That Can Ruin Your Finances

Posted In:
Financial Fitness

For my last post before summer break (I will be back posting in September, as usual), I want to talk about the saying, "no good deed goes unpunished." That old saw holds up in personal finance, too, in that there is a lot of great advice out there, but unless it fits your finances specifically, it could backfire.

Here are three pieces of excellent advice in certain circumstances:

  1. Pay more to your mortgage each month
  2. Save for college
  3. Save more to your retirement plan to reduce your taxes

All three pieces of advice are excellent IF you have the cash flow to do it. If you don’t, all three can get you into a mountain of credit card debt.

If you do not have enough cash flow to pay for all your monthly expenses plus some full discretionary money (everyone needs some!), plus some savings for Annual Needs and a small cushion, then you could be “robbing Peter to pay Paul.” You could be saving $200/month to your child’s 529, paying $500/month extra to your mortgage and maxing your retirement, but if you do not have $200+$500 ($700) EXTRA each month AFTER maxing your retirement AND paying ALL your monthly expenses, saving for Annual Needs, and having a small cushion, you will inevitably have to charge expenses that come up like plumbers, kids activities, birthday parties and other lifestyle expenses.

All that good saving could squeeze your cash flow each month and force you to charge regular expenses that come up. Instead, KNOW if you have an extra $700/month after paying for all your monthly expenses (including some full discretionary funds to cover your child’s activities and birthday parties), saving for Annual Needs and having a small cushion. Only once you know you have enough left over, can you confidently follow any or all of the advice listed above and NOT risk amassing more credit card debt.

Think about whether you are saving more than you can afford to each month. More about real money casino http://mapleleafonlinecasino.com/real-money/ on mapleleafonlinecasino.com! That happens to well-intentioned people everywhere, especially if you are in a cash flow heavy period of your life (e.g., kids in daycare or college). If you are saving more than you can, reduce your savings and make sure you can handle your monthly expenses. It's more important. Look at your monthly expenses, you may be able to trim some to free up more money for saving (woohoo!), but if you can’t, don’t follow the good advice listed above (however, you should always save at least 15% total to retirement including your employer match, but anything over that can be trimmed, if necessary). Instead, make sure you don’t get into more debt due to monthly expenses.

There, I said it. Don’t save… until you know you can.

On May 1st, 2017 by Lori Atwood

Spending Gives You Life Experience! Yes, I Agree, But...

Posted In:
Financial Fitness

There's a fair amount of chatter on social media and articles being written about how life is about experiences and not stuff. I couldn't agree more and I've written about it before. There was a great article in the New York Times about it just a few weeks ago.

The essence of the article and much of the current thinking on happiness is that happiness is tied to experiences (as well as other things like relationships, purpose, etc.) not things or objects. Buying another object won't make you happy, but having a great life experience just might. Both objects and experiences usually cost money and the more life-changing either is, generally (and I know there are exceptions) the more money either costs.

The argument goes: "spend it and don't worry about saving because you are adding to your life experience and that's more important than some number on some account somewhere."

My position goes: Yes, once you are savings secure, you can decide if you want to spend that extra dollar on an experience or on growing your savings more (I would probably vote for the experience personally!). If you spend on experiences before you are savings secure, you could be risking credit card debt or even financial ruin.

People should have experiential goals and they may even help you keep your focus as you get saving's secure so you can spend your NEXT bonus on climbing Everest. Here's what savings secure looks like:

  1. spend less than you earn each month consistently
  2. have a few thousand set aside for Rainy Day expenses like home or car repairs, root canals and emergency travel
  3. have 3-6 months of your total monthly expenses saved in cash/money markets for a total loss of income
  4. save 15% of your pretax income (including employer matches) for retirement
  5. save monthly or have enough annual income (bonuses, tax refunds, etc.) to pay for your Annual Needs like camp and vacations.

Once all that is in place, any dollar over that amount can and should be spent on experiences and other goals like saving for college or a home renovation. Bottom line, you can't have financial goals, whether they are experiences, new cars or college, until your are savings secure. Until numbers 1 through 5 above are complete, your only financial goal should be getting them completed.

I know everyone needs to blow of steam and that's why everyone needs some fun money each month and money put aside for vacations each year."Experiences," within the amount you have for fun money each month or vacations each year, is great. Additional experiences, require savings security. Besides, how much fun is white water rafting when are freaking out that you can't really afford the trip.

Goal 1: Savings Security. Goal 2: All the life has to offer.

On March 28th, 2017 by Lori Atwood

If You Have Revolving Credit Card Balances, Do NOT Use those Cards for Daily Purchases. Here's Why

Posted In:
Financial Fitness

I see this all the time in my practice. Clients come to me with some credit card debt. Usually, it is spread over more than one credit card and sometimes it is just one. They want to pay their credit cards down. Great, I say, and we figure out how much they can squeeze out each month to pay down their balances.

Then, they say they still use the card with the balance for their daily credit card. They ask if that’s bad. YES, it is a bad idea. Here’s why:

  1. You could be adding to the balance because you have to charge "stuff that happens" like car repairs and root canals. If you do not have a RAINY DAY SAVINGS account for Stuff that Happens, paying down your credit card becomes two steps forward and three steps back because you pay $300/month, but had to charge $450 for the brake job.
  2. You charge everyday expenses and you don't know how much you charged. Are paying extra towards the revolving balance or just paying the current purchase or not even paying the current purchase and thus adding to your revolving balance?
  3. Psychologically, it’s probably causing you stress just seeing that card in your wallet without a plan to really pay it down. Maybe you either just throw up your hands and say, "whatever, let's buy it" or never buy things you really need. Either is bad.

What should you be doing if you have credit card debt you want to pay down:

  1. Make sure you are spending less than you earn each month. Know how much you have extra each month to put towards credit card pay down. Try to make it the same amount each month.
  2. Have $3k ($1500 if you rent) of savings for RAINY DAY expenses. If you don't, save for it BEFORE YOU TRY TO PAY YOUR CREDIT CARDS DOWN. Without the RAINY DAY fund, you will only amass more credit card debt with your first brake job or root canal.
  3. Have a DIFFERENT credit card (or ONLY use your debit card) for every day use. Take the card with the balance and stick it in your drawer. Figure out what you can pay on it each month and just start throwing payments at it. No more purchases.

Sometimes it is a good idea to get a zero percent card and transfer the revolving balance to a 0% card AS LONG AS YOU CAN PAY THE BALANCE BY THE TIME THE 0% PROMO ENDS. If not, just get another card or use your debit card for daily purchases. If you get another card, YOU MUST make sure you are spending less than you earn each month and pay that new card in full each month. Let me repeat: pay the new card in full each month. If you don't do that, this whole strategy falls apart.

This recommendation of getting a new card is not license to spend more. That’s the issue in the first place. For many, credit card debt is unavoidable (e.g. medical, repair bills, etc.), but for most, it is the result of not cutting spending when necessary and THEN being hit by a medical or repair bill.

First things first: cut spending, then get a card that you can use daily and pay it off each month. Hammer away at your revolving debt by KNOWING how much extra you can send to it each month and try to make that amount consistent. It’s not easy, and it’s not fun, but it will relieve stress, and that’s pretty good, too.

On March 6th, 2017 by Lori Atwood

4 Ways to Spend Less than You Earn - Hint: Only One Really Works

Posted In:
Financial Fitness

I was talking to a friend (yes, I talk about this stuff on my free time, too) and I was saying that the most critical thing about being financially secure is making sure you spend less than you earn every month, consistently, have a little bit to save and have a small cushion each month.

She said, “what if they can’t spend less than they earn?” I said people have to cut expenses until they spend less than they earn and she replied, “what if they can’t?” and I looked at her as if she had six heads and said, “what do you mean? You can’t spend money you don’t have, indefinitely. You will eventually go bankrupt.” It's shocking to me that someone would say "what if they can't," because you can ALWAYS cut even if it means moving, selling a car or public school.

Her comment reminded me of something I’ve seen with clients and I think it’s important and common enough to write about it: feeling entitled to continue spending more than you earn because you've decided something is “non-negotiable.” I often hear, "Johnny would not survive in public school." Okay, that may be true. Then move to a smaller place, sell your car and commit to Johnny's education. Do not run up credit card balances trying to do it all.

Feeling shame or embarrassment because you move to a smaller place, although very hard emotionally, is still not a good enough reason to pile up debt. There I said it. "Keeping up with the Jones'" is not a good enough reason. "Shame" is probably not the right word either, because think of the pride you will feel at being financially secure and prioritizing your family's needs.

Ok, so what can you do if things are that tight and you are consistently spending more than you earn each month? There are only 4 ways I can think of to cover yourself if your expenses are more than your income on an ongoing basis:

  1. Steal
  2. Print money in your basement/counterfeit
  3. Earn more and/or cut expenses
  4. Borrow money/charge stuff

If you are doing either of the first two, please do not tell me and STOP! If you are doing the fourth, you’re going to end up with a pile of credit card debt. You can only use debt to cover your expenses when it is TEMPORARY, as in 2-3 months at most between jobs or something like that. Even then, if you have been reading my blog, you know you need 3-6 months of emergency funds for exactly that situation, i.e. a total loss of income.

The only solution that makes sustainable financial sense is increasing your earnings and/or cutting expenses. If you cannot cut enough, and that happens sometimes especially in large urban areas when you have young kids, you have to increase earnings. That means you have to get creative on the income side by doing things like AirBnB or taking on consulting work, or whatever makes sense for you. But, raising income or cutting expenses are still the only smart ways (not to mention legal ways) to handle the problem.

There is NO indefinite situation where it’s okay to just live bigger than you earn. None. It’s part of the social compact. If everyone overspent with no end in sight, we’d have a lot of people who end up bankrupt (anyone remember 2008?). Check your feelings of entitlement and see if they really fit your wallet. Then, look at what you are spending and see where you can trim and what is really important. Wouldn’t it be great to feel less stress about your finances? Here’s how you start.

On February 9th, 2017 by Lori Atwood

Trashing the Fiduciary Rule - Yes, It Will Affect You!

Posted In:
Financial Fitness

I know I said last week I do not usually resend other people's articles, but please read John Bogle's Op-ed in the New York Times about the administration's trashing of the Fiduciary Rule. I've been meaning to write about this and now is the time. The new administration has slowed the progress (and could possibly stop altogether) a Department of Labor ruling that was supposed to go into effect in April 2017. The ruling (referred to as the Fiduciary Rule) says that brokers and investment advisers (a.k.a. "your guy who manages your money") MUST put client interests FIRST before their own interest when recommending investments for a client's RETIREMENT account.

There are 2 things to note in the sentence above:

  1. client interests
  2. retirement accounts

Let's discuss both. "Client interest" means your interest. It means that right now your broker or adviser is legally allowed to recommend investments (e.g. mutual funds, bond funds, stocks, etc.) for your retirement funds that make him a lot of money in commissions and may not make you the most money in the long run either because of lackluster performance OR high fees that erode your gains in your RETIREMENT funds. You should be furious. Retirement funds are the ones that will keep you from eating cat food in your dotage. It's pretty damn important.

If you are paying a bunch of commissions (also referred to as "loads"), high expense ratios (different than loads, these are fees charged by the actual underlying mutual fund manager) and possibly a wrap fee or a percentage of your entire account to your broker, you may not get the best return because the fees are crushing you. People are investing for 30 and 40 years and having 4% returns TOTAL (not each year) and can't figure out why. The reason is usually fees, and now the administration is saying we do not need to rush into a rule that forces investment advisers and brokers to forego their largest commissions and concentrate on getting the best return for their clients, which many times means low cost index funds.

Next, the second important concept: Retirement Accounts. These are your 401ks, IRAs, SEP IRAs, TSPs, 403bs, and several others. The rule, if it ever happens, only governs your retirement accounts. Your regular investment accounts, also known as brokerage accounts are not even affected by a rule that should never have to be a rule in the first place. Those non-retirement accounts can still be raked over the coals for the highest commission mutual funds and investments possible.

Doesn't sound fair, does it? It's not. It should be illegal. It's not. What if your doctor didn't have your best interests in mind when she prescribed medicine. What if she gave you a bunch of prescriptions you didn't need because she made a commission or worse, gave you the wrong medicine because she made more commissions from the wrong medicine than the best one. Clearly, that would be illegal, but this is somehow not. Yet.

Always question your "guy who manages my money." How much is the commission on the product? Is there another way to achieve the same thing. Why is an index fund not appropriate? You have to be your own best advocate here, because clearly the regulators will not be.

On January 23rd, 2017 by Lori Atwood

Student Loan Repayment Pitfalls - Don't fall in...

Posted In:
Financial Fitness

Usually, I do not resend articles written by other outlets, but in this case I am, because I think it is so important and I get asked about student loan payback plans a lot.

If you, or your child, have student loans, please read 6 Tips for Avoiding the Worst Student Loan Repayment Traps by Ron Lieber, in the New York Times, January 20, 2017.

My general advice on student loan payback plans, which this article only touches on, is to get on Studentloans.gov and click the "use the repayment estimator." Once you are at the Repayment Estimator, go through EVERY student loan repayment program with your eligible loans and make a table with the name of the repayment program down the side of the table and across the top have a column for each of the following information types:

  • First Payment
  • Last Payment
  • Total Paid
  • Forgiveness
  • Period of Repayment

Fill in all the data list above for your loans and compare each program. You want to optimize the following TWO items:

  1. monthly payment; AND
  2. total paid

Don't worry about forgiveness not being on my list of two items to optimize. If you are eligible for forgiveness, it will be reflected in a much reduced "total paid." The reason I ask you to "optimize" both monthly payment and total paid, is that when you are just out of school or maybe you've just started a family, monthly payment matters A LOT, but at the same time, you do not want to pay tons in interest over the life of your loan, which may be up to 20 years. Try to find a payment plan that allows you the lowest monthly payment you can manage while also giving you the lowest total payback possible. That's optimizing.

There may be plans with lower monthly payments, but over the life of your loan you end up paying thousands more in interest because you paid so little each month. That's not optimizing. Each case is different and you might be in a period of life where monthly payment is all that matters. I get that, but, in general, try to optimize both total paid AND monthly payment.

We live in uncertain times and all these program might change or go away altogether. It's worth the ONE HOUR it will take you to fill in this table and make sure you are on the right repayment plan before that repayment is potentially eliminated. You may still be able to be grandfathered in if you enroll before any changes are made.

Student loans are not to be messed with. These things stay with you even if you were to go through bankruptcy. Yep! They never go away until they are paid or forgiven (if you are on a forgiveness plan). Speaking of forgiveness. Do not assume you are eligible for a forgiveness plan and if you are eligible, do not assume you are enrolled. You have to enroll in the plan and make sure they count all the years for which you are eligible.

Student loans, like many other great benefits offered by our government, have to be monitored, checked and generally stayed-on-top-of throughout the time you have them. Email me if you have questions or would like my template for the table i discussed above.

On January 10th, 2017 by Lori Atwood

Are you a McGyver or an Anyway/Anyhow person?

Posted In:
Financial Fitness

I’m going to describe a certain type of person. I know it’s not you, but maybe you know someone like this. I call this person Annie, short for “anyway, anyhow.” Annie’s daughter comes home from school and needs to find something to wear for a school play. What does Annie do? She finds an appropriate costume online and buys it and pays for quick shipping.

Annie is planning a vacation for her family. She wants to go to Europe. She books the trip for next month, books the hotel and walks away thinking about how exciting her trip will be.

Annie back is hurting. She needs to see a doctor. She asks her friends who their favorite orthopedic surgeon is and books the next available appointment. She books acupuncture and a massage as well. One of her friends tells her about some supplements that her cousin’s neighbor took, so Annie buys them online, hoping they will help.

What I’ve described here is Annie’s Anyway, Anyhow personality. When she wants something, she does it when and how she wants and does not think about the cost or. The challenge is that Annie probably overspends every month with her Anyway/Anyhow personality.

Buying your kid the best costume without first seeing what you have at home, is expensive. Trips booked without comparing flights and hotels, or even considering another destination where a special is being run, are expensive. Going to doctors recommended by friends and not checking to see if they are on your plan can be REALLY expensive, not to mention supplements and other therapies that might not be appropriate. You get the picture, right?

If you think like someone who can just do whatever you want whenever you want, you will end up with credit card debt. Don’t fool yourself into thinking you have enough money. Nobody does. Even if you are rich, the amounts would just go up to just beyond the limits of your wealth. Happens all the time.

Instead, think about being more like McGyver (old TV guy who uses whatever he has on hand to get out of whatever jam he’s in). Here are my 3 McGyver rules:

  1. Keep your mind open – keep your mind open to other ways of accomplishing the same thing that do not involve buying new stuff. Open your mind to using stuff you have at home already, or wearing the same dress to a party where nobody has seen it before.
  2. Think before you buy – take 5-10 minutes to think about whether you need this item, how it fits in with other items you have or if you have something similar. I like to have 3 occasions, reasons, outfits or whatever that the item works with before buying.
  3. Consider options – Always comparison shop even for tin foil. Look around on the same shelf and compare brands at least. Convince yourself you are getting the right deal (not necessarily the cheapest, but the best). With the internet, it’s easy.

Here comes that overused word, but… be mindful of how you are spending your money. You work hard for it. Do not throw it at whatever comes your way. I’m not telling you to be cheap or live with a sense of scarcity. I’m suggesting you think a little more before you buy and see what happens.

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