RealSmartica

Educate parents and young adults in practical money matters

Facebook
LinkedIn
Twitter
  • Home
  • Contact
  • A Resource for Schools
  • College Planning
  • Financial Housekeeping
  • Money Lessons for Kids
  • Women and Money

Resolve to Beat the Odds

January 4, 2019 By Dina Isola 3 Comments

 

woman holding lips with black framed sunglasses

What if I told you that you could immediately accomplish a New Year’s resolution that most people fail at, all before January even comes to a close?

You can, and it won’t be that painful or time-consuming; I promise.

In “10 Top New Year’s Resolutions for Success and Happiness in 2019”, Peter Economy cites “saving more money” as one of the most popular goals people have.  Overall only 8% of people making resolutions succeed, and those seeking to improve their money situation have a higher rate of failure. Ouch.

Before you throw up your hands and decide it’s not worth trying to save more, let’s look at some ways you can defy the odds.

Often, people tell me they have no idea where their statements are.  Good news.  With year-end out of the way, statements will be arriving and will clearly show you what you have and how much you added to the account over the course of 2018.  This is your baseline on which you will improve.

Armed with this information, you can quickly assess the situation and make some changes today in 3 easy steps:

1. Look at your individual retirement accounts.  How much did you put away?

  • You have until April 15, 2019 to make a contribution for 2018 (this is a rare opportunity to right a wrong from 2018).
  • For 2018, the maximum you can put into an IRA or Roth IRA is $5,500 or $6,500 once you are age 50 or older; for 2019, these amounts are higher – $6,000 and $7,000, respectively.
  • For 2019, consider setting up a systematic investment program where a set amount gets invested every month right from your bank account.

Resolve to set yourself up for success by making a 2018 contribution and by using an automated system for investing in 2019, so you commit to monthly investments. Set it and forget it.

2. Now, take a look at your investments.

  • Do not panic if your investments are lower than when 2018 started. The market has been volatile.  On the upside, a down market means prices are lower, so your fixed monthly investments will buy more shares.
  • Do check what you are paying for your investments since excessive fees are always bad, but particularly devastating when market returns are nowhere to be found. Check your fund expenses with FINRA’s fund analyzer.
  • As a point of reference, look at what your fund expenses could be if you were in a low-cost option, like Vanguard funds. Simply swapping out an expensive investment for a lower-cost option can make you money regardless of what the market returns. Which would you rather own: a fund with a 5% sales load and fund fees of 1% or a no-load fund with expenses of 0.2%?  No, this is not a trick question.  The gaps in fees can be that wide.

Resolve to look at a down market as a long-term investor’s best friend because it encourages you to stick with your investment plan. 

AND

Resolve to not throw good money after bad; money is always better in your pocket than in someone else’s. Cut your fees to the bone.  

3. Look at your year-end pay stub.

  • Did you contribute to your employer-sponsored retirement plan? Did you get a match from your employer?  The benefits/payroll department will know what you need to contribute to get the match.  With or without a match, increasing your participation by as little as 1% is still an improvement.
  • For 2019, the maximum you can put into a 401(k), 457 or 403(b) is $19,000 or $25,000 if you are 50 or older. For Simple IRA plans, the maximums are $13,000 or $16,000, respectively.
  • You may be surprised to find that increasing your contributions to your retirement plan may not materially affect your take-home-pay, because it lowers your taxable income; your payroll department should be able to offer some guidance.  Here is a basic calculator to give you an idea.

Resolve to get involved in your employer-sponsored plan, get the match or increase your savings rate per paycheck.

Recently a client met with the payroll coordinator and she was shocked to discover that putting in $800 a month reduced her bi-monthly paycheck by just $50!  This would not affect her monthly budget one iota and yet it made a huge difference in her goal to save more money.

I’ve only scratched the surface.  There are many more elements to successfully handling your money, such as building a plan that reflects your goals/time frame and diversifying your investments appropriately.

But just developing the habit of putting money aside – and accomplishing that goal right away – may be the momentum you need to move the needle in the right direction and keep going.

Make 2019 the year you resolve to beat the odds.  I’m rooting for you.

 

Source:  “10 Top New Year’s Resolutions for Success and Happiness in 2019”, Peter Economy, Inc.com, January 1, 2019.

Photo by Andrej Nihil on Unsplash

Planning for the “Big” Day

October 27, 2018 By Dina Isola Leave a Comment

 

One of the greatest “gifts” I ever received from my parents did not feel like a gift a first; it was a torturous exercise, truth be told.  Involving me in their estate planning would be something that would offer my entire family peace of mind, but not until much later down the road.

I did not ask to be involved; I actually was uncomfortable looking at my parents’ finances; it felt like TMI.

To put things in perspective, I was not a financial advisor at the time, nor was Tony.  I was in charge of marketing communications for a mutual fund company and Tony (an avid investor) was teaching history.  It was our experience with my parents’ planning that led us to the work we do now.

One of my brothers had helped them take care of the legal part of the equation – wills, health care proxies, trusts, etc. were in place.  But now, we had to make sure everything was titled as it needed to be and that beneficiaries and contingent beneficiaries were properly named (with seven children that was a lot of form-filling).

Assets had to be consolidated from numerous accounts; stock certificates needed a better home than the bedroom closet; their portfolio needed to be realigned based on their increasing medical bills; and investments my father bought back in the 1960s needed a price at purchase (cost basis).  Tony spent a good chunk of his summer break researching average share prices in the library (this was pre-internet).

Here is where the gift part comes in – when my father died in 2004, and my mother in 2015, there was no guessing about anything (not even the music played at the funeral Mass).  Our family was able to focus on being together and mourning my parents; we were not caught scrambling in a panic over the loose ends that we should have tied up when they were alive.

Money had been set aside in a bank account in our names to pay for all the expenses that would arise before the funds were disbursed.  No one was forced to charge thousands on a credit card to pay for the funeral arrangements.

When the heart is heavy, any complications can feel overwhelming; minimizing decision-making is a tremendous help.

Yet, according to the Financial Awareness Foundation, a nonprofit organization dedicated to raising financial awareness and literacy, 120 million adults in the U.S. do not have an estate plan in place.  This leaves them and their loved ones in a precarious position.

People mistakenly think that estate planning is for millionaires, and not the average person.  That is simply not true.  Yes, people with significant assets have more complexities; but everyone needs to have a plan in place to ensure a smooth transition in the event of illness, mental incapacity or death.

I am fortunate that my colleague, Gary Pulford, has experience with the potential issues that can threaten a plan; he is a wealth of information.  You should consult with an estate planner to address your specific concerns, but here are a few basic elements you should have in place:

  • Planning for right now – It is more likely for you to become impaired than to die; becoming mentally incapacitated is not limited to a long-term illness, like dementia.  Anyone can have an unfortunate accident or suffer a stroke.
    • A durable power of attorney will enable someone to handle financial decision-making responsibilities (check-writing, managing assets, etc.). This form must be on file with each institution and on every account that you want to grant someone control over should you become unable to manage your affairs.
    • A living will enables you to state your wishes regarding medical care or end-of-life decisions and a health care proxy allows you to appoint someone to make health care decisions on your behalf.
  • Beneficiaries on IRAs/Roth IRAs and Retirement Plan Accounts – Assets in these accounts are not governed by the will, so make sure the beneficiaries/contingent beneficiaries are the appropriate people.  Divorces, deaths, and the arrival of children/grandchildren may have occurred since you last reviewed your accounts.  Those inheriting the accounts only need to provide the death certificate, so these assets can transition to the heirs very quickly.
  • TOD on Bank Accounts and Taxable Investment Accounts – TOD or “Transfer on Death” acts much like a beneficiary designation works on a retirement account. It allows assets to move seamlessly to heirs once a death certificate is provided.
  • Last Will and Testament – A will gives instructions on how an estate should be handled when someone passes.  It also appoints guardians (for the care of minor children or impaired adult children); trustees (to manage the money and the disbursements); and an executor (who collects and distributes the assets).  It can be used to distribute non-retirement investment assets (without a TOD in place); and hard assets, such as homes, real estate, vehicles and other personal property.  The will is only valid if it is in compliance with the probate laws of the state.  If you have moved to another state, your will should be reviewed.  Likewise, if your will is not current, you should review it to make sure it accurately reflects your wishes.

Among its free publications, the Financial Awareness Foundation has a free downloadable set of forms to organize and document your financial, personal, and family data.  It has an exhaustive list of items to gather, but do not be put off by this.  Rather, use the parts that are only relevant to you.

For a more basic list, check out a blog I wrote a long time ago when I deemed estate planning as an unpleasant task.

I understand why this is a chore many avoid – I really do.  But I can also say – as the daughter of parents who did the right thing – when you have this in place, it removes some stress off of your loved ones at a time when their hearts are burdened enough.

Let that be your parting gift.

An Unforgettable Journey

April 12, 2018 By admin Leave a Comment

Dadphotos 006My Dad, 1991

We sat on the other side of the doctor’s desk.  My father was wedged between my mother and me, just in case he tried to make a break for it.

It turns out, I was the one who wanted to run.

The doctor started off in a light, conversational tone but my father, even in his confused state knew an interrogation was coming.  He looked to me, a weak nervous smile on his face, and I wanted to stop what was coming next. But we were there for answers – even if I didn’t really want to believe what those answers might be.

“How many children do you have?” The doctor asked.

My father broke into a wide smile; he knew the answer – lucky seven – like the back of his hand.  He even managed to name us all, which in his younger years would sometimes cause him trip over the names, as parents often do.

“Can you name their spouses?”

And with just the second question, everything began to unravel.  My father peered at me nervously, like a kid trying to cheat on a test; my hands started twisting.

I couldn’t run; I couldn’t help him and all that energy coiling in my gut started to knot my fingers. I blinked over and over, to stop any tears from building up.  To avoid eye contact with everyone in that room, I fished a pen out of my pocketbook and scribbled meaningless notes that I didn’t recognize as my own writing.  Occasionally, even blinking didn’t help; a fat tear would splatter the page, in spite of my best efforts.

He had overcome heart attacks and various brushes with cancer.  His mind, though, through all his life, was sharp; frighteningly so. He could spot a problem, mistruth or danger and stop it dead in its tracks.  Now his mind was just a trap door that kept opening and swallowing up precious memories.

“Technically, Alzheimer’s disease can only be diagnosed at autopsy,” the doctor said.

I didn’t need my father to die as proof of what was apparent; this disease was erasing bits of him in front of our eyes. I wondered how long his essence would last and how long we would grieve his loss before he actually did leave us for good.

Years after my father passed away, Tony and I stood in front of a group of family member/caregivers at an Alzheimer’s Association-sponsored seminar.  There were several presenters sharing their various areas of expertise – an elder care attorney, a visiting nurse, and a director of a facility for the memory-impaired.  Though we all had unique insights to give the attendees, the best perspectives we had to offer were that each and every one of us had had a front-row seat as the disease consumed a loved one.

We were there to talk about what my father’s illness taught us and what they needed to consider, such as:

  • How medical costs for someone with this disease would increase faster than inflation and the costs could last a long time – the average lifespan after diagnosis is eight to 10 years;
  • How to make sure assets were divided into short-term needs (five years of cash) with other assets invested to provide some future growth to tackle the rising costs of care;
  • Why a durable power of attorney was only useful if it was placed on every bank and investment account;
  • Why eliminating any high investment fees would make more money available for caregiving; and
  • Why locking the money up in complex investments and insurance policies could be a dangerous idea.

His illness led us to the most important work we have ever done.  Ultimately it resulted in a complete change in our respective career paths to financial advisors; it was the reason we were able to stand in front of that group and truly empathize.

The Centers for Disease Control and Prevention names Alzheimer’s disease and other dementias as the sixth leading cause of death in the U.S. (2014); the only major causes of death on the increase.  Of the 46 million Americans 65 years of age and older, an estimated 5.3 million suffer specifically from Alzheimer’s disease.  This is a far-reaching swipe that many will deal with directly (as a patient) or as a concerned family member.

Expect to hear more from me – and the financial services industry – about the challenges this presents and the importance of planning.

There was a time that I wished we didn’t understand this situation, but we do; we can’t un-walk that walk.

Now I see it for what it is — an unforgettable journey we were forced to take that just might help someone navigate that heartbreaking and treacherous terrain.

Shoot the Inner, Sitting Duck

November 19, 2017 By admin Leave a Comment

 

My last post, “Nailing Financial Predators,”  may have left some feeling like an easy mark.  But what if we could take our six natural human responses to persuasion and make them work in our favor?  Well, we can.  Here are some ideas on how to proactively take charge and shoot that inner, sitting duck:

1. Authority – If we respond to the perception that someone has expertise or power over us, it’s best to make sure that that reverence is actually warranted before heeding their advice.  Seek out respected authorities on investing, such as Warren Buffett; who keeps his advice simple:

“When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients. Both large and small investors should stick with low-cost index funds.”

2. Reciprocity – When someone does a kindness (even with ulterior motives), we are tempted to do something kind in return.  What if the good starts with us?  Seek out a helpful resource, such as Vanguard’s tips for becoming financially responsible and pass it on.  Doesn’t that feel good?

3. Liking – We want to do business with people we like — there is no crime in that.  Just make sure that they can: give objective advice, keep costs low, provide a plan that is thoughtfully personalized, explain everything  – including fees, and not press for an immediate commitment.  If they can make good on that, there truly is a lot to like about this arrangement.

4. Scarcity – Salespeople love to create a sense of urgency so we will be manipulated into prematurely pulling the trigger.  What if we were to make attaining our goals the urgency — and the scarcity is time?  Every day we fail to plan is one more day we lose.  Stop procrastinating, make a plan and get at it already.  The meter is running.  Tools, such as Vanguard’s When Can I Retire? can be a great way to assess the current situation and start the process of goal-setting.

5. Social Proof – Because we tend to look to others to help us make decisions, this can get tricky if we turn to the wrong person.  Luckily, facts have no feelings, nor do they lie.  The Financial Industry Regulatory Authority (FINRA) has helpful resources to protect investors.  BrokerCheck is a great tool to investigate the background of a financial professional and a firm.  Make sure to look at the firm, as well. Why do business with a company that engages in questionable behavior?  Also on FINRA’s site are the very useful Fund Analyzer and 529 College Savings Plan Expense Analyzer, which allow investors to examine the costs associated with different investment options.  Remember Warren Buffett’s advice — keep costs low!  For teachers, understanding the fees associated with their 403(b) plans can be like solving an open-ended riddle.  Two great resources to help cut through the fog of ambiguity are 403bcompare and 403bwise.

6. Commitment and Consistency – Once we commit to something, it makes it uncomfortable to turn back on our word.  Instead of committing to someone else’s agenda, what if we commit to ourselves, our goals, and the financial well-being of our families?  When these become the motivation for our efforts — when we fear disappointing ourselves more than others — we can move in the right direction.  Systematically investing every paycheck, treating investing as a bill that must be paid every single month,  and increasing the amount every year — this consistency will turn commitment into meaningful action.

These six natural responses can be our best friend or worst enemy.  The decision is ours as to whether to sit like a duck and let others take aim, or make our efforts reflect the goals we aim for.  It seems like a pretty easy choice, doesn’t it?

 

Next Page »

Dina Isola

Since 2002, Dina Isola has worked closely with investors, hearing their concerns. Drawing on her experiences and challenges, Real$martica was born, which focuses on making personal finance issues relatable to women, children and families and educating investors to make informed decisions. A contributor to A Teachable Moment, she is a client relations specialist at Ritholtz Wealth Management. She also serves on Stony Brook Children’s Hospital Task Force.

Recent Articles

  • Your Creative Solution
  • Relentless Optimism
  • Calling All Ladies
  • Resolve to Beat the Odds
  • From Disinterested to Fully Engaged
  • Introducing On Her Mind Podcast
  • How an English Major Became an Advisor
  • The Kids Will Be Alright
  • Planning for the “Big” Day
  • Simple Does It

In the news..

Mortgage Stories
Bankrate.com
Retirement Stories
Bankrate.com
Read current mortgage rates and home loan stories.
Read the latest retirement planning topics and trends.

RSS College Tuition News

  • KitchenAid’s Key Ingredient: Investing in Workers. ‘It’s Not a Dead-End Job Anymore.’ - The Wall Street Journal
  • Utah House passes bill that would cover college tuition and fees for needy Utah students - KSL.com
  • Bill offering DACA recipients lower college tuition passes Arizona Senate - KTAR.com

RSS Personal Budget News

  • Should You Use a Personal Loan to Fund Your Business? - U.S News & World Report Money
  • Mayor reprimands councillors for 'appalling behaviour' as budget is passed - Grimsby Live
  • What to do if you can't pay your credit card bill on time - NBC News

© Copyright 2016 Real$martica · All Rights Reserved · Powered by WordPress ·