Make the Right "BIG" Decisions (pt. 1 of 5)

By Olivia Sandham

 

Earlier this week, an email circulated through our office with this article.  It is typical for us to share work-relevant articles every so often, but what was NOT typical was that for the next several minutes, everyone in the office emailed their thoughts and responses to the article.  The most memorable quote one of our advisors pulled from the article was:

“Make the right BIG decisions, and the small ones won’t mean so much.”  We even jokingly (okay, maybe seriously) considered ordering coffee mugs with this quote.

This article and our comments got me thinking (and researching) about the “small decisions” we make when attempting to better our financial position.  Several decisions could include:

• Cut back on expensive coffee (the premise of the article)
• Cut back on monthly subscriptions
• Use homemade shampoo, laundry detergent, cleaners, etc.
• Use coupons
• Use a fan instead of air conditioning, or more clothes/blankets instead of heat
• Buy generic brands at the grocery store
• Buy from second-hand or thrift stores
• Eat out less
• Drive less

Somewhere along the lines of researching small financial changes (and maybe because it was lunch time), I ran into articles about making small diet and exercise changes to improve lifestyle.  This got me thinking, does the same quote apply?  So, I put together a list of “small decisions” we make when attempting to better our diet and exercise:

• Use a food journal
• Cut back on alcohol, sweets, fat, and carbs
• Eat out less (repeat item!)
• Walk/bike more (aka drive less - repeat item!)

Does anyone notice a trend with most of these ideas, besides the fact that they are “small” changes?  When I read this list, all I see is the word SACRIFICE.  I can’t speak for everyone, but when it comes to making any decisions that are going to stick for the long-haul, I need to be motivated and I need to feel like the change is worthwhile.  But cutting back on the small joys in my life is not motivating, and putting in a lot of extra time and effort for a small result is not a worthwhile change to me.  Here’s what comes to mind for me when I look at these ideas:

• Cut back on expensive coffee:  The couple of extra bucks for expensive coffee might be worth it.  A smooth and flavorful coffee is either a morning ritual to get your day started (as necessary to waking up as showering in the morning), or as is the case for me, it is an occasional indulgence because I don’t drink coffee that often, so it better taste really good when I do.
• Cut back on monthly subscriptions:  There seems to be no better deal than movies or TV shows on demand in my living room (or on-the-go smart devices) for a monthly price of what it would cost for me to go out to or rent a movie only ONE TIME.  And don’t get me started on movie theater snack prices versus snacks at home!
• Use homemade shampoo, laundry detergent, cleaners, etc.:  Anything DIY (do-it-yourself) almost 99% of the time ends up being a BWTM (big-waste-of-time-and-money) because I make a big mess and don’t use half of it anyway because it never works as well as the real stuff.
• Use coupons:  I am already panicking just thinking about how much extra time I would have to spend finding, cutting, organizing, and remembering to actually use coupons.
• Use a fan instead of air conditioning, or more clothes/blankets instead of heat:  My house is a place of solace, and the temperature being (as the nursery rhyme says) “not too hot and not too cold, but just right” is an extremely important part of that.
• Buy generic brands at the grocery store:  Most generic brands just aren't the same - they don't taste right, they don't smell right, they don't feel right!
• Buy from second-hand or thrift stores:  Second-hand and thrift stores are okay for certain purchases (I have found some neat furniture and gifts), but there is something that just irks me about buying some items like clothes and children’s toys that have been used before by someone I don’t know.
• Use a food journal: I feel anxiety just thinking about how much effort it takes to measure and write down every little thing that goes into my mouth.
• Cut back on alcohol, sweets, fat, and carbs:  I don't know what happens, but if I am trying to eat less of something, I suddenly feel deprived and as if it is the only thing I want to consume, and then I feel guilty for wanting what I am not supposed to have, and it's just a big awful cycle that always seems to backfire.
• Eat out less:  Eating out is already a once-in-a-while affair, and usually involves an event or celebration of some sort.  This would just be taking away all my fun!
• Drive less OR walk/bike more:  If I didn’t drive as much, I would either stay at home all the time or I would have to bike/walk, and I have no desire to arrive to work or other engagements either freezing with icicles of snot running down my face, or sweating profusely out of every pore.  Plus, imagine how much earlier I would have to leave...

Okay, so you might be thinking that my inner child ("But I want that!") and my inner laziness ("But I don't wanna!") is definiting sneaking out between the lines.  But isn't that just what happens with any decision?  If we make decisions that dissatisfy our inner needs on a regular basis, how can we expect to succeed at these changes?  As you can see, it’s pretty obvious for me that the “small” changes listed above (sacrifices!), no matter how many times I try, probably aren’t going to stick.  So what kind of decisions would?  As the quote says, “Make the right BIG decisions.”   Here is a list of a few financial “BIG”s that might be better to think about:

• Automate payments
• Renegotiate rates
• Earn more money

And now a list of the lifestyle “BIG”s that might stick better:

• Plan and prepare ahead
• Completely remove and replace “bad” food items
• Focus on getting MORE

The “BIG” financial decisions can be exciting when accomplished and can take very little time and work, sometimes just a few minutes online or over the phone.  And the lifestyle “BIG”s can be fun and effortless, too.  What's great about these decisions is you only have to find the nerve once in a while to implement these changes, and the best part, they could actually SATISFY your inner needs instead of making them feel like sacrifices!

Read our blog for next week as we dive into the tips and tricks on how you could accomplish each of these “BIG” decisions!

Build Weath and Discover Financial Freedom

FinancialMentor.com

 

1) Spend Less: Align your values and goals, and track your spending so you can focus on being accountable and staying disciplined.  Consider eliminating wasteful expenditures, repairing instead of replacing, and selling unused items.  Also, avoid using credit cards for bills or to extend purchasing power.

 

2) Earn More: Increase your working value by personal and professional development through education and training.  Seek higher paying jobs or additional income through part-time or freelance work. Consider turning your hobby into an income stream or even starting a side business.

 

3) Invest Wisely: Connect with a credible and knowledgeable investment advisory firm to wisely invest your funds.  Re-evaluate your investments every so often to make sure you are on track.

 

4) Financial Freedom: Enjoy living the life you want and deserve!

Creative Strategies to Collect More Social Security Income (Part 1 of 2)

By Olivia Sandham

 

As mentioned in last week's post, this week we would like to start discussing “Creative Strategies to Collect More Social Security Income”.  Lucky for us, one of our Family Investment Center advisors, Mrs. Elaine Coder, is our designated Social Security Specialist.  I recently worked on an educational presentation with Elaine, and through that experience I gained a lot of insight into how just about anyone, in just about any situation, can use these strategies to incorporate Social Security as a key factor in their retirement plan.

 

Before jumping into Part 1 of 2 of our discussion about the main strategies to collect more Social Security (SS), let’s cover a few terms that we will be using throughout these posts:

 

Full Retirement Age (FRA):  The age at which a person may first become entitled to full or unreduced SS benefits.  Click here to find your FRA.

 

Primary Insurance Amount (PIA):  The benefit amount a person would receive if he/she elects to begin receiving SS benefits at his/her normal retirement age.  At this age, the SS benefit is neither reduced for early retirement, nor increased for delayed retirement.  Once claimed, this PIA is what you will receive for your lifetime.

 

Life Expectancy (LE):  The average period of time that a person can expect to live.  Click here to calculate your estimated LE.

 

Now that we know the terms we are going to use, let’s get started discussing the first couple of “Creative Strategies to Collect More Social Security Income”:

 

1) Wait as long as possible to claim SS benefits:  There are many advantages to waiting to claim SS benefits. First, by the taking time to research and meet with a Social Security Specialist, you ensure that you have covered all strategies and that you will be applying for the maximum PIA when it is time to claim.  Second and third, by waiting to claim until you are past your FRA, your PIA will not be penalized for claiming early, and you will earn delayed retirement credits, which increases your PIA.  Finally, since your PIA is adjusted based for inflation, each year you wait to claim can increase your PIA even more.

 

2) Claim SS benefits correctly the first time:  Once you apply for your SS benefits, you only have 12 months to withdraw your application, and you are limited to one withdrawal per lifetime.  There are several other “hoops” to jump through if you withdraw, including paying back the benefits you and your spouse/children received, as well as having anyone who received any of the benefits consent in writing to the withdrawal.  Also, if you miss the 12-month window to withdraw or adjust your claim, you can no longer make any changes and the PIA you claim is the PIA you will receive for the rest of your life.  So, if after applying and claiming your SS benefits, you find out that you missed a step or didn’t capitalize on a claiming strategy, there is nothing else to be done. Claiming correctly the very first time avoids all of these concerns.

 

Next week we will discuss strategies including the living spousal and survivor benefit incomes, as well as how you can combine strategies to be able to compute your overall optimal benefit.  Make sure to stay tuned!

 

This post is for information purposes only.  It is not intended for use in determining when or how to claim Social Security benefits, as benefits and strategies vary based on individual circumstances.  Our firm is not affiliated with the Social Security Administration.  For more information or for help determining a specific strategy for your own situation, please contact our office at (816) 233-4100, or contact the Social Security Administration directly by visiting www.ssa.gov.

Inexpensive and Thoughtful Valentine’s Gifts For Your Sweetheart

If you’re like most couples, you’re watching your pennies this year and looking for ways to romance your sweetheart on Valentine’s Day without breaking the bank. This list, chosen from a list of 50 ideas from www.smartmarriages.com, will help:

 

# In the morning, tuck a love note in his pocket or her pocketbook or other certain-to-be-found spot. Jot down some meaningful words on a piece of paper – “Can’t wait to wrap my arms around you tonight!”; “What’s for ‘dessert’?”; “You make me happy every day!” – and tuck it in a conspicuous location to be easily discovered during the day.

 

# Pick a few household chores your Valentine usually does and surprise them by doing it before they get a chance, i.e., making the bed. It doesn’t sound romantic, but the thought will most certainly count.

 

# Create a year-long calendar with photos of just the two of you above (top page) each month. Office supply stores will insert the spiral/binding for you.

 

# Leave a note on your mate’s pillow expressing how special you think he/she is. Place a couple of mints on the pillow, too (or a single rose)…all to be discovered at bedtime.

 

# Create an indoor picnic with available props, i.e., picnic tablecloth, paper goods. Share finger foods and favorite treats along with a glass of wine. Spice up “dessert.” Enjoy your picnic on the living room floor or in bed. Play card games, board games, or make up your own.

 

# Decorate a unique-looking jar or box with craft items. Write numerous love notes on small pieces of paper and fill the jar with them. Present the jar to your sweetheart.

 

# Write “I love you because….” notes and insert them into balloons. Blow up the balloons, and spread the balloons throughout your bedroom for your Valentine to pop and capture each message.

 

# Write a “Top 10 Reasons Why I Love You” list.

 

# Present your Valentine IOU coupons: I will make dinner; I will do the laundry; I will take care of the kids one day a month for the next year; I will clean the kitchen for a week; I will serve you breakfast in bed.

 

# When you make that special dinner…Just like when you go to a fancy event and a “dinner menu” is put on each plate describing each food item, do something similar. For example, on your menu, write “Spaghetti & Meatballs, made with passion to be with YOU.” Don’t forget to give your “event” or “restaurant” a name at the top of the menu.

 

# If you don’t have a special sweetheart, focus on bringing a smile or laughter to everyone you come in contact with on Valentine’s Day.

 

See the full list of ideas for inexpensive gifts from www.smartmarriages.com by clicking here.

Could Your Tax Refund Be Costing You Money?

Time Business & Money posted an interesting article earlier this week titled “This Simple Tax Error Is Costing You $2,800”.  The article covers the relevant topic of tax refunds and discusses how having a large tax refund could actually be detrimental.  Read below to review key points of the article, or click here to read the article in its entirety.

Did you know?  Over 68% of Americans prefer to pay more taxes than they owe so they can receive a larger tax refund.

The average tax refund for 2012 was $2,803, which means an overpayment in taxes by about $54 per week per individual.

It seems many people use overpaying into their taxes as a sort of “forced-savings plan”.  Over 2/3 of those who receive a tax refund choose to either save/invest it, or they use it to pay off their debts, rather than simply spending the money.

Unfortunately, nearly 50% of people who pay the correct amount in taxes throughout the year, and thus have more take-home pay, actually end up spending the extra money rather than saving or investing it.

So what is the recommendation?  Pay the correct amount of taxes throughout the year and set up an automatic monthly withdrawal for the additional money.  The funds can either be transferred into a savings account or it can be used to pay down debt.

In a savings account, the money will earn interest, whereas sitting in Uncle Sam's pocket until tax-time earns you nothing.  Also, these funds will be accessible if needed for big expenses or an emergency situation, which will also help to avoid increasing debt (with high interest) to pay for these occurences.

Another option is to transfer the funds to pay down debts, and thus lower interest charges.  This maneuver could actually add up to an average savings of almost $200 a year, which can make a huge difference over time.

HOW TO: Save Money and Pay Off Debt

By Olivia Sandham

Although the two don’t seem to logically go hand-in-hand, saving money while also paying off debts is certainly possible.  With a few simple adjustments to your lifestyle and budget, you can create a comfortable and debt-free future.

 

The first step to saving while paying off debt could be to create a household budget that trims unnecessary expenses.  This budget will only be feasible if it allows for some discretionary spending to avoid feeling trapped or “broke”.  Examples of areas that could easily be trimmed without too much lifestyle shock include eating out one less night a week, consuming one or two less high-priced beverages (such as cutting back on a latte or cocktail), and switching groceries to generic brands.  Think about how much you could save each week by making these changes, then multiply that by 4-5 times per month!  These small changes can certainly impact the amount of additional money you will have to put toward paying off debts and increasing your savings.

 

The second step to saving while paying off debt is to consider designing a debt payoff strategy that best suits your needs.  Paying off debts utilizing the “snowball” effect is a popular method of paying your debts in a specific order.  You could choose to either 1) Pay off the smallest balance first, which can be motivating in a short period of time because you see the number of debts you owe drop, or 2) Pay off the highest interest rate first, which makes the most sense from a pure financial approach, since you will keep more of your money in the long-term.  Choosing the best debt payoff strategy will be a personal choice so that you find a strategy that you will want to maintain over the long-run.

 

The last step to saving while paying off debts is to build your emergency fund and future investments.  Once you have designed a trimmed budget and chosen your debt strategy, you can plan to have additional money placed into an easy-to-access emergency savings account.  Although this account will not produce much (if any) interest, there will be no penalty for taking the money out should you absolutely need it.  However, once you are able to build your savings to a sufficient amount (three to six months of expenses is typically recommended), you can then start to invest part of your monthly additional money into accounts that will produce higher return rates, such as an investment account or an IRA holding diversified mutual funds.

Make Getting into Financial Shape Your New Year's Resolution

By Olivia Maragna

 

One of the most popular New Year's resolutions is to get into shape with an exercise program.  So, why not also apply this to your financial health?  We found these six steps to be motivational toward getting your financial fitness looking better than ever in 2014.  Click here to read the full blog posted on brisbanetimes.com.au

1.  Follow a program - Set yourself a budget and stick to it.

2.  Trimming down - Minimize your debts.

3.  Bulking up - Contribute into retirement funds.

4.  Cross training - Invest in multiple types of retirement accounts.

5.  Injury prevention - Adequately insure yourself.

6.  Endurance training - Prepare your estate to ensure your loved ones are taken care of in the future.

Superfunding a 529 College Savings Plan

According to a Reuters article shared by CNBC.com earlier this week "Should You Superfund Your 529 College Savings Plan?", college costs have reached an average of $40,917 a year for a private four-year college and $18,391 for a state school, as researched by the College Board.  These high numbers along with ever-increasing tax rates have affluent families and wealthy grandparents considering strategically "superfunding" a 529 college savings plan as a way to aggressively cover college costs while also saving on taxes.

If you are interested in finding out about the benefits of contributing to a 529 plan, click here to read the full article.

Retirement Plan Gone Awry: What Do I Do Now?

By Olivia Sandham 

Type the word “retirement” into any search engine and you’ll be directed toward hundreds of web pages, articles, and videos presenting advice on how to save and invest for your retirement.  But what if you’ve already been retired for several years, you are already collecting Social Security, and after taking a closer look, you begin to realize that you will soon be outliving your retirement fund?  You may have planned ahead by saving and investing for decades pre-retirement, but somehow it simply hasn’t been enough to cover your expenses post-retirement.  Although this can be an overwhelming realization, there are several options available, many of which do not require financial expertise.  With a little motivation and “Thinking Outside the Box”, you can remain financially secure throughout retirement.

Option 1:  Re-enter the workforce.  Although you may not be as energetic as you once were, consider finding simple work for modest pay.  Think Outside the Box:  This job does not have to be a traditional position.  For example, parents are happy to pay for a reliable person to watch their children, and grown children are happy to pay for a reliable person to help tend to aging parents.  If you work in a more traditional position, you might be entitled to free services or discounts which could work in your favor during retirement as well.

Option 2:  Offer your knowledge or skills.  After decades of working you most likely picked up a few tips and tricks along the way, which someone may be seeking.  Advertise with your local newspaper offering your services as an informal mentor or advisor in fields in which you have some expertise.  Think Outside the Box:  If you don’t have money to spend on a newspaper ad, ask your local shopping markets and retailers if you can post a sign or flyer for free.  And of course, spread the word with your family and friends.

Option 3:  Prioritize your spending.  It’s easier to stay financially viable during retirement if you are paying attention to your expenses.  Look for deals on needed items, lessen finances spent on clothing, entertainment, and travel, and watch out for spending too much on loved ones.  Think Outside the Box:  Some not-so obvious changes in spending patterns that can make a difference during retirement.  These include using liquid forms of payment (cash, check, debit card) rather than racking up interest bills on credit cards, buying generic rather than name brands, and doing any necessary shopping at church/charity stores.  Any of these adjustments can certainly add up in your favor over time.

Option 4:  Turn your assets into cash.  You may own a home, car, valuables, or life insurance policies which could be converted into liquid assets.  Think Outside the Box:  Converting to liquid assets doesn’t always mean the asset has to be sold.  A reverse mortgage may allow you to withdraw equity from your home without having to move.  Also, consider the possibility of renting out a room in your house, or even consider renting your entire house and living with friends or relatives, or in a modest apartment.

Option 5:  Re-invest and re-grow your nest egg.  Once you follow the previous suggestions, you might start to find extra finances available.  Rather than spending or only saving these funds, stay on track with what you have been doing and look into ways to reinvest your small amounts of income.  Just because you are retired does not mean you can’t continue to grow your nest egg.  Think Outside the Box:  Traditional thinking says the older we are, the less risky our investments should be.  However, since you do not have as big of a nest egg as you did years ago, investing with a little more risk tolerance might create more growth.

Option 6:  Get by with a little help from your friends.  It can be tough to ask people for help, since most of us like to feel independent, and having to explain that we fear outliving our savings can seem embarrassing.  However, it is very likely that you have a lot of people in your life that would be happy to help, even for a short period of time.  They can be friends or family.  This is not the time to be stubborn with pride; rather this is the time to be smart and reach out to others.  Think Outside the Box:  Look into retirement resources and services available within your community, such as services provided at your local church or within a nearby retirement community.

Option 7:  Get in touch with an expert.  Expert financial advisors might take a peek into your assets, liabilities, income, and expenses and give you a better picture of what changes you need to make.  Experts may also be able to help you make adjustments in your investments or assets which you may not have otherwise been aware were options for you.  Think Outside the Box:  If you don’t have the funds to seek ongoing expert advice, at the very least try to find a non-profit firm or government agency who would be willing to offer a short analysis for free.  It doesn’t hurt to make a phone call and ask.  And as always, make sure to utilize your network of friends and family to see if they know anyone who might be willing to help.  Good luck!