4 Life Lessons I Wish I’d Learned 30 Years Ago

July 14, 2017

The other day I started thinking, “If I could travel back in time, what advice would 55 year-old me give to 25 year-old me?” The list grew and I started to get depressed, so I decided to limit it to two things financial and two things non financial in hopes that you might find some life wisdom in here as well.

Here are the conversations I imagine I’d have with my younger, cockier, less experienced (but oh my, much thinner…) self:

Non financial life stuff

Keep in touch with people who are important to you. In about 20 years your daughter will ask you and your wife (whom you haven’t met yet), “Were all your friends in college so nice?” The answer is no, you just got rid of the ones that weren’t good for you throughout the years. There will also be some that you regret not keeping in touch with. (There is this thing coming called Facebook which will make this easier.) The bottom line — it’s worth it to keep in touch with the people who are important to you, as they will make life better throughout the years.
Focus on things that you do well and find ways to compensate for things that you don’t do as well. I would tell Young Steve that spelling will always be a challenge for you, but there is this thing coming called spell check that will help, so don’t waste too much time memorizing words. (Although 2017 spell check still cannot figure out what word I am trying to sspaejkll on occasion.) You will be driven to overcome things you are not very good at and pay less attention to what you are good at, but this is a folly — it should be the opposite. I learned this from a book called “Strengths Finder,” which was published in 2007, and showed me I’d wasted a lot of energy over 20 years trying to “fix” myself rather than focusing on what I already did well. Figure out what your strengths are, what you are really good at and focus your time and energy on improving those. Worry less about your short-comings. (And if possible, write that book yourself in ’05 so you can retire early on the revenues from it!)

Financial life stuff

Figure out a spending plan. I know you hate the word budget – it sounds like diet and they both tell you something you cannot do and you hate that. So here is the trick you play on yourself: it’s not a budget, it’s a “spending plan,” where you plan what you want to spend your money on. And you need one ASAP. Rather than beating yourself up for what you wasted your last paycheck on, it is time to think about what you want to spend your next paycheck on. It doesn’t mean you can’t spend money, it means you will be spending money on what is most important to you. For instance, if you want to take that nice sailing trip with your friends next summer ($1,500), that means taking your lunch to work 3 days a week ($10*3*50 weeks =$1,500). 2017 tools that can help do this include Mint.com, everydollar.com, Easy Spending Plan, your bank’s system or any another system/tool/app available. The particular system doesn’t matter; what matters is that you have a way to make sure you are spending your money on what is important to you and that your system gets you and is easy to use.
Set aside 30 minutes a week to think about your finances to make sure you focus your time and money on what is important to you. Right now, your thought process is what is politely described as “inspirational” (also known as scatter brained), but when you find something you like you really dig into it (also known as OCD). If at 25, not married, no kids you cannot find time to take care of your money, you never will find time to do this. Make the time now. Turns out that you are a morning person, the latest you wake up is 6:30 (you used to think Dad was weird when he did the same thing) and that is when your energy is highest, so do it then. Set an appointment every Sunday morning from 7:00 to 7:30 to go over your finances. Look at what you are spending your money on and make sure it matches your spending plan. Make adjustments as necessary. Review your investments to make sure you are taking an appropriate amount of risk. The bottom line — focus your time and money on what is important to you.

Then I thought, “What do I think 85 year-old Steve will want to tell 55 year-old Steve?” Guess what – at this point, I think it would be the same thing. Only time will tell!

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This Easy Budget Hack Could Save You Hundreds Each Month

May 31, 2017

If you’ve ever taken the time to categorize your monthly spending, chances are you had a similar reaction that I did when I realized how much we spend on food each month – disbelief with a side of regret, anyone? It’s just the hubs and I for now, and we are pretty good about eating in, at least compared to a lot of our DINK (dual income, no kids) friends, so I’m always shocked when our grocery spending sometimes tops what I’d expect a family of four to spend.

Food is expensive…

The fact is, food is expensive and who wants to walk around the grocery store with a calculator? There are ways to counteract that by planning your menu around the grocery store sales, buying in bulk, etc., but sometimes life is just too busy, I know. So here’s an easy hack that I learned from my friends Jill and Andy:

The hack…

One week per month, skip the grocery store and instead eat what’s already on hand. Then take the money you don’t spend on groceries and transfer it to your savings account or use it to boost the payment on a high interest rate credit card. The only number you need to know is what you spend each week, on average.

The long-term effect…

This hack alone could boost your retirement savings by over $250,000 if you stick with it over the years or literally shave years off your debt payments if you use it to get out of credit card debt sooner. Plug your info into the Debt Blaster calculator to see the difference.

Get creative in the kitchen…

That’s it! No coupon clipping needed. It may require a little bit of creativity in the kitchen, but I always find it’s easier than it seems – digging out those jars of interesting sauces I impulse buy at Trader Joe’s or finally using that extra cooked orzo I froze feels so good and budget friendly. You can also use Supercook, a website that let’s you input ingredients you have hand, then suggests different recipes. Plus, it helps to clear your pantry, fridge and freezer of food that may otherwise end up in the trash – a double financial bonus!

Don’t Lose Your Voice When It Comes to Your Finances

March 14, 2017

My husband loves cars. No, I mean he really, really, really loves cars. Whenever he is driving, our conversations will quickly go from what we are going to eat for lunch to the engine power on the vehicle next to him – often in the same sentence.

I thought I was all alone, until my colleague, Vekevia, shared with me that her husband loves cars too. As we started talking, I wanted to share her wisdom on how to keep the peace in a household with very different interests, especially when one person manages the household finances. Below are her thoughts:

Some couples manage money together and other couples have one person who primarily manages the money. Usually, in cases where one spouse manages the finances for the family, that individual is more financially savvy or may just be better at handling that responsibility. That makes sense.

It becomes an issue when either spouse, most likely the one not handling the finances, feels like their financial goals or desires are overlooked or not taken as seriously as the other spouse’s financial goals or desires. This is especially true when you just do not see eye to eye on the value of what either spouse holds dear. I handle the finances in our family and have had to learn to work with my husband so that we both feel heard.

My husband is an avid car lover and I don’t just mean that he enjoys seeing nice cars. No, his passion extends far beyond that. He is fascinated over how a car is designed and built. He cares about the horsepower and enjoys seeing how it performs.

Every year, we go to a well-known racetrack in our area to see other car enthusiasts show off what they’ve built and race each other. As you might suspect, this is not cheap. On average, the cost to build a car like what you would see at this type of event can sit close to six figures and annual maintenance after racing can fall in the five-figure range. Guess what? He wants to build one.

Initially, this was a problem for me because I do not value cars the way he does. I just like when a car is visually appealing, dependable.…and INEXPENSIVE! The good news is that we are compromising and he plans to build a much less expensive car, but the financial planner in me wants to scream. Cars are depreciating assets that lose value rapidly over time.

However, my husband’s passion for cars, as expensive as it may be, holds a value that I can’t technically plug into my calculator and put down on paper. It would mean a lot to him for his dream to become a reality at some point this lifetime. I value him and his happiness. Life is short and you only live once.

Being financially healthy doesn’t mean denying yourself the things you’re passionate about just because of cost. It’s about fitting your passions into your budget. Sometimes, you may have to find ways to make more money or decrease your expenses. We’ve chosen to fit building a car into our budget, not at the sacrifice of keeping a roof over our head, saving for our son’s college, or being able to retire, but it’s important, so it’s there.

Are you in a similar situation with your spouse? Here are some tips to show your spouse he/she has a voice in your finances:

Have an open conversation about your financial passions or dreams.
Decide what you value most. (You may have to choose 1 or 2 passions each this go around and take on the others in your next lifetime.)
Calculate how much you need to save for other financial priorities like retirement and funding your kid’s education.
Estimate the cost of making it all a reality.
Determine if your current income can carry the cost.
Seek opportunities to increase your income. That might mean pursuing a degree to make a career change, going for a higher paying position, or taking on a second job for extra income.

Realize that the cost of something is important, but so is the way your partner feels when you are willing to acknowledge and support his/her interests. You both should have a voice in your finances and work together to set up a feasible plan to make your dreams become a reality.

How to Save Money on Your Next Auto Loan

February 28, 2017

My first car was what we call in the south a “hooptie.” I paid about $1,500 dollars for it. The car was a multiple array of rust-created colors and the air conditioning did not work, which was a joy during the hot southern summer. As a new car owner, there were a lot of car rules I ignored, such as regular car maintenance. As a result, I soon found myself on the side of a road with a locked engine due to no oil.

This made me rethink my ideas on car maintenance, but it also put me in a position where I needed a new car. With no experience or common sense, I walked into a nearby dealer, told him the payment that made the most sense to me and trusted him to find the car that matched my payment. To his credit, he stuck to my budget and helped me find a halfway decent car. The payments were in my budget and I was happy so I drove off and did not think anything of it.

Recently, I found the auto loan paperwork from that car and almost choked when I read the document. Had I known what to look for and asked when I was getting the auto loan, I could had saved myself thousands of dollars. If you are shopping for an auto loan consider doing the following.

1. Establish rules around how much of a car you can actually afford. Although I considered the payment, I did not take the actual cost of repairs under consideration. A great rule of thumb to use when budgeting for a car is the 20/4/10. This rules involves putting at least 20% down towards a car loan, financing a vehicle for no more than 4 years and keeping your total monthly vehicle expenses to less than 10% of your gross monthly income. (Monthly expenses includes insurance and gas.)

2. Pull up your credit report using websites like Annual Credit Report.com or use websites like Credit Karma or CreditSesame.com to gauge your credit score. The last thing you need is a surprise on your credit report as you talk to your potential auto lender.

3. Research your auto loan options through banks, credit unions and non-bank auto finance companies to find the best option for you. Consider getting pre-approval and using the CFPB’s Auto Loan Shopping Worksheet to compare your loans. Going into a dealership with a pre-approved loan gives you bargaining power.

4. Understand what’s in your auto loan contract. Find out if there is a pre-payment penalty if you pay off your loan early. Fees such as processing fees, dealer preparation fees and delivery charges may be negotiable. Even your interest rate may be negotiable. It never hurts to ask.

As you shop for a loan, consider printing the CPFB’s Auto Loan Shopping Worksheet and using it as a guide to shopping for loans. Also, read your contract carefully and constantly ask for discounts. Doing these few things can help you save potentially thousands on your auto loan.

Why Is Your Budget Failing?

February 21, 2017

Why is my budget failing? My friend asked me this question a few days ago. She has been trying to budget for the last few years and just can’t seem to stay on track. I told her that I have found that there are some common reasons why budgets fail and if she addressed the following common reasons why budgets fail, she can become a successful budgeter:

1. Budget categories bursting at the seams. Years ago, I worked with a woman who was diligent about creating and tracking a budget but struggled to handle emergencies. When I looked at her expenses, I saw that over 50% of her spending was her mortgage and 30% was a car payment. There was no wiggle room to handle emergencies. Luckily, she was able to get a roommate and downsize her car. Consider reviewing articles like this one as a starting point as to how much to spend in each budget category.

2. Not sticking to your budget. A budget only works if you actually follow it. I always tell people that there are two parts to a budget. One is forecasting what your spending needs are for the month and the other is tracking. If you are not doing both then it will be hard to stick your budget.

3. Using the wrong budgeting system. Using the wrong budgeting can make budgeting feel like a dreaded chore. If you hate technology, use a budgeting worksheet and either a notebook to write down expenses or keep receipts in an envelope. If you are comfortable with spreadsheets then use Excel, which can do the math for you. If you want more features then explore the various online budgeting software programs and find out which best matches how you want to budget.

4. Unrealistic Budgets. My friend had a family of seven that wanted to budget $350 a month for food. Considering she had five very tall teenage boys to feed, we decided that her budget was not realistic. If you find that you are constantly going over certain budget categories, consider increasing your budget and maybe using cash for purchases in that category. Also be honest with yourself. If a Mocha latte or a manicure keeps calling your name, just put the expense in your budget.

5. Not changing the budget with life changes. It’s rare that your spending is the same every month. As gas prices, food prices and your utility bills change, so will your budget. Be flexible and adjust your budget to accommodate changes in your expenses.

Now, these aren’t all of the reasons why budgets fail. But if you are struggling with your budget, the list above gives you a good starting point. With a few tweaks, most people can become budgeting gurus in no time!

How to Create a Budget After Divorce

January 10, 2017

It’s probably not going out on a limb to say that just about everyone knows of someone who either got divorced or is getting divorced. Over the years, I have worked with several people getting ready to divorce and I find many are unprepared for what life is like financially afterwards. Going from two incomes to one means an overhaul of your finances and for some, a readjustment of their lifestyle. If you find yourself wondering how to put all of this together after a divorce, consider using the following tips to get you on the right track:

1. Know what money is coming in. Review payments you may be getting or receiving from your divorce and adjust your total income accordingly. Typically, child support does not impact your income tax whereas alimony paid can reduce your income and alimony received counts as income. If you are getting or receiving alimony, you can use the IRS tax withholding calculator to make sure you aren’t paying too little in taxes or giving the IRS a large tax-free loan

2. Know what money is coming out. Create a spending plan to account for how much money you need to have monthly to maintain your lifestyle. Consider ALL of your expenses beyond mortgage/rent, car payments and debts. Typically, the most underestimated and forgotten are auto and home maintenance, groceries and eating out.

If you are not sure where to begin, consider using online tools at your bank to find out how much you have been spending. Most online tools will categorize your spending, so first consider adjusting the categories. Then choose a 30-90 period to see what your average spending looks like.

3. Know what the difference is. Subtract your income from your expenses to gauge if you can afford your current lifestyle. If you have a surplus, review your numbers to make sure they are realistic, you have a category for savings and you have a buffer (10% or greater) to account for unexpected expenses (better known as Murphy’s Law).

Also review how much you are spending in each category. For instance the guidance is for household expenses to take up no more than 25%-35% of your net income and auto expenses (car loan, insurance, gas and maintenance) should be no more than 20% of your take-home pay. If you are spending more in those categories, you may not have the cushion to lessen the blow of an unexpected expense. If you have a deficit, then you may not be able to afford your current lifestyle and expenses may need to be cut. This could mean downsizing to a less expensive home, a less expensive car and in some cases, a less expensive neighborhood.

Divorce is hard enough on its own. You don’t want it to cause too many financial problems as well. Taking the time to review your expenses after a divorce can go a long way into making the transition process easier.

7 Ways to Earn More Money Without Quitting Your Day Job

November 30, 2016

When you hear the word “budget,” what do you think of? Chances are it makes you think of things like sacrificing, cutting back, going without or other restrictive terms that are often associated with budgeting. But a budget is simply a tool to help us achieve our life goals in a more deliberate and successful way. Sure, one way to balance a budget is to cut back, but another way is to increase income. Here are seven ways to do that – several of them that I’ve done myself.

1. Become a Tasker on TaskRabbit. Have you learned how to read the language of IKEA assembly directions or do you get a special thrill from the sound of the vacuum sucking up debris? These are just two of many everyday skills that can be put to flexible and lucrative use via the TaskRabbit app, which connects people who have more money than time to people like you, who have more time than money these days.

2. Babysit. Do you have any idea how much over-worked parents are willing to pay a teenager to watch their kids for a night out? Imagine what they’d pay a fully-employed responsible adult, even for just a few hours on weeknights… easy money!

There are even services like Care, Sittercity and BabysitEase that connect you with families seeking help. I was a sitter for BabysitEase back in my Cincinnati days and it was great! If I had a Saturday night with no plans, I just logged into the website and signed up for whichever family looked like the most fun for me.

3. Take care of cats and dogs. If kids aren’t your thing, consider offering your services as a pet sitter. This is another side gig I held until recently.

I signed up for a local pet sitting franchise that performed a background check on me and then offered me the chance to check in on people’s cats and dogs while they were out of town. I only did the ones I wanted to and they did all the work of collecting the money, providing insurance in case something happened, etc. This was an especially great way to make money when I was in town for the holidays.

4. Teach others your hobby. Are you the person your friends and family turn to with questions about technology, fitness or even just how to properly apply their makeup? Services like Dabble (not to be confused with the dating app) are a great way to teach other people how to do the thing you love while making some extra cash. I have an acquaintance that makes great use of Dabble to teach other crafters how to knit and crochet on weekend afternoons.

5. Sell the products of your hobby. Several years ago, I signed up for a booth at a local craft fair where I sold fingerless hand-warmers that I had knitted myself while binge-watching The OC on DVD. One of my ongoing coaching clients uses Etsy to sell her original paintings in an effort to escape her paycheck-to-paycheck lifestyle without having to leave her beloved apartment. It doesn’t cost anything to set up your store.

6. Blog about your hobby. I have a good friend with a day job who started a food blog several years ago to share recipes and entertaining ideas with friends and family. After building up a decent following on social media, she’s now able to pitch large brands for sponsored posts, which has helped her to pay down several thousand dollars in credit card debt!

7. Charge for your carpool. I’ve met some of the most interesting people while riding around town in rideshare cars via Uber and Lyft. They are authors, nurses, and even office workers who just give one ride each day after work before heading home.

No matter what way you decide to earn some extra cash, make sure you take the extra step and actually apply that cash toward your savings goals. While the money you earn may seem like just a little, it adds up. Make the most of your spare time to help get you where you want to go faster.

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Are You Having Trouble Sticking to Your Budget?

October 18, 2016

I love what I do for a living, but there are definitely some drawbacks. My friends and family will come to me with financial questions but will run from me like I have the plague if they are not following my advice. In fact, a family’s or friend’s communication with me after I give advice is my best indication if they are actually following my guidance. I find the more voice mails I leave, the more likely they are not following my guidance. Such was the case with one of my young cousins.

Samantha is a recent college graduate in her early twenties that recently landed her first job. Immediately, the “I wanna have” disease took over and she quickly found herself barely able to make it from paycheck to paycheck. We sat down and worked on a spending plan based on her lifestyle. As a Starbucks fanatic, I am the last person to deny someone a pumpkin spice latte, but I encourage people to create a budget so you are not “latteing” yourself out of paying off debt, building an emergency fund or saving for retirement. She took my advice…or so I thought.

After not hearing from her for months, which is unusual, I finally got her on the phone and she admitted that she had been avoiding me because she was not following the budget. Once I told her that it was okay, that a failed budget only means re-strategizing, we looked at ways to help her stick to her spending plan. If you are having trouble sticking to a budget, consider doing the following:

1. Consider increasing some of the areas where you continuously overspend. Samantha struggled with eating out. She is young, single and in a new city. Her income allowed for some eating out so she decided to eat out 5 days a week, bring her lunch into work and eat at home twice a week.

She reduced her grocery budget and increased her eating out budget. Since part of the reason for her eating out was loneliness, I suggested having a potluck or pizza/home movie night with friends on one of the days when she eats at home to share the cost and for her to have company. Consider increasing your budget in areas where you constantly overspend. Remember, you have to make up for the overspending by decreasing spending in another area though.

2. Consider using cash for areas where you overspend. If you have areas where the problem is simply a lack of discipline as opposed to a need to increase spending, consider using cash. Some of the popular areas where people overspend are: groceries, clothing (this includes kids), eating out, entertainment, and gifts. If you overspend in any of these areas, consider using cash.

3. Find the method of tracking spending that works best for you. Samantha was tracking her spending with a great budgeting tool that she thought was too much work. She switched to her online banking budgeting tools, which streamlined the budgeting process for her. Her bank offered a robust app so she can stay connected to her budget online.

Consider how you want to access your info. If it is through your smartphone, consider online apps. If you want to not only budget but review investments and tackle debt, review online tools that can help you. If you are not sure where to start, consider doing what Samantha did and start with your bank’s online programs.

Remember to be patient when you start a new budget. There is almost always a need to make adjustments during the first three months. Hang in there and you will be a budgeting guru in no time!

What Our Planners Would Tell Someone Just Starting Their Career

September 02, 2016

Last week, I wrote about conversations I had with some newly hired recent college graduates. That post was about steps I talked about with them in our one-on-one coaching sessions (all good stuff, if I must say so myself…and I must!) After I had written that and before it went live on our blog site, one of our other financial planners sent an email to the planning team to ask what advice they’d give someone starting their career today – a “what would you tell your 22 year old self” kind of email. Here are some of the responses from our planning team along with some of my editorial commentary (in italics):

Create a budget. I despise the word “budget.” I prefer “spending plan.” Figure out how much money is coming in and develop a spending plan that comes in well below the cash inflow.

Create a plan to move up or out of your current position in 3 years to stay relevant and in control of your career and salary. Always improve your skill set and fight for your own career. No one else will do it for you.

Start a side business based on your passion to help accelerate your debt payoff, increase savings and fund other financial goals that your salary might not cover. That side business could turn out to be what becomes your full time pursuit and source of greatest wealth in the long term, but you won’t have that chance if you don’t ever start it.

There is no need to show off to your friends because you are the one that landed the new job with cool title. The people with the flashy cars and lifestyle are usually either getting support from family members or are fueling that lifestyle with lots of debt.

Build friendships with those that are financially like-minded and encourage each other. It’s hard to be the only one that orders water instead of drinks almost every time you go out because you are the only one that has a spending plan. Don’t let peer pressure cause you to lose your spending discipline.

Use the same creative mindset you had in college as it pertains to money. If you could figure out a way to have a great weekend and only spend five bucks back in school, why should it change now that there is income. I joke that I had more cash flow when I was a starving college student than when I was a professional financial planner with a great job.

Get on a plan ASAP to pay off any student loans. It definitely needs to be a part of the budget. A time frame for them to be paid off would be best. Don’t just elect deferment or forbearance because it’s an option. Truth.

Set up an intentional savings account, even if it’s just $25 to start. Set up a transfer of at least $25 a paycheck to get in the habit of seeing how painless it is. Then boost it to get to $2,500 within the next year. An emergency fund can prevent the need to tap into credit cards when the car needs brakes and tires.

Don’t take on a deluxe apartment or mortgage until the student loans have been dealt with. They’re a mortgage in their own right. Live way below your means. Americans spend way too much on housing as a rule.

Get the match at work at the very least if you have student loans and try for 10% or more deferral if you don’t have student loans or after they’re under control. Early saving is HUGE in your financial future.

Be thoughtful about what you spend your money on. You work hard for it. Set a 30 minute weekly money meeting with yourself to go over your finances. Whether you’re just starting out or have been in your career for decades, this is just flat out solid advice.

This is a lot of info, but it’s an especially useful list for recent grads just getting started. The decisions they make now will have a huge impact on the rest of their financial life. My daughter is beginning her senior year of college so in less than a year, she’ll be graduating, and I’ll be printing out this blog post and last week’s to help her get her financial life started in the best way possible.

What To Teach Your Kids Before College

July 26, 2016

This time of the year is brimming with the excitement of future college freshmen over their new adventure. Talking to them is fun – hearing about their hopes, dreams and expectations of their freshman year. The more I started listening, the more my excitement wore off and disbelief settled in. I started to realize that some parents have this expectation that they can teach their kids zero about finances, give them an account with a few thousand in it and expect their kids to become financially responsible and budget properly. Here are some tips to follow instead:

1. Summer jobs are great economic teachers. If your student has a summer job, use it to teach your child invaluable lessons such as what their future careers may be for life if they drop out of college with no plans, that the gross vs. net difference in a paycheck is big and guidance on how to budget their money. Use websites like Mint, YNAB, or even the budgeting tools where you and your family banks to help your child create a budget.

2. Show your child the economic realities of college. Most people think about tuition, books and room and board. To some degree, that is only the beginning.

Every organization, fraternity or sorority your child is thinking about joining may have a fee, some to the tune of over $600 a semester. There are also those pesky fees like student health center fees, student activity fees, orientation fees, new student fees, technology fees and whatever other fees the college thinks up to charge. Use checklists like this one as a guide to possible costs.

3. Come up with an “oops I screwed up plan.” Okay, let’s be honest. None of us were financial wizards when we went to college. A lot of us overspent in our attempt to fit in and alleviate home sickness. Talk to your child before they mess up about how you will handle it the first time and come up with what you will do if they make the same mistake twice.

One of my friend’s parents told her daughter that she would consider the first time she makes a financial mistake a lesson learned. The second financial mistake will result in the “Bank of Mom” shutting down. My friend figured that at worst, her daughter would still have food from the cafeteria to eat, a dorm room bed to sleep in and feet to walk to class.

Don’t wait.Working on a contingency plan now will save you from unnecessary and probably emotionally charged conversations in the future. Take the time to work with your kids on a financial plan for college to not only save your wallet but to save your sanity.

Reality 101

July 05, 2016

I recently went to New York to visit my family. I always love my trips because I get to hang out with my loved ones and pretty much eat nonstop, but I do not actually have to cook anything. Before the kids came, I always had my favorite foods cooked when I went home. Now when I go home, it is the kids’ favorite foods.

While I was visiting, I had a chance to talk to my nieces and nephews. Most of them are in their twenties so our conversations have shifted from the latest Jonas Brothers song to college and their futures. As my niece started talking about moving out of her parents home and becoming a teacher, I started taking a good look at her. Her hair, clothing and handbag probably cost more than most of the outfits I owned combined.

I, like probably all of you, can see the financial train wreck as her spending and the reality of her income, unsupported by family and in Brooklyn, NY of all places, came together. I recognized that she, like many young adults, was in for a serious reality check the first month she attempts to pay for rent and a $1,000 handbag on the same paycheck. I attempted to stop the wreck I saw ahead by doing the following reality check with her.

Salary

We looked up what her potential starting salary as a New York City Public School Teacher, which would be about $54,411 a year. (Parents, go online to websites like the National Association of Colleges and Employers (NACE) to find out the average starting salary for your child’s major and share it with them.) She was initially disappointed. She thought it would be higher, but then she got excited.

Take Home Pay

I quickly stomped out the excitement by reminding her that this is gross and we needed to calculate net. We used a paycheck calculator like the one from Paycheck City to estimate that her take home pay was going to be approximately $3,000 month. Give your kids the gift of a reality check by helping them understand the difference between a gross and net check.

Living Expenses

Next, we started creating a budget. She already knew living in Brooklyn was expensive, but a studio apartment, not even a one bedroom, in the area she wanted to live in was about $2,000 a month – almost her entire paycheck. If she wanted to share an apartment, a two bedroom averaged $3,400 a month.

Up until this point, I felt I had about 50% of her attention. When we started working on the budget, it really opened her eyes as to exactly how little her money stretched. Consider creating a post-college budget with your children who are close to graduating to help manage their salary expectations and lifestyle once they graduate.

After my niece got over the shock that her lifestyle is going to look very different once she is on her own, she surprisingly started talking about ways to cut back on her lifestyle and save money. She said that her biggest motivation was the fact that if she did not control her spending, she will be living with her parents until 100. Take the time to give your kids a financial reality check so they can start off their adult lives on the right foot.

3 Reasons We Spend Beyond Our Means

June 29, 2016

While the US personal savings rate is higher these days at 5.4% than it was a year ago, Financial Finesse’s research shows that 34% of people are living beyond their means or spending more than they make. Some of this overspending is due to factors beyond their control like medical expenses or other emergencies. But in many cases, it’s more from a lack of planning ahead combined with rationalizing what one can “afford,” a measurement that is often more emotional than based in reality.

For example, when it comes to meeting up with friends after work for happy hour, I’ll go to great trouble to avoid paying $15 for parking or a taxi cab, but don’t think twice about ordering a glass of wine that costs the same. When I stop to question this logic, it sounds nuts. How can I mindlessly afford $15 for a glass of wine but schlep for several blocks from the bus to avoid spending the same amount for more convenient transportation? We make the same kinds of bargains with ourselves all the time. If you’re looking to save more money by cutting back on spending, it’s important to be aware of these three reasons that often cause us to compromise our savings goals:

1. It feels good. Emotional buying is a lot like emotional eating. When we’ve had a bad day or are tired, sad or sometimes even ecstatic, our emotional mind tends to rule out our rational thoughts. But while a purchase may temporarily lift your spirits, it won’t solve the emotional need you’re seeking to fill.

One way to overcome this trap is to build a “bad day” spending amount into your monthly budget. I have a friend who keeps a fifty dollar bill in a hidden fold of his wallet for those days. Another way is give yourself visual reminders. I keep a sign in my office that reminds me, “Until you make peace with you are, you’ll never be content with what you have.” Rather than trying to buy your way to happiness, think about what’s really missing and take the baby steps to get closer to that.

2. The Pinterest effect. Social media has taken celebrations like weddings and even simple backyard barbecues to a whole new level of creativity and even competition to have the prettiest, the hippest, and the most impressive decorations and ideas. I cannot believe the themes some of my friends pull off for their kids’ birthday parties. To me, it’s a modern day version of keeping up with the Joneses times ten.

If your 5-year old’s classmate has a farm-themed party complete with pony rides, there’s an element of peer pressure to match or better that with your own kid’s party. That’s fine if it’s part of your budget, but if it stresses you out to think of what you’ll have to pay for a bouncy house or to have a live Elsa show up to the party, take a step back and assess your priorities. Your child won’t miss what’s NOT there, and you can use the money you save toward their education. “I wouldn’t mind taking out student loans if it means my parents had thrown me extravagant birthday parties as a kid,” said no college student ever.

3. We all love a good “deal.” It’s a proven fact that when large retailers go out of business, they often hire liquidation firms who come in and actually mark up prices so that they can “discount” them in an effort to clear items out of the store. They’re banking on buyers’ perception of getting a deal and it works. Same goes when you’re shopping online and buy more simply to qualify for free shipping.

When you find yourself buying something that you weren’t actually seeking out, take a pause and first consider whether it’s something you need and can afford. Try to fast-forward in your mind to the next time you’re cleaning out your closet or packing up to move and whether you’ll be glad you have that thing or wish you hadn’t purchased it. If you do decide it’s something you need, then do a quick check on your smartphone to make sure the price is actually a deal. Stores call this “showrooming,” which means they hate it when people do this, so try to be inconspicuous, but if you do find a lower price online, see if the retailer will honor it.

Finally, when you do find yourself overcoming the urge to spend, don’t let that money find itself being wasted somewhere else. Consider turning that victory into actual savings by transferring the amount you were considering spending into your savings. It adds up and you’ll never regret saving more.

Want to Quit Your 2016 Budget? Don’t!

February 02, 2016

If you have read any of my prior blog posts, you probably know that I have a thing for chocolate. I even do a run called “Hot Chocolate” held in January. I do the 15K, about 9 miles, with water and chocolate stops along the way. Once I am done, you are given hot chocolate and I gulp it down in about 30 seconds. Despite the sub-freezing temperatures, I enjoy the runs because they gives me and my friends uninterrupted girl time to catch up. Continue reading “Want to Quit Your 2016 Budget? Don’t!”

How To “Budget-Bust Proof” Your Spending Plan

September 01, 2015

Okay, I am going to call this Confession Tuesday. I have spoken to so many people that struggle with creating a budget. I can hear the guilt and even shame in what seems to them like their inability to live within their means. Continue reading “How To “Budget-Bust Proof” Your Spending Plan”

Your 4 Week Financial Check-Up Challenge: Week 2

June 01, 2015

A couple of weeks ago marked the beginning of a Four Week Financial Check-Up Challenge. For some, these “best practice” financial behaviors are a part of the daily routine and you already create world class budgeting spreadsheets and could teach classes on making every dollar count. For others, just the thought of getting financially naked and examining the state of your financial affairs is a bit overwhelming. Continue reading “Your 4 Week Financial Check-Up Challenge: Week 2”

How Costco Is Like An R-rated Movie

March 11, 2015

Recently, my teenage daughter wanted to go with some friends to see an R-rated movie but she’s not 17 yet. I had to inform her that the rules are the rules and that she couldn’t go to that movie without an adult. That’s when my wife chimed in and asked if she could apply that adult supervision rule to me when I go to Costco!

Being a good financial planner, I use Costco to save money on items that my family uses frequently and buys in bulk. I admit, however, that one of my challenges is that the TVs are right by the door. Even though I come in with a list of things to buy, I almost always stop and check out the latest and greatest TVs and start thinking about which ones would be the best for sports, which would work better for movies, etc.

That 3 or 4 minutes of distraction sometimes lowers my vigilance and while I haven’t walked out with a new 70 inch TV, I have made a couple of small impulse purchases. Personal finance is just as much or more about our behavior as it is about math. So what are some things that I – or you – can do to avoid the need for adult supervision?

Make a shopping list and stick to it. Remember that if a product is as good and useful as it appears to you at that moment, the supplier will continue to make it. You will be able to calmly and rationally decide at home whether that purchase really would make sense the next time you go or if it was just an impulse buy.
Understand what your triggers are. In my case, I love to watch sports and am always looking for the “perfect TV” to watch a game. Since a large TV is a major purchase, I have avoided the temptation to unnecessarily buy a TV but I have learned that the TV dreaming at Costco triggers my desire to want things that aren’t necessary. Now I make a conscious effort to move past the TVs as fast as possible so that I can avoid my trigger. What is your trigger?
Set a budget for your shopping trip and keep tab of what you’re spending. If you know what you’re shopping for, you should have a good idea of what it will cost. Set a limit – say $200 – and use the calculator app on your phone to keep track of how much you’ve spent so far. That way if you get up to $180 and you still have items on your list, it’s much easier to see that no matter how tasty that free sample was, it isn’t affordable today.

Use these tips to save yourself a substantial amount in impulse purchases, and if you know of any good deals on TVs – let me know.

Tipping Point – Could Restaurants Be Your Budget Solution?

July 25, 2014

One of the “hot button” issues in my personal budget is dining out. If there’s one area where I overspend occasionally, it’s this area. I live a pretty nice lifestyle and am fairly frugal but I do like the experience of going out to eat periodically. I know I’m not alone because in my consultations with people, this is quite often brought up as an area where they can shave expenses and get a bit more fiscally responsible with their funds. Continue reading “Tipping Point – Could Restaurants Be Your Budget Solution?”

Are You in a Cash Flow Drought?

July 11, 2014

Living on the East Coast but working for a California based company, I get to hear about things that are newsworthy on both coasts. One of the more recent news items that I talked about with my CA coworkers was the drought that they are currently experiencing. This article talks about the drought and what it has done to the price of water in California. Continue reading “Are You in a Cash Flow Drought?”

Is Your Financial Life a Thriller?

June 13, 2014

I have heard a lot of people say jokingly that they wish they had the financial resources of a random famous person. Take Michael Jackson. Houses, cars, amusement parks in his backyard, animals galore…he seemingly had it all from a financial wherewithal standpoint. Continue reading “Is Your Financial Life a Thriller?”

How to Slash Your Entertainment Budget This Summer to Less Than $100!

June 18, 2012

Entertainment seems to be a universal budget crasher. My son Brian told me that he tries to stay in his budget but sushi night always puts him over. He has subsequently switched to the 10 cent wings night at his local barbeque place and bragged to me that he ate something like 35 chicken wings in one sitting. Entertainment, which inevitably involves expensive food, will bust a budget every time. My friends and I went on a hike this past weekend (free!) but afterwards we grabbed lunch with a group of friends so each couple ended up spending something like $35 bucks on lunch and libations. There goes the benefit of the free entertainment. Continue reading “How to Slash Your Entertainment Budget This Summer to Less Than $100!”