Saturday, October 1, 2016

Claim It or Lose It

Massive amounts of money (app. $41 billion) are declared unclaimed and ready for cash-strapped state governments to absorb!

Did you move several times? Have you found all the accounts your deceased parents ever held? Did you ever cash out that mutual fund you opened as a kid? You may be pleasantly surprised by going to, the website for the National Association of Unclaimed Property Administrators.

Stocks, bonds, bank accounts, insurance policies all fall under unclaimed or abandoned property. States use the cash and investment earnings as general revenue. These funds have become so critical to state budgets that recent changes result in your losing your assets even faster:

1. Seven years, the time in which you had to claim your property, has now been reduced to five and in some states three years!!

2. The definition of abandoned property (the return of undeliverable mail) has been changed to lack of contact. Even if you have been receiving statements your property is considered lost if you have not contacted the financial institution for a certain period of time!

Contact means:
1. calling
- speaking with a rep - automated lines Do Not count.
2. emailing
3. returning a proxy ballot
4. written correspondence.

Direct deposit, direct withdrawal, payroll deduction or reinvesting dividends Do Not count as contact!

Financial institutions typically ask for updated personal information every three years or so. Even if nothing has changed, make sure you respond. If you have not had contact with a company for some time, make the effort to verify or update your present address and phone number.

Be $ Smart - stay in touch with all your financial institutions to demonstrate you have not abandoned your accounts.

Happiness Quotient

You may have heard of the term wealth effect - it is the idea that when the value of stock portfolios, IRA's, 401k"s, rises due to escalating stock prices, investors feel more comfortable about their wealth, allowing them to spend more.

We now have the happiness quotient as determined by studies in the UK where a group of social scientists measured the "happiness" of bank clients through multiple surveys. They found that overall wealth was not the factor. What produced a true sense of happiness and well-being was the amount of available cash in personal checking or savings accounts.

Invested money or a pension felt either abstract or inaccessible whereas their large ATM balance evoked a sense of security and importance.

The thought of surplus cash not invested as losing value (due to inflation, lack of growth) misses the human psychology element. The premise is how you maximize your well-being over maximizing your financial benefit.

Ways to increase your happiness
1. build your savings i.e. your emergency fund,
2. save for vacations before you take them,
3. live within your means (aka spend less than you make),
4. buy experiences not things,
5. give money to causes that feed your spirit.

Be $ Smart: Enlarge your cash buffer to increase your sense of personal power, security and happiness.

Out of touch...

Once upon a time at the end of the work week, men and women would stand at the payroll window and receive an envelope of cash as payment for the hours they worked at any given job.

Some would go out and celebrate, some go shopping and some would go home where they would parcel out the cash into a series of envelopes: food, rent, doctor, gas & electric, telephone, emergency, vacation. One wouldn't dare touch the rent money! If there were any money left over, it was spent on fun.

We have lost touch with money.
Direct deposit of paychecks, credit cards, wire transfers, etc. all have removed us from the physical touch of money. We're not sure how much we make nor are we sure of what we spend. Money has become ethereal and elusive.

Try these two exercises to put you more in touch:

The next time you plan to eat out, take only the amount of money you intend to spend that evening. NO CREDIT CARDS - $35, $65, $100 As you order be aware of the cost of each item and factor in the tip. Can you "afford" another glass of wine, a second dessert or a cappuccino? With your credit card you wouldn't have a second thought and often spend more than you intend.

For two weeks track your ATM withdrawals.
On the back of each ATM receipt write down every purchase you make with that withdrawal - to the dollar! You might find you are suddenly aware of how you spend your money.

Once you get back in touch then you can make wise $ decisions.

Thursday, August 11, 2016

Easing Money Anxiety

The word "money" carries many connotations:
power, freedom, evil, fear, uncertainty, anxiety, depending on one's relationship with it.

It would be a great advantage for money to bring more positive reactions like freedom, opportunity, excitement, brotherly love, kindness.

How can you make that happen? How can you change your relationship with money? Find a really good financial adviser.

Yes, I know you can read and attempt to do it yourself. I've learned the hard way that even using YouTube videos, I still need a plumber, electrician and car mechanic. My reading and learning helps me understand the situation better but I have no intention of making that my profession. Research and comprehension keep me from being ripped-off or led astray.

A true financial adviser plays a sacred role and exercises a societal obligation to help people cope with money anxiety as stated in a recent article of Investment News.

Your adviser should be able to extract fact from fiction:

- are your fears or concerns about money well founded?
- are your goals realistic?
- are your values reflected in your investments?
- are you clear about where you are today and where you want to be in 5 years, 10 years, retirement?

A Robo adviser cannot feel your emotions or understand the cycles of life to help you make good decisions over your lifetime.
A true adviser honors your values, respects your worries and concerns and helps you accomplish your goals. And, they bring expertise to the table; the expertise that many years of study, client interaction, fluctuating markets built their experience and wisdom.

Good financial advisers are out there; you just have to search for them.

Be $ Smart
- take the time to find the financial adviser who's right for you to relieve your money anxiety!

Critical Life Task: Planning for a Spouse's Death

In a recent issue of Research Magazine, Ellen Uzelac listed all the mistakes she and her husband made in planning for each other's passing. She thought they had covered everything until he was no longer around to help her. In listing her tips, she refers to a recent book "Moving Forward on Your Own: A Financial Guidebook for Widows" by Kathleen Rehl.

1. Carve out time to discuss your financials and end-of-life wishes. Rehl suggests couples spend one hour a week, over a glass of wine or a cup of tea, to talk about such things as wills, beneficiary designations, why things are invested the way they are, legacy issues, and health care directives. She calls it “active loving.”

2. Create a repository for passwords and other need-to-know information. Whether you and your spouse record everything in a three-ring binder or on a thumb drive, just do it and keep it in a secure place. The document should include account numbers, information for key contacts, online passwords, security codes and PIN numbers along with the location of items such as birth and marriage certificates, divorce papers, vehicle titles, mortgage documents, life insurance policies, retirement plans and stock certificates. Prepare an inventory of what's stored in any safe deposit box and identify where the keys are kept. Update passwords, security codes and PINs on an ongoing basis.

3. Get to know your financial advisor. Industry research indicates 70% of widows fire their financial advisor — in large measure because they never bothered to develop a relationship.
As Kelly A. Shikany, a certified financial planner with Lakeside Wealth Management in Chesterton, Indiana, affiliated with First Allied Securities, notes: “I can't tell you how many times I have a meeting scheduled and the wife decides she's getting her nails done. There's an element of trust with the spouse: ‘Oh, he’ll fill me in and we’ll talk about it later.’ It's so important to get these women comfortable with money, comfortable coming to meetings. You don't need to add money to the grieving process. You don't want your first experience with an advisor to be: ‘I’m sorry for your loss. Let's talk about changing titles on the accounts.’ It's really a time to settle and find strength from family, friends and community before you need to push through this stuff. And you can do that with a trusted advisor.”

4. Make sure your accounts are titled properly. Jointly held accounts tend to be the gold standard. Merrill Lynch advisor Mary McDougall, based in St. Paul, Minnesota, favors JTWROS, or joint tenants with right of survivorship — a vehicle that allows the surviving spouse to inherit the contents of an account without triggering a gift tax. Brokerage and bank accounts should be held jointly so that they can't be frozen during probate. And McDougall says it's a good idea to have any household account — utility, telephone, TV — held in both names so that when a death does occur, the surviving spouse is on record as an existing customer.

5. Consolidate accounts. Multiple small-value accounts are hard to manage and sometimes even overlooked, according to Avani Ramnani, director of financial planning and wealth management at Francis Financial in New York City. People often start IRAs at different banks at different points in life or leave 401(k) accounts with past employers. It's best to park everything in one place. “Planning for financial clarity is always a good idea,” says Ramnani. “Doing so makes things efficient and easier to handle.”

6. Familiarize yourself with probate and how it works in your state. Probate can be easy or expensive and onerous, as it famously is in Florida and California. “Some states are such a nightmare that everyone plans to avoid it,” says Lisa Hutter, senior director of wealth planning for Wells Fargo Private Bank in Austin, Texas. “And even if you are in a probate-friendly state, when you have a will you still have to file the paperwork, transfer assets, change titles on everything.” And all those records are open to the public. Because assets are frozen during probate — a process that can linger for months or years — Hutter suggests that each spouse have enough cash on hand to pay expenses for 24 months.
To avoid probate, Hutter recommends placing assets in a revocable living trust. Such assets are not subject to probate. She adds that a two-page will can direct any assets not held in the trust to be held there at death, thereby bypassing probate altogether. (Note: Jurisdiction also matters when it comes to the nation's nine community property states. Make sure you are mindful of how that can impact end-of-life planning.)

7. Check beneficiary designations and how things are titled. It's a good practice to make sure beneficiary designations and titles align with your will, your trust, your wishes. “This is a really important door to open and examine. Lots of folks will go to a lawyer, update their documents and think they’re done. Unfortunately, that's not always the case,” says Kathy Muldoon, senior vice president of Dallas-based Carter Financial Management, an affiliate of Raymond James Financial Services. She suggests getting a “letter of instruction” from an attorney, essentially a guide to beneficiary language and titling. “This is really important, especially if there's any complexity at all: a second family, a family business, an angry family member,” she adds. “Pick your topic. If there's any quirk at all, and every family has one, it's not worth taking the risk.”
Even if you’re certain you know how things are titled or designated, check anyway. “We’ve seen ex-spouses named, charities clients don't like anymore, or kids who’ve died. Little was in line with today's wishes. So verify everything,” advises Mike Tylavsky, managing director of Tylavsky & Lombardo, a Wells Fargo Advisors’ group in Pensacola, Florida. “You’d be amazed. They think it's titled one way, but when you go to verify, it's different.”

8. After a death, give yourself structure and space. The financial fallout that follows the death of a spouse can be numbing. Muldoon, a financial planner for 15 years when her husband died suddenly, talks about the “overwhelmingness” of the financials — and that along with her kids, the household, going to work, and dealing with friends and family. “It's almost like you’ve got a knapsack on your back full of bricks and you can't lighten the load,” she says. What helped Muldoon, and others she has advised, was to set aside a half-day twice a week to initiate an activity involving the unwinding of financials. “It contains it. It puts a structure around it. And it gives you permission not to work on those things on the other days.”

9. Maintain one joint bank account. It's surprising how many checks payable to a deceased spouse filter in over time: a stock dividend, a rewards refund from a credit card, the proceeds of a class action suit, the balance of a bank account following probate. Wynne Whitman, an estate planning attorney with Schenck, Price, Smith & King in Florham Park, New Jersey, says: “By all means, keep a joint bank account open for one to two years. So when that refund from Time magazine comes, you’ll be able to deposit it.” Also, don't close your spouse's credit card until you understand what bill paying may be tied to it through auto-pay options.

10. Consider your Social Security choices. A widow has various options when it comes to Social Security claiming strategies because she can claim under her own work record or as a surviving spouse. “This is something you want to get right because Social Security is under no obligation to tell you how to maximize your benefit,” notes Jennifer Murray, a certified financial planner with Stonebridge Financial Advisors in Morristown, New Jersey.
Women can claim the widow's benefit as early as age 60 although there is an income cap attached to it. One popular strategy is to take the surviving spouse's benefit at 60 and then claim your own work record at 70. The good news here is that your own benefit continues to grow at 8% a year until age 70, when it tops out.

11. Understand your expenses. Many women are surprised at how much they spend. As Murray says: “I’ve never met a client who says ‘Oh my god, I can't believe I only spent that.’” She suggests using a one-page spreadsheet to track expenses — a process, she says, that can lead to a lot of self-discovery. Murray met with a young widow recently whose husband had prepared a spreadsheet for her in advance that included all of the need-to-know information. He had even researched her Social Security options. “She came into the office and said: ‘I’m starting with this. Can you help me understand it?’ Do as much as you can ahead of time,” Murray advises. “You’ll be so much better off.”

Important Topics to Cover as You Approach Retirement

There are many topics to cover before and during retirement. Sometimes the tricky ones may be neglected or ignored by your financial adviser. Here are a few to bring to the table:

1. Social Security - Claiming social security at 62 might not be the best deal for you. There are several claiming strategies which may put many more thousands of dollars in your pocket over your lifetime. Ask your financial adviser how these strategies may benefit you.

2. Required Minimum Distribution - RMD starts when you turn 70 1/2 for your tax-qualified accounts. The first year can be tricky with the possibility of two payments in one year. Find out the rules so you don't pay more taxes than necessary or be penalized if you forget to take the distribution.

3. Smart tax-planning - Your financial adviser cannot give you tax information (unless he/she is licensed to do so) but they can tell you what type of accounts you hold and how distributions may be taxed. Ask your tax adviser for guidance on the best withdrawal methods in retirement to keep taxes as low as possible.

4. Pension replacement - Today many people do not have pensions. Your adviser can recommend ways to set up a lifetime stream of income along side your social security benefits. Most likely he/she will suggest an income annuity, fixed annuity or immediate annuity. Be wary and shop around as annuities come in many sizes and colors!

5. Professional Help - maybe you've taken a few courses and read some books about retirement planning. You may want to do it yourself to feel in control or to avoid fees. Just like everything else, know when to ask for help and seek a professional. There may be a few critical parts you missed or need tweaking. Find a fee-only adviser to give you a second, unbiased opinion. The advice may prove invaluable.

Be $ Smart - prepare for retirement with good planning and advice.

Saturday, July 9, 2016

The Family Contract - Managing Expectations

The cost of higher education has pushed many folks to work past normal retirement age to finance their children's education. Either through home equity line of credit or co-signing for loans parents mortgage their retirement for the sake of their children

After the 2008 financial crisis where many graduates could not find employment, they naturally moved home. Even when they found a job, the "rent free" lifestyle persisted. The additional cost of food, utilities, cell phone, car insurance thwarts retirement plans and savings. Young people do not realize the parental sacrifice unless someone enlightens them.

Sharing a home includes sharing responsibilities. Putting those responsibilities in writing clarifies the situation for everyone. Some parents might have the means to continue supporting their children but is it really fair? Earning, saving, spending are all financial realities of life. Denying children those lessons helps no one, hence The Family Contract.

List the expectations AND the consequences.
Put it in writing and have all parties sign.

For example:
Son/daughter may live at home until June, 2017. During that period he/she will:
1. occupy one bedroom and use one bathroom, keep them neat and clean them (scrub/dust/vacuum) once every two weeks.
2. grocery shop once every two weeks to purchase favorite foods, replace essentials (milk, coffee, eggs, laundry detergent) and pay for such items.
3. refill the gas tank when borrowing the family car.
4. pay their own car insurance (if applicable).
5. do their own laundry.
6. assist with house upkeep (e.g. mow lawn, take out trash, walk the dog, etc.)
7. pay $200 a week to cover utilities and other household expenses.

Parent(s) will:
1. pay utilities and mortgage/ rent.
2. provide heat, hot water and A/C.
3. provide simple meals
4. make car available for occasional use (could be specific days/times).

Consequences should also be specific such as:
1. loss of car privileges,
2. an increase in weekly "rent",
3. finding another place to live.

If you feel uncomfortable charging "rent" realize your child must allow for rent in their future budget. You are not helping him/her live independently by providing a cushion. If charging rent truly bothers you, put the weekly money in a savings account and give the money to them after they move out.

Yes, they are your children. Yes, you love them. Your goal is to raise healthy, social, independent, responsible human beings. A Family Contract facilitates respect and growth for all concerned.

Be $ Smart - Make your children welcome but not so comfortable to jeopardize their future or your retirement.