Sunday, October 25, 2015

Creative Housing

This topic presents itself to me many times as I meet with clients. Housing can be a huge chunk of our monthly expenses. "Rule of thumb" says housing costs should be about 30% of our income. For someone making $250,000 that's not usually a problem. Those making $35,000, it's a big problem especially if it means they must cut back on food, medicine or fun.

We tend to be a nation of independents - we drive solo instead of carpooling; we live alone rather than communally. With rent and housing costs rising, more and more people, especially single women, feel the financial strain. Also, if we believe what financial companies tell us, many folks have not saved enough for retirement. Where will these retirees live?

If housing cost concern you, here are a few ideas to consider:

- Try house sitting. Snow birds, avid travelers, professors on sabbatical all leave behind empty houses. These vacant homes beg for care, protection from burglaries and leaks.

- Become a live-in nanny. Many two income families could use help with the children after school and doing homework. You could live with the wealthy and get paid for it.

- Become an elderly companion. "Aging in place" is a concept that's taking hold nationwide. Often the elderly would prefer to live (and die) in their own home. You find one person living in large houses and multi-bedroom apartments. They would be happy to exchange a room for companionship and some care,

- Become a vagabond. If you can work from home and your only need is wifi, try wandering in an RV. Part time volunteer work can be found at National Parks, museums and fairs.

- House share. In many parts of the country, single women are buying houses together. They write a contract that covers costs, visitors, kitchen privileges, repairs, etc. Once all the components are put in writing, it's simple to follow the rules.

- Rent a room. Empty Nester's often have one or more bedrooms empty when their kids go off to college or get married. They may be eager to earn a few dollars to help pay for the mortgage or repairs. Such an arrangement might prove mutually beneficial.

Be $ Smart - review your housing costs and entertain ways to live creatively.

An Innovative Way to Buy Stock

A friend called to ask me if I would comment about the Wall Street Journal article on a new way to give stock as a gift. The concept totally surprised me as well as the fact that it has been available for some time!

A few years ago my 10 year old grandson told all his relatives he wanted stock for Christmas. That is not an unusual request knowing Calvin is obsessed with making money, always manages to have money and constantly chides his parents about the cost of things. So we all sent him cash with which his father opened an UGMA brokerage account and built a portfolio.

But NOW there is a simpler way. is a company that offers gift cards (like iTunes, Home Depot, Target, etc.) which enables you to buy a specific dollar amount of hundreds of stocks!

I am not endorsing this company as I have not made any purchases and cannot vouch for the process but I thought it important to make you aware of its existence. Here is what they offer:

- The ability to purchase the stock of hundreds of U.S. and international companies,

- Any amount of the gift - up to $1000. Whatever the amount will buy a certain number of full or fractional shares depending on the share price on the day the card is activated.

- Instant card delivery as they accept most credit cards.

- No cost to the recipient who may buy shares for the full amount of the gift but there is a gifting fee to the giver which pays the credit card fee and commission.

- A gift receipt which allows the receiver to choose a different company,

- A claiming notification to tell you when the gift stock has actually been claimed.

(Minors may own stock with a parent or someone over 18 in a Uniform Gift to Minors Account.)

A gift of stock makes a child curious especially if the stock is in a company he/she knows like Disney, McDonald's or KFC.
It takes the mystery and fear out of investing. It builds interest and confidence.
A gift card saves you from going through the pains of opening an UGMA brokerage account.

It might even make an interesting birthday or wedding gift for your friends!

Be $ Smart - start youngsters early in the stock market. It will pay a lifetime of dividends.

Friday, October 2, 2015

Hemorrhaging from Your Capillaries

Over the past 30 years I have given many presentations about money. As a way to describe massive losses of money from small expenditures I coined the phrase "hemorrhaging from your capillaries". Capillaries are tiny blood vessels and it is hard to imagine how you could bleed to death but it's the image I want to create of losing significant cash through passive, unconscious spending on seemingly insignificant items.

Folks meet with me wanting to save for a house down payment, college education or retirement BUT they are living paycheck to paycheck and cannot find those dollars to put towards their goals. To help, I suggest they practice "conscious spending". For one month to pay close attention to where their money goes.

Here are a few suggestion where you might find hidden savings:

- If you take $200 or $500 from your ATM can you account for how you spent that money? Keep the ATM receipt and record your spending on the back of it. Any surprises?

- How much do you spend on lunch out each week? Brown bag it once or twice. Leftovers usually taste better.

- Add up the cost of your daily Starbucks latte. Maybe go to Starbucks MWF and visit MacDonald's TTh.

- How many magazines come into your home? Do you make time to read them all? Cancel one.

- When you go out to dinner and the cute waitress or waiter suggests appetizers, specials, desserts do you succumb and run up a bill that surprises you? Try using cash instead of your credit card to limit how much you spend.

- Does your bank charge you a monthly fee for a checking account? Maybe you qualify for a simpler one with fewer components and no fee.

- Have you added up what you paid in credit card interest? Paying down those cards could free up hundreds of dollars.

I'm not suggesting you deprive yourself; I am recommending that you PAY ATTENTION. Before you can find those dollars to fund your dreams, you must become aware of how you spend your money to avoid hemorrhaging from your capillaries.

Be $ Smart - track your incidental spending to find money to save. Then take those savings and invest them!

Know Thy Credit Card

I recently shopped at store where the salesperson offered me 15% off my purchase if I opened a charge account with them. Since it was a large purchase I accepted the offer figuring I could save a few dollars.

The bill arrived mid-month after I had paid all my bills and the due date was the first of the month, before I normally pay bills. The bill got lost among piles of paper. I ended up with a $50 late payment fee and interest charged on my purchase!

I promptly called the company, explained that I was a new customer and requested they change my billing date. They also, as a courtesy to a new customer, removed the late fee. The bill now comes at the end of the month with payment due mid-month along with all my other bills.

Credit cards provide great convenience and must be used wisely.
Here are a few credit card tips:

- Establish the same due date - call each company to adjust your billing cycle. This helps keep you current even if you pay all bills online.

- Keep fewer cards - too many cards may have a negative impact on your credit card score.

- Know your Debt to Credit ratio - if you have several cards and your debt balance is low that will influence your score positively. Low balance is key!

- Be aware of Length of Credit History - when you pay off your debt do not rush to close the account. The length of credit history is a positive towards your credit score. It could earn you lower interest on loans.

- Add up the interest - take each credit card bill for the past six months and add up all the late fees and interest you have paid. That can be a shocker!! What could you have done with all that money?

- Read the fine print - when the credit card company mails Terms and Conditions it's telling you something has changed. Make note of new late fees, interest rate, due dates, penalties, etc.; it could save you lots of money.

Be $ Smart - keep more money in your pocket by staying up to date on the terms of your credit cards.

Costs of College

Back to school brings parents a sigh of relief in one sense but it also brings to mind the cost of higher education.

If your student is bright and talented, there is a possibility he/she might qualify for Merit Aid. Be aware that some elite colleges may not offer merit aid to all students. Merit aid might be only offered for certain majors, e.g. engineering or computer science or particular talents, e.g. music, dance, athletics.
Parents need to research those colleges offering merit aid and learn the criteria needed to quality.

Financial Aid (need-based) may be available based on the student's family situation. The formula: cost of attendance - the Expected Family Contribution = need, determines eligibility. The EFC, the result of two formulas from FAFSA and CSS Profile, is the amount a family can afford to pay each year.
Parents need to learn their EFC early and develop a strategy to make their student eligible for aid.

Student loans are both a help and a curse. Over time, the interest can add tens of thousands of dollars to the cost of college. Parents borrow from home equity, retirement plans and Parent Plus loans all adding the interest costs to the college expense.
The key is to borrow the bare minimum, search for the lowest interest rates and pay off everything as soon as possible!

529 Plans are an effective way to plan for college:
- They can be set up as a systematic deposit.
- Depending on your state, they may offer a tax credit.
- The gains are not taxed when used for qualified college expenses.
- They reduce the amount of money taken in loans.

Be $ Smart - do some homework, plan ahead, be aware of the extraneous costs of college and borrow as little as possible.