Whether appearing in your mailbox or your browser, financial information inundates us daily, adding to the papers and information (virtual or real) you already have. Some of it is important; some of it is not. Not only should you strive to reduce the amount of paper and computer files that you retain, but you need a system for organizing everything that you decide to keep. Not only are we inundated with information, our lives require more passwords than ever. Time to confess: I have far too many passwords (financial accounts, online shopping, subscriptions, kids’ schools, activities . . . the list goes on). I have wasted a lot of time trying to find or remember them all, and I worry about online security. Your passwords need to be secure, whether you write them on a piece of paper (keep the list hidden far from your computer) or you use a…
Creating an ICE Plan
With an In Case of Emergency or ICE plan, you assemble key contact and financial account information in one place. An ICE plan guides someone who must act on your behalf—it is like a roadmap of your financial life. If you use a web-based personal financial management service, you have a great head start. To create an ICE plan, prepare a list of: Bank accounts, credit card accounts, retirement accounts, brokerage accounts, and any other investments The name and phone number for anyone who helps you manage your financial life—banker, insurance agent, accountant, investment adviser Details about your lease or your mortgage—the name of your property management company or mortgage company Bills that are on automatic pay, with passwords to access the accounts or the master password if you use a password management service For someone just starting out, your retirement account is likely your most valuable asset. As you…
Financial Truths To Keep In Mind
Managing your financial life is not a “set it and forget it” exercise. You must educate yourself and stay engaged. As you become more conversant with concepts, many simple financial truths are worth remembering: The importance of time: Compounding is powerful. The importance of risk and return: There are many types of risk. The importance of discipline and conviction: Stay true to your plan. The importance of patience: Study your investment decisions and don’t rush. The importance of value: Value is not what you paid for something. It is what someone else is willing to pay for it. The importance of supply and demand: Both have an impact on value. The importance of expectations: They also drive value. The importance of liquidity: How easily something can be converted to cash is key. The importance of total return: Look at both appreciation and income. The importance of taxes: Timing and keeping…
Serving as a Financial Caregiver
Women wear many hats. The COVID pandemic was a stark reminder of how many of us serve as caregivers. The type of care we provide has also expanded. As our population ages and our financial lives become increasingly complex, financial caregivers are more common. Defining and understanding what the role entails is essential. Have you been asked to serve as a financial caregiver? Are you considering asking someone to serve as a financial caregiver for you or a loved one? The Consumer Financial Protection Bureau (consumerfinance.gov) offers four free guides explaining what it means to serve as a trustee, power of attorney, guardian of property, and a government fiduciary (for Social Security and VA benefits.) A common trait of these types of financial caregivers is that they involve a fiduciary duty. These four guides explain fiduciary duty and offer helpful suggestions on how best to serve in these roles. Guides…
Home Office Refresh
Over the past few years, our home offices have taken on greater importance. Having a functional, organized home office makes our professional lives and our financial lives easier to navigate. If your home office needs attention, it is time to get started. Financial Spring Cleaning Just like when you go through your closet or food pantry to determine what to keep, what to donate, and what to toss, you need to do the same with your financial life. Perhaps even more important than what you keep is what you can shred, recycle, or delete. Keeping unnecessary documents and statements makes it harder to locate vital personal finance information in a hurry. Most of us waste a lot of time trying to find things on our computer and amidst our papers. Getting rid of unnecessary documents frees up precious space in your file cabinet and in your filing system on your hard…
Emergency Reserve and Liquidity
Experts recommend that you have an emergency fund sufficient to cover three-to-six months of living expenses. Your emergency fund should be a safe, stable reserve such as a savings account or money market fund. If you are new to the workforce, it may take time to build up an adequate reserve. The easiest way is to transfer a portion of your paycheck every pay period directly into an account. If you dip into your emergency fund, replenish it as soon as possible. In addition to an emergency reserve, you need to think about liquidity. Liquidity is a term from economics that indicates how easily an asset can be converted to cash. Some asset classes are more liquid than others. Cash and money market funds are the most liquid assets. Stocks and bonds are usually liquid. During periods of financial turmoil, however, you may not want to convert these assets to…
Simplify Your Bills and Your Life
According to a study by Mercator Advisory Group, more consumers pay bills online than by mail or in person. The pandemic and subsequent rise in remote work and relocation helped to accelerate this trend. When it comes to paying bills online, you have choices. You can (1) use your bank’s bill payment portal; (2) go to each biller’s website and make a payment; or (3) sign up for a non-bank bill pay service. You can arrange automatic payments directly from your checking account for recurring bills such as rent, mortgage payments, and utilities. You can use your credit or debit card for smaller recurring payments like subscriptions. Paying bills online has numerous benefits. The two most important benefits are convenience and simplification. Your records will be digital and easier to maintain and organize. Each person’s financial situation is unique, as is their comfort level with technology. For most bills, using…
Navigating Tax Season
Tax time can feel overwhelming for many people. Preparing your taxes requires you to manage a lot of information and documents. In addition to your W-2 (or 1099-NEC forms if you are a contractor), you will need supporting documentation related to your savings and investment accounts. A 1099 statement details the year’s dividends, interest, and capital gains earned. Some investments are structured as partnerships and provide a year-end, or annual, K-1 instead of a 1099. A K-1 shows an investor’s share of partnership income for a given year. Transactions that you need to document at tax time occur throughout the year. Therefore, I strongly recommend that you keep a Current Year Taxes folder. As you receive tax-related documents in the mail or from a financial firm’s portal, store them in this paper folder or a similar folder on your hard drive. If you are a contractor, save an extra copy…
Holiday Tipping Guide
The holidays are joyful and also a little stressful. In addition to getting a head start on shopping, plan your holiday tips early. Holiday tips are a nice way to say “thank you” to those who help us out during the year. Many have questions about whom to tip during the holidays and how much to give. Here are a few thoughts: For those who help you out regularly – dog walker, trainer, hair stylist, babysitter, piano teacher – tip the equivalent of one service or session. For nannies or housekeepers who work with you more than once a week, consider one week’s pay as a holiday bonus. For teachers or coaches, consider pooling voluntary contributions from parents and putting the funds toward a gift card to be given at the end of the season or at the end of the school year. For other service providers that you use…
Getting Your Financial House In Order: Helpful Tools
Getting your financial house in order has numerous benefits. You will be more engaged in managing your finances and better prepared if life throws you a curve ball. Most important, you will feel less overwhelmed and less stressed. The In Case of Emergency (ICE) Plan and the Asset Allocation Grid are helpful tools. The ICE Plan creates a roadmap for your financial life, while the Asset Allocation Grid is the dashboard. Invest the time to use these tools. Engagement in our finances is essential. Asset Allocation Grid ICE Plan