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Planning For Retirement … the ultimate level of unemployment – Part 1

January 29, 2012 By

Long ago and far away, in a time and place where cars sported lots of chrome and fins, the head of household (we’ll call him Joe) got out of bed each morning and went to work at The Big Company, Inc.

Joe started working at The Big Company right out of school and it was understood that he would work there for his entire career.  When he retired, The Big Company’s pension plan would send Joe and his wife a pension check each month that would allow them to enjoy their golden years with some degree of comfort.  The Big Company accepted the responsibility for investing the right amount of money each year to ensure that Joe’s retirement (along with the retirement of all of Joe’s fellow workers) would be safe and secure.  Joe could count on that pension check arriving like clockwork each month and he could never outlive that income.  That’s just the way things worked “back then”.

Today, Joe’s grandson (affectionately called Joe3 by family members faces a much different employment future.  The Big Company (TBC) no longer offers its employees a pension plan.  Instead, TBC invites its employees to contribute money into a Qualified Retirement Plan.

This Qualified Retirement Plan allows TBC to deduct money out of Joe3’s paycheck each week.  Joe3 decides how much will be taken from the check and how that money will be invested.  While TBC makes sure that there are many options for Joe3 to choose from, Joe3 is responsible for selecting his investments and monitoring them from month to month and year to year to make certain that he sufficient money to fund his own retirement.  If he plans well and the investments perform well, Joe3’s retirement should be safe and secure.  If he fails to put enough money into the plan; or, if the investments don’t perform as well as he had hoped and he has too little to retire on … oh well, that’s Joe3’s problem and TBC has no responsibility or culpability for the shortfall.

Since it’s Joe3’s responsibility to make sure he has enough money when he retires, we’re going to take a look at the different plans that Joe3 can choose from; the opportunities that those plans offer and the limitations that are included in those plans.  In Part 2, we’ll look at one of the most prevalent Qualified Retirement Plans … IRA’s

Filed Under: Financial Planning, Money Management, Personal Finances, Retirement Planning, Saving Money, Saving Money

What Your Family Needs to Know When You Die (Part 4)

December 9, 2011 By

The assets you listed in the last installment are only half of your personal balance sheet that your family will need when you are gone.  The other half are your liabilities … the debts you owe to others.

  • Mortgage – for most families, the mortgage on the family home will be the largest debt that is owed.  Your family will need to know the name of the mortgage lender and its address; the loan number; and, the current balance owed on the loan.  If there is more than one mortgage on the property, be sure to list any other lenders and the appropriate account numbers.  Be sure to list the monthly payment that is due on each mortgage.

This would also be a good place to list any life insurance policies that you may have purchased to provide the funds to pay off the outstanding mortgage(s).

  • Auto Loan(s) – provide your family with the name of the lender along with the lender’s address; the account number; the current balance owed on the loan; and, the monthly payment that is due.  If you have purchased any loan cancellation insurance, you should list it here including the name of the insurance company, its address, and any person with whom you regularly have contact.

You should also list here the name of the company that insures your vehicle(s) along with the name of your agent and the policy number so that the company can be notified of your death.

  • Credit Cards and Personal Loans – in a perfect world, no money would be owed on unsecured debts.  However, few of us live in “Perfect World, USA” so list all of your personal/signature loans, credit card accounts, addresses for each account, the account numbers, and a current balance on the account.  Also, indicate where you keep your current statements and balances owed on each account.

A person’s death does not wipe out any debts that are owed.  Creditors have the right, and they will exercise it, to make demands for payment against your estate.  Sadly, there are some who will attempt to take advantage of survivors’ grief and confusion to make money by making claims against the estate for debts that do not exist.  By leaving a clear inventory of debts owed, you can protect your family against these bogus claims.


Filed Under: Financial Planning, Money Management, Personal Finances, pre-need planning, what my family needs to know, what my family needs to know Tagged With: , , ,

What Your Family Needs to Know When You Die (Part 3)

November 28, 2011 By

When you are gone, your family will need to know a great deal about your personal finances.  They’ll need to know about your assets and your liabilities.  Today, we’ll look at assets.

Assets are the things you own that have value; perhaps generate income that can be used to support your dependents.  Your family will be helped tremendously if you assemble an inventory of your assets.  Consider the following …

  • Bank and Credit Union Accounts – do you have a checking account; savings account; certificate(s) of deposit; safe deposit box?  If you have any of these assets, list the name of the financial institution along with its address; account number(s); and, the name of the individual with whom you most frequently do business.
  • Stocks, Bonds, and Mutual Funds – if you have investment accounts, your family will need to know what assets your accounts hold; i.e., the names of any individual stocks, bonds, or mutual funds you own along with the name of the Registered Representative and firm with which you do business.
  • 401(k) – if your company offers a 401k … other qualified retirement plans include 403(b) plans, tax-sheltered annuity plans, and 457 deferred compensation plans … be sure to include the name of the plan administrator with the administrator’s address and telephone number; the name of the person at work who is your primary contact regarding the plan; and, a recent statement showing how the funds are invested and current balances.
  • Real Estate – obviously, the first item on this list would be your house.  Be sure to include a current estimate of the property’s value.  You can obtain a current value from a Realtor; or, do an on-line search by typing in the question “what is the current value of my house”.  Your search should yield a number of websites that will help you estimate its current market value.

The list of assets above is certainly not all-inclusive.  You may own art, collectibles, firearms, jewelry, and many other things.  Be sure to include these items in your list of assets along with their current market value.  If these items have been professionally appraised, include the most recent appraisal.

The days, weeks, and months following your death will be trying times for your family.  They will be grateful for any help you provide for them that will help them put together the financial pieces of their lives.

Filed Under: Banking, Checking Accounts, Financial Planning, Money Management, Personal Finances, pre-need planning, Savings Acounts, what my family needs to know, what my family needs to know Tagged With: , , ,

“… Making A List and Checking It Twice …”

October 24, 2011 By

Whether you celebrate Christmas, Hanukah, Kwanza, or another holiday, the holidays are a time of gift giving.  For some, the temptation is there to spend more than the budget really permits.  Here are some tips for managing gift giving expenses.

  • Make a list of those for whom you intend to buy gifts and set a dollar limit for each one.  The price of the gift is never indicative of your love or respect for the recipient.
  • Shop early … don’t wait until the last minute to go shopping.  Shopping early and often gives you the opportunity to comparison shop and make certain that you are obtaining the best price on the product you’re purchasing.  It also affords you the luxury of not being pressured into buying “what you can get” rather than “what you want to get”.
  • Large, extended, families may decide, as a group, to draw names and only buy a gift for a limited number of people (perhaps only one person) rather than for every family member.  My friend Brenda tells me that her family elected to do this; and, that it allows each family member to give a special gift to each person on their exchange list rather than having to give small inexpensive gifts in order to stay within budget.

As we move into the month of November, Santa is not the only one who should be making a list and checking it twice.  A little bit of planning now will empower you to enjoy the spirit of holiday giving without fearing the costs.

Filed Under: Holiday Savings, Money Management, Personal Finances, Saving Money

Charge Cards vs Credit Cards

October 14, 2011 By

While working with a client recently, I noted that she was using the terms credit card and charge card interchangeably.  When I pointed this out to her, she asked if there was actually any difference between the two.  In fact, there is a significant difference.  To fully understand the difference, it is necessary to review a little bit of history.

Prior to the advent of either type of card, consumers generally could not buy merchandise until they had accumulated sufficient cash to pay the price in full.  There simply was no way to obtain the goods or services without the cash.

In the 1920’s, some merchants began offering “buy now and pay later” plans.  These plans allowed consumers to buy that specific merchant’s products or services and make payments over time.  This type of account is representative of charge cards.  They are only accepted by the specific merchant or firm that issued the line of credit.

In the very early 1950’s, a program was introduced that allowed people to purchase meals at any participating restaurant regardless of brand or affiliation.  At the end of the month, the balance on the account had to be paid in full.  Although it was not possible to carry a balance from month to month, this program was an early type of a credit card.

The first credit cards that permitted account holders to carry balances from one month to the next were introduced in the late 1950’s; and, the marketing and use of these accounts became very widespread in the 1970’s.  Today, consumers in the United States are carrying in excess of $790 billion in balances on revolving credit cards!  1

As we consumers move forward in our economic lives, debating how to pay for the goods and services that we want or need, it will be important to keep these differences in mind as they will impact how (and how much) we pay for our purchases.

1 Federal Reserve Statistical Release dated October 7, 2011; data is through August 2011.

Filed Under: Banking, Checking Accounts, Money Management, Personal Finances, Saving Money

Will That Be Debit or Credit?

October 7, 2011 By

The news that several major banks are planning to charge consumers a monthly fee for using debit cards appears to be an attempt to drive consumers to a greater use of credit cards.  Why?

  • First, new regulations have taken effect that limit the fees that these banks can collect from merchants whenever a consumer uses a debit card.  It does not appear that these same limitations will apply to the use of credit cards.
  • Second, consumers have been making a conscious effort to pay down credit card balances and to voluntarily limit their use of credit.  Lower balances mean less interest can be collected by the banks, further cutting into their profits.  If the banks can drive credit card balances up again, interest receipts should increase and profits should rise.
  • Third, many banks are already charging consumers fees for the privilege of carrying one or more of the bank’s credit cards in their wallets.  The fee may be called a monthly or annual service fee; a membership fee (one must wonder what the consumer is a member of); or any one of a number of other euphemisms for a cardholder fee.  Increased use of credit cards is likely to lead to new accounts being opened and an increase in fees that can be collected by the banks.

If you are one of the many consumers who has resolved to reduce your debt and live within your means, stay firm in your commitment to living in a personal cash economy.  It may be hard to break the credit habit; but, your family’s financial well-being hangs in the balance.

Filed Under: Banking, Checking Accounts, Money Management, Personal Finances, Saving Money, Saving Money

Major Banks Plan to Charge Fees for Using Your Debit Card

October 2, 2011 By

News reports on Friday, September 30th, indicated that several major banks were planning to begin charging customers a monthly fee for using debit cards.  These fees could be as high (at least for NOW) as $5 each month.  That’s $60 each year!

After spending years and millions of dollars convincing customers that using a debit card was THE way … fast … convenient … easy … to pay for purchases at the grocery store, gas station, dry cleaners, and every other merchant with a swipe machine at the register, now the banks want to charge you, the consumer, for the privilege of spending your own money.  The bankers have decided that they aren’t making enough money by charging the merchants for this service.  Now, they want to dig into your wallet, too!

I’m confident that the bankers will tell you that you really have no alternatives … you can’t slow down or stop the wheels of commerce from turning.  However, I’m going to suggest that you DO have options.  They are …

  • Pay Cash – the commercials will try to convince you that the use of real money (rather than plastic) will cause the wheels of commerce to come to a screeching halt if you don’t swipe your card.  That’s OK!  It’s YOUR money and you have the right to spend it in whatever manner is best for you.  If you aren’t in the habit of carrying cash, the good news is that, at least for now, the bankers aren’t planning to charge you for withdrawing your money from your own bank’s ATM’s.  Rather than getting charged for swiping your card through the merchant’s machine, get your cash from you own bank’s ATM and pay cash.  This saves both you and the merchants money … and lower merchant expenses could lead to lower prices.  Don’t believe me?  Look at the gas stations that charge one price for their gasoline if you pay with cash and a higher price if you pay with a credit card … and, in some cases, with a debit card!
  • Change banks – yes, it is inconvenient; but, as a consumer, you have a right to demonstrate your genuine displeasure with your bank’s new policy.  Vote with your feet, and with your money, by taking your business to a bank that values your business and doesn’t feel compelled to squeeze every last penny out of your pocket in order to enrich its stockholders.
  • Join a Credit Union – credit unions are not-for-profit financial institutions that are owned by their members and operated for the benefit of those members.  Traditionally, credit unions have avoided many of the fees that traditional banks have charged and kept costs low for their members.  Many credit unions offer the same services as their traditional banking counterparts but charge lower, more reasonable, fees … in some cases, services are provided without the imposition of (yet another) fee.

Yes, you do have choices … but only if you are willing to make the changes that are necessary in order to send a message to your banker

Filed Under: Banking, Checking Accounts, Money Management, Personal Finances, Saving Money

Saving Money at the Grocery Store – part 3

September 12, 2011 By

Teaching financial management classes gives me an opportunity to share money saving ideas with many different people; and, as different as all of the people are, they often ask the same question, “Where do you find all of these great deals?”  There is no one answer.  In fact, these bargains are found in many different places.  Here are just few suggestions.

  • Grocery store flyers – every week, the local paper contains an insert that includes the advertisements from the various supermarkets in the area.  These flyers contain not only announcements of sales; but, they also frequently print recipes that use the products that are on sales.
  • Mail – since not everyone subscribes to the local paper, the grocery stores also have the flyers delivered every home along with the mail on the day after the flyers are delivered in the newspaper.
  • Internet – each of the major grocers in my area also publish their advertising flyers on line.  To find them, just do a web search for [store name] weekly circular.  Additionally, there are many websites that offer coupons at no charge.  A few that I, and others, have found helpful are …

─      www.Couponmom.com

─      www.Coupon-lady.com

─      www.Shopathome.com

─      www.Livingfrugal.com

If you have other websites where you regularly obtain coupons, please submit them so that they can be shared with others.

Filed Under: Grocery Shopping Tips, Money Management, Saving Money

Saving Money at the Grocery Store – part 2

September 9, 2011 By

My friend Carol proudly declared herself to be Coupon Clipping Royalty and claimed the title, “Queen of the Coupon Clippers”.  Two questions immediately come to mind when people start talking about coupons.

  1. Can you really save enough money to make taking time to clip them worthwhile?
  2. Where do you find all of these “great” savings?

Let’s take the first of these  questions.

Yes, you really can save enough money to make it worth the time it takes to clip the coupons!  Think of it this way … what is the value of your time? 

If you spent 30 minutes clipping coupons and saved just $10 on your grocery shopping expedition, you’d have the equivalent earning of $20 per hour!  Aren’t you worth that kind of money?

If you spent just 30 minutes reviewing the grocery store advertising circulars to see what kinds of sales you could take advantage of before planning your menus for the week, how much could you save?  To find out, I performed a brief experiment.

I picked up the grocery store flyer for a nearby supermarket and created seven dinner menus using only “buy-one-get-one” items.  I tracked the amount of time it took to complete this exercise here are the results:

  • 2 chuck roasts – one weighed 2.88 pounds while the other weighed 2.82 pounds.  At $4.99/lb., I got 5.70 pounds of beef for $14.37.  The first one was cut into bite sized pieces and cooked with vegetables to make a beef stew for Monday’s Dinner.  The second one was used to make pot roast for Sunday Dinner.  Total spent:  $14.37  Total Saved:  $14.07
  • 2 bags of frozen, boneless/skinless chicken breasts.  Each bag contains a total of 40 ounces of chicken; or, 8 pieces, each weighing approximately 5 ounces.  Four pieces were cut into small pieces and turned into sweet and sour chicken for Tuesday’s Dinner.  Another 4 pieces were baked with some rice, matchstick carrots, and broccoli along with a can of cream of chicken soup to make a casserole for Thursday’s dinner.  Total Spent:  $10.99.  Total Saved $10.99; and, I have the second bag of chicken breasts in the freezer for use next week.
  • 2 packages of center cut pork chops.  The first package weighed 1.29 pounds and was baked for Wednesday’s Dinner.  The second package weighed 1.22 pounds was cut into bite sized pieces and simmered in a plum sauce and served with rice (also buy-one-get-one) for Friday’s dinner.  Total spent on the pork:  $6.05.  Total Saved on the pork $5.72.  Total spent for rice:  $2.99 for a 3 pound bag.  Total saved $2.99, and, I have enough rice left in the pantry for several more meals.
  • 2 jars of pasta sauce (each 24 ounces) and 2 packages of spaghetti (each 1 pound).  One package of spaghetti and one jar of sauce were cooked for Saturday’s dinner.  The remaining package and jar are in the pantry for use next week.  Total spent for both pasta and sauce:  $5.08  Total saved:  $5.08.
  • 2 frozen pepperoni pizzas.  One was baked for dinner on Saturday night and the other is in the freezer for use next week.  Total spent:  $6.99.  Total saved $6.99

Total savings:  $45.84

Time spent:  20 minutes

Per hour “wage” equivalent:  $137.52

I would dare say that most of us, if offered a job that paid $137 per hour, would leap at that opportunity.  This “job” is yours for the taking.  All you have to do is block out a little time to plan the menus and shop the flyers to find the bargains.  You’ll eat well; and, you’ll save money, too!

Coming next:  Where do you find all of those “great” savings?

Filed Under: Grocery Shopping Tips, Money Management, Saving Money

How can I save money at the grocery store?

August 2, 2011 By

Recently, my good friend and client Carol asked me to review her family’s budget with her to determine if there were any opportunities she was missing for saving money and getting the most value for every dollar she spends.

While going through the budget, I noticed that she was spending far less at the grocery store than she had in the past.  I asked her how she had managed to cut her grocery bill while prices seem to keep going up nearly every day.  She shared her strategy with me … here it is.

  • Every Sunday, she sits down and plans her menu for each meal for the week.  Once the menu is set …
  • She creates a shopping list that lists out everything that is needed to put those meals on the table.  She then …
  • Takes the list to the pantry and crosses off those items that she already has.  With the list pared down to the items that she must buy, she …
  • Becomes the “Queen of the Coupon Clippers”.  Finally,
  • Carol goes to the store with her shopping list; and, if an item that looks good is not on the list, she does not buy it.  She sticks with her plan.

Sounds easy, doesn’t it?  Planning ahead helps avoid impulse buying.  It also ensures that all of the required ingredients are on hand when it’s time to make dinner.  Planning also helps save money!

It’s certainly well worth trying … it just might help you get more for every grocery dollar that you spend!

Filed Under: Grocery Shopping Tips, Money Management, Saving Money Tagged With: , , , , , , ,
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