Money on the Move - Expert, Relevant Financial Advice for Generations X and Y

The Daycare Tax

2009-06-11T13:14:00.000-07:00

Running around the planet for global scavenger hunts is nothing compared to parents scrambling for childcare during the summer. With schools and daycare centers widening gaps in their schedules parents are doing everything they can to fill in without being absent from the workplace.

Enter the daycare tax - paying teachers and babysitters 2-3 times what you normally pay to provide the same service for 3-4 weeks in the summer. Now everyone needs a break, especially if you spend all year in a small room with 20 screaming preschoolers. Some schools even offer a mini-camp or playgroup for the weeks between school and camp. But most parents instead shoulder the burden and scramble for coverage using up any carefully hoarded vacation time and dollars.

Here are some tips on covering the daycare tax:

1. In every community where both parents work there are usually a critical mass of stay-at-home moms and moonlighting nannies. While the stay-at-home-mom isn't hurting for childcare she definitely needs a mini-vacation, even from her own family. If she watches your child for a few days offer to take hers for one day and send her to a spa. If the children are already friends and get along well, this is a win-win-win for everyone.

2. With the slow job market there are plenty of idle recent college grads in search of discretionary income. Consider an impromptu playgroup with a two-to-one ratio of kids to grads and rotate the location.

3. Five parents can each take one day off and cover a week of childcare without spending a dime. At over $100 per day this strategy can save each family $500 per week of additional childcare.

It's a cruel, cruel summer when trying to cover childcare gaps on your own. Communities can stick together to preserve relationships as well as cash. For all of the fairy grandparents that come in to babysit, I hope you are well-appreciated. If not, I know an adorable three-year-old who will be out of camp later this summer....

Micro-Philanthropy: Make a Big Impact with Small Change

2009-01-28T13:40:00.000-08:00

Have you ever wanted to help someone or some cause and felt powerless to help? When you write a small check to a big organization do you wonder where the money goes? Several organizations are now using the web to reach out and ask for small donations from people around the globe. For every contribution received, the donor receives in return confirmation of how the money was spent. Donors come away with a deep sense of satisfaction that the money was put to good use and the receivers get the opportunity to prove how well the money was spent, and perhaps ask a little more.

Websites available to make targeted donations include:

Givemeaning.com lists specific projects and causes that need support around the globe. Receipts for tax-deductible contributions are available on a case by case basis. There are no administrative or credit card processing fees to reduce the contribution. You can also start your own fundraising initiative to get your own cause out there.

At Kiva.org you can make an interest-free loan to entrepreneurs in poor countries. When the loan is repaid you can lend it out again, putting the same $25 or $50 to use over and over again. Kiva works with microfinance institutions that are local and accessible to the poor entrepreneurs, mostly women.

If helping out schools is close to your heart check out DonorsChoose.org. This site enables teachers to ask for funds for specific purposes such as DVDs or chairs for the students. You can locate classrooms in need by state or topic. You can even purchase gift cards for friends and family to donate to a charity that is meaningful to them.

These sites all offer a big bang for your contribution buck. You get to learn about the person or class in need, make an affordable contribution and know you have made a significant difference in that person's life. Word of caution: watch out for sites that charge high credit card and administrative fees for processing your contribution.

Merging Your Money

2009-01-20T18:37:00.000-08:00

Merging finances with another person can sometimes take the relationship down a treacherous path. Whether the two people are involved romantically or in a business relationship, sharing a financial goal implies that both parties' interests will be met. This goal is much easier said than done. A lot of stress and sometimes legal trouble can be avoided by taking time in the beginning of the relationship to clarify the common goals and the responsibilities of those involved to build a strategy that satisfies everyone.

The Roommate Example

Most people start out with roommates whether it's sharing a room as a child, sharing a dorm room in college or sharing your pad with friends after graduation. Having roommates are a great way to share living expenses, stay social and sharpen your debate skills (i.e., "no, I bought the last package of toilet paper"). In this case, money is really about money and the fastest way to stop fighting is to track the household expenses and how much each person contributes. If the concept of budgeting makes you want to curl into a ball just focus on the household expenses like utilities, cable, internet access, and supplies for the kitchen and bathrooms. Break it down into a monthly total, determine how much each one will contribute (determined in equal portions or by amount of use) and on what day of the month each person will cough up their share. Then schedule a monthly get-together to go over last month's expenses and contributions just to keep everyone current. Introduce a bottle of wine and your roommates will back out less often.

The Relationship Example

Money is an emotional topic. Money and relationships cut to the quick of our feelings of security and control. Mix them together, throw in a little stress and you may have an explosive combination on your hands. Since no one is totally rational about money and relationships woes tend to build on money woes it is critical to be honest with yourself about how much financial compromise you are up for. Some couples share everything from the get-go while some couples are married for 30 years and still don't know what is in each other's accounts. You may want to know what the other person has going on but are you willing to share your own secrets? Being honest about your own financial expectations will help you be reasonable about expectations for your partner.

One strategy that gives couples a lot of flexibility is the mine-ours-mine approach: each person has their own checking and savings account and one joint checking account. The joint checking account is used to pay household expenses (see above) and addresses the "roommates" part of the relationship. If there is an interest in sharing travel costs or other near-term goals, a dual savings account can be created for this purpose. I highly recommend against joint credit cards if there is any history of identity theft or money troubles in either person's past. Keep credit accounts separate until you have household finances down to a science and your bills are all paid on time to avoid any future credit score trouble.

The Business Relationship

Business relationships thrive on documented goals and procedures. If a personal relationship goes sour it's highly unlikely an old partner will sue you for their share of last week's groceries. However business relationships tend to have higher stakes and more legal paperwork to establish financial expectations. For example, if you are considering purchasing an investment property with a friend, take care to document everything spent in the process of purchasing and improving the property. These documents are also necessary to determine any tax breaks you may be eligible for. Roommate and personal relationships thrive on an emotional bond between the parties that helps them resolve technical financial matters. In a business relationship there is no emotional safety net for the relationship, and if a business partner pulls out, you could be on the hook for a lot more than a cable bill.

When you merge finances remember to: 1) track where the money is going and 2) document each person's responsibilities to making the arrangement work. Take these steps and there will be less stress and more transparency in the relationship

A New Era

2009-01-20T18:02:00.000-08:00

Well before the election I was on my way to work one morning and passed a group of Obama supporters waving signs, smiling and waving at drivers. They weren't demanding anything or asking for time, just smiling and waving. As someone who always keeps an eye out for vague messages and hidden sales pitches, I was looking for the catch. Instead as I glided past them I took a bit of their hope with me. And I'm grateful for it.

I recently wrote about starting your own domino effect. One person affects another, they affect three more and before you know it there is a movement spilling into the world. The movement of hope and change has brought us to this new era today. Take the hint. Start your own new era. Make one real change that you can commit to and live by.

For example, my new era started three months ago. One evening after tossing two week's worth of leftovers into the trash I decided that I would not throw out any more food. A simple thing really, but it has changed the way I shop, cook and eat. Now when I hit the grocery store I only buy things I know will be eaten soon. I've cut my grocery bills by 25% and don't feel the change since I'm cutting out the food I was throwing away. The extra money is going into a travel fund. My 2009 Roth IRA contribution is calling but you have to live a little.

No more lurking tupperware glaring at me from the back of the fridge. No more cooking and storing food that will mock me from the bottom of the trash. Want an instant fan club? If you enjoy cooking make your friends an offer they can't refuse and offer to cook if they buy the groceries. You will have an instant following that is well-fed and singing your praises. You get free meals and they get real nutrition instead of cereal for dinner. It's a win-win-win for everyone.

Find Your Solid Ground

2009-01-14T10:19:00.000-08:00

As busy professionals it's hard to find time to focus on anything, let alone topics that require a lot of courage to approach. Money management tends to be a scarier topic to explore as most people feel a combination of shame and failure when they think of their personal finances.

For this reason Solid Ground Financial Planning has created the Solid Ground Program - a four-part seminar series to educate and build financial confidence in key personal finance areas. Holding the seminars at the workplace makes it convenient. Keeping the program low-cost for young people in entry-level positions makes it affordable. Employers can sponsor the program themselves, share the cost with employees or the employees can pay individually to attend the program.

The first seminar is an overview of debt management, saving and investing strategies. The next three seminars are workshops that explore each concept in depth and help participants develop personal financial plans.

By the end of the program each participant will know exactly which debts to pay first, how much money they can reasonably save every month and which investments belong in their retirement accounts.

If you would like to bring this program to your workplace please contact Rebecca Schreiber at Solid Ground Financial Planning at (202) 297-1321 and rebecca@solidgroundfp.com. Solid Ground will work with your Human Resources or Professional Development department to bring the program to your workplace.

We All Live Downstream

2009-01-07T10:49:00.000-08:00

I recently found myself at a local nature center and noticed a poster on the wall describing the effects of water pollution. The poster featured a fish mowing his lawn underwater warning of pesticides that end up in the water supply. The title was "We All Live Downstream" and it got me thinking about the different types of financial "runoff" we're exposed to and how we effect each other's financial well-being.

In the U.S., no one exists in a bubble. With 24-hour news on your radio, tv and PDA there's no getting away from the financial decisions we see others make. This exposure creates a domino effect on how we manage our own money. If enough dominos fall we get a boom or a bust. The most recent domino effect was the spending of emergency funds. First individuals did it, then banks did it, now the Federal Reserve is doing it. Consumers stopped saving for several years, then banks lent out everything they had to pocket the fees and now the billion-dollar bailouts will keep the country from saving anything for several years to come.

What can you do about it? Once you recognize where the financial influences are coming from in your life you can affect them. The dominos headed your way may be friends, family, your work environment or your own bad habits. Are you happy to stay and watch Netflix when your friends want to go out to dinner and a movie? Do you enjoy simpler vacations than the rest of your family? Are you feeling dragged out to shopping you don't really enjoy? Many people spend any extra money they have because they don't know what else to do with it. Offer some suggestions - maybe a simple dinner at your house. Get takeout. Maybe a pizza. Whatever it is, start your own domino effect. Your friends may all be better for it.

Babyproofing Your Finances

2009-01-07T09:53:00.000-08:00

This morning I was a guest on Your Turn With Mike Causey, a regular show on Federal News Radio. We discussed how to navigate life events and still keep your head above water. This is particularly helpful for new parents who have introduced into their lives not only a bundle of joy but a bundle of expenses and tough choices as well. Whether you are welcoming child #1 or child #4 into your family, here are some tips to help you keep your bearings:

1. Once the baby is born you have 30 days to change work-related benefits that you normally only get to change during open season. The birth is considered a "qualifying life event" that triggers the 30-window for benefits changes. Take the opportunity to adjust your health insurance, medical and dependent care Flexible Savings Accounts for the new baby-related expenses. If you miss this window you will have to wait until open season again to start saving taxes.

2. Automate your savings and bill-pay. Over the next several months you'll be surviving on precious little sleep. If you're lucky you'll remember the last time the baby ate, napped, or even the names of your other children. Chances are that a student loan, credit card or car payment will slip through the cracks. If it does your credit score will suffer and the late payment will haunt your credit report for 7 years. Before the birth spend 30 minutes online and set up your payees and automatic payments. Your credit score will thank you.

3. As soon as the baby is born submit a new W-4. This form, available through your HR department, allows you to increase your take-home pay by increasing your withholding. The idea behind withholding is for your employer to withhold from your paycheck the amount you expect to owe in taxes that year. Since the IRS gives you a tax break on every dependent you will owe less taxes. Thus, increasing your withholding simply reduces the amount your employer needs to put away to pay your reduced tax bill. The W-4 is processed right away so by the time you're paying for diapers there's more money in your paycheck to cover it.

4. Be flexible to the idea that you may change your work plans once the baby is here. I have seen many clients expect to want to immediately go back to work or stay home altogether, then change their minds once the baby is born. Keep your options open. Wait a few years after the birth to purchase a home or upgrade to a larger home. It's tempting to get the home purchase "out of the way" before the kids come but it paints the family into a financial corner. And as many of us have learned the hard way, it's pretty expensive to get out of a home we can't afford.

Your family will last a lifetime. Make sure you cover your bases with a budget, an emergency fund, life insurance and retirement savings - then move on to home ownership. Be a professional now. Be a parent now. Be a homeowner when you know you can handle it.

If The Airlines Can Raise Cash, So Can You

2009-01-05T13:47:00.000-08:00

Last week the Wall Street Journal reported that United Airlines and Delta were able to raise billions of dollars in cash. Guess where they found it - under millions of airline seat cushions. Well, not exactly. They simply upped their game and played some well-known airline tricks such as selling and leasing-back airplanes and launching frequent-flyer programs. No brain surgery, no rocket science. They were just holding out.

Now before you go raiding your friends' couches take a moment to let this sink in.
No doubt you also have have a few cost-cutting, cash-raising tricks up your sleeve that would come in real handy right now. 2009 is a fresh, new year. People are wise to the value of a dollar these days and think better of those who spend wisely. Now is an excellent time to adjust to a lifestyle that is more in tune with your goals.

Maybe you've got a few things you wouldn't mind selling or trading. Perhaps you've been meaning to start new healthy habits and need a little competition to get going.

Well, Delta's beating you by about a billion dollars.

But all is not lost. After all, how can one person compete with a whole airline? Level the playing field, find a friend and make a bet: whoever saves the most in three months buys dinner. And not a dinner that comes in a paper bag, either. A little competition goes a long way. After all, it made the airlines billions of dollars.

Gearing Up for 2009

2008-12-29T14:01:00.000-08:00

I love this time of year. There seems to be a collective calm as everyone comes off their post-holiday binges, savors the last few hours of vacation and takes a cautious peek at the new year.

The sales out there don't hurt either.

If this is the year you've decided to get started organizing your finances I have a few belated gifts for you. The hardest part of getting started is finding the tools that make the most of your attention span. Here are my three favorite tools for getting organized whether you prefer the written word, the web or the all-powerful spreadsheet:

1. You Have More Than You Think by Tom and David Gardner. This light-hearted, informational guide was written by the two happy blokes who started the Motley Fool. The book was published during its venture-capital-rich high times when they could afford to educate the masses for free. Ah, the good old days. You Have More Than You Think is a pleasant, easy-to-follow guide that covers investing, making large purchases and other financial events. There's even a guacamole recipe in it. Definitely borrow this one from a friend or the library.

2. Microsoft Excel. As a professional money tracker I think of tagging and categorizing expenses as a good time. For some reason, Quicken and Microsoft Money ruin it for me. Excel is simple, everywhere, and by creating one worksheet per month you can easily compare expenses from one month to the next. I have the entire year's expenses in one workbook that I update Sunday mornings (remember, this is fun for me). I spend less time formatting and more time analyzing where I can get more bang for my buck.

3. The Millionaire In The Making column on CNNMoney. I've been following this column for years as it highlights what real people are doing to build piece of mind along with wealth. Beware the recent iReport link - it is the American Idol way of letting people publicly apply to be featured in the column and is more noise than wisdom. Go to http://millionaires.blogs.cnnmoney.cnn.com/ for actual featured families. Though your situation may not match any of these potential millionaires you still get insight as to the thought process that helps them grow rich. Try not to be discouraged by the couples who preferred to go childless and retire early - parents get rich, too.

These tools have served me well and I pass them on to you. Happy New Year, be safe, and I wish you a prosperous 2009.

2008-12-22T08:39:00.000-08:00

First Aid for Retirement Portfolios

For the past year the economy has been rubbing salt on our wounded investment portfolios. Most of us have stuck it out while some are shaking their heads on the sidelines with their portfolios halved, sitting in cash, waiting for the next sure thing. With pundits pounding their chests about the worst recession since World War II they are also claiming that it will all be over by the end of 2009. Not 2010 or 2012, but all of twelve months away. And when the turnaround hits, you're going to want your money there when it happens.

Check Expenses, Not Balances

The first thing to do is to take a look at your portfolio. Do you even know what you're invested in or what it costs? If you've been hiding your unopened statements in a drawer it's time to open them up. Don't look at the balances, just Google the funds to find their expense ratios. If your funds are charging you more than 1% and this is the first time you've looked at your accounts in six moths, seriously consider index funds.

The Lazy Investor's Best Friend

Index funds are groups of stocks that track portions of the economy and they are great low-cost, long-term, low-maintenance investments. Unlike mutual funds with an investment manager constantly buying and selling stocks, index funds are managed by computers who work for cheap. Thus the lower expense ratios. Anyone who doesn't want to spend hours every week tracking their investments or their investment managers should take a close look at index funds and put their long-term investments to work. Most index fund expense ratios are under 1.00, also called "1 percent" or "100 basis points." Most actively managed funds will run you 1-2% in annual fees.

Money for Nothin'

With Treasury rates swirling the drain you can expect any interest you are earning on your savings to drop with them. Hopefully your bank's rates will stay afloat, but if not, fight the urge to take your savings and do something "productive" with it. Keep your cash where it is. If you use it to pre-pay debt or replenish your retirement funds and something happens you'll have to turn to credit cards to keep you afloat. Remember, the purpose of an emergency fund is to keep you from emergency debt.

A Million-Dollar Station Wagon

2008-08-01T12:48:00.001-07:00

Building wealth doesn't have to be about pouring over investments or living like a beggar. Sometimes it comes down to one thing - one change in your life - that you're willing to make for your future.

For me, it's my car.

I drive a beaten up 1997 Mercury station wagon in a classic shade of hunter green. It has two long scratches down the sides and a rearview mirror held in place by elmer's glue and hope. Two years ago good friends of mine offered to let me borrow this extra car that was taking up space in their driveway. In return I would let their dogs out before and after work to give them more flexible schedules.

I had no idea this arrangement would make me rich.

The car runs well and passed all of its inspections after some minor repairs. It's not pretty but it's reliable and has plenty of cargo room. When I recently considered buying a new car I ran the numbers to see what I would gain if I kept it. I never new it would make me a millionaire. Here's why it will:

I save $350 per month on a new car payment and
I save $100 per month on insurance for a new car (my beauty is $30)

Total: $450 per month in car savings

I contribute the monthly savings to my retirement account at work that matches me dollar for dollar with immediate vesting:

I put $450 per month into my retirement account and my employer matches me $450 which I vest immediately (meaning I get to keep it even if I left the next day) totalling $900 in monthly contributions to my retirement account. I invest it in an S&P 500 index fund.

My $900 per month will sit and grow in a broad market-based index fund earning 9% per year average after minimal expenses. I don't expect to retire for another 30 years.

$900 per month earning 9% over 30 years = $1.47 million dollars.

I get $1.47 million dollars for driving a beat up station wagon.

For me it's a car. For someone else it might be having a roommate, taking public transportation or only eating out on special occasions. These changes aren't easy but the payoff is too great to pass up. Now when I get in my car I feel gratitude - gratitude to my friends for lending me the car, to my employer for the generous retirement match and most of all to the car that dutifully starts up every morning. One day it won't start up, and when that day comes, I think I'll cry.

Welcome To Money on the Move

2008-03-17T14:33:00.000-07:00

I recently met a friend of mine for coffee and the late afternoon conversation drifted into our future. Our financial future, that is. As a financial planner with an eye on the needs of a younger generation I offer fact and perspective on current financial events and how to benefit from them. So welcome to “Money on the Move” where I offer you short, sweet, relevant responses to the debt, spending and investing questions offered by clients and friends. Feel free to ask a question through the contact page on http://www.solidgroundfp.com/contact.html and we’ll throw it into the mix.

From someone who can be rational about everyone else’s money (doctors make the worst patients) let me offer a few nuggets of information to help you center your financial world:

¨ Organize your information into three categories: debt management, spending and investing. These topics cover the money you’ve spent in the past, what you spend today and what you’ll spend in the future. It is better to make a little progress in all three areas than to make a lot of progress in one and neglect the other two.

¨ Cash is King. If you don’t have an emergency fund don’t overpay your bills. Instead keep any extra cash where it won’t get spent - in a money market account, your checking account or even a coffee can. Cash is freedom. If you have cash you have choices.

¨ Financial planning brings you instant gratification. Keeping yourself fiscally fit enables you to have what you want when you want it - even if you don’t know what that is yet. Anyone can have the life they want with a little honesty, a little sacrifice and a calculator – you just need to decide if it is worth the effort.

So keep coming back to Money on the Move for relevant advice from a trained financial eye. Oh, yes, and financial planners buy lattes, too.