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Joe is a former financial advisor and media representative for American Express and Ameriprise. He was the “Money Man” at Detroit television WXYZ-TV, appearing twice weekly. He’s also appeared in Bride, Best Life, and Child magazines, the Los Angeles Times, Chicago Sun-Times, Detroit News and Baltimore Sun newspapers and numerous other media outlets.  Joe holds B.A Degrees from The Citadel and Michigan State University. 

I Miss Checkbooks

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Another in the series of AverageJoe’s day-by-day attempts to just get along. And failing. For other stories in the series, check out:

– There’s Something Wrong With The Car

– I’m Not an Expert on Everything

– Networking 101: Meeting Basketball Insiders (a How To manual)

– Blog Post of the Week! by Money Beagle

 

A recent post at DebtBlackHole.com showed some awesome Wonder Woman prints, and reminded me that we’ve probably come to the end of the golden age of taking out a pen and actually writing a check.

I miss that sexiness in my banking. I’m not referring to Wonder Woman’s …ah….assets, either.

My debit card has a free picture of a baseball on the front, but there was once a time when people would whip out a cool pad of Bugs Bunny checks to purchase a new toaster. Or pizza rolls.

Those were the days.

 

Better You Than Me

 

I’m that guy.

There’s no way I’d ever give up the few extra dollars it costs for Skeletor or the Detroit Tigers logo on my checking account. My checks are and always will be white with the name of my bank across the front.

Beyond creative.

But that doesn’t mean I’m a hater. I love creative checks if you use them.

Checks are gone partly because scammers figured out that it didn’t matter what you wrote on a check. If you shopped at Sears, you could make the check out to “Mickey Mouse” and write “One million, seven hundred and seventy seven dollars” across the front. If the little box said $32.50 in it, guess how much money was deducted from your account? You’ve got it. $32.50. And it wasn’t made out to your favorite mouse, either. The cash went to Sears because they’d presented it for deposit.

But that’s not the reason I miss checks. I have a better one for you. Read on…..

 

My Irrelevant Tale

 

My daughter, like many, played youth soccer from about six years old on. I’m not the world’s biggest drinker, but I so wanted to be drunk at these games.

The kids swarmed like hungry wolves around the ball, all kicking each other at the same time. You had no idea which kid was yours. Then again, it really didn’t matter.

The coach yelled, “Don’t bunch up!”

He was a nice guy, but if the best soccer advice you can offer is “don’t bunch up,” youth soccer strategy might be over your head.

Luckily, I met some nice parents at the games. Many are still friends today. One who isn’t, is Dick Smith.

I’d plop down my chair next to this dad, Dick, who was out there like me, taking one for the team every week. He was a flat-out super guy. Distinguished looking grey hair. Tall and thin with an easy smile and easier laugh.

I’d always try to sit next to him because Dick was a vice president at a frozen food manufacturer and always had good engineering stories about process management and green beans. I’m a sucker for logistics and keeping veggies icy, apparently, because I had tons of questions and always was mesmerized about how the shipment to northern Ohio dethawed while the trucker frantically tried to keep the refrigerator running.

I’d pull up a chair and say, “Hey, Dick! How are you?”

He’d smile back at me as I slumped next to him. We’d watch our daughters kick each other and the ball for about 45 minutes and chat.

This went on for about two and a half years.

 

So far, so good, right?

 

Each week I’d walk down the sideline. He’d be sitting there, pretending like he wasn’t trying to pull his hair out. Then his miserable look would melt as he’d see me and smile, “Joe! How are you?” I’d reply, “Hey, Dick! Mind if I join you?”

Of course, he never minded.

It took the pressure off watching the game.

Our daughters went to the same school. In a big parent money-grab for the Parent-Teacher Organization, semi-annual teacher conferences dumped into the library, where a huge Scholastic Book Fair sucked money out of our checkbooks.

It was expected that you’d buy your kid a book after the conference.

Dick and his wife, Margie happened to be in the book fair when Cheryl and I finished meeting with the teacher. As always, our daughter had a fine conference and we were doing our duty by buying her a book.

The line for the cash register was a mile long. I thought about heading to Barnes & Noble to buy our book. Who’d know? My daughter wouldn’t have a clue where it came from.

I was just telling Cheryl that we should ditch the fair when I saw the Smiths.

“Hey, Dick!” I said, waving. My mood changed immediately. Now I could stand in line for a long time if Dick was there. We’d just talk frozen food, sports, or whatever.

The four of us chatted for about a half hour before we finally made the front of the line. Dick motioned to Margie.

“Can you hand me the checkbook?”

“Sure,” she said, rummaging through her purse.

She pulled out the checkbook. Dick opened it and took a pen from his pocket.

Because I love checkbook art, I leaned in to see what print the Smiths were sporting and turned white.

Across the top of the checkbook it said Mark and Margaret Smith.

….I know now…..

I can’t believe he’d kept smiling at me for two and a half years…..

The Worst of the Free Financial Advisor Podcast – Episode 1: A Big Reveal, College Planning Tips & Tricks & Meet the Roundtable

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NOTE: We’re learning “how to do this podcast thing” as we go. Right now we’ve not figured out how to get an RSS subscription started. Finally, we aren’t signed up with iTunes or other services yet. Thanks for your patience!

Update: We’re now LIVE on RSS (it’s probably a lot easier than we made it out to be…) and you can subscribe by clicking here.

Update #2 – iTunes now has us LIVE as well!  So…pretty please with sugar on top, stop by iTunes by clicking here (subscribe if you want to) and write a nice review.  It sure helps us out !  Thanks!

 

To kick off our debut episode, the anonymous blogger at YourFinancesSimplified reveals his real name…and tells us why he’s doing it.

How’s that for a scoop, huh?

TheOtherGuy and I deliver college planning advice and talk about estate planning taxes maybe changing.

We also have introductory interviews with our Roundtable members:

Dr. Dean from the Millionaire Nurse Blog,

Carrie Smith from CarefulCents,

YFS (above)

and of course….wielding the Magic 8 Ball…Len Penzo from LenPenzo dot Com.

Thanks to Buck from the Buckinspire Podcast and Shannyn from the FrugalPreneur Podcast for their help on the episode.

All of our music on the show is from Kevin McLeod’s Incompetech.com.

 

Important Stuff Mentioned in the Show:

  • Peterson’s – Joe’s favorite college guide online
  • FinAid.org – All of the financial aid information you can stand, and much more
  • SavingForCollege.com – A great site to compare 529 plans
  • Fastweb – FinAid’s sister site tobegin your scholarship search

I didn’t mention it on the podcast (but should have). A great blog for college planning help is Money For College Project. Check it out.

Our Facebook page is here. (If you don’t know why I’m linking to this, you’ll want to listen to the podcast again…..)

We don’t talk about it on the podcast, but link to us on Twitter here for more witty-free banter.

 

 

Download Episode 1 By Right Clicking/Save As…Here

 

 

 

5 Good Reasons to Hire a Financial Advisor and 2 Bad Ones

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The decision to hire an advisor to help with your financial planning isn’t a step I recommend lightly. I’ve been lucky: over 16 years of practice I was hired mostly for good reasons, although some others were….not so much.




Most people don’t need a financial advisor.

I’d tell individuals before they hired me that 90 percent of what I did, they could do themselves. My job was to guide them through sometimes stormy financial waters. As a bonus, I’d save them time and money by already knowing tricks they could probably find online. My staff would fill out annoying paperwork, and we had access to the best professionals in related fields. If you needed good advice, I either could provide it or knew how to find it fast.

In fact, at some points I was more of a concierge than a financial advisor….while most of my contacts were finance-related, I knew good babysitters and how to get a table at the top restaurants in town!

Here are five good reasons to hire a financial advisor:

 

1) You don’t have time.

I worked with many successful people who could have easily completed their plans alone. Most of my clients were engineers or executives working for Microsoft and Chrysler. These were intelligent people (often financially savvy, too).

They recognized that they needed a good plan drafted that they could examine and sign off on. They also needed someone to facilitate the legwork. It had to be someone knowledgeable who had their back. They needed to be able to review everything on a plane or between meetings.

 

2) You aren’t going to look at the stuff yourself.

Some of my clients were smart people, but in completely different areas. I had a client who was a very well-known artist. He needed to be forced to have consistent meetings about his meetings. Without me, he wouldn’t ever review how he was doing.

 

3) You don’t want a full financial education.

This type of client would sometimes frustrate me, but I had a large number of them as clients. Different from my artist and executive clients who were generally well educated, financially savvy people, these clients would just rather pay me to do it.

These clients were very happy to meet with me and talk financial planning. They’d listen and nod. I was pretty sure that they were getting the basics about what we were talking about. I tried to keep it entertaining, because I knew they hated being in my office.

Some were looking for the concierge treatment. For those people, we had client dinners, good coffee in the lobby and occasionally went to sporting events or concerts. They didn’t care about how the money was managed, as long as it was done with as little input on their end as possible.

These clients sometimes scared me, because if things went wrong, they had no idea why and didn’t want to learn from anyone but me. If this sounds like you, it’s better to hire a good advisor than wreck your financial ship because nobody’s at the helm.

 

4) You want a smart coach in your corner…

…to steer your plan in the right direction.

Some of my clients I knew were only going to be with me for a short time. My job was to educate them how to do it themselves. Some advisors won’t do this. I was happy to help. I liked talking strategy anyway, so if I had a willing client who was coachable, I’d take them through the process. As a bonus, I handled most of the annoying parts (like filling out Roth IRA forms) because they were paying me a fee. It wasn’t why they wanted me as an advisor, but it was definitely icing on the cake.

 

5) You want an ally to point out flaws in your strategy.

This was probably my least profitable type of relationship, but the one I appreciated the most. I had a few Do It Yourself investors who already had a complete strategy and just wanted to hire me for a couple of hours a year so they could tell me their strategy. I always had questions, then feedback, and nearly always, adjustments I’d recommend.

One client, Paul, said he specifically hired me because our philosophies clashed and he wanted to make sure his strategy looked good from the other point of view. He thought about his plan so often that he usually had a winning approach, even though I definitely would have rarely completed the plan the way he did.

 

 

There are a couple of important reasons NOT to hire an advisor:

 

1) You want someone to do it for you.

There’s a subtle difference between this person and the one in #3 above. The person in #3 was happy to meet with me every few months and talk about money. They wanted some small amount of “here’s why we’re doing this.”

Then there’s the person who just wanted “take this cash and make it work.”

I care about my former clients. I never can care about your money more than you do. I’m the money babysitter, you’re the parent. Act the part.

 

2) You want to day trade with a partner.

I had two clients who could never get through their skull that I was very happy that they day traded…but leave me out of it.

Initially we’d separate the portfolio into two sections: the “long term investment” portion, that I’d help steer, and then the “play money” portion that they’d day trade. I’d make clear that they were on their own with the play money account.

Invariably, these two clients would call in a panic and tell me that Jim Cramer had just said something on television and they needed to sell…but what did I think first? Should they sell? Should the go contrarian and buy more? Could I look up some charts for them? Maybe call a couple fund managers and ask their opinion off the record?

No thank you.

The math on my practice worked this way: 150 families, all of whom paid for and should demand my attention.

If I met with each client on average 3 times per year for an hour and a half, that meant 675 hours of meetings. Additionally, I’d call each client twice a year minimum and talk for 20 minutes (assuming there weren’t urgent financial events afoot or you hadn’t called me first). That was another 50 hours.

We won’t even approach all of the emails I sent or returned daily. Remember that I mentioned Microsoft employees? Those people love email.

After 10 hours of preparation time a week and 10 hours of strategy/internal and analysis time (not to mention any marketing we were doing), that left 30 hours for client meetings. After holidays, I worked about 48 weeks a year.

Where was I going to find time to day trade your account?

 

 

That’s my story. Now it’s your turn: have you interviewed advisors? How did the meeting go? What did you like/didn’t like about their approach?

 

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Budget Spreadsheet on Steroids: A Mint Review

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By now, you should know that I strongly believe it’s great money management systems, not mental strength, that creates wealth.

In earlier pieces on budgeting, we tackled two important topics:

– Many successful people don’t have create time to create or track a budget spreadsheet, so automating the process is important for success:  Forget 5 Steps To Budget Success–How About One.

– Budgeting with a partner is as much about communication asit is about counting pennies. Cheryl and I use this budget to make sure we’re on the same page:  The Twenty-Minute-a-Week Budget: A Busy Couple’s Best Friend.

If you’re a busy person who can’t write down every expense on the fly, it’s important to stay on top of data. You’ve heard me mention a tool called Mint which I use to monitor my financial life.

 

What is Mint? Let’s take a tour.

 

Mint.com is a free website that tracks your money management. For the most part, it does so seamlessly, handling all the budget spreadsheet tasks and more. I get excited whenever I log into my Mint account, because it puts a wealth of information at my fingertips.

With Mint, I know:

– How much I’ve spent this month

– My net worth at a glance

– My investment status

– Opportunities to improve

Of course, just because it’s free doesn’t mean there isn’t a cost. Mint assails you with  partner offers and a myriad of ways that you could do better, using products solicited through the site. Like I mentioned in my review of Upromise, to me this is a small price to pay for a robust tool that saves me from creating a budget spreadsheet and looks for opportunities to save me money.

In many ways, Mint is like another pair of eyes that can point out strengths and weaknesses.

 

Setting Up the Account

 

When you first log onto Mint, you’ll enter in information about your financial life. It’s going to ask for your brokerage, home, savings, checking, and credit cards. It’ll be helpful to have login information ready at your fingertips.

If you aren’t sold on Mint, give it a quick tour to see how it’ll affect your money management decisions. Put in only one or two accounts at first. You can always add the rest later if you like it.

Sometimes adding information to your Mint account isn’t easy, even though it seems like it should be. I use a small regional bank. Mint had 22 variations of the name, and it took me about 15 minutes to discover which bank was mine. That was a pain.

Besides this issue, though, I was able to quickly put the bulk of my finances into the system. That’s when the magic began.

 

Mint Alerts

 

Forget spending hours on the budget. Mint automates the process so you focus on results.

You’ll be able to set up custom alerts on Mint, but right out of the gate, it informed me that my house payment was due in three days and I had a credit card payment due now. A budget spreadsheet would have never noticed any of these things.

It’s the focused alerts that keep me coming back for more. Who has time to set 20 individual alerts across the financial universe when I can aggregate this information into one convenient spot.

 

The Budget

 

Mint laid out my expenses clearly in a graph format. I can quickly see if my expenses are where they should be, without having to dig through my expense history.

Better yet, I can place constraints around budget categories and ask Mint to notify me if an area of spending is out of control. This feature is awesome for busy people. You’ll know immediately if an area of the budget is compromised without having to go check your stuff.

We just completed a trip to Austin, Texas for the state swim meet. Mint told me that I’d spent far more on dining out than I normally do. For a quick money management update, this is handy information. Even though I was aware of my overage in this case, the reminder from Mint is always welcome.

 

When Mint Doesn’t Work

 

Like any budget, diet or workout schedule, Mint only works if you use it. You have to visit the site frequently or set up alerts to make sure that the information is useable.

I like Mint in combination with our weekly family planning meeting specifically for this reason. By reviewing our Mint budget spreadsheet at every meeting, we make sure that the data we’re collecting helps us make good decisions in the future.

 

Security

 

I’m not a security expert, and it worries me that I’m trusting Mint with my entire money management financial life. Here’s how I justify it: Mint is aligned with nearly every financial institution in the country. Their security experts have to be satisfied that Mint is a safe place for customer information before agreeing to be a part of the network.

Is this a valid argument? Probably not. That said, for me time is money. Mint is a time-proven entity that saves me a ton of hassle and has saved my financial bacon on more than one occasion. There are threats to my financial security all around. I have to trust some sites or I’ll end up at home with my abacus, getting nothing done.

 

What do you use to automate your budget? Do you manually create a budget spreadsheet or have you found a quicker way? If you use Mint, is there an area you like that I didn’t mention? Are there parts of Mint you find frustrating?

(assembly line image credit: Paul Esson, Flickr)

 

Interested in trying Mint? This will take you to the home page: Mint.com

 

A Cuppa Joe: What Are Your Buying Triggers?

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Minions,

Happy Monday! It’s time to gather over a cup o’ Joe and discuss the question of the week.

This week: They gave you glamour and movie stars. Let’s counter it Monday morning with our own glitz: hypnosis, fast food and cheesy commercials! Dream!

 

We all have triggers that influence our buying decisions. Many of these are unconscious, according to a recent Psychology Today article. We buy more when we’re hungry or tired because we’re especially susceptible to specific triggers during these times.

 

Fast Food Love

 

A few years ago, a friend gave me the opportunity to undergo hypnosis. I thought, “Cool! I’ll finally get to walk like a chicken in front of a crowded theater of people.” Instead, she and I were in a comfortable office alone, and I was handed a list of topics. I chose weight loss, because my waistline was starting to balloon and I wanted to keep this sexy figure.

What I discovered during these sessions was beyond interesting.

The first two times I went under, we discovered that I most enjoyed the communal properties of eating. I like good discussions, and those often happen over lunch or dinner. Plus, in my financial planning job, going out to eat was a great way to network, which led to bigger paychecks.

Eating out equaled career success.

Those were neat, but the third session was the breakthrough.

I had a strong image during the third session of riding in the back seat of our Buick next to my brother. My mom drove us to pick up my dad on his break at the local GM plant. He’d work long hours, but would be able to escape with us for a few minutes to hit the close-by McDonalds, pizza place or Dog ‘N Suds drive thru.

I remember these times and immediately get a warm, comfortable feeling. We were all together, happy and eating hamburgers.

In short, we found out that I equate fast food with home, happy times and family.

To my subconscious mind, Big Mac = Huge Love.

Ever since this revelation, my eating habits have morphed. Sure, I still like fast food, but when I pull in, I now know that those family feelings are a lie. It’s just a hamburger and fries. The old days won’t reappear, but my waistline will disappear.

 

Unlimited Laughs

 

Humor is another big seller for me. I don’t usually like dumb humor, like the Three Stooges. I know people who love that type of thing, but it doesn’t do anything for me. I’m into more subtle humor, (like lyrics found in songs by The Beautiful South). If somebody worked on making it clever, I think it’s funny.

We were up early at 4 a.m. getting ready to make the long drive to the state swim championships. I was both tired and hungry, so it doesn’t suprise me that I sat and watched all of this commercial:

 

It’s the first time in forever that I’ve watched an entire two minute commercial. Funnier? Cheryl watched it all with me. What do I like about it?

– First, the product appears to work and solve a need. If it doesn’t work, the humor doesn’t matter.

– It laughs at itself. I have this tendency, too. Witness this, this and this. I have an appreciation for those who can

– It emulates the absolute worst in infomercials and makes fun of it. Watch the commercial a second time and notice how hard the actors appear to be trying to cheese it up.

– There are slimy but clever jokes about cat hair and playing with your Schticky. Some of this stuff I can’t believe they say in a commercial. Then again, it make me listen to the whole thing, so apparently it worked.

– The pitchman even makes fun of this run-in with the law.

– They double down by making the biggest part of the product free. Of course it is! Why would the smallest portion of the product be free when you can give away the store? Brilliant.

…all while reminding you over and over again how well the product works.

I don’t know if I’ll ever buy this, but I’m captivated by the marketing strategy. In an age when everyone seems to be working hard to be taken more seriously than the next guy, I like that they’re redefining the rules of informercial television.

 

Now the Cuppa Joe Monday Question

 

What are your triggers? When and why do you impulse buy? Have any commercials keep your attention…or better yet, made you buy?

 

((Photo credit: Flickr user puuikibeach))

Why I’m a Upromise Fanboy

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Let’s cut to the chase:

1) I love doubling up on point programs. Getting stuff for free that I would have paid for anyway = awesome.

2) It isn’t just a college savings fund, although I have a 529 plan for my kid’s education. After my kids finish school, Upromise will pay me in other ways (a savings account, student loan repayments or a check).

I’ve been a Upromise member since 2004. I knew going in that Upromise is a marketing plan. They want to watch me shop. Normally, this would scare me almost as much as catching my parents skinny dipping. In this case, the rewards justify the means. They aren’t interested in AverageJoe who lives at my particular address. They’re interested in the fact that I’m a 44 year old money nerd with 16 year old twins. I’m a statistic. Sigh.

Signing up is free. There are no strings attached. You won’t get billed later if you decide to stay in the plan. Nothing. Nada. Free.

 

The Bad News

 

Whenever there’s a free service, you’re going to somehow pay for it. Upromise is no exception. When you try and sign up, they’ll immediately pitch you their reward credit card. While this isn’t a bad choice of cards, if you’re living a cash only lifestyle, it’s usually a better choice to press the “no thank you” button on the lower right corner of the screen.

You’ll also receive emails from them about partner offers. If you don’t like these, give Upromise an email address that you use for this sort of thing.

 

The Good News – Double and Triple Dip Point Plans

 

You can score double or triple rewards with this program. Let me show you how:

1) Let’s say you’re dining out. Before heading for the restaurant, you pull up the Upromise dining plan page. Restaurants are arranged by your zip code, so it’s easy to see what’s close by. Pulling up a random zip code 63108, I find many restaurants that pay Upromise points. Notice also that these restaurants don’t necessarily give points every day. There are so-called black-out dates, so watch for those.

2) Sign up for another program such as iDine. If you head to the iDine website, you’ll be able to pull up their list of restaurants. Go ahead and plug in the random zip code (63108) again…. Wow! Most of the same restaurants are in both plans. With iDine I’ll have to fill out a survey about by experience, but now I’ve received points from Upromise and from iDine.

3) Check out your bank or credit card point plans. You may also receive points by using a card with reward features.

You’ve just triple-dipped points.

 

More Good News – Upromise Pays for a Wide Range of Merchants

 

I’ll tell you a secret.

I don’t pay much attention to whether Upromise pays points at a retailer or not.

I could totally game this system like I showed you above, but I don’t as much as I should. However, I still rack up points accidently.

An example: although I’m not really a Walmart fan, there are two in my town. It’s impossible not to end up searching the aisles of Walmart nearly once a week. Walmart used to pay Upromise Rewards at a 1 percent rate. Had I not been writing this article right now, I would have never known they have a promotional rate until 2/23/12 of 5 percent rewards. I would have scored even more rewards doing what I normally do, and not noticed any difference in my lifestyle.

…all because I took 10 minutes to sign up.

 

How It Works

 

You’ll accumulate points in the program. Once you reach $10 (in some cases it’ll need to be more), you can sweep your earnings to a high-yield savings account, a 529 plan, pay down a Sallie Mae student loan, or request a check.

 

To Summarize

 

  • The plan takes 10 minutes to sign up for
  • I link credit and debit cards to the account
  • Whenever I use those cards at participating retailers, I receive rewards
  • I ALSO get rewards through other programs, such as my credit card or other reward programs
  • I redeem rewards when I hit $10 or more

 

When I was a practicing advisor, I recommended that all my clients sign up for Upromise. The firm I worked with wasn’t affiliated with Upromise and I received no compensation from them. My job was to help my clients improve their financial situation. I’ve been a Upromise member since 2004. Although I do receive affiliate income from them now, it’s something I’d recommend regardless (similar to Mint and an ING savings account….two other plans I recommend and have enjoyed personally).

 

How to Find Upromise

 

Here’s a link to the Upromise website: Upromise Reward Program.

 

Do you use Upromise? How do you double and triple dip reward points? Join the discussion in the comments below.

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The Twenty-Minute-a-Week Budget: A Busy Couple’s Best Friend

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There are few times when I feel closer to Cheryl than when we’re talking about money.

I’m not talking about the stereotypical “You spent how much on coffee?” discussion, either. I’m talking about the heart-to-heart sit down where you walk through your dreams, goals and daily expenses.




It’s during these times that we both get excited because we’re moving in a unified direction toward concrete goals.

In theory, it should be easy. Talks about money should come naturally to two people who love each other and share much of their daily existence. You and I both know that it isn’t easy. You have to grind it out, because there are so many other, less important discussions that crowd out money talks. Things like “what are you laying out for dinner” and “what are we doing Saturday” get in the way of “what do we want to do with our money to successfully plan the rest of our lives?”

I tend to agree with David Chilton, author of the financial planning book The Wealthy Barber.  Like him, when I read yet-another-blog-post about yet-another-budget-idea, I think “budgets are baloney.” Like him, I believe that people do what they have to do to make ends meet.

The problem is that we spend far more time planning the near end than the far end.

My personal story about why most budgets don’t work:

As a financial advisor, I’d work with people on their budget. We’d figure out how much the family should spend on dinners, travel and holidays. Everyone would leave the meeting happy, ready for the challenge. A couple weeks later when we’d meet again, I’d be disappointed that the budget hadn’t worked. The couple wasn’t able to stay within the confines of this well-laid roadmap.

At first, I blamed the couples I worked with. They weren’t trying hard enough. They were so focused on irrelevant stuff that they weren’t truly trying to make a difference in the one area of their life that could change literally everything about their existence: their daily spending, their children’s education and their retirement vision. Everything.

Then I realized that I wasn’t following the type of budget I was recommending, either.

Who was I fooling? Certainly not my wife and kids. Sure, we were saving some money for retirement and college, but we weren’t doing nearly as well as you’d think, based on the money we were making. We’d find a reason for another dinner out, a treat for the kids, maybe an expensive dessert. Just little things. Almost always forgettable.

It was depressing.

So, I searched for a better way. And, the good news, is that after lots of trial and error, I found a successful budget plan.

I use it. Many clients use it. It’s had an astounding success rate. I wish I’d kept track of the statistics. Sadly, I never thought about it in those terms at the time.

So, with the usual aplomb you expect here, this is my scientific assertion: “This budget works for tons of people, dude.”

The Premise

The real truth behind my budget plan is this: most couples don’t talk about money. That’s all that my budget tried to accomplish. Rather than writing down every penny or looking backward at expenses, this budget looks forward. We’re paying attention to last week’s expenses, but only so we don’t keep making horrible mistakes.

The truth in many families is that they operate like mine: one member of the team lives in a castle in fantasyland—while the other is focused on the bottom line. Often, it’s not even one person in fantasyland, but both partners are living only half of the truth. In my family it worked like this:

Daily expenses: Cheryl knows every penny and I’m in fantasyland

Investments and Planning: I know every penny and Cheryl is in fantasyland

At first, you may think, “This works for them! They’re delegating tasks that each of them are good at. This works.”

I don’t dispute that couples should delegate tasks. My budget allows for one member of the family to know the intricate details of their favorite area. The problem is that fights occur when the second partner has no clue what’s going on. I’m focused on our stock that tanked or the insurance application that’s been sitting on the table for four days (and Cheryl still hasn’t signed), while she can’t figure out why I’d go and fill the car up with gas when I work from home and never use it. We needed that money for other expenses this week, and now it’s spent and wasting away in the driveway.

So, all this budget does is accomplishes one single goal: it gets you talking about money.

You’ll be amazed by how transformative it is.

Early Budget Attempts

This is funny. Initially when I set out to design a “better budget,” I had this cerebral concept of a “family meeting”, but didn’t know how it would work. We chiseled this budget through trial and error. When you try my system—and I hope you try it–you’ll find areas that don’t work for you. Please write me about how you’ve adapted this budget to meet your own needs. I’m always happy to find another success story who’s taken this and melded it to their situation.

Cheryl and I decided to try out my meeting idea. We had lots of papers and stuff and we sat down on a Sunday afternoon.

Here’s a list of all the things that went wrong:

1) We felt like dorks. There was no agenda or plan, just a “meeting.” I realized nearly immediately that we’d actually need something to discuss during this time, or I’d just be staring at my lovely wife for an hour. I find that to be fun, but nothing gets done.

2) We meandered. Sometimes our budget talk became a “why is Nick not focusing on his math homework?” discussion. Not what we’re looking for.

3) Once we got rolling, the meeting ran really long and was sometimes contentious. I realized that it was awesome for a single meeting, but committing to that every week when we’re both driven and busy with daily tasks was impossible to ask.

4) We’d forget important papers. Sometimes we’d have the water bill and other times we’d have the 401k, but rarely did we have everything we needed to make informed decisions.

5) The meeting wagon often left without us. A month would go by without the meeting because life got in the way. Money disagreement weeds would crowd the nice budget tree we were growing.

Our Findings

1) The budget needed to include a data collection system. Chasing papers is frustrating and time consuming.

2) We needed a clear agenda so we didn’t just stare at each other.

3) It had to be a quick meeting. We set a goal of fifteen minutes. Usually we take twenty, but we’re still trying.

4) We’d have to focus not just on today’s meeting, but how we can improve the process. We’ve honed this process for over ten years now.

5) We acknowledge that we’ll fall off the wagon sometimes. It’s important to get right back on and keep moving.

The Budget

We use a basket like this near the door to collect all bills and investment statements.

1) Bills and investment statements go into a basket near the door. Cheryl likes to pay bills immediately when they arrive. Unfortunately, that didn’t work for our budget because the important part, talking about expenses, would be missed if she just paid it right away. We now pay bills weekly. Some of my clients that are paid monthly only pay bills once per month, but look at every bill weekly that’s arrived.

2) The meeting has a set time and day of the week. Ours is Sunday afternoon. This started when my kids were young enough that they’d nap, so we’d take care of the budget meeting during that time. Now we meet at that time out of habit. This has become one of my favorite times of the week.

3) Here’s the agenda:

  • Each person looks through every bill. Cheryl opens one and I open another. We look quickly through each bill and then pass it to the other person. In this way, each of us knows what every expense is that passes through the house! We’ve found so, so many mistakes on our bills that it’ll need to be a separate post. We’ve also discovered ways to lower our heating bills, water bills and cell phone packages, among others. Just because it’s right in front of us.
  • Each person looks through every investment and insurance statement. We ask questions about each one and either answer them or write them down.
  • We delegate responsibilities. Cheryl usually pays the bills (the part she likes to do) and I call the investment and insurance people. I also usually investigate changes to our cell plans or call about mistakes on the bill (the part I like to do).
  • We talk about big expenses coming up that week, month and year. The main reason for this part of the budget is that I can’t stand being surprised by major expenses like school clothing. Shopping bags at the entrance to our house have caused more fights in our marriage than any others.
  • We review the Mint expense summary (I’ve printed this off just before the meeting).

That’s it. Fifteen to twenty minutes per week and we’ve accomplished the following:

  • We both know what the bills are in our house and the investments.
  • We still focus on our areas of expertise and enjoyment
  • Major expenses all are discussed before they’re made

This budget has solved more fights among couples than any other system I’ve seen or created. It may be easy to rip holes in because it’s not very analytical or sophisticated, but it works. I think this is because it acknowledges that people are busy creatures, and if you have a career and family, any budget plan has to be flexible enough to keep up.

In the next few weeks I’ll begin digging into pieces of this plan. We’ll examine areas of the budget that we’ve been able to cut. We’ll talk about home improvements that can lower your expenses. We’ll talk about automating your household so that the twenty-minute-a-week budget is a reality.

Okay, that’s my story. Now it’s your turn: What problems do you run into with your budget? Are there tricks you use that successfully help you avoid “the money fight?”

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College Savings Simplified: The Best Places to Save Money For Education

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While I tend to do things the hard way, finding college savings isn’t one of the areas where I complicate a task. For some reason, my sixteen year old twins helps me focus on whether a 529 plan, Roth IRA, or savings bonds will treat me right.

So, even though I’ll generally remember to add softener to the washing machine just after it’s finished, I understand how college plans operate up and down.

If you’re saving for college, it’s important to categorically work through the details of each plan to determine which best fits your needs.

…because there IS A right way to save for college, and a wrong way to save.

The bad news? The BEST way to plan college savings differs depending on who you are and what your circumstances may be.

I know that sounds generic and evasive, but it’s true: the best way to save for college will depend on your own income, current savings and college goal, so the best course of action will be this:

Know what plans exist and how they’ll affect your ability for financial aid before investing a dime.

If you haven’t yet, you should read the pieces on:

– 5 Steps to a Successful College Plan – This will guide your plan of attack when creating a college plan.

– Narrow Your College Search – This will focus your college search to those schools which are the best fit, both financially and for your particular interests.

After reading these two thorough primers, you’ll be armed with an idea of the cost and feasibility of your favorite school.

 

Let’s now save for the goal: education.

 

Complicated Ways to Save For College

 

Some methods of saving for college are so fraught with risk that I’m reticent to ever recommend them to people. That doesn’t mean that these college savings plans are bad; on the contrary, they all have some huge upside potential, provided that all the right conditions exist. Here are a few:

 

In-State Tuition Reimbursement Plans – Many states offer plans which reimburse the cost of college credits at a later date. This can be a fantastic way to lock in the price of a college, provided that everything goes according to plan.

Upside: Paying today’s rates for in-state public institutions. Don’t have to worry about market conditions or returns on investment.

Downside: Have to worry about state plan solvency. More than one state has already notified participants that they might not be able to meet their obligation. In fact, some plans no longer guarantee that your dollars will lock in present rates. Instead, these plans invest your money with state funds. Who wants their state government as a money manager?

 

 

Life Insurance – Some life insurance plans, such as whole life and universal life are presented as attractive options for education savings vehicles.

Upside: These plans are financial-aid friendly. When completing a FAFSA application, money inside of life insurance policies doesn’t count against your savings, acting as a nice shelter. Also, if for some reason the insured passes away, money is available for education.

Downside: You may have to cancel your life insurance policy to withdraw education funds. What if you still need the policy? Also, do you really need life insurance? If the answer is yes, and you’re sure that you will no longer need coverage after this incident, then this might be a good option.

Watch out for fees, too. Not only will you pay for insurance, but often a policy which offers stocks and bonds are filled to the brim with fees to manager and (maybe more importantly) to withdraw funds.

Still want life insurance in your account? Read this good article at FinAid.org for a more in-depth argument: Variable Life Insurance Policies.

 

Annuities – Tax deferred savings may seem like a good option for education planning. Why save into an account that’ll be taxed every year when you can shelter your money?

Upside: These accounts are FAFSA friendly, meaning that they are not usually counted in the equation for financial aid. Many annuities offer some flexible savings options.

Downside: Too many to mention here, but mostly: fees and penalties. Make sure you’re going to be over age 59 1/2 before you remove money, because if not, there’ll be IRA penalties on top of whatever the annuity company may charge.

Taxes can be a bear. Here’s why: when you withdraw cash, dollars in the account are removed in a LIFO (last in-first out) accounting manner. This means that all interest on the account must be taken before principal is removed. Why is this a big deal? Taxes. You’ll pay taxes as if you earned the money in the year you remove the money. This income may also make your chances of receiving financial aid worse in the following year.

 

Less Complicated But FAFSA or Tax Return Unfriendly

 

Stocks or Stock Based Mutual Funds – These accounts can be used whenever you wish, assuming the dollars aren’t inside of a tax shelter. In some years there’s a chance of nice returns, too.

Upside: Returns. While there are no guarantees, over long periods of time the instability of a stock or stock-based exchange-traded fund or mutual fund can be countered with a high average annual return.

Downside: Risk. There is a chance you could lose a substantial amount of principal if you don’t monitor or manage your money. Also, this type of investing isn’t FAFSA-friendly. Dollars that aren’t sheltered count directly against your chances of financial aid.

 

 

 

Bonds or Bond-Based Mutual Funds – More stable than stocks, these types of funds have performed attractively over the last ten years.

Upside: Returns with generally less risk than stocks above. Because bonds throw off dividends as one of the main methods of creating returns, these investments often perform more consistently than stocks.

Downside: Taxes. Bonds often throw off an attractive dividend that savers often reinvest. This money, unless it comes from a special type of bond such as a municipal bond fund, is taxable every year, slowing down your return. While there has been tax reduction with capital gains taxes, these are taxed as income, which is a much higher tax bite. These are also FAFSA unfriendly investments, unless you use government savings bonds. These can be good to you tax-wise, as long as they’re titled correctly and cashed in the same year as you’re paying qualified education expenses.

 

The Easy Way To Save For College

 

Roth IRA Plans – A Roth IRA is generally a retirement savings vehicle. Money invested gives you no tax benefit today, but can be taken tax free during your retirement years. You’ll have to follow a few rules, but you are allowed to withdraw funds for college. You may also use nearly any time of investment you choose inside of a Roth IRA.

Upside: Tax shelter. This money can grow tax deferred for education, and if you end up not using it can be used later for retirement, tax free.

Downside: Retirement savings. The best use of a Roth IRA is clearly as a retirement savings vehicle. While money can be used for college, why miss out on the main Roth opportunities around retirement?

 

Coverdell Education Savings Accounts (ESAs) – These plans allow you to save not only for college, but also for earlier years of private school expenses.

Upside: Flexibility. This tax shelter allows you to use money for many types of education options, so it’s great if you’ll have elementary, high school and college savings needs.Classroom

Downside: Funding. Man, these accounts are small. Because you can only place $2,000 per year into this type of account, they often don’t make sense. I’d also meet people with very limited funds in a few different Coverdell IRAs. Who can manage all these little accounts effectively?

The IRS page on Coverdell ESAs is very helpful. Find more details here.

 

529 Plans – State sponsored education plans offer a good tax shelter, are somewhat FAFSA friendly, and eliminate taxation of dollars as long as funds are used for qualified education expenses.

Upside: Amounts of savings. You can pack tons of money into these plans. Most allow as much as $300,000 to be invested into a 529 account. These accounts can either be in self-directed fund options or can be in age-based options. If you don’t use the money for the primary beneficiary, funds may be used by siblings, parents, children or other close relatives. In these plans your choice of education institutions isn’t limited to a single state. You may use these dollars in any state and still receive the tax benefit.

Downside: Money earned in a 529 plan must be used for education expenses or you’re slammed with penalties. If you aren’t sure about saving for college, funding your Roth IRA first might be a better idea, because while these funds are flexible for college funds, money will be trapped here.

 

Of these, the savings option I like best is a 529 plan, because of its flexibility, range of schools that accept funds, and tax treatment. While it isn’t best for everyone, for the vast majority it’s where you should save for college.

 

Here’s How To Evaluation 529 Plans

 

Just like we’ve told you previously that Morningstar is the best way to evaluate mutual funds, I like savingforcollege.com to evaluate 529 plan options.

Here’s a link to savingforcollege.com. Have a look around to see how thorough this site is on investing for education.

The Good – Lots of information on FAFSA and college savings options. Great reviews on the fees associated with 529 plan savings accounts.

The Bad – While fees are certainly important, I’m about returns. Savingforcollege.com does a poor job of comparing how money managers work unless you’re willing to fork over some money for a premium membership. When compared to more robust money management sites such as Morningstar.com, there’s no reason to pay for this information.

 

Can I recommend a single-best 529 plan?

 

Absolutely not.

Check your state’s plan options at savingforcollege.com to see how they stack up. Always evaluate a few national plans to see how they compare against your own state’s options.

My favorite national plan is UPromise, though I also like the T. Rowe Price option.

Why Upromise?

I’ll attack this next week, but here’s a preview: not only is the plan managed better than most options available, but if you sign up your credit and debit cards, but using the Upromise Rewards program (which you can sign up for whether you use a Upromise 529 plan or not) you’ll receive points which can translate into extra money into the 529 plan later. Combine the benefits of low cost investing, good management and extra money, and you’ve found a plan that’s hard to beat.

If you want to compare Upromise with your state’s plans, here’s a link for more information: Upromise is the smart way to save for college!

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