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Stay on Track with an Accountability Partner

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With most things in life, it often helps to have someone with you. Experiences, whether good or bad, are almost always better when you have someone to share it with.

Finance is no exception. In a world that’s connected more than ever before, it’s time to find an accountability partner.

This accountability partner could be anyone. A spouse or significant other, a friend, or someone you met at a local coffee shop.

In this article, we’re going to explore what makes a good accountability buddy and how you can encourage/help each other.

Choosing a financial accountability partner

Ideally, your financial accountability buddy will have similar goals as you and hopefully will hold the same financial philosophies, as well. If you’re saver, they’re a saver. If you like to cook at home, they like to cook at home.

Honestly, the most important thing to find in an accountability partner is someone that will keep you honest. Someone you can and should be totally honest with.

Tell this individual your goals. What you want to accomplish and what purpose your money serves. Then ask them the same thing.

You just need someone that can be honest with you and someone you can be honest with.

Mentor

An accountability partner can also come in the form of a mentor. Someone that’s been where you are before and/or someone that’s had similar goals as you before.

They can guide you along your journey, correct you if you’re making mistakes, or just be someone you can turn to if you have questions or start to feel discouraged.

Example

While doing research for this post, I came across an article about a couple. This couple had a goal of paying off tens of thousands of dollars worth of student loans.

After they came up with this goal and developed a plan on how to achieve it, they told some close friends. Friends that could keep them honest.

Because of that, this couple was more able to be honest when turning down invitations to hang out. These social outings often involved going to bars and restaurants, which costs money. Money that they didn’t want to spend so they could achieve their goal.

Create challenges

To make things fun, or competitive depending on your personality, you can create challenges. For example, who can save the most money (as a percentage of salary) in a month, or who can go the longest without spending any money.

Be advised, a no-spend challenge typically excludes necessary expenses like bills, rent, and debt payments. 

Another thing you can do is create a list of inexpensive dates/activities you can do together, or with your significant other (SO) if your financial accountability partner isn’t your SO.

Scheduling

Schedule regular check-ins with each other. How frequently you check-in can be up to you, but it should be no less than monthly.

You should also establish a rule for impulse purchases or expensive items. If you want to buy something that’s over a certain dollar amount, you have to check in with your accountability partner first.

Related Reading:

A Systematic Approach to Goals

How to Succeed This Year

Financial Mistakes to Avoid

Different Ways to Think About Money

Why Your Will Should Be Up To Date

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With the Coronavirus making its way through countries and countless healthcare systems, it’s a good opportunity to check in with everyone about their will and general estate planning.

We’ve written a couple of posts about the finer details of estate planning, but one of the most important things you can do is make sure that you have an updated will.

Beneficiaries

A beneficiary is anyone that will receive an asset, or assets when you pass away. You will have beneficiaries listed on your retirement accounts and life insurance policies. They can also be added to brokerage accounts via a Transfer on Death (TOD) designation.

It’s important to note that beneficiary designations and TOD designations bypass probate. The assets that the deceased owned at the time of death do not need to go to court. They go directly to the beneficiary (beneficiaries) listed on the account.

So…why is it so important to keep your beneficiaries up to date? The obvious answer is because life changes all the time.

Life Changes

People get married, divorced, re-married, etc. People have kids or marry someone that already has kids. The more grim circumstance is when a beneficiary predeceases you. It’s unfortunate, but something that does happen.

When you assign beneficiaries, there is often a box you can check labeled “per stirpes”. This simply means that if one of your beneficiaries passes before you do, that beneficiaries portion would be received by their children instead.

Not only can changes take place with your beneficiaries, but they can also change with the people you’ve entrusted with your estate. Roles like the power of attorney and executor.

Again, people can pass away before you and/or relationships can fall out of favor.

When it comes to your assets, those change often too. Good or bad years in the stock market can see drastic fluctuations in portfolio value.

Moving will change your residence, but it can also change your net worth depending on the value of your new home and how much you owe on that home. Remember Finance 101? Net worth = assets – liabilities?

Consequences

There could also be consequences for not having an updated will. The wrong beneficiaries could receive assets. Your power of attorney could be your brother and not your sister.

You actually have a much higher net worth than you thought, so now your heirs will have to pay estate taxes. Had you known that, you could have taken advantage of the gift tax exclusion and shared your wealth in order to bring your net worth down to avoid taxes.

To sum things up, you need an updated will because the items within it are going to change…plain and simple.

Related Reading:

How Long Should You Keep Financial Records After Death?

Your Estate and Your Family

Where Your Property Goes When You Die

Hacks for Covid-Related Issues

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Our daily lives have been disrupted. People are working from home, unable to go to the store, or have lost their job.

For those of us that are able to continue living our lives, relatively normal, with some minor inconveniences, we need to adjust.

We need to take advantage of the 21st-century technology available to us. This could be anything from grocery shopping apps, social media, or the apps of your favorite stores.

In this article, we’re going to dive into some of the tools and hacks you can use to help get through this period of quarantine and social distancing.

Grocery Shopping Hacks

There are several hacks you can use to make your trips to the grocery store more efficient and effective.

  1. Get what you need and get out. You HAVE to make a list and you NEED to stick to that list. This isn’t the time to browse or look for sales (more on that in a minute), buy the items on your list and leave.
  2. Plan your route – If there’s a particular store you frequently visit, use that store’s app to plan your route. Personally, I go to Walmart for almost everything. The first thing I do is make my list. Then I go onto the app and start searching for the items on my list. The location marked as “your store” will pinpoint which department, aisle, and shelf position for your item.
  3. Buy in bulk – with items that won’t go bad or if the time in which you need to use it by is several months or years in the future, buy it in bulk. Be careful, however. It is important to do the math. Figure out the “per unit” price and make sure buying in bulk is an economically beneficial decision.
  4. Look up recipes ahead of time that require only a few/minimal ingredients. Ideally, you’ll want to find recipes that require few ingredients that can also make a healthy amount of food. That way you have leftovers. The way I like to think about it is how much does each meal cost?
  5. That brings me to my next point…buy foods you can freeze, or make meals that you can freeze. This gives you food that you can use down the road and also gives you something easy to eat if you’re tired or aren’t feeling well.
  6. One more quick one – Use your knuckles and/or elbows when possible. We all want to stay healthy and avoid passing Covid onto others. Where it makes sense, try not to use your hands.

Grocery Shopping Apps

There are possibly hundreds of grocery shopping apps available, but in doing my research, I found five apps that I thought were extremely useful.

  1. Flipp – Matches coupons from your favorite brands with the weekly flyer from your favorite store.
  2. MealBoard – Manages your recipes, grocery list, and it also keeps track of what you do or don’t have in your pantry.
  3. Grocery Pal – Browse sales and coupons from the stores you frequent, and seamlessly add sale items to your grocery list.
  4. Out of milk – Lets you know what’s in your pantry and what you need to add to your shopping list.
  5. Big Oven – Kind of like a social network for groceries and recipes. Find out what your connections are buying to get inspiration for recipes. You can also type in the ingredients you do have and find some recipes you can make with those ingredients

Working from home

It’s no doubt that we are extremely fortunate to be able to work from home. With all of the technology available, a considerable amount of the workforce is able to tap in from a remote location and still get their stuff done.

As lucky as we may be, working from home comes with its own unique challenges. Here are some hacks for those working from home.

  • Get dressed like you’re going to work – this is something that’ll help you psychologically. It’ll trick your brain into thinking you’re going to work. This helps you frame your mindset for work.
  • Designate a work-space in your home – a psychological trick as well as a means to an end. You can’t work in front of the TV. You need a space where you can actually be productive.
  • Keep a strict schedule (if you can) – Now this isn’t possible for everyone, especially if you have little kids at home that need constant attention. Just do your best. Lean on your family members to watch the kiddos for a little while so you can get some work done. Also, please remember to take breaks. Check-in with friends and colleagues. Try to make your day as normal as possible.
  • Communicate everything – Almost to a fault. Send emails and texts. Make phone calls about anything and everything. We’re so familiar with communicating in person that we don’t realize how much we actually say.

Working together

My favorite part of this post. Writing about the human condition and how in times of crisis we always put our differences aside to help our neighbor.

During this pandemic, do what you can to help your fellow humans. Offer to pool resources together. Share recipes. Have a rotation of who goes to the grocery store.

If you have an elderly neighbor or family member, do everything you can to help them. Go to the store for them. Send letters to loved ones. Send letters to folks in nursing homes and assisted living facilities.

We’re not all scientists, healthcare professionals, retail employees, or other essential professions that are keeping the wheels turning, so we have to do our part in some form or fashion. Be nice.

Reading and Resources:

What are the Advantages and Disadvantages of Saving at a Bank

Feeding America

American Red Cross

CDC Foundation

Direct Relief

My Life and How I Manage Stress

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This post is going to be very candid. I’m going to highlight what’s been happening in my life recently, how I’ve dealt with it, and what habits really help.

Let’s just tackle the last month, shall we?

I had three things going on all at once.

We’re Moving

First, I ran into an issue at my current apartment. When I was shown the unit, I mentioned that I’d have my dog, Mya, a couple of days per week. The remainder of the time, she’s with my ex-wife.

I looked at the unit in October of 2019 and they were fine with it. Come to find out the Condo Association where I rent has a 25-pound weight limit on dogs. Mya is 75 pounds, so there were a few complaints.

I tried to get them to make an exception and my landlord (the owner of the condo) went to bat for me. I was thankful for that but to no avail.

The choice was to part with the dog or find a new place to live. My son and I love Mya, so it was a pretty easy decision. We’re moving.

Thankfully, we were able to find a place pretty quickly. Our new home has more space and a basement, and that’s something I’ve wanted for my son so he has plenty of room to play when the weather is crappy.

Investment Property #1

Second, my old house (the one my ex-wife and I own) is being rented. It’s March 24, 2020, as I’m writing this and our tenants have moved in.

There was a strong push to get everything done sooner than I anticipated because of the Covid-19 situation. They (the tenants) wanted to get as far away from the city as possible, and our house is 45 minutes from the nearest “big” city. They moved in, a week or so ahead of schedule.

I busted my butt to try and get the house ready for them, but that had to be done when I had free time. Outside of business hours and outside of when I had my son. That left me with two nights per week and all day Sunday.

It was a lot of work, but I’m happy to say that I got it all done. The tenants are pleased and I’m looking forward to providing a lovely home for them.

The Market

Third, the elephant in the room. Covid-19. There has not been much of an impact on me personally. My lifestyle hasn’t changed much, though, I’m not sure what that says about my lifestyle.

I avoid going out as much as I can. I also forego taking my son to his favorite play place on Wednesdays.

Outside of that, it’s created an extraordinary amount of volatility in the markets. Thankfully, I prepared clients ahead of time, in terms of proper asset allocation and mentality.

On the other side of things, I’m part of our building’s tech department, so there was a strong push over the last two weeks to set my colleagues up so they are able to work from home if it’s deemed necessary.

I’m not going to lie, things have been incredibly stressful. A lot of work in a short amount of time and a relatively significant change in my living situation. Not to mention, I’m trying my hardest to limit the impact moving has on my son.

What habits help?

I’m meditating more regularly, I’m interacting with people I care about more often, and I’m viewing everything (or trying to) from a positive point-of-view.

The meditation calms me and makes it easier for me to find my “center”. It also reminds me to breathe when I start to feel too anxious or overwhelmed.

With regard to social interaction, I’m just meeting a primal need as a human being. We’re social creatures, not to mention I’m fairly extroverted, so talking with people always gives me a good boost.

The last piece is the x-factor. I’ve shifted my mindset and I have Stoicism to thank for that. If there’s an obstacle or a trial, I’m always looking for the bright side and I’m always looking for a lesson to be learned.

As I dive deeper into Stoicism, I find more value and gain more insight from it.

It’s been busy and challenging, but I’m doing much better from a mental perspective. Keep putting in the work, find habits that help, and things will get better.

To learn more about Stoicism, I highly recommend Daily Stoic. They have weekly newsletters, videos, and podcasts.

Related:

A Systematic Approach to Goals

Financial Stability and Marriage

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Marriage and finances. A match made in hell. Why do these so often go together like oil and water? Why is money such a contentious topic in most households?

It’s because people go through life differently. Depending on how you were raised, what you learned, and what you personally experienced, your money philosophy will be different from that of your spouse.

Before we talk about that, however, I’d like to touch on financial stability and why the growing trend is being financially stable before committing to someone.

Financial Stability

It makes sense from a psychological perspective. Having financial stability makes you appear more mature and that you have your priorities straight. People who see that, probably see someone that’s ready for a commitment.

Additionally, getting married, and marriage in general, can be an expensive endeavor.

Obviously, it depends on the wedding you want, but the average price tag on a wedding nowadays is around $25,000 (source). Add onto that a honeymoon that could take you to another state, if not another country, and you’re spending a lot of money within the first month of being married.

What, historically, follows is a house and kids. Both, though worth every penny and minute, are expensive.

Because everyone has a different experience, and there are so many of them out there, I can’t go into detail about every one of them. Instead, I’ll speak generally about what they are trying to do.

Debt

People are trying to get out of or get a firm grasp on their debt. Whether it’s student loans, credit card debt, or medical bills, nobody wants to go into a committed relationship, let alone marriage, with a significant amount of debt.

Not only does debt hinder you from putting it towards future wants and needs, but when you get married, your debt becomes your spouse’s debt as well. You don’t want to burden them with that.

People want to be financially stable going into a marriage so they can afford the wants that often come with marriage, and they don’t want to be sacked with debt that brings down the family balance sheet.

Credit

Another piece of the financial puzzle that people try improving is their credit score. Your credit score plays a factor in almost every important life event. Where you live, where you work, and what you drive, your score could play a role.

Your financial philosophy is how you view money and how you use it.

Philosophy

Are you a saver or a spender? Do you view credit cards as a tool or a money sucker? When you do spend, do you prefer to buy stuff or experiences? Would you rather invest with the chance to earn more or put those dollars in a savings account for safekeeping?

As I mentioned before, your upbringing, what you’ve learned, and your personal experiences shaped the answers to these questions.

When you commit to a relationship, you’re going to have different answers. The key with any part of marriage, and money is no exception, are compromise and communication. You have to find some middle ground so each individual is getting their needs met, to an extent.

What you have to do is sit down with your significant other, dive deep into each other’s life experiences with regard to money, and what’s important to you, both now and in the future.

Once you have a good understanding of where you’re both coming from and what you want, you can work together to develop a plan, and once you have that plan, you can start executing

Related Reading:

5 Steps Before Tying the Knot

The Psychology of Money

How My Relationship with Money Changed

What Affects Your Credit Score?

Financial Planning Basics: The Financial Pyramid

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The first time I heard about the financial pyramid, I was instantly intrigued. I had never thought about it in this concept before, but I unintentionally had been practicing this in my own life.

In finances you have to build the base before you can reach the top or it will all fall apart, hence the allegory of a pyramid.

financial-pyramid

The Base

The base of your financial pyramid should be a solid financial plan. This includes your written budget, short-term and long term goals, and how you will make your income as well as an investment plan to be implemented in the future.

You should have a positive cash flow, meaning, no longer using debt to fund your lifestyle.

RELATED: The Importance of a Personal Investing Statement

Once you have implemented the base, you can move onto the first building block: protection.

Protection

You must protect yourself from the unimaginable, so I recommend everyone have a will and power of attorney, insurances such as life, health, auto, homeowner’s/renter’s, and disability, and a basic emergency fund of at least $1,000-$2,500.

I was thankful to have my mini-emergency fund when I had some car issues because I was able to pay cash to repair them instead of having to go into debt. The overall pyramid looks something like this:
the-financial-planning-pyramid

The second building block is low-risk wealth accumulation. This would include saving for a home, retirement, and children’s college education, in addition to reducing consumer debt.

Debt Reduction

Financial guru Dave Ramsey teaches that you should get completely rid of any debt before beginning savings, although, in my opinion, you should still invest in retirement while reducing debt only if your employer offers a match.

I, myself, am in the debt reduction stage but still contribute to my retirement account since my employer offers up to a 4% match into my 401(k).

Additionally in this step, you should create your emergency savings fund. Many people believe an emergency fund of 3-6 months’ worth of expenses is adequate.

Investing

The third building block is high-risk wealth accumulation.  This includes investing. Expanding on the second block, in this stage, you will max out your retirement accounts and then build a non-registered investment portfolio.

Once you have built your net worth to an amount sufficient to fund your lifestyle and retirement, you can move to the next stage of investing– speculation (also known as speculative investing.) In this stage, you invest money into investments such as start-up companies.

This is very risky, so you don’t want any debt by this stage. Also, you should only invest a small portion of your total investments into speculation. Also in this stage, you’ll want to begin tax planning, especially as your retirement investments increase.

Estate and Charity

The final building block is wealth distribution. You’ll gift and spend the money you have earned. As well as plan your estate for future generations or charity upon your death. Since your net worth increased quite a bit since you first started the financial planning pyramid, you should update your will and/or trust.

Finally, once you’ve got these basics nailed down, it’s time to hire some help. One approach a lot of millennials use is robo-advisors. A robo-advisor is a machine that uses various theories about portfolio allocation to make investing decisions. If you’re interested in a critical review of this, consider checking out Roboadvisorpros.com, they have a good article on the topic.

If you aren’t into trusting your cash to a computer, consider signing up with Personal Captial.  They’ve pretty much become an industry leader among the newer financial planning firms.

If you’re’ going to use them, please use this link or click on the banner below.  It will help keep the lights on here at The Free Financial Advisor.

personal-capital-pyramid
For help getting your financial pyramid in order, check out these great articles.

10 Best Financial Planning Blogs
Best Free Financial Advice
Become a Financial Expert Step-by-Step

What Happens When You Fall Behind On Your Mortgage?

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what-to-do-when-youre-behind-on-your-mortgage
What does the bank do if you’re barely hanging onto your mortgage? What if you’re still a little behind, or a lot behind, on your mortgage?

First, it depends on your definition of behind.  It may not be the same as the bank’s definition (not shocking). Let’s examine:

1 – 15 Days Late

Most companies allow a 15-day grace period before tacking on any additional fees.  I know that being self-employed, my mortgage company calls me on the second of the month if I didn’t pay on the first, but there’s nothing to worry about if you’re “behind” less than 15 days.  No big deal.  That’s why they call it a “grace” period.

15 – 30 Days Late

If you’re in that 15 to 30-day time frame, prepare for a ton of telephone calls from your mortgage service provider (probably between two and four a day).  You’ll also begin receiving letters reminding you that if you forgot to pay your bill, now would be the perfect time to make that payment.

Back when my income was very unsteady, a sneaky trick my mortgage company would pull was to send out another bill insinuating that I was two months behind and that if I disagreed with them I should call ASAP.  Sneaky snake oil salesmen they were.

During this fifteen to thirty day period, if you can’t pay, don’t worry about the phone calls.  You’ll have to pay a small late fee of some kind, but there still won’t be any damage to your credit report.

30 – 59 Days Late

It’s important to note here:  If you’re running up against that 30-day late period, it’s best to drop everything and pay your mortgage.  Even if you’re habitually late 29 days; it’s better than being 30 days late from a credit reporting standpoint.

Now the letters and phone calls increase dramatically until you’re 60 days late.  Your credit report will note your current late status. Your credit score will fall.

60 – 90 Days Late

Here the phone calls and letters will cease.  Does the mortgage company give up?  Ah…that would be nice, but alas, no.  They change tactics.

Once you’re over 60 days late, they’re going to send someone out to your house, just to make sure it and you are still there.  You can see these people coming a mile away.

They circle your block two or three times, usually, they don’t look like they belong in your neighborhood, then they run up to your front door, peer in a window or two and leave a note on your door saying “Sorry we missed you.  Please call us at once.”

It’s at this point you should start preparing for your next steps.  If you’re 60 or 90 days past due, it’s probably a lingering problem, but all hope isn’t lost.

The best thing you can do when you’re behind is to communicate with your lender.  Home lenders have instituted a number of programs to help you work through your late status.

The second biggest thing to remember is that the people you talk to don’t know you and you don’t know them.  They don’t care about your problems.  It makes no difference to them whether you stay in your house.  They’re a thousand miles away in a cubicle.  Stay calm while talking to your lender.

When you’re behind more than 30 days, you need to start talking – but don’t wait until it’s too late.  Call your mortgage company, explain your personal circumstances, and begin laying the groundwork to solve the problem.

Can you pay the late payment over a couple of months?  How about rolling that payment to the back of the mortgage?  Can they waive a fee or two?  Sometimes they will, sometimes not, but you’ll never know if you don’t ask.

Next week I’ll talk about the different options you have when you’re really behind on your mortgage and what they all mean.  Stay tuned!

For more on paying off your Mortgage and ways to help you do it check out these articles.

Pay a Little Extra on Your Mortgage – What a Difference it Makes
6 Tips for Paying off Your Mortgage Quickly (Without Going Broke)
Don’t Be Afraid to Refinance: 6 Options to Meet Your Financial Needs

Photo: Hanging On: Jess2284

What Advantages and Disadvantages Are There To Saving Money In The Bank

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While saving money is indisputably a good decision, there are different routes and methods of getting there. Many people choose to save their money in a bank, rather than investing it in the stock market. If you are having this debate, there are quite a few things to consider. Here are a handful of the advantages and disadvantages of saving your money within a banking system.



Advantages:

Liquidity

Savings accounts are one of the most liquid investments. Your money is readily available. If this is important to you, saving money in a bank would be a better option than investing in the stock market.

Convenience

Storing your money in a bank is by far the easiest way to save. For one thing, it is user-friendly. You can set up automatic transfers from your checking to a savings account, it is effortless to instantly withdraw money from your savings, and it’s easy to track where your money is at.

Another benefit of linking the two is you protect yourself from overdraft fees. If you overdraw on your checking account, an automatic transfer from savings to checking will take place to keep your checking in positive territory.

Safety of money

A bank keeps your money untouched. In the stock market, there is always the risk of stocks doing poorly and you losing money rather than gaining. Your profits may be low while saving through a bank, but you are not taking the risks of losing large sums of money through your savings account.

Short Term Savings

Saving up for trips, down payments or expensive items that you foresee buying in the immediate future can easily be done. You can save up quickly in a savings account through your bank, and then immediately withdraw the cash when the time comes. For short term savings, this is the way to go.

Emergency funds/cushion

If you save your money in a bank, you will have immediate access if there is ever an emergency. If your car breaks down, don’t sweat it. Just pull some of your savings right away. This also is handy if you need a cushion within your budget during a tough month. There is less to stress over when you know that you have a back-up plan that’s easy to access.

Insurance

One huge advantage of saving your money at the bank or a credit union is your savings are federally insured by the FDIC or the NCUA. If there is a run on the banks or your credit union closes for some unforeseen reason, your cash is insured up to $250,000.

Disadvantages:

Low returns

Savings accounts typically earn less over a period of time than the cost of inflation. These low returns make saving at a bank a poor financial decision for the future. It may be a better choice to save money long term by investing it in mild and safe mutual funds.

Easy to Spend

Due to the convenience and ease of savings accounts, it is very tempting to spend the money that you are saving. Having your personal savings at your fingertips may cause you to spend more than if access was a little less readily available.

Rules

Banks limit the number of withdrawals you can make from your savings account each month. It’s called Regulation D and limits you to 6 withdrawals per month. Also, there may be fees for withdrawals. Typically, you cannot get checks connected to your savings. Know the rules for your particular bank.

Insurance

As I mentioned before, federal insurance at your banking institution is a wonderful thing, but it does have it’s limitations. Now, I would argue that saving in excess of $250,000 is unwise, but if you can afford to park a significant amount at the bank, just make sure it’s less than $250,000.

Related Reading:

Quick and Easy Ways to Save Money

Banks vs Credit Unions

5 Useful Life Lessons We Can Impart to Our Future Kids About Saving Money

How long should you keep financial records after a death?

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There is a copious amount of paperwork involved in organizing your finances. Tax season every year gives us an opportune time to go through the endless paperwork. We decide what to keep and what to toss- decluttering at its finest.

Standard protocol is to sustain all tax records for a solid seven years. This means we should keep copies of tax returns and all supporting documents or receipts.

However, what if it’s not your tax records we are talking about here? What do you do if you have recently lost a loved one?

How long should you keep financial records after a death?

The IRS’s statute of limitations for an audit is three years. This means that any of the deceased persons’ tax returns are subject to random audits for the next three years. However, tax experts recommend that you preserve all tax records for a minimum of seven years in case there are questions about the deceased person’s returns.

Each state has its own requirements. If you are interested in knowing more, search tax forms for your state and review your state’s specific regulations.

Here a couple of tips for saving these important papers:

  • Use a manila envelope or special filing folder to store papers
  • Separate paperwork by year
  • Label everything
  • Consider storing in a fire-proof safe
  • Check annually to see what paperwork can be tossed. Only keep what you need to. This will prevent you from maxing out your storage.

When do you file an estate return?

Use Form 1041 to file an estate return if the deceased person has an estate plan whose assets generate more than $600 in yearly income. This also should be retained for seven years, along with the other tax records.



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What Records Should be Kept Other Than Tax Returns?

  • Retain paper copies of receipts (pay stubs, insurance statements, credit card statements, bank and investment statements). Keep these for one-three years.
  • Records of assets should be kept until the assets are sold (cars, investments or savings bonds). Once you obtain the bill of sale and the title or deed, this paperwork can be also shredded. On the other hand, if the deceased had used a transfer on death deed instrument, the property will automatically be transferred to the new owner.
  • Estate and important documents such as trusts, wills, birth and death certificates, Social Security information, and marriage and divorce certificates should be sustained indefinitely. Consider storing these important documents in a fire-proof safe.

Some tax experts recommend keeping estate-related information, including estate tax returns for at least 7 years. The IRS can assess additional taxes/penalties if the executor and/or the accountant for the estate if they feel the estate was underreported by 25% or more (source).

After losing a loved one, the last thing that we want to focus on is their leftover finances. However, someone has to handle the paperwork after they are gone. If we let it get ahead of us, it will be much more complicated to deal with later.

Do not let the financial documents and obligations overwhelm you. There are answers to all your questions and many people have done this before you. It is important to be proactive in storing and sifting through the vital paperwork so that you are not overcome later by stacks of documents that will need your attention. Stay ahead of the game and take a deep breath. Remember, you are not alone.

My Investment Philosophy

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I’ve been in the investment advising business for almost six years now. During that time, my role in this business changed. I started as an office assistant and learned the ropes for 2 years.

Since then I’ve been in charge of other people’s money. Sometimes it’s someone’s brokerage account that they have with me to diversify among financial institutions.

Sometimes it’s someone’s life savings.

Obviously, when I started, I was in charge of very little until I gained enough experience and was able to prove myself as a capable advisor and investor.

From then until now, my investment philosophy changed. How I view investing and my approach to managing clients’ money is different from when I started.

When I started

In the beginning, it was very straight forward. I was a value stock picker. I charged a 1% fee (industry average) for that service, but the client also got unlimited access to me during business hours and other financial planning services.

Then I figured out, picking stocks was not a good use of my time. The research and analysis took far too long, and my time could be better spent engaging with clients and prospects.

Meaningful change

I changed my method of doing business. Instead of picking stocks, I would utilize passive ETFs. Because I was not putting in as much time with client accounts, I charged them less. It seemed fair and logical.

I still offered the same “extra” services, but I didn’t have to spend nearly as much time researching stocks. Instead, I had a basket of investment options to pick from and would allocate clients’ portfolios according to their age, risk tolerance, and time horizon.

Don’t get me wrong, I still believed in active management, but being able to do that and grow my book of business was extremely difficult.

Yeah…passive has outperformed active for the last decade (source). That’s because we haven’t had anything to, really, panic about. Since the Great Financial Crisis, the market has been up and to the right with minimum volatility. Certainly, well below average (source).

I thought low fees and passive ETFs were going to be the way forward.

My mind was blown

That was until I watched a video on Real Vision. In the video, the guest being interviewed brought to attention the danger of passive ETFs.

He explained that once passive overtook active, in terms of net assets, we’re in trouble.

And it began to make sense. ETF custodians (Blackrock, for instance) need to sell underlying securities when investors sell the ETF. They don’t have a significant amount of cash on the side at the ready for redemptions.

The lightbulb came on. When the market actually crashes and we experience a recession, there’s going to be a barrage of selling. Everyone is going to try and get out of the market and minimize the damage.

That’s the problem. If half of investors are in passive funds, then those funds will have to sell loads and loads of securities to meet client demands.

Selling will exacerbate and the sell-off will intensify until we have a 1987 type moment. Thankfully, there are “circuit breakers” now in place.

What’s a circuit breaker?

If the S&P 500 index falls enough, trading will halt. There are three levels of circuit breakers. Level 1 is a fall of 7% and trading halts for 15 minutes. Level 2 is a fall of 13% and, again, trading halts for 15 minutes. Level 3 is a fall of 20% and trading ceases for the remainder of the day.

After that video, my philosophy shifted. Instead of utilizing passive funds, I use active and smart-beta ETFs. I get the best of both worlds. Active management and low fees.

What’s the point?

I wanted to make two points when writing this.

  1. I wanted to highlight my thought process, my investment philosophy, and how it changed.
  2. I needed to get across an important message. One that we seem resistant to. You HAVE to be willing to adapt. To change. Not only that, you have to challenge your own ideas.

I’ve made two changes in my process so far and I hope there are more changes coming, but those changes didn’t happen overnight.

I poured over hours of research, reports, and charts. I needed to make sure that the change I made would benefit my clients.

One last thing I wanted to mention. When my philosophy changes, I don’t make sweeping changes to my clients’ portfolios.

That would a) be incredibly annoying as a client to have your portfolio transform because my ideas changed, and b) selling and buying could incur fees and taxes. Clients shouldn’t be penalized for that.

Related reading:

The Difference Between Mutual Funds and ETFs

Are You Taking Too Much Investment Risk?

Client Experiences