Jacob Sensiba, Author at The Free Financial Advisor

How to Utilize Rewards

July 29, 2020 by Jacob Sensiba Leave a Comment

On this site, we talk about credit, investing, and how to pay off debt. One thing that’s often missed around the debt subject is rewards.

Rewards are incentives to keep going. It’s something we can use to motivate us on our journey, no matter what that journey is.

Whether we are trying to pay off debt, lose weight, or just, straight up, improve our life. You need to reward yourself, otherwise, it’s go go go, all the time.

In this article, we’ll talk about when it’s a good time to reward yourself, how, and things to look out for.

Habits

A reward should be centered around two things. Habit formation or commitment, and goals.

If you are trying to make an improvement on something, whether it’s your health or your finances, you have to develop good habits.

If you want to exercise more, do it six days in a row, then take a break. That break can be your reward. If you want to eat better, do it for six days and then take a little break with a cheat meal.

The first step is creating the habits to get yourself to that better place.

Goals

The next reward will come when you hit goals. You want to get to a certain place, say saving $20,00 for a down payment, eliminating your debt, or losing 20 pounds.

Those are great goals, but you should put in place incremental ones to help you get there. That could be a reward for every $5,000 saved, every $5,000 paid down, or every 5 pounds lost.

It’s a lot like Dave Ramsey’s “Snowball Method” with applications in different areas of life. The goal with that method is to give you small wins to keep you motivated.

How to reward

If you put those habits in place and hit those goals, it’s time for the reward. The great, but the challenging part about that is everyone defines reward differently.

So when you create a reward for yourself, you should keep two things in mind. Make sure it’s good enough to release some dopamine, but small enough that it doesn’t set you back on what you are trying to accomplish.

If you’re trying to lose weight, your reward should be a little cheat meal or a day off from working out. Not a day of binge eating or a week without breaking a sweat.

If you’re trying to save money or pay down debt, don’t let whatever the reward is negate you from saving that month or add to your debt.

Large enough to make you feel good, but small enough so you stay on course.

What to watch for

The biggest thing to watch for is the size/duration of the reward. It mustn’t be too big or too small.

It’s a fine line and may require a little trial and error before you get it right. Start small and work your way up.

As I mentioned, it shouldn’t detract you from the pursuit of your goals, but it should also make you feel good about the progress that you’ve made or the habits you’ve created.

How I handle rewards

I won’t lie to you, rewards are a challenge for me. I’m very much a black and white type of person.

I keep junk food out of the house because I can’t be tempted with it. I make regular transfers from checking to savings in order to keep “discretionary money” out of my bank account for fear of spending it away (mostly on take-out, honestly).

It’s hard for me to put the pedal to the floor and take it off for a day. I’m either all on or all off, but I’m starting to figure it out. It really just takes some practice, a little will power, and some self-awareness.

Most Important Financial Statements

July 22, 2020 by Jacob Sensiba Leave a Comment

When you’re looking for a company to invest in, you’ll want to do some research. Typically, you’ll have two options, technical analysis or fundamental analysis. Personally, I use fundamental analysis, so today we’re going to go over the most important financial statements you need to look at when conducting your research.

There are three financial statements you need to pay attention to, income statement, balance sheet, and the statement of cash flow.

Income statement

The income statement is also known as the profit and loss statement. It shows the revenues and expenses for a given time period, typically on a per quarter basis.

You’ll gain some unique insights from an income statement, including an overview of operations, management efficiency, comparison to peers, and net income. Net income = (revenue + gains) – (expenses + losses).

There are two types of income statements. Single-Step and Multiple-Step. Single-step is one simple calculation ((revenue + gains) – (expenses + losses)). Multiple-step separates operating “net income” from non-operating “net income”.

Balance sheet

The balance sheet is just as straight-forward as the income statement, except it shows assets and liabilities instead of revenues and expenses.

That means a balance sheet displays what a company owns and owes. It also shows how much is invested by the shareholders.

Statement of cash flow

The cash flow statement provides data that shows a company’s operations, where the money is being spent, and how that money is being spent.

This data is broken down into three categories: operating activities, investing activities, and financing activities.

Operating activities will show the following information:

Accounts receivable
Accounts payable
Depreciation
Inventory
Wages
Income tax
Rent
Cash receipts

Investing activities are any money spent on the future of the company, which could include equipment, R+D, property, and other assets.

Financing activities include debt issuance, stock issuance, dividends, interest payments, and stock buybacks.

Analysis

As I mentioned in the beginning, when doing research, you’ll fall into two camps. Technical analysis or fundamental analysis.

Technical analysis views everything as a security. A technical analyst will use charts and trading information to identify investment opportunities.

Fundamental analysis views everything as a business. A fundamental analyst will use the above financial statements to pass judgment on companies.

What to look for

If you are doing fundamental analysis and you are looking at these financial statements, there are certain things you want to see.

Balance sheet, income statement, and cash flows should be positive – Negative numbers either means they’re making less than they spend or they owe more than they own (in the case of the balance sheet).
Efficient operations – theoretically, you could see this on all three statements, but it will be most prevalent on the statement of cash flows. The operating revenues should be significantly higher than operating expenses (at least that’s preferable). However, this should be cross-referenced with the company’s peers (certain industries have higher margins than others).
Low outstanding liabilities – Less future earnings going towards interest and paying off debt, and more going to investing activities. This is especially favorable near the end of the business cycle, as revenues typically drop. Fewer liabilities could mean healthy margins even when revenues dip.

You’re investing in a business. You want to see that management is using capital effectively, and they’re not biting off more than they can chew. Positive financial statements and healthy margins.

Money Anxiety

July 15, 2020 by Jacob Sensiba Leave a Comment

Money anxiety is not an official mental disorder but is often treated. It manifests itself in a variety of ways, but I want to explain how anxiety and money affect my own life.

As I’ve mentioned here before, I have been diagnosed with anxiety so my feelings and experiences may be amplified to what you feel.

When it comes to money anxiety, I experience it in a few different scenarios.

Pleasing people

Your willingness or ability to spend money in a relationship should not determine the strength of that relationship. If that’s the case, is that a relationship really worth having?

In my case, it’s directly correlated with my former spouse. She got dealt a few bad hands in life, so I was willing to spend beyond my means to make her happy. Not that the spending inherently would make her happy, it was more of a reluctance to say no due to financial constraints.

That inability to say no stuck me with debt that set me back on my personal finance journey. Obviously, there are other personal factors that resulted in these circumstances, but that’s the gist.

Fitting in

I’ll echo what I said in the first section, your willingness or ability to spend money in a relationship should not determine the strength or quality of that relationship.

Thankfully, I’ve learned from/outgrown this, but it used to be a real challenge for me. Growing up, I never really felt like I fit into a particular friend group. So I developed relationships that I’m thankful for now but otherwise appeared destructive.

Destructive from a personal and financial perspective. As I said, I’ve since outgrown that tendency, but it’s something to be aware of for yourself.

Long-term thinking

This section will specifically talk about my house. The one I’m currently renting. Before we bought that one, we were two years into a mortgage in a different city. The plan was to live there until my son was school-age, and then we’d move to a city with better schools.

The house we ended up buying, I found on a whim. We looked at it, loved it, and put in an offer. It stretched us SUPER thin from a financial perspective. I mean, exhausted all of our savings (including retirement), and we were incredibly close to being negative on our budget.

I knew in my heart that it was the right long-term decision, and I was willing to go through the pain/struggle in the short term for it.

Little did I know that circumstances would change dramatically in the next year or two. Plan for the long term, but also plan for short-term variances (even the dramatic ones).

What I know

Because of my profession, my training, and what I’ve read, I’ve seen what happens when you make poor decisions.

That said, many (if not all) of my financial choices are heavily scrutinized. When I say “financial choices” I mean the larger ones. Day-to-day spending and bills are factored into my budget, though I do a review (as you should) regularly to see where I can trim excess spending.

When I make a financial decision, my money anxiety kicks into gear, as I always second guess myself. I run through the possible scenarios that could play out.

Tim Ferriss calls it fear-setting. The Stoics call it premeditatio morum. It’s a practice of expecting the worst and planning for them as they will happen. Expect the worst, hope for the best. Not a bad thing to do, in money and in life.

My Last Reflection

The Importance of Being Handy

How Long Does Bankruptcy Stay on Credit Report?

July 8, 2020 by Jacob Sensiba Leave a Comment

Filing for bankruptcy is a tough decision to make. It can provide relief when you’re drowning in debt, but it does have consequences when it comes to your credit. How long does bankruptcy stay on your credit report?

We’re going to explore the answer to that question, as well as a few other items, in this article.

What is bankruptcy?

It’s a legal proceeding when an individual or an entity is relieved from some or all of their debts. Whether it’s all or some, and how that process takes place depends on the type of bankruptcy that’s filed.

Chapter 7 – Liquidable assets are sold in order to pay off debts. When those assets are exhausted, the remaining debt is discharged.
Chapter 11 – The most expensive option, which is usually used by companies (General Motors and J.C. Penny, for example). This is a reorganization plan that enables companies to remain open while getting their financial obligations situated.
Chapter 13 – Only available to individuals. The person filing implements a payment plan and is typically able to keep their assets (house, car, etc.). The debt must be paid off in 3 to 5 years.

Federal student loans are often excluded from being discharged, so you’ll be on the hook for that.

Let’s take a look at how bankruptcy affects your credit report.

How it affects credit

I’ll state the obvious by telling you that bankruptcy negatively affects your credit. Typically, you can expect your score to drop by 20-25%. This also depends on your current credit score and credit strength.

Discharges on more accounts and/or accounts with higher balances will affect your score more than discharges on a small number of accounts and/or low balances.

Delinquency usually proceeds bankruptcy and those stay on your report for 7 years. Chapter 7 bankruptcy stays on your credit report for 10 years, while chapter 13 stays on for 7 years.

What to do after

Inspect your credit report with a fine-toothed comb. Make sure that the debts discharged were actually discharged. If you find errors, go through the proper channels to get those corrected.

Once you’ve filed, you can immediately start building your credit back up. The first step is to ALWAYS pay your bills on time. I’ve stated before that on-time payment history is the number one factor when calculating your credit score.

The next step is to open a credit account. This should be something small and manageable. I often suggest a secured credit card. With this type of account, you make a deposit and that deposit acts as your credit limit.

Establish a positive payment history and keep your utilization well below 30%.

Bankruptcy on your report

You don’t have to do anything to remove the bankruptcy from your credit report. It will fall off on its own.

Review your credit report once the 7 or 10 year period ends. At that point, depending which type you filed, the bankruptcy should come off.

Give it a few months as your credit report often lags a little after the activity actually took place.

Stay diligent. Bankruptcy is not a death sentence, it’s a fresh start. Pay on time, keep your utilization low, and keep your spending in check.

The Importance of Being Handy

July 1, 2020 by Jacob Sensiba Leave a Comment

Perhaps it is just within my circle, but it seems that the character trait or the skill of being handy has lost its value.

People seem unable to fix simple things. Around their house, their car, what have you.

I’m curious if the majority of people know the difference between a Phillips head screwdriver and a flathead screwdriver.

At no time was the importance of being handy more clear than during the last few months, when the entire country went into lockdown. You never know when that service you rely on will be unable to help you.

My Experience

My dad taught me from an early age the importance of being able to fix things yourself and the value of a strong work ethic. Those may seem unrelated, but I believe they are directly correlated.

I watched him and helped him with all of his projects. Plumbing, changing the oil on his car, renovations, replacing his brakes, you name it.

Not only did it save him and us, as a family, money, but it was quality time I got to spend with him. There were valuable lessons taught in those experiences.

Now, I can fix almost anything. It gives me a sense of pride, it saves me money, and now, it’s making me money.

At my last apartment, I was the go-to handyman for our complex. They took a small chunk off my rent and paid me by the hour when I was on a job. Saving and earning at the same time.

Now that I’ve moved, I no longer am the go-to for that complex. Instead, I’m the go-to for all rental units owned by that investor in my city. That’s an incredible opportunity for me to make money outside of my normal 9-5.

Growing up, did I think this kind of circumstance would come upon me? Of course not. But that’s the thing. No matter how you think your life will turn out, it hardly goes that way.

You have to vary your knowledge and competencies across a range of industries. You truly never know what will fall into your lap.

From there, we’re going to take a hard right turn into a different topic

Consumer Math

This is something that should have been on my radar, but it wasn’t. Until this morning. My cousin is taking a consumer math course, and after learning about what it was, I have to promote it.

You can find a consumer math course anywhere, and they all teach the same thing.

Math for real-world situations.

It’s basically a personal finance course. It teaches things like budgeting, taxes, loans, buying a car, wages, deductions, spending, and transportation.

These are topics that everyone should be knowledgeable about, as they lay the foundation for your financial life. Ace these, and you’re steadfastly in the driver’s seat of your finances.

Quick Wrap-Up

Above, we covered two things. Being handy and having a wide range of knowledge can help you later in life, and how having a foundational understanding of consumer math puts you in control of your finances.

Both of these are vitally important but dramatically undervalued by the masses.

How to Answer a Civil Summons for Credit Card Debt

June 24, 2020 by Jacob Sensiba Leave a Comment

You do what you can, but sometimes debt gets out of control. If you get far enough behind on your credit card payments, eventually, the lender or a debt collector will file a suit against you to get what they’re owed. In this article, we’ll explore what a civil summons is and what to do when you’re faced with one.

What is a civil summons?

Generally speaking, a civil summons is when a governing body, individual, or organization files a lawsuit or judgment against another individual or organization.

The document indicates the reason for the suit or administrative action. It also listed pertinent information, such as the time and date of the first hearing, details about the plaintiff and defendant, and the amount of time the defendant has to respond.

A civil summons with regard to credit card debt usually occurs when the account reaches “charge off” status. Charge-off status usually happens between 120 and 180 days.

With that said, here are the steps you need to take.

Don’t ignore it

This is the worst thing you can do. The suit will continue, whether or not you respond. If you don’t respond, the court will issue a ruling in favor of the lender.

That means you will be forced to pay what’s owed. They may also tack on attorney fees, court fees, and interest to your balance.

Negotiate

Get in touch with the lender/collector that filed the suit, and see if they will accept a lower amount.

The filer may ask for a lump sum or a series of payments. The negotiated amount can range from 40% to 80% of the original balance.

Who filed the suit also makes a difference in negotiation. If the lender is after you, they will be less willing to negotiate a lower amount than a debt collector that bought the debt at a discount.

Research

If negotiation doesn’t work, it’s time to build your defense. Get a hold of the lender or collector again and gather information.

Check through your records to confirm if the debt owed belongs to you – do the amount and the original lender match up? Is it yours?
Get a chain of custody records – does the filer have the legal right to do so?
How long have you owed the debt – the statute of limitations could forbid the suit based on how long you’ve owed it
Get proof from the filer – are their records accurate? Is the information listed correctly? If the filer has missing or incorrect information, this can work in your favor.
Get copies of everything – accurate and complete documentation is very important

Talk with a professional

Get a consultation. Often, these are free. At the very least, it’ll help get a better understanding of what you’re up against and what you should do.

If money is tight, there are organizations, like lawhelp.org, that will provide an attorney that volunteers their time.

If money isn’t as tight, vet and hire an attorney to help your cause.

Go to court

If negotiation and settling outside of court don’t work, then it’s time to go to court. Here’s what you have to do.

Formally answer the summons with the court. This has to be in writing and generally, you have to answer within 20 to 30 days of receiving the summons.
In your reply, you have three answer options: admit, deny, or lack of knowledge. Admit it’s your debt, deny it’s your debt (only if you’re 100% sure), or attest that you don’t have enough information to say otherwise.

Options after court

If the ruling goes your way, there’s not much else to do. However, there may be terms you need to settle on, depending on what the judgment was, so you may not be completely out of the woods yet.

If the ruling doesn’t go your way, you have a few options.

Try negotiating with the lender/collector again.
Pay the amount mandated by the court
Argue the ruling by filing an appeal
File for bankruptcy
1. This is the last resort and should only be used if there’s no way to pay back what you owe.

Credit score

Your credit score will take a big hit throughout this process.

Prior to 30 days late, it won’t affect your credit score, but you will be charged late fees (most likely).
After 30 days, a late payment will show on your report. On-time payment is the number 1 factor when calculating your score, so expect a significant drop.
The impact late payment has on your credit gets worse as you pass 60 and 90 days.
As stated, a suit normally isn’t brought against you until 180 days late. At that point, the account is listed in “charge off” status and that will really hurt your score.

Obviously, you want to do everything possible to prevent being served a summons for your being behind on your credit card bills, but if you get there, these are the steps you need to take.

Down Payment or Investment Opportunities?

June 17, 2020 by Jacob Sensiba Leave a Comment

The current dilemma I am having is whether to stash my savings for a down payment on a house or contribute to my Roth so I have cash available for buying opportunities.

I’m pinching pennies, and I’m saving money wherever I can so that cash is accessible when I need it. I just don’t know what to do with it.

Do I put it towards a down payment or set it aside for investment opportunities. Like most things in life, the answer will lie somewhere in the middle.

Down payment

I’ve mentioned in prior reflections that I’m renting right now.

I’m renting because I got divorced and exhausted all of my savings on the down payment for my house. That house is currently being rented by another family, and my ex-wife and I still own it.

That’ll help build equity into the house so we receive more if/when we decide to sell, which is good.

I’m happy with my current living arrangements. I like the place. I like the neighborhood. My commute to work is 2 minutes, and I’m close to all of my family and friends. All good things.

The only bad part is I have no outdoor space to call my own. I have no yard.

I’m trying to frame it positively by saying that I’m not spending my time on yard work, and instead, have more time to spend with my son/work on myself when he’s not here. These are both very good things.

However, I want to give my son a space to play. A place to put a jungle gym and a sandbox. A place where he can just run around and have fun.

I want to give him that because he deserves it. I want to use my savings for a down payment on a house so we can have a place to call our own.

Investment opportunities

Here’s the second part of my dilemma. I see a lot of chances to put my money to work in the market.

I’m able to play the long game because of my investment philosophy and my training. The best investors I have long-term time horizons.

What I mean to say is I can see past the present and I have an idea of what my investments can do over the long term, and the [possible] reward for investing now can’t be ignored.

That’s why I’m having a difficult time deciding what to do.

What will I do?

As a parent, you want to give your kids everything. I want to have a place we can call our own.

At the same time, I know how valuable it is to start saving and investing early so I can take advantage of compounding returns.

So here’s what I’m thinking. I’m going to develop a “savings plan”. I’ll take the dollar amount for an ideal down payment and how far in the future (in terms of years) when I’ll want to use it.

I’m thinking of $25,000 for a down payment and four years until I’ll use it. I’ll, then, divide $25k by 48 to get my monthly savings goal. Anything over that number I’ll put in my Roth.

That’ll take care of saving for a house and for retirement.

My Last Reflection:

My Experience with Life Insurance

How is Passive Income Taxed?

June 10, 2020 by Jacob Sensiba Leave a Comment

A lot has been said about passive income.

“If you don’t find a way to make money while you sleep, you will work until you die.” ~ Warren Buffett

“The key to financial freedom and great wealth is a person’s ability or skill to convert earned income into passive income and/or portfolio income.” ~ Robert Kiyosaki

With the above quotes in mind, there is a particular area of passive income that is rarely talked about…taxes.

How is it taxed? Are there particular income streams that are taxed differently than others? How do you optimize so you’re taxed favorably? We’ll cover all of that in the following article.

What is Passive Income?

As defined by the IRS, passive income is either net rental income or income from a business in which the taxpayer does not materially participate.

There are several different kinds.

Forms of Passive Income

Real estate – If you own a property, be it a single-family home, duplex, or apartment complex, the rent you collect from tenants is considered rental income.
Limited partnerships – As a limited partner, your only responsibility is the capital you invested. The general partner manages the day-to-day activities of the business and has unlimited liability in terms of the debt taken on by the business. You receive income as a percentage of the company revenues (percentage based on your percentage of ownership).
Some portfolio income – speak with a tax professional on this subject, as the IRS isn’t quite clear on whether portfolio income is taxed as passive or not.
Peer-to-peer lending – Individuals lending to individuals. If you’re looking for passive income, you lend money to someone, charge them interest, and then collect that interest.
Equipment leasing – buy a piece of equipment and rent it out. Pretty straightforward.

Material Participation

500+ hours of activity per year towards the “business” to which the income is received
Up to 100 hours of participation per year and at least as much as anyone else participating in the activity

Taxes

Passive income is taxed in a couple of different ways. First off, passive income losses can only offset “actual” passive income.

Capital gains

Short-term – Taxed at your ordinary income tax rate. For 2020, the rates are 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
Long-term – Gains from “investments” held for over one year. The tax rates for long-term gains are 0%, 15%, and 20%.

Real Estate

1031 exchange – take capital gains from selling a property and use it to buy another property. Then, you don’t have to pay taxes on those gains.
Tax write-offs – You can write off depreciation, money spent on the property, and amortization (interest on a mortgage).
20% “safe harbor” deduction if your income is below a certain threshold. I’ll link to a resource for more information about this one (see here).

Taxes are anything, but simple. Please speak with a qualified tax professional.

My Experience with Life Insurance

June 3, 2020 by Jacob Sensiba Leave a Comment

Life insurance is necessary. Sure, you can make the argument that a single person with no children probably doesn’t need it, but I disagree.

No, they don’t have anyone to support, but someone will have to pay for the funeral and burial arrangements. Get a little bit as a courtesy to the person responsible for your remains.

In this article, I’m going to share my personal feelings on life insurance, as well as my current circumstances with my own policy/estate planning.

Life Insurance

As I said in the beginning, life insurance is a necessity. However, the purpose of the policy and the type of policy will differ from person to person.

This makes sense, right? Everyone is different, with different circumstances and points-of-view, so their insurance policy should be tailored to meet their needs.

With that in mind, my personal opinion with regard to life insurance is that it should only be an insurance product. There are several different types of life insurance (i.e. whole life, universal life, variable life, etc.).

Each serves a purpose and has unique advantages and disadvantages.

You might think that one or several of those products are the bee’s knees, and I’m not saying any of those are good or bad. As I stated, life insurance should just be about insurance. My desired life insurance product is term insurance.

It’s bare-bones coverage. You select the term you want to be covered for and the death benefit. That’s it.

Insurance and Investing

Term insurance is much less expensive than the other products out there. The intention behind this is to compare term insurance to your typical whole life product.

Specifically, compare the monthly premium of the two. Whatever the difference is, contribute that to an investment or retirement account.

Be advised: This is not a recommendation for best practice, just my personal opinion.

This strategy will not suit everyone. Whole life can be a great way to diversify your holdings if you’re a wealthy individual. Retirement accounts have contribution limits. A whole life policy could be another “bucket” of retirement savings.

My Current Setup

When I found out I was going to be a dad, I got life insurance. Specifically, I got a 30-year term policy with a $300,000 death benefit. That still exists and I’m still paying for it.

I would like to get some more so I can set my son up if anything were to ever happen, but first, I need to make some changes.

Since I got divorced in February, I need to do some creative estate planning because my son is only 2-years-old. I can’t directly leave him the money because he’s a minor.

I need to see an estate attorney, once things return to normal, to set up a trust. I’m doing it this way because I can set up a guardian for my son and someone to take control of the money if I were to pass away.

There are several other nuances to estate planning that I have yet to experience, so I’ll be sure to give an update once everything is all said and done.

My Last Reflection:

How My Finances Changed with Covid

Mistakes to Avoid in Retirement

May 27, 2020 by Jacob Sensiba Leave a Comment

In many finance websites, blogs, and articles, a lot has been said about how to prepare for retirement, but I believe there hasn’t been enough written about what to do when you get there. More specifically, there’s a lack of content about mistake, or mistakes, to avoid.

In this article, we’ll explore several mistakes to avoid when you reach this milestone.

Spend beyond your means

This seems obvious, but once the psychological barrier of spending versus savings is breached, people (not everyone) develop this mentality of “I saved for 40 years for this moment, why shouldn’t I enjoy it?”

You should enjoy it. You worked your butt off for it, right? There are strategic ways to do this, however. The mistake is going gangbusters right away.

Create a budget/spending plan – Your budget in retirement will be different than your budget before retirement. Create line items for everything, and get real granular with your discretionary spending (i.e. sub line items to breakdown where the discretionary spending is actually going).
Plan for healthcare – Healthcare costs, generally speaking, will be your largest expense in retirement. Plan accordingly.
Income strategy – More than likely, you’ll have a few different income sources (social security, pension, retirement distributions, etc.). Create a line item for each source.
Senior discounts – Take advantage of every single one. There might be a psychological hesitation with this, as it forces you to come to terms with your age/where you are in life
Spoil grandkids – Every grandparent wants to spoil their grandkids to death, but it must be done within reason. Get creative and be strategic about when and how much.

Make Quick Decisions

Another mistake is making quick decisions. Don’t do it. Any decision you classify as BIG needs to be well thought out. This could be anything like moving, downsizing, vacations, or eliminating a vehicle.

I would argue that any decision about an expense that’s not in your budget/spending plan, should be thought about for several days. My rule of thumb is a week. By then, the euphoria of such a purchase has gone away, then you think more logically about it.

Investing Aggressively

Over the years, a big mistake clients make is the desire to invest more aggressively than they should. Oftentimes, this is to compensate for an inadequate savings rate during their working years or a significant market pullback that hurt their portfolio.

While capital appreciation is still an investment objective in retirement, it’s no longer the primary goal.

This primary goal should be capital preservation. Limiting losses on what you have. This has less to do with time and more to do with your decreasing ability to go out and make more money. Allocate your portfolios accordingly.

Ignoring Estate Planning

Estate planning is a key ingredient to your financial planning recipe. It mustn’t be ignored. Every debt and asset you have needs to be accounted for, listed, and given a task for when you pass.

Estate attorneys can be expensive, but I believe it’s 100% necessary to find one you trust, so your estate is well taken care of.

Isolating Yourself

Your social life is more important than ever. Countless studies show that people with strong relationships outlive those that don’t. So the mistake here is not making your social life a priority.

Join a community, volunteer, retain, and nourish friendships. Whatever flavor of social life sounds desirable, make it a priority.

Letting Yourself Go

Taking care of your mind and body is always important, but especially now. It will keep you healthy, therefore, lowering your healthcare expenditures, but it’s also another way for you to meet people.

Go for walks with neighbors and/or friends. Join a gym. Many of which have reduced rates for seniors. Additionally, many health insurance companies have “silver sneaker” programs that offer inexpensive services and programs for seniors.

Expecting it to be easy

This is a BIG life change and the transition will not be easy.

Not only will you shift from saving to spending, but those social connections you developed over your working years can reduce in frequency and strength.

Go easy on yourself and be patient.

Taking Social Security too early

Unfortunately, there are situations and scenarios where taking Social Security Income (SSI) distributions early is necessary. However, for those of you where this does not apply, speak with a trusted advisor about optimizing your SSI strategy.

Getting Swindled

Scammers adapted. They’re smart and they know how to target susceptible people. Unfortunately, elderly individuals are inherently more at risk than the general population.

Any email, phone call, or text that you receive (unsolicited, of course) should be greeted with a fair amount of skepticism. Don’t willingly give out any pertinent information (name, DOB, social security number, etc.).

Doing it alone

A BIG mistake people make is thinking they can plan by themselves. It would behoove you tremendously to consult with several experts. Estate attorneys and financial advisors should be at the top of this list.

Do your research, check online reviews, and get testimonials from trusted contacts. Having capable professionals in your corner could set you up for success and put your mind at ease.

Habits

Goals

How to reward

What to watch for

How I handle rewards

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Income statement

Balance sheet

Statement of cash flow

Analysis

What to look for

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Pleasing people

Fitting in

Long-term thinking

What I know

My Last Reflection

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What is bankruptcy?

How it affects credit

What to do after

Bankruptcy on your report

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My Experience

Consumer Math

Quick Wrap-Up

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What is a civil summons?

Don’t ignore it

Negotiate

Research

Talk with a professional

Go to court

Options after court

Credit score

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Down payment

Investment opportunities

What will I do?

My Last Reflection:

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What is Passive Income?

Forms of Passive Income

Material Participation

Taxes

Capital gains

Real Estate

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Life Insurance

Insurance and Investing

My Current Setup

My Last Reflection:

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Spend beyond your means

Make Quick Decisions

Investing Aggressively

Ignoring Estate Planning

Isolating Yourself

Letting Yourself Go

Expecting it to be easy

Taking Social Security too early

Getting Swindled

Doing it alone

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