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5 Smart Money Moves For Young Families

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Even a small step in the right direction counts. The best Valentine’s gift for young families? Getting on the same page.

As a Certified Financial Planner™ practitioner, I meet with clients from all walks of life.  One of the things I say to all my clients is, “I’m never too busy to meet with anyone you’d recommend.”  Which, of course, is a nice way of saying – “l’ll meet with anyone as a favor to you.”

Usually clients have a pretty good idea who we’re after from a prospecting standpoint, but on occasion, I am asked to meet with a client’s grandson or nephew – someone who may not be in our “target audience” as it relates to practice growth.

But, I’ll always gladly help them.

 

Why I’m Telling You This Story

 

Last week, I had the privilege of meeting with a young couple – Jack and his lovely spouse…Jill.  (We’ll change the names to protect the innocent).  They were the typical American young family – just out of college, a young child, tons of college debt, a handful of credit card debt, no real savings, and a meager job just to pay the rent.  They looked like deer in the headlights when they walked into my office.

I know the type – I used to be Jack and maybe you were (or are) too – young, arrogant, (heck, I’m still that one), confused, unsure of oneself – so much unknown, you don’t know even where to start.  That was Jack and Jill, except they wanted help, but they had no idea where to start.

And frankly, hiring our firm wouldn’t help them that much either, and I told them as much.  They looked exasperated – I could see it on their faces – “if this guy can’t help, we’re doomed.”  So we sat down and started making a list of all the small things – things you can do with under $1,000 – to get the ball rolling in your financial and personal life.  I’m narrowing them down to my top 5:

 

Build a portfolio early

 

If you search around, you can find a nice discount broker who won’t rob you in commissions, and then buy two exchange traded funds (ETFs): one which tracks the S&P 500 and another that follows a bond index.  For example, 5 shares of SPY or IVV (S&P 500 funds) and 2 shares of AGG (Aggregate Bond Index) will give you a 70% equity / 30% fixed income portfolio.  That’s quite a start.

I explained to Jack and Jill that if they start early, a little guy called “gains” can work in their favor. Make your money work for you as quickly as possible and you’re reap huge rewards down the road.

 

Pay attention to tax shelters

 

If you need the money, save it into a spot where you can get it. But taxes can drain from your returns, so if possible, shelter the funds.

Small steps…investing even $1,000 in a Roth IRA and adding $100 a month from age 22 to 65 would turn into $478,000!  As we’ve mentioned several times, you can access your contribution at any time so it could double as a little cash reserve if you need the money.

There’s also good news at the end of this tunnel: in most families, they’re able to contribute more later as they earn more cash. Set a good foundation with small amounts today and

 

Cash is the key to your debt repayment

 

I’ve seen too many people attack debt with every dollar, only to find the dishwasher broken or the muffler dragging behind the car. Where do you go for cash then if you’ve drained all of your funds?

Right back into debt.

Don’t start the habit of pulling plastic out of your wallet. It gets easier and easier every time you do it. Keep a cash reserve. By cash, I mean cash. With our increased reliance on ATM machines, credit cards, etc., a simple power outage can cause quite the disruption.  Live through the next Zombie apocalypse by keeping $500 or $1,000 in cash at home in a safe.  But remember, this is for emergency only! I’ve met too many new investors who spend their emergency funds on vacations or credit card repayment. That’s not why that money’s there.

Speaking of emergencies…with a young family, don’t forget insurances. I told Jack and Jill to focus on disability insurance at work and cheap term life insurance.

 

Manage your energy

 

Huh?  Are you talking about vacation?  Jack and Jill can’t afford anything! Are you nuts?

They thought I was crazy at first, but like I’ve said…I’ve been there before. Let me explain. When you’re buried in debt, the last thing you need is an expensive, week long trip. But you need to keep a clear head to move the ball forward, so take smaller vacations…but still take some!

These vacations aren’t because you deserve them. You don’t. They won’t help your debt in a direct way. But indirectly? You’ll notice a huge difference in your ability to attack your problems when you’re fresh and relaxed.

Find a deal to hop the train to Toronto or Chicago for the weekend if you’re in the Midwest, or Austin if you’re in Texas.  Use a travel site like Hotels.com to book your reservation and save money.  Take a quick cruise to the Bahamas.  Remeber to do whatever it takes to keep away the cobwebs and return fresh. It doesn’t need to be expensive…it just has to be “away.”

Recent studies have shown a direct correlation between physical health and monetary wealth (unintended rhyme…happy Valentine’s Day!) If you’re lucky enough to have short commute – try a different method for a week and see how you feel.  Could you walk?  Ride a bike?  Adding a little cardio exercise to your day will make you feel better and will improve your work attitude and output.  Give it a try –if you rode your bike to work only 3 days a week and it was 5 miles each way, you’d ride 1,500 miles a year!

 

Educate your children

 

I told Jack and Jill that this was the most frustrating part of my job: meeting too many new investors who had no idea what moves to make first. Stop the cycle by helping your kids become money-savvy. Most people think I’m going to say, “Invest in a 529 plan.”  Wrong.  IF you do invest in a 529 plan, teach them to track the funds with you. Play board games that help them think about strategy and money. Let them sit in on your budget meetings. Track electrical output in your house and make it a game. Heck, invest in a Kindle from Amazon.  They’re $150 or so, and if they’re young enough, sign them up for Amazon Free Time, (a service that pre-screens kid-approved content for one low monthly cost of $3). Don’t leave them alone with the stuff and expect your kids to learn. Make it family time with the Kindle, or heck, with a book. Remember those?

Recent studies have shown a direct correlation between physical health and monetary wealth (unintended rhyme…happy Valentine’s Day!) If you’re lucky enough to have short commute – try a different method for a week and see how you feel.  Could you walk?  Ride a bike?  Adding a little cardio exercise to your day will make you feel better and will improve your work attitude and output.  Give it a try –if you rode your bike to work only 3 days a week and it was 5 miles each way, you’d ride 1,500 miles a year!

 

Bonus:  Communicate

The closest we’ll get to a good Valentine’s gift today is this: communicate. Especially communicate if you’re worried, but also when things are going well. Practice our weekly meeting plan. Real budgets are about keeping the family on the same page, not about dollars on a spreadsheet. Especially in married or cohabitating couples, I find that one generally knows what’s going on with the money while the other is in Fantasyland. Don’t make this mistake. When you both own your financial life,

Jack and Jill left looking relieved. They didn’t have to hire an expensive financial advisor and had a pretty clear road map on how to start down the road to prosperity.

 

Who delivered your first financial lesson?

How to Consolidate Your Post-Holiday Debt With a Balance Transfer

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This guest post was written by Jason Bushey. Jason runs the day to day operations Creditnet.com, a free online credit repair authority.

A few weeks back, Average Joe blogged about post-holiday distress and how the holiday season has wreaked havoc on credit card debt for more than a few of us.

Now that the first post-holiday credit card bills approach the all-dreaded due date, it felt like a good time to revisit the fact there is an easy way to consolidate and SAVE when it comes to paying back that holiday debt: make a credit card balance transfer.

But first, why is it worthwhile to consolidate your debt, whether it’s post-holiday or otherwise?

For starters, consolidating your debt makes life a little easier. Think about it; fewer due dates to track and fewer interest fees to take into account of every 30 days. That puts less pressure on you and your calculator, and makes budgeting your personal finance formula less of an algorithm and more simple math.

Not to mention you can save a ton on interest fees if you’re credit is strong enough. Here’s how it works…

The easiest way to consolidate your credit debt and save on interest fees is to transfer a credit card balance you’re paying interest on to a new, 0% interest credit card. The fee to do so is small – generally 3% of the total balance you’re transferring – and the savings on interest fees are significant.

The average 0 interest intro period lasts anywhere from 6-to-18 months, depending on the card. The better your credit, the better chance you have to get approved for a credit card with an extended introductory period.

Before you  apply for a balance transfer credit card, there’s a little homework to be done…

First, you should determine how long it will take to pay back most or all of your credit card debt when you’re paying zero interest. Figure out a simple payment plan – maybe you’ll pay back $100 a month, without fail – and then calculate how many months it will take at this rate to get to zero credit debt.

Once you’ve determined how many months it will take to pay down your holiday debt via a balance transfer, research which credit cards have an intro period long enough to cover your payment plan, and make sure that this intro period includes balance transfers at zero interest.

Once you’ve found the right card for you, the process gets a little simpler. As soon as you receive and activate your new card, initiate the transfer with your new credit card company. This can be done online or over the phone, but you should note that it takes up to two weeks for the balance transfer to take effect on your old card. (So don’t ignore your latest credit card bill on your old card, if that date overlaps with the transfer you’re making.)

As soon as you see that the transfer has successfully taken place, pop out the champagne and celebrate! Just kiddin’ … Well, I suppose it is cause for a celebration, but there is still work left to be done with your new 0% interest credit card.

Many credit cards require that you make on-time payments to remain eligible for their intro period; basically, do as you’re supposed to and you won’t have an issue. That said, it’s going to be mighty tough to pay back your holiday debt in a timely manner (i.e. within your zero interest intro period) if you continue to make new purchases on your credit card…

Yup, it’s time to take a break from credit card spending.

Give yourself a couple months – or as long as it takes, really – to catch back up on your personal finances by putting the credit card away. We know; it’s new, shiny, and it’s got all kinds of bonuses attached to it. But the only way you’re going to pay down post-holiday debt is to cut your credit purchases and make significant payments each and every month.

So now that you know how to consolidate your debt with a balance transfer, it’s time to shake off those post-holiday blues and get back in the green. There’s no use in paying back Christmas 2012 through the summer of 2013, especially if you’re paying interest. Cut your interest fees, pay down your debt directly and you’ll be back in the holiday spirit. (Christmas in July, anyone?)

Year End Business Tax Planning – Stop Uncle Sam From Eating Your Lunch

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Two weeks ago I received a call from an agitated client: “O.G.!  I need your help. My taxes are going to be out of control!  We made too much money this year!”

My first thought: “Oh, poor baby.  You’ve made too much money.”

Then I ran to the nearest phone booth, twirled around in it a bit, and walked out the looking the same as I had 30 seconds earlier, although I was much dizzier.

Time to be the last-minute tax superhero!

If you own a business and you’re doing a little accounting at the end of the year piling up your nickels, you may notice you have a little extra scratch laying around.  The bad news is that if you’re like most business owners, whatever is left as of December 31 is rolled up to your personal tax forms and you’re going to pay taxes on it, no matter what your plans are.

For example: You paid yourself $50,000 in 2012 and your business now shows a $50,000 profit.  If that extra $50k isn’t spent or expensed by December 31, you’ll be taxed on the entire $100,000.  Lovely, isn’t it?

Here are a couple things you can do in the 11th hour to minimize your bill:

1)    Pre-pay as many expenses as you can.  If your sudden profit is because a client paid earlier than expected, this is probably the best bet.  Take a look at January and February expenses and start writing checks.  Now you won’t have to worry about expenses next year and can rebuild your excess cash pile.

2)    Contribute to your company’s retirement plan.  If you don’t have one established already, you’re pretty limited with options, but you can contribute up to 25% of your profit if you’re a sole proprietor to your SEP IRA plan.  You have until your tax filing deadline to make that contribution, though, so no hurry.  It would make sense to reach out to a tax professional or retirement plans specialist to create a plan for the future.

3)    Give some money away – to your employees.  If you bonus employees now, there will be two benefits: first, they’ll pay a lower FICA tax before January 1, 2013 and second, you can expense the cost.

4)    Buy capital expenditures for your business.  Section 179 expenses, as they’re called, are expenses that usually are amortized but can be ‘pulled forward’ to the year of purchase.  If you’re considering a technology upgrade, or a company car, today may be the right time.

5)    Take a couple bucks and hire a good CPA, EA, or business financial planner.  The best time to prepare for unexpected profit is in August, not December.  A good advisor on your team will have mapped out all these (and other) strategies long ago and now they’ll be ready to be executed, without having to scramble through year end business tax planning.

A good CPA or financial planner will also be able to implement and run cloud financial management systems for increased efficiency.

Moving into 2013, here are a couple ‘sneaky’ tax ideas that help offset income taxes for some people:

1)    Rent your home to your corporation.  According to the IRS, “If you use the dwelling unit as a home and you rent it fewer than 15 days during the year, that period is not treated as rental activity. Do not include any of the rent in your income and do not deduct any of the rental expenses.”  Fewer than 15 days means 14 days, by the way.  Your company has to have monthly board meetings, right?  Ever consider renting a hotel banquet hall?  No?  Why not?  Oh…because it’s $1,000 a day!  Do the same thing, but from your home!  There are a lot of pitfalls here, so you have to do it the right way.  But if you had 14 corporate meetings a year…and the lease rate was $1,000 per day…you do the math.  Tax free money.  Boo-yah.

2)    Hire your kids.  If your kids are over 7 years old, they can be hired in the family business to do menial tasks.  Don’t hire your kids as Senior VP of Sales, but he or she can lick envelopes, take out the trash, etc.  Then pay them commensurate with their age and activities.  Anything up to the standard deduction (this year is $5,950) is tax free.  Pay them $10,950 and contribute $5,000 to their IRA.  Again, pitfalls abound, but it may work for you.  By the way, a $5,000 annual contribution from age 7-14 growing at 8% until age 60 is worth about $1.8 million.  Just sayin’.

3)    Establish a real retirement plan and set up a sweet company match system.  Remember, you can only do for you what you do for all your employees, so this only works if you’re by yourself.  But, you can set up a pretty sweet 401(k) plan and a stellar matching program for yourself if you want.  You just need to do it before December 20.

Hopefully this gave you some year end business tax planning ideas to mull over while you enjoy your Williams Sonoma peppermint bark next week.  Enjoy Christmas and be sure to take some days off away from work to recharge the batteries.  Smart business owners know they’re most productive when they’re fully charged up!  Merry Christmas and Happy New Year!

Investing Myths: Four Traps That Catch Amateurs

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Why do so many do-it-yourself investors perform far worse than they should? How do you make sure and avoid some of the potholes that most amateurs seem to step in?

In theory, people managing their own funds should do well. Today’s investor has access to more tools, more research, and more information than ever before.  You can easily view data in near-real time, putting the average person on par with professional brokers and large brokerage businesses on Wall Street.  It’s easy to track company performance, get up-to-date and late breaking information just by opening an app on your phone.  What a world!

But, with all this information available, you’ll need to filter out truisms, half-truths and outdated ideas. Managing your own money isn’t tough, but it’s easy to fall into traps.

Let’ s walk through some top myths today’s investors need to realize aren’t true anymore.

First, a diamond may mean forever, but buy and hold isn’t.  You shouldn’t just buy a stock and close your eyes.  Occasionally, good companies have badly performing stocks.  Instead of “buy and hold” investors should “buy and pay attention.”  You should carefully select your positions based on the information at hand, but be sure to have a well-thought out exit plan before you buy the stock.

Second, performance isn’t the only thing that matters….and I’m not just saying that because I’m a guy. Historical performance is worth noting, but it’s not, as they say, indicative of future performance.  We do believe, however, that performance does persist – there is investment momentum.  What matters more than past performance? Simply put, volatility, tax considerations and overall asset allocation should be equally considered. It’s paramount to create a portfolio that compliments your long-term investing goals. Remember that the ones that shoot up fast are also the ones that crash quickly. Volatility is a two way street.

Listen to ways your investments could be more successful on our podcast: 2 Guys & Your Money Episode 15: Top 5 Ways to Improve Your Investment Returns

Third, charts don’t only make sense for professionals.  Some people believe only “technical traders” use charts or that they’re somehow outdated relics from a bygone era.  Not true.  Charts can tell investors a great deal about what’s going on in the markets and with any particular holding.  Charts aren’t crystal balls – but they can help you manage risk. How much volatility has a position had in the past? How does today’s price compare with past prices? When does the position pay dividends? How has this position grown relative to its peers? All of these are easily answered by reviewing a few charts.

Finally, don’t try to always buy at the bottom.  This one’s really dangerous.  How do you know it’s the bottom?  Investors are egotistical beasts; we think that because it looks like the stock/bond/real estate/whatever is going to turn around, our few dollars are boing to be perfectly placed. We’ve seen investors buy stocks at $10 that once were $100, only to find out that they were not even close to the bottom.  Remember two things: 1) you’re nobody in the market, and your brain is too small to call the bottom of the market (sorry if that offends you); and 2) investment prices fall for a reason. If a position is “on sale,” it’s important to know why it’s fell before you make a bet that it will rise again from the ashes. The person who buys a stock that’s near its yearly low is betting their purchase is going to be the reason it turns around.  Unless you’re Warren Buffet, I wouldn’t be too sure.

The biggest rule when it comes to investing is not to try to ”win big” but rather “lose small.”  Manage and know your risk before establishing a position and you’ll go a long way toward becoming a more successful investor.

Is This Starbucks Gift Card Over the Top? How Much is Too Much?

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I couldn’t believe what I was reading, “Starbucks to roll out $450 gift card” courtesy of USA Today.  

For real?  I felt like the guys from ESPN’s Monday Night Football broadcast crew, “C’mon, man!”

If you didn’t see the story:  Apparently a $7 cup of coffee isn’t good enough, so they’re now selling a gift card made completely of steel (just like your stomach must be to drink their coffee) for $450.  The good news is that it comes pre-loaded with $400 in credits, so it’s really only a $50 card with $400 of coffee on it, but still.  My question is: Is this too much?  Has Starbucks finally gone overboard?  What purpose does this serve?  What’s wrong with the iPhone app?  It works the same!

Of course, being an investigative journalist for this burgeoning website, I decided to research deeper.  Apparently, this card is only going to be available on the website Gilt.com.  What is Gilt? It’s a smorgasbord of $85,000 watches and $1,500 pairs of shoes.  You know…just in case your Timex ever runs out of batteries.  And there are no other batteries available.  Anywhere.  Ever again.

Do I have you sufficiently fired up?  Are  you tired of this all-you-can-eat-and-then-eat-some-more-until-you’re-utterly-exhausted-type of consumerism?  Have you had enough?

Me neither.

I absolutely love it.  I think it’s the worlds most awesome thing that people exist who buy $450 Starbucks cards and $1,500 loafers.  I’m so happy that those people have a heartbeat.  I’m not personally overly materialistic, but I do have some nice things and I have things on my “wish list” that someday I’d like to buy.  On the very top of that list is a red Ferrari.  I just think it would be cool.  And no, I’ve never driven one.  Someday?  We’ll see.

I love the fact that we’re able to make our own buying choices, and for the most part, must pay the consequences of those actions (except the federal, state, and local governments.  Don’t get me started).  Consumer spending counts for nearly 70% of our GDP.  I say: the more the merrier.  I hope they sell out of those cards.  They’re only making 5,000 of them, so by my math that’s $2,000,000 of pre-bought coffee.

That’s a whole lot of no-whip peppermint mocha lattes.

Having “The Talk”: Another Awkward Holiday Dinner Conversation

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Have you had “the talk” yet?  Ya’ know, the really awkward conversation we all dread?  I’ve thought about having it during our Thanksgiving dinner, but I just don’t know how to begin. They’re so young…maybe I can wait a little while longer. I mean, really, how many their age are actually doing it?

Of course, I’m sure you know “the talk” I’m referring to: a discussion with your parents and grandparents about their financial and healthcare wishes should they become too sick to make them on their own.  It’s an awkward conversation to bring up (hey, pass the potatoes…by the way, what would you do if you can’t manage your own money anymore?), and even more awkward to continue (Uh huh. Can you give my brother all the bills but me all the cash? Great turkey, mom!)–but what’s the cost if you DON’T bring it up?

I’m writing this tonight while driving (read: riding shotgun) from Chicago with a world-class estate planning attorney who’s so busy he can’t keep his head on straight. With so many changes looming around the fiscal cliff and government tax plan, people are battening down the hatches. I thought I’d take this time to interview this young man as we barrel down the freeway.

So, Mr. Estate Planning Attorney, what are the most important things you need to discuss with your parents about money?

Can they give you some? Ha ha ha.  Well, first of all, with the estate tax going up, seriously, should they be giving you some money through a gifting strategy?  Also, have they grandfathered their estate exemption?

What the heck is “grandfather their estate exemption” mean?

It basically means: Have they taken advantage of the existing laws to benefit them, compared to their new laws expected in 2013?

What about “the talk?”  What kind of healthcare questions should we, as their children, know?

First, they need to know every state has a healthcare power of attorney and the forms can be found at the local public library. That POA lets them dictate who can make medical decisions if they’re not able.  Secondly, they should probably let you know, or you should ask, what their long-term health wishes are.  I mean…the weird questions like “Do you want life support” and stuff like that.  But all of that can be handled in their healthcare POA.

So, what happens if someone doesn’t have a healthcare POA?  And, while we’re on it, when should someone get one of these things?

Everyone of legal age should have one. If you don’t have one, doctors cannot follow your specific wishes regarding your healthcare. Also, if you’re unconscious, doctors cannot make healthcare decisions for you, unless it’s an emergency. For example, we had a client who went in for surgery, routine-type stuff, when the doctors found a small tear in his kidney. Without a POA, the doctors would have had to wake him up to get his permission. Now, thankfully his wife was waiting in the waiting room, and was his POA, so they were able to fix it no problem.

So we all need these things no matter what. Got it. Anything else we should know before year end?

The fiscal cliff is going to affect estate and income taxes. If you have more than $2 million,  you need to talk to your attorney immediately. Remember, that $2 million includes the death benefits from your life insurances through work and outside policies–it’s not just your assets.

Sounds like your calendar is filling up fast!  Thanks for your insight. Maybe we can get you on our podcast?

Would love it. 

A Look Into the Post-Election Crystal Ball

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The votes are in and I’d like to congratulate President Obama on his re-election.

This was a hard-fought campaign on both sides, and since we now know who will occupy the White House for the next four years and the Senate and House for the next two years, some of the uncertainty we’ve been experiencing in the stock market should finally begin to dissipate.

Many of you are wondering what the future holds for stocks and the market – and while no one knows for sure – including me, I do have a couple of themes that I think will emerge (or continue) over the next few years.

Theme #1 – Corporate Cash on balance sheets

There are trillions of dollars sitting on corporation’s balance sheets that were awaiting the outcome of the election.  Many were anticipating a Romney election which would’ve brought with it likely corporate easing, but now these large multi-national companies have to do something else with the cash sitting overseas.  If they repatriate it, they’ll be subject to double taxation, much like they are when they issue dividends, and at the highest corporate tax rate in the world.  What I expect in the near term is an increase in company stock buy-backs, which have the immediate impact of lowering supply of that company’s corporate stock.

Immediate effect: Stocks with large cash positions might be worthy investment positions and short term winners.

Theme #2 – CNBC’s Fiscal Cliff

The producers at CNBC can’t help themselves. The phrase “Fiscal Cliff” sells heaps of advertising, so you’ll hear this over and over in the upcoming weeks.  Since the House controls the country’s purse strings, and the President and the House have very different ideas on how to spend money, I expect continued gridlock up to and through the so-called “fiscal cliff.”  Obviously, this will be resolved at some point, but it will provide uneasiness in the markets until it’s behind us.

Immediate effect: Lots of waves in the financial markets. Probably higher VIX (volatility) index.

Theme #2 ½  – Budgetary Issues Related to the Above

I don’t know if it will be a retaliatory-type reaction, or just purely out of ideology, but I expect the continued gridlock in Washington to impact all of the sun setting provisions that have been put in different tax-law extension bills over the last several years.  For example, I think the severe defense cuts will take effect at the beginning of the year and the entitlement spending to continue.

Immediate effect: See Theme #2.

Theme #3 – Weak Dollar and Quantitative Easing

The U.S.’s credit has been downgraded twice already, and it appears headed for another downgrade as we reach our self-imposed borrowing limit of $16 trillion.  Obviously, the Congress and the President will just kick that down the road a bit, but that means continued weakness of the dollar compared to other currencies worldwide.  This is bad news if you’re travelling to Japan or Europe for vacation, because our weak dollar buys less Euros and Yen, but the large, multi-national companies we discussed earlier will benefit from a weak U.S. dollar since they make money in all currencies.  Secondly, our fearless economic leader, Big Ben, has promised to continue to print vast amounts of dollars as long as the government continues to run deficits.  Looks like Ben’s printing money for a long, long time…which could lead to inflation

Potential Headwinds

If there are any market headwinds, it will be the short-term issues relating to the pending fiscal cliff and their respective tax increases.  Undoubtedly, the 3.8% tax on interest, dividends and capital gains that takes effect in 2013 will have an impact as well as the continued implementation of Obamacare.  Since healthcare is mandatory for those employees who work over 30 hours per week, expect to see companies continue to reduce their workforce’s hours to 29,as the CEO of Darden Restaurants (Olive Garden, Red Lobster, etc.) has already announced.

So What Does That Mean for Me?

I think the best bet for many investors is to continue to chase yield.  With bank accounts earning nearly 0% and no rate increase on the horizon, the fact that the S&P 500 averages 2.2% will provide some base level of market support over the coming years.  As confidence comes back, the market should also bounce back accordingly.  It’s sad, but President Obama is probably a “lame duck” president, at least over the next two years, as the House will continue to block all attempts he makes at advancing his agenda.

Ultimately, it’s more of the same.  The uncertainty should be ending, the weak dollar means good things for the large multi-national companies.  I know many were surprised by the outcome, but we are a country that comes together.  Let’s focus on the future and not on the past.

Hoping to Stay Married? 4 Money Rules for Wedded Bliss

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No one talks about money on their wedding day, do they?

Maybe they should.

The two biggest questions I get from my newly married couples are “how do we pay all this debt off?” and “what do we do with all these accounts?”

Many people now merge their financial lives with tens of thousands of dollars in student loan debt, car loans, credit cards, mortgage(s); because of high student loan amounts, even some shockingly young people are facing piles of debt before they tie the knot.  Additionally, people are generally marrying later, which means they already have established routines and stable financial relationships – and usually many different accounts.  There are a few simple rules to consider when discussing (and planning for) debt and account management in a new marriage.

Rule #1 – You don’t automatically become responsible for your new spouse’s debt when you marry.  If it’s in their name only, unless you’ve co-signed for it, it’s their responsibility.  Many people think that once they’re married they become obligated to the new debt.  Not true.  So, the rule is this:  Don’t assign yourself to your spouse’s debts once you’re married.  There’s no reason to become a joint account holder on their mortgage or credit card account.

Rule #2 – In some states, you can be liable for debts your spouse accumulates after you’re married.  That means you need to be open and honest at all times with money.  No one likes a surprise credit report ding.

Rule #3 – New marriage equals new banking relationships and credit relationships.  It’s the cleanest way to do things.  People change banks now like they change shampoo, so this really shouldn’t be an issue – both of you can keep your own checking accounts, but create a joint one at a separate credit union or bank that you agree on and use that one for household expenses.  Same goes for credit cards.  Don’t become “joint owner” on your spouse’s credit cards unless it’s a $0 balance.

Rule #4 – One person should be named on all utility accounts. Everything shows up on your credit report now, including your utilities (I learned this the hard way).  To keep order, one person should be named on all utility accounts, i.e., electricity, water, gas, cable, phone, etc.  That way if one person has issues, it only takes one person’s credit score down and the other remains fairly clean in case you need credit in the future.

Money isn’t complicated.  It requires very little thought and discussion, but it does require some.  My overall advice is simple: be honest and up front with the debt you’re bringing to your relationship and develop a plan together to pay it off.

Photo courtesy of: photographerglen

Want to Earn More? Trade Money For Time

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Would you pay a premium tax (toll) to get out of rush hour traffic?

The traffic is so bad in Austin, Texas that the town has finally decided to do something about it – they’re building a new lane in each direction.  Here’s the catch: It’s a toll lane.  But not just any toll lane, it’s a toll lane that changes its rates.  The rates, however, aren’t based on day of the week or time of the day, but rather on the average speed in the ‘express’ toll lane.

It took me a second to figure this one out, but the price goes up when the average speed drops below 50 mph.

Chew on that for a second.  The slower this new exclusive lane goes, the more it costs to get in it.  In economic terms it’s called peak-load pricing and it got me thinking – what other things are priced that way?  What other areas of our finances do we trade money for time so that others (those who don’t pay anything) get a better experience (in this case less traffic in the ‘free’ lanes)?

 

What this means is important: A tool more often used becomes more valuable.

 

I’m reading a book called Talent is Overrated. It describes a concept I’ve understood more and more as I’ve aged. The idea called “talent” means little when compared to another factor: time perfecting the job.

Notice I didn’t say “time on the job.” That’s seniority, which is irrelevant. You can sit and bullshit while being paid for thirty years and learn zippo at your chosen career. As you spend time actually honing your skills you improve. Talent is what brings you to the task….it’s more fittingly thought of as “aptitude.” Because you enjoy a particular activity, you’re more willing to spend the time it’ll take to practice. Want to be a better golfer? Practice golf perfectly for a few hours a day. Want to write better? Read and practice writing activities to create perfect sentences and paragraphs. Soon you’ll be among the best. That guy whacking a bucket of balls? He’s wasting his time. The woman churning out another crappy blog post on how to make your own computer from tractor parts? It’ll be as bad as the one on why you don’t need to hire an electrician.

When it comes to your main breadwinning activities, spend your time wisely honing your skills. When it comes to everything else, like riding down the highway, trade money for time, but only if this time will be used to practice more. The sooner you tackle your unique ability, the more your wallet is going to thank you. Soon you will find, that like Austin expressways, your fees are going up because your skills are being used more frequently.

How I Saved 35% on My Walt Disney World Vacation

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Last week I was lucky enough to spend a week at the most magical place in the world – Walt Disney World.

Whew!

I now need a vacation from my vacation!

Here’s the amazing part:  the bill they put on my door on our last day–after a week’s stay–was for $600.

My credit card statement will be for $600 after a week of Disney.

I can hear you now: did you sleep in your car?  Sneak into Walt Disney World and do the rides at night?

Nope.  None of those are true. first, we had a 100% authentic trip. First class. We stayed at the resorts (Specifically, the Saratoga Springs resort). We swam in the pools. We ate the Mickey food. It was the entire “stay on-site” Disney experience. Given, this isn’t everything we spent (I’ll explain that in detail below), but we made ourselves a heck of a deal that you can have, too.

My youngest child kept on talking about his “other house” and we couldn’t understand what he was talking about until he said, “You know, Dad, the one with all my toys and bikes and kitty?”  Oh, yes.  Your real house.  Apparently, Walt Disney World was his real home now, and our house was his other house.  Disney knows what they’re doing.

 

The Details

You must plan to get most of the deals I’m going to outline:  If you’re looking for a quick trip this weekend to the House of Mouse and want to save a ton of money, I can’t help you much.  (Check the bottom of this piece for a last-minute newsletter to sign up for that will give you a few sweet deals.)

We started our research in June, which by some standards is too close. If I were to do it again, I would’ve planned this in March.

Savings #1

You know that Disney has timeshares, right?  (Don’t worry, this isn’t a timeshare pitch – in fact quite the opposite).  Each year, the timeshare owners, or Disney Vacation Club owners, receive a number of points  to use however they please.  Those points can accumulate for a couple years, but eventually they expire and become worthless.  If you know anything about the timeshare market, a lot of people have them, but they’re like boats.  The best two days to a typical boat owner are the day you buy and the day you sell your boat.  Many people hate their timeshare after they buy it, but they’re difficult to sell, so they waste them.

That’s until David showed up.  He runs a website DVCRequest.com where he buys Disney Vacation Club (DVC) owner’s points for cheap and sells them on the market after taking a small cut.  It’s a brilliant plan.

There is also a site called Buy a Timeshare where you can buy DVC points on the resale market. David’s site focuses on rentals, but if you decide you love Disney enough and want to buy in to their timeshare program, you can do that here at significantly discounted prices. Just make sure to do your research before buying anything. The Disney Vacation Club can save you money over time, but only if you know how to get the best use out of it.

Here’s how it works:

First, head to his site, www.DVCRequest.com and begin the search for how many points/dollars you’ll require to stay at your favorite Walt Disney World resort.  Let’s take a hypothetical vacation the week of February 17, 2013.  On the left hand side, click “Points Calculator” and select the dates you wish to travel.

Now, a list comes up with all the Disney Vacation Club properties (you’ll notice they’re all super-duper nice!) – as I mentioned, we stayed at Disney’s Saratoga Springs Resort and Spa in a 1 bedroom condo – which, for that week costs 203 points.  David charges $13 per point, so that’s $2,639, right?  When I went on the Disney website and selected the same resort, same days, same room, it came up to $3,956, that’s a savings of 33%, or $1,317 for the same week, same room!  Are you kidding me?!

After you select which week you’d like, you complete David’s very quick process, pay a small deposit of $91 to get started, and they begin looking for rooms that meet your need.  If they can’t find a Disney Vacation Club room, you get your $91 back.  If they do, then you fill out an online contract and pay the room rental fee right there!

Done.

Now that’s part of my strategy about my Disney vacation.  By paying for the room in June like I did, it’s one part of my trip cost completed.  I’ve already received that credit card bill and paid it, so from a cash flow point, I’m now 4 or 5 months removed from this bill.  Kind of like Christmas – once you get to March, the damage is usually all done with, right?  It gets better…

Savings #2

The next thing we did, since we were staying in a Disney Vacation Club condo with a full kitchen, was to order our groceries online using a site called www.gardengrocer.com .  Disney will store your groceries for you in their freezer and refrigerator until you arrive (of course they shop fresh for you) and for a small mark up (milk was about $4.50 per gallon) you find waiting for you a fridge full of groceries.  Now you don’t need to worry about the Disney Dining plan, which saves another $700-$1,000 per family, depending on what plan you avoided.  We spent about $200 with them and another $300 on food at the lunches at the park and one dinner out, so we saved a couple hundred bucks this way.

Savings #3

Of course, you have to actually go to the parks, right?  Well, we saved money here, too.  Head to the site: www.undercovertourist.com and take a look around.  We opted for the Buy 3-Get 1 Free plan, so we were able to see all four Walt Disney World parks (although we skipped one and did Magic Kingdom twice).  We figured we didn’t need Park-Hopper options, since we have little kids and when we were done…we were done.  A neat little benefit they throw in is their Undercover Tourist app for the iPhone which can keep track of ride times, dinner reservations, parade times, and fast-pass lines.  Pretty handy feature.  So there we saved another $200.

So, by the time I arrived on the Disney property last week, I’d already paid for my room (5 months ago) my groceries (last month) and my park tickets (2 months ago) so I only had to worry about what we spent while I was there…which was about $600.

Trust me, it’s a nice feeling to leave Disney spending only $600, even if you’d spent an additional $3,200 already.  But, for a family of four to stay at one of the nicest resorts on the Disney property in Orlando for under $4,000…food, tickets and all, I think we created a pretty good deal for ourselves.

This was my first time to Disney since I was my son’s age.  I’m sure I can make other changes to save more in the future – anyone have any ideas I didn’t use?  Post your comments below!

Photo: CKramer