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Post-Holiday Distress: Did You Spend Too Much?

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Stop. Take a deep breath. That feeling of dread? It’s just the holiday spirit leaving your body with each passing breath. It’s your own fault… everyone knows not to look at the receipts on the day after!

If you were smart, you planned ahead. You created a holiday account at the beginning of the year so by the time November rolled around, you had cash on hand for cherry-picking the best deals.

If you were smart, you stuck to your budget and didn’t let stress, competition, irresistible deals, or last-minute price hikes to knock you off your plan. You made a list of people and charities you wanted to recognize, set a price per gift, stuck to your list, and got your shopping done early.

That’s if you were smart.

But if your candy cane and cookie euphoria is dissipating with every thought of your credit card statement, you’re not alone. It’s engrained in our culture: Thanksgiving is to overeating as Christmas is to overspending – lavish spending you’d never consider otherwise.

The pressure to GIVE is powerful; our senses may leave us entirely. When we shop, we anticipate the warm embrace and feeling of joy WE create when a gift is received. It’s awfully noble. But if you’re like me, today is the day you watch your kids and realize just how little use your gift will get (I will never buy a robotic pet again!).

So what’s next?

Budgets are fluid. They require constant reevaluation. If you overspent, it’s time to reconsider your budget for the coming months. You won’t be able to see any viable options without a clear picture. If you didn’t before, go back and write down what you spent.

Chances are, it’ll make you feel better. You’ll realize that, while you had a bad month for your budget, you aren’t completely out in the cold. Because, you see, most of the year… You were smart.

If you’re not feeling better, take solace knowing that it’s possible to mount a comeback.

A few years back, holiday spending tipped my credit card balances over the edge. I wasn’t smart. I thought I was – it makes sense to open up store credit cards to save 10%, right? Wrong. It wasn’t until too late that I realized I wouldn’t be able to make the minimum payments on so many cards.

I knew enough to see that with accumulating interest, everything I could afford to pay towards my various credit card bills would be going straight into the creditors’ pockets while my debt level remaind constant. Classic debt spiral.

What did I do? Consolidate. Debt consolidation sounds ominous, but it’s far worse for your credit to fall behind on payments. You can take advantage of low interest rates on balance transfers and merge your debt to one account, or seek a consolidation loan to pay off your principal balances. If you have good credit history, you may be able to achieve a lower interest payment or a longer payment period. Managable. You can handle that.

The moral of the story? I’ll say it again:

Stop. Take a breath. Enjoy what’s left of the holidays. You’ve got options.

Photo: TopGold

Thanks to Jennifer Willard for taking over the blog responsibilities today while Joe & OG search for more egg nog. Jennifer has a new blog, Crayons & Coins. She also writes for Credit Guard, a non-profit debt counseling company.

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Holiday Games and Finance: What Can the Game “Dominion” Teach You About Money?

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While Joe’s playing Dominion with his sister, brother in law and spouse (we all l.o.v.e. this game at our house), Erin Shanendoah of The Dog Ate My Wallet fame holds down the fort at the blog. Hope you’re enjoying some quality family time like we are!

Dominion is hands down the favorite game in our house. Set up is minimal, and you can get through a 2 player game in as little as 10 minutes if both the players know the cards. Every game is different, which means that players need to be open to different kinds of strategies if they want a chance at winning.

Even forgetting that you have money within the game (copper, silver, gold & platinum(in the expansions)), you can learn a lot about finances from Dominion.

Every game is different. Just like every person’s financial situation is different. Because of this, there is no one strategy works for every game of Dominion, and there is no one size fits all solution to personal finance. You have to look at the cards that have been  dealt and figure out the best plan for this game, this situation. Only by responding to the uniqueness of each situation can you hope to consistently do well.

Multiple strategies can be viable options. My husband and roommate both love playing games, and for the most play well together. But they have different outlooks on life and will often see the exact same set of cards and come up with two completely different ways to win. They each go with the strategy that they are the most comfortable with.

Just because someone has a similar financial situation to you does not mean you have to both take the same financial strategy. Find what works for you and what you’re comfortable with, and you’ll have a much greater chance of “winning”.

Diversity is good. Too much is not. Currently, there is the base set and 7 expansions for Dominion. While you can play with as many expansions as you want, we’ve found the best games are limited to 3 sets- usually the base plus two expansions. 3 sets gives you lots of options, but you don’t lose the synergy between cards.

Diversifying your holdings financially helps mitigate your risk, but if you diversify too much, you lose the power of “buying in bulk” so to speak. (Average Joe and The Other Guy can both speak about this much more eloquently than me.)

Sometimes you just need more money. Other times, you need your money to work harder for you. Within Dominion, you use money to buy other cards. You can buy more money, action cards, or victory point cards. Sometimes, the best strategy is to use your money to buy more money, especially in the early stages of the game. But later, you’ll want to use that money to buy action cards. Those cards allow you to advance your strategy, hinder the strategy of others, and sometimes even buy the highest value victory card, even though you started the hand with only 2 coppers.

Early on in your life, often the best solution to money problems is just to get more–go out and work a second job, find a way to earn passive income, etc. But once you get to the point where you’re not struggling to pay the bills, you need your money to work for you. By making smart moves with your money, you can open new doors for yourself or your family, and eventually “win” the game by having a comfortable retirement. (I do hope that in real life, you won’t use your money to hinder others. That should be a game strategy only.)

Just sitting on money can slow you down. One might think the one strategy in Dominion that would work in every game would be to use your money to buy more money until you had enough to buy victory cards, and just keep doing that. It doesn’t work. While you obviously need victory cards to win the game, they don’t do anything else. You can’t spend them. You can’t take an action from them (well, in some expansions there are victory cards that have actions, but those are very special cases). Instead, they just take up valuable space in your hand and do nothing, slowing you down.

While sometimes it seems the safest way to save money is just to stick it in the recliner and sit on it, your money can’t grow that way. It can’t actually do anything for you. It’s a strategy that just slows you down.

The cards aren’t always your friends. There are good cards and bad cards in Dominion. There are cards that are good for the person who plays them and awful for others. There are thieve and militias, there are curses and witches. You can be forced to destroy your victory point cards or have a platinum stolen by the player to your left. Sometimes, you just get negative victory points. In order to win, you have to have a strategy to weather or eliminate the bad.

Bad things happen in real life. You need to have the tools to survive them. Sometimes it’s just in making smart decisions and protecting yourself. Getting yourself out of debt and carrying the right kinds and amounts of insurance can also protect you against the vagaries of the world.

Luck always plays a role, but it’s not everything. Because every player of every game of Dominion starts out with the exact same 10 cards, and a five card hand, there’s a limited number of opening hands you can have. But which one you get and how well it works for that particular game, is all a matter of luck. If two good strategies are going against each other, it’s really just going to be luck that decides the winner of the game. But it’s very rare for a well thought out strategy to lose to no strategy at all. Just depending on luck isn’t likely to win the game.

Some people start life luckier than others. Some people get lucky later on. And some people make their own luck by coming up with a well thought out strategy. And in life, it’s not really going to matter if you retire with $2 million while your buddy is ending with $2.1 million. You’ve both “won”.

Don’t forget to have fun. Dominion is a game. The husband and roommate are both competitive people and love to win. I care much more about enjoying the game. But I can’t enjoy the game if I feel ineffective. I will enjoy myself just as much putting together a strategy that comes “this close” to winning as I will winning the game. I will even enjoy a failed strategy if I find a single good combination within it.

How much money you die with matters only to the people you leave it too. You can’t use it anymore. Don’t put your life on hold just to reach some arbitrary savings goal. If you never take vacation until you’re 75 years old, are you going to be able to climb the island stairs at Tintagel? Yes, you want to save for the future and make sure you have enough to retire in comfort, but there’s no counting up victory cards at the end of your life, declaring you the “winner”, so make sure you have some fun along the way.

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.

Year End Tax Planning: A (Surprising) System of Cleaning My Closet

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On the way home from this Thanksgiving weekend in Michigan, I finally reached my limit with the situation in my closet.

For the last four years it’s become bigger and bigger mounds of….clothing. Just as I get the closet organized, it becomes a mess yet again. Being a recovering financial advisor, I loathe messes. Everything should be in neat and tidy rows, not thrown on the closet floor.

Historically, at this point I’d decide to get rid of clothing. I’d pick up stuff and make the “stow or go” draft move:

“No,” the hoarder in me said, “I’ll wear that some day.”

“I got that at my favorite 5k in 1998. I can’t get rid of the Pickle Run shirt!”

“If I get that stain out I’d wear it all over the place.”

I should have been saying, “Some day bell bottoms will come back in style!”

Sometimes–not often enough–I’d find a piece that definitely had to go. Whenever I brought home new clothing from holidays or trips to the mall, old stuff stacked up. The “donation” pile contained a lonely piece or two. I was adding clothing at a 2:1 rate over donations.

On the way home I snapped. Suddenly I formulated a plan:

 

The Plan

 

It was so easy, I can’t believe I hadn’t seen it earlier.

Clothing decisions (and by extension “stuff” in general”) isn’t about whether I like each “thing” or not; of course I loved them all. I wouldn’t have bought them if I didn’t like them. They all had sentimental value AND my mind needed to justify the reason I’d added them to my collection in the first place.

In short: using my current criteria, there was no way I’d ever clean out the closet.

In my a-ha moment, I flipped my thinking: the closet wasn’t a place to store all the cool stuff I wanted to keep. It was a place to store things I needed.

Following that train of thought led me to the real question:

How much did I really need?

 

The List

 

I made a list of things I really needed:

10 Long Sleeve Running Shirts (probably don’t need 10, but that was a start)

10 Short Sleeve Running Shirts (closer to the number)

4 Pairs Running Shorts

3 Pairs of Jeans

4 Pairs of Dress Pants

3 Suits (again, probably too many for my lifestyle, but I could cut more later)

6 Ties

6 Button down shirts

5 Pullover sweaters

….and so on.

 

…and Action!

 

Sunday was a bloodbath in my closet. I tore everything out and placed it on the floor. I was making Top 10 lists of each type of clothing. Soon I was at the difficult portion: there were pieces I liked, but they didn’t make the  Top 10 (or 5, or whatever….). At this point it didn’t matter how much I liked the shirt: there were enough pieces for me to wear without it in my closet. Better to gift it to someone who really needs it this holiday than to keep it sitting in my closet with 10+ items I’d rather wear.

I created a gigantic mound of clothing to donate.

 

Itemized Charitable Donation Deductions: Bonus Time!

 

If you itemize your taxes, you are probably eligible for charitable donations to 501c3 organizations. If you aren’t sure whether the place you want to donate clothing is a 501c3, just ask them. They’ll know.

If your organization is eligible and you itemize deductions on your taxes, you may be able to write off your charitable contributions. I received a receipt at Goodwill that listed all of the items I’d donated to them. I’ll use this at tax time next year.

Bonus!

 

The Lesson

 

I’ve learned this lesson 100 times and still continue to struggle with it daily. Don’t get caught in one line of thinking about a problem….especially nagging ones like cleaning out a closet. Turn the question around. Search for a better answer. Scour the web for strategies….soon you’ll have a clean closet, better decisions and possibly tax deductions!

 

This is another in our list of systems for busy people. Want more? Check out our budget plan for busy couples. It’s another play-tested system (that one OG uses with couples all the time and I used when practicing…it’s worked magic for non-budgeters.)

What are you waiting for? Go clean out that closet and cha-ching on the tax deductions!!!! What system do you use for weeding out old clothes you still love but should probably chuck?

How Much Did This Election Really Matter?

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We just experienced a big day for the United States. Throughout the country people cast votes for new laws and elected officials, including the president. Common people electing officials….it brings up a question: does this mean anything to your overall plan?

For my friends Tim and Kathy, you wonder. They have two young children and make $85k per year. According to them, they have credit card debt of around $6,000. They don’t save, although they could. When we piece together their financial picture, there’s a clear pattern:

 

Credit Cards:

 

They love high end restaurants.

“Why?” I asked when we were playing games together one night. Kathy asked me if I could find her a lower rate credit card and handed me their latest bill.

“We eat dinners out because we work hard all day. We’re both absolutely fried when it comes time to make dinner,” Kathy replies. “It doesn’t make sense to be tired all night so we’re tired the next day at our job. Everybody’s had enough, so we head for a nice meal out. We’re happy sharing our day together instead of slaving over prepping a meal.”

That sounds nice, until you read the bottom lines: $48, $53, $79.

“We try to stay away from alcohol during those meals,” Tim quips. “That helps keep the price down.”

Down?

Further down the bill, I see department store shopping.

“It makes it so much easier to get the stuff at one place. Saves us time,” Tim explains.

“I hate shopping,” Kathy says defensively.

 

Utilities

 

Tim has an addiction: sports. They have the MLB network package that allows them to see every game in the league each night.

Cost? $120.

Each weekend during the fall, he’s watching several games, courtesy of NFL Sunday ticket.

“It’s for my league,” he says. “I’m in this fantasy football thing. $100 to get in. If I finish in the top three I at least get my money back. Then he points to the television remote. “If I win, it pays for about three years of this.”

Cost? $140.

Has he ever won?

“This is the year!” he smiles.

 

House/Lawn Work

 

When I drive by their house, a team of high school age kids is cleaning their lawn. I asked Tim about it at a party we were both attending. “The kids needed the work. It was nice. They came to the house and asked. It’s only $20 a week. Saves me all that time….and gas.”

Speaking of gas….they live in the country. “No high city taxes.” Both Tim and Kathy commute over 20 miles to work. They must spend a couple hundred dollars in gasoline a week.

On my personal Facebook account, Tim made his politics known leading up to the big vote. “We’ve gotta get the President out of office. He’s costing this country dearly. We can’t afford four more years.”

I think there’s a bigger question: Can Tim and Kathy last four more years whether the President won or not?

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

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

7 Things Guys Should Not Say At Work

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Time for some serious financial advice:

I’m recycling old magazines and donating books. My bookshelves are busting at the seams with books and periodicals I’m keeping for reasons beyond my knowledge. While I was making stacks today, I came across an Esquire special magazine which featured a HUGE list of phrases guys shouldn’t use at work.

Keeping a job isn’t just a good part of being a guy…it’s part of being financially fit. That’s why, if you’re wondering how the hell this post fits this website, I was able to sneak it in under the wire.

I’m trying to help you keep your job.

Being a guy is part science/part art. Sometimes, I’ll admit, I  don’t even quite understand “the rules.” I admitted at a bar one time that Muriel’s Wedding was one of my favorite movies.

Let’s just say that didn’t go well.

I tried to make it better by telling them that I loathe Steel Magnolias (don’t get me started), but apparently admitting that I’d even seen the film was a reason I’ve been told I have to forfeit my man-card.

That said, if you were a dude and said any of these in the office, it might catch my attention:

 

My Favorites From Esquire’s List of “Things a Man Should Never Say at Work”

 

7) “You seriously wanted me to do that?”

6) “Nice Botox”

5) “I had a dream about you last night.”

4) “How much’re they paying you anyway, sweetheart?”

Zumba

I’d fit in like a lobster at a seafood restaurant

3) “It’s called Zumba. I’ve lost 12 pounds.”

2) “That’s not how we did it at my last job.”

…and my favorite line from Esquire’s “Things a Man Should Never Say at Work”

1) “They’re white-chocolate cranberry. I baked them last night.”

 

I hope these tips helped you hold onto your job a day or two longer. Any I missed?

Five Money-Saving Tasks That’ll Help You Cha-Ching! in the 4th Quarter

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I love the sound of the cash register ringing, don’t you?

If you’re going to be successful in your financial life, treat it as if it’s a business and you’re trying to hear that awesome cash register sound. If you don’t, you’ll always prioritize yourself behind more “important” activities like your job (nevermind that the job is there to help your net worth…that’s probably the subject of another post).

Every business has a mandatory list of activities that can’t be ignored. So does your financial life.

Here are five items that MUST be on that list this quarter:

1) Mutual fund capital gains. Even if you don’t have mutual funds outside of an IRA now, you should learn how these rules work. When the manager (or system, for an index fund) trades stocks or bonds inside of the fund a capital gain is generated. Someone has to pay it, and there’s no real fair method, so the mutual fund company declares a date and divides the gain among shareholders of record. Even if you didn’t sell the fund, you’re responsible for your portion of the manager’s buying and selling.

With results so far in 2012 looking up, there’s a good chance you might get hit with a tax bill this year. Avoiding this tax is legal and easy. Find the dates the fund declares capital gains and transfer your money to a different fund in the same family. This avoids fees for switching and the manager’s capital gains tax.

Grab a calculator before you move any money. You’ll still be on the hook for capital gains taxes you generate by selling as well. The cost of switching might outweigh the savings you’ll realize from avoiding any taxes created by the fund manager.

2) The lemon drop. Hoping to skim off some of that skyrocketing Apple stock? Cover a portion of your capital gain by also selling your brother in law’s “can’t lose” loser. There’s no time like now to weed your portfolio of positions that aren’t going anywhere. Although you’re only allowed to show $3k in net capital losses each year, leftovers can be carried over to deduct in future years.

3) Charitable giving. Hopefully you’ve given to your favorite community non-profits throughout the year, but if not (and especially if you itemize), you’ll want to make cash and in-kind donations in before December 31. Keep receipts for your gifts. The IRS has tightened charitable giving laws in recent years.

4) Estimate your taxes and decide when to pay property taxes. If you own a home winter taxes are deductible either in December or January, your choice. Did you receive a big bonus this year? Take the extra deduction now to help lower your tax due. If you make too much, it might be a better idea to wait until next year. High income earners aren’t allowed to claim all of their itemized deductions (ask your accountant about whether you’re subject to phaseouts).

5) Goal evaluation and setting. The 4th quarter is the perfect time to begin thinking about your short and long term goals. Did you hit your benchmark in 2012? If not, what are you going to change in 2013?

While people generally talk a good game about benchmarking, most of my clients were surprised when I pulled the actual number out of their plan to see if they’d hit the mark during a year. By sticking with actual data and avoiding the “Yeah, it feels like I had a good year” you’ll be able to make the necessary course corrections to save the right amount of money in the upcoming year.

I’ll be addressing each of these areas in more detail during the course of the quarter, but do yourself a favor and schedule these tasks now. These are five activities that you don’t want to miss!

What other events are on your 4th quarter financial calendar?

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How to Fix Your Rotten “Get Out of Debt” Plan

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If my title intrigued you, I’ll assume your debt payoff strategy is in shambles.

I’m not surprised if it is. Many people struggle with debt:

  • The average person carries $7,800 in consumer debt.
  • 33% of this is revolving debt. The rest are loans.
  • $51 billion of fast food was charged to credit cards
  • Over 2 million households in the U.S. have more than $20k in credit card debt

It seems that many of us are in a never-ending spiral that we can’t escape.

Yet, successful businesses manage debt effectively every day.

Why is it that the same people who make these business decisions so effortlessly during the day come home and make emotionally fueled decisions at night?

That’s easy. They separate their working thoughts about money from their home life thoughts about money.

For some reason, when we reach home, we go from pragmatic individuals who can easily make objective, fact-based decisions for a company, to people who are emotional about their credit card debt and student loans.

I watched it happen for 16 years, but this behavior doesn’t make any sense!

You deserve success in your life. You deserve to have a debt payoff plan that actually works. All that you really need? Change the way you look at debt and your own financial picture.

Think of your own situation as if you were controlling a company.

Here are three crucial differences:

1) Companies manage interest rates and terms effectively, while most people don’t.

The average person says “I want a 15 year mortgage because my house will be paid off earlier than it will with a 30 year loan.” Really? Why is that? You can’t pay off the loan on a different schedule than the bank approves? Companies don’t begin negotiations by asking “when is the loan due” and then try to weasel the term to a shorter duration. Successful companies ask the bank for the longest, most flexible term available and then have their intelligent accountants create and maintain a repayment plan that works best for their goals.

Why do businesses do this? It makes financial sense to find a low interest rate and flexibility.

Why don’t we do it at home? We can’t trust ourselves to stick to the plan. We’ve messed it up so often in the past that we know we’re more likely to be successful if we have someone else do the thinking.

– How would you rearrange your debt if you focused on flexibility and interest rates?

2) Corporations focus on the big financial “game changer” moves while individuals worry about the latte factor and whether they should brown bag their lunch or eat at a restaurant.

Companies will focus time and attention toward negotiating salaries and health care costs to save millions of dollars. An employee stealing a few pencils and some toilet paper are a blip on the bottom line. Yet, the same people who focus on whether to raise the price of goods sold to increase profits $10 million will go home and waste all their time cutting a few coupons to save $4.73. What if they used this time to negotiate a raise or find better employment? That could mean $10k more to the bottom line instead of $4.73!

– What would happen if you focused your energy on major financial decisions instead of the line-by-line budget items?

3) A company makes decisions based on building financial muscle, not based on “feeling good.”

Companies weigh the financial impact of decision “A” against decision “B” and most often choose the more profitable path.

I’ve had clients who are vice presidents of major companies tell me, “I’m going to pay down a 3% loan before I tackle raising my 401k savings.” Why? “I hate having that hanging over me.”

While I appreciate the sentiment, I think this is where you modify the Nike slogan “Feel the fear and do it anyway” into “Feel the hanging over me feeling and do the right thing anyway.” It almost works.

  • Why do businesses analyze financial data and growth projections before making decisions? They have shareholders to hold them accountable.
  • Why don’t we make growth decisions more often at home? Would your financial picture be better if you thought of your family as shareholders? What would change about your focus?

Imagine a “shareholder” meeting to discuss what you’re doing well and where your “company” needs improvement

  • What charts would you show at this meeting? Would you produce information about your projected future? Are these accurate?
  • What changes could you make that you don’t make now if you had these?

If you were a shareholder for your company, what would you say about your stock? Going up? Struggling? Why?