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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?

Avoiding Sex With Strangers and Other Poor Money Decisions

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Thursdays are when we hear from the Other Guy (OG). Sit back and enjoy:

I recently stumbled across two interesting sites on longevity. Both www.livingto100.com and gosset.wharton.upenn.edu/mortality accomplish the same task – they pose a litany of questions about your health, wealth, mental and spiritual well-being and use your inputs to predict how long you’ll live.

For the record, I’m planning on living until 135.

The questions these sites ask fall into two different categories: things you shouldn’t do to your body and things you should.

My unscientific analysis surmises that it’s generally a bad idea to:

a) smoke
b) drink
c) avoid seat belts
d) have random sex with strangers (I know you think I’m kidding – but seriously, according to these two sites, it’s not a good idea. I can’t seem to imagine why…)

All this “research” started me thinking about financial longevity – what are the 4 stupidest things you can do with money that will kill your chances of a healthy financial life, no matter how well you try and recover in other areas? Can we draw some parallels? If we’re smart enough to show you the Top 7 Financial Hacks to Avoid, we can surely pull together the four worst ways to train wreck your financial life.

 

Here’s my list:

 

1) Borrow money from your 401(k) or other retirement plan. Why? This is financially like smoking 3 packs a day. Stop doing this. “But, O.G., I’m paying myself back with interest!!” Right. You’re paying yourself back these pre-tax dollars with after-tax money. Don’t get me started on the arithmatic of how much you’ll pay.

2) Rack up credit cards and roll the balances into your mortgage. Obviously this isn’t as common as it used to be, but it’s still happening. Paying 2.99% for a J Crew sweater for the next 30 years is freaking dumb. This is like having six Jack and Cokes a day. Your liver isn’t going to quit tomorrow, but it’s not there to crank through your whiskey addiction at 6 ounces a night either.

3) Not paying attention to your lifestyle costs relative to portfolio value. This has come up in my practice a number of times recently. I don’t care how much money you have – you simply cannot withdrawal $100,000 per year from a $1,000,000 portfolio forever, even if David Copperfield is your buddy. It’s simple mathematics. It won’t last forever. Be conservative. Wear a seatbelt – and go slow.

4) Scattering money with no clear and coherent plan or direction. You guessed it – this is like putting your…well you get the idea. You’re not in college anymore. It’s time to settle down and put all your stuff in one place.

That’s my fantastic four, or fabulous four, or fashionable four, or…well you get the idea. What are yours? I’m curious: what’s the top financial mistake you’ve seen that will submarine an entire financial plan?

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5 Must-Know Privacy Lessons I Learned From 9-11

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I was late to work and sneaking up the stairwell to my office. A passing friend said, “A second plane just hit the World Trade Center.”

There’d been a first plane? The World Trade Center? It must be a little Cessna.

The entire office huddled around televisions. I wasn’t prepared for what they were watching. The heroism of everyday people that day still amazes me.

Later in the week, among the flurry of stories echoing the disaster, one personal finance problem emerged: private financial documents with personal client information littered the streets of Manhattan. Many of the firms in the World Trade Center were financial companies (in fact, one firm owned by a cousin of a client, Alger Mutual Funds, lost David Alger and 35 other staffers that day). I began helping the media complete stories about “How to Protect Your Privacy.”

Although we can’t prevent another 9-11, we can make sure that our financial documents are the last thing we worry about when far more important concerns (such as people) should dominate our thoughts. Here are five lessons I took far more seriously after that day than I had previously:

 

5 Steps To Protect Your Identity

 

shredder1) Shred unnecessary documents. A good shredder pays for itself immediately. If you’re using it for household bills, this Amazon shredder will only set you back $29.99. Businesses should invest in a more robust tool.

2) Don’t give out your social security number, telephone number, or other unnecessary information on documents. I hand over wrong numbers like a hot woman at the bar. Create a separate email address reserved for email forms and correspondence with companies.

3) Check your credit report regularly. You’ll want to keep a tight watch over predators trying to access your credit. Companies with free credit tools like Quizzle or CreditKarma are great places to monitor lender activity. On episode #2 of our Two Guys & Your Money podcast, Len Penzo reported that he turns off his credit with each credit company until he needs it. Look for other mistakes while you’re there: a recent ABC news story reported that over 90% of all credit reports have inaccurate information.

4) Review every credit card statement. Ever wonder why Mr. Monopoly looks shocked when you draw the “Bank Error in Your Favor….Collect $40” card in the popular board game? It’s because errors happen all the time and they’re rarely in your favor. More importantly, you may see early signs of thieves trying to gain access to your credit.

5) Back up your documents – I’ve recently begun transferring my paper documents into digital form. Keep these in two places in case you lose access to the first or thieves steal the data.

Foremost in my mind today is the tragic and unnecessary loss of life on 9-11. I learned far greater lessons than the five I pointed out above. However, I also learned a little about taking care of my financial life so that if tragedy strikes, the threat to my identity is minimized.

 

What steps do you still need to take to better protect your financial privacy?

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So You Want to Manage Your Own Money?

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A friend texted me this morning.

“We should talk soon. Julie is coming around to the idea of us managing our own money.”

It seems easy, right? My initial reaction to my friend was, “That’s awesome!” because it is. There are few things more satisfying than achieving your financial dreams and knowing that you climbed the money management mountain yourself.

No “money-god” came down and did it for you.

You didn’t need the Powerball numbers.

You actually plotted a financial course and landed safely at your destination.

For my friend, and for you if you’re about to embark on this journey, there’s good news and bad news: the good news is that it isn’t difficult to manage your own money.

The bad news is that to effectively manage your own money you’ll need to be ready to face some fairly difficult tasks.

 

Two Types of People

 

When I was a professional advisor, I’d meet some smart people who wanted to jump into their own money management and wanted an expert with an opinion to look over their shoulder, hold them accountable, and make sure they didn’t miss any “I” dotting or “T” crossing.

…and then there were other, often equally-smart people who wanted to hand it over to me and have someone else take care of it for them.

Believe it or not, most advisors I knew preferred the latter type of client and loathed the first one. Someone questioning their motives? Someone asking “why are we doing it this way?” all the time? That’s preposterous!

But if you’re going to ever learn how to manage your own money, you’ll need to be the first type, not the latter.

The steps aren’t difficult:

 

The Steps to Managing Your Own Money

 

My kids are reading myths in school. In the story of Hercules, he faces a series of challenges to achieve is goal.

I look remarkably like the guy on top, but I’m a little paler and not quite as naked. And I have less hair.

You’ll have a series of gauntlets in your way too, if you want to manage your own money.

1) Write out your goals. I’m not talking about writing:

Retirement

College

New Boat

Fall Deeper in Love

Real goal writing has a specific time, dollar amount and vision attached.

I want to be able to live on $65,000 per year (in today’s dollars) by age 65 without having to work every day. With this money I’d like to: (here you write your bucket list, which should include visiting every NASCAR track in the country).

That’s a goal you can shoot for and be excited about (except for visiting the track at Pocono, which I thought was pretty overrated).

2) Next, you write out all the hurdles in your way.

– I have $25,000 in credit card debt (separate by interest rate, term, amount)

– I have to put two children through college

– I know nothing about money management

3) Then, you find one of the nearly bazillion financial calculators online (you can use our powerful little PlanWise calculator here on the site!) and figure out how much you need to save to reach your goal.

– I need to save $250 per month to reach my dream if I achieve an 8% return.

Armed with your money management return information, now you figure out how to come up with $250 per month.

– Tweak your budget

– Pay down debt

– Take on more work

4) Before investing, though, you have a big problem. You have to insure yourself against some of the huge “what if’s” out there for you and your family:

What if you die?

What if you are disabled?

What if you have a car accident?

You’ll need to create a will and evaluate insurances.

5) Finally, you begin the heavy task of research to find investments that have historically achieved 8%.

 

No Step is Difficult, You Just Shouldn’t Miss One

 

As you can see, when you take on the hard task and decide to manage your own money, getting it right will be difficult. Each area demands time and energy:

– Planning, milestones and tracking

– Budget, income advancement and debt reduction

– Insurance need projection and comparison analysis

– Estate planning

– Investment allocation, picking and monitoring

These are five basic money management steps, but each packs a punch!

 

I Don’t Mean To Imply You Can’t Do It

 

As soon as I finish this piece I’m calling my buddy and talking him through these points. Before he takes on the task, he should know how long the financial security road really is. Going in with your eyes wide open is half the battle if you plan to win the “manage your own money” game.

He can do it, and so can you!

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