Category Archives: WAHM Finance and Business Tips

11/2/11

Social Security benefits for next generation? Don’t count on it!

Is our Social Security in Jeopardy?

 

My answer would be, “Absolutely.”

 

In fact, the Social Security Administration admits to the same questionable and doubtful view of the future of its program.  Here is what the Social Security Administration itself has to say on the matter,

 

“The financial conditions of the Social Security and Medicare programs remain challenging. Projected long-run program costs for both Medicare and Social Security are not sustainable under currently scheduled financing, and will require legislative modifications if disruptive consequences for beneficiaries and taxpayers are to be avoided. “

 

During the infamous “Debt Ceiling” debate in August, concerns about Social Security and Medicare were again brought to the forefront of the American people’s attention—as they should be.

 

As most know, Social Security is in serious fiscal trouble.  While many experts believe there is no immediate concern for those currently receiving benefits, or to those who may do so in the near future, I don’t feel as confident.  It’s my opinion that Americans will need to rely more on their own income and savings, and less on Social Security retirement benefits to maintain their desired retirement lifestyle.

 

According to the SSA, 94% of American workers are covered under Social Security. 

 

Social Security is mostly funded through payroll tax in which employees and employers each pay 6.2% of wages up to $106,800.  Self-employed individuals pay the combined rate of 13.4%.

 

While disabled workers and survivors receive benefits under the SSA, the majority of beneficiaries are retired workers.  In 2011, $40.7 billion will be paid out as retirement benefits.   The average monthly benefit paid to a retired worker in 2011 is $1,175.

 

As a young individual in this country, I am not relying on any form of Social Security for my retirement.   I encourage readers under the current retirement age to conservatively assume such benefits will be unavailable or greatly reduced in the future. 

 

Yes, I understand that as a taxpayer I am contributing to Social Security.  But I am not naive enough to believe these funds are being set aside for me (or my generations) future needs.  On the contrary, what we are paying into the system now is help funding our parents and grandparent’s generation.

 

Somewhere, the cycle has to stop.

 

While no politician wants to be involved in cutting any type of social security benefits, the truth remains that there is actuarially speaking, not enough funds to sustain the system in its current form.  Changes will inevitably have to be made either to the amount of benefits received, or qualifications for receiving such benefits.

 

Thus, my family and I will work hard to create our own stream of retirement income for our future.  Any social security we receive I will consider a bonus or unplanned addition. 

 

 Will I be frustrated if I never receive a dime of benefits after years of contributing to the system? Of course.  Am I hopeful major reform is made and that Social Security can be sustainable for our generation and those to come?  Sure.  But, realistically do I see that happening?  No.

 

Take your future into your own hands.  Work hard, budget, save for retirement, and accumulate your own wealth and retirement income.

 

11/2/11

4 Estate Planning Documents every Family needs

4 Estate Planning Documents you Need

 

Will:
A will is simply a document which outlines your final wishes.  It can be as simple as a “sweetheart will” in which one spouse leaves everything to the other, or as complex as one which makes considerations for charities, non family members, or trusts.  A guardianship provision, if applicable, denotes your choice of a guardian for your minor children.

 

Living Will:
Also called a health care directive, a living will serves as an outline of your preferences regarding medical treatment and health care decisions.  It may be used by health care professionals or by your family in the event you become incapacitated.  The document also allows you to appoint someone to make decisions and carry out your wishes on your behalf.

 

Power of Attorney:
Similar to a living will, a Power of Attorney appoints another individual to act on your behalf. The powers given can vary drastically depending upon how the document is created.  It is therefore very important to choose your POA wisely, and to consider with great thought the amount of power you wish for them to have.

 

Trust:
Trusts also vary greatly in complexity.  Because of this, they can be a great estate planning tool.  Trusts may be used to reduce estate taxes, provide for minor or special needs children in the event a parent’s death, or simply as a vehicle to reposition assets.

 

Estate planning is complex. Because it is not a one-size-fits-all kind of process, it’s often worth hiring a reasonably priced attorney to have your documents created or reviewed.

11/2/11

Couponing 101

Thanks to TLC’s new show, “Extreme Couponing” an old money saving idea has come back into style.  While most do not have the time or patience that “Extreme” couponing entails, here are some easy ways to get started on the Coupon Craze.  Your budget will thank you!

 

Traditional Cut and Clip:

Some of the best coupons are found the traditional way, just like your mother taught you.  Purchase or subscribe to the Sunday edition of the paper (purchase multiple copies for multiple coupons) and start clipping and filing.  Manufacturer’s coupons are advantageous in that they can be used at multiple stores, and used when stores offer additional promotions such as Double Coupon Days.

 

Online Coupons:

User friendly websites such as www.couponmom.com and www.redplum.com printable grocery coupons at no cost.  Such websites also provide additional grocery saving tips and advice.  Try Kroger’s website to upload coupons straight onto your Kroger Plus card.  The discount will automatically apply during checkout.

 

Be Loyal:

Stores reward loyalty.  So if you do most of your shopping at Kroger, Walgreens, or CVS, consider signing up for their rewards program.  Ask a sales associated what perks you may receive for items besides groceries such as prescriptions or fuel.

 

Subscribe to Email lists and mailings:

While you may receive some junk, you may also receive valuable sale information emailed only to the store’s subscribed users.  Consider setting up a separate email address to avoid receiving “junk” in your personal inbox.

 

Consider keeping track of your coupon savings and allocating it toward an emergency fund, debt payments, or other financial goal.

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10/22/11

5 Ideas for Kids to Learn about Money

5 Ideas to Help your Kids Learn about Money

 

1.  Play Games: Monopoly is a classic board game for a reason.  Lessons in real estate, opportunity costs, and cash management transfer well to real world economics.  For young family members, consider Monopoly Junior.

 

2.  Take Field Trips:  Allow your child to accompany you to the bank.  Instead of going through the drive through, go inside and let your child help you fill out the deposit slip.  Explain the basics behind a checking account, credit and debit cards, and mortgages and loans.

 

3:  Talk the Talk:  Many parents think it’s taboo to discuss finances in front of their kids.  On the contrary, an open discussion about family finances allows your child an opportunity to learn important financial topics from the best teachers available—mom and dad.

 

4:  Save Up:  As a family, save lose change and dollar bills toward an agreed upon family goal—such as a trip to the circus, vacation, or even a pizza party.  Let your kids be part of the end reward to feel the satisfaction of accumulating funds for a goal.

 

5:  Start a Business:  Lemonade stands, bake sales, babysitting or lawn care…find your child’s talents and encourage them to start a mini-business.

10/20/11

New Stimulus Idea: Forgive Student Loan Debt? No Way!

 

 

 

 

 

 

 

 

 

 

 

 

So, this has been floating around facebook, and I finally feel like interjecting.

 

There is a petition circulating from SignOn.org, to encourage lawmakers to forgive student loan debt as part of a new economic stimulus plan.

 

I have to say (though I’m sure I’m in the minority) that this is an awful idea.

 

In full disclosure, I will admit that I personally have no student loans (thanks to generous and hard-working parents, a reasonable in-state college, and KEES scholarship money.)   

 

However, David and I are now sitting on ginormous student loans thanks to his attendance at the University of Louisville Medical School.  Just like we do with all of our finances, David and I consider this debt to be a burden we both share.  Although only his name is on the loans, it is a part of our entire family’s financial plan, and we are both taking responsibilities to tackle the payments.

 

Therefore, you’d be hard press to find another family that could benefit more than we could from a loan forgiveness stimulus package.  And yet, I still think it’s an awful idea.

 

Why?

 

First and foremost, I think there is a lesson in responsibility that would be lost should the government honestly consider eliminating student loan debt.  A loan is an I.O.U.  Not an I.O.U (but let’s forget about the “O” part.) 

 

Those of us with student loans have a legal (and ethical) responsibility to make good on the promise we made when we borrowed the funds.  What kind of society are we living in when a student can borrow $100,000 for a private education, never pay a dime of principal or interest, and expect the debt to be magically wiped away with a magical congressional wand?

 

A post-high school education in this country is a luxury, not a necessity.  It is a choice, and it is a privilege.  It is a blessing in our country that any one who really wants to receive a college education (or post-graduate education for that matter) has the opportunity and resources available to do that.   That doesn’t mean one will receive their education for free, be able to attend any college one desires, or graduate without any ill financial consequences or debt.  It just means the opportunity is there, although some will inevitably have to sacrifice for it more than others.

 

By taking out student loans, you are investing in your future, believing that the education you receive will provide you with enough income to later in life make good on your loans.  That’s how loans work.  Someone lends you money today, in exchange for the return of the money (and interest) at a later date.  Loans are contracts.  Loans are promises to pay.  Loans shouldn’t be forgivable.

 

Secondly, as a taxpayer, I have a problem with the forgiveness of student loans, justified only by the fact that they are “student loans.”  Most students that borrow for college are not just borrowing money for tuition, books, and fees.  Justifiablly so, these students are borrowing money for living expenses, food, shelter, entertainment, computers, clothes, beer, concert tickets, etc… etc….

 

We live in a college town, and I see this every day.  These kids support our town through their plentiful (and sometimes frivolous) spending patterns.  David will be the first to admit that it was his borrowed money that paid for everything during medical school—beers while watching the game with the guys,  our dates, and even a trip or two now and then.  Please tell me why a taxpayer (or anyone other than David or myself for that matter) should be responsible for paying for those types of expenses?

 

And lastly, beyond the ethical dilemma I think this would cause, is an economically more important point in that I think the idea would fail as a means of a stimulus plan.  We’d be “bailing out” those with student loan debt—college graduates, lawyers, doctors–the ones in our country who need to be “bailed out” the least.  

 

I understand some college graduates are having trouble finding a job in this economy and are having difficulty making student loan payments.  I do think there could be adjustments to the system, though I won’t go into that in this post (for example, our loans are at an interest rate of 6.75%–well above the rate we pay for our mortgage or car loan).  But completely forgiving debt would not hold the millions of students responsible for a promise they made.  Nor do I think it would encourage job growth, as there would be even less of an incentive for people to find employment. 

 

If you are a graduate having trouble with your loans, consider Federal programs that qualify you for a portion (or complete) student loan forgiveness through public service.  You can find out more about these opportunities by visiting http://www.finaid.org/loans/publicservice.phtml

 

 

10/18/11

Basics on Long-Term Care Insurance

Your basic questions about Long Term Care Insurance answered.

 

What is long-term care insurance?


Though a somewhat new concept, long-term care insurance is just like any other insurance policy. The insured makes premium payments to an insurance company in return for the company’s promise to pay for specific coverage—in this case, nursing home costs.

 

Who needs it?


According to Dan Sheets, owner of Kentucky Insurance World, the person who needs LTC insurance is “the individual who wishes to preserve whatever savings they have accumulated for retirement.” With nursing home costs skyrocketing, the danger is that baby boomers will have to exhaust their savings to pay for health care costs. “There is no magic dollar amount of how much you need,” Sheets says, “but a policy that protects and pays for at least two to three years should be minimum.”

 

What should I look for in a policy?
There is more to look for in a policy than just the cost of premiums. “The two most important things to look for are the commitment the company has in the long-term care industry, and the purchasing of an inflation rider,” Sheets says. The inflation rider allows the policy benefits to grow and keep pace with rising health care costs.

 

10/18/11

Online Budgeting Tools

Here are some great online budgeting tools to help you get started on budgeting:

 

Microsoft Office offers custom budget templates: http://office.microsoft.com/en-us/templates

 

A great budgeting tool I use and love is Mint.  It sends alerts based on personal information and settings.  Great Mobile App as well:

www.mint.com

 

For a small business, I highly recommend the use of QuickBooks.  This is what I use for my small business to keep track and send out invoices.

 

http://quickbooks.intuit.com/

 

You might also find that a simple Excel spreadsheet, Word document, or old fashion pen and paper works for you.  Whatever format you choose is less important than making sure you consistently update, review, and follow your family or business budget.

 

 

10/18/11

How to Budget

 A lot of people ask me how they can get started reaching their financial goals. And my answer always starts with the “B” word:  Budget.

Having a budget means you understand where your money is coming from and where your money is going. And once you understand where it’s going, you then have a basis for future financial decisions. In this sense, a budget is the foundation to any financial plan.

 

Do the Math:

Start by listing the basic bills you pay each month such as rent/mortgage, utilities, car, student loan and credit card payments, gasoline, insurance, cable, phone and Internet.  Don’t forget to include money donated to charity, food, clothing, savings, travel expenses, entertainment and miscellaneous expenses.

A great budgeting tool to use is your on line bank or credit card statements. Often these will offer an itemized list of your monthly expenses.

 

I have a budget… Now What?

Making a budget is easy. The hard part is implementing action steps in result of your budget.  If you’re not willing to execute needed changes in result of preparing a budget, then it’s not worth any more than the paper you printed it on.

Subtract your monthly income by your monthly expenses to see what is left over.  This “leftover” money can serve as a piggy bank for your dreams.

Dedicate your piggy bank money to your goals, whatever they might be: paying down debt, saving for retirement, buying a home or vacation home, or taking a family trip. Continue to find ways to make your budget work for you…not the other way around.

Through budgeting, you may discover that you need to increase income–not just decrease expenses.  Consider a part-time job, over time work, or refinancing your house.  Do not consider borrowing from your 401(k), taking on additional debt, or ignoring your cash flow issue.

As with anything in life, perfecting your budget will take practice.  But there is no better starting point to financial success than a sound and basic budget. 

Check out these online budgeting tools to help you get started.
 

 

10/18/11

How to Save Money on Gasoline

With oil prices high, consumers are feeling the impact rising gas prices have on their wallets.  Since drastic changes such as buying a more fuel efficient car, driving less often, or carpooling aren’t realistic options for many, here are four easy gas saving tips for all drivers–regardless of the vehicle.

 

1.  Drive like you’d want your teenage daughter to drive.

Or better yet, how you’d want her sixteen year old boyfriend to drive with her in the car.  That means driving the speed limit and anticipating traffic patterns to avoid sudden stops and aggressive take offs.  According to the Federal Trade Commission, safe driving can improve gas mileage by nearly 5%.   The FTC reports on their website that “gas mileage decreases rapidly at speeds above 60 mph.” It pays to take your time.

 

2.  Plan Ahead:

Planning ahead can save time and money.  Cars are most fuel efficient when the engine is warm, so combine multiple trips into one afternoon and try to avoid rush hour traffic.  When possible, find “one stop shops” rather than driving to multiple venues.  Unpack any unnecessary items in the trunk which might add more weight to the car.  Before leaving home, look on line for the best prices on gas and plan your route accordingly.

 

3.  Maintenance:

According to AAA, ongoing maintenance of your vehicle can equate to more fuel efficient driving.  Important up keep includes making sure your spark plugs are in good condition, checking the air filters twice a year, and inflating tires to the appropriate level specified in your owner’s manual.

 

4.  At the pump:

“When possible, try to buy gas during the coolest part of the day,” suggests Dr. Ron Weiers, author of 365 Ways to Save Gas, “The pumps deliver and charge you according to volume, and gas expands when the ambient temperature is higher,” Weirs explains.  “If you really want to be picky, and you’re forced to buy gas during a warm time of the day, try to favor the pump that’s been in the shade the longest.”

 

10/18/11

Teaching Kids about Money

Most parents think the “birds and the bees” talk will be the hardest conversations with their children. But equally as difficult as well as complex is the discussion about the value of money.

 

According to Certified Financial Planner Tracy Redmon of Ameriprise Financial, it’s never too early to start “incorporating your values about money” to your children.

 

“The first best place to learn about money is at home,” says Redmon. “Involve your children early…it will help them for the rest of their lives.”

 

How do you get them involved? Here is what you should be discussing with your kids at different stages in their life:

 

Age 5-8: Even at age five you can begin to explain the concept of money.  Once children can count, it becomes easy to relate that skill to money management.  When out shopping, let your child count the money and hand it to the cashier.  Ask your child questions at the grocery such as, “Which one of these is cheaper? What can we buy with $5?”  Encourage them to start saving coins in a piggy bank and to count their savings. 

 

Ages 9-13: Now it’s time to help them understand where money comes from.  Explain how you make money and what you do with the money you make.  Let them go through the process—at the bank, let them deposit a check or let them help pay the water and electricity bills online.  Explain how it’s important to share money with those less fortunate and include them in this process. It’s also a great time to have your child start his or her own savings account. Most banks and credit unions offer this with no fees and no minimum deposit.

 

Ages 14-18: It’s now time they work for it.  They understand Mom and Dad work for money, but do they understand how hard it is?  Help them find a part-time job doing something they enjoy.  Instead of giving them an allowance, tie the allowance to the completion of certain jobs around the house.  Give bonuses for good grades or good behavior.  Offer to match their savings (the idea is to provide an incentive just as an employer might do in the future). Use real money, even if it’s a small amount, and teach them how to invest it and the power of compound interest.

 

18 and Beyond: Although they are no longer children, they still look to you as a role model, especially in money matters, says Suze Orman, financial expert and author of The Road to Wealth. “Parents, I know you want the best for your children,” she says. “So you should realize how much that means making sure you’ve got your own financial act together. Children who watch parents do stuff like ring up huge credit card bills buying goodies and vacations they can’t afford tend to dig the same financial holes themselves as adults.”

 

How do you teach your kids about money?  Share with us under Comments…