Sunday, December 7, 2008

Adjusting to Uncertainty

Wanting snap solutions and quick fixes are unfoturnate impacts of all the success in America from the past several decades. From the microwave oven to the internet, we now expect to get what we want when we want it, and believe me I get it. This is also a behavior that has contributed to the recent economic turmoil. The real culprit - impatience!

Well, we all need to overcome our collective anxiety about having everything at once and start doing the things that bring us long-term success and that means changing certain behaviors. But change is hard and nobody knows this better than me. I've been through change after change throughout my entire life but in some ways that has helped me keep my head above water. I crave stability. I crave waking up to the known each day and I'm getting closer to that as I navigate a recent personal loss. BUT - I don't want stagnation. I'm seeking a balance between too much change and not becoming stuck in a rut. I feel closer to this than any other time in my life.

I have been working with a therapist to balance out my life, especially since I had a traumatic jolt to my life earlier this year. My life literally turned upside down and I wasn't sure what or where my future would be. I was so devastated that I couldn't sleep and after three days of not sleeping I begged my doctor to prescribe medication. I was catatonic and it was affecting my work, my relationship with my daughter, with myself and my life. Thankfully I only needed this medication for a few weeks but I'm so glad I reached out for help.

As a result of this traumatic jolt I am now on my own and have to fend for myself. It's been difficult and it will be difficult for awhile but I have hope and I have a future. I grew up in very difficult times and in a very difficult childhood so I know that I can survive adversity but it's also because of this challenging childhood that I ended up preparing myself for the unexpected situation in which I now find myself. The roads of my life are now all merging and it's proving to be interesting and uplifting, even if it has been gut-wrenching and painful.

Well, I have and I will continue to survive. I know it in my gut. I also know in my gut that the economic situation, as bad as it is, will improve eventually. BUT we all need to make some changes. We need to learn what we can about the current situation and what got us here. My next blog will address five things to do to prepare for the future. Until then, take a deep breath, economize and if you still have a roof over your head, count your blessings. I do - each and every day!

Sunday, July 20, 2008

Five or Ten Things

There are lots of lists out there these days on what you should and should not do to lose weight, save money, live longer, be happier, save for retirement and more. Well, I've been reading many of those lists and in some way most of them say the same things but just with a different perspective or flavor in the writing. In the keeping of the spirit of lists and distilling much of the information into my own list here is one I hope will help:

List 1 - Five things to do NOW to save money

1 - Turn off any unnecessary lighting in and around your home. Don't sacrifice security but instead of leaving lights on all the time, install motion sensing lights, especially outside. Good lighting outside is a great way to reduce crime against your property but motion sensing lights help you control how much you spend to do this. If you have appliances that even when not being used have digital displays, consider completely unplugging them when not in use. I keep my microwave plugged in and it does have a digital clock display but it's the one appliance I feel justified in having ready to use at all times. My toaster on the other hand, which has a digital display for how dark the toast becomes is unplugged except when in use. These digital displays can be energy vampires and recent estimstes put that at 25% of our overall energy useage. So, 25% of our energy is consumed by applicances and things we don't use all the time. Electricity costs are increasing dramatically so it's worth doing an energy audit of your home to keep this under control. Here's a link to help you with your audit:

http://hes.lbl.gov/


2 - Make your lunch and bring it to school or work, in other words: brown-bag it. Some estimates are that you can save close to a $1000 a year by bringing your lunch to work or school, especially if you eat out everyday. I am always amazed at how many people spend $10 and more a day for lunch. I only do this when I have visitors, at office functions or for a really special treat. I usually keep my lunch costs under $3 a day by bringing it to work - and if you think I'm suffering - don't! I have everything from albacore tuna sandwiches to high-end salads that I make myself. My lunch often looks better than what my workmates purchase for 3-4 times as much. Here's a link to help you with this:

http://www.bargainist.com/deals/2008/06/moneysaving-tips-for-brownbagging-your-lunch/


3 - Walk or bike wherever you can. It's easy to hop in the car and drive up the street just to get a few things from the grocery store, but maybe you should ride your bike. Not only will you be saving on gas but you'll be getting some valuable exercise. Obviously, if you are going for many or larger things you will want your vehicle but consider breaking your weekly shopping for perishables into several smaller trips and getting exercise by biking or walking. If you have kids, include them and make it a fun family adventure. However, be smart - wear a helmet. Head injuries contribute to future health costs like Alzheimers. Here are some links:

http://bicyclesafe.com/
http://pediatrics.about.com/library/car_seats/blkids_on_the_move.htm
http://www.bikecommuters.com/
http://www.alz.org/alzheimers_disease_causes_risk_factors.asp


4 - Brew your own coffee. I brew a pot of coffee at home and take a travel mug into work with me. My home brew, which I share with my daughter, is from good beans and tastes absolutely wonderful. If I need more coffee I have a regular coffee pot at work and many of the long-standing brands of ground coffee are just fine for the day. I calucalte that it costs me about 75 cents a pot or less and I will share this with my co-workers. So, for a fraction of the costs of buying a cup of coffee out almost anywhere, I have plenty of coffee for the day and even some to share. Here's a useful link:

http://www.wikihow.com/Make-a-Good-Pot-of-Coffee


5 - Use coupons, but only for things you know you will use or use regularly. If you haven't tried something yet and don't know if you'll like it definitely use coupons for that test purchase. It doesn't make sense to use coupons for something you don't use or end up throwing away, something I'm weaning myself from doing. It's so tempting to save money with coupons but you have to be smart about it. If you end up buying something that you then decide not to use, donate it to your local food pantry. Here's a useful link on this topic:

http://ezinearticles.com/?Couponing-101:-Saving-Money-Clipping-Coupons&id=15248
http://www.secondharvest.org/how_to_help/donate_food/


Next time the list will be about things to do now - habits to get into - to save money in the future. Think of it as investing in yourself.

Saturday, July 5, 2008

Independence Day from Debt

More and more alarming statistics are emerging about how much debt we are all swimming in these days. The number of seniors on fixed income visiting food banks is dramatically increasing. A recent story in USA Today's Money section is a wake-up call for all of us. Here's the link:

http://www.usatoday.com/money/perfi/retirement/2008-07-01-retiree-fixed-income_N.htm

On this independence day weekend it's important for all of us to relook our finances, particularly our spending habits and how we pay for what we use or need.

The unstable economy is bringing to the forefront just how irresponsible we have been in this country with regard to money and what is and is not important. We all have a part in this mess we find ourselves in from living beyond our means to not voting and allowing our public offices to be hijacked by figure heads that primarily support special interest groups.

So, here's what we need for our independence:

- responsible spending
- saving for our retirements
- voting in an informed and responsible manner
- teaching our children how to do the same.

I will be highlighting a number of sites and books in the coming months that will help each of us pursue a more financially and personally responsible future.

Happy Independence from Debt Day and Year!

Sunday, May 25, 2008

Beware False Promises

There are many scams and fradulent activities out there and we all need to be careful about what we choose to do and who we listen to. I am greatly concerned about scams and bad advice related to paying your federal income taxes.

Please see my article at www.helium.com on my take of dealing with the IRS and why you should vote.

Here's the link:

http://www.helium.com/items/1055061-anger-towards-internal-revenue

Sunday, May 11, 2008

Mother's Day

It seems almost ironic that on Mother's Day there are more and more warnings that women are less prepared - even seriously unprepared for retirement compared to men.

A recent article in the money section of USAToday titled, Path to Retirement has Pitfalls for Women, brings this home more than I can express. It's a must read not just for women, but anyone who has a woman in their life for whom they care about and wish to see have a long, quality life.

Here's the link to the article:

http://www.usatoday.com/money/perfi/retirement/2008-05-08-women-retirement-savings_N.htm

With gas prices and the basic cost of living increasing at an alarming rate, women are far more vulnerable than men to fall victim to financial unpreparedness, especially once they retire.

So, what's the moral of this blog? If you are a young woman you NEED to start saving for retirement now. Do not play Scarlett and take the attitidue that tomorrow is another day with regard to saving for your future. Yes, tomorrow is another day but today is the best time to start saving. Once you're in the habit of saving for retirement you will wonder why - perhaps even kick yourself that you didn't start sooner. Tomorrow becomes today faster than you think.

According to the USAToday article referenced above, 25% of women have NO retirement savings at all. That's 1/4 of all the women in the United States! That's pitiful for one of the richest countries on the planet, and if you think the government is going to take care of you, you'd better think again. With current deficits at an all time high, the government at all levels will be collecting higher and higher taxes from all of us just to make the interest payments on that debt.

Moreover, with all the federal tax cuts more and more state level governments are looking for money to shore up their debt and pay for programs that were previously kept alive by federal funding. In some cases, state governments have cut programs all together and this is especially noticable in the social services sector such as mental health programs. So at a time when more women who are reaching retirement age need social service programs, the funding for those programs is drying up.

The government approach to our future can be scary and if we managed our money the way the current deficit is being managed we'd all be chastised for running up such large amounts of debt. Wait a minute - I think that's what has happened. The government does it so the rest of us think it should be okay, but look at the financial mess we are all in at the current time and quite frankly, I'm not optimistic about our overall ability to work our way out of this financial mess. Indicators such as a dramtaic increase in homelessness only fuel my skepticism. Please, everyone out there - prove me wrong. I want to be proven wrong!

One of the things that the federal government is banking on is a phenomenon called the Tax Gap. The reason the Tax Gap is being pushed is because politicians are pushing it. Politicians are pushing it because they see the Tax Gap as a source of revenue without having to raise taxes - something that every politician fears doing.

Essentially the Tax Gap is the difference between the taxes collected and those that should have been paid based on current tax law. For 2001 the Tax Gap has been estimated at 345 billion dollars - yes billion! But as my mother was known to say when I was growing up in the 60's - you can't get blood out of a turnip. This money is only useful if it is actually collected. The quesition is - How realistic is it that this money will be collected? The answer will only be told once the collection effort is fully realized. Moreover, Congress will need to provide substantial funding to the Internal Revenue Service (IRS) in order to facilitate this collection process. For more information on the Tax Gap, please see my article at Helium - here's the link:

http://www.helium.com/items/956548-theres-phrase-congress-legislators

So, what is a women of today to do? Again, the younger you are the better chance you have for a quality future not dependent on the government but only if you start saving today. Drop the "tomorrow's another day" attitude and pay into your retirement account before you have that next expensive cup of coffee or buy that next pair of shoes you don't need. You can always reward yourself with either of these once you've reached a reasonable financial goal.

For women ready to retire, make sure that you can actually afford to retire. In some cases, working just one more year will make a significant difference and just might keep you from being desperate enough to live out of your car. I was mortified at a recent news cast on the foreclosure mess sweeping this country to see an older couple literally living out of their car because they couldn't afford to pay for their home anymore - a home they had owned for decades.

Pay attention to your Social Security Benefit Estimates form that all of us receive each year just before our birthdays. If you haven't received yours then contact the Social Security Administration and make sure they have your current address. Go to http://www.ssa.gov/ for more information. You are strongly reminded on this form that it's just an estimate so make sure you take that into account.

Continue to read publications and advice I reference in this blog. NEVER take just one perspective. A cross-section of reading materials will give you a better overall sense of how to approach saving for your retirement and how to adapt this overall advice to your personal situation - a crucial element of retirement planning. The more you read and educate yourself, the better able you will be to take care of yourself financially. Something the government doesn't always do so well - so be careful whose example you follow.

Saturday, April 5, 2008

So, who's financial advice should you take?

One of the challenges women face in saving for their retirement is who to listen to and which advice to take. Because financial decisions can become so complicated most people - men and women alike - will just do nothing for fear that they will make the wrong decisions or trust the wrong people.

For most of us doing some very simple things is the best answer and truly we can’t afford not to take these simple steps in our financial lives. My previous blog, Women and Poverty - a Wake-up Call, highlighted the importance of education and lifetime earnings and making sure we put in the minimum amount of money in our retirement savings accounts to get our maximum employer match.

So, let’s look at some simple steps to follow:

1 - Get the most education you can as early as possible. If your job skills become unmarketable, take courses to update or acquire new skills to make you more valuable to your current employer or a future one. Most community colleges offer affordable programs that can lead to certifications or Associate Degrees that will help you in this pursuit. Moreover, some employers still offer a form of educational benefits that will help you pay for this. You need to check and see if your employer is one of them.

2 - Contribute to your 401k, 403b or other deferred savings retirement account to get the maximum employer match. If you can’t do the maximum, do as much as you can and whenever you receive a pay raise increase your contribution as much as you can. The old adage to pay yourself first is a solid one and you will find that you will adjust your spending accordingly. More and more employers are automatically enrolling new employees in the company deferred retirement plans, and the employee has to actively "opt out" to not get this incredible advantage.

3 - Depending on your current tax bracket and only after you get your employer match, consider contributing to a Roth IRA - not a traditional one - but a Roth IRA. The reason? The lower your tax bracket the less up front cost there is to a Roth IRA. With a Roth IRA you contribute dollars you’ve already paid taxes on, in other words post-tax dollars. So, while you are in a lower tax bracket - say 10 or 15% - contribute to a Roth IRA. When you reach 59 ½, which is the qualifying age to pull the money out tax free you will probably be in a higher tax bracket and since the growth will be tax free at that point you will have a great financial advantage. The other benefit of a Roth IRA is that since you contribute post-tax dollars you will have a basis that is available to you in cases of emergency without paying any taxes or penalties if you need the money. Just don’t take out any of the growth - always leave that amount in until you reach the qualifying age. Besides it will continue to grow!

4 - Carry as little debt as possible and carry it at the lowest interest rate possible. This is harder than it sounds and it’s one of my weak areas. I too am working on reducing credit card debt and have to remind myself of my own advice. It’s essential to a financially secure retirement to get rid of all debt before you retire, especially credit card debt. I have literally charted out how and when to pay down my debt and figured out how long I have to work to achieve my financial goals. In other words, I have a blue print. Life has thrown me a few zingers along the way and each time I’ve had to adjust my blue print but the good news is that I have room to maneuver because I understand where I am financially and where I want to go.

5 - If it sounds too good to be true - it probably is. Don’t let anyone talk you into investing in anything that promises unrealistic returns or sounds like a get-rich quick scheme. Check out everything before you give anyone any of your hard-earned money. Every single one of us has some financial insecurity and this is what unscrupulous people prey on. Most states have agencies that will help you figure out if you’re being preyed on by someone who is trying to scam you, so take the time to research your options and who is offering you a deal that sounds too good to be true.

6 - Start reading books and magazines that offer retirement advice. Go to the library or go online so you don’t even have to spend any money to get this advice. As you continue to read about retirement from credible sources you will develop a working knowledge of the processes that are available to you and then you will need to learn how to adapt these to your personal financial profile.

Here are some links to get you started:


http://www.suzeorman.com/
http://www.smartmoney.com/
http://www.retireonyourterms.org/
http://www.irs.gov/
http://www.money.cnn.com/

Tuesday, April 1, 2008

Women and Poverty – a wake up call!

I like to have the evening news on while I'm loading the dishwasher or fixing dinner. I'm a true multitasker at heart. I don't usually pay strict attention to the broadcaster, often hearing only the key points or main topics of the story being related, looking them up online another time. However, the other night, one story caught my attention through the sound of running water and the clang of dishes being loaded for washing. The gist of the story? Elderly women are one of the groups being hit hardest by the recent economic woes.

This is nothing new of course. I remember growing up in the 1960's and knowing plenty of elderly women who were living in poverty or headed in that direction. It was still a time when women were expected to grow up and marry, have children and basically support their husband's career. The majority of women truly believed if they followed this path they'd be taken care of in their later years. I remember conversation after conversation with women and young girls planning their lives around following this exact path with no thought to what would happen to them if things didn’t work out just as they expected - if their prince charming really didn’t take care of them “forever after” like the fairy tales we loved as girls, regardless the reason.

The 1960’s and the 1970’s were also a time when women were trying to assert themselves in the world - some more reluctantly than others. It was also a time of increasing divorce rates and men who left their families for other, younger women or to “find themselves.” Marriages were increasingly easier to dissolve and a growing number of women were becoming single parents with or without the cloak of marriage vows.

What is still shocking in this new, allegedly more enlightened century is how many women are still following this path – the path of not being prepared to support and take care of themselves if life doesn’t work out the way they expect or want it to. It’s okay to want someone to love you forever and be there for you as a soul mate, a lover, and a friend. What’s not okay is being unprepared for the zingers that life tends to send our way. What’s not okay is believing that you can’t have that soul mate and still be prepared. The two are not mutually exclusive.

An article in 2005 at the US Dept of Agriculture web site had some very sobering findings – and unfortunately the overall economic situation for women continues to worsen. While this article focused on women living in rural areas it’s a wake-up call for all women since we outnumber men in later years. We tend to live longer than men, which is a blessing but can also be a curse if you’re living in poverty with limited resources. Here’s the link for the article:

http://www.ers.usda.gov/AmberWaves/September05/Findings/OlderWomen.htm

According to a study by AARP older white women are twice as likely to live in poverty than older white men and for African American women it’s three times as likely. This is shocking. Again, because we live longer and make less money overall than men, we have less money to spread out over our lifetime. And the older we become the fewer options we have for work and generating additional income.

Here’s the link to the study:

http://www.aarp.org/research/assistance/lowincome/2008_03_poverty.html

So, what’s the answer?

Well, there is a correlation between education and how much we earn over our lifetimes regardless of gender or race so, one answer is education. There’s sill a pay disparity between men and women but higher education does bring higher wages overall. The Bureau of Labor Statistics has published some attention getting numbers in a chart called “Education Pays” at their site:

http://www.bls.gov/emp/emptab7.htm


If what I’ve shared so far isn’t chilling enough go to the Women Work! Site at:

http://www.womenwork.org/policy/factpoverty.htm


And if you want to see what’s happening to women in the rest of the world go to the World Health Organizations site:

http://www.who.int/mediacentre/factsheets/fs252/en/index.html


For thirteen years I worked as a senior tax advisor for a leading tax preparation firm and I was able to understand first-hand just how little women earn compared to most men. They tend to take jobs that accommodate their family’s schedule and their husband’s career. They tend not to have as much saved in their retirement accounts as their husbands because they make less overall which affects how much their employer matches, or they don’t save anything! They also don’t consider their income to be as important as what their husbands earn. It is absolutely essential that everyone – men and women – contribute the minimum amount to their retirement accounts to receive their full employer match. Not doing so is financial suicide.

Women also tend to cash in their retirement savings first when there’s a financial emergency for the family, which is another form of financial suicide. A way for women to build financial success is for them to obtain as much education as they can afford as early as possible, whether it’s at a university or college system or a vocational school, and to work and save as much as they can for retirement early on and NEVER TOUCH IT. Growth over time is part of the magic formula for retirement wealth.

That is until they retire at a qualifying age.

Taking money out of retirement accounts prior to reaching the appropriate age introduces all kinds of taxes and penalties and women risk loosing as much as half of that money unless there are specific provisions to exclude these costs. Before prematurely cashing in any retirement accounts women should consult with a tax professional to see the financial impact of this decision. Often, clients would come in after the fact and when I showed them the heavy cost of their decision they often asked if there was a way to undo what they had done and unfortunately there wasn’t. It’s like that old saying of putting the cart before the horse. The horse might be able to push the cart a little but it isn’t a very efficient arrangement, costing both time and money. Just put the horse in front and DO NOT cash in your retirement accounts prematurely!