Archive for the ‘Financial Education’ Category

Budget: NOT a 4-letter word

April 26, 2010

What does the word “budget” mean to you? Do you cringe when you hear it, thinking of an end to spontaneous dinners at your favorite restaurants and a new habit of packing your lunch? No more cute shoes and Starbucks runs? If so, then you are like most people! But to me and in my financial coaching practice, budget means nothing more than an on-paper look at where your money is going.

Most of my clients come to me with needs including debt-reduction advice and help with saving more money. They’ve done the basic budgeting in their head and know there is extra money somewhere to put away, but they struggle to find it. The thing is, when they add up all the “fixed” stuff like rent/mortgage, utilities, car payment, other loans, childcare, etc, and compare that number with the amount of money coming in, a lot of people are sad and discouraged to see what “should” be leftover.

More often than not, the process usually stalls out there with feelings of poor willpower and negative self-talk. It is at this point that I remind clients they aren’t counting the other little things that are also needs in our everyday lifestyle. Haircuts, oil changes, personal care items, house cleaning, gas money, and yes, food. Most people do have an amount of money each month that they could put toward debt reduction or savings without really feeling a pinch to their accustomed lifestyle, but it isn’t as much as it initially appears.

So once you have all the predictable bills down that won’t go away without major changes, take a look at the other things you’re spending on. You will probably be pleasantly surprised to learn that even when you factor in such indulgences as date night at Nada or your daily stop at Coffee Emporium, you will still be able to find that little bit of extra money.

And even if it is only $50 per month, if you make saving it automatic through payroll deduction or auto-transfer from your bank, you will be surprised at how quickly you will see a difference. Then as you acquire little windfalls like tax refunds, a raise at work or some other bonus, you will be more inclined to put some of that money toward your goal, getting you there even quicker. So enjoy your gastronomic pleasures, knowing that you can still stick to a budget and achieve your financial goals.

A version of this article was published in Cincy Chic on April 26, 2010


Spring Cleaning Your Finances

March 15, 2010

Cleaning up your finances doesn’t have to be a big chore; you can do it while catching up on your DVR one evening. Not only will you put a better system into place to reduce clutter, you will also re-connect with your money and hopefully begin taking control of it.

Start by getting organized. Gather all your documents in front of you — grab your files, empty that basket, pull out your bills and round up your receipts. Next sort them into the following piles:

 Receipts, paycheck stubs, bank and credit card statements and monthly bills
 Investment statements (401k, brokerage, IRA, etc.)
 Tax returns and the documents used to prepare them
 Insurance policies, ownership deeds, etc.
 Warranties, user manuals and their corresponding receipts
 Identification documents

Next, place your identification documents (also called “forever docs”) in a fire-proof safe in your home. This includes birth certificates, passports, marriage license, divorce decree, will, trust, power of attorney, death certificates and other original documents. For all of the other piles, create a folder for each and add new papers as you receive them.

Some folders will then have folders within them. For example, in your folder for monthly bills, you might have a separate folder for electric, cable, credit card statements and so on. If you can, keep these files in a fire- and water-resistant safe. If that is not possible, at least keep them together in a drawer or on a shelf.

Then let the de-cluttering begin. Read on for guidelines on how long to keep what type of documents.

Utility bills: Keep for one year, unless you claim a home office deduction, in which case they become tax documents.
Pay stubs: Keep for one year until you receive your W-2. As long as your last paycheck matches your W-2, you can toss them.
Bank and credit card statements: Keep for two years, as you may need them when applying for a mortgage or other loan.

Keep your monthly or quarterly statements until you receive your annual. If you make any trades, keep the trade confirmation for a purchase as long as you hold the asset and for a sale, for at least three years. If you make any non-deductible contributions to your traditional IRA or convert to a Roth IRA, save the IRS Form 8606 until you withdraw during retirement as proof that you’ve already paid the taxes.

Keep everything for at least three years. For questions on IRS recordkeeping guidelines, check out IRS Publication 552.

Keep all as long as the policy is in effect or as long as you own your home or car. Consider placing this file in your fireproof safe as well.

Save all active warranties. Toss any that have expired or for items you no longer own. Try to weed this file out on an annual basis. I like to staple the receipt showing proof of purchase to the warranty in case I need it. If you are comfortable using the Web, I recommend tossing user manuals. Manufacturers now have downloadable versions on their Web sites, so you can rid yourself of this clutter.

As far as ATM receipts and other receipts for purchases, you can toss these after you’ve checked them against your bank statement. I keep receipts for clothing until I’ve worn and washed the item and for household items until it has been used at least once, unless it has a warranty.

As you are de-cluttering and tossing unneeded documents, be sure you shred them before putting them in your recycle bin. Even if it is a statement for an account that is closed, you don’t want to tempt identity thieves by offering your name, address and an account number on one page.

Finally, once you have your important papers more organized and up-to-date, make a note to revisit your files on an annual basis to weed out those no longer needed and collect and add any new documents collected.
A version of this post was published in the Cincy Chic column “Cents & Sensibility” on March 15, 2010.

Wedding Bells Without the Money Blues

March 1, 2010

When planning your dream wedding it is easy to ring up an event costing more than $30,000 — that’s more than the price of a decent new car! As each little thing adds up, it is important to save money in areas where it won’t really affect the overall day. Try one or all of these ideas to save some coin without sacrificing the ultimate intent: exchanging vows with your beloved!

Minimize the Menu If you’re hosting a large reception (over 150 guests), the cost of food can exceed $10,000 if you choose a premium main course. In my opinion, you don’t need to serve a gourmet meal — chicken and veggies are just fine.

Most wedding guests aren’t coming to your reception for the food anyway. In general they will expect a decent meal, but won’t be disappointed if they are not served a filet or lobster. And if you hire a fun deejay, (one area where you can get a lot of bang for your buck) most people won’t even pay attention to what they’re eating because they’ll be so anxious to get out on the dance floor.

Save money on the food and spend it on great meals on the honeymoon that you will savor and remember.

Lower the Bar Bill Don’t let your party animal friends talk you into hosting a top shelf open bar. While some wedding guests may prefer a mixed drink before dinner, most will be fine with choosing beer or wine as their drink of choice for the night. Trim a dollar or two off the cost of EACH GUEST by choosing to serve only beer and wine at your bar and you’ll save hundreds of dollars on the reception. If you’d still like to make mixed drinks available, guests will understand if you choose to have a cash bar for those options.

You may also choose to offer an open bar for the first three hours of the event, turning it into a cash bar later in the night to discourage guests from overindulging. This is safe for your budget and your guests’ health.

Have Your Cake It is worth the money to have a professional bake your wedding cake. Ask any caterer and he or she will have a story of an amateur wedding cake gone awry. To have a beautiful cake without breaking the budget, ask your baker to make your decorated cake smaller, then bring a couple extra sheet cakes or “kitchen cakes” to keep in the back to give you enough to serve all your guests.

Event center staff are used to this arrangement, and your guests will still enjoy a tasty cake while never knowing that the piece they savor didn’t come from the actual cake you cut.

Above all, don’t lose sight of why you are planning such a celebration. A wedding is one of life’s great milestones for many and loads of fun to plan and execute. Just remember that at the end of the day, the only purpose is to unite your life and your heart with that of your soul mate’s. As long as you make that happen, none of the other details will really matter in the long run.

These tips are just a sampling of the many I have collected over the years. My newsletter, Weekly Wedding Wisdom, offers several other money-friendly ideas related to getting married. If you’d like more, please Email me to be added to the list. Your email address will not be used for any other purpose.

A version of this post was published in the Cincy Chic column “Cents & Sensibility” on March 1, 2010.

Decade in Review: 10 Years of Financial Turmoil

December 21, 2009

When it comes to money and the past 10 years, most investors are frustrated by the poor performance of the United States stock market. A dollar invested in the S&P 500 index 10 years ago would be about $.97 today, according to To address that concern, I could echo the typical investment adviser and remind long-term investors that they are in it for the long haul and that, while the 10-year snapshot may look bleak, it is the overall return when you actually need to liquidate the investment that really matters.

However, that topic has been covered ad nauseum by investment writers, with everyone having his or her own opinion. Because really, no matter what the expert investment analysts say, no one can predict how the stock market is going to do over the upcoming 10 years, and the past year or so has proven that history doesn’t always repeat itself.

Instead, I’d like to review the various reasons behind the behavior of the stock market over the decade, including world events and changes in attitudes and information.

Since the year 2000, our world has changed dramatically. Thinking back 10 years, the Internet was just becoming available to the everyday person. The speed of information was at a snail’s pace compared to what it is today. The thought of carrying a tiny computer that gave you access to the Internet, e-mail and virtual maps at the touch of a finger seemed space age and decades away. How did we survive without iPods and text messaging?

It is in part due to this increase of availability of information that investing in stocks as we knew it 10 years ago will never be the same. That hot stock tip that could earn savvy and fast-acting traders millions in a couple days is now available to EVERYONE and within split seconds, important information that affects the price of a company’s stock is reflected.

We had Sept. 11, which closed the New York Stock Exchange for six days. Entire firms were wiped out in one day, such as Cantor Fitzgerald, which lost 658 employees in the World Trade Center attacks. Fear of a repeat attack was reflected in the performance of the U.S. stock market for years, as investors remained uncertain.

Martha Stewart went to prison for selling stock based on insider information, meaning that she acted on information that was not yet available to the public, allowing her to make an unfair profit.

Executives at Enron and WorldCom lost sight of their duties to run their companies with integrity and, in some cases, cost their loyal employees their life savings. Greed took on a whole new meaning, and with news now available 24/7, the whole world is instantly made aware of such indiscretions. Investors are unsure of which corporations will be around for the long haul.

The U.S. went to war in the Middle East. Interest rates have been at an all-time low multiple times. And the Great Recession still has many searching for jobs or new careers. These are just the headlines from the past 10 years, but they describe much of what contributed to such poor performance of the stock market.

All of these factors make it difficult for people to continue to contribute to 401k’s and other long-term savings plans, but I would advise investors not to give up or cash out yet. While I can’t promise that the next 10 years will be better, I still believe that investing in the stock market is the best way to earn a higher return on your money with the lowest amount of risk.

Here’s hoping that the second decade of the 21st century is better in terms of investment performance and that we all keep our sights on what is truly important: having something to believe in and something to live for BESIDES money.

Personal Opinion Disclaimer: This article represents the views of Kelley C. Long based on her capacity as a certified public accountant and her experience in the financial services industry. The opinions expressed are intended for educational purposes only and are not to be considered financial advice.

A version of this post was published in the Cincy Chic column “Cents & Sensibility” on December 21, 2009.