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Investment Moves to Make Before the Year Ends

You should be looking into financial planning for the coming year but there are some things you can do before the clock strikes midnight on the last day of the year that will be beneficial.  Money magazine offers its readers “7 Investing Moves You Need to Make by December 31.”

If you got a raise, raise your retirement savings rate. It is easy to keep your savings rate the same, especially if you have automatic deductions through a 401(k) with an employer but Money advises:

“If you simply stay the course and fail to raise your contribution rate periodically, you’re leaving money on the table. That’s because over time, being an aggressive saver and mediocre investor beats being a good investor with just average saving habits.”

The article illustrates how raising your savings rate by 2% can make a significant difference in your retirement account balance.

You should also look at adding to other retirement accounts like IRAs and HSAs. While you may focus on overall retirement savings through a 401(k) or IRA, don’t forget that you are likely to incur many health-related expenses that will take away from those savings. Since “HSAs are triple tax advantaged: Money goes in tax deferred, grows tax sheltered, and, if withdrawn for qualified medical expenses, comes out tax-free.” you should make the most of them.

Your retirement investments are not the only thing to look at before the year ends. Consider what stocks you can sell at a loss. Selling a stock at a loss means that you can use that loss to balance out gains you’ve made with other stocks or offset your income. When you sell an investment that has made gains, you will owe the government so if you have an investment that is losing and it is time sell, look into doing that before the year ends.

The Softer Side of Estate Planning

We’ve said before that estate planning is not just for those with great wealth. it is for anyone who will leave loved ones behind and who has an interest in having a say in how the resources they leave behind are used. Estate planning is more than just numbers. It sets guidelines for care of dependents and distribution of assets.

While a Fee-Only financial planner can help you figure out how to reach financial goals that include leaving resources to help care for yourself and others, it helps if you know your personal stance on a number of issues. Some financial experts refer to this as the ‘softer side’ of estate planning.

Care at the End of Life: You may assume that the more assets you have, the better the care you will receive but you also have to put something in writing so your desires are known. An Advanced Directive is one document that can help in this area. For example, would you want to be in a facility or would prefer in-home care?

Care for Loved Ones: You can designate guardians for your minor children and see that they have access to funds for their care. It is up to you to secure a commitment from a guardian you trust and discuss your values and vision for the care of your children. There are some things that legal documents don’t cover.

You can also find someone to care for your pets and use a pet trust or a will to provide for your pets. With a will, you can leave assets that ideally someone will use to care for your pet. A pet trust (legal in every state except one) would include details pertaining to the care of your pets and how the money is to be used.

Personal Objects: Much has been made of the fact that Shakespeare left his “second best bed” to his wife. But it is that kind of specificity that ensures that your possessions are distributed as you wish.

Financial Literacy: Credit Cards and Holiday Shopping

According to U.S. News and World Report, holiday shopping tests your financial literacy. Don’t let the desire to get just the right thing for someone you care about blind you to how retailers and credit card companies find ways to make more money or to how you can save on your purchases.

Black Friday Bargains? Whether you monitor things yourself or you use apps that track prices, make sure you are getting the best price for big-ticket items. The article notes that last year, WalletHub research indicated “…about 17 percent of items were actually more expensive on Black Friday 2016 than they were the week before on” And some Black Friday sales are repeats from previous years.

Use Credit Wisely. There are credit cards that will return to you the difference between what you paid for an item and a price-drop, if you have saved your receipt. This is one way to pay less for items that may be hyped as Black Friday or Cyber Monday bargains and turn out not to be such a great bargain.

When you pay with cash or use credit cards, you are paying immediately and that is good, especially of you tend to get carried away using credit. However, if you can use credit in a measured way, you may benefit more from using a credit card with a good rewards program.

U.S. News and World Report also points out something worth considering if you use credit wisely:

“…credit card-using households receive a subsidy of about $240 per year from cash payers, according to a 2010 study by the Federal Reserve Bank of Boston. Prices for goods don’t go up for card-based payments, you see, which means cash users help foot the bill for credit card payment processing and rewards programs without enjoying any of the perks.”

Catching a good sale is great but increasing your financial literacy can mean more money in your pocket when you know how to shop wisely.

Plan for the Future and Invest in the Moment

For some of us, the time leading up to Thanksgiving through New Year’s Day is stressful. For others, it is a very busy and active time. Some of us spend so much of this time fretting or trying to accomplish tasks that we don’t really take time to be grateful. It is possible that the fretting is a way to avoid dissatisfaction with your current situation.

In a Forbes column on The Happy Habits of Appreciation and Gratitude,
you can find these words:

“We are so busy planning for the future that we are not aware of the present moment. Don’t get me wrong. …wealth management is based on the future-oriented thinking of making very small changes now to yield enormous gains over time…Future orientation means making your future-self happy. Actually being happy requires stopping every now and then to appreciate the moment your past-self helped to make reality.”

As you plan for the future, hoping that your investments bring big returns and saving for things to come, don’t forget that it was choices you’ve already made that have helped you arrive where you are now…even if you know that you want more.

As the Forbes columnist notes, you really should take a moment to appreciate what you have already done to secure your financial future. If your retirement planning is on track and you know you are doing things now that will help you as you age, be grateful. If you haven’t saved and invested as you would like, you can be grateful for work that will help you do more of that in the future.

If you spend each part of the rest of the year preparing for the next part of for the future, you will miss enjoying what you currently have. If you spend Thanksgiving getting ready for a later holiday and then spend that time getting ready for the new year, you might miss out. Don’t forget that that purpose of financial planning is the get the most out of your life. Invest some time in the moment.

Women and Negotiating: Is It Worth the Risk? Part 2

In Women and Negotiations: Is It Worth the Risk, Part 1, we discussed how sometimes women don’t negotiate because they sense it will do them more harm than good, even though their finances and overall quality of life would benefit from earning more and having greater flexibility at work.

You’ve probably heard that ‘it never hurts to ask’ and that you have the most bargaining power after you’ve been offered a job but before you actually start. In article that says women should not always negotiate, The Atlantic offers the cautionary tale of a professor who counted on both of those ideas and to her dismay found her job offer rescinded: a college withdrew its offer of employment after she asked for a bit more money, paid maternity leave, a sabbatical, and a limit on the number of classes she’d teach. The offer wasn’t the start of negotiations as people sometimes tell you; the offer was all there was.

A senior lecturer at Harvard’s Kennedy School of Government teamed up with Carnegie Mellon for studies with found that women were more likely to be penalized if they started to negotiate a job offer. Women in the study penalized both men and women who initiated these conversations.

Researchers at Rutgers found “when women are already in the hiring or promotion process—that is, when their credentials have already been screened and they are in the interview phase—the focus shifts away from their competence and toward their social skills. That effect is absent for male candidates.”

The  article also suggests that men [in power] reward men not to punish women but simply because “like attracts like.”

No matter the reason, the playing field is not level. Women need to be aware of how attempts to negotiate may be perceived and be strategic about how they negotiate because “No social-science study can tell a woman what to do in any particular negotiation. The variables are too complex.”   One piece of advice is to make sure you are clear about how your request can benefit the organization as a whole; advice with anyone could follow, regardless of gender.

Women and Negotiating: Is It Worth the Risk? Part 1

According to an article published early this year in The Atlantic, “Women Know When Negotiating Isn’t Worth It.” There is a lot of talk about the gender wage gap and how women are often paid less than men for the same work. In response to this, women have been advised to negotiate since there is a perception that women earn less because they don’t ask for more. Contrary to this notion, The Atlantic examined research that says that when women choose not to negotiate it is because they already know that it will not be to their advantage.

In research that The Atlantic described as more “transparent” than salary negotiations, two-person teams needed to reach an agreement about salary or face a financial penalty. The negotiations were done via instant messages and in some cases they person assigned the role of worker had to negotiate and in some cases the worker could choose to negotiate.

“Women were avoiding the negotiations they knew would not end well for them. The likelihood of women losing money tripled if they were forced to negotiate, rather than given the option…Unlike women, men were not particularly likely to opt out of negotiations that they would probably lose. Thus, being forced to negotiate was neither bad nor good for the men, but it was bad for women…”

Because they earn less and yet tend to live longer than men, women need to find ways to maximize their earnings and negotiating salary and benefits is one way to do this. Earning more money or being more rested because of negotiated time off can alter your financial planning and overall financial outlook.

It seems women are at a disadvantage because there is a price to be paid for failing to negotiate just as there is a cost if you negotiate when you can already sense that it will not be to your advantage. Perhaps the answer lies in an idea put forward by an author interviewed for the article: that we aren’t born knowing how to negotiate but we can learn and improve at this skill in order to negotiate effectively.

You Not Updating Beneficiaries May Haunt Your Heirs

Investopedia outlines the many reasons it is so important to update the beneficiaries on your retirement accounts. Whether you update your beneficiaries right after a major life change or go over this information periodically with a Fee-Only financial advisor, this is not something you want to ignore.

You may already know that you need to check to see who your beneficiaries are if you divorce, remarry, or have a child and that if you don’t designate someone, the courts will decide. But have those of you leaving money to charity checked periodically to make sure the charity is still in operation and that is operating as you would want? Couples need to put a plan in place in case both partners die around the same time (instead of one outliving the other for years as people expect will happen). People also don’t expect to outlive their beneficiaries but it can happen. You can work with professionals to plan for these occurrences. For example, there are IRAs that allow you to customize your beneficiary designation.

The thing is, the decisions you make can haunt your heirs in the years to come. We’ve already told you about the woman who learned that her husband’s ex-wife was the designee and took the case to the Supreme Court. Here is a rather treacherous and sinister tale of not changing your beneficiaries:

Firefighter William Walker died after his wife of four months arranged his murder so she could get his insurance money. Walker’s wife got friends of her teenage daughter to carry out the deed but as Yahoo! points out, she did not profit:

But this is where things get interesting: Walker was married prior and never changed the name of the beneficiary on his life insurance policy, so his ex-wife will be the one to inherit $100,000 plus his city pension.

While there was a sort of poetic justice in this instance, you really do want to keep your beneficiaries updated.

Warren Buffett: What to Look for in an Investment

There are a lot of investment experts out there and Warren Buffett is one of the best. He isn’t the flashiest but he has longevity. In “Warren Buffett: My Greatest Investing Advice And The Investments Everyone Should Make,” the man known as the “Oracle of Omaha” discusses how he became interested in investing and talks about what he looks for in an investment.

Buffett is honest that in some ways he followed in his father’s footsteps since his father was also in investing. Buffett would tag along with his father and read things in his office. However, you do not need a parent who was an investor to pick sound investments. According to Buffett:

“That strategy is to find a good business–and one that I can understand why it’s good–with a durable, competitive advantage, run by able and honest people, and available at a price that makes sense…And then we want a management team we admire and trust.”

He notes that you are not looking for something that will earn more right away but rather something that will continue to bring in earnings for years to come.

Buffett not only took advantage of having a father who was in the investment business, he sought out opportunities to learn. At age 20, he boldly went to talk business with the man who would later be the CEO of an organization of which his company would buy a controlling interest.

While Buffett is not known as a self-help guru, his example of sound investments and frugality (he still lives in the house he bought decades ago) inspires some. Some of his most important advice appears at the end of this article—he admonishes readers of Forbes to invest in themselves: “Address whatever you feel your weaknesses are, and do it now.” The $100 he spent in a public speaking course yielded dividends of the confidence to propose to his wife and to sell stocks as a very young man.

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