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Clarity Financial Planning Services is an advocate for your financial future who takes a holistic approach to your needs and goals.

Paying Off Credit Card Debt is Great…Until it Isn’t

In “The mistake I made while paying off $15,000 in credit card debt — and how to avoid it,” one consumer outlines how what he thought would be a triumphant moment, turned out to be less so because of what he didn’t know about the way credit works.

The writer explains that in 2021, he paid off $15,000 in credit card debt after nearly a year of working at it. He writes that although he was warned by his mother not to get carried away with credit, he did. What his mother may not have been able to tell him is that having a zero balance on a credit card can also be a problem.

He writes that logically, “I didn’t want to add to my debt while paying it down, so I didn’t use my card until I reached a zero balance. But my bank marked the account “inactive” and terminated my credit line without notice.” After the credit line was terminated, he had less available credit and that altered his debt-to-credit ratio. He became aware of the impact of having less available credit when his credit rating was downgraded to poor.

While you may not know it, the credit cards you choose can impact your credit score for years to come. You may have already been advised not to simply close your oldest line of credit because that can erase years of credit history. You may not have been told that you shouldn’t let a credit card go completely inactive. With some cards, you will need to use the card occasionally to keep it active. Other cards may require more. The article advises: “Don’t use more than 30%. Always use more than 10%. Finding that sweet spot is hard.”

The takeaway is to not let your enthusiasm to get rid of debt come back to haunt you because of insufficient use.

Don’t Go in the Red on Black Friday

We have always had the ability to ‘shop ‘til we drop’ and that is especially true during the holiday season. As the years have gone by the winter holiday season crept into the fall and now people start shopping much earlier. This is not referring to people who purposefully buy gifts all year long with the winter holidays in mind; but to people who fall prey to the temptation of so many sales.

Retailers have decided to take advantage of holidays that are celebrated in October by offering so much more merchandise than they ever did before. A shopping “holiday” that used to be just one day (Black Friday) has now been stretched to last more than a month.

In discussing the expansion of Black Friday, metro.co.uk observed that this year people are being encouraged to shop early, in part, because there are rumors and fears of scarcity. Many of us probably didn’t discuss cargo ships and supply chain issues before, but we do now.

The title of an article from The Province says it all, “Don’t let fear of missing out justify Black Friday spending”. The article tells readers that “the best deals are the ones you can afford” and even then you need to compare prices and avoid being swept up in advertising designed to reel you in.

All of these bargains combined the carpe diem feeling people have because they are happy about making it through another year will likely increase sales…and debt.

No one wants to be advised to take caution, but please do. You do not need to buy everything that seems to be marked down. Some advertised sales aren’t really offering much of a discount if the retailer inflates the price and then pretends to slash it. 

And as we have discussed on this blog before, there are diminishing returns on buying objects. Many people find more happiness in experiences.

A Scarcity Mindset Could Ruin Thanksgiving

Photo by Gabrielle Henderson on Unsplash

If you have been paying attention to the news lately, you have seen the reports about how Thanksgiving celebrations this year will suffer because of scarcity and higher prices. At the beginning of November there were news stories about how shoppers probably wouldn’t be able to find the products they want for their holiday dinner. Then came the stories about how whatever you could find would be more expensive. Not to mention, the higher cost of traveling…

Rather than fret over what you may not have this Thanksgiving, why not think about what you do have? Yes, the idea of giving thanks is right in the name of the holiday but it can be tough to remember gratitude if your finances have taken a hit. Even if you are not particularly worried about money, you may want to feel the comfort of knowing that this year you can have all the things you usually have for Thanksgiving.

The Money After Graduation website defines a scarcity mindset as ‘…the persistent belief that you do not have enough.”  Adding: “A scarcity complex about money will cause a lot of anxiety about everything from budgeting to saving. It’s also likely to worry you every single day. Not only is this uncomfortable, it actually prevents you from focusing on long-term financial goals. You don’t think beyond meeting your immediate needs, and as a result, long-term plans fall by the wayside.”

This is not about “preaching” gratitude from a moral high ground or demanding that people be happy no matter what is happening in their lives. There are very practical ramifications when you worry constantly. It affects your health and your ability to function well on a daily basis.

This Thanksgiving you can remember what you do have and consider how you can find ways to manage your money better. If you do not have any kind of plans in place, a Fee-Only financial planner can help.

Women: Seek Investment Advice and Mentor Others

For Investing and Financial Services, Women’s Influence Grows,” an article on Forbes.com opens with the writer sharing an anecdote about being young and working at a place where she thought the male employees were savvier about money than she and her other female counterparts. Her male co-workers had no problem discussing financial planning and would sometimes bring in financial advisors for these discussions.

The author writes:

“Many of the other younger women and I, however, weren’t really sure what to do or how to begin this process. I didn’t have any female mentors or managers at the time to broach the topic with, but luckily a co-worker of mine suggested I speak with her husband who was a financial advisor. With no other options and a feeling this was a relationship and connection I could trust, I took her up on it and am so glad I did.” 

There is a lot to unpack there. The women in this office weren’t sure what to do and didn’t know who to ask for help. Given that many companies lack women in upper management, the author didn’t’ have role models within her organization. Presumably, she didn’t have anyone in her personal life who could help either. She was lucky that her co-worker’s husband turned out to be a financial advisor she could trust. Although she didn’t know who to ask, she confided in a female co-worker who suggested a financial advisor. While she didn’t have a mentor or woman to offer insight into investing, she felt comfortable enough to ask her co-worker.

The article highlights the influence have over financial resources. Women manage the finances for many households. Women in heterosexual romantic relationships are more likely to inherit wealth than their partners since women tend to live longer than men. A sizable number of daughters and nieces are also positioned to inherit wealth. 

The author suggests that the finance industry needs to do more to reach out to women. She notes that women tend to understand the need to diversify investments and their portfolios often do better than men’s portfolios. However, despite their skills, women tend to be less confident overall. The finance industry may make some efforts but real change will come from individuals: women brave enough to ask for help and mentors who are willing to share what they know.

The Crusade Against COVID-era Investment Fraud

Photo by Goh Rhy Yan on Unsplash

Last month, Washington Post columnist Michelle Singletary reported that the pandemic made it easier for criminals to perpetrate fraud. More of us, particularly senior citizens, spent more time at home and isolated from others with our phones and internet-capable devices within easy reach. Not only that, people were (and still are) under a lot of stress. Even if you felt fine and it seemed you were adjusting well to the changes the pandemic wrought, you may have been stressed without realizing it.

Singletary writes that state securities regulators often act as crusaders against investment fraud. Their efforts are complicated by the fact that scammers spend ill-gotten gains quickly and people are hesitant to report fraud because they feel ashamed. The pandemic also made it easier to scammers to reach people, but COVID-related court closures meant it was harder for victims to have their day in court.

Many people may be able to spot low-risk, high return investments that sound too good to be true, but there are also investments that can appear legitimate when they are not. You may feel pressure to jump on an investment right away but if you aren’t sure about it, you can do more research before taking the leap.

Speaking of pressure: if someone pressures you to get family members of friends in on an investment or if someone in your circle calls you with an amazing investment, take a step back. 

Singletary advises readers to look into investment opportunities by going to www.nasaa.org, the website of the North American Securities Administrators Association, to contact their state securities regulator’s office. When you click on the “Contact Your Regulator” link, you will be able to verify if the entity that wants to invest is licensed or not.

You can also run any investment opportunities by your Fee-Only financial planner to get their input and advice.

Raising Awareness about Breast Cancer and the Cost of Treatment

Photo by National Cancer Institute on Unsplash.com

Going through treatment for and recovering from a disease such as cancer not only takes a toll on the body and mind; it can also put a dent in your finances.

As Next Avenue  observes in “The Financial Burden of Breast Cancer,”  “…there’s an ongoing financial toll to…long-term diseases that often surprises patients and makes saving for retirement much more challenging.” And these challenges are often even greater for women of color and anyone from a marginalized population.

October is Breast Cancer Awareness Month. All of the efforts geared toward educating people and possibly preventing this disease go a long way towards protecting someone’s health as well as their present finances and retirement savings

We can now detect breast cancer earlier and many more people survive now than in decades past but because treating breast cancer is more expensive than treating other cancers, survivors may face financial hardship. The well insured, the underinsured, and uninsured face an array of expenses. Some patients lose income because they cannot work. There are patients have to decide between regular bills and treatment. Patients without childcare need to pay for that to get treatment. Even visiting a hospital or treatment center for radiation that is covered by insurance can get costly when you factor in gas and parking. Finally, some patients have the expenses of treating other conditions the developed as a result of their cancer treatment.

As an expert interviewed by Next Avenue suggests, “…anyone with a chronic, long-term condition speak with a financial adviser who can assist in developing a plan for managing the long-term costs of an illness.”

Breastcancer.org says, “If you don’t have insurance or are unemployed, paying for treatment may seem overwhelming. Don’t panic, and don’t skip any treatments or doctor’s visits. There are resources available to help you.”

Online financial resources include: 

https://www.breastcancer.org/tips/paying

https://pinkfund.org

Estate Planning Includes Disability Planning

The very human desire to not think about uncomfortable things is understandable. However, when it comes to estate planning, people not only have to consider death, in some cases, they also have to think about a different kind of life.  Your estate and estate planning documents are as subject to change as anything else in your life. And if you did not consider the possibility of living with a disability in your estate plan, you can alter it.

Disability planning is a part of estate planning because it is important to have sufficient resources should you become incapacitated in any way. And let’s be clear, disability planning is not just about old age; life with a disability can start at any age. One common tool used to provide in these circumstances is a revocable living trust.

You do not have to wait until you reach retirement age to create an estate plan and an estate plan created at any age needs provisions for disabilities.

Another angle to this issue is the estate planning and preparation work parents, guardians, and caretakers of someone with a disability must undertake. These caretakers have to plan for their own future with an eye to making sure that the person in the care can live comfortably in the future. Estate plans created for this circumstance can include a special needs trust (SNT). An SNT is used to make sure that a person with special needs does not lose eligibility for Medicaid and Supplemental Security Income because of an inheritance that puts them above the caps set for these programs. People with a disability who cannot earn a living will need the funds from those programs as well as anything they inherit.

The Special Needs Alliance offers a step-by-step guide for those who take care of someone with a disability and you can also talk with Fee-Only financial planner about your estate plan.

The Back-to-the-Future Budget

Photo by Sharon McCutcheon on Unsplash

Budgeting is all about planning and saving for the future, right? Perhaps. Real Simple offers a way to approach budgeting that goes in the opposite direction in “Why Backward Budgeting is the Key to Making a Money Plan You Can Actually Stick To“.

Years ago, financial experts advised to examine all of their receipts for a week to track their spending and see where their money was going but they may not have been advised to take the extra step to create a budget afterwards. (Plus, these days many people can examine online statements so there is no need to gather receipts.)

With backward budgeting, you can look at your past expenses for a week, a month or even half a year to figure out how much money you need to set aside for different expenses. In a study where some participants budgeted forward (planned ahead) and others budgeted backwards, the backward budgeters were more realistic about expenses because they planned with past unexpected expenses in mind. They were also able to see where they had overspent (ex. dining out). However, backward budgeters spent more than some forward budgeters who optimistically budgeted less.

And of course, no one is bound to a specific kind of budgeting. Real Simple notes that forward budgeting is good when want something to spur you on to reach certain financial goals. Backward budgeting is useful when you are trying to decide if you can afford to make a certain purchase or add on a certain recurring expense.

The article concludes, “Forward budgeters use their budgets like vision boards, while backward budgeters use their budgets like roadmaps: Either way, as long as the budget helps you head in the right direction, you’ll have something to celebrate.”

If you want the objective help work with budgeting and financial planning, you can work with a Fee-Only financial planner.

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