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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.

Spending Money in Ways That Increase Happiness

An article from The New York Times article says, “Want to Be Happy? Buy More Takeout and Hire a Maid, Study Suggests.” Does this surprise you?

This past summer, the National Academy of Sciences published a study which found that when you spend money on something that will save you time, you can reduce stress and likely increase your happiness. This is something to consider as we enter the winter holiday season, a time when some people find themselves dealing with stress related to holiday preparations and travel, in addition to their everyday stressors and responsibilities. The findings of this study back up the theme of Happy Money, a book we recommend reading.

When you hear the saying ‘time is money,’ you may think about instances in which wasting time also wastes money. We’d encourage you to reframe your thinking: if you can spend money in ways that give you more time to do the things you want to do, the effect on your happiness may be invaluable. Researchers found that people who spend money to time-savers felt better than people who spend money on material items. Examples of time-savers the can boost your mood include: paying people to do tasks you don’t want to do, taking cabs, and getting takeout.

We would caution that spending in ways that are unwise may cause you more stress in the long run, so if you are on a budget, choose carefully how you will spend to save time. The study found:

“And it didn’t matter if they were rich or poor: People benefited from buying time regardless of where they fell on the income spectrum. (The authors note, though, that may not hold true for the poorest of the poor.)”

Research has also shown that while you can increase happiness when you spend money that saves time, the happiness you feel may depend on your values. Researchers speculated that some people won’t spend on time-savers even if they have the money because they feel shame about having someone else do work they could do themselves. If you feel a certain sense of accomplishment doing things on your own or if you think hiring help will cause you to lose face among your peers, you may not benefit as much from using money to save time.

Women and Retirement: Attitude is Everything

Kerry Hannon has written about women and money since the 1990s and she has been disappointed to see that not a lot has changed since then. Women still earn less than men and are likely to leave work to take care of family members. But she doesn’t feel that these things mean that women, in particular, women over 50, have no recourse when it comes to retirement planning. According to Hannon, attitude makes a difference. In “The Wisest Retirement Solutions for Women,” she writes:

“From my research, I’ve found that the root of the money quandary many women face is their own attitude. And that’s manageable. You can control how you approach your finances. You can stop the negative mental chatter. You can put an end to procrastinating. You can choose to make understanding your own financial decisions a priority. And you need to.”

Some of the ways women don’t make financial planning a priority include: avoiding the work of researching investments or getting knowledge about financial planning and devoting resources to the family an ignoring their own needs. Cannon points out that ignoring your own needs can happen in a variety of ways including things that seem generous such as spending for a child’s education (and neglecting your own finances) or not taking compensation while working for a family business.

This is where the idea of “putting your own mask first before helping others’ comes into play. Present-day sacrifices that may seem noble may lead to trouble later. One should help one’s family but you may need to rely on them later if you do not have enough retirement savings…but what if they are not available for some reason?

If you have been putting yourself last and avoiding financial conversations, it is time to do more for you. A Fee-Only financial planner can help you help yourself retire well.

Retirement Planning Includes Planning Retirement Account Withdrawals

Does your retirement planning include a plan for how you will take withdrawals from your retirement accounts?

You can spend your life saving for retirement with the assumption that once you reach retirement age, your work is done. Or you can recognize that money management continues into your golden years and do some financial planning ahead of time to make it easier.

The Motley Fool highlights “3 Mistakes People Make With Retirement Withdrawals” to help readers avoid missteps after working and saving for many years.

If you wait too long to withdraw money from certain tax-favored retirement accounts, you may info that those accounts have accumulated so much that they are in a higher tax bracket. Some people see the IRA requirement that one withdraw from a traditional IRA or 401(k) as a goal to reach or think of it as the time they should start to withdraw funds from these accounts. What they don’t realize is that they can take money from these accounts earlier and as indicated, it may be to their advantage to do so if they can avoid paying the taxes they would pay if the account moved into a higher tax bracket.

You will also need an overall plan because just withdrawing money when you need it can backfire. Budgeting based on your expenses while making sure you have some funds that remain untouched in case of an emergency sounds like what you have always been told to do. As a retiree, you need to be even more strategic unless you plan to go back to work. Some retirees do just that but you would want to do it because you found something you wanted to do and not because your nest egg ran out. And since you can’t count on being able to return to work so it is better to plan well.

While the order in which you withdraw funds from different retirement accounts does matter, there is more than one way to do this. That may seem like a contradiction but it isn’t. The best sequence for your retirement withdrawals depends on your financial goals. For example, people who wish to leave as much tax-free money as they can to their heirs should not withdraw from a Roth IRA first.

The Motley Fool says, “The value of a strong financial planner really comes through when it comes to planning retirement withdrawals.” and we would certainly agree.

Charitable Giving After a Natural Disaster

There is a hurricane season each year but several hurricanes have been particularly devastating this year. Naturally, many of us want to help and since we are not equipped to travel to these places to assist in person, charitable giving is a good way to help when you cannot be there. In recent years, the general public has become more educated about how one needs to be discerning about donating since some organizations make better use of donations than others. You may also have seen articles and social media posts with information about the strengths and weaknesses of some major charitable organizations.

In a Huffington Post article, Danielle Sabrina suggests that you “let other organizations do the vetting for you.” There are organizations that rate and vet charities so you do not have to figure it all out on your own. If you are unsure about the criteria used for the ratings of charity watchdog organizations, you can look up which organizations have the approval of Better Business Bureau and do your own research.

Sabrina also suggests that you give more to one cause rather than donating small amounts to different charities. If you think a charity is really doing good work that aligns with your values, why not give that charity more? You are probably aware that many charities that have your contact information will send you mailings, etc. to cultivate you as a donor and this costs money. When you give you many charities and they all spend to try to get you to give again, you are contributing to their overheard costs. You don’t mean any harm course but if you commit to a few organizations, there are some that won’t need to spend to try to win you over.

Finally, Sabrina talks about what we can do to prevent the devastation that such natural disasters can cause. The article was written in the aftermath of Hurricane Irma; at its time of publication, the damage caused by Hurricanes Jose and Maria was still forthcoming. While you cannot singlehandedly prevent a hurricane from decimating an area, you can do more to help the areas that a prone to natural disasters if you wish. There are ways to give that support more sustainable infrastructure or donate to organizations that work with environmental causes.

Women and Retirement Planning: There’s Still Time to Learn

In “Retirement planning for women: It’s never too late to learn,” interviewed Melissa Brown, the CEO of a wealth management firm, has helped a number of young widows and wants women who rely on someone else to take care of the finances and retirement planning to know that it is not too late for them to learn.

“We have a stereotype of an elderly couple aging and when one passes away, they have their adult children or family members to help the surviving spouse manage their finances. However, what happens when we have a 45 year old widow with small children? What if her spouse always handled the financial responsibilities for the family? Who is there to help her?”

Brown mostly talks about women whose husbands have died but there are other cases where a woman relies on someone else–be it a friend, romantic partner, or family member–to handle money matters. As she points out, it would be better to get info from the person who is currently handling the finances and knows where important documents are than to scramble to figure things out when that person is no longer available.

For those who work but plan to rely on a spouse or partner’s retirement plan, Brown suggests you also have your own retirement savings. This may change your amount of take-home pay and require some adjustments but it is a rare person who retires and finds they just have way too much money.

She also says to those who are around 50 and say that it is too late to start saving for retirement, that ideally, they would have at least 15 more years to save. Yes, it is better to start earlier but it is better to save something while you are working than to do nothing as retirement approaches.

Set Financial Goals So Emotions Don’t Derail Your Investments offered tips to help you keep your emotions out of investments. Emotions, such as concern for your family’s future, can fuel your desire to invest but they may cause problems if you let emotions derail your investment. In a culture that often tells you to follow your gut, you may find at times that your emotions can lead you astray when it comes to investment strategy.

The article first suggests that you set financial goals. Goals can help you to keep perspective. For example, if you hear about a big change in the market, you don’t have to panic if you know that you are planning to retire in 20 years. At the same time, you may want to invest more aggressively if you retirement is not far away. No matter what your retirement outlook, you need goals to set some parameters. That way, no matter what happens you can see how possible decisions line up with your goals.

While suggests that work with a professional such as a Fee-Only financial planner because “Entrusting a neutral third party who can help you examine your situation dispassionately and encourage you to stay on track…” they also suggest that you “do your own research…even if you have outside assistance.” As the article notes, it is difficult to take ownership of your investments if you don’t know much about the organizations or products you invest in.

You need a balance between being aware of what you are investing in but having some distance from your investments so you don’t sell to quickly or allow sentiment to cause you to hold on to an investment that you need to sell. This is where a Fee-Only financial advisor can help: a professional can give you perspective once you’ve done your own research. And a financial advisor can help you create and when necessary revise your financial goals.

Are You Undermining Your Retirement Goals?

Despite your best intentions, points out ways you might be sabotaging your own retirement plan. You have visions of the day when you will not have to go to work everyday and can enjoy your family and favorite activities but you might undermine your retirement goals if you do the following:

Obsess about the market/Rely on unrealistic expectations

The article says, “…if you give in to the urge to overhaul your investment strategy every time stocks there’s the threat of a setback in the market, you run the risk of making moves that may seem prescient at the time but that you may later regret.” If you find yourself monitoring the stock market and your investments and worrying over them with frequency, take a step back. Find a way to monitor your investments at a regular interval to keep yourself from devoting too much time to them.

Even if you start to invest later in life, you still have to give your investments time to grow.

View investment terms through rose-colored glasses

While you should invest, you shouldn’t have an unrealistic view of the kinds of returns you will get. And this can be complicated by the next mistake…

Skimp on saving

If you rely on investments and don’t save enough, you may come up short once you actually retire. And some people don’t make enough money to save 15% of their earnings as some experts suggest.

If you find that saving is more of an issue of discipline than of lack, you can ‘pay yourself first.’ Use an investment plan at work or set up automatic savings so you save without needing to think about it each time.

A Fee-Only financial planner can help you set realistic goals for retirement and guide you as you stay on track to reach those goals.

Estate Planning for Millennials

Last week, we discussed estate planning for same-sex couples and this week we’ll look at another group that needs to consider their unique estate planning needs.

Engage Millennials in Estate Planning” is an article aimed at attorneys but it has important reminders for millennials and anyone else who puts off estate planning. The article describes millennials as being more money-conscious that older generations may think, especially when they have worrisome student debt. But it also adds that like previous generations of young adults, they can’t yet see themselves growing old and think estate planning is for older people.

Millennials who are married (or in common law relationships) and millennials who have children may see the obvious benefits of having a estate plan, even if they procrastinate about creating one. You may not see the benefits if you are unattached or don’t yet have children.

When you don’t outline beneficiaries, your state will decide who will receive your assets. And someone reading this may not think they have many assets but millennials may underestimate the value of what they have. Young adults with life insurance policies, homes, cars, and jewelry may seem like prime candidate for estate planning while those without those things may not see the need. However, in addition to things like retirement accounts and property, millennials may have other resources like pets, family memorabilia, and digital assets. An estate plan can address the future of all of these things. You will certainly want someone you trust to take charge of your pet. Even if your memorabilia has more sentimental value than cash value, you may still want to decide how it is distributed. And if you didn’t know, you can outline the future of your digital assets such as photos and social media accounts.

Sometimes young people avoid estate planning because they don’t want to think about not being around. Taking stock of what you have can be a valuable exercise in making the most of what you have. When you’re ready to have greater awareness of your assets and plan for the future, a Fee-Only financial planner can help you with the financial aspects of estate planning.

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