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Adjust Your Budget in January While the Year is Still New

Whether you prepared a budget at the end of last year or if you have never made a budget, the end of January is a good time to consider your finances and spending. You may have been more optimistic at the end of the year about how much you could save or how little you would spend. Or, maybe the results of holiday spending have just become all too real for you in January. Whatever the case, at the end of January, the new year is still new but you may have already faced some hurdles in your request for financial freedom and you may be ready to adjust accordingly.

Subscriptions: Did you sign up for a gym membership, magazines, or internet streaming services? How much have you used them this month? If you never went to the gym or didn’t use other subscriptions, there may still be time to cancel some of them before you pay a year’s worth of fees and wonder where the money went later in the year.

Automatic savings: You can set up automatic transfers to a savings account at any time, of course. But if you haven’t done this yet and start early in the year, you will have time to see how the money accumulates. And if you find you need emergency funds later in the year, you’ll appreciate how much is there.

Whether you just have a general savings pool or you designate funds for certain purposes (such as a vacation or a holiday fund), it is good to commit to saving or to saving more than before at the start of the year.

Get help with goals: It is okay if you don’t know exactly what you want to save for or how to start trimming your budget. Fee-Only financial planners work in a holistic fashion—talking with you to learn about your lifestyle and the the kind of financial future you want to create.

Avoid Shock at Tax Time with Tax Planning

Many of us simply work all year and then approach tax season with much dread. We delay doing our taxes for as long as possible because we don’t want to face this unpleasant task. Even people who feel assured of a refund may not file right away. But perhaps the recent changes to the tax code will encourage people to take a new approach after this year: tax planning. Rather than being surprised at what happens, you can plan for your taxes. You can make decisions earlier in the year that will help soften the blow of having to gather receipts and materials and pay taxes the following year.

Last year, U.S. News and World Report suggested taxpayers “make a date with their financial planners” to avoid surprises in their 2019 taxes because “Last year’s tax cut and Jobs Act of 2017 made significant changes to federal tax laws – rejiggering tax brackets, capping some tax deductions and eliminating a few others.”

Even if you didn’t do this and made no changes to your withholding to adjust for the ways that the altered tax law may change your taxes, you can still avoid the shock some will feel if they wait until the last minute to file and are unaware of how the changes will affect them. Getting help with your taxes earlier in the year will also allow you to get a head start on mitigating the effects of a large tax bill if you find that you need to pay more than expected. 

The big increase in the standard deduction may be simpler for some but may cause anxiety for others. The article observes, “For individuals who don’t have businesses or other income, the charitable and medical deductions are the only other ways to possibly push these taxpayers above the standard deduction.”

If you find that you do not like what  happened with your taxes this year, why not work with a Fee-Only financial planner to ensure that next year is better?

Xennials and Retirement Planning

You’ve heard of Millennials but have you heard of Xennials? And if you are a Xennial, does this label make a difference in your retirement planning? It might. You could scoff at these terms a marketing ploys or just conversation starters but it does help to know something about the specific obstacles people in your generation may face. We all need to save and prepare for retirement and recognizing the economic factors that affect our earnings can alleviate guilt about not saving enough and motivate us to do more.

Business Insider defines Xennials as a ““microgeneration” born between 1977 and 1985.” They didn’t grow up with cell phones or social media. Xennials were already working when the Great Recession happened, so while Millennials were just hitting the job market, Xennials “may have been hit hardest by the recession because of a combination of student-loan debt, job losses, and other factors.” And this is said not to create competition between these two groups but to increase understanding of what each age groups may have faced.  Many Millennials couldn’t get started and some Xennials suffered setbacks just as they thought they were gaining momentum.

According to Investment Executive, a survey found Canadian Xennials…are too overwhelmed by financial obligations to contribute as much as they would like to retirement savings.” On the one hand, people of all ages feel this way and on the other hand, Xennials have to see that they are in a position to save more aggressively and still be okay at retirement time. People born in the late 1970s and early 1980s don’t have as much time as Millennials but all is not lost. 

A Fee-Only financial planner can help you with strategy to make the most of your money and the rest of your working years so you can retire (or semi-retire) without fear.

Estate Planning: Get Started with Life Insurance

Life Insurance As a Baby Boomer Estate Planning Tool” outlines just why a life insurance policy can be beneficial to those looking for ways to ease burdens their heirs may face. The article states that found that “forty-two percent of baby boomers don’t even have an estate plan” or that those who do have one haven’t updated it, so life insurance may be one way to do this since:

“Life insurance can play an important role in providing liquidity  –cash — at death when faced with the following cash flow drains.”

Families facing a death have to deal with final expenses and may have to deal with unpaid debts so liquidity is crucial. 

The article also outlines some of the costs associated with administering an estate including probate costs (including attorney’s and accountant’s fees), estate taxes, estate equalization, business succession, and any pre-planned charitable donations. 

Life insurance can help a family opt out of forced liquidation because that solution can be more complicated than it seems. If there is a need to sell assets quickly there will be pressure to underprice them for a quick sale. However, even if the assets are sold quickly, the estate will still incur costs such as appraisals and commissions. And of course there may be capital gains tax to be paid on any assets sold.

While a tax expert can help you understand just how current tax law will affect your estate planning, a Fee-Only financial planner can assist your family with estate planning. While something may be better than nothing, you want to pick a  life insurance policy that really fits your situation and a Fee-Only financial planner can help. And of course, life insurance is just one part of estate planning, but if you’ve been reluctant to makes these plans, getting a life insurance policy is a good start.

Invest in Yourself

If you have a difficult time with financial planning and money management, perhaps it is time to look at money matters with a new perspective. Even if you are not a really “into” finance, you will find that money is a frequent topic of conversation be it from people you know, your financial planner, all the money experts on TV, your own sense of guilt, etc.—instead of feeling as if you are being nagged, consider that  you are being reminded to invest in yourself.

If you don’t like paying bills or would rather spend than put more money towards debt, stop thinking of these things as obligations and think of them as an investment in your future. The less debt you have, the more money you free up to reach your goals. And if you have bills that you resent, you can find ways to change your lifestyle to reduce or eliminate those costs. Invest time and energy into finding a way to meet basic needs and financial necessities that works for you.

Saving money can also seem like a chore, but remember that money is for you. An emergency fund will be there to help you when you need to use it—for something like unexpected home or car repairs. Yes, the money may go to pay someone else but having it ready can reduce your stress.

In addition to financial planning, there are other ways to invest in yourself, such as professional development, that will cause you to spend money on something other than everyday expenses. Whether you take a course or return to school for a degree, it will cost you in money and/or time but if you plan wisely, it can be a worthwhile investment.

You will need pay money out to various individuals and institutions but consider the best way to get a return on your investments and take any gains and re-invest them in your financial wellbeing.

Resolutions Fail Without a Specific Action Plan

In her Washington Post column, “The financial resolutions that will doom you to failure in 2019,” Michelle Singletary gave advice related to what Fidelity Investments said were the most popular financial resolutions for the new year:

“[People] want to, in this order: Save more money. Pay down debt. Spend less.

Here’s the problem. You can’t achieve your financial goals with vague promises. You need to be specific, and you have to have an actionable plan with a timeline.”

It is not the act of making resolutions that means failure but the fact that people don’t have specific plans for achieving these goals.

Singletary recommends that people use the acronym SMART when setting financial goals and resolutions. (You may have had to set SMART (specific, measurable, attainable, relevant and time-bound) goals at a job or somewhere else; if you found it challenging, you may find it better when you are setting these goals for yourself and not for the approval of someone else.)

The examples Singletary provides show readers how to go from general goals to actionable ones that can get results. If you wait until you feel inspired to save more money, you might never save. You need to consider a certain amount to put away and set a date or an amount to indicate that you’ve met your goal.

She also recommends using the “debt dash” method to pay down debt: instead of just saying you want to pay down debt, you will be taking steps to eliminate your debt. You will have to find a consistent amount of money to dedicate towards debt by either earning more or cutting expenses. Then, you use that amount to pay off either the lowest debt or the debt with the highest interest. After you pay off the first debt, you move on to the next one. 

In “Consider Interest Rates When Tacking Credit Card Debt,” we mentioned that research finds that it makes more mathematical sense to pay off the debt with the highest interest first. Singletary concedes that this method does make sense numbers-wise but cites other research which finds that people gain more momentum from paying off their smallest debt first.

Do Women and Men Really Have Different Investment Styles?

There is a lot of talk about the differences between the ways in which men and women invest. The discussions of these differences usually have the aim of getting people to examine their behavior, play to their strengths, and consider what they might do differently to improve their investment portfolios. However, it is possible that different investment styles are more a matter of personality than gender.

“Men and women aren’t that different: investing app Stash,” a Yahoo! article, states:

“When it comes to investing, the overwhelming narrative is that men have more of an appetite for risk than women. But, men and women are equally risk-taking with their portfolios, according to a new report from financial investment app Stash…

Ninety percent of female users identified as having a low or medium risk tolerance.

Though the vast majority of women don’t believe they are risk takers, their behavior indicates otherwise. In reality, when it comes to investing, men and women act practically the same, according to the report.”

While women may also be taking as many risks as men, the article also discusses how women have less wealth (due in part to gender-based pay disparities) and that women keep more of their wealth in cash.

The research also examined men and women’s behavior, finding that both groups make consistent contributions to investment portfolios. Where they differ is that the men studied are more likely to sell when the market doesn’t look so good, indicating that women can weather the highs and lows of the market better.

Whether you are a man or a woman or no matter how you identify, you can consider your tolerance for risk in investing and what that means for financial future. A Fee-Only financial planner can help you with a financial strategy that works for you and will help you meet your financial goals.


Examine Your Spending Habits

The Balance looks into “The Psychology of Spending Money” to encourage readers to examine their spending habits. If you can figure out what causes you to spend more than you should, you can work on changing those habits instead of repairing the damage that happens when you overspend.

You may be familiar with the advice that one should keep a spending log to track spending habits but to really understand your financial missteps, you may need to go a little deeper because

“Identifying the triggers that stimulate the urge to splurge can be uncomfortable, but if you don’t face them, you may never get control of your spending and your debt.”

The Balance recommends not just noting the money spent but also writing down your moods so you can understand your spending decisions.

Once you recognize what triggers you to spend unwisely, you may also need to examine what causes those moments when you spend without thinking or considering the effects. It might be that you are copying behaviors you saw growing up. It may relate more to your current circumstances and how you feel about yourself overall. If you start to remind yourself that your worth isn’t connected to money or possessions, you may find less of a need to spend unwisely.

It also helps to learn more about money and financial planning. The things you buy on impulse are often not investments in your future. Once you start considering how you want to live (both now and in retirement) and work on financial goals, that may become more important than the things you want right now.

And if you need to break the psychological hold that using credit has on you, you may have to try putting your credit card(s) on ice–literally if necessary. Credit is convenient and the option to ‘buy now, pay later’ is more than some people can handle. There is no shame in switching to cash or using a debit card.

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