Financial Fitness is a Family Affair

Improving our health – physical or financial – may mean changing the habits we  learned as children.  What was your family’s attitude about money?  Is yours still the same?  Financial health is so much more than how much money you make or save: it’s about who you are and what you want from life.  The bottom line is that it’s “All About You.” 

As soon as kids begin to handle money, it’s time to start teaching them how to handle it wisely.  Concepts like saving for something valuable, financial goal setting, and basic money management are all important lessons that generations of children have learned from parents and extended family members.   

Here are five fundamental exercises that will develop financial muscles for kids as they move through the various stages of money maturity. 

1. Allowance.  Giving children an allowance is a good way to begin teaching how to save money and budget for things they want.  Allowances can be coupled with opportunities to earn extra money by doing chores that fall outside normal household responsibilities.
2. Saving.  Piggy banks are a great way to introduce the concept of a savings account.  By elementary school the next step is to open a savings account at a bank or credit union. This teachable moment can highlight the value of earning interest on your savings.
3. Critical Thinking.  As kids get older, television commercials and peer pressure are constant temptations to spend money.  Teach them how to compare items by price and quality and encourage care thinking about purchases they make.
4. Part-time Job.  Teens that have part-time jobs begin to experience greater financial independence.  This is an opportunity to show how withholding for FICA and federal and state taxes take a bit out of their paychecks.
5. College bound.  When young adults head off to college a prepaid spending card can offer an opportunity to learn about using credit responsibly without accumulating bad debt. 

In many ways, financial health is like physical health.  Both of them require:  knowledgeable advice, a long-term view and proactive participation.

It's Just Math...

Let’s say Samantha invests $100,000 in the stock market and in a gigantic downturn, she loses half. Not great for Samantha, since she was planning on sending her son to college soon and now she has $50,000. Perhaps it’s time to pick a new school, but first let’s do the math. 

Quick question:  How much does she need to gain to get back to even? 

Did you guess 50%? 

Wrong! When you lose 50% and you then gain 50%, you end up at 75%. If Samantha gained 50% after her bad run of luck, she’d be up to $75,000 … not the 100-grand she invested from the get-go. 

To get back to where she started and get her son packed off to college, Samantha’s going to need a whopping 100% return! So remember, the greater the losses … the greater the needed rebound just to get back to even. 

                   If you lose …        You’ll break even with …

                   10%                      11%

                   20%                      25%  

                   50%                      100%

                   80%                      400%

Medicare Open Enrollment Starts October 15th

As if Medicare and all of the changes in plans and formularies aren’t enough, you know have to make your choices sooner!  Beginning October 15, 2011, and ending December 7, 2011, you can make changes to your enrollments for:

• Medicare Part D plans
• Medicare Advantage *
• Medigap Plans

*Medicare Advantage plans can also be changed from January 1 to February 12, 2012.

Making the wrong Medicare choices can cost you hundreds of dollars per month.  It is important that during this limited period of time you carefully evaluate your needs and the available plans to make sure that you are in the most cost-effective plan for your situation.   You can do your own analysis by using the online tools provided by Medicare or look for the help provided by local senior organizations or independent Medicare consultants. 

 Taking the time to find the right plan for you can be financially life changing.  Contact your financial planner for resources in your area.

The Best Tool for Retirement Readiness

If you're like most Americans, you're dreaming of the day of retirement.  When you can set your own schedule and do all the things you couldn't do when you were working.  But will you be financially ready when  the time comes?

A recent study (July, 2011) by Brightwork Partners concluded that individuals who receive professional advice are much more likely to be prepared for retirement, no matter what their income level might be.  The survey polled 3,290 workers aged 18 to 65 and assigned a “lifetime income score” projecting the percentage of current income each person could expect in retirement , including investments, Social Security and other sources.  Those using advisors, not surprisingly, scored higher than those who didn’t.   The gap between the two, however, was significant: the median lifetime income score for those using an advisor was 82%, versus 61% for those who did not have a paid advisor, with the gap being most significant at higher income levels.   A major conclusion from the study is that retirement readiness is mostly about a person’s set of practices (behaviors), use of available tools (knowledge and skills), and partnerships (professional relationships). 

October is Financial Planning Month -- now is the time to take action to plan for your retirement readiness.  If you don't currently work with a planner, go to the Financial Planning Assocation website (www.fpanet.org) to use their free planner search tool to find a Certified Financial Planner™ in your area.

Lost Life Insurance Policies -- How Do You Find Them?

As I watched the many documentaries and tributes to those that perished during the 9/11/2001 attacks, I was reminded of how many spouses and children were left behind.   Families were left with voids in their lives, not only physically and emotionally, but financially as well.  It is likely that many of those that died during 9/11 left behind financial security by way of life insurance policies with their spouses and/or children as the beneficiaries.  What happened if the beneficiaries were not aware of the details of those policies?

Every day, life insurance policyholders fail to inform the beneficiaries of the policies they have in existence.  As a result, death benefits go unclaimed and families are left to struggle financially.  Where can you go to find insurance policies and benefits that you may be due?

• Michigan’s Money Quest - The Michigan Department of Treasury’s site for unclaimed property.
• NAUPA – The National Association of Unclaimed Property Administrators.
• MissingMoney.com – A search engine for unclaimed property in the U.S.
• NAIC – The National Association of Insurance Commissioners orphaned life insurance policy search.
• MIB Solutions – Lost life insurance policy locator service.

If you think you may be the beneficiary on a lost insurance policy, start your search today.

In addition, if you are the owner of a life insurance policy, make sure that the important people in your financial life are aware of the policy (insurance company, policy number, beneficiaries).  Document your life insurance policies and additional important financial information using the Center’s free Personal Financial Record Keeping document.

What Does MOM Stand For?

The other day, my teenage daughter related to me a quip she received by way of Twitter.  It goes something like this… a child was pestering his mother about his urgent need for a new cell phone.  The mother continued to answer “NO,” without an end to the requests.  She finally asked in frustration, “Do you think I’m made of money?”   The child replied, “Isn’t that what MOM stands for… Made Of Money?”

My first response to this story was to chuckle; it is a very clever play on words.  However, after my own children continued to use the Made Of Money reference over the next several days, I realized that this is a clear indication of a real problem.  Most school age children and younger adults are receiving little to no financial education at school or at home.  They see the kids on TV and their friends at school ask and receive anything they ask for, without understanding what it takes to earn the dollars that are being spent.

As a parent, what can you do to begin to teach your children about the value of money?

• Help them learn the difference between wants and needs. 
• Pay them an allowance, but make them earn it with specific weekly responsibilities.
• Put them in charge of something (financially) at home; put them in charge of something at home (like food for their pet).  They are in charge of buying it when it runs out…using part of their allowance.
• Encourage saving (i.e. if they can save ½ of something they want, you can match it to make up the difference).

For list of Financial Education Resources for Parents and Children, visit the Certified Financial Planner Board of Standards, Inc. website at http://www.cfp.net/learn/resources_children.asp

Back-to-School Shopping -- 5 Financial Lessons for Your Kids

It’s that time again – the first day of school is right around the corner!  You likely received your supply lists weeks ago and stores have been advertising back-to-school items since the Fourth of July.  If you’re like me, you’re dreading the last-minute crowds…and the bill at check-out.

I have read several articles recently telling parents that the easiest way to save money on school supplies is to leave your children at home.  As tempting as this may be, I urge you to take your children on this shopping trip.  Back-to-school shopping can be a great opportunity for financial education. 

Here are 5 financial lessons you can teach your children:

1.  Take inventory of what you have.  Before you leave the house, make sure you know what you have and what you need to avoid purchasing duplicate items.

2.  Comparison shop.  Search printed newspaper ads or shop the internet to find sales and compare prices on the items you need.  Coupons are also a great savings tool!

3.  Set a budget.  Set the maximum dollar amount you can afford to spend, and stick to it.  This is a basic cash flow planning principle we should all stick to!

4.  Stick to a list.  Make a list of the items you need, and don't deviate.  Just like a trip to the grocery store, straying from your list can be detrimental to your wallet.

5.  Make smart choices.  Within your budget, there may be items you choose to spend more on.  Consider buying store brands for basic items, and spending a little extra for others (backpacks, clothes, etc.) to enhance quality or style.

Prepare a plan and stick to it for the start to a successful school year!

Phone Scams Catch Unsuspecting Grandparents Off-Guard

A family member calls and says “Grandma, I need your help and please don’t tell mom and dad.”  The reality is that the request can be real or it can be a line used by a criminal posing as the victim’s grandchild.  Differing versions of the same scam have been around in one form or another for years. Unfortunately, when the caller is a con artist looking to pull off a phone scam; deceit and lies are designed to catch the caller off guard.         

Recently, I was talking with friends and uncovered an ugly story that bears repeating even if it saves one grandparent from financial loss (not to mention the emotional aftermath of being scammed). 

The criminal called posing as a grandchild and convinced the well-meaning grandmother that he was in serious trouble.  The circumstances sounded plausible in a moment where fear for the safety of a family member was heightened.

The “facts” heard by the unsuspecting grandmother:

• My grandson is in Mexico attending the wedding of a friend
• He was driving a rental car and was sideswiped
• The hit and run driver left the scene
• The police took my grandson to jail
• An attorney is going to save the day and free my grandson
• I can help by wiring $3,000 ASAP  

While most of us would like to believe we would never be trapped in a scam like this, it is does happen.  Awareness is one important key to stopping phone scam criminals from preying on family trust and loyalty.  

Please pass the word among your family members to be on alert for calls like this.  If calling an immediate family member is not an option, then consider contacting a trusted financial advisor to talk through the situation before taking action.

Who, What, When, Where & Why

WHO…WHAT…WHEN…WHERE…WHY.  The “five W’s” - we all learned about them in elementary school, but why am I mentioning these “W’s” in a financial planning BLOG, you ask?

It turns out that the five W’s can help you to take control of your financial life.  Whether you are new to financial planning or well established, it is important have a clear understanding of YOUR five W’s:

WHO are your key financial advisors (financial planner, CPA, attorney, insurance agent, etc.)?

WHAT do you have (assets, accounts, policies, benefits, etc.)?

WHEN did you acquire each piece of your financial puzzle (maturity dates, etc.)

WHERE are your assets and important documents held or stored?

WHY do you have what you have and how does this fit into your overall financial plan?

Taking an inventory of what you have and recording the information in document form is important for a couple of key reasons:

• For you, it is a reference guide so that key information is not lost or forgotten.
• For your family and or future durable power of attorney/executor, it is an invaluable guide to assist in handling your financial affairs when you are unable to handle them yourself.

HOW do you get started on your “five W’s”?  For a free copy of the Center’s Personal Record Keeping Document, go to https://static1.squarespace.com/static/54341a03e4b08690c01bc8de/54dcf260e4b018fb5adfbec4/54dcf263e4b018fb5adfcdbe/1303923614337/record_system.pdf