Money – Page 5 – mardihumphreys.com

Another Day, Another Crypto

I led an Is It Worth Your T.E.A.M.? workshop for a group of young professionals recently. One of the questions we worked through was about investing money. There were usual questions like, Should you invest in property or stocks? Then one participant said he felt like it was time to do some serious research on cryptocurrency. I realized that it had been a couple of years since I even thought about cryptocurrency and, at the time, I dismissed it as an experiment that probably wouldn’t go anywhere. But this year, I’ve seen television commercials for tax preparers offering to make sense of how to report your cryptocurrency income to the government. Guess it’s time to take another look and see how the experiment has iterated.

What Is It?

Cryptocurrency (AKA Crypto) is a purely digital form of money. There are currently over 10,000 different cryptos. Bitcoin is the original and the most popular. Crypto comes into existence through a process called mining. It’s a bit like a modern version of mining for gold, but instead of a person panning in a river, data centers solve mathematical puzzles to produce coins. Also, much like a gold miner spent a great deal of human energy panning, data centers use a great deal of electrical energy computing. This makes mining crypto environmentally unfriendly. Regular currency is backed by banks and governments, but crypto is administered by blockchain. This is a type of technology that acts like its name. A block is a set of transactions that are validated by an online network. The blocks are strung together to form a ledger. The ledgers form a database that is shared by nodes (e.g., a small server) in a computer network. Since the blockchain is a distributed network, this decentralized transaction record system is considered very secure.

How Do You Use It?

Right now, there aren’t many places accepting crypto for purchases. It’s mostly an investment option and a volatile one. You buy and sell it on exchange websites like this one. If you choose to invest in crypto, please remember to bankroll your emergency fund, pay off debt, and set up a system for saving for retirement first. Think about limiting crypto to 10% (tops) of your investment portfolio. Even though it’s trendy, most investors continue to choose gold over crypto due to the current inflation and Russia’s invasion of Ukraine.

Does It Have a Future?

So, it seems that not much has changed since the last time I researched crypto. We are still in the early-adoption phase, but major financial institutions are starting to get involved. Recently, Fidelity announced it would offer a bitcoin option in their 401(k) plans. I imagine that eventually using crypto will be much like online banking transactions. To reach that goal, crypto administrators must figure out how to battle scams, how to scale it, and how to stop the environmental damage mining causes. In spite of the challenges, crypto is predicted to exponentially grow by 2025.

My research indicates that cryptocurrency is polarizing; you either love it or you hate it. Which side are you on? Please share what you think about it in the comments.

The Waiting is the Hardest Part

Income tax filings are due next week. If you owe, then you have my sympathy. If you will receive a return, congratulations! (Although, perhaps we should discuss how using the government as a forced savings account may not be the wisest choice…) While waiting, you may already be contemplating what to do with your income tax return. Should you save it? Should you treat yourself? Should you invest it? Your self-control super power can help you make this decision.

Stop and Think

Should you buy the Apple Watch Series 6 or stick with the SE you currently own? Should you deposit the return in your long-term savings account so that it’s easily accessible when you want to spend it later? Should you invest it in your IRA and not spend it for several years? You know putting money away in your emergency fund is always a wise choice, but it’s hard to fight the temptation facing you right now. To control your spending, stop and consider what you already have. Then, determine the value of buying more stuff. For example, Is the Apple Watch Series 6 an exponential upgrade from your SE? Do you have to purchase it right this second? Walk away while telling yourself that you’ll revisit it after your income tax return arrives. There’s a good chance that the Series 6 you feel like you can’t live without today will lose a bit of its lure by then.

Pause and Play

Can you afford to be generous? Think about allocating a percentage of your income tax return to spend on someone or something you love. For example, you could plan to take your kids out to a movie, your partner to a minor league baseball game, or a friend for a manicure. Are you back to eating out at locally owned restaurants? Make a mental note to generously tip your server. Do you go to church? Consider dropping your designated dollars in the offering plate or use the giving app. Is there a nonprofit organization you feel passionate about? Donate to it. Fun fact: if you donate to a church or nonprofit, you may be able to claim it as a tax deduction for this year.

Refine and Iterate

Use the wait to audit your budget process. Evaluate whether or not it still serves you well. If the word “budget” feels too restrictive to you, then call it something else, like “freedom plan.” A budget is simply a strategy that empowers you to reach financial freedom. The typical budget advice is to divide your net income into a 50/30/20 split: 50% should go to your basic needs like food, clothing, and shelter. Spend 30% on self-care. Save or invest 20%. Disclaimer: This is not my favorite advice because it makes no mention of charitable giving. If you feel overwhelmed, try a budgeting app.

If you adopt a mindset that it’s fun to speculate what to do with your income tax return, then it’s easier to exercise self-control over where it will go. That gives you something money can’t buy, peace of mind.

Spend, save, give, or invest. Which are you doing with your income tax return? Please share in the comments.

Don’t Press Your Luck

St. Patrick’s Day is this week and while you’re deciding whether or not you have a green shirt appropriate for work, thieves are working to steal the pot of gold you plan to get back from the federal government. It’s time to file your taxes and scammers are looking for ways to get their hands on your refund. Some of the most common scams involve stealing your identity. Here are three you should be aware of.

Tax Refund Fraud

You submit your tax return online. You receive a notification that your taxes have already been filed and the refund paid. A scammer has filed a tax return pretending to be you and stolen your refund. That isn’t the only thing they’ve stolen. They have to have your Personally Identifiable Information (PII) to file a tax return; specifically, your name, Social Security number and birthdate. This means they’ve stolen you identity too. To prevent this, keep your PII both secret and secured. It’s also a wise choice to file your taxes as soon as you receive all the necessary documents, like W-2s, 1099s, etc. Here is a checklist.

IRS Imposter

You receive a call from someone who presents themselves as an official. They say you owe unpaid taxes. You want to both act with integrity and stay out of trouble, so you’re inclined to answer their invasive questions about your PII. Right now you may be thinking, “This is old news. Fraudsters have been doing this for years.” And you’d be right. But if you see the words Internal Revenue Service (IRS) on your caller ID, it makes the scam seem legitimate, doesn’t it? Scammers get more sophisticated every year and experienced ones use spoofing to disguise themselves. To prevent this, remember that the IRS does not contact you through a phone call, text, email, or social media. If they want to get ahold of you they will snail mail you a letter. If you want to double check after receiving a communication other than a letter, call them at (800) 829-1040 and tell them what happened.

Stolen Unemployment Benefits

You lost your job thanks to COVID-19 and received unemployment benefits from your state in 2021. That money is taxable by the federal government. You received an IRS Form 1099-G. Box 1 on this form lists an amount of money you did not receive, or the amount listed is more than you received, or you did not apply for unemployment benefits from the state that sent you the form. A criminal has stolen your identity and used it to file for unemployment benefits. To prevent this, if you receive a text message or email from someone claiming to be from a state workforce agency and it contains a link to a website, do not click on the link. The message is from a scammer who is trying to trick you into going to their fake website. They want you to think that you’re applying for unemployment benefits on this site, but what you’re really doing is giving them the PII they need to steal your identity. If you receive a text or email like that, report it here.

Here is a longer list of current tax scams the IRS is keeping an eye on. What do you do to protect yourself from tax fraud? Please share in the comments.

Isn’t It Romantic?

It’s not the most romantic topic to discuss for Valentine’s Day, but since close to three out of four American couples say that money is what they fight about most, let’s get to the bottom of the problem so that we can get back to the love.

Our Lips Are Sealed

No one talks about money. Do you know what your coworkers’ salaries are? Trends indicate that 2022 will be the year to normalize pay transparency. If you can get comfortable talking with your team about money, then it will be easier to discuss with your partner too. Fights about money aren’t really about the money. They are about how we feel about the money. We bring all kinds of beliefs about it to our relationships including what society taught us about it, how our family used it, and our past experiences with it. For example, if you’d rather save money than spend it, then the pain center in your brain activates when your partner makes a purchase that you consider expensive. You may feel like you work hard to earn your paycheck and it’s bad enough that taxes, insurance premiums, retirement savings, etc., come out of it before you even see a penny and now your partner is spending what’s left on whatever they want. The spender got joy out of the purchase, but is now frustrated by your judgement of their decision. Both of you are making up negative narratives about one another in your heads because neither one of you feels good talking about what just happened. Now MY head hurts.

Start Me Up

Talk about money. When you decide to share your partner’s financial responsibilities, you both have to be self-aware enough to know what your values, triggers, and goals are. Then you both have to be brave enough to calmly communicate them to your partner on a regular basis. The two of you are in this financial situation together and need to maintain a team mindset. Keep your first conversation basic. Talk about a budget. For example, at least discuss what you have to spend (bills), what you have to save (emergency fund), and what you want to spend (leisure). If the word budget has a negative connotation for either you, or your partner, or both, then rename it. Call it Spending Plan, or Our Money Goals, or whatever label reminds you both that this agreement is a tool to help you build your future together. Ahhh…now we’re back to the love.

Let’s Dance

I oversimplified the solution, and simple doesn’t mean easy. Achieving financial compatibility can be more complicated than learning the Viennese Waltz. I boiled it down to give you a launch pad. The very act of starting the money conversation will give both of you peace of mind. You can’t put a price tag on that.

Why do you think talking openly about money is taboo in our society? Please share in the comments.

Back to Basics

COVID’s effect on the economy touches us all whether we lost a job, sold a house, or can’t buy toilet paper. Recovery is going to take years, but you can begin now by auditing some of your basic financial tools like credit cards, insurance, and retirement savings.

Credit Cards

Is your credit card serving your current lifestyle? If you have a card that pre-dates rewarding you for purchases, then you’ve outgrown it. For example, there are plenty of cards that offer a percentage of cash back when you use them to buy groceries. By the way, it is safer to purchase groceries with credit instead of debit.
Do you pay your credit cards off every month? Credit card companies usually charge compound interest; billing you both for the principal and for the convenience of carrying a balance. To avoid these charges, pay your credit cards off every month.
Are you applying for a new credit card? Use a prequalification tool. Applying for credit or a loan temporarily lowers your credit score by a few points. If you apply for multiple cards in a short period of time, that quickly adds up against you. Prequalification tools make soft credit inquiries which have no impact on your credit score.

Insurance

We purchase items when we need them, but you have to buy insurance before you need it. For example, when you rent an apartment, the lease often requires you to purchase a minimum amount of renter’s insurance. This not only protects your belongings, but it also protects the landlord from liability if you pursue a legal claim. If you move out with all your belongings undamaged, then you spent money on something you didn’t use. This can give you negative feelings toward purchasing any kind of insurance. It helps to think of it as buying peace of mind. Since you can’t predict the future, the minimum types of insurance you should consider are health, homeowner’s (or renter’s), short-term disability, life, and auto. For more details, go here.

Retirement Savings

If your employer offers a retirement plan, such as a 401(k), then consider contributing 10% of your income to it. If they offer a matching plan, then contribute at least as much as they do. If you don’t, you’re refusing to accept free money!
You need multiple sources of retirement savings. In addition to your employer’s retirement plan you should also have an Individual Retirement Account (IRA), even if you intend to take your Social Security benefits when you are eligible. There are plenty of IRAs to choose from.
If you’re not interested in managing your money, are intimidated by it, or confused by all the options for short-term and long-term investing, working with a financial planner is a wise choice. Do your research and find out how they make their money, if they are a fiduciary, and whether you need a financial planner or a financial advisor. Here is the difference.

It’s never too early or too late to get back to the basics of personal finance. I hope 2022 brings you prosperity!

What other personal finance basics have I forgotten to mention? Please remind me in the comments.

Fiscal Fitness

Photo by Tima Miroshnichenko from Pexels

I know you’re all in the holiday spirit and everything, but before the year gets away from you, stop for a minute and think about what you need to do with your finances before January 1. Taxes are the obvious consideration, but also think about your savings goals and protecting your credit rating.

Taxes

Slow Down: With the economy trying to recover from the effects of COVID-19, you may find yourself in a lower tax bracket next year. If you are able to defer receiving any year-end bonuses until January, they won’t be taxed this year. If you can afford it, you may also want to delay collecting payment from a few clients until January so that income won’t be taxed in 2021.

Speed Up: It’s not too late to take advantage of tax deductions for this year. Do you itemize your return? If so, do you have any expenses like medical payments, interest payments, or state taxes that you can pay now? Also, charitable deductions are still a great way to lower your taxable income if you follow the rules.

Saving

How did you do on your savings goals this year? Check the numbers on your long-term savings goals like a vacation, car, or house. Are you on track? Can you pay for holiday gifts without using credit cards? At this time of year you may be disappointed at the commercialization of the holidays and want to make them more meaningful by less money spending and more blessing counting. Use this mindset to embrace minimalism. The result is savings on decorations, food, and gifts. Consider giving presents that cost you something other than money. For example, invite a friend over for a mid-week holiday coffee date or a multi-player game of Fortnite. Your time is more valuable than your money. Did you get a holiday bonus? Think about depositing it in your IRA.

Credit

You may be making more purchases with credit cards this holiday season. It’s best practice to check your credit score monthly, so If you haven’t in a while, now is the time. Some credit cards offer this as a service when you have an account with them. If you’re thinking about getting a mortgage or car loan in 2022, you want to make sure your score is at least 700. Also, be mindful to keep your credit use below 30% of your total available credit, otherwise it can negatively impact your credit score. If you have debt on multiple credit cards or outstanding loans, instead of depositing that bonus check (you know, the one I keep harping on) in your IRA, use it to make an extra payment. Paying off debt is almost always the first priority.

The eye of the hurricane between the holidays and the new year allows you a bit of time to think. Use it to brainstorm what you’d like to accomplish next year. Let your imagination run wild. The sky is the limit. Maybe you want to buy a yacht or start your own business. Then, think about what finances you need to support those goals. What baby steps can you take in 2022 to achieve them?

What is your financial New Year’s resolution? Please share in the comments.

Help Me Help You

You don’t get a raise because you need the extra money. You get a raise because you’ve made a positive impact on the bottom line and the company anticipates you’ll contribute in the future. If you executed duties above your job description, brought in revenue, and/or saved the company money, then you deserve a raise.

It’s Work

If you don’t have a “Brag File” yet, start one. Right. Now. Populate a new folder on your desktop with complimentary emails from both clients and coworkers, the link to your recommendations page on LinkedIn, awards, and any other evidence of the great job you did over the past 365 days. With this research, write a report quantifying your value to the company using explicit data to empower your case. For example, “I saved the company $19,800 in training expenses through my network connections and research.” Practice talking about how what you’re currently working on will benefit the company in the near future. Check out websites like salary.com to find out what others with your job title make. All these things pulled together enable you to enter the meeting knowing your worth.

It’s Scary

Your goal is to make you, your manager, and your company successful. You did your due diligence and have every reason to be optimistic, but it’s natural to feel nervous. Set a positive tone when you walk into the room. After greetings and small talk, use your curiosity to dive into your agenda. Ask your manager what their priority is right now. Follow up their answer with what you did this past year to help them get closer to their goal by pulling that report from your Brag File. Thank them for their insight. Tell them you’ll use it to further refine your process to assist them in achieving their priority. Of course, that means you will take on more responsibility and you anticipate that more compensation accompanies that effort. Say that with a poker face. Take the emotion out of the conversation. Report what you did to further the company’s success last year, demonstrate how you intend to keep doing it next year, and put a dollar amount on what the company should invest in your time, energy, and attention. It’s more scary to not get the raise you could’ve received if you’d simply asked for it.

It’s Worth It

Seventy percent of employees who ask for a raise get one. You may be told no even though you performed your job above and beyond its description. COVID-19 decimated our economy and your employer may not have the funds to give you a pay increase right now. Ask if the company is open to other forms of compensation (e.g., flexible schedule). If your requests are rejected, schedule a meeting for six months from now to revisit the possibility. Ask what KPIs your manager would like to see you hit in the interim. Keep your manager updated on your progress either through scheduled 1:1s or an end-of-week emailed report showing that your work is aligned with both your manager’s and the company’s goals.

If the compensation conversation intimidates you, reframe your fear as excitement. You’re anxious to share the good news of how you’ve improved both yourself and the company during the past year. If your enthusiasm is welcomed by your manager, then that’s a good sign you have a future with the company. If it isn’t, well, that tells you something too.

What do you do to build up your confidence to ask for a raise? Please share in the comments.

Old Money

You spend your whole life working hard, saving aggressively, and accumulating good credit. Your reward for that high net worth? A big target on your back. In the United States, elder fraud is estimated at $3 billion annually. You want to be polite to strangers and lead with trust, but if you are duped, you could lose your entire life’s savings.

Why Seniors

As of 2019, 34 million baby boomers are retired. This provides fraudsters with a wealth of opportunity. Society often portrays people over 65 years old as naive, lonely, and gullible. When popular schemes become widely publicized, they quickly change tactics. Once a fraudster has your money, it’s almost impossible to it get back.

Current Scams

Fraudsters prey on the target’s emotions. They approach with either overly sympathetic and friendly or overly pushy and threatening behavior. For example:

Romance – offers companionship
Caregiver – you employ them to work around the house, but they accept the job to steal
Grandparent – informs you that a grandchild is in trouble and you need to send the fraudster money to help your grandchild
Government Imposter – threatens arrest unless you pay them
Medicare – claims they are a Medicare representative and asks to verify your number. They use it to bill Medicare for fake services then keep the money. By the way, Medicare will never (and I don’t throw that word around) contact you for your number unless you have previously given them permission
Foreign Sweepstakes/Lottery – asks you to pay a fee to win a fake contest
Charity – a fake non-profit requests a donation
Home Repair – claims your home needs a repair, charges in advance, never provides service
Tech Support – offers to remotely fix non-existent computer problems
Media – fake ad for non-existent services like a reverse mortgage or prescription drugs
Investment – offers a guaranteed high return on your investment but only if you send the money to the fraudster right now
Zoom Account Suspension – an official-looking email saying you can’t use their service arrives with a malicious link to click so they can collect your Personally Identifiable Information (PII)
Vaccine Card – if you posted a selfie on social media with your vaccination card revealing your PII, fraudsters can capture your information to steal your identity

Be Proactive

Stay up-to-date on the current scams and refuse outreach from strangers. When tempted by an offer that seems too good to be true, verify the seller’s credentials, consult someone you trust, and/or research the offer online. Other people have probably already been approached and have insight on it.
Be suspicious of anyone who wants you to make a quick decision and keep it a secret. If someone contacts you claiming you, or someone you love, is in danger, write down their instructions: What do they want you to do (e.g., wire funds, send a gift card)? Where do they want you to send it (phone number, email address, website, financial institution, name, and account number)? Then call the police and give them the information you recorded.
Refuse unsolicited phone calls, mailings, door-to-door services, emails, and texts.
Do not give or send PII or valuables to strangers.
Be mindful online. Use reputable anti-virus software and keep it updated. Enable your computer browser’s pop up blocker. Do not download, open attachments, nor click on links in messages sent from strangers. If you receive an email from someone you don’t know, then the best practice is to delete it without opening it.

What do you do to protect yourself from fraud? Please share in the comments.

The Talk

It’s time for “the talk.” Not THAT talk; you need to talk to your family about retirement savings-both theirs and yours. Yes, the economy is suffering right now and it’s tempting to push pause on long-term savings, but the future keeps coming and everyone from Baby Boomers to Gen Z should continue to plan for it.

Don’t Count on It

Do not make the mistake of counting on the United States government to fully fund your golden years. Social Security is intended for use as an emergency resource, not your main source of income after you leave the workforce. Plus, by 2034, projections reveal that the Social Security Administration will be paying out more benefits than they are taking in through payroll taxes because there will be more retirees than employees. If Congress steps in then it probably won’t run out. But if you want to live the rest of your life comfortably, then you should fund your own retirement.

It’s Not About the Money

When talking to your family about future finances, you’re not really discussing money. Whether it’s your adult children who want you to carry them on your insurance or your parents who want you to be the executor of their wills, money is just a representative. What you’re really talking about is both expectations and emotions. Whether fear, resentment, kindness or generosity, feelings are attached to financial conversations. These discussions are not one-and-done. For example, when your parents began telling you about the birds and the bees, it wasn’t just one talk, was it? When our daughter was three years old she asked me where babies came from. I told her Cleveland. That satisfied her for two years. As she grew older, her questions grew more specific. It’s the same for the money talk. As everyone in your circle of care ages, the questions you ask them should become more specific. For example, when speaking with:

Gen Z – Do you have an emergency fund with at least $1000 saved? If not, they should think about automating their savings. Here is how to create a plan
Millennial – Are you aggressively paying off debt? Here are some pros and cons
Gen X – Are you taking advantage of catch-up retirement savings? Here is how they work
Baby Boomer – Have you thought about where you want your assets to go after you’re gone? Here is what they need to know if they live in the great state of Ohio

Awkward

How you manage your money is a very personal choice. When it has the potential to impact, either positively or negatively, the people you care about, you must talk to them about it no matter how awkward it feels. Opening up a dialogue before a financial emergency happens allows you to remain calm when the crisis hits. It may even prevent the crisis. The result of uncomfortable money conversations with your loved ones is it becomes more comfortable the more you do it. The result is peace of mind, and you can’t put a price tag on that.

What stops you from talking to your people about their and your future finances? Please share in the comments.

Tempting Talent

Last week we discussed how to retain your current employees during the Talent Tsunami. But despite your best efforts, it’s likely that some of them will still jump ship (cue Debbie Downer). From a financial perspective, hiring a new employee is an expensive process. You not only have to calculate salary, but also the cost of recruiting, training, and benefits. If you are a company of 0-500 people, this price could average $7645. How can you ensure you’re attracting trustworthy talent?

Congruity Through Change

It’s tempting to just increase the top of the salary range or offer a sign-on bonus and publish the “We’re Hiring!” post. But throwing money at the problem is not a long-term solution. The pandemic proved the workplace can function very differently than it’s been allowed to since the industrial age. This excited employees, but management not so much. COVID-19 fast-tracked the inevitable evolution of the way knowledge work gets done. Protocol that made factories run efficiently (e.g., all employees work five consecutive eight-hour days) are no longer in employees nor companies best interests here at the end of the digital revolution. If you make this an arbitrary rule, you risk losing out on valuable talent. Conversely, if you explore innovative alternatives for running your business, then you keep your company’s vision intact by taking advantage of modern methods to manifest it. For example: How many processes can you automate? Can you employ subcontractors? Can you upskill high-value individual contributors? Concepts like remote working and unlimited PTO that your company deemed impractical before COVID-19 are now your competitors’ widely advertised company perks. Ponder how implementing such changes may impact your business. A company that helps its workforce navigate work-life integration attracts employees who want to make that company thrive. Be a company that allows employees autonomy to get their projects done, advance in their career and life, and affiliate with both their coworkers and company. Prioritize being a great place to work; a place where employees are valued as human beings and not treated like cogs in a machine. When you do, that becomes part of your brand. In short order, you have an inspiring story to tell everyone and you will attract a workforce excited to invest in the company’s success.

Not Your First Rodeo

You’ve been short-handed before, so now is not the time to panic. Employment is a long-term prospect. You need to discern whether a new hire will be a loyal member of your team or if they are just riding a Talent Tsunami wave. Be as selective in choosing whom to add to your staff now as you were pre-pandemic. When hiring, consider:

Why are they changing jobs?
Did COVID-19 cause them to be laid off or furloughed?
What did they learn during the pandemic that will help them succeed in this role?
Are they looking for more purpose in their work?
What specifically drew them to your company?
Did someone you trust from your network connect you to this talent prospect?
Do they seem excited to meet with you?
Did they tailor their resume to the open position?
Did they ask you good questions about both the company and the job?

This power shift to job seekers won’t last forever. You’ll likely have the same pre-pandemic issues (e.g., finding employees with specific skills) you always had, but if you refresh your policies to create more win-win working conditions, you’ll attract quality talent.

What makes your organization attractive to talent? Please share in the comments.