Money – Page 7 – mardihumphreys.com

Self-sufficient Social Security

The headline in our wealth manager’s newsletter read: “Almost Nine Out of Ten Women Qualify for Social Security on Their Own.” I wondered, “Why is this newsletter worthy?”

Milestone

More women enter the workforce every year. Since most people have to earn 40 credits to retire, you have to work (and pay into Social Security) for at least 10 years to qualify for retirement benefits. The fact that the percentage of women ages 62 to 64 who meet these requirements based on their own work records has risen 24% since 1980, means women are staying in the workforce long enough to earn their own benefits.

How it Works

There are three types of Social Security benefits: retirement, disability, and survivors. In a nutshell, when you are employed by an organization where the Social Security Administration (SSA) takes a percentage of your paycheck in taxes, it uses those wages to fund a program that distributes payments to retirees, the disabled, and their families who qualify. The assumption is eventually most Americans will qualify for Social Security and draw money from it. We’ll stick to retirement benefits for this conversation. To qualify for SSA retirement funds, you must reach your full retirement age, accumulate enough credits, and apply for it. Here is a good explanation of Social Security benefits.

What Women Should Know

Almost 55% of people receiving Social Security retirement benefits are women. Not only do women earn their own benefits, they can qualify for a spouse’s benefits. This is significant because women tend to live longer and earn less than their spouses. Social Security will not be as much money as your current paycheck. You can expect it to be about 40% of what you’re currently earning. Social Security should only be part of your retirement plan. You can use it as a foundation to build on. If your employer offers a 401(k) (or a 403(b)) plan, you should participate. If your employer contributes to it as well as invests a percentage of your paycheck for you, contribute at least as much as they do and increase your percentage beyond their contribution every year. It would also be wise to open an Individual Retirement Account (IRA). The current rule of thumb is saving 15% of your income for retirement. Three sources of retirement income seems like overkill, but a quick Google search indicates a nest egg of $1,000,000 will only last 19 years in retirement. Social Security benefits last until you die, but you won’t receive the same amount throughout your retirement. Payments are made monthly and usually by direct deposit. Every year, the SSA considers adjusting retirees’ payments for inflation and decides whether or not it will increase them to reflect the cost of living. The SSA has explanations for how changing your name, becoming disabled, or divorced or widowed affects your social security benefits. You can read about it here.

The increase in women who earn their own Social Security benefits means more people are paying into the program. It also means more people intend to be paid from it. Could this be an incentive to prompt thinking on how we can empower more women to stay in the workforce so Social Security can sustain funds?

What do you think? Please share your opinion in the comments section.

Shop Smart

Another stimulus check may (or may not) be coming. Stores are reopening and we’re bored in the house. This combination is dangerous because it gives us opportunities to spend money we either don’t have or can’t afford to waste. With the end of the pandemic nowhere in sight, the impact on our finances is really just beginning, yet we want to support the economy. What can we do to be smart shoppers?

Food

Make a grocery list and stick to it. If the store’s displays are just too tempting, shop the store online and use their pickup or delivery service.
Download the store’s app and activate their loyalty card.
Download the store’s coupons, but only for items we regularly use.
Wait for sales on the items for which we’ve downloaded coupons.
Eat before grocery shopping. This makes a huge difference for me. Walking through the bakery (or the valley of the shadow of death, as I like to call it) isn’t nearly as tempting on a full stomach as it is on an empty one.
Recognize some food manufacturers are playing sleight of hand with us. For example, the brand of chicken wings we buy used to put a dozen hot wings in a bag. Now, the price is the same, but there are nine wings in the bag.

Clothing

Shop Goodwill, Salvation Army, and local thrift stores.
Opt for classic pieces instead of trendy. I found this suit and loved it in cobalt blue, but it was also available in black. Guess which color I purchased. Yep. I’m more confident a black suit will still be in style next year than I am about a cobalt blue one.
Wait to purchase until the end of a season. Swimsuits are cheaper at the end of July; winter coats are cheaper in March.
Leave items in our online carts for 24 hours. This cooling off period allows us to contemplate whether we really need the merchandise. When I do this, some retailers email me a reminder I still have items in my cart and offer a discount to entice me to finish the transaction.

Shelter

Borrow maintenance equipment we need for one-time only use; think a ladder or steam cleaner.
For items we’ll use more often, check a price comparison app before purchasing.
Think about how often we use something. For example, when it’s time to replace my coffee pot, I go for quality because we use it every day, then, I look at the price. It’s cheaper to invest in a well-made product than frequently replace an ill-made one. Since I don’t drink tea every day, I purchased a cheap electric kettle.

When in doubt, we shouldn’t spend money right now. If we can live without the items, let’s do. There will always be fun stuff to spend money on. Self care: yes, Treat yo self: not right now.

How do you practice shopping smart these days? Please share your tips in the comments section.

Financial Infidelity

Back in March, we discussed financial fidelity. In the section on transparency, I alluded to the fact that hiding money from our spouses is cheating, but that was a whole ‘nuther post. Well, here it is.

As of January 2020, 44% of Americans with joint finances, cheated on our spouses with money. Anything hidden is considered cheating. For example: secret bank accounts (savings or checking), secret lottery winnings, secret debt (credit cards, loans), lost our job but acting like we didn’t, or spending money on an expensive item without discussion, can all be considered breaches of faith. Here are some behavioral tells to watch for: our spouse insists on paying all the bills, won’t divulge account logins, refuses to discuss money, or argues about spending large sums.

Why the deception?

Control: revenge spending
Guilt: knowing the spending was irresponsible
Fear: afraid of spouse’s reaction if discovered
Conflict Avoidance: we want something our spouse will object to

What’s the harm?

Lying about finances causes arguments, distrust, and can end the relationship. If we lie about money, what else will we lie about? Hiding money only delays the inevitable conversation about motive. If concealing debt is the issue, it could affect both spouses’s employment. Hiring managers check credit scores as part of the interview process. We shouldn’t have to tell each other every time we buy a venti at Starbucks, but we can’t run up $50K in credit card bills and keep it a secret. That will undermine the whole relationship. Some states’ laws make our finances our spouses’ finances. If the relationship ends and one spouse is in debt, both live with the responsibility until the debts are paid.

How do we fix it?

If we are the cheated, put aside judgement, and ask about the feelings that led to the deceit. Financial infidelity is a symptom. The real problem in the relationship needs acknowledgement. If we are the cheater, be honest, apologize, and stop keeping secrets. To begin, we can talk about tolerance. Can we spend $500 without asking? Can we divert $100 a week from our joint checking account to a private savings account? Our partner needs to know our motivation for having a separate account. Do we want to save up so we can spend money however we want without asking, or are we secretly saving up for a divorce? (In some states it’s illegal to hide money during a divorce, btw.) We don’t have to give our spouses access to this account, but they should know how much is in it because it’s a factor in our financial decision making. Define long term savings goals together like the children’s education, a new car, or retirement, and both commit to working toward them. When we want something that will impact those goals, it’s time for another discussion. We should revisit savings goals once a year. Maybe during tax season since it’s a logical time to talk about finances. When we get into this habit, as the years pass, it gets easier to talk to our spouses about money.

Money is a major stressor in a relationship and talking about it can quickly turn into arguing about it which makes you avoid talking about it. But keeping secrets is usually a waste of your T.E.A.M. If we don’t talk to our partners about money, we’ll never figure out how to work together to manage and maximize it.

How do you broach the subject of money in your relationship? Please share in the comments section.

How Much Will You Pay for Peace of Mind?

My husband and I are on that step of the parenting journey where we have to explain realities to our daughter like 401k plans, insurance, and taxes. Insurance is a really tricky one. Why pay hundreds of dollars for something you may not need? Because life happens and we have to protect ourselves from financial ruin when it does. Here are a couple of questions we’ve answered.

What Even IS Insurance?

My grandmother used to say, “An ounce of prevention is worth a pound of cure.” Insurance is the ounce of prevention. We buy it before we need it, which is kind of backwards, right? We don’t buy dog food before we adopt a dog, but we do buy homeowners insurance before our house burns down because insurance companies won’t pay for a fire we’ve already had. It’s also weird in that insurance companies decide whether or not they want to insure us and how much they will charge us to do so. For example, when buying car insurance, if we have a crash on our record, the insurance company can charge us more than they charge someone who has never had an accident. Here is a comprehensive article about insurance.

What Kind of Insurance do I Really Need?

There are so many options. We can practically insure everything we own if we want to. Some insurance we are required to purchase. For example, it’s illegal to drive without car insurance. Some is optional; like pet insurance. So what are the essential types of insurance we should buy? It depends on our situations and who relies on our incomes. We work hard for our money and want to keep as much of it as possible. The following are common types of insurance and resources you can use to decide what’s best for your situation.

Health – Premiums, deductibles, and copays, oh my! There are so many variables associated with health insurance, there’s not enough room to go into them in this space. Here is a good article about them.

Dental – It depends on whether or not your employer provides it. Here is a good explanation.

Disability – According to the CDC, 61 million adults in America have a disability. You need long-term disability insurance. You can use your emergency fund for short term (lasting 3-6 months) disabilities, but here is a resource to help you decide.

Life – Should you choose term or whole life? Depends on what you want the insurance to pay for after you’re gone. Here is a good explanation.

Pet – We opt to use our emergency fund or credit card instead, but here is a resource for you.

Homeowners or Renters – Covers property damage (e.g., you get robbed) and liability (e.g., someone gets hurt on your property). Here is a resource for homeowners, and here is one for renters.

Flood – In most cases, yes. Neither homeowners nor renters insurance cover flooding. Here is an article about it.

Auto – It’s the law. Here is an article to help you decide what type is best for you.

Umbrella – Are you at risk of getting sued? Then yes. More details here.

Long-term Care – Probably not. Here is an explanation.

Identity Theft – Probably not. Here is why.

Have you had a circumstance where you were really glad you were insured? Please share about it in the comments section.

Hiding in Plain Sight

Like Donna Summer, we work hard for the money and we need to manage it. Otherwise, it will manage us. We want to get to a point in our financial lives where we can pay our credit card balances off every month, pay cash to replace a dead refrigerator, and take that spontaneous long weekend trip without feeling guilty about how much we spend on it. A budget is a useful tool for that. Here are some options. After choosing the right plan for us, we need to take into account expenses that may be hiding in plain sight.

Let’s begin by recalling the conspicuous items a budget should include (along with a few examples):

Food, clothing, and shelter for the entire family
Childcare
Utilities (electricity, gas, water, sewage, trash removal, recycling removal, cell phone (including data), internet, cable tv)
Transportation (gas, oil changes, car loan, repairs, insurance, registration, car wash, parking, tolls, roadside assistance, public transportation, ride-hailing)
Medical Copays for the entire family (office visits, dentist visits, prescriptions, dermatologist visits, eye exams, lab work, therapists, urgent care)
Minimum monthly debt payments (student loans, credit cards)
Savings both short term and long term (emergency fund, vacation, children’s college, retirement)

Whew! Okay. Breathe.

Now, here are some items that may not occur to us when we are budgeting, but should (along with a few examples):

Haircuts for the entire family
Pets (grooming, veterinarian visits, medication, accessories (leashes, waste bags, cat litter, sweaters), food, boarding, toys)
Subscriptions (Netflix, Box subscriptions, Spotify, Playstation Plus, Amazon Prime)
Self-care
Property taxes
HOA fees
Makeup
School (supplies, pictures, private school uniforms, sports (including uniforms, participation fees, and equipment), band (including uniforms, participation fees, and instruments), teacher gifts, fundraisers, field trips, enrollment fees)
Lawn care (mowing, weed killing, landscaping, pest control)
Coffee and/or Fast Food and/or happy hour
Out-of-town guests (if they are staying with you, you are using more water, electricity, food, transportation, entertainment)
Physical fitness (home equipment (weights, treadmill, stationary bike) memberships to gym, yoga studio, classes)
Bank account fees (overdrafts, transfers, low account balances) if this is a significant expense for you, you might consider taking your banking to a credit union
Gifts (holidays, birthdays, anniversaries, graduations, Mother’s Day, Father’s Day)
Dues (union, fraternity/sorority, professional organizations, licenses, certifications, continuing education credits)
Charitable contributions
Software/Apps

How much we spend on these items is very personal. We also have to take our spouse’s needs, wants, and opinions into consideration. No one wants to feel financially deprived. On the other hand, no one wants to lie awake at night worrying about how we’re going to pay the bills, either. This shutting down of the economy has gone on so long that we are now in the second wave of layoffs. Some companies who managed to avoid furloughing workers, now have to ask their employees to take pay cuts or be laid off or both. When so many have lost their jobs, and those who didn’t feel overworked from home, (or tense on the front lines) forgotten budget expenses are unpleasant surprises.

Are there items that should be on this list that I missed? Please share them in the comments section.

Ruling Your Budget

One of the bright spots in this Coronapocalypse is our daughter FaceTiming my husband and me more than usual. One conversation turned to people we knew who’d lost their jobs because of the pandemic and this lead to a discussion of money. She had big questions: Was our savings still intact? Should she keep investing in her 401(k)? If so, how much? How much money does a car cost? Budgeting is very personal. It can also be confusing, tedious, and overwhelming. My husband and I use an 80/10/10 rule (live on 80% of our income, save 10%, give 10%), but there are a ton of theories out there.

Before deciding on which plan was right for us, we needed to know what our income is and what our expenses are. I’ve never met a spreadsheet I didn’t like, so I populated one with all of our expenses. Since we mostly pay with a credit or debit card, they were easy to find; especially the monthly bills. I had to search the record for an entire year because there are expenses we pay annually (e.g., renter’s insurance), and those we pay twice a year (e.g., car insurance). The expenses we paid in cash (e.g., parking), I had to estimate. Then I categorized our expenses according to need (e.g., the utilities are a necessary expense, the Disney+ subscription is not). Having access to this big picture is important because every budgeting theory I’ve researched has a savings component. We usually have to divert money from non-essential expenses in order to save it. Budgeting rules are expressed in percentages instead of dollars so we can scale them as our incomes fluctuate. I’m defining income as the amount on our paychecks, not the amount on our W-2s. After some research, here are the top three budgeting rules I found.

The 70/30 Rule

Invented by Jim Rohn, this plan suggests dividing personal net income into four buckets: 70% to pay living expenses; and 10% each going toward active investing (e.g., a savings account), passive investing (e.g., a 401(k)), and giving (charitable contributions). Pros: It’s easy to remember. Cons: It’s hard to do. Here is a good explanation.

The 70/20/10 Rule

This strategy proposes spending 70% of income on expenses, and setting aside 20% for savings (or debt), and 10% for giving. We should be realistic about paying off debt. I wouldn’t deprive myself of vacations for 30 years to pay off my mortgage, but I did take a part-time job (in addition to my full-time job) to pay off my car. Pros: This works if we have an emergency fund and little debt. Cons: 20% is a lot of income to save. Here is a good explanation.

The 50/20/30 Rule

This approach allocates 50% of income to paying expenses, 20% to debt, savings, or investments; and 30% to things we want (e.g., these can be anything from fast food every Friday to a Nintendo Switch). Pros: It’s a good plan for people new to budgeting. Cons: It’s hard to do when budgeting for a family. Here is a good explanation.

Do you follow a budgeting rule I didn’t highlight? Please share in the comments section.

Stimulus Reality Check

Photo by Vladislav Reshetnyak from Pexels

Many of us received money from the US government through the CARES Act. What should we do with it? For those who lost their jobs, it’s obvious. But for those still working, not so much. Just because we have a job now, doesn’t mean we’ll have it tomorrow. The longer physical distancing is imposed, the more of us could lose our jobs (the forecast for April was 20%). Then there are those whose jobs are considered essential and the paychecks come as usual. With all this uncertainty, what is the wisest thing to do the money?

The Obvious

If we’ve lost our jobs or been furloughed thanks to COVID-19, the stimulus money can go for what the government intended it to buy. Necessities like paying bills (mortgage (or rent), utilities, medical, etc.), buying food, diapers, cleaning supplies, face masks, gloves, cat litter, or dog toys (Our fur babies are in quarantine too, ya know!) is the reason the U.S. Senate released these funds. Let’s use them to buy time to find an alternate (hopefully temporary) income.

The Not-so Obvious

If our jobs are in jeopardy thanks to COVID-19, the stimulus money can go for things that will give us peace of mind. If we owe federal, state, and/or local taxes, we can send the money back by July 15 (that’s when our 2019 taxes are now due). If we have debt like student loans, car loans, or credit card debt, the stimulus money can make a dent in these bills. If we aren’t carrying debt, stimulus money would make a good emergency fund or seed money for an I-lost-my-job fund (3-6 months of expenses).

The Not-at-all Obvious

If our jobs are essential and our income hasn’t decreased thanks to COVID-19, the stimulus money can go for buying our futures. We can add it to (or start up) an IRA. If we’re comfortable with a bit of gambling, this is a good time to invest in the stock market. It would be wise to engage a financial advisor (ask friends for recommendations) or at least read this. Or, we can choose to be generous with the extra money. Here is a resource to search for reputable charities to support. Also, we can use the money to support local small businesses. The big chains like Domino’s, Dunkin’, and Don Pedro’s will survive, but our favorite Mom and Pop owned pizzerias, doughnut shops, and Mexican restaurants may not. We can order take out or buy gift cards. Know a local home improvement company still open because they are an essential business? Now may be a good time to add that deck (or something else on the house’s exterior). Here is a resource for the Dayton, OH area.

If we choose to save the money now, we’ll spend it eventually, so there’s no wrong way to use our stimulus checks. Please share how you’re using yours in the comments section.

Battered Budgets

The COVID-19 pandemic has the world at HPCON C. It’s assaulting every aspect of our lives especially our finances. Do NOT panic. Since the pandemic has blown up our budgets, we’re forced to take a long hard look at our expenses and ruthlessly cut out what isn’t necessary for survival. We’ll feel better if we take control and devise a plan. Let’s start by figuring out what our resources are and what we can do to bring in cash fast.

Do Something

Did we lose our jobs? Apply for unemployment ASAP. Benefits vary by state, most states have increased them for job loss due to COVID-19, and now they provide for the self-employed.
The good news is companies are hiring. The bad news is probably not for the positions we want. When this is over our willingness to pitch in during a crisis can help us stand out to hiring managers and get us promoted faster.
Our inboxes are overflowing with emails from our banks, utilities, and services offering safety nets. Are our banks deferring mortgages and loan payments? Are utilities assuring us they won’t cut off our electricity? Is satellite radio offering free entertainment? Let’s take advantage of the relief so we can temporarily divert funds to basics like diapers and formula.

Don’t do Anything

Let’s not turn to Amazon for retail therapy. We don’t need new clothes to couch surf.
It’s tempting to withdraw money from our 401ks in this emergency, but let’s resist the temptation. We’d not only have to play catch up paying it back, but there’s a 10% penalty for early withdrawal and we’d have to pay taxes on it. That’s three strikes.

Remember the Accounts we Usually Forget

Need healthcare? Let’s be sure to pay for it with our HSAs. Here’s a list of acceptable things on which to spend HSA funds.
The due date to file our tax returns is now July 15, but if we’re getting money back, let’s file now.
Do you have a cash back credit card? We have one that gives us a percentage back when we use it to purchase gas, groceries, or at restaurants. So we do because those are all things we’re still using during the Coronapocalypse.

Live Simply

How many streaming services (Netflix, Hulu, Disney +) do we really need?
While in place, we can clean our own shelters (cancel the cleaning service), cook our own meals (stop DoorDashing), and use the library’s online app for entertainment (no buying books, music, movies, etc.)
Let’s look at our monthly subscriptions (e.g., Stitch Fix, Blue Apron, Pickles Every Month Club). We probably don’t need most of them (or maybe any of them) right now.

Be Kind

Does someone owe us money? Now is not the time to collect.
Do we know someone who lost his job? Hyping him on our social media platforms and reaching out to people in our networks who are hiring doesn’t cost us money.

What are some adjustments you’ve made to your budget to get through COVID-19?

Financial Fidelity

Before we marry we discuss money: Am I a saver? Are you a spender? How much income do we need to live comfortably? But after a year or so, we conveniently forget these well intended discussions because life happens. We discussed what we’d do in a perfect world, but we live in an imperfect one. We can’t predict the future and we change our minds. Since opposites attract, it’s much more likely we have very different attitudes toward money; mostly thanks to the way we were raised and how our parents managed it. We can’t agree to terms at the beginning of the marriage and not ever talk about money again. Finances are a recurring conversation.

Listen

We need to set a limit we both consider large and not spend over that amount without discussing it with our spouses. When our partner comes to us wanting to make an expensive purchase, we shouldn’t immediately say no. We should listen to why they want to buy. It’s rarely about the purchase. It’s about how the purchase will make them feel.

Boundaries

Pinching pennies too hard is as harmful to our relationships as spending too much on luxury items. Whether it’s: living debt free, having an emergency fund, tuition saved, and building retirement funds, or two vacations per year, luxury car, designer clothes, eating out every week, and monthly concert tickets; compromise is key. You want a Jaguar, but a Honda will get you to work. He wants a $2000 emergency fund, but $1000 will suffice. It helps to quantify both spending and saving. No one wants to feel deprived.

Transparency

Speaking of not feeling deprived, we need to agree to set aside a bit of disposable income we’re free to spend on ourselves without obtaining permission from our mates. These are not secret accounts. We should not hide what we do with money. It’s lying and will cause us to break our spouse’s trust. It’s cheating, much like being sexually unfaithful is cheating, and is easily revealed. Our transactions are all tracked and available online (but that’s a whole ‘nuther post). Each partner should keep an eye on the joint finances. If we have separate accounts, we should make information on those accounts available to our spouses (e.g. ask if they want to see the monthly statement; not necessarily give them access to the funds).

The whole two-becoming-one thing is a push and pull of give and take to make a whole new third identity out of two people. Sometimes we want to do what we want to do and we don’t want our spouse to have a vote in the decision. But since the traditional wedding vows say, “for richer or for poorer,” when our behavior impacts that status, we have to inform our mate. It’s no longer a matter of money, it’s a matter of trust.

How do you and your spouse compromise on money decisions? Please share in the comments section.

Come Together

Photo by John Guccione www.advergroup.com from Pexels

Spendthrift loves Cheapskate

When couples argue over finances, money is almost never the real problem. It’s a symptom of the real problem. We learn about money as children. We didn’t analyze our parents’ bank statements when we were 10 years old, but we did experience where their money went. Did we live paycheck to paycheck? Did we go to Disney World every year? Did we donate to charitable organizations? If we got a bike for Christmas, we knew we had money. If the heat got turned off at Christmas, we knew we didn’t. These experiences influence our relationship with money. It’s common for couples to have vastly different opinions regarding money, while simultaneously assuming everyone else’s attitude toward it is the same as ours. Saver marries Spender oblivious our spouse’s financial philosophy will quickly drive us crazy, but couples overcome financial differences every day. As with most things in life, it’s all in the approach.

We Need to Talk

Saver and Spender should talk about money priorities at a time that is good for both and in a relaxed setting. We come to this date with a list of what is important to us to both spend money on and save money for. First, we figure out how much money we each make every month. Next, we go through the monthly bills (e.g., mortgage/rent, utilities, internet, phone, gas, groceries, etc.) and see how much we have to spend on these fixed expenses. Ideally, what we have to spend is less than what we make (If not, that’s a whole ‘nuther blog post).

The difference in those two figures is disposable income. This is the money we have to talk about. Does Saver like putting money in a savings account? Does Spender like to eat out? Agree on monthly limits for both. We also need to agree on an amount each can spend without the other’s blessing and we should set parameters on what qualifies as a big purchase (e.g., a car). The goal is for Saver to feel secure and Spender to not feel confined.

For additional comfort and freedom, we can open separate accounts in addition to our joint account. The joint account is for bill paying and each spouse can contribute proportional to our income. We define what purchases qualify as household expenses (e.g., child care) and pay those out of the joint account. Discretionary spending comes from the individual accounts.

We consider debt. How much are we comfortable with (e.g., credit card debt)? What are we willing to go in debt for (e.g., our children’s education)?

We ought to discuss saving and investment goals. Do we want to buy a house? Go on a month-long vacation? Retire early?

The more couples talk about money (how we spend it and why), the easier it gets. We aren’t just building our finances, we’re building our trust in each other.

How do you and your spouse deal with money issues? Please share in the comments section.