Minding Your Money 360 - Quick tips to manage your money for success

I get asked a lot of money questions a frequent question I get is do I really need a financial plan?

Well hey, my background is in financial planning so you can probably guess what my answer is. But let’s look at it from a different perspective. It’s early Saturday morning and it’s finally vacation time so the Martin family rushes out to the car, suitcases in hand and hurriedly packs the car. Then Mr Martin begins to back out of the driveway he suddenly looks at Mrs Martin and she looks at him and they both ask with a puzzled look on their faces, “Where are we going?”

Now this didn’t really happen. No vacation was harmed but can you imagine that…No one would dream of setting out on a family vacation without knowing where they’re going, how they’re going to get there, where they’re going to stay, things they want to see and do and determining if they have the money to pay for it all or credit cards.

So back to my original question – do you need a financial plan? Of course you do. Your whole life, where you are going, how you will get there and how you will pay for it is infinitely more important than one vacation. Yet most people spend more time planning their vacation than they do planning their life and their future.

Financial plans don’t have to be fancy smancy (a technical term) or be the size of a book but they should be written because even though it may not be a big feat to keep your vacation plan in your head, keeping your life plan there and making modifications over time can be a little more difficult. There are many resources you can use in developing a financial plan, including financial planners, some brokers and there are templates on the internet if your prefer to write your own. And, that’s one of things we’ll do in my upcoming Money Makeover Challenge in June. To get more information, visit www.psworth.com and click on the red button on the home page.

And, that’s the minute for today. Did you miss a minute? You can listen to them all again, along with my notes and resources at www.mindingyourmoney.org.

Thanks for listening and as always remember that minding your money really is the path to a richer life!

It's Monday and I have a question. And it’s a question that I received from a listener. As you will recall, our word of the week, this past week was asset allocation and Gary asked so what’s the difference between asset allocation and diversification or are they the same things?

And that’s a really good question because they sort of are the same thing but not exactly. Asset allocation we said was how you divide your portfolio into the three basic categories of stocks, bonds and cash or cash equivalents. Diversification is really the next step in the process. So if I have decided that I want to put 60% of my portfolio in stocks, the next question becomes which stocks? I have tons of choices and that’s where diversification comes in. If I decide to put it all in my company stock then I meet my asset allocation but I am not diversified – essentially all of my eggs or 60% in this case are in one basket and if that stock goes down, 60% of my portfolio goes down. On the other hand, if I spread that 60% out across 5 or 6 stocks or mutual funds or index funds (my favorites) then there is the potential for some to be up when others are down so I don’t have such a bumpy ride and I lower my risk.

So as I said they are kind of the same thing but not exactly. So here’s your task for the week: Take a look at your investments and see how they are allocated. First, check to see if you have some in each of the three basic categories: stocks, bonds and cash. Then check to see if they are diversified in that category. In other words, do you have those categories broken down even further into subcategories? If you see some problem areas, make a plan to review and make revisions so that your investments are allocated properly and diversified.

And, that’s the minute for today. June is coming and so is my money makeover challenge. If you want to get your money life in order this could be the ticket for you. Visit www.psworth.com and click on work with Patricia for more info.

Thanks for listening and as always remember that minding your money really is the path to a richer life!

It’s Friday and time for our word of the week –the word this week is Asset Allocation.

I chose asset allocation because it is so important to how well your assets perform over time. Asset allocation is the process of choosing what proportion of your portfolio you’d like to dedicate to various asset classes. The three investment asset classes include stocks, bonds, and cash or cash equivalents (like certificates of deposit), and each of these reacts differently to market cycles and economic conditions.

This decision of how to allocate the assets in your portfolio should be based on your goals, your personal risk tolerance and your time horizon. Stocks, for instance, have the potential to provide strong growth over time, but may also be more volatile that is, they tend to go up and down a lot. Bonds, on the other hand, tend to have slower growth, and are generally perceived to have less risk. So by diversifying your portfolio across multiple asset classes, you get to spread out risk while taking advantage of growth.

Our word of the week asset allocation. There are many who believe that your asset allocation is as important, if not more important than the actual investments you choose. If that’s true, maybe we’ve been looking at this whole investment thing all wrong.

And that’s the minute for today. Like the Minute? Subscribe and leave us a review on your favorite site so you never miss an episode.

Thanks for listening and as always remember that minding your money really is the path to a richer life!

My new book about divorce is out and lots of people are dodging me because they are afraid that divorce might be contagious but worry it’s not. But what is contagious and what can kill a marriage in a hurry is not talking about money or better yet, financial infidelity.  So what is financial infidelity? Well, it’s essentially keeping money secrets from your significant other. You may actually be doing this without really realizing it or the harm that it can do your relationship.

Financial infidelity can range from hiding an occasional purchase from your partner to secretly gambling away your retirement investments. In either case, money deceptions, no matter how small or how well rationalized, can create irreparable cracks in your relationship.

So why do we commit financial infidelity? Some of the common reasons include:

Feeling that you are entitled to get the things you want or

Feeling that you’re not entitled to buy things you want so you lie about it

To avoid a fight because every time they talk about money it turns into an argument

And then there’s revenge or payback

Because financial infidelity can not only can ruin your relationship, but your bank account as well, many people think it’s actually more harmful than sexual infidelity. So how can you keep from falling into the financial infidelity trap? Here are three basic strategies that can certainly help:

Have regular money discussions – don’t wait for things to bubble up, be proactive.

Have a ‘mad money’ allowance – this is money that you can spend any way you like so you don’t have to hide the things you purchase or feel guilty about them

Manage you money together. It’s okay to delegate tasks, but check in on occasion to make sure everything is okay – or in the words of Ronal Reagan, trust but verify.

Money is the leading cause of divorce but it is avoidable if you just take the time to talk about it.

And, that’s the minute for today. My new book is finally out!! Yeah!! It’s called How to Get Divorced Without Losing Your Blouse. Get your copy on my website (www.psworth.com/shop), Amazon or other bookstore. It pulls back the curtain on the process so you know what to expect and can be better prepared. And, it is one place where you really want to mind your money.

Thanks for listening and as always remember that minding your money really is the path to a richer life!

What motivates you? Why do you do it? Why do you get up each day and if you live in some place like Atlanta fight traffic back and forth to get to a job? And, I don’t want you to give some instant answer like for the money. But the deeper reason that drives you.

So today, when you get a moment, stop and think about what really motivates you – what really drives you? And, then make a note of your answer.

I listened to Elizabeth Warren on Morning Joe this morning and whether you like her or not, she has passion about what she does. I truly believe that what drives her is partly the need or the desire to make a difference and the money is secondary -- it’s a combination of things and I think that is true for most people.

For example, I might say something like I work for money so that I can create a better life for my family but I too want to make an impact or a difference and that’s part of the reason I do the ‘Minute’ each day. So I repeat, what motivates you?

Think about it then make a note and tuck it in your wallet so when things get tough or you have to deal with the not so good side of your job, you can take a peek at it and get back to work. Life is complicated but understanding your why helps simplify it.

And, that’s the minute for today. Like the Minute? If so subscribe and leave us a review on iTunes or your favorite site. I read each and every one of them and 5 stars would be spectacular.                                            

Thanks for listening and as always remember that minding your money really is the path to a richer life!

I an article on money.com by Walter Updegrave titled A Roth IRA Could Be a Worse Choice Than You Think and naturally it caught my attention. I am a great believer in Roth IRAs and I wanted to understand why he would say such a thing.

Well, long story short, whether a Roth IRA or a traditional IRA will net you more money in the future largely depends on how good you are predicting tax rates in the future plus a couple of other factors. But sticking with the tax rates and brackets for now, it turns out that generally, if you end up in a higher tax bracket in retirement than when you made the contribution, you'll have more after-tax dollars with the Roth IRA because you will have paid tax at a lower rate when you put your money into the account and avoided the higher tax rate when you take the money out, since qualified Roth withdrawals aren't taxed.

On the other hand, if you drop into a lower tax rate at retirement, that tends to favor a traditional IRA, since you avoided taxes on your traditional IRA contribution when your tax rate was higher and you'll have paid taxes at a lower rate when you take the money out.

So which one should you choose? Well, it depends. If you believe your tax rate will be higher in retirement than it is now a Roth IRA  may net you more money? However, if you believe your tax rate will be lower, you might do better with a traditional IRA.

And, that’s the minute for today. Did you miss a minute? You can listen to them all again, along with my notes and resources at www.mindingyourmoney.org.

Thanks for listening and as always remember that minding your money really is the path to a richer life!

It's Monday and I have a question. First, Happy May Day! And, my question is this, “what’s in your emergency fund?”

There are some alarming statistics out there that say that most Americans, well most people don’t really have an emergency fund and they are just one-paycheck away from disaster. I think a lot people quite frankly, go wrong because they listen to advisers who say you need 3-6 months of expenses and they say that as something so unattainable that they don’t even try. But what advisors often fail to mention is that you don’t get to that 3-6 month target instantly, it takes time to build it up. So I like to start with something a lot less like $1,000, $500 or even $100.

The key here is just to start where you can and continue to build on it. For example, you can get to $100 by saving just $25 a week and at the end of the year that would be $1,200. And, if you continued just that habit that would be $2,400 at the end of year two and so on, and so on until you get to that magical number that you feel is right for whether it’s 3 months, 6 months or a year. My point is that emergencies are not things that just magically disappear at a certain age – they are always ongoing so saving for them needs to be ongoing and by starting at a point that works for you, it’s so much easier to attain even if it takes a little longer. Also, as you use the funds, replace them as quickly as possible so they are available for the next emergency.

And, that’s the minute for today.  Want more ways to build your emergency fund and what to do with it along the way? If so, check out my May newsletter – it’s available to subscribers. If you haven’t signed up, you can do so by going to my website at www.psworth.com or www.mindingyourmoney.org. then watch your inbox for news and tips to manage your money better.

Thanks for listening and as always remember that minding your money really is the path to a richer life!

It’s Friday and time for our word of the week –the word this week is Durable Power of Attorney.

I chose durable power of attorney because if something happens to you and you are unable to take care of your own financial and/or health care – a durable power of attorney or POA allows you to appoint someone to do that for you.

Just so there is no confusion there are actually two kinds of durable POA’s – one for your finances and one for health care so if you get one, be sure it specifically spells out what it covers and just to be on the safe side I would recommend that you get both.

So what’s the difference between a regular POA and a durable POA? A regular POA ends when you become incapacitated but a durable POA does not.

Our word of the week durable power of attorney. It’s one of the most important documents for anyone over 18. Without one, you can’t manage any financial affairs for any family member over age 18 even if they are your baby.

And that’s the minute for today. Like the Minute? Subscribe and leave us a review on your favorite site so you never miss an episode.

Thanks for listening and as always remember that minding your money really is the path to a richer life!

I don’t know about you but I find all of this talk about deregulating the financial industry very troubling. When all is said and done, it will be legal for your advisors, brokers, etc. to put their interests   though you are paying them for their advice and we will no longer have a consumer protection agency to help when things get way out of hand.

So what are you going to do about it? Well, we can whine and complain but that and 25 cents won’t even get you a cup of coffee or you can do something that you most likely should have done some time ago and that is to learn how to take charge of your money. That means managing what comes in and what goes out as well as learning how investments work, how to determine the fees you are paying and the right questions to ask to ensure that your advisor, if you have one, is really working for you. Deregulation is your opportunity to become savvy in all aspects of your money.

If you haven’t already joined the Minding Your Money Movement, consider doing so because we are going to start having a series of monthly calls that dive deep into different money topics. The calls will be free, but if you’re not a member, you might miss it. You can sign up by visiting my website at www.psworth.com or www.mindingyourmoney.org

Minding your money is more important than ever because no one will look out for you if you don’t.

And, that’s the minute for today.

Thanks for listening and as always remember that minding your money really is the path to a richer life!

As promised, I want to pick up where I left off yesterday with the right way to start to get your money life under control and if you want to get out of debt without a lot of drama. Well, maybe there will be some drama, but it will be because you caused it.

If you haven’t already guessed, I’m talking about creating a budget. The key here is to begin to think about you finances like a business. No business worth its salt would ever think of running without a budget and neither should you. Now it doesn’t have to be something that is so formal that you have to put on a suit and tie, but it should be structured enough so that it allows you to make informed decisions like where you want your money to go before you actually spend it.

Once you have a budget so that you know what you have available to put towards paying off your debts, the next big thing is to figure out exactly what you owe. This in and of itself is enough to make some people stop spending much like the person who gets on the scales to weigh themselves for the first time and nearly faints. This can be eye-opening to say the least. The next big step is to make a plan to get rid of your debts by attacking them one at a time to create a snowball effect in paying them off.

And there you have it. A way to solve your debt problems once and for all. And, that’s the minute for today. Like the Minute? If so subscribe and leave us a review on iTunes or your favorite site. I read each and every one of them and 5 stars would be spectacular.                                                   

Thanks for listening and as always remember that minding your money really is the path to a richer life!