Category: Family Finances

Your journey as an employee in tech is about more than just you. Your whole family can thrive financially. What should you consider for setting them up for success?

Should You Buy a Vacation Home? Financial Considerations

First off – CONGRATULATIONS! Considering buying a vacation home means you feel comfortable financially and that is a wonderful feeling.

Now, before you start browsing listings and envisioning lazy days by the beach, it’s important to carefully consider whether purchasing a vacation home aligns with your financial goals.

Do you have your financial foundation in place?
What will the vacation home bring to your life? What will it take away?
Is this an investment or a pure cost?
What can I afford?

We like to think of finances in a hierarchy.

First, you need a strong financial foundation to know you are secure and can meet your basic needs of shelter, food, etc.

Then, you can focus on financial flexibility. Financial flexibility is taking a big breath, centering your mind, and focusing on what your most fulfilling life is. Then, you focus on aligning your values with your money.

This may mean focusing on your kids – private school, college funding, getting your time back to spend making memories with them.

And/or it may mean more time flexibility – leaning into travel, sabbaticals, or a different career path.

For many of our clients, this is where thinking about a vacation property comes into play.

What do you feel you will enjoy most from owning a vacation home?

Often I hear:

…a place to gather family,

…to make memories with my kids,

…a place to ‘just’ be and not be subject to the city hustle, etc.

These beautiful visions bring my clients peace. And we want to keep it that way by exploring some of the key factors to make an informed decision.

Evaluating your Finances for a Vacation Home

First and foremost, evaluate your finances. Can you afford to purchase a vacation home without compromising your other financial goals?

Do you have a good emergency reserve in place?
Are you on track for college funding?
Have you already maxed out your company benefits and retirement accounts?
What additional cash flow can you put towards this investment on an ongoing basis?
Are there any other large expenses coming down the road in the near future?

Next, consider the total cost of owning a vacation home. This includes not only the purchase price but also ongoing expenses in maintaining it. Property taxes, homeowners insurance, maintenance, utilities, and possibly association fees.

Will you get a mortgage on the property? What is your total debt to income ratio now? Would you qualify for it based on your current finances? Vacation home properties aren’t the same as primary homes. They generally experience higher interest rates and require larger down payments as second homes.

If you are looking at a beach home or ranch property, the rate of increasing costs may also be in question. How much has the homeowners insurance and association fees gone up annually? Many beach home communities are finding their insurance rates skyrocket at 40% a year the last few years. This is something you want to know for future planning.

Another consideration beyond the home is how are you getting there? Will you be able to drive or do you need to fly to get there? Fuel and wear-and-tear on your car while driving to and from the vacation home and a larger dining out budget may factor into your decision.

What kind of activities do you plan on pursuing there? Does this lead to a membership at a ski lodge or a boat purchase?

What may feel like buying a vacation home can lead to buying a vacation lifestyle. Know the all in cost.

Evaluating the Investment Opportunity of a Vacation Home

To lessen the overall cost, could it be an investment property? If you are considering renting out the property, you will need to add a rental income estimate to your calculation. What is thee rental demand in the area? Are there seasonal fluctuation?

Renting out the home can often lessen the total price tag of a vacation home but can lead to more hassle if you aren’t ready for that step.

Will you offer the property as a short term rental? What will be your minimum stay requirement?
How will you manage the property? Will you hire a property manager or will you personally manage it?
Will you give up holidays for higher rental income periods? When will you use it?

Once you estimate the vacation home revenue and costs, it’s time to dive deeper. Now, it’s time to dive into what your return on investment (ROI) and cash-on-cash return would be for the investment property. There are many real estate investment calculators available. The hardest part is deciding what numbers to put into the calculator 🙂

To learn more about the investment property side of real estate, we recommend checking out Bigger Pockets, the Real Estate Rookie Podcast, and Wharton school’s certificate program (if you are looking to make this your encore career).

What Can YOU Afford?

Now that you’ve evaluated your personal finances and the investment opportunity, it’s time to ask yourself what you are willing to do in trade-offs…

…Knowing this, what is possible now?

Depending on the area, I’ve calculated the annual cost for clients (even with rental income) to be $50,000+ for the pleasure of owning the home.

What would it cost to rent an AirBnB in the same area? Could you come up with an even nicer travel tradition for your family for less than $50,000?

Additionally, think about your long-term plans and lifestyle preferences. Are you committed to returning to the same vacation spot year after year? Or do you prefer the flexibility of exploring different destinations?

If you have small kids, what are your hopes for them growing up? Many kids activities can take over weekends with competitions and practice.

For our clients, my favorite YES BUY IT! moments are when we create a P&L and look at the return on investment of renting the property out less than half the year, and using it for the remainder of time.

If the ROI and cash-on-cash return are still positive at that level, I know the property can function as an investment property in a worse case scenario.

Buying a vacation home can be a rewarding investment and lifestyle choice, but it’s essential to carefully weigh the financial considerations and ensure it aligns with your overall financial plan.

The above discussion is for informational purposes only. Recommendations are of a general nature, not based on knowledge of any individual’s specific needs or circumstances, and there is no intent to provide individual investment advisory, supervisory or management services.

What is the maximum 529 contribution? Should I fully fund it?

What is the maximum 529 contribution? This question can actually mean two separate things.

What is the annual maximum contribution I can make before gift taxes apply?
What is the maximum contribution I can make in total to my 529 plan?
What should I fund for a 529 plan for my child(ren)?

Let’s break these questions down…

Annual Maximum 529 Contribution

When you hear ‘maximum 529 plan contribution’, this usually refers to the annual gift tax exclusion. A 529 contribution is considered a gift to another person (i.e. your child). Gifts to other individuals above a certain threshold are taxable events in the United States.

For the 2024 tax year, gift taxes may apply for gifts above $18,000 per individual (or $36,000 for married couples filing jointly).

This applies to 529 contributions as well. You can contribute up to $18,000 each year, per child, without having to pay gift tax as of 2024. This amount can change annually based on inflation.

On the flip side, 529 contributions may earn you a tax deduction or tax credit in certain states. Generally, to obtain the tax deduction or credit, you must use the 529 plan designated by the state. The benefit can range from $80 to $1,200+ in a reduction of state taxes. Find out whether your state offers a benefit HERE.

If you are willing to file a Gift Tax Return (Form 709), you can stretch this contribution even further in a year.

The 5-Year Election for 529 Contributions

If you are going through an IPO or a large liquidation event in one year, you may decide to make a ‘5 year election’ to superfund your 529 plan.

This means you can contribute up to $90,000 per individual (or $180,000 for married couples filing jointly) to a 529 plan in a year. The catch is you cannot make further contributions to the 529 plan in the following 4 years and you must file a Gift Tax Return.

The benefit of making the 5 year election is mostly around time. You fund the 529 plan now and allow more time for the investments to grow. This can be a great way to ‘set it and forget it’.

Total Maximum Contribution to a 529 Plan

So if I can technically make a 529 plan contribution each year up to $36,000 for married filing jointly couples and I start the day my child is born, I could actually put in $648,000 by the time they graduate from high school???

Nope!

529 plan total contribution limits range from $269,000 to $570,000, depending on the state. This limit really boils down to what the state believes is a good estimate for attending school. North Dakota believes this to be $269,000 while Utah says this is $560,000.

Where you open your 529 plan should account for tax benefits, plan costs, investment choices, and how much you plan to contribute to it.

Funding a 529 plan for your child

Whether or not you should fund your 529 account to the max depends on a number of factors, including your income, your savings goals, and your child’s age. Here are some things to consider:

Your income: If you are in a low tax bracket and expect to stay there, you may be eligible for financial aid through the FAFSA process. Get to know the components of how your ‘expected family contribution’ (EFC) is calculated to know how much would be expected of you in today’s dollars. If you are in a higher tax bracket or you’ve accumulated $2 million+ in investments, you will need to pay for the majority of your child’s college expenses.
Your savings goals: Prioritize retirement savings and high-interest rate debt first. Put your own oxygen mask on first before helping a child! Then, if you feel comfortable you are on track financially, then consider what 529 contributions you can make.
Your child’s age: If your child is young, you have more time to allow the 529 contribution to grow. This may mean a few years of maximum annual contributions will go a long way. However, if your child is older, you may need to contribute each year in order to save enough money. If your child is already in high school, you may want to consider whether a 529 plan is still the best option for you.
Your child’s college plans: If your child is likely to attend a state school, you may not need to save as much as if they are planning to attend a private school. This is because state schools are typically less expensive than private schools.

The 529 conundrum

The best time to fund a 529 plan is when your child is still under age 3 for the largest potential growth… but you should only fund it based on what kind of college you expect them to attend… What does that mean I should do?

Ultimately, the decision of how much to contribute to your 529 account is a personal one. There is no right or wrong answer.

At SeedSafe Financial, we make sure our clients are on track financially. Then, we balance retirement dreams, expense expectations, and the desire to set their family up for success. This means each family may have a different plan:

some may contribute $36,000 for a few years and stop,
others may contribute $8,000 a year until high school,
and a few will make a 5 year election and superfund a 529 plan to the max

The important piece of this is to know what you can afford to do that doesn’t put your own long term safety at risk.

Why should I consider contributing the total maximum to a 529 plan?

If you are in a good place financially, making $1M+ a year, or have a net worth of $10M+, there is a case to consider contributing the total maximum allowed.

It’s called the ‘multigenerational’ 529 plan strategy (or Dynasty 529 plan).

This is where you use a single 529 plan account to support education for multiple individuals. You start by creating the plan for your child and contribute up to the maximum $560,000 over the first 15 years.

Then, you utilize the funds for college expenses for your child (as intended). However, there will most likely be quite a bit left as the investments continue to grow. What happens to this ‘leftover’ money?

The IRS allows for a beneficiary of a 529 plan to be changed to “a member of the family” of the beneficiary. This means you could change the beneficiary from your child to your grandchild in the future.

The goal is for the investments to continue to grow over long periods of time – allowing the gains to compound. Then, when each future generation goes to college, they are able to use those gains and continue the line of funding. This feels like magic.

And with all magic, the IRS wants to know it isn’t being abused. Changing the beneficiary may still trigger the gift tax rules (remember those from the beginning of the article?). However, another 5-year election or part of the lifetime gift exclusion could be used to help offset this tax cost. (Work with your tax advisor to make sure this is correctly reported).

That is a lot to think about.

Remember how I said there is no right or wrong answer? Consider your individual circumstances and make the decision that is best for you and your family.

Some tips we suggest for all 529 plans:

Start early: The sooner you start saving, the more time your money has to grow in the account. Even if you can only contribute a small amount each month, it will add up over time.
Set up a regular contribution schedule: One of the best ways to save for college is to set up a regular contribution schedule. This will help you stay on track and reach your savings goal. You may decide to use ESPP funds on a quarterly basis, RSUs as they vest, or from your paycheck. Whatever method you choose, make it consistent.
Take advantage of gifts: Let family know you’ve set up the 529 plan and send them a gift link. You may be pleasantly surprised at who all wants to help fund your child’s education 🙂
Get professional advice: If you are not sure how much to contribute or which type of 529 plan is right for you, be sure to get professional advice from a financial advisor.

If you don’t have a financial advisor, consider scheduling some time to chat with us.

Did you enjoy this article and are looking for other ways to set your child up for financial success? Check out our blog post HERE.

How to Set Your Child up for Financial Success

As you continue on your journey towards financial freedom, you may start to think about the legacy you leave behind. For many of our clients, this becomes a crucial conversation at around $5 million in investments. Security for themselves is no longer their main concern. Now, it is about making the right moves to have a lasting impact on their family.

How do you set your child up for financial success? What can you do now, to change their relationship with money and help them make better decisions?

Money is emotional, logical, and takes time to understand. Your approach should be similar and provide them with the right money mindset.

The best ways to set your child up for financial success are to teach money lessons around:

What is money? How is it used?
What do I value? How can I use money to support those values?
Create a framework for using money towards what you want in life

These lessons may look different at each age. We are big Montessori followers in my home, so we group the lessons based on the three planes of development: age 0-6, 6-12, 12-18.

Setting your child up for financial success: Age 0-3

From birth until 3 years old, the #1 thing you can do for your child is to model the behavior you seek. What is your own relationship with money? This is the time for you to go through your own money stories and understand why you view money the way you do.

To lead by example, you will need to ask yourself:

What does money mean to me?

What do I value in my life?

How do I use money to support those values?

Do I spend money in ways that do not align with my values?

From age 0 to 3, if you find you struggle with these questions, it may affect your ability to lead your child down a financially successful path. This is the time to learn more about your own money mindset and to set a new course to mentor your child. I love Morgan Housel’s Psychology of Money, Thomas Stanley’s The Millionaire Nextdoor, and John Bogle’s The Little Book of Common Sense Investing to start. These look at mindset and simple ways to start investing.

You should also ask, how do I want to support my child into adulthood? If you want to pay for their college education, a down payment on a home, etc. then the best time to start saving and investing for these goals is now 🙂

Setting your child up for financial success: Age 3-6

At age 3, we can begin to introduce money to our children’s experiences and concrete use of dollar bills and coins.

Name the ways we pay for things: dollars, quarters, checks, credit cards, etc.

Name the ways we make money: “I provide value to X by doing Y, and they pay me money for the work I do. I then use that money to buy what we need (and want) for our family.”

When you are at the store, include your child in the checkout process and help them give the cashier coins and dollars. We are building the muscle that money is used to buy the things we want and need.

If you buy your child a toy, go out to dinner together, or enjoy another experience that costs money, ask them some questions about how they value it.

Think of this as a ‘happiness test’. One of my favorite happiness researchers, Elizabeth Dunn, speaks of an example in her book, Happy Money: The Science of Happier Spending. I will butcher the example here, but the main point was when looking at a car purchase, the most happiness felt was before purchase. It’s about dreaming and the ideal – less about the reality. The happiest individuals with their car purchase were able to enact many of the wonderful things the car allowed them to do. So dream big with your kids about experiences and items they want to purchase, and then check in.

Keeping this in mind, we will review purchases together with our children:

Day of: How does it feel to have X? What will you do with it?
Week out: How does it feel to have X? Are you using it the way you wanted?
Month out: How does it feel to have X? When did you use it last?

Then, we will talk about the differences in what we felt when we purchased something vs how we value it over time. This often leads to, I have more fun with these toys when I get to play with them for a day or two. How can we borrow X toy instead of buy it and use money on something that made me happy longer term?

Setting your child up for financial success: Age 6-12

At this age, morality and independence become prominent. Children begin to take control of their own learning, so this is an age of supporting them on their journey.

Depending on where their interests lie, you may be able to help them set up to earn their own money. They may participate in a garage sale (to sell their old things), set up a lemonade stand on a hot summer day, or be ready for ‘extra’ chores that you will pay them for.

This is a great time to help them count their money and decide on how to use it. As a family, you may decide your child should have a similar strategy with money that you do.

How do you want to think about using your money towards investing, future wants, and current needs?
When you make $10, how will you allocate it towards those goals?
What is the best way to set up financial accounts based on those goals?

These are small actions that lead to great long term habits. Talk about what you do personally to augment their learning and understanding of the family finances as well.

Savings Strategies for Children

I like to think of this as a ‘hierarchy of financial literacy’.

When spending money, consider beginning with cash so they can feel the inflows and outflows. Younger children thrive on concrete concepts and this can help them better understand the flow of money.
Consider ‘appifying’ spending by finding online tools/games.
If saving for a larger purchase, consider a savings account specifically for the purchase so they can see how close they are to their goal over time. This may be a great time to learn about compounding interest as well.
For investing, consider opening a UTMA account with them and choose how to invest the money together. Note: depending on the size of the account you may run into ‘Kiddie tax’ issues. Please consult with your tax advisor.
As they work more, consider setting up a Roth IRA for long term compounding of investment growth.

Setting your child up for financial success: Age 12-18

The old saying is really true – kids do grow up fast. It’s hard to believe by age 12, children strive for social and economic independence and a sense of control of their life. They are already small adults (tears).

Here, we see children create their own identity and are more socially aware of what peers are doing/what they have. This is when ‘keeping up with the Joneses’ may start.

If you’ve set good financial habits by now, then it is time to start discussing the differences in spending money vs being truly wealthy.

Share the stories from the books I’ve mentioned above. Help them reframe what they see in that light.

This may be time to also discuss debt and leverage with your child. How spending can be augmented by loans and debt, and how this impacts future wealth.

Then, it’s time to discuss credit and how our financial system works in the USA. Being able to start building credit at age 12 is an opportunity for getting a better mortgage or student loan rate in the future.

As college approaches, discussing the value of college and what they want to get out of it. Let them know how much you can contribute and help them think through a budget for spending. There are many studies and helpful analysis tools for college and expert coaches to help.

How to Build your Child’s Credit

There are a few ways to build credit for your child. You can add them to your credit card as an authorized user, you may sign them up for a special debit card, or you may be able to get a secured credit card in their name.

Each of these methods to build credit have pros and cons. Making them an authorized user on your credit card is subject to age restrictions and may only influence their score minimally. If you give them the actual credit card, then spending limits will not be as easily controlled.

Secured credit cards and debit cards may allow your child to have a better impact on their credit score while maintaining more controls.

One card (and app) I’ve played around with is Greenlight. Greenlight is a card and budgeting portal for young adults. It costs around $5/month (their special), and has an entire platform built to help kids save, invest, spend, and build their credit history. There are other platforms as well, and the goal is to find the right one for your family.

Wrap-Up

In the end, there are many ways to set your child up for financial success. The actions you take as a parent to prepare yourself and your child are important. For both of you, the sooner you start, the better!

Ready to learn more? Check out other ways to launch your family:

If you would like guidance in developing your financial strategy to know what you can do to set your family up for financial success, please schedule some time to chat with us.

Year End Planning and Setting Intentions for 2024

Each year we reflect on what went well for the year, what could be better, and how we will improve in the following year. Some of the reflections are financial, some are based on improving quality of life, and others are around giving back to the community.

In my reflection this year, my heart is full of gratitude for the lives we touched at SeedSafe Financial. We partnered with our clients to stay the course towards better finances in 2023, and that’s a big deal to me!

Although 2023 did not include the start of a pandemic, or fumbling through what that means in a ‘new world’, the year had its own challenges. Rising interest rates, layoffs, and a stumbling stock market felt heavy at times and caused many to pause and ask the questions:

How long will this last?

Does this change big financial decisions I want to make?

Where do we go from here?

Each year I hear these questions asked in year end meetings and it reminds me that life is full of unpredictable changes that will test our resolve. The best way to stay the course is through a long term vision, reviewing plans, and creating priorities on an ongoing basis.

Build a long term vision of life

What is your most fulfilling life? What are you doing in your most fulfilled life? How are you feeling? Where do you lean towards in this life?

We often skip right over our life vision and the purpose of money. We may go straight to financial tactics: reading up on investment and tax strategies or the ‘top 5 things to do’. We forget – money is a tool to facilitate a meaningful life.

Money may mean different things to different people – comfort, security, freedom, anxiety. It’s how we use money towards our life vision that makes an outsized impact.

Changes happen every year and our vision can lead us through it. Your vision of your life should be your anchor and color all decisions (financial or not) that come your way.

With a vision of your life and the values you want to lean into, the next step is building financial flexibility towards that vision.

Knowing my long term vision of life, how do I feel about last year?

Work and life ebb and flow – some years you will have more time and energy to focus and some years less energy.

Review your time and energy over the last year. What gave you more energy? What took away energy? How can you bring more energy to your life?

An enlightening exercise, The Wheel of Life, reviews major areas of a fulfilled life and asks you to assess how you are doing in those areas. This can help you think more about what needs attention and time in the coming year and longer term.

As humans, we can (too) easily find ways we want to improve our lives. Sometimes this is for ourselves, but sometimes it is what we ‘think’ we need to be happy. Too often we can end up on the hamster-wheel of life. Few on their deathbed wish they had more money.

One caregiver wrote about the experience of working with those towards the end of life and the regrets they had. In The Top Five Regrets of the Dying, Bronnie Ware writes about the regrets:

1) “I wish I’d had the courage to live a life true to myself, not the life others expected of me.”

2) “I wish I hadn’t worked so hard.”

3) “I wish I’d had the courage to express my feelings.”

4) “I wish I had stayed in touch with my friends.”

5) “I wish I had let myself be happier”

It takes time and energy to live a life true to yourself, surrounded by those you love, and free from the ‘keeping up with the Jones’ attitude.

Where can I lean into this year?

Now that you have your long term vision, reviewed last year and identified where you want to grow towards…what could possibly get in the way? 🙂

What can you make a priority this year? How will you make it a priority? Creating SMART goals rears its head again! If you only have so much time and energy, then how you use it will make the biggest difference.

What can you remove from life that keeps you from a fulfilling life?

What can you lean into towards your most fulfilled life?

Considering your time

Each year I review my calendar and rate the activities and events I was part of. What got me closer to my most fulfilled life? What took away from it?

Knowing this, what can I do now to make next year even better? It may include blocking out more days for creative work or scheduling out friend gatherings. I love to host board game nights so I am penciling in those nights now.

Considering your energy

I am by nature an over-doer. I want to do ‘all the things’ and find energy from a jam packed life, but even I have my limits. What helps build your energy? What takes away from it?

Are there activities that ‘must be done’? Who else can do them?

Often I find our clients come to us because they know finances are important, but finances just are not on their priority list in life…and that’s okay!

If money is stressful, anxiety inducing or just ‘not fun’, why would you put more energy into it? This may be an ideal place to begin to outsource and have a thinking partner that helps with money decisions.

The same may go for cleaning your home or cooking. If you don’t enjoy it and you could use that time towards a more fulfilling life, then what can be done to reduce these activities? For some, this may be buying a smaller home, reducing material things, or hiring a cleaning service.

For those who don’t have time to cook or have no desire to, it may mean hiring a meal prep service or buying ‘ready made’ frozen meals.

Each of us are individuals that deserve to be happier, healthier, and living our most fulfilled life.

If you go through the exercise of envisioning your most fulfilled life and find finances are something you want to change, please schedule a chat with us.

We wish you a beautiful holiday season!

How can you help your parents in an emergency?

Preparing for a Parent Emergency

Each year, our financial advisors launch an ‘Annual Renewal’ with clients. We discuss, what does money allow you to do? What should we focus on for this year? Are there any changes with children, parents, etc that you need help thinking through?

A big theme we saw this year was parents reaching their 70s and the implications of what could happen to them. What would happen if they have an emergency? Where would we even start?

Your parents may have an estate plan (wills, trusts, etc) but do you know anything about it? Who has it? Who is the executor/in charge? What part do you play in it?

An estate plan isn’t fool proof. Beneficiaries still need to be listed. Accounts still may have auto-pays coming from them. There is certainly more to a life than 50+ pages of legalese.

So how do you give your parents – or your partner – a leg up in an emergency?

This is a great question our Paraplanner, Alex Smith, is pondering for our clients and himself. There are so many blogs or kits out there on ‘Legacy Binder’ or ‘Death Letter’ and boil down to similar components:

What you want for your family

Not everything is in an estate plan. Start with your hopes and dreams for your family. Did you create a tangible asset list for your will? If not, consider sharing who you’d like certain items to go to.

Where to go for help

Contact info for lawyer / advisors
Contact info for current employer HR department
What custodians / banks you have accounts with
Lastpass or 1Password account(s)

What needs to be paid

Monthly bills to expect
A list of what is on auto-pay
Loan agreements / statements
Where deposits come from (Pension, Annuity, etc)

The legal jargon aka financial documents

Car title(s)
House deed(s)
Estate plan documents
Powers of attorney
Insurance policies
Copies of keys to any tangible safe drawers/safe deposit boxes

Do you feel like you can start this conversation with your parents? It can be hard, especially if parents do not wish to be a burden on you or are afraid of judgment based on where they are in their life.

How can you make a baby step in the right direction?

Alex recommends reading Mom and Dad, We Need to Talk: How to Have Essential Conversations with Your Parents About Their Finances by Cameron Huddleston

If your parents do not have an estate plan or an advisor, consider gifting them some time with a financial advisor. There are so many great firms available now that can do hourly planning work or project based work. XY Planning Network has a great Find an Advisor portals to review for the right fit.

We are all on a journey. Step by step.

New Year’s Resolutions Suck. Joyful (Money) Habits are Better.

I’m not pessimistic usually, but New Year’s Resolutions are definitely at the top of my list of anti-cool. How in the world am I suppose to be able to say, ‘Poof! And now I will eat healthy from now on, starting today!’…? Or decide that this year I will sleep more, drink less, meditate more, do better with my money, etc. Why do I need this special holiday to finally make a change?

In reality, we know we should eat healthier, sleep more, keep our mental state clear, but we still have trouble taking this logic and making it a reality. Just look at the top resolutions for 2020!

Top New Year's Resolutions 2020 by Statista

It is really about marrying the logical with the emotional. Without finding a way to make the logical ‘feel good’, we won’t be able to move forward in a meaningful way.

We all want to manage our time and energy to make it through the day in one piece. So the question is: what story have I told myself emotionally feels good about what I am doing, even if logically I know it isn’t quite right for me?

When I am looking to change something, I generally want to understand:

Why am I doing this? Do I find joy in doing this?
Has this become a ‘ritual’?
What do I want to change? How can I make this change feel good?
How can I interrupt my mental path?
What do I need to do to create a new ‘ritual’ that has a better chance of long term success?

Let’s take my great nemesis, TV, as an example. I can go months without watching much TV at all, but then a sudden addiction of Netflix and HBO set in. Mostly this happens when times are stressful and I want a mental break. Being human is hard.

Why am I doing this? Do I find joy in this? I turned TV time into my ‘I deserve a mindless break’ time to give my brain a pause. I’ve told myself this is a happy relaxing moment for me…but afterwards I’m always asking myself why it doesn’t feel like I really relaxed much.
Has this become a ‘ritual’? Yes, we put the kiddo to bed and I stretch out on the couch with a blanket and curled up with the dogs. It feels so good, but then I wonder where the time went.
What do I want to change? How can I make this change feel good? I still want a mental break for myself, but I want to be more aware of the act so I can luxuriate in the feeling of the mental break.
How can I interrupt my mental path? Log out of Netflix and HBO (or cancel them).
What do I need to do to create a new ‘ritual’ that has a better chance of long term success? My downfall seems to be sitting down on the couch. Maybe taking the dogs for a walk outside instead. After that, I can doodle in a notebook, listen to relaxing music, or read a book about something totally unrelated to work.

Ready for the punch line? It works with money habits too!

Right now, we are going through a 2019 Post-Mortem for the majority of our clients. This post-mortem is meant to answer the same questions around spending. Yet, everyone is at a different level of understanding of what their spending plans are. And yes, even if you don’t have a spending plan, you do. Spending happens every day and you are making choices one way or another.

First, we go through all transactions from the prior year (including an Amazon order history report) and categorize them to see what ‘is’. We categorize to better understand where spending happens. House expenses, subscriptions, dining out, shopping, kids stuff, entertainment, etc.

Then, we get together to go through the questions:

Why am I doing this? Do I find joy in this?

For example: some clients eat lunch out every day because of time and energy. However, when they talk about joy in eating out for lunch – this tends to be the farthest thing from their mind. It’s not like they are eating out with friends every day, they are grabbing lunch as fast as possible to get back to work.

Has this become a ‘ritual’?

For sure, no packing lunch in the morning (little time) and in need for a quick fix by lunch time. I meant to pack a lunch, but the kids never seem to know where their shoes are and forget how to brush their teeth every morning!

What do I want to change? How can I make this change feel good?

I want to feel less like I’m coming at this from a scarcity place of no food and no time. That stresses me out and then I feel guilty about spending so much money on it by the end of the week. Sometimes I don’t have time to wait in line for the good healthy food places and I end up with fried stuff I don’t even like.

I’d love the change to feel better by giving me time. I don’t want to feel frazzled about making food, and I want a nice break at lunch time where I can actually relax a bit instead of rushing around. Basically, a good (money) habit.

How can I interrupt my mental path?

Weekend food prep? Checking into a weekly chef / food service that can bring me healthy meals on the weekend that I can pop into the fridge and grab on the go during the week.

What do I need to do to create a new ‘ritual’ that has a better chance of long term success?

I will let my family know this is something that is important to me and block time off on my calendar now to make this a priority and a reminder.

Believe it or not, a weekly meal prep service can often cost less than eating out for lunch every day. Others find it easy if they can get a slow cooker and recipes that allow them to throw stuff in, set it and forget it on the weekend. Both of these options take a good habit, and turn it into a good (money) habit for the client. And for others this isn’t even something they care to change. The goal is to find where you do want to stretch and find ways to make the change easy.

If you are interested in digging into this more, I suggest reading…

The Power of Habit: Why We Do What We Do in Life and Business

Atomic Habits: An Easy & Proven Way to Build Good Habits & Break Bad Ones

Good Habits, Bad Habits: The Science of Making Positive Changes That Stick

Here’s How to Easily Create a Budget

3 Steps for Long Term Budgeting Success

January 1st isn’t the only time we can start fresh. Any day is a good day to review your habits and decide whether making a change could mean better mental health and a better life 🙂

Ready to change your money habits? Schedule an introductory call with us to find out how we can help you.

Here’s How to Easily Create a Budget

Budgets and the New Year go hand in hand. If you already budget, you may review how well you did and decide what to do different for 2018. If you don’t budget, this may be the time to look at your income and figure out where to start.

I am a believer in simplicity to get the job done right. There are two ways to look at it: top-down or bottom-up. If you prefer to start with expenses and where you spend money, check out 3 Steps for Long-Term Budgeting Success. If you are interested in starting with total income, keep reading!

Step 1: Determine estimate of net cash inflow

What are you expecting for total compensation this year?

Salary + expected cash bonuses + RSU sales = estimated income

Estimated income – 401(k) contribution + vesting RSUs = est. taxable income

Once you know your expected income, then it’s time to make an estimate of how much you will need to pay in taxes. A nice tax bracket chart for 2024/2025 is HERE. I don’t make it too complicated and only deduct my expected 401(k) contribution.

Est. income – estimated taxes due = net cash inflow

Step 2: Determine what you want to save this year.

Do you want to save a percentage of your net cash or do you have specific goal amounts? If you aren’t sure where to start in saving, check out how to change your life with your bonus for some great ideas.

Net Cash Inflow – 401(k) Contribution – Savings Goal = Annual expenses

Step 3: Break down expenses and think about increasing savings.

Expenses fall into two categories – fixed and variable.

Fixed expenses in budgeting include: housing, transportation, utilities, and groceries. These are your ‘must haves’.

Variable expenses are miscellaneous items like travel and lifestyle choices that vary from month to month. Lifestyle choices may include hobbies, eating out, Kindle books, Audible, etc.

Monthly fixed expenses x twelve months = Annual fixed expenses

Annual expenses – Annual fixed expenses = Miscellaneous expenses + Savings Opportunity

Once you determine your ‘must haves’ it is time to see what is left over. Do you have more in your budget for miscellaneous expenses than you need? This is a great opportunity to add more savings to your year. See the compounding effects of saving more now versus later!

Were you surprised by how many expenses you have to fit into your budget? It may be time to reassess what you are spending money on and to take a deeper look.

Want a helping hand to keep you accountable with your new goals? Schedule a free consultation to see how we can help.

Did you enjoy this post? Sign Up for my newsletter so you won’t miss another article.

How to Change your Life with your Bonus

Surprise! You received a little extra cash for the year. What should you do with an unexpected or year-end bonus?

A bonus is an opportunity to start a habit that will change your life for the long-term. Many times, we end up spending bonuses on a present to ourselves for all our hard work. Instead, allocate it toward goals that will pay compounding presents to your future-self!

The top four ways to use your bonus for a present to your future-self are:

Pay down high-interest debt
Fund emergency savings
Fund retirement savings
Invest

Pay down high-interest debt

What defines ‘high-interest debt’? In my mind, this is debt that you don’t pay off on a monthly basis and has a higher interest rate than 8%.

List out your high-interest loans and credit cards, the balances outstanding, and what the interest rates are. Stack the debt by highest interest rate and start hacking away. Doesn’t that feel good?

But here is where the habit part starts. Paying off your debt and keeping it paid off are two different things. If you make the decision to pay off your debt, you should also make the choice to keep it paid off. Take another look at your spending habits and put together a budget to make this good feeling last.

Fund emergency savings

Do you have 3 to 6 months of savings on hand for emergencies only? If you think your credit card limit counts, guess again. Having three to six months worth of savings is vital in today’s economy. You may bounce around from job to job more often or decide you need a sabbatical to check back in with yourself. Not having this money available for breathing space wreaks havoc on your emotional well-being.

Fund retirement savings

Do you have a 401(k)? Are you making the maximum contribution? If not, this is a chance to save for your future self and reduce your taxable income. Cha-ching!

Invest

A lot of articles I read are focused on setting the right tone with budgets and savings. What do you do for your longer term savings goals? Maybe you want to take an international trip in 5 years, provide for your children’s college fund, or invest extra money so you have more options in the future.

Long-term success requires investments in yourself and in the financial markets.

Little tweaks now create huge differences later. The benefits of compounding interest and gains can change your life. Check out our philosophy on long term success HERE.

S chedule a free consultation to see how we can help.

Did you enjoy this post? Sign Up for my newsletter so you won’t miss another article.

3 Steps for Long-Term Budgeting Success

Budgeting sometimes feels like a New Year’s goal for weight loss. “I’m going to stay on top of my budget this year!” “I am going to start tracking my expenses January 1st!”

The truth is, you only have so much time. Like with weight loss, there is no magic pill but there is a long term sustainable option. To get to this, I recommend a three stage approach:

Budgeting Step 1: Manual process – one or two months of inputting every pain-staking expense into a spreadsheet (example here).

This hurts – but only for a short bit! If you really want to see where every dollar goes, manually categorizing expenses in a spreadsheet is the way to go. However, a manual process generally isn’t sustainable. I generally recommend doing this for one or two months to see where your money is going and then switch to a semi-automated or automated format.

Think of it like visiting the nutritionist or a personal trainer, they want to see a week or two of exactly what you’ve eaten and when. This helps them, and you, understand your starting point.

Budgeting Step 2: Semi-Automated process – Mvelopes app or other budgeting app that works for you. Generally for around 6 months.

Using mvelopes, or a similar service, allows you to connect your bank accounts for automatic feeding in of expenses. Then you can set categories and assign transactions to those categories. For categories, you can get into specifics like electricity, water, internet, etc. or have one category of utilities to include these. I like how easy it is to see where you are with each budgeted category. I’m using an app right now since having a baby changed our expenses a bit.

Make it fun by setting goals for each expense category and see if you can ‘beat the goal’ by spending less than you budgeted for.

Budgeting Step 3: Automated process – Mint.com with the ‘Big 3’ categories for long term success.

Category 1: Home – includes only housing, transportation, utilities and groceries (suggested to be no more than 50% of take-home pay). These are your semi ‘fixed’ costs – so a lower percentage of take-home pay is even better!

Category 2: Investments – includes savings, debt payments, and personal investments (suggested to be at least 20% of take-home pay)

Category 3: Miscellaneous – includes lifestyle choices from gym fees, hobbies, eating out, internet, cable, etc. (suggested to be no more than 30% of take-home pay)

Within Mint.com, you can set ‘rules’ for expenses to automatically flow to these categories. It will take some time in the beginning, but as you frequent places this will quickly go down to a few updates a month.

Notice yourself spending outside of the budget again? or want to fine tune your budget? Go back to Step 1 or 2. This is a sliding step process as you find your needs change.

Budgeting is an important step in building your financial home.

Did you enjoy this post? Sign Up for my newsletter so you won’t miss another article.

What should I know (and ask) before hiring a financial advisor?

In lieu of my usual weekly post, I thought it would be helpful to share some content from The National Association of Personal Financial Advisors (‘NAPFA’).

The financial advising world is full of different ways of making money from clients, with some ways more transparent than others. Some advisors use commissions from investment sales to primarily pay themselves (sometimes up to 8%!) and others use a percentage of assets (AUM) only.

NAPFA is kind enough to offer resources to the public detailing great questions to ask potential advisors, how to obtain a full picture of your advisors compensation, and what is important about having a fiduciary in your life.

If you are considering a financial advisor, take advantage of these resources HERE.

Did you enjoy this post? Sign Up for my newsletter so you won’t miss another article.

The above discussion is for informational purposes only. Recommendations are of a general nature, not based on knowledge of any individual’s specific needs or circumstances, and there is no intent to provide individual investment advisory, supervisory or management services.

If you live in a state with it’s own form of state AMT, this further complicates the matter. AMT calculations can be difficult and you may need professional help, such as that of an accountant, tax attorney, or someone experienced in complex tax returns.