Tax planning?  It helps you pay less, if you act

Checking your income tax planning now is a good idea – tax planning can be done year-round.  As with any planning, acting while you can have an impact is best.  Tax laws may change but knowing where you stand now will help you respond in the best way.

Check out these posts from our sister website: mid-year planning and year-end post on 2021 tax planning; let me know if you have any questions or comments! And good work in keeping up your financial literacy!

Holiday gift and tipping guide, Pandemic style

The holidays are a great time to say “thanks” and show appreciation for those who help us keep our families, homes and businesses on track, keep our homes clean, help us stay fit, and help us in other ways to get through each day throughout the year.  With that in mind, we updated our suggested gifts and tips for 2021. 

Gift giving etiquette may not always be obvious when considering gifts for people outside of your friends and family, so be mindful of the message you send.  Giving should show appreciation and respect.  Sometimes a smile or kind word can really make someone’s day.

For those you can’t tip, you can still make them feel appreciated

The list of people to thank includes first responders and health care workers.  Like many houses we see, you can display a sign with a red heart as a way of saying thank you. 

You can also send letters of thanks directly to a local hospital, fire station or police department or send a meal or buy coffee.  Check for any online bulletin board in your town, both to post a thank you note and to see if there are other ways to acknowledge your local first responders. 

“Neither snow nor rain…”

Despite the weather, terrain or traffic, your mail carriers, FedEx, UPS and Amazon drivers deliver your mail and packages every day and ensure that your online purchases arrive on time and in good condition.  These delivery workers have carried an increased burden during the Pandemic, even risking their own health.  

In deciding what and how much to give, consider the particular company’s gift giving restrictions:

1.  Mail carriers – are prohibited from receiving cash gifts and gifts of more than $20.

2.  Garbage and recycling pickup – depending on what municipal rules permit, we suggest $10-$30.

3.  FedEx – employees may accept gifts under $75, though no cash or gift cards.

4.  UPS – workers are allowed to accept tips, but UPS discourages the practice.

5.  Newspaper delivery – a gift of $10-$30 is standard.

6.  Amazon driver – we suggest the same as for newspaper delivery. 

7.  Food delivery and curbside pickup – again we suggest the same as for newspaper delivery.

Caregivers (for kids, parents and pets, too!)

Caregivers for your children, parents and pets can be lifesavers.  They provide care, education, exercise, and attention to those you care about most.  This is the time of year to let them know how thankful you are for all that they do.  The amount of service they provide and the arrangement you have with them can dictate the appropriate gift level:

1.  Nanny/au pair – a week’s salary and a small gift.

2.  Daycare teachers – a $25-$70 gift.

3.  Home healthcare worker – from one week up to a month’s salary.

4.  Teacher – a small gift and a handmade card from your child (unless your child is still remote learning).  Note that a cash gift could be misconstrued as a bribe.  You can pool resources with other parents for a gift card.

5.  Dog walker – depending on your walker’s schedule, you may want to gift a day’s pay or a full week’s pay.

6.  Dog groomer – from half up to the full cost for the service.

If you contract any of these services through an agency, you may want to contact the agency to find out if they have a gift-giving policy in effect.  If the agency prohibits gifts, consider alternatives like making a donation to the agency or sending in homemade cookies to the office.  

Also, if you have seen these people less frequently, consider adding more to a tip as they have suffered from the infrequent visits by you and others.  Or sneak a Starbucks card into their stocking. 

Home Maintenance

Whether you live in a single-family home or a large apartment building, it’s likely there is someone who services your home or property in some way. 

1.  Trash and recycling collectors – a gift of $10-$30, which you may want to mail directly to the collection company if you can’t safely leave for the collectors.

2.  Doorman – a gift of $25-$100, depending on their role this year.

3.  Regular cleaning person – the cost of one visit.

4.  Landscapers/gardeners – a gift of $20-$50 per person or if you have just one person doing the work, the cost of one visit.

5.  Parking garage attendant – a gift of $10-$50.

6.  Building’s handyman, superintendent and custodian – a gift of $20-$100.

If you have someone who always goes the extra mile, such as a handyman who’s prompt and efficient or a doorman who is quick to carry heavy packages for you, then a larger tip may be warranted. 

Personal Services

It’s hard work keeping you fit, perfectly coiffed and beautiful, and ready to face the day, but recognizing the efforts of those who do is easy and may also help you get that special appointment when you really need it.  In deciding whether to tip and how much, consider this:

1.  Hairdresser/manicurist – if you’re a frequent visitor, tip the cost of one visit.  If you’re a less frequent customer, then $20.  However, if you tip generously through the year, you do not need to give an extra tip at the end of the year.  If multiple people work on your hair, divide the tip among them. 

2.  Personal trainer – up to the cost of one visit.

3.  Massage therapist – also up to cost of one visit.

4.  Golf or tennis instructor or sax teacher – a thoughtful gift.

If you’re unable to tip or give a gift, a thoughtful thank you note will acknowledge the good work these people do for you throughout the year.   

Good feedback is appreciated by their supervisor as well as by the people who are helping you out. 

Another effective gesture of gratitude is to send a thank you note to the supervisors of the people who provide you with great service throughout the year, letting them know how impressed you are with the service you receive.

If you have any more ideas, let us know! 

Be safe and stay well! 

  • Steven

2020 Updated Guide for Holiday Tips and Gifts

“The best way to not feel hopeless is to get up and do something. Don’t wait for good things to happen to you. If you go out and make some good things happen, you will fill the world with hope, you will fill yourself with hope.” ― Barack Obama

This year, we thank all the first responders and essential workers!  

… and during challenging times

While gift giving etiquette may be obvious in some instances, it can get less clear when considering gifts for people outside of your friends and family.  And this year is even more challenging, with social distancing and travel restrictions. 

To help adjust for gift giving during the Pandemic, we updated our guide of suggested gifts and tips for the people in our lives that help us keep our families, homes and businesses on track and get through each day as we move forward throughout the year. 

In many cases, the services these people provide ensure we can work, have clean homes and stay fit, including caregivers, delivery, home maintenance, and personal care services. 

For some, you can’t tip but you can still make them feel appreciated

This year, the list of people to thank includes first responders and health care workers.  Like many houses we see, you can display a sign with a red heart as a way of saying thank you.  You can send letters of thanks directly to a local hospital, fire station or police department. 

You can send a meal or buy coffee.  This may mean having a local restaurant deliver a pizza, which helps the restaurant as well as thanking the fire or police station or emergency room.  Or you can pay for a local coffee shop to treat workers who stop in.  

Check for any online bulletin board in your town, both to post a thank you note and to see if there are other ways to acknowledge your local first responders.  And be sure to observe local rules on social distancing, for your safety and theirs. 

“Neither snow nor rain…”

Despite the weather, terrain or traffic, your mail carriers, FedEx, UPS and Amazon drivers deliver your mail and packages every day and ensure that your online purchases arrive on time and in good condition.  These delivery workers have carried an increased burden this year. 

Let those who make those deliveries know you’re grateful.  Some people have left gift baskets on their porches to say thanks (a video of one Amazon driver dancing with joy went viral). 

In deciding what and how much to give, consider the particular company’s gift giving restrictions:

1.  Mail carriers – are prohibited from receiving cash gifts and gifts of more than $20;

2.  FedEx – employees may accept gifts under $75,  though no cash or gift cards;

3.  UPS – workers are allowed to accept tips, but UPS discourages the practice;

4.  Newspaper delivery – $10-$30 is standard; and

5.  Amazon driver – we suggest the same as for newspaper delivery. 

Caregivers (for kids, parents and pets, too!)

Many who are working from home in 2020 may not have had access to caregivers.  Those that have may be especially thankful.  These caregivers for your children, parents and pets can be lifesavers. 

They provide care, education, exercise, and attention to those you care about most.  This is the time of year to let them know how thankful you are for all that they do.  The amount of service they provide and the arrangement you have with them can dictate the appropriate gift level:

1.  Nanny/au pair – a week’s salary and a small gift;

2.  Daycare teachers – a $25-$70 gift;

3.  Home healthcare worker – a week to a month’s salary;

4.  Teacher – a small gift and a handmade card from your child – if your child is not remote learning.  In that case, you may have to arrange delivery;

5.  Dog walker – depending on your walker’s schedule, you may want to gift a day’s pay or a full week’s pay; and

6.  Dog groomer – half the cost to the full amount for the service.

If you contract any of these services through an agency, you may want to contact the agency to find out if they have a gift-giving policy in effect.  If the agency prohibits gifts, consider alternatives like making a donation to the agency or sending in homemade cookies to the office. Or sneak a Starbucks card into their stocking …

Home Maintenance

Whether you live in a single-family home or a large apartment building, it’s likely there is someone who services your home or property in some way. 

1.  Trash and recycling collectors – $10-$30, which you may want to mail directly to the collection company if you can’t safely leave for the collectors;

2.  Doorman – $25-$100, depending on their limited or expanded role this year;

3.  Regular cleaning person – the cost of one visit;

4.  Landscapers/gardeners – $20-$50 per person or if you have just one person doing the work, the cost of one visit;

5.  Parking garage attendant – $10-$50; and

6.  Building’s handyman, superintendent and custodian – $20-$100.

If you have someone who always goes the extra mile, such as a handyman who’s prompt and efficient or a doorman who is quick to carry heavy packages for you, then a larger tip may be warranted. 

Personal Services

It’s hard work keeping you fit, perfectly coiffed and beautiful, but recognizing the efforts of those who do is easy and may also buy you scheduling flexibility when you really need it – especially in a year of Zoom calls, masks and other restrictions.  In deciding whether to tip and how much, consider this:

1.  Hairdresser/manicurist – if you’re a frequent visitor, tip the cost of one visit.  If you’re a less frequent customer, then $20.  However, if you tip generously through the year, you do not need to give an extra tip at the end of the year;

2.  Personal trainer – up to the cost of one visit;

3.  Massage therapist – also cost of one visit; and

4.  Golf or tennis instructor or sax teacher – a thoughtful gift.

If you’re unable to tip or give a gift, a thoughtful thank you note will acknowledge the good work these people do for you throughout the year.  Another effective gesture of gratitude is to send a thank you note to the supervisors of the people who provide you with great  service throughout the year, letting them know how impressed you are with the service you receive.  

Good feedback is appreciated by both the supervisor – as well as the people who are helping you out. 

If you have any more ideas, let us know! 

Be safe and stay well!

New Job? Great time to start planning, so dive in!

Starting a new job can be nerve-racking , but it’s also exciting. You’re embarking on a new future, positioning yourself to write a fresh story on a clean slate.

-Adena Friedman

When you accept your first job, you will probably get a packet of information someone from someone in the Human Resources department detailing your options on health insurance, dental and disability insurance, vacation time, flex savings, HSA accounts, retirement contributions, and company policies.

Reviewing this packet can be overwhelming.  However, it also provides an excellent time for long-term financial planning!  So, dive in – your future self will be glad you did.

Start easy – get the free stuff

Most employers use group purchasing power to get benefits at a discount.  This usually includes health, disability and life insurance but can also include club memberships, banking and more.

Get health insurance:

You need health and dental insurance, unless someone already provides that for you, so sign up.

If your spouse has insurance, then review your new plan to see if the benefits are better or the cost is less.

Life and Other Insurance

Most employers provide some amount of life and disability insurance.  Again, take what’s free.

If you have others who depend on your earnings to survive, then you may need to enroll in additional group life and disability insurance, if offered.  If there is no additional insurance or it is not sufficient, then you have other estate planning work to do!

Retirement – check for “free” money

Retirement may seem far off, but planning now will pay off because of the impact of compounding.

If your employer matches what you contribute, you really need to push to contribute so you get that match.  How else can you get that kind of return on your money at the front end?  (and if what I just wrote makes no sense to you, you really need to brush up on your Financial Literacy!)

As for investing, you can use the default investment option, but real long-term planning would be best.  That is, pick a fund that is geared to your anticipated retirement age if you must, but doing your own asset allocation among funds by investment objective will work out better over time.

As with other cash management decisions, you don’t want to sacrifice too much today for your future; strike a balance between enrolling in payroll deductions and having enough in your paycheck to keep enjoying yourself now.

Other Benefits – continuing education

If you are offered continuing education, take the chance to improve your skills.  This makes you more marketable for when you want to advance or change jobs.

Flex Spending and Credit Union

If you can sign up for an HSA account or other flex spending, do so to cover any uninsured medical bills that you could have during the year.  You will need to revisit each year, so you do not contribute too much, leaving funds never used in the plan.

A credit union may provide benefits too, so check that out.

So, what about your Student Loans?

Putting part of your paycheck into important benefits may mean less left to destroy those student loans in a matter of months the way some bloggers tell you they have done.  However, debt management is only part of a total financial plan.  You need benefits like health insurance and should contribute to retirement if your employer matches, so keep everything in balance!

Work on your Financial literacy

If you have questions on any of this post, then please check out our other posts and please let us know what is not clear!

Thanks, and good luck with your new job!

Steven

5 steps for woke investing

If your goal is saving to buy a house next year, putting your down-payment in the stock market could be a disaster. 

Sure, you could gain 10-20% in a year, but you could also lose that much. 

On the other hand, never investing in the stock market could mean you fall far short of what you need for retirement.

How do you make sense of investing? 

This post is here to help. 

Never invest emergency savings in the stock market. Suze Orman

1 – Match risks to your time horizon

When you put part of your pay into a 401(k) plan at your company, you are investing.  And when you save money to buy a house, you are investing. 

Different investments have different risks.  If your goal is saving to buy a house next year, putting your down-payment in the stock market could be a disaster. 

The risk does not match the horizon.  If the stock market is volatile, it goes up and down.  If you can stay invested long enough, the ups outweigh the downs.

So, when you have a short-term horizon, less than three years, you need investments that have little or no risk to principle. 

On the other hand, if your goal is saving for retirement, leaving your money in a savings account will be a disaster.  Sure, your principle is safe.  But, you took no risk, so the funds did not grow much. 

When you can wait at least 5 to ten years, then investing in the stock market is preferable because well-diversified investments tend to go up over time. 

2 – Diversify investment types

Buying one stock could give you huge returns, or lead to a complete loss. 

Diversifying means allocating your investments to different categories: stocks, bonds, real estate, raw materials, etc.  These categories respond differently to economic events, so an investment that goes down can be offset by one that goes up.  You allocate portions of your
investment among investment categories to reduce your overall risk.  That helps protect your against a major loss on any single investment. 

You will also want to diversify within categories.  For stocks, you look at value and growth investment styles, large, mid and small-cap companies, and US stocks and international stocks.

Okay, now we are making it sound complex.  You may want to get advice, either from a financial planner, broker or good robo-planner who can help create and asset allocation suitable for your goals.  

3 – Allocate and then re-balance periodically

Once you diversify, you need to review the allocation among investments at least annually.  Otherwise, the allocation could get way off track.   

Check to make your mix of investment by category still fits your goal.  If your allocation is off, re-balance it by selling the excess of  investments that performed well and buying the investments that have been under performing.  Good investments may lag at times, so re-balancing helps you to maintain the proper allocation to stay on track. 

4 – Dollar-cost average – sometimes

Worried that the market is too high, that stocks could tumble?  Emotions such as fear, as well as excitement or greed can lead to bad investment decisions. 

One way to address fear of a correction is to dollar-cost average.  This means adding new funds to your investment allocation by investing the same amount of money on a regular basis, e.g. once a month for six months.   

5 – Keep costs down

What about costs?  You generally want to avoid loads and other forms of broker commissions whenever possible.   And you want to select investments that have low fees. 

·      Make your investments at a discount broker, on line or via an app, and

·      Use exchange-traded funds (“ETFs”). 

Have any questions? 
Let us know, we’d love to help you stay woke about investing

Protect Your Stuff!

“It simply isn’t acceptable for the likes of Google, Facebook, Amazon and others, which amass data by the terabyte, to say, ‘Don’t worry, your information’s safe with us, as all sorts of rules protect you’ – when all evidence suggests otherwise. “

– Maelle Gavet

Protect your data and devices

There are now more tools available than ever to help you organize, access and protect your sensitive data and documents.

Mobile Devices

The amount of information we store on our mobile devices is staggering:  emails, personal contacts, client contacts, banking information, music, and pictures represent only a fraction.  You can easily protect this data by enabling the password service, or, in the case of the newer iPhones and iPads, by enabling the fingerprint recognition software.

We have become heavily dependent on these devices that, if we lose them or they malfunction, we could spend days trying restore or replace the data on the device.  To protect against this potential headache, you should back up the device regularly.  You can also shift more application content to cloud services such as iCloud or G Cloud.

Computer Safety

If you know the sickening feeling of losing an important file that you saved on our computer, then you know you do not want to risk losing all the data on your laptop.  That’s why we recommend backing up your important files to an external hard drive, remote server, cloud storage or online back-up program.  Some of you may want to make the backup occur automatically, so that all files are stored on a regular basis.  Others may prefer to do so manually.  If so, be sure to set a reminder that works for you so that you frequently safeguard as much of your important data as possible.

In addition to backing up your files regularly to an external location, we recommend you install anti-virus and malware software.  When you buy a computer, an anti-virus program is often included.  Make sure the virus definitions are updated constantly.  Also, you can add more projection for free, such as Malwarebytes.

Original Documents

There are certain documents that deserve an extra level of security, like original copies of your estate plan (link to planning) for the inevitable.  For these documents that hold significant legal and personal importance, place them in Ziplock bags to prevent water damage and store them in either a fireproof safe or a safety deposit box.

Conclusion

Taking these small steps each of you can take now to protect your tax and financial information will prove invaluable if the unexpected occurs.

How can you plan to take a year off and still saving for retirement?

“Quote relating to subject matter, search on: http://www.brainyquote.com/, Select the quote text and then hit the quotation button to create.” – Quote’s Author

Here is a tough financial
planning challenge:

How do you save to take a year off as a sabbatical, or go a big (expensive) vacation, and
still stay on track with saving for your retirement?  

What if you also have student loans you desperately want paid?  

Answer: it depends on your situation! 

If you get a large capital influx

The easy solutions would be some massive influx of capital, such as stock options in a company that skyrockets in value or a huge inheritance  … or winning a major lottery prize.  Such an influx of capital would provide funds to pay off the debt, invest for retirement and cover the costs of a sabbatical or round-the-world vacation. 

If your spending is meager

At the other end, the problem might be soluble if your needs at retirement are quite modest.  Meager needs would require less saving to reach retirement, allowing you to spend more now and even take off from work for a period of time. 

Everyone else

If you’re spending is average, and you don’t have the fortune of a major capital influx, then you really need a good plan that plots out how you will pay off the debt, save money for the sabbatical or vacation, and still save and invest enough to meet your retirement needs.

Possible strategies

Obviously, one strategy would be to delay retirement.  This way you need to save and invest less now to fund your lifestyle when you do retire.  

Another strategy would be to commit to saving a great deal now and after the sabbatical or vacation.  This would mean serious cost cutting on expense so you can save more when you are earning.  

Using debt more is another strategy.  That is, you can’t do it all immediately, so you may have to live with the student loan debt longer than planned.  If you can keep saving for retirement, you may want to borrow to fund the sabbatical or vacation, with a plan of
paying it off afterwards.  

Cost-out your goals

How do you pick and implement the best strategy?  First, quantify your options.  You can calculate what you need to save for retirement.  This includes what you set aside in your 401(k) or 403(b) plan and any Roth IRA or SEP-IRAs. 

When you cost out saving for the sabbatical or vacation, you cannot count on the return you expect from retirement savings.  You have short time horizon and cannot take as much risk. 

Review your student loan debt to see the interest rate.  If it is low, you want to delay paying anyway.  See Let’s really talk about risks

Devising a plan – the goal and resource mash up!

Any planning problem can be solved; it just requires pushing around all the possible resources and variables so that you fit the square peg in around hole. 

You sort through the cost of the goals compared with the total you have decided to save for the goals.  If what you can save doesn’t allow you to meet your other goals and still take a full year off, then maybe you would have to settle for nine months, or a less expensive vacation.

Okay, now get going and good luck (and send us a postcard when you do go away).

When “free” is not free, when paying is worth it

“Quote relating to subject matter, search on: http://www.brainyquote.com/, Select the quote text and then hit the quotation button to create.” – Quote’s Author

Nothing on the internet is truly
free. 

Many sites are lead generation sites, and most social media websites track our every move to get paid.  If you any doubts, please read this article:  “Mark Zuckerberg, Let Me Pay for Facebook – ‘Free’ social networking sites cost more than we think.”

If you search financial planning and other sites on the web for retirement calculators, you will find many options.  See our prior post explaining why one line calculators can differ so much.

On of these websites provides “free” use of a gamified retirement calculator.  However, when you delve deeper (I read the company form ADV as of May, 2015), you learn that the website may receive compensation from vendors for referring users to financial products and solutions in order to fulfill action steps, such as lenders for a user who needs to refinance her mortgage.  The website receives a referral fee from the mortgage lender. The same for a rollover of a 401(k), a fee from Schwab, Fidelity or TD Ameritrade, or for life insurance, a fee from the insurance.

Furthermore, management of the website own a registered investment adviser and many are insurance sales people. 

Hardly sounds free – it’s a leadgen portal!

Websites like this are lead generation portals.  Compare to those “free” seminars on estate planning put on by insurance salesmen to sell life insurance and other products.

In contrast, there are good tools, for which you pay.  One example is the investment firm Betterment, which introduced a tool some time back that was available to its paying customers called “RetireGuide.”

The firm describes it as “a new planning tool, available for free to all Betterment customers, that helps investors work through scenarios, like …. RetireGuide provides sophisticated  retirement guidance that is easy to understand, always up-to-date, and simple to change as your life changes.  RetireGuide uses information you provide and the balances from your Betterment accounts, as well as assets outside of Betterment, to answer these questions. It also provides a seamless way to start saving more in a globally diversified portfolio of ETFs based on your retirement plan’s recommendations  … This planning tool merges an advice engine with a way to automatically save and invest in a diversified portfolio.”

RetireGuide looks very good, as a tool to help you keep with your retirement plan. 

Where are we at WokeMoney in all this?  We had designed tools and how to steps to help you create your own plan for free.  However, that website was never launched. 

What do you think of this?  Your comments would interest me, thanks. 

 

If you help support others, you need life insurance and more – really

If a child, a spouse, a life partner, or a parent depends on you and your income, you need life insurance. 

-Suze Orman

She’s right:  If you help support others, examine your priories.

Purchasing adequate life insurance and doing your estate plan, viz. signing a will and creating a trust, are probably low on your list. They should be at the top.  Especially in a Pandemic.

Two good reasons that you should review and act:

I saw the confusion and pain wife had to address when she lost her husband, before he bought the life insurance he had promised to obtain, and had to help her kids adjust to the massive change of lifestyle as they sold their home and downsized because they could no longer afford what their dad, the chief income earner of their family, had provided them. If they had proceeds from his life insurance, they would have only been dealing with the
grief of losing him, not radical life changes as well.

I saw adult children deal with the probate process so they could be appointed administrators of their mom’s estate just to be able to access bank accounts, pay funeral expenses and then sell and distribute the remainder of her assets, making their own decisions in place of knowing what she would have wanted.

Sure, you hope the money spent on life insurance is a waste – because the earner lives on – but better to have the protection than add financial suffering on top of grieving!  Plan for those who may survive you!

As for signing a will, trust and other estate plan documents, please consult an attorney for help in determining what is necessary and appropriate. 

So please think again.

If you have not obtained life insurance to replace your earning power, which helps support your family, and if you have not executed a will, along with a trust, medical directive and other documents that may be appropriate, you are not just avoiding an inconvenient imposition on your time and the payment of premiums and fees, you are failing to properly think of the consequences of not acting and the impact that could have on your loved ones.