How to Cure the “Gimmes” in Your Children

This is the first post of our new staff writer Melissa, who regularly blogs at Moms Plans. Please welcome her!

If you are a parent of a child that can talk, you have probably heard, “Can I have this?” or “Will you buy this?” or, if your child is older, “But, all the other kids’ parents buy it for them!” If you are lucky, you have probably only heard this a few hundred times; however, most parents hear their kids whine for something daily. If you are tired of suffering, there is a simple way to cure the “gimmes”—put your child in charge of his own finances (relatively speaking).

My son is nearly eight, and though we don’t give in to most of his wants, he still begs endlessly for things. However, we recently put an end to this behavior by putting him in charge of his own money and allowing him the opportunity to make money.

In our home, he is responsible for doing some basic chores such as clearing the table when he is done eating, putting his dirty clothes in the dirty clothes basket and helping his sisters pick up toys. He does not get paid for these and is expected to do them as a contributing member of the family. He gets paid to take out recycling, put away his clean clothes, tidy up his room in the morning, and vacuum his bedroom twice a week. He can earn up to $5.75 per week if he does all of his chores. He has to set aside some of that money to give and save.

We noticed he begged endlessly for items until we suggested he use his own money. Suddenly, he was much more careful about what he bought. (Isn’t it funny how he exercised caution when he was using his own money, not ours?)

He enjoys reading, and wanted to save up money for the book fair at his school. We agreed to give him $10 to buy whatever books he wanted, but if he wanted anymore, he had to save for it. In the weeks before the book fair, he counted his money every Friday. As the book fair got closer, he started asking how he might earn money. We agreed to let him do more chores around the house for more money. You have never seen a kid so eager to mop the bathroom floor and clean the dust off the ceiling fans. When book fair day came, he had $25 to spend.

After the book fair, he showed us his books, and explained the process he used to decide what books to buy such as buying paperback books instead of hardcover because his money would go further. He even made sure to not spend all of his money because he wanted some leftover.

Now, instead of begging us for money, he frequently asks for more chores to do. By giving him the power to both earn more money through hard work and to choose how he spends it (within reason), we seem to have cured him of the “gimmes” as well as put him on the path of financial responsibility.

What steps have you taken to tame the “gimmes” in your kids?

via bargaineering.com

The key here is to put kids in charge of their own money- allow them to feel the pain of it leaving their hands and the joy of making it through extra chores.

Do you know the Diff between a broker and a fiduciary? do you care? LOL

Watch this funny video - it compares a broker a fiduciary, a butcher and a dietician- go figure! 

and learn something new, too. 

BrokerorFiduciary

 

 

 

Article: FutureAdvisor Raises Funding From Sequoia To Bring Financial And Investment Advice To The Masses

FutureAdvisor Raises Funding From Sequoia To Bring Financial And Investment Advice To The Masses
http://techcrunch.com/2012/03/20/futureadvisor-raises-funding-from-sequoia-angels-to-bring-financial-and-investment-advice-to-the-masses/

(Sent from Flipboard)

Fern Alix LaRocca CFP EA

Trust ? Like in Madoff? Goldman? who do you trust with your bucks?

I got a lot of flack because I question whether people should truly trust financial professionals. 

That says a lot -especially since I am a financial professional. That said, I basically believe that all people are good and that they want to do the right thing. But unfortunately, if it is going to come down to whether they put food on the table for their kids or they sell you a "not so great" investment plan that makes them a bit more than the fantastic investment plan-Guess which choice they are going to make? 

The financial industry doesn't make it easy for the consumer either to figure out who legally has to disclose how they make their money and what services they provide and which ones are order takers and salespeople posing as financial advisors trying to help them. 

Even with all the publicity about fee-only financial advisors, if you ask John Doe how can he tell which financial advisor is fee-only and which isn't, he wouldn't have a clue (other than trusting that he is telling the truth). 

The time has come when we have to work side by side with clients to help educate them and empower them to make the right financial decisions. They need to work with someone who will work with them on a personalized plan not someone they trust who will tell them what to do. 

People aren't idiots and we shouldn't treat them that way. This is a people business and a service business. We help people make the right choices with their money. We aren't always right and neither are our clients- only an unselfish Financial Advisor can work side by side with a client as equals on this journey through the personal finance maze.  

You deserve more than just a quick answer to your questions, you need to work with a partner that can help move your money to support your current and future lifestyle. That is even deeper than trust. 

 

 

 

When Good Estate Planning Advice goes Horribly Wrong

 

I just got back from a funeral for my dear friend and buddy. He took my good financial planning advice over the years --- so why did he leave a horrible mess behind?

Check out the story here:

A Sad Tale of Good Estate Planning Advice Gone Wrong

Why You NEED a Mortgage

You need a mortgage. Sounds crazy right? Isn’t sound financial planning and wealth building strategies all about saving and investing? Not necessarily. It is about saving and invest and keeping more of what you earn. That means keeping a careful eye on taxes. One of the biggest tax deductions (other than your retirement plans like a 401K) you can take is the mortgage interest deduction. When you take out a mortgage most of your payment is interest and all of that interest is deductable. If you have a mortgage, take a look at your Schedule A Itemized deductions federal tax form.  Under interest deductions, you will see how much you wrote off of the total amount of yearly mortgage payments. Why so much? Because almost all mortgages are fully amortized, this means that each payment is part interest and part principal.  In the early years you will see that almost all of your payments are interest. You can get a mortgage amortization schedule of your mortgage on an online calculator if you really want to get exact.

Most people focus on the payments that they make on their mortgage. There wealth building strategy is to get a lower payment. That can be a really bad strategy in some situations. Let’s look at two in particular:

1. John is getting ready to retire. His wealth building strategy is to pay off his mortgage so he has less debt. He will live on his social security, income from his 401K, and some part-time job income. What John doesn’t realize is that by paying off his mortgage, he may be paying more taxes than when he was working. Why? The income from his 401K and his part-time job is taxable. He doesn’t have any mortgage interest deductions to reduce that taxable income so his taxes are higher and part of his social security is taxed too. John is not happy about the choices he made.

1. Sue bought a house 15 years ago. She has just come into an inheritance. She wants to refinance and use her inheritance to pay off most of the mortgage. She figures she will be able to work part-time if she doesn’t have a big mortgage. Sue refinances at a lower rate and uses all of her inheritance to pay off most of the mortgage. Sue now finds that she can’t live on her part-time income even with a lower mortgage. Her taxes on the lesser income are much higher and her take home pay is a lot lower than she expected. She will have to go back to full time work. She is not happy about the choices she made.

In both examples, there was good intention to do the right thing but not a holistic approach to the problem. You need to carefully consider tax planning with your Financial Advisor or Wealth Coach in any wealth building strategy that you choose but in particular with a mortgage or a refinance.

 

The Worst Financial Advice in the World

As part of your wealth building strategy, you should have a third party give you feedback on your personal financial plan. That could be a friend, relative, or a paid financial professional.  There is no guarantee that the advice or suggestions that you receive will work out and you need to use your own common sense and analysis to figure out the right thing to do. Unfortunately all humans are unique and we all come with different tax brackets, risk tolerance, and financial goals. That is why it is so difficult to commoditize financial advice. No matter how hard the brokerage industry tries to put your money into a portfolio box marked conservative, moderate or aggressive; you know deep down that certain aspects of your money does not fit in that box. So here are some common investment advice remarks that you should run from:

It will eventually come back to what you paid for it.  Don’t count on it. Every time you buy an investment you should have a plan for when to sell it. Just hoping that it will come back to what you paid for it isn’t going to make it happen. You must have a benchmark to consider whether the investment is worth sticking with. If your small-cap stock fund is going down and all small-cap stock funds are going down, why would you sell it? Realize that markets go up and go down and you must have a selling strategy as well as a buying strategy.

You are young so you can afford to take more risk.  I have seen young people who are risk adverse and elderly people that can stomach wild swings in the market. Where are you in the spectrum? Don’t let anyone judge what type of portfolio or risk tolerance you have by your age alone. Your risk tolerance should coincide with your financial goals not just your age.  

You are in a high tax bracket so you need to put every penny into tax deferred plans.  Yes, tax deferred plans like the IRA, 401k, 403b, etc. can help save on taxes but the end result can be a very high taxable income at retirement. The 3 pillars of income sources to replace a paycheck are Social Security, tax deferred plans and pensions, and investment accounts. By having these three, you can minimize taxes at retirement and net more income. If you are heavily withdrawing from tax deferred plans for paycheck replacement, you will find your Social Security being taxed and you may be in a higher tax bracket than when you were working.

You won't get any tax deduction from that investment.When considering an investment you need to first figure out if it is suitable for you which include taxation, but it should not be your sole consideration. A higher return on an investment may offset the taxes paid.

It won’t cost you a thing.  No commission and no-load does not mean free. There is a cost to everything and you need to find out what it is. Once you do, you can compare it to others and see if the fees are reasonable for what you get or extraordinary and will eat into any returns you get. Read the fine print and you will see in every investment that someone is getting paid.

I guarantee it. Guarantee is a dirty word in the investment world and you will rarely hear anyone say it. If you do, run don’t walk to the nearest exit. Nothing is guaranteed. You may find “teaser rates” that guarantee you a certain high return and then after the rate lock, drop like a rock. So carefully look at the full term of the investment and not just any attractive start rate.

Keep your wealth building strategy on track by avoiding investment advice like the above.  Have someone like a Wealth Coach review your personal financial plan once a year to make sure that you are on track to meet the financial goals that you set that have your risk tolerance and tax bracket factored in. Your ability to build wealth depends on it.

 
al

 

Year of the Water Dragon-2012 -Here's an Offer to make extra $$$$ this year

I am busy writing the great american memoir and so I won't be taking on very many Coaching clients this year. 

So- I am making you an offer you can't refuse - read about it here

Prosperous 2012 

 

Why?

 

When you come from the view of working to get money to spend-that is poverty consciousness.

When you come from the view of money supporting your lifestyle that is -real wealth.

5 Critical Mistakes You Can Make in a 401K Plan

 

It is no surprise that a lot of people are depending on their 401K maximum balance to provide income in addition to their social security. That is why you need to make careful choices when you are investing your contributions into your 401K plan at work. Here are 5 of the most common 401K investing mistakes that can deplete your 401K balance quickly:

1)      Don’t take fees into account. You may have a limited number of investment options and you may also have a brokerage option that will give you a lot more choices. Sounds like a no brainer to take the option with more choices. Not so fast. Many of the brokerage options have a mix of load funds (those with an upfront commission or a deferred sales charge) and no-load funds. Are you savvy enough to know the difference? Will you be able to pick out the ones with all those choices that are no-load and have low expense ratios?

2)      Put all of your money in one sector. Good asset allocation means spreading your money around asset classes (large-cap, small cap, foreign, etc.) and asset styles (growth, value). A common error is to put your money into the fund that has the best investment return. This is not a great investment strategy. It is very risky and it doesn’t take advantage of buying low and selling high.

3)      Leave a lot of money in the money market options. Since you can’t touch this money without penalty before age 59 and a half, why keep it in savings accounts? If you are that risk adverse, you should look into stable value funds or funds that invest in US Treasuries. Not having your contributions invested and working for you over time leads to a lot of disappointment when retirement comes and your 401k maximum balance is low.

4)      Switch funds every quarter. Moving in and out of investments is a surefire way to lose a lot of money fast. That methodology is called market timing. It is proven not to work. Now this isn’t the same as reviewing your holdings once a year and determining if your asset allocation is still correct (for example, 60% growth and 40% income) or if the fund’s manager has left and the returns are lot lower than expected due to a new investment policy. That kind of review is important but just darting in and out of funds trying to get the best one is a losing strategy that never works.

5)      Don’t stick to a plan. It is hard to have a long term outlook when the media is screaming at you to buy gold now or sell everything and go into cash. You should ignore all of that and invest according to your financial goals, your tolerance for risk, and your personal tax bracket. If you shoot for nothing, that is what you are going to get. Figure out what is a reasonable return that you can get with the asset allocation that you devise. Let’s say that you decide a 60/40 mix is appropriate for you. With that asset allocation, you determine that you should get 7% over the next ten years.

Don’t make these critical 401k mistakes when you are deciding what to do with your contributions. Even saving and investing 2% of your pay can make a big difference over the long term according to Fidelity. Avoid these 5 critical 401K mistakes and you will be rewarded with a bigger 401K balance that will replace all or part of your paycheck. 

Get Your Free Financial Advice January 12th & 17th

 

FREE Financial Advice!
You will be able to ask a Fee-Only financial advisor your most presssing financial and retirement questions -- for FREE!

You will be able to do this through the NAPFA and Kiplinger Facebook pages or through the chat box in the link above.

You can also dial into a toll-free hotline to speak with a volunteer advisor. That number is 888-919-2345.

 

From My Most Popular blog post- the ebook The 7 Secrets of the Wealthy

I have had over 30,000 views on this one blog post and so I took the time to expand it into an ebook,

The 7 Secrets of the Wealthy.

Click on the link above and please "Like" or review it on Amazon. You are going to love it!