Investment Management

In this article, we examine how we can more be more mindful when it comes to our money.

Ask these questions before you spend

I recently came across a story (link opens in new tab) about the Japanese art of saving money which listed some questions which I love. The article says that before you pull out your wallet to buy that item, ask yourself these questions:

Can I live without this item?
Based on my financial situation, can I afford it?
Will I actually use it?
Do I have the space for it?
How did I come across it in the first place? (Did I see it in a magazine? Did I come across it after wandering into a gift shop out of boredom?)
What is my emotional state in general today? (Calm? Stressed? Celebratory? Feeling bad about myself?)
How do I feel about buying it? (Happy? Excited? Indifferent? And how long will this feeling last?)

https://www.cnbc.com/2020/01/08/how-this-japanese-method-of-saving-money-changed-my-lifeand-made-me-richer.html

The article mentions several other strategies for saving money (or, not spending money) which are also interesting, but these questions really spoke to me as they really focus on mindful spending.

We tend to get bogged down by stuff. There’s always another social media post of a cute outfit or gorgeous chef’s knife. There are ads everywhere, and even our friends tell us about all the latest stuff they happily purchased. But truly, when does stuff ever actually make us happy? That’s what I love so much about these questions. They ask us to think twice before buying. They remind me of the Marie Kondo question, does it bring you joy.

Some of the people I talk with are concerned that they spend too much and save too little. They know this is a problem, but they don’t know how to start to change this habit. That’s why I like to ask about life goals as part of the financial planning process – what do you imagine when you think of financial independence? If the way you use your money isn’t lining up with what you value, why not? I also sometimes ask people to look at their spending in a budget like I describe here (link opens in new tab).

The questions above could help in the moment of deciding to make a purchase. Being more mindful about what we purchase, pausing before pulling out the wallet or hitting the “buy now” button, is often a great first step in getting onto the path towards financial independence – or to whatever your financial goals might be. And they probably don’t include that cute new outfit.

In this article, we consider how psychology and softer sciences play a role in financial planning

Financial planning as a liberal arts based profession

Here’s a quote that for me, sums up so much of what I love about the art of financial planning. It’s from Dick Wagner’s book, “Financial Planning 3.0”.

“If we consider financial planning to be a liberal arts based profession, we need to know a lot about a lot, and then we need to know how it all fits together. Our client relationships and professional undertakings require us to engage in work and conversation encompassing geopolitical realities, the ever-unfolding miracles of the physical sciences, the anticipated tragedies of global warming, potential pandemics and peak oil as well as the mysteries of the spirit and multiculturalism. They take us all the way into the most intimate details of an individual’s personal aspirations. To work effectively with their money, we must grasp their most cherished family relationships and personal relationship with the divine. Our work requires us to see into the future even as we understand and appreciate the past. It forces to us to understand how intangible forces influence the survival of six and a half billion souls on a vulnerable planet. Face it, this work calls for wisdom and understanding on a par with any other profession or sensitive undertaking. No other profession needs more depth and breadth as essential aspects of its training and daily work.”

I recently heard an interview with a person who teaches financial planning classes at the university level, who recommends all her students take psychology classes. You may have the best financial analytical skills around, but you will have a hard time helping others with financial planning if you can’t communicate and understand why they make the decisions they do around money.

I feel strongly that my liberal arts degree has been a benefit in this profession. My degree taught me how to see the big picture; evaluate research and solve problems; how to communicate with others orally and in writing; what motivates people to make decisions, and more.

So much of our behavior around money seems to come from a place of emotion or deep-seated fears/anxieties around money. Here are some things I’ve heard clients tell me about money:

We never had enough growing up so I think I won’t ever have enough.

My parents always fought about money so I do everything I can to avoid money conversations with my spouse.

Money affairs should be kept private and not shared with anyone, even my spouse.

My mom lived check-to-check, racking up credit card debt while I was growing up so I don’t see any other way to be.

My dad was money-obsessed, so I’ve taken a different path. Maybe I should have learned a little more from him about money.

As an integral part of my practice, I strive to understand my clients’ emotions around money. I try to ask open-ended questions in my client interviews to help get at these underlying feelings around money. Questions like, How do you feel about the amount of money you have? How does your perspective on money differ from your spouse’s? What would you like your children to learn about money? What was your earliest memory of money?

I also try to let there be space in the conversation to allow my clients to feel comfortable to talk about what’s important to them and why. I find that when a safe space is created, people are willing to share these deeply personal feelings about money.

Ultimately, money is usually a means to an end. I think the way we use our money should be aligned with our life’s goals. I love learning what my clients imagine their life could be in the future. And I am so grateful that I have a chance to play a small part in helping them get there.

In this article, we look at millennials and retirement savings.

Millennial women may be saving less than millennial men

Millennials are the generation of people born between about 1981 – 1996, according to Wikipedia (link opens in new tab).

Recent research (link opens in new tab) indicates that millennial women are contributing 5% of their income towards a company retirement savings program like a 401k. But millennial men are contributing 8% of their income. Add to this the potential gender pay gap, and millennial women are saving even less.

On top of this, only 46% of millennial women feel confident about investing, according to this study (link opens in new tab). Another statistic from this same study: While a typical retirement costs $738,000, only 9% of American women have at least $300,000 saved. Of course, millennial women have some time to accumulate this amount of savings, but there’s no time to start like the present.

Start saving now – there’s no time like the present

It’s so important to save a portion of your income now, which can permit you to pay for yourself in the future when you are no longer able to work. With most people not receiving pensions from their employer, and social security typically only covering a small percentage of a person’s living expenses, the social safety net is not what it once was for retirees.

The good news is, millennials have a long time ahead of them in which to work, and save, for retirement. As a start, workers should typically save at least enough in their company’s 401k or other retirement savings program to earn the company match, typically around 3-5%. If they aren’t contributing at least this amount to their 401k, workers can be missing out on some valuable compensation which adds up over time.

Taking one step now towards saving, even if it’s a small percentage of your income, is still better than doing nothing. Talk to your financial advisor about your specific situation.

Get started now making good financial decisions for your future.

In this article, we discuss maximizing financial aid for college.

A child’s college education can be a big family expense

72% of US college students receive some form of need-based financial aid according to the National Center for Education Statistics (link opens in new tab). This is good news, because according to Trends in College Pricing (link opens in new tab) research by the College Board, in about 10 years college is expected to cost over $142,000 for 4 years at a public university, and over $324,000 for 4 years at a private university, including tuition, fees, and room and board. These figures assume an average college cost inflation rate of 5%.

Planning for college expenses should typically start when children are young, so any savings have longer to potentially accumulate compound interest. I wrote another article (link opens in new tab) about some fun ways to contribute to a child’s education savings account.

FAFSA & CSS calculate a family’s expected contribution to college expenses

But what about all the other assets a family has when it comes time to apply for financial aid? Typically, the first step in seeing if a student qualifies for financial aid is to complete the FAFSA, Free Application for Federal Student Aid. Some schools require the CSS, College Scholarship Service Profile. These forms calculate the family’s expected contribution to college.

To complete either form, the family and student must provide many details about their financial situation, such as income, savings, debt, other children also in college, net worth, and more. Each application looks at the previous year’s financial information. So for example, if a student was beginning school in the fall of 2021, the family would fill out the aid form in 2020 based on the 2019 tax return.

Ways to potentially maximize financial aid

Here’s an article (link opens in new tab) which looks at some ways a family and student may be able to maximize financial aid for college by doing things like paying off car loans and credit card balances, moving funds into retirement accounts, and using earned student income over a set limit to pay for things a student would need in college like a laptop, rather than keeping it in a bank account.

Read the full article here (link opens in new tab). And talk to your financial advisor about your specific situation.

In this article, we consider ways of teaching kids about money.

I often talk with clients about how to teach their kids about money.

I’ve also had many conversations with my husband about ways to educate our son about money. I don’t want him to be spoiled, or overly focused on money. But I do want him to understand that we work hard for the money we earn, and we can’t afford to get every new toy that catches our (his) eye, because we have other things we need to use our money for. I also don’t want him to be constantly worried or thinking about money, because that’s not his job.

It’s a tricky balancing act. And then there’s an allowance. How to do it, whether to do it, how much to give, etc.

I read a couple articles recently that offered up some tips on teaching kids about money.

This article (link opens in new tab) mentions the benefit of paying an allowance (about the amount in dollars of your child’s age), and requiring them to allocate a that allowance by percentage to charity (10%); immediate spending or quick cash (30%); medium term saving such as saving up for a bike or laptop (30%); and an amount towards future expenses like college (30%).

This article (link opens in new tab) gives some concrete examples of how to teach kids about money at different ages. The early childhood timeframe can be an opportune time to start the teaching. The article mentions letting kids mess up, for example, let them regret a spending decision and sit with that feeling. And also, for a child who’s not a natural saver, perhaps offering an incentive to help them save – like matching every dollar they save. And doing it with actual dollars and coins, rather than electronically, can be another way for them to learn.

I’m also reading a good book right now about allowances and how they can be used to teach kids many lessons about money in a very immediate and practical way that can change over time. The book is called The Art of Allowance, by John Lanza.

I’d love to hear from you too; how do you teach your children about money? Click here (link opens in new tab) to post your ideas and tips in the contact us message form.