MONEY matters

I used to think it was mostly a west coast thing. What I’m referring to is the rapidly growing number of couples that are putting quality of life ahead of their standard of living - those who are downsizing and simplifying. In many cases, the men are encouraging and supporting their wife/life partner to be the breadwinner in the family, while they often stay at home to care for the kids and run the household, or work from home part-time.

Here in the San Francisco Bay Area, where the culture very much encourages self-empowerment, this trend is exploding. There are classes and workshops that focus and teach women how they can best cope and support the men in their lives that are (and this was the wonderfully delicious euphemistic term used to market an upcoming workshop), under-earners.

It’s a Leap of Faith

From my vantage point as a holistic financial planner, I often meet the men that have voluntarily simplified their lives. Many describe making the change as a leap of faith. And for full disclosure, when I meet with couples where this idea or concept is on the table, I do everything in my power to see how this can work and make it happen for them.

When I meet people that truly desire to reinvent themselves, but the only major obstacle standing in the way is money - I can’t wait to get started on a financial plan with them. Because my first priority is having my clients be successful, having a personal financial plan in place is the only way to proceed.

Transition to Success

Of course, talking about this type of personal transformation, I’d be remiss if I didn’t mention the book Your Money or Your Life which very often provides the catalyst and self-confidence necessary to make major life changes. It’s when you begin to challenge all the core assumptions in your life, especially the ones about how much you ‘should’ make or the type of work you ‘should’ be doing that life really gets interesting.

The vast majority of men I meet that are contemplating this downsizing and simplifying life choice are currently in high stress, high income careers or jobs that feel more like they’re making a ‘dying’ instead of making a ‘living’. Many guys are literally just burned out from striving and never arriving as every time they were close to reaching the finish line, someone moved the goalpost yet again. Men making this downshift in terms of career change risk the wrath of not only society, since this is still very much out of the norm, but often friends and extended family make their opinions of your choice that much more of a challenge.

Women Leading From the Heart

Swimming upstream is much more challenging than going with the flow. Men that begin reflecting on their life choices often notice the creative juices really start bubbling to the surface.  They may feel empowered and inspired to “quit their day job”, they might take personal mini sabbaticals in order to regroup or rest, they often reinvent themselves by taking a gig that’s low stress and easy on the mind and soul.

But we still live with sexism so with these unorthodox choices comes the dubious distinction of possibly being dubbed lazy, under-earner, girlie men, slacker or a poor provider for the family. But down the road, when the investment made in yourself and your family by taking some time off to just slow down enough so you could think clearly manifests into a happier, healthier and more prosperous you, it’s then that all the naysayers will tell you how smart a move that was back then to take some time off.

For all the men I have helped and encouraged to make this move, the X factor that has made the difference between a successful or unsuccessful reinvention is the unconditional love they have received from their wife/life partner during this transition.

It’s what teamwork is all about. A wife helps her partner to become a happier man, him becoming happier helps her love him even more. The more love, the more abundance they attract into their lives, and on and on it goes…

Mark Twain said it best: “Twenty years from now you will be more disappointed by the things that you didn't do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. “Explore. Dream. Discover.”


Photo by Mr.T in DC

I'm not saying it's fair, not by a long shot, but these are some facts about women in the workforce:

• On average, women make less money than men - 77 cents on the dollar
• Women contribute less to retirement plans like IRA’s and 401k’s and less to Social Security during the course of their work lives
• On average, women work 12 years less than men (by taking time off to raise kids or care for elderly parents)
• Women generally don’t have a pension since pensions require length of service and women often take time off to raise kids or care for parents
• Women live 5-7 years longer than men, so they’ll need more savings when retired

Being Proactive and Planning for a Successful Retirement

Women who take charge, do the math, plan for contingencies and work with their partners and/or financial planners have a better chance of securing their finances in retirement than those who shrink from the process, according to a new study.

The MetLife Study of Women, Retirement, and the Extra-Long Life: Implications for Planning, shows women face a number of unique financial risks—including outliving retirement funds, aging single, lower retirement incomes, greater health care costs and added care-giving responsibilities—and have not planned adequately to address these concerns.

Slightly more than half of the women surveyed know the likely amount of their retirement income/assets and only 44% have calculated the amount of their essential expenses, according to the study. Approximately one-in-six (16%) reported that they have or plan to delay retirement, on average, four years.

The data suggests that women who work collaboratively with spouses, partners, financial advisors and even knowledgeable friends, report higher confidence in their retirement security. Among men and women, men are more likely, by a margin of 65% to 55%, to calculate retirement income.

"The combination of risks for women and their relatively inadequate retirement planning has become known as the ‘perilous paradox,' but the message is clear that women are able to avoid that," said Sandra Timmermann, director of the MetLife Mature Market Institute. "The risks and costs of ‘living long and living female' call for an ‘affirmative action' plan. We find that those who plan for a steady stream of income, along with some flexibility for the unexpected, are best prepared for what can be an extended future."

Longer life spans for American women create additional costs and financial constraints that can lead to greater financial challenges in retirement, according to the study. As of 2009, women aged 65 years or older had significantly lower annual retirement incomes than men—an average of $21,500 vs. $37,500. American women are more likely to experience retirement alone since many never marry or are widowed or divorced.

Retirement Planning-Taking the Next Step

If you’re like most people, (both men & women) the thought of developing a comprehensive financial plan that provides you a clear and easy to understand roadmap of your retirement income is easier said than done.

Yet the sooner you know where you stand and how best to move forward, the sooner you’ll enjoy the benefits and peace of mind a solid financial plan brings to your life.

 

 

Fair/Not Fair Photo by Xuoan's Dailies

Bogle Discusses Investment Risk During Volatile Times

These are not happy days here in the U.S.  With a constant barrage of bad economic news and a stock market that has even the most earnest long-term investor rethinking their investment strategy, hope and optimism is in short supply.

That’s why this week, when the PBS News Hour did a segment on a new book titled: Millennial Momentum: How a New Generation Is Remaking America by Morley Winograd and Michael Hais,  I could barely contain my excitement and enthusiasm. Finally, finally, after drowning in a sea of gloomy news comes this inspiring book that can remind all of us intelligent optimists why we prefer to see the glass as half-way full.

Next time you’re stuck at the airport on a business trip or sitting in traffic on the way to or from work, ask yourself this question. If given a choice between a higher quality of life vs. a higher standard of living, which option would I choose?

As we move into a global economy that moves faster and faster and becomes ever more competitive, the question of your money or your life will become ever more relevant. That’s because the financial pressures will continue to increase as will the demands on your time.

A Balancing Act

Striking a balance between work and play used to be a lot easier.  Although this has traditionally been a struggle for most people, now it seems harder than ever. And with a sagging global economy and a roller coaster stock market thrown in the mix, finding time to just clear your head and think about your future is a daunting challenge.

For all the amazing benefits financial planning brings to people lives, perhaps one of the least understood yet most powerful outcomes is giving yourself the freedom and space needed to step back from your day to day routines and check in with yourself.

Although this seems like such an easy exercise to perform, with busy lives and demanding careers, it’s easier said than done. Usually a task like this gets put on that elusive to-do list, never to be seen from again. And before you know it, 10 or 20 years goes by like the blink of an eye. Yet taking the time this year or even next year to stop, slow down and assess where you are and where you’re headed can reap enormous dividends if done well and with unabashed self-honesty.

Ask a small business owner to describe what makes their business tick and most of the time they can answer this question with superb detail and enthusiasm. Now ask this same, passionate, small business owner to describe their overall tax strategy and most likely you’ll hear silence.

Of course this silence is not a mystery.  Most small business owners wear at least five hats to begin with when operating their business and their tax and finance hat is usually not one of their favorites. That’s all too understandable, but here’s why it's important to have a tax strategy for your business.

Like any business owner, if you’re profitable, (or even if you’re not) paying taxes is going to be one of your major expenses - many times one of your largest. As a former practicing tax accountant, I wish I could say the tax code is fair and you’re operating on a level playing field. That’s not the case. The deck is stacked against the little guy/gal and until there’s actual and real tax reform, it’s going to stay that way.

Lowering Your Odds of an IRS Audit

Because the tax code is so complicated, most small business owners opt to file a Schedule C - Sole Proprietor return. And because most small business owners in general tend not to be the best record keepers, the IRS loves to audit Schedule C filers. Even if you did everything right and assuming you have nothing to hide, an IRS audit distracts you from your business at hand and very often causes high anxiety and stress.

I’m a big fan of operating your business as an S corporation. It’s not for everyone, that’s for sure. But if you haven’t had a CPA or financial planner run a tax comparison of what business entity would be most optimal to operate your business or practice, I highly suggest you have this analysis done prior to the end of the year.

Very few S corporation tax returns filed each year are audited. In recent years, the audit rate has been 0.40% annually. That’s the kind of odds a tax accountant loves. How does this compare to other business entities audit chances?

•    Partnerships: 0.40
•    C Corporations: 1%
•    Individual’s filing Schedule C: 1.17%

Although statistically there doesn’t appear to be a big difference between an S corporation audit risk and a Schedule C filer - the difference is night and day. With the IRS eagerly on the pursuit for fees and income, becoming a tax savvy small business owner is more important than ever.

 

 

data source: TurboTax 

photo by saturnism

Although summer is just winding down, it's already time to look at your 4th quarter financial tasks. Here is the last in the four part installment from the Financial Planning Association (FPA) task list.

Last week, one of my investment management clients called and asked me to review his 85 year old mother’s investment statement and offer my opinion about her overall investment strategy or lack thereof. He was worried that his Mom’s portfolio was being churned and burned.

Even before his fax came through, I had a bad feeling. When I reviewed her current investment statement, it didn’t surprise me to see that 85% of her now dwindling portfolio was invested in stocks and that on average, 42 stock trades were being bought and sold each and every month. I wish I could say this was an isolated incident, but it’s not, not by a long shot. Elder abuse, especially when it comes to investing, is on the rise.

I’ve seen enough statements like this one that betray an investor’s trust to last a lifetime. It always gets me thinking - this could be my Mom being taken advantage of.

Beware of Being Sold the Investment Performance Sizzle

Who remembers the 7-up ‘un-cola’ commercials? All these decades later I still remember that distinctive voice of actor Geoffrey Holder. If you want a flashback-here he is in a YouTube video that will bring you back in time: 7-up

Talk with any financial advisor about money management, investment strategies, financial planning, you name it, and unless you’ve harbored a secret desire to become a financial advisor yourself, sooner rather than later, your eyes will glaze over and next thing you know you’re thinking about the wood-fired pizza you’re ordering for dinner tonight.

Last week I met with a prospective client that’s an amazingly talented and successful artist with a studio in Bolinas in West Marin County. Lisa (not her real name) is recently widowed after a very long and loving marriage. Her husband was a prominent attorney in San Francisco and handled nearly every aspect of their money management and investments.