Author Archives: Danielle

Debt Reduction—10 ideas on finding money to pay

Posted on by

1. Take any opportunity to generate cash.  Best if part-time or “on-demand” so that a main business can be developed or employment maintained.  Ideas include:

  • household services—lawn mowing, pet sitting, pet walking, newspaper   delivery, house-sitting, babysitting
  • substitute teaching & tutoring
  • retail (evening)
  • sell stuff on ebay

2. Build your local business or search for a job by obtaining and calling a set number/goal of potential clients or employers per day. 10 can be called within 2 hours. Follow up with email, then another phone call. Use a prepared script—one if you reach them, one if you reach voice mail, one for follow up. Always ask if they know anyone else who might use your services.

3. Develop a side business.  Make a goal of how much you want to earn in a month then focus your efforts on finding a way to do so. $500-$1000 is doable even with a regular job. Good websites: www.iwillteachyoutoberich.com, www.theabundantartist.com, www.ducttapemarketing.com For sales of craft products: www.etsy.com

4. Cut living expenses. The biggest expense that most people can cut is their rent or mortgage. Get a roommate, rent out a garage (check with your insurance first), and get a house-sitting gig for a while (perhaps realtors would know of a place that can be house-sat). Rent or buy a cheaper place.

5. See whether credit card balances can be transferred to “no interest for first x days” deals. Then DO NOT use that new card AT ALL. Be sure you understand all the terms before you do this. Alternatively, see if you can negotiate a lower interest rate on current cards.

6. I recommend the Dave Ramsay “debt snowball” method. Here it is:

  • Put some portion of the “new” money in emergency savings. If you put everything toward debt repayment, you will never get out of debt because every time there’s an emergency, you’ll charge it again. Try to build to an emergency fund of at least 6 months of bare bones living expenses. Don’t start paying any extra on debt until you have $1,000 in emergency cash.
  • Take most of whatever money you generate by #1-4 above and put it toward the SMALLEST debt
  • Pay the minimum balances on all the others
  • As soon as you pay off the smallest debt, take the money you were paying and add it to your minimum payment on the next smallest debt.

7. Apply for any state or federal benefit you might qualify for—food stamps, Veterans Disability programs, Social Security disability (hard to get) immediately. Your doctor should be able to help you with this. These programs are designed to help the needy, and if you are needy, they’re for you.

8. Don’t touch your retirement funds. These are essentially immune to creditors, even in bankruptcy, except for debts to the IRS. If you have no other assets, you are essentially “judgment proof” and most creditors will not be able to collect against you, although liens can be placed on bank accounts, wages, cars and homes. People are often tempted to clean out retirement funds to pay off debts and relieve the stress. Then what? Unless you are on the verge of being homeless, don’t do it.

9.  Consider whether you should investigate bankruptcy. One indicator: figure out whether you can meet living expenses + pay off the debt within 5 years. If not, at least talk to a reputable bankruptcy attorney. Bankruptcy exists to give people a fresh start. If you have already thought through a plan to change your financial situation (better job, side job, change in spending), then you deserve a fresh start.

10. Seek professional help, but be very aware of how your advisors are being paid. Make sure any non-profit credit services are reputable. A fee-only planner can take a comprehensive look at your situation. A bankruptcy attorney who is also a CPA or can work with a CPA might be very helpful.

When you’re in such a stressful situation, it’s very difficult to think strategically and not be depressed. Nevertheless, the best way to start over is to focus on a problem solving (rather than self-blaming) approach. This situation is an opportunity for some real life transformation.

These ideas will not work for everyone in every situation and should be regarded as ideas only, not specific advice. It is very important to get advice that is specific to you and your situation.

Investments—eat what you cook

Posted on by

Financial advisors are really good at cooking up investment schemes. I’ve seen stews made up from crazy lists of gold, commodities, all cash, pink-sheet stocks—you name it, some advisor, somewhere, is recommending it as the only way to go. So, may I recommend you choose something other than the plat du jour? Try asking your advisor how much of his or her personal money is invested in the recommendation.

For mutual funds, this information should be in a Statement of Additional Information, usually grouped with the prospectus literature on an investment company’s website. From my point of view, it’s most interesting to know this information for actively managed funds. For index funds, it doesn’t much matter as the manager is making far fewer decisions. Their responsibility is to track their benchmark, not season the sauce. However, a manager that purports some strategy that claims to beat the market ought to sit down at the table and take a big gulp, and I’m not talking about a $10,000 investment, which is barely a tip to these guys. If he’s heading for the exit, he probably knows something you don’t (and should). Me, I’m LOTS more interested in investments I actually have money in, although some of them, some of the time, require a Pepto to stomach.

Now let’s take a look at those “investment advisors” who call you up with the latest hot high-commission sales product their firm is pushing—e-r-r-r, considered investment recommendation. I think it’s entirely legit to ask whether they’ve bought the product themselves, and if so, how much or what portion of their investment portfolio is placed in that investment? Of course, it’s always possible that the investment may not be “appropriate” for their personal portfolio, but I’d sure want to know why not. If they’re not willing to take the risk, why should you?

There is one big “but”, however. You don’t want someone who’s made a huge buy, decides to pump you up, then sell his own holdings at the now inflated price. That is, unless you enjoy seeing your “investment advisor” doing a perp walk in a photo in the Wall Street Journal.

You can’t protect yourself against every possible misstep, but these ingredients can go a long way:

1. Know how much you’re paying and how you’re paying it. Nobody works for free. There’s ALWAYS a fee or commission or hourly rate somewhere in EVERY investment.

2. Find out whether the advisor invests in the recommended investment.

3. If it sounds too good to be true, IT IS. This one principle alone would have saved all the Bernie Madoff victims and most of the victims of rip-off mortgage loans.

4. Just because someone’s nice doesn’t mean they’re good. Personal charm of the broker has nothing to do with the worth of the investment.

 Check it out before you fork over your money. Bon appétit!

 

 

Retirement planning—unusual budget items to consider

Posted on by

We can worry and plan for so many possibilities, but the ones that get us are often the ones we never see coming. I’d like to submit a few items for your retirement planning consideration that are not part of traditional budgets.

We can all come up with guesstimates for food, housing, property taxes, utilities, and insurance. Car purchases can be scheduled periodically (although please make a plan to stop driving at the point where your kids tell you that you should). But while walking my elderly dog yesterday and looking at my weed filled yard, I realized there are two areas I’ve never really incorporated into my own retirement plans.

The first is routine household care. If you plan to stay in your own home as you age, you will almost certainly need more of this than when you’re younger and active. Even if you’re a do-it-yourself type, you probably won’t be forever. I’d happily quit wrestling with the snow blower and the lawnmower THIS MINUTE, but right now, hey, what are kids for? But a recent stint with a fractured foot and a child away at camp have given me many thoughts about how much lawn and snow removal assistance I might need at 75 or 90, and how house cleaning services might be essential.

I’m a pretty avid gardener, but I would have to face changing my “design” and get-to projects if I had a landscaping service—no one would fool with my yard the way I do. And those of us who have a cleaning person every other week, tidying up in the interim, would probably want to step up that schedule. Some people think that cutting back on these services might be a way to cut costs once they are no longer working and have “plenty of time”, but in fact, the reverse is true. You will probably need more services, not less. Based on the fractured foot incident, and the resulting immobility, I have a good window on how a garden can transform from nice and fairly under control to the front yard of Sleeping Beauty’s castle in less than six weeks. You don’t want the EMTs to have to hack their way in to get you.

But back to the aging dog. Vet care, while so worth it, can be astoundingly expensive. The dog and our beloved cat with cancer have rung up sums that, this year, are approaching 5 figures, and we’re only in July. And I’m here to say that this isn’t the first time it’s happened over the years. I could never willingly put down an animal that had a chance at a decent quality of life, so for me it’s essential to have a pretty large pet care budget. Then there are all the services for pet care that can come to your house if you’re not up to hauling the dog to the vet, but they’re going to cost you, too.

One of the most heart wrenching aspects of moving to assisted living or nursing care is the necessity of giving up pets, so before you acquire an animal at your retirement age, think about 15 years in the future (an animal’s life span, give or take a few years). That’s caused me to realize I need to choose a smaller breed dog in the future, I want my long-term care insurance to cover home care, and my daughter will need to bond with and be capable of caring for any animals that come to live with me.

Staying in your own home, surrounded by beloved pets, is a delightful prospect, but like nearly every other goal and dream, there are aspects of financial planning that need to be considered. Excuse me, but the cat is demanding petting…