Why Keeping a Check Register Is Important

I always love training new bankers. I’m actually not “training” the new girl at work, but she’s still a lot of fun to be around.

She came into the credit union today in a bit of a panic. She had checked her account and there was a fraudulent charge showing up. She was nervous and worried that her identity had been stolen. She wanted to know what to do. I’ve been through this many times with many customers so I told her what to do and what we would do for her account.

The charge, she said was for an establishment she’s never been to and she wanted to know how it was possible that someone could have charged the card when she had it in her purse the whole time. I tell her that it’s possible she could have swiped the card somewhere that a crook had set up a skimmer to copy the numbers or they could have gotten a picture of the card number. These things are possible, though I know that’s not what had happened in this case.

If someone gets a hold of your debit or credit card, very rarely do they just charge one item. Usually it’s multiple items in rapid succession of each other, and you’ll almost always find a few gas charges on your account. They’re filling up theirs and their buddies’ tanks on your dime. Taco Bell also seems to be really popular with people who steal other people’s debit and credit cards. Go figure.

So I do a little research on the charge and discover that it’s not from the place she never frequents, but rather from a place she visits ALL the time. I tell her the place and she says she hasn’t been there in….then it hits her! She was, in fact, there the day the charge had cleared her account. She had forgotten. She turns a little red and apologizes for the mistake. I smile knowingly - but only because I just like to pick on her anyway - and ask her if she has a check register. She says she does. I ask her if she’s using it. She looks down and sheepishly answers no. I told her she needs to use it; it will help her avoid the panic next time around. Apparently I sounded like her mom.

Sometimes bankers have the unenviable job of sounding like mothers, but keeping a check register is important on many levels. Not just for keeping balances, though that’s important, too. I get a lot of members that tell me they use online banking and that works for them. Yes, but what happens in a situation like this where you forget that you used the card at a certain place and freak out because you think you’ve lost your card? Or, the reverse where you don’t pay any attention to your charges and you may actually have fraudulent charges on the account. Having a register where you write down your transactions can help you monitor that. Keep in mind that most banks only allow you 60 days to dispute an item, so if you miss something from three months ago, to bad because you’re probably not going to get it back. It’s important to keep up with your account.

The other reason that you want a register is because there’s a difference in how your transactions will post. If you use your card as debit and enter your four-digit pin number, it usually posts to your account right away. I only know of a few who don’t post them right away. But, if you use your card as credit and sign for it, then it can take a few days to show up on your online banking. The reason is that it all depends on when the merchant batches out their credit files and sends them off for payment. Some go through the process every night and post them right away. Others may go every week. But, they have 60 days to post a transaction so if you haven’t written it down and they don’t take it out until 45 days later, it can cause some damage to your account if you’re not expecting it.

Ok, so how many of you out there have check registers and are actively using them? If you’re not, how come? Have you run into any problems not using one?

Popularity: 12% [?]

The Business Credit Score

Just as creditors will look at a personal credit score before making a decision to lend to an individual, business lenders look at a business credit score before determining whether or not to lend to the business. While there are certain similarities between the two systems, they work a little differently.

There have been a number of business credit reporting agencies that have cropped up over the years, but the primary one - and probably the only one I’d concern myself with - is Paydex from Dunn & Bradstreet. The main difference between business credit scores and personal credit scores is that while the consumer side takes many factors into consideration, Paydex only considers two things: whether a business makes their payments on time and whether they satisfy the creditor’s payment terms.

A Paydex score ranges between 0 and 100 with 80+ being in the top tier. A score of 70 means you were 15 days late on your bills and a score of 50 means your were 30 days late. Jut like the consumer side, as you pay your bills on time and practice good credit habits, your score will increase. If you’re trying to establish credit, there are a couple of ways to go about doing this.

1.) You can enroll in the CreditBuilder or Scorebuilder programs offered through D&B

The drawback to this is that these programs can cost several hundred dollars. But, they are a quick way to establish a credit rating.

2.) Apply for a D-U-N-S number

This is a nine-digit identification number that you can use to establish a small line of credit with a company that reports to D&B. Note: if a company doesn’t report to D&B, then don’t waste your time applying there if you’re trying to establish a Paydex score.

It’s not required that you build credit through D&B, of course, though this is the most respected. And it’s not required that you build credit for the business at all. If you’re more comfortable, you can always continue applying for credit under your personal info. However, there are drawbacks to that such as the tax benefits that you’re missing out on.

Like consumer credit, business lenders want to see continuous activity. Once you’ve established your Paydex score, you have to keep using it. Too often business owners make the mistake of stopping and that can cause the score to drop. Even if you’re only using small lines of credit from some of your vendors - like an office supply chain - at least there is some activity to keep your business credit positive. A further note of caution is to continue to be diligent with your personal scores as well. In most cases, a lender will pull your personal credit along with your business credit to get a complete picture of the company’s strength. A poor personal performance can cause problems for the business.

And that’s really all there is to it. Many people think the best way to build credit for the business account is to get a business credit card, but the problem with that is that business credit card applications generally require the owner to pledge their personal property as collateral. Going the Paydex route means that your personal property stays personal and as long as you maintain a balance with your personal score and your business score, you’ll be able to deal quite easily with business lenders.

Anyone with a business deal with Paydex for their scores? If not, who do you use and why?

Popularity: 11% [?]

Credit and Debit Card Blocks at the Pump

With gas prices soaring to over $4 a gallon, there’s a little something many consumers are running into that’s never been a problem before - limits and ‘blocks’ at the pump. Issuers and merchants have always had these limits and ‘blocks’ in place, but it’s never been an issue before because gas prices haven’t been as high.

What this means is that issuers and merchants set a predetermined limit that you can spend for at-the-pump purchases. This is usually anywhere from $50-75. When you swipe your card - debit or credit - the merchant does an authorization with the card company. Since the total purchase is unknown at this point, there is a ‘block’ on a specific amount of funds - usually the $50-75, but it can be as little as $1. The problem that people are running into is that since gas prices have increased, so is the amount that folks are putting into the gas tank. When the amount reaches the limit, the pump shuts off. Consumers are left there with their tanks unfilled - already aggravated by the high prices they have to pay.

In addition to the annoyance, there’s something else happening as well. When you use credit at the pump, that hold isn’t automatically released once the transaction is complete. According to Visa, merchants and/or financial institutions - depending on who is holding the funds - have three business days to release the holds. But, for some, these holds can cause all manner of fees to hit their accounts if it causes them to go over their limits or overdraw their accounts. Some banks have it set up where you’re not actually charged that fee as long as the actual purchase clears for less than what you have in the account; however, credit card companies are not always so gracious.

Naturally, the number of complaints to merchants has significantly increased, but in most cases it’s not the merchant’s fault, it’s the card issuer’s fault. The problem is that there’s nothing you can really do about either. These limits are set in place to help avoid fraud. The first thing someone who steals your card is going to do is go fill up their gas tanks. By limiting the amount the fraudsters can get, the credit card company or financial institution limits their liability when you report the purchase as fraudulent.

Fortunately for me I have a small car so this has not been an issue in recent times. However, I did experience this once when I was moving. In addition to using the gas station three times that day, I was also filling up a U-Haul and that ended up sending me over my limit for that transaction. It wouldn’t let me fill up any further and I had to go inside to actually complete the transaction. I didn’t think about it at the time, but there’s another way to circumvent that as well - a second transaction.

These limits and holds placed on the card are only on a per transaction basis. You can complete the first transaction with the hold and then reinsert your card for a second transaction. It’s a little bit of a hassle for consumers to do that, but if you really don’t want to walk inside, you at least have this option. Unfortunately, this option tends to hit merchants hardest because they pay on a per swipe basis. If each customer swiped their card two or three times, that would be one outrageous bill for the merchant at the end of the month. It impacts us because they have to compensate somehow, which is usually in the form of higher prices on gas and convenience items.

Have any of you experienced this problem at the pumps? Do you think the limits should all be raised in light of the gas prices, or left as they are because it’s only a temporary situation?

Hey, I’m optimistic that gas prices will go down!

Popularity: 17% [?]

Bank of America Review

I thought I’d try something a little different and add a bank and credit union review, sort of like the credit card review that Jonathan did with the Amex card. Each week I’ll pick a bank or credit union and give a review of their services and fees - you guys are welcome to throw suggestions out there for ones you’d like to see reviewed!

The areas of the review are as follows:

1. Checking
2. Savings
3. CDs
4. Cool Features
5. Customer Service

This week’s pick: Bank of America

Checking Accounts

Bank of America has four main checking accounts - MyAccess Checking, CampusEdge Checking, Bank of America Advantage Checking, and Regular Checking.

MyAccess Checking:

The minimum opening deposit is $25, no minimum balance required thereafter. According to the website and their phone representatives, the online offer does not require direct deposit, but if you go in person to open the account, direct deposit and other service fees may apply. This is a non-interest bearing account.

CampusEdge Checking:

Same as the MyAccess, except it’s for students - high school and college. Students are also eligible for a “Stuff Happens” card which allows the owner to waive one fee assessed to their account. Once the student is no longer in school, the account converts to a MyAccess.

Bank of America Advantage Checking:

The minimum opening deposit is $100 and the monthly service fee can be waived with a daily average balance of $5000. Account allows loan and investment balances to be included to avoid monthly service fees. All loan and investment balances - except mortgages - must have at least $15,000 outstanding. Mortgages can be any amount. If requirements are not met, the monthly service charge is $20. This is a tiered interest bearing account; however as of now, all tiers are earning .05% APY. Users also get priority calling for telephone banking - means they get a special number to call and skip the line.

Regular Checking:

There is a $25 minimum opening deposit. To avoid a monthly service fee, users must keep a minimum of $750 in the checking account, or $2500 in the savings account. If below either of those balances, the monthly fee is $9 with direct deposit or $11 without direct deposit.

All checking accounts come with a free debit card (with picture), online banking, bill pay, telephone banking, and unlimited teller transactions. Non-Bank of America ATM fees in the U.S. are $2 for withdrawal or balance inquiry. Non-Bank of America fees in foreign countries are $5.

NSF fees: $25 per item for the first offense. The second offense and up within a consecutive 12-month period is $35 per item. Each day limited to 5 items.

Savings Accounts

There are two main savings accounts - Regular Savings and Balance Rewards Money Market.

Regular Savings:

There is no monthly fee with a $300 minimum or automatic transfers of $25 or more from a Bank of America checking account. Users are limited to a total of six withdrawals per month, three free and the remainder are $3 per withdrawal if the balance falls below $2500. Continued violations of the six per month will result in the savings account being turned into a checking account or shut down completely. It is interest bearing, .20% APY, compounded daily and paid monthly.

Balance Rewards Money Market

There is no monthly fee when linked to an Advantage checking account or with a minimum balance of $25,000. Otherwise, the fee is $20 per month. The account offers an annual cash bonus based on the balances in the account - a complete bonus schedule is available online. Offers limited check writing capabilities and can be linked to checking account for overdraft protection. The interest is tiered based on the balances, and runs from .5% APY to 1.55% APY.

CD Accounts

Bank of America offers CDs in terms of 28 days to 10 years. Interest rates are tiered based on the balance and run from 1.4% APY to 4.00% APY.

Cool Features

The cool feature for Bank of America is the “Keep the Change” program. When consumers use their debit cards, the purchase is rounded up to the nearest dollar amount and moved over to the savings account. For the first three months of a new account or set-up, Bank of America will match the savings penny for penny. Thereafter, they will match a total of 5%, not to exceed $250 a year.

Customer Service

Terrible. I went inside to get some information and was left sitting in the lobby for 25 minutes. When I asked for some literature on their accounts, the representative told me they didn’t have any but that he would be glad to explain the accounts to me. I agreed to hear him out and then he proceeded to basically read me off a memorized script about the accounts. It was methodical. I’ve heard from other employees that have left Bank of America and come over to other banks that they do require the employees to read an approved script.

Beyond that, the guy was interested in asking a bunch of personal questions without telling me what he was doing. I knew what he was doing, but from a customer’s standpoint, he should have explained. Not doing so put me on the defensive since I just wanted account info. Instead, I was bombarded with questions about my investments, mortgage, and car loans.

There are no direct numbers for a branch, which is really frustrating. If you want to speak to someone at your local branch for something as simple as directions, expect to be on hold with their 1-800 number for a period of time. The individual I finally got had an extremely thick accent that I couldn’t understand and I finally had to ask to be transferred to a supervisor just to understand what I was being told.

Bottom line:

Not my favorite. The products are decent - I especially like the “Keep the Change” program. But, interest rates are average and their service is terrible. They seem to be a company that does well for those with a lot of money - as evidenced by the priority calling for the Advantage folks; but those who don’t have a lot of money don’t get much for the hassle.

I’d recommend Bank of America for those who have a chunk of change they want to deposit or for those who like the nationwide aspect. Otherwise, you may find another institution better suits your needs.

Popularity: 16% [?]

Lifestyles of the Rich and In Debt

After reading an article in the New York Times I thought we should revisit our discussion of millionaires. Now, none of the clients I’ve worked with have done any of what you’ll find in the New York Times piece, but it does remind me of a trip I took to New York a few years back.

I was working for one of the larger banks at that time. About a year prior, we had completed a merge and switched over to the other banks computer systems because they were significantly more advanced. The company had decided that the New York branches were going to stay on the old systems for a year - no one really knows why. At any rate, my trip to New York was to help some of the branches become familiar with the new systems. I spent about a week down there and worked specifically with the bankers, teaching them how to upload loans and so forth.

The very first Monday I was there, a woman came into the bank and haughtily asked to speak to her banker. When her banker came up front, she was all smiles with him - they did the kiss on each cheek thing. Anyway, they went into an office and he motioned for me to follow him. He explained to her that I was helping him with the new system. I smiled politely and offered to shake her hand. She looked at me for a moment and then turned back to him. She told him that she would like to speak to him in private. Then she looked back at me and gave me a hard stare.

Taking the hint I told the banker I’d be back in a little while. He sat in there with her for 25 minutes before he poked his head out of the office looking for me. When I went back in, she was dabbing her eyes - careful not to smear her makeup. We proceeded to put in a loan application for her. I walked him through the steps and then left the room before she could tell me to get lost. What I found out later was that she was having financial trouble. Her husband was some big tycoon on Wall Street and apparently a lot of their personal assets had been tied into several funds that had lost money. It dropped their net income from about $15 million to about $4 million. But, their lifestyle was a $15 million lifestyle and they couldn’t afford to drop to $4 million.

None of that was her primary concern though. Apparently she was very concerned with what her friends would think of her. Like the NY Times article talks about, being snubbed in a public restaurant is the ultimate disgrace for these socialites. She even asked about liquidating some of their remaining assets over a period of time to make up the difference because she couldn’t sell her car or her jewelry - her friends would notice.

It’s almost disgusting to those of us struggling to make mortgage payments and meet our regular bills to read stories of the really wealthy stressed out because their income dropped from a 9-figure to an 8-figure. But, to their credit when they’ve lived a certain lifestyle so long, it’s hard to imagine living any differently. We laugh at shows like the Simple Life because it’s a bunch of spoiled heiresses joining the real world, but a lot of these socialites who’ve inherited their wealth and never had to earn it have no clue what it’s like to be without money. So when the economy takes a turn for the worst, they feel the pinch just like everyone else.

For me, the difference is in how they accumulated their wealth. Heirs and heiresses who’ve never had to work a day in their life don’t really appreciate the value of hard work or a dollar, for that matter. For them, money has always been there for the taking. In our last discussion of millionaires, we focused on stories of people who worked their way up to millionaire status; it wasn’t just handed to them. To that end, those people know how to be frugal with their money so even in an economic downturn their lifestyles don’t change.

Do you feel sorry for the rich people who find themselves in these situations? Or do you think they need the reality check?

Popularity: 13% [?]

Ode to Getting Rid of Credit Card Debt

After all of the serious discussions on the board, I figured we were due a little lighthearted folly, or in my case, a complete leave of my senses! My sincerest apologies to Salt ‘N’ Pepa! [Sidenote from Jonathan: I think Kristy may have gone insane…]

Let’s talk about debt, baby
Let’s talk about you and me
Let’s talk about all the money
And the fees that you’ve cost me

Let’s talk about debt!
Let’s talk about debt…

Let’s talk about debt for the people at home or in the store
If you use that credit card you’re just gonna pay more
Don’t avoid or ignore the bills coming in the door
Unless you want a drop in your credit score

We talk about debt on the radio and the TV
Ramsey and Orman even have their own CDs
Let’s tell it how it is and how it could be
How it was, and of course, how it should be

Let’s talk about debt, baby
Let’s talk about you and me
Let’s talk about all the money
And the fees that you’ve cost me

Let’s talk about debt!
Let’s talk about debt…

The government says they’re gonna try and regulate
Won’t mean much if you pay your bills late
Some give rewards and super low rates
Just make sure you read what the fine print states

Pay your balances off and watch what you spend
Don’t try to keep up with the Joneses my friend
You’ll find that your debt won’t be nearly as much
You can contribute more to that retirement stuff

Let’s talk about debt, baby
Let’s talk about you and me
Let’s talk about all the money
And the fees that you’ve cost me

Let’s talk about debt!
Let’s talk about debt…

The end. Hope you’ve enjoyed my little parody. Keeping with the theme of lighthearted folly, share some of your ideas on musical parodies as they relate to debt. It can be anything - just try to keep it clean!

Popularity: 15% [?]

Justifying 3-6 Months of Expenses in Savings

First, thanks to Megan for asking the question. The Dave Ramsey debate is still raging on so if you haven’t weighed in, please do so! We’d love to read your opinions. But Megan asked how we can justify leaving 3-6 months worth of expenses in a savings account only paying 3% when there are clearly other investments that can offer a better return.

The answer: that money is intended to cover expenses in the event you lose your job, become disabled and unable to make payments for a period of time, or if something happens to one of the breadwinners in your family. Yes, there are certain insurances that cover most of these things; however, most have stipulations on how long before they kick in, how much and how long they will make payments, and even as to what will be paid. There is no such insurance for being laid off. Can your family really afford to take the risk of not being protected in the event one of these scenarios takes place? Can your credit report afford it?

Some people have suggested the use of credit to cover these types of emergencies; however, I think that’s asking for trouble when you start relying on your credit cards to cover your monthly expenses without the intention of paying them off at the end of the month. An occasional emergency here and there isn’t a big deal and a good reason to have a credit card in the first place. But we’re talking about having at least six months of expenses saved here. If you lost your job and were out of work, how would you pay the credit card back? You could end up defaulting on the card and disparage your credit report in the process. This is also why I think it is important to have the savings account and contribute as much as you can until you reach the six month’s of expenses, even if you have debt. Again, if your income is suddenly gone, how would you pay for anything? Credit is an option for a while, but eventually that runs out and the bills have to be paid. What then?

So for me the justification is simple: I need this money just in case something was to happen to me or in case I lose my job. I would rather only be paid 3% and pay no penalty fees if an emergency comes along as opposed to earning a better rate of return in investments but then have to pay penalties and taxes if I need the money. Not to mention the fact that investments can lose value and even though I started with six months, I could potentially have nothing if I ever need it. Investments are meant for the long haul, pulling out early could hamper your earnings. However, there is no need to have more than six months expenses saved at any one time. I’d say more than that and you’re losing out on better opportunities.

Still, that liquid savings account is fairly hard for some folks to swallow and I completely understand. Another option to consider would be certificates of deposit (CDs). Now, CDs aren’t 100% liquid; however, they are 100% safe and your money will be there when you need it. Most institutions will charge you a fee to withdrawal early, but most don’t touch your principal, only your interest. So, if you ever need that money, it’s there and it’s safe; but it’s also earning a little better than just a savings account. That option is completely up to you. I personally like the savings account because I just don’t like to spend money when I don’t have to. But that’s just me.

What do you think? Is it justified, or just a waste of time?

Popularity: 20% [?]

What I Think of Dave Ramsey

I get asked about Dave Ramsey a lot. Several people come into the credit union spouting the words of Dave Ramsey and then ask if we know who he is. Well, any banker worth their salt should know who he is. He’s only made our lives more difficult when it comes to educating people about the proper way to handle debt. But, recent conversations have prompted me to address the matter of Dave Ramsey and the debt snowball on this forum, so here goes:

My opinion of Dave Ramsey is that he’s horrible with math and probably not so good at psychology, either.

I’ve posted before on the fact that I don’t like the snowball method. I understand the reason for it existing, but I don’t think it makes good financial sense to teach people a method that costs them more money just because it may make them feel better.

I like the idea of taking things slow to achieve financial success, which is the basis of his 7-step plan; however, I don’t agree with some of his methodology. By the way, just in case anyone isn’t familiar with Dave Ramsey, he’s the guy that invented the debt snowball method, i.e. you pay your debt down in order from the smallest amount to the largest irregardless of interest rate. He has his own radio show and he’s also got a television show somewhere on network TV, but I’ve never seen it. His 7-step process looks like this:

1. $1000 to start an emergency fund
2. Pay off all debt (except the home) using the debt snowball
3. Build 3-6 months of expenses in savings
4. Invest 15% of household income into Roth IRAs and pre-tax retirement accounts
5. College funding for children
6. Pay off home early
7. Build wealth by investing

First and foremost, I’m a firm believer in paying yourself first and continuing to do so even when money’s a little tight. If you don’t, you’ll never find the money to save. Likewise, if you don’t have an emergency fund with 3-6 months expenses in savings, you won’t be making any payments on anything in the event something happens with your job. With that said, one and three should be combined.

I’ve already mentioned that I don’t like the debt snowball method, so for me Ramsey’s number two is ridiculous. As a financial “expert,” he should be teaching people the right way to manage their debts and offer advice on how to overcome their discouragement with regard to paying off those high interest debts. He shouldn’t be offering easy-out solutions that don’t teach people the value of working to pay down their debts. Beyond that, I’m just opposed to giving financial advice that costs people more money.

I think what people need to do is sit down and work a side by side comparison of the debt snowball and the traditional methods. Compare the time it takes to pay everything off and the amount of money spent at the end. Once they see the numbers in black and white, I think most people will fully begin to understand why so many financial experts are against the debt snowball. However, I realize that for some, this is the only method they’ll use and there’s no changing their minds. As you wish, but you’re still paying more money than you should and I imagine there’s other things you’d like to be doing with that money!

Investing into pre-tax retirement accounts and Roth IRAs is an important step for taking care of your retirement needs, so I’m good with number four. Your retirement is up to you as no one else will take care of it. I will add that this should not be neglected while you’re paying down your debts. And to finish off the list, the last three are fine with me as well.

So that makes my list a six-step process that looks like this:

1. Build a savings account with 3-6 months worth of expenses
2. Pay off all debt (except the home) using the traditional method
3. Invest 15% of household income into Roth IRAs and pre-tax retirement accounts - with the caveat that this is not neglected at any point in the overall process
4. College funding for children
5. Pay off home early
6. Build wealth by investing - be sure to diversify your portfolio

I was talking to a member today who was a huge fan of Dave Ramsey. He asked me if I knew who he was and I said yes. He went on about how his advice was great and he’s working to pay off all of his debts, etc. He was even opening an account for his emergency fund and dropped about three months worth of expenses in it. Then he asked what I thought…Something you have to understand about me is that I don’t like to sugarcoat stuff, especially when it comes to finances. I’m a bit like Suze Orman in that I tell it like it is. People need to hear the truth.

So, I told the member that I’m not a fan of Ramsey’s, but that I was glad he was opening the savings account. He asked my why I didn’t like Ramsey. I told him everything that I’ve said here and then I told him I would show him. So we sat down with his debts and worked the numbers both ways. If he did the debt snowball method it would take him 29 months to pay back his debts and it would cost him $8945 in finance charges. If he paid his debts the traditional method it would take him 27 months and only cost him $7988. That’s a difference of $957. So, to me it’s clearly obvious that the traditional method was better. I don’t think he’d ever considered it that way before because he seemed blown away. We talked about some other options to shorten the time span and save even more on the interest all of which he declined, but at least he walked away with better options. And that’s what a financial expert should do - they give you options that help save you time and money. They offer advice on areas you could improve. They DO NOT give you easy-out solutions that cost you more money in the long run!

Ok, so let’s have some friendly bipartisan debate here:

For those who side with Ramsey, why do you like the debt snowball method? For those who agree with me, what’s your biggest objection to it?

Popularity: 56% [?]

Do You Work to Live, Or Live to Work?

I have a friend from Germany that has moved to the states to work. He’s always wanted to live here, but now that he’s here he’s wondering whether or not he made the right choice. We got into a conversation about it the other day and he said the biggest difference between Americans and the rest of the world is that Americans live to work; everyone else works to live.

That statement was simple, yet very profound for me. I definitely live to work. I haven’t had a vacation in more than ten years - not a real one anyway - I haven’t stopped to smell the roses in I don’t know how long. My life is consumed with my work and school. My friend, on the other hand, working only to live goes sailing every weekend. He enjoys the simple things in life like a picnic in the field on a warm spring day or a drive through the countryside at dusk. These small pleasures that are simple and free, yet we often take for granted.

So now that I was feeling thoroughly depressed with how hard I seemed to work and how little I seemed to play, I thought about it a little more. Is it a bad thing to work as much as I do when you love what you do? Doesn’t passion count for something?

To be fair, my true passion is writing and I’m not doing nearly as much of that as I’d like. While I love the financial industry and helping people, if I’m honest I do it because it provides me the money I need to pursue my passion of writing. And while I occasionally get paid for my writing, I’m not so sure I’m ready to cut the safety net of the financial industry. But, part of my job in the financial industry means I keep up with financial news around the world and in the U.S., at least as much as possible. What I found today was both inspiring and deflating in equal measures - how’s that for injustice?

Kiplinger’s gave a report on a couple in Florida who have little debt, a new baby, one spouse working the steady 9-5 gig and one spouse doing the freelance gig. The one working 9-5 is Todd and his passion in life is to make films. He’s part-owner of an indie production company that’s made some acclaimed short films and now they’re seeking out investors to help develop feature films. The trouble is, he’s only able to devote himself part-time to this venture because his priority is to the job bringing in the income.

Todd and his wife are doing modestly well with $135,000 saved in retirement accounts, a liquid savings account with at least 6 months worth of expenses saved, and little debt - in other words, their finances are an excellent model of where a couple their age should be; however, market experts say now’s not the time to leave his steady job. Now’s the time to stay his course and keep the benefits given the uncertainty of the economy. That’s definitely a wise course of action, whether the economy is bad or not. While your passion may be a dream you’ve longed to pursue, when you have obligations that passion sometimes has to take a back seat to your life. Still, it has to be insanely frustrating to be so close yet so far away from his ultimate goal.

Clearly my inner artist is craving attention today as my post is more folly than practical, but assuming that we didn’t have bills to pay or had responsibilities to tend to, where would your passion lead you?

Popularity: 17% [?]

Why You NEED More for Retirement

This is going just a little off topic from the natural order of this blog, but I hope that you will indulge me. Given the state of the economy and the fact that EVERYTHING is going up in price, I felt it was a prudent time to address this situation. Plus, I just had a conversation with the most infuriating person in my life about why he doesn’t have enough for retirement….*groan*

So, let’s talk some specific numbers here. Realistically, how much do you think you’ll need in retirement? I had a conversation with a couple nearing their golden years the other day. Naturally we talked about retirement and they told me their financial advisor told them they would only need 70% of their current income because costs would decrease once they hit retirement. I told them to fire their advisor.

First of all, it is a myth that your expenses will decrease in retirement unless you do something drastic to make that happen. No longer working the 9-5 doesn’t magically make your electric bill go down. In fact, because you’re home all day, it’s likely to go up. People planning for retirement should ALWAYS plan for more than what they think they need. And if you still have credit card debt when you hit retirement age, guess what? That still has to be paid back. There is no magic pass that says you get out of debt just because you retired. Wouldn’t that be nice, though?

Back to specific numbers. Let’s take a look at how much it will cost you to eat in your retirement years:

Here’s to hoping you are one-half of a couple in retirement and both of you have got to eat. Most people like to eat three meals a day - I know some don’t, but in retirement, why not? The average meal comes to something like $8, but if you live in an expensive part of the country, you may want to calculate a higher number. Now, I like to eat everyday and I’m guessing most other people do, as well. So we’re talking 7 days a week and 365 days a year here. And, just for giggles, let’s say you plan to enjoy your golden years for at least 20 years. Now we have an equation….

2 people x 3 meals a day x $8 per meal x 365 days a year x 20 years = $350,400

Take a good, long look at that number. Now take a look at your 401(k) balance. Will you be able to eat once you reach retirement? Here’s something else to consider - this number doesn’t include anything but food. It doesn’t account for medical bills, living expenses, housing expenses, or any activities you dreamed of doing once you made it to retirement. And, just for good measure, let me remind you that this doesn’t take into account inflation either.

As of now, experts recommend that senior citizens have a minimum $220,000 saved for medical expenses alone to cover what Medicare won’t. Ideally, that number should be closer to $500,000 as expenses are expected to increase every year. So, with medical expenses, that puts you at a little under $3 million and we haven’t touched living expenses or entertainment. Remember those trips you wanted to take? Well, you can forget about it if you’re not fully prepared for retirement. The other option is to keep working all your life and rely on social security, which gets smaller every year and may not be around for much longer.

I think you can see why it’s important to adequately prepare for retirement. You may think these numbers sound extreme, but the reality is that they’re probably underestimated. Living on a fixed income is hard. You probably did it for years while you worked, living pay check to pay check. But you can’t afford to do that in retirement. I can’t stress enough how important it is to evaluate where you are with your retirement goals. You should be talking to your advisor at least once a year, preferably twice a year, to go over your goals and where you are. If you’re just contributing to a 401(k), then you should consider other options.

And don’t put off planning just because you think you have plenty of time. Start now! Couples in their 40s have to work twice as hard as couples in their 20s. The earlier you start the easier it is to reach your goals and live comfortably in your retirement.

So, are you ready?

Popularity: 23% [?]