Teaching Kids to Save

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July 28  |  goals, saving money  |   Lisa R. Hatcher

MoneyMonkey-PNG“Monkey see, monkey do”.  An old cliché, but an apt one in this case.  One of the best ways to teach children how to save is by example.  The age of the child needs to be taken into consideration to figure out what to do.  For instance, a younger child will respond to a piggy bank, something very tangible, whereas an older child can understand the idea of putting money into a savings account at the bank.  In fact, a field trip to the bank for the purpose of opening an account and explaining how a bank works can be a fun activity!

Getting into the habit of talking about money and sharing how you are managing money goes a long way to teach your children.  They don’t have to know the exact numbers, but getting a sense that one sets aside money now in small amounts so that it can grow into a bigger amount in the future is a good lesson to learn.  This strategy of sharing can be an incentive and motivator for you as well to stay on track.  The idea of delayed gratification is challenging but is an oh so important lesson to learn when young.

Setting goals is a critical part of handling money.  For your next family vacation, let the kids help plan it.  Teach them about creating a budget, help them work through tradeoffs of not being able to do everything they want.  Once you have the total budget, work backwards to figure out how much to save weekly and monthly in order to be ready for the trip.

Lots of parents have questions about allowances.  There are different schools of thought, and I encourage you to read up on the various options.  The main sticking point is whether or not the allowance is tied to chores.  Each family needs to decide what works best for them.  Research does show that getting an allowance in some form results in better money management later in kids than just doling it out as needed.

Here is a great website that talks about money and kids at every age level.  Check it out!  http://moneyasyougrow.org

Have a recent college grad at home?  We love to talk college students and recent graduates about getting off to a good start financially. Call for an appointment.

 

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Getting Divorced? First steps financially

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June 13  |  divorce, home page news  |   Lisa R. Hatcher

UntitledGetting divorced sucks.  I don’t actually like using that word… sucks… I think it is vulgar, but having gone through a divorce myself, I can attest to its validity.  Divorce is one of the most emotionally draining experiences one can go through that doesn’t involve the death of someone.  There is a death, though.  There is a death of a relationship that once held great promise.  It is difficult to think about the financial aspects of divorce when your emotions are raw and you are mourning the loss of the marriage.  I think both parties may feel this, even the spouse who initiates the divorce.

So while it is a challenge to think about, the financial issues are a huge part of the process and you can best protect yourself with information and knowledge.

Below are some initial things to do once you realize divorce is on the horizon.

Gather copies of your financial data.  Get copies of last three years of tax returns, get latest statements of all individual and joint accounts (checking, savings, brokerage, retirement accounts such as IRAs, Roth IRAs, and employer plans like 401(k) and 403(b), HUD statements for any home purchases, titles to cars, life insurance policies, and any other information about a substantial asset.  Also gather the latest pay stubs for each person.

Get copies of credit report from all three bureaus.  Note which accounts are joint and individual and where there may be an authorized user.  Joint accounts will eventually need to be closed and authorized users removed.  If you do not have a credit card in your own name, now is the time to apply while you can still include household income if you are not employed or your income is low.

Determine your spending.  This can be the hardest work if you are not used to tracking your expenses.  Review your bank and credit card statements to get a sense of your spending.  You may want to try an online tool called Mint.com which will get about three months of spending history on average when you set up your account.  You can use this tool moving forward to track your spending.  Get a sense of what your “squeak by’ number is, that is, the basic amount of spending to keep you and your family housed, fed, clothed, and transported (in a low frills manner).  Then see which expenses are more flexible and can be reduced if needed.

Make a list of your assets.  Note how they are titled, joint or individual, and if joint, what type of survivorship.

Make a list of your debts. Note the original balance, the current balance, interest rate, and minimum payment, and the term of the debt if not revolving.

All of this information will eventually be needed as the divorce proceeds.  While it can be overwhelming, make a checklist from the items above and start chipping away at it, one item at a time.  The more you understand about your financial picture, the better equipped you will be to make property and support decisions.

At Hatcher Byles Financial Planning, we can help you organize and analyze your information so the settlement process is more efficient and less costly.  We work with clients (with one or both parties) on their own and in conjunction with mediators and attorneys.

GETTING MARRIED? TALK ABOUT YOUR FINANCES!

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May 28  |  home page news  |   Lisa R. Hatcher

marriage_love_wedding_265659_lGetting married is such an exciting time! But through all the excitement and hectic planning, don’t forget to spend some time with your soon-to-be spouse to talk about the #1 topic couples argue about –finances.

Handling your finances does not have to be painful, it’s just something that needs to be discussed, planned for, and agreed upon and the best time to do it is before you tie the knot. Think of it as part of the planning for your amazing future together and setting some goals for all the wonderful things you will do together!

Here is something to consider: how are you going to handle your finances once you are married; separate bank accounts, joint accounts, or a combination of both?

1) Separate Accounts (i.e.: you each have your own accounts in your own name)

If you have separate accounts how will you separate the bills?
One option if you are a two family earner, you may choose to split the bills in the same % as your earnings (i.e.: if hubby earns 60% of the household income and the wife earns 40% then split the bills 60/40).

2) Joint Accounts (i.e.: you put your money together into one account that you share)

If you have joint accounts, how will you handle if one person wants to make a large purchase (shoes, gifts, etc)? Perhaps you make a rule that if one person spends over a certain amount (like $100 for example) that it needs to be discussed first.

3) Combination of Separate and Joint Accounts

You use joint accounts for household expenses and joint savings goals, and , if applicable later on, for child related expenses.  Keep separate accounts for personal expenses for things like personal care, clothing, and gifts.

There’s no one way that is right for everyone and it may take some trial and error to find the best match for you and your beloved. It’s important to talk about this and be prepared to tweak as needed.

We recommend that you each have at least one credit card in your own name. The other person can certainly be an authorized user and have a card for that account but you each need to continue to establish and maintain your own credit.

The most important thing to do is to set your goals; how much do you want to save each month, how much do you want to invest, how much do you want to spend? You may want to have a look at our blog: http://hatcherbyles.com/needs-wants-and-savings-the-50-30-20-rule) for some great suggestions.

Do you want to save money to buy a home? Do you want to travel? Are you planning to have children? Will one of you stay home and work part time or not at all? When do you want to retire (it’s never too early to plan for that!)?

Once you agree on your goals, it’s much easier (and more exciting) to save your money knowing you are working towards something wonderful.

Start your new life out right and talk about your finances. Not sure how to get the conversation going? Just print out this article and share it with your spouse. You’ll be so glad you did!

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Stormy Weather or We’re In the Money?

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April 15  |  home page news  |   Lisa R. Hatcher

stormy weather (150x149)One of my delightful clients described to me how her emotions mirrored the music on NPR when the stock market report came on.  If the jingle was “We’re in the Money” she felt good, it meant the market was up and if it was “Stormy Weather” she felt bad, as that meant the market was down.   If you are regular listener of NPR’s Marketplace, you can relate.

Research shows us that investors feel the sting of loss more deeply than they do the joy of gain.  This emotional, visceral response to losing is strong.  We want to avoid situations of loss.  But taking some level of risk in the stock market is necessary for almost all of us in order to achieve our goals of financial independence.  Understanding this emotional component and having a mindset and an action plan to counteract our gut reactions is crucial to the long term growth of our investments.

As we’ve had some recent days of down markets, it’s a good time to be reminded that ups and downs are inevitable in investing.  While it is no fun, volatility is to be expected.

Here are some key points to remember in order to succeed as an investor:

Cultivate this Mindset:

You can’t beat the market over the long term

Market timing doesn’t work

Focus on what you can control (fees, savings rate, your asset allocation)

Investing is for the long term (match your risk level to your time horizon)

Execute this Action Plan:

Choose an investment mix wisely

Stick with your mix

Keep your investment costs low

Rebalance annually

If you are already a client, you know that I am a big fan of Vanguard funds.  For a more extensive discussion, including supporting research, on the topics I’ve raised in this blog, see this link on the Vanguard website.

If you have any questions about how to implement your own Action Plan, please schedule a Get Acquainted meeting with us, we’d love to help you.

Photo credit – 2oth Century Fox Studios

The Behavioral Side of Finance: What’s holding you back?

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March 19  |  goals, saving money  |   Lisa R. Hatcher

I’m celebrating this month!   It’s been 10 years since I started working in financial planning and five years since I moved my home-based financial planning practice to a cozy IMG_20140318_154812_379office in Bon Air, Virginia.  Long time readers of this blog know that I love vision boards.  The picture with this blog is from 2008 – it was my vision of my business space.   Thanks to Ikea, interior designer Kelly Brown, and some sweat equity with a screwdriver, this dream office came true!

As I look back on my ten years’ experience, what I learned that wasn’t talked about or acknowledged in my coursework was the effect of our emotions on our finances.  Now it is much more of a hot topic.  In fact, I co-created a workshop where we delved into it, The Behavioral Side of Finance:  What’s Holding You Back?  I want to share some of the key points of that presentation with you. *

First we talked about our money blocks.  What are the messages you received growing up about money? What messages do you get from society, your family, and your friends now?  Was there a scarcity mentality or an abundance mentality?  Was money talked about or was it considered taboo?  By examining these beliefs, we then discussed some of the common ways we sabotage ourselves through behaviors such as avoidance, over-spending, indecision, and for many women, beliefs that they “just aren’t good with money” and/or that someone else, i.e. a spouse, would come along so they don’t need to think about money.

Next up was “change your money mindset”.  Once you’ve identified the money blocks, it is much easier to avoid them!   While each specific behavior needs to be addressed, a common thread was the idea to think about money differently, to show it gratitude and appreciation.  How do you do that?  Instead of thinking negatively about all your bills, think about how fortunate you are to have electricity when paying the power bill, how divine a hot shower is when paying the water bill, and how easy it is to jump in your car to drive wherever you want to go when the car payment is due.  This may seem like a subtle shift, but expressing gratitude helps us to be open to more abundance.

You show money appreciation when you know your goals and you know your numbers.  What numbers?  To start out, do you know:

1) how much money comes in each month?

2) how much money goes out and where?

3) how much you owe?

4) how much you own?

If those numbers are fuzzy, then this is a good place to start.  Once you’ve got this nailed down, then it’s time to review the typical financial topics of taxes, savings, insurance, investments, retirement, all the usual stuff.  Address the behavioral side, and then focus on the financial planning side.

The last takeaway we gave them was to pay attention to your money.  By this we mean, check your balances every day.  Become intimately acquainted with your money.  When you check it every day, you gain awareness and the opportunity to show gratitude.  It can help you stay motivated and committed to your financial goals.  Set an alarm on your phone to remind you to check.

By identifying your money blocks, changing your money mindset, knowing your numbers, and paying attention to your money, there’s nothing to hold you back from reaching your financial dreams!

 *Thank you to Angela Bach, a licensed professional counselor, who was my co-creator and co-presenter of this workshop.

 

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Applying to College?

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February 18  |  college, home page news  |   Lisa R. Hatcher

photo (1)You need to know about the FAFSA.

If your son or daughter is applying to college, be sure to check out the available financial aid. Many factors affect financial aid eligibility and any change in family financial circumstances can change your eligibility for aid. Deadlines to apply for aid vary by school, but usually by March 1st or so.

FAFSA stands for Free Application for Federal Student Aid, and applying on http://www.fafsa.ed.gov/   will determine what federal aid you are eligible for. While in college, filling out a FAFSA each year will allow you to access federal aid. The program offers more that $150 billion in aid to students yearly through grants, loans, and work-study funds.

You will need financial information for parents and the student to complete the FAFSA, so it helps to have your taxes completed first, though you can use estimates initially.

Even if you don’t think you qualify for student aid, everyone is qualified for an unsubsidized Stafford Loan. Unsubsidized Stafford Loans are federally guaranteed loans that aren’t based on financial need. With an Unsubsidized Stafford Loan, a dependent student can borrow up to $5,500 to $7,500 per year, (depending on grade level) at a (current) fixed interest rate of 6.8%. Interest accrues from the time the loan is disbursed to the school, as opposed to the subsidized Stafford, which delays interest accruement. With either Stafford Loan, interest and/or principal payments are not due until six months after graduation, or six months after you drop below a half-time student status.

Another government site with lots of info is http://studentaid.ed.gov/ and there’s even a YouTube channel about federal financial aid.

Be aware of companies that try to trick you into thinking you have to pay to complete the FAFSA.  You don’t!  The first letter F, after all, stands for FREE!

In my area, there are local resources available to help with filling out the FAFSA, GRASP,  the GReat Aspirations Scholarship Program, Inc.  Check your local area to see if there are similar programs as well.

See this blog for more information on how to evaluate a financial aid award letter.

Paying for college can be challenging, but knowing your options can help make a college education affordable.

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3 Secrets to Get Control of Your Money

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January 21  |  budgeting, goals, home page news, saving money  |   Lisa R. Hatcher

Secret Kiss From One Boston Terrier to AnotherTo get control of your money, you have to know how much is coming in and how much is going out.  Unless you have a system in place to track your expenses, you probably aren’t really sure.

So, the 3 secrets to get control of your money are really not so secret.  In fact, they are quite available and easy to use.  The secret is in the DOING.  It doesn’t really matter which secret you choose, just that you consistently use it!

Here are 3 ways to track your expenses and gain control of your finances. Pick one that feels right for you.  Try it for a month and then evaluate your progress.  If it’s not working, try another method until you find the one that works for you.

Secret  #1.  Pen/paper/envelopes

Pros:  Easy to start – easy to understand, no worries about sharing your data online

Cons:  Difficult to summarize the information, can be time consuming if lots of transactions to record

This is old school, but for some it’s the easiest way.  Use a notebook to list out all your fixed expenses (housing, debt payments, utilities, and, hopefully, savings).  Subtract from your take-home pay to see how much is left.  Then take a couple of pages and list out your main categories of your spending – food, gas, eating out, clothes, entertainment, et cetera.  Keep a running total in each category as well as the total.  For some people, the act of writing down the expenses helps them spend less.  You can also create a template for each month of spending and make copies of it.  There are also budgeting notebooks at office supply stores.

For categories that you find hard to track or budget for, try using envelopes.  For instance, if eating out is your weakness, set aside the amount you want to spend that month on eating out.  Put that in cash in the envelope.  Only use that cash for eating out.  Once the envelope is empty, you have to wait until next month to eat out again!

Secret  #2.  Smartphone apps

Pros:  The apps summarize and categorize your spending quickly and easily.  Great for on the go tracking

Cons:  Must have a smartphone and be comfortable using it, can be a learning curve

Within apps, there are different approaches.  Some track your spending as it is linked to your bank account and credit cards, others rely on you entering the data.  See this article for suggestions on apps:

http://www.imore.com/best-income-and-expense-tracking-apps-iphone-spendee-mint-budgt-and-more

Secret #3.  Computer – either online or offline and choice of a program or your own spreadsheet

Pros:  Easier to summarize your data, get totals, and compare your spending monthly and annually

Cons: May require you to input data

You can create your own spreadsheet or go to http://office.microsoft.com/en-us/templates/excel-templates-FX102828204.aspx

Some of the online programs have apps for the smartphone as well.  A very popular free online program is www.mint.com.  This tool pulls all your transactions from the accounts you enter, like your bank and credit card, categorizes them, and lets you see at a glance how much you are spending.  There is a little bit of a learning curve, but once you get the hang of it, it is fairly easy.   Another  popular software is You Need A Budget, YNAB  http://www.youneedabudget.com/  .   It offers a free trial, then it is $60 to purchase.  Many users find it more forward looking than Mint.  There are avid supporters of each product.

TAKEAWAY:  Find the method of tracking expenses and budgeting your money that works for you.  The effort towards finding what works for you will be worth it in the end.  Having control over your money will truly help you reach your financial goals.

If you are having success with one of these methods, please comment!

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One Dollar One Vote

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December 11  |  budgeting, goals, saving money  |   Lisa R. Hatcher

1458458_10151774963397717_1454222442_nIn an election, sometimes we feel like our vote doesn’t really count, that there are too many others voting to make a difference, so does our one vote actually matter?  The answer is yes, it does matter.  Because each single vote is added one by one, with the final tally determining the winner.  In my home state of Virginia, just ask the candidates for Attorney General if every vote counts.  Out of more than 2 million votes cast, only 165 separate the candidates (a recount is scheduled).

In our financial lives, every time we choose to spend or save money, we are voting.  One dollar, one vote.  And just like in an election, when the votes are tallied, we see who wins.   When you look over your spending, are you voting for winners – for the things that are important to you?

  • Are you voting for your future independence by contributing to retirement plans like a 401(k) or IRA?
  • Are you voting for financial stability by funding an emergency fund?
  • Are you voting for the security of your family by having enough insurance?
  • Are you voting for education by setting aside money for your children’s college fund?

Our spending ideally should reflect our goals and priorities and be in alignment with our values.   This requires two things:

1) you know what your goals and priorities are

2) you know how you are voting with your money, i.e. you know what you are spending

When you examine both of these, any discrepancies will quickly become apparent.

We encourage you, as we go through this holiday season, to think about your values, priorities, and goals, and to be mindful as you spend….what are you voting for?

Gratitude: A Money Mindset

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November 25  |  goals, home page news  |   Lisa R. Hatcher

391214_10150370330317391_195780057_n (2)Gratitude has immense power.  It can make the difference between being content or miserable.  As Abraham Lincoln said: “People are just as happy as they make up their minds to be.”

I am grateful to have a diverse range of clients.  Some are recent college graduates, some are retirees with substantial means, and many are somewhere in between.  From my vantage point, though they differ in income and wealth, they have similar challenges. Everyone faces spending decisions.  What am I going to do with my money? Am I going to buy a “thing” or an “experience”?

Research tells us that we get more happiness from anticipating and planning for experiences than we do from buying stuff.  We also have learned from studies that money buys some happiness, but not as much as you think.  The magic number seems to be $75,000.  There is not a significant difference in happiness when earning more money than that.

No matter our income level, we all have bills to pay and finances to keep organized.  For those of you who may struggle with this, I have some suggestions:

1.  Reframe your attitude towards paying the bills.  Rather than approaching it with dread, make it a pleasurable experience.  For instance, if you pay bills once a month, set a date on your calendar, sit down at your desk/computer with your favorite beverage (tea, coffee, a Chardonnay), put it in your favorite glass and start to work. Have a special pen.  Use a pretty notebook or colorful folders.  Create an atmosphere that is welcoming to completing this task. Make a small vision board with your financial goals to prop up while you write that check or hit send on the payment button.

2.  As you make a payment, think about how much you appreciated the service or item that the bill represents.  I am grateful I have electricity and hot water.  We live better than kings and queens did long ago!

3. If you bank online, personalize your accounts when you can, even your logins and passwords.  My regular checking account and my down payment account are renamed “Grateful for all I have” and “Future Freedom”.  Every time I check my balances, I see those lovely nicknames and am reminded to be grateful.

4. If you have set a goal to staying on top of your spending – i.e. you are keeping track of your expenses and you see progress towards your goals, it’s okay to give yourself a reward.  In fact, it is a really good idea.  This will help keep you motivated to continue.  Just don’t go overboard!

Cultivating gratitude for where you are and envisioning abundance in whatever you have will help attract more of what you want.  By focusing on the positive, we reduce our stress and enjoy each day more.

Happy Thanksgiving!

What’s your plan?

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October 21  |  budgeting, goals, home page news  |   Lisa R. Hatcher

thinking of moneyAll of us face many demands on our time.  There is work, family, friends, schools, charitable events – trying to eat healthfully and get enough exercise…the list goes on and on.  We put taking care of our money at the end of those lists.  For some of us, this is true even when we worry over our finances.  We deliberately don’t think about it, as it is too much to contemplate.  So, I want to go over a few ideas to get you started on facing your finances and creating your own personal financial plan.  Start small; take baby steps….get going!

1.  Get a notebook – one that makes you happy to look at and is a three ring binder.  You can keep your plan in this.

2.  Make a list of all the money related issues that worry you.   Circle the top three.

3.  Write these three on another piece of paper.  Then think of the steps you need to take to reduce your stress in that area.  Often, just writing things down will make you feel better.

4.  Now, here is the idea of small changes…baby steps.  Choose ONE thing that you can do this week off the list.  Each week, try to do ONE thing.  It may seem like you are not making progress, but if you can consistently do just a little bit, you will be moving forward!

5.  Once you go through the top three, go back and find the next three issues.

If you are like most people, you hear about the importance of having a financial plan.  If you are not sure what that really means, here is a simple start.  Your “to do” list would be well served if you had these items on it:

1.  Make a list of all your assets and their current value

2.  Make a list of all your debts, with their current balance, the monthly payment, and the interest rate

3.  Make a list of all your expenses – the monthly fixed recurring ones, the irregular ones, and the variable ones.

4.  Make a list of all your income sources

With these four things, you will know your net worth (assets minus debts) and your budget (income minus expenses).

Armed with this knowledge, you can tackle other areas like credit scores, emergency fund, college funding, saving, investing, retirement planning, insurance, taxes, and estate planning.  Everything else is interwoven through those four items.  They all come together in a unique way to create YOUR financial plan.

“Those Who Plan, Regardless of Income, Save More and Feel More Confident About Their Financial Futures” ~ CFP Board study

- See more at:

http://cfp.net/news-events/latest-news/2013/09/18/new-research-shows-most-american-households-do-financial-planning-but-the-extent-of-this-planning-varies-greatly#sthash.Ss1vUNvo.dpuf

http://www.letsmakeaplan.org/

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