Here’s to the 2021 Graduates!

With inspiration from the Archives of TGIF 2 Minutes… and in light of graduation season, it can be beneficial to celebrate the basics of personal finance for future peace of mind – both for ourselves and the kids, grandkids, nieces, and nephews who mean the most to us. 

College graduation may have been a long, long time ago or more recently – and experienced from the perspective of a parent, grandparent, or friend.

Inspired by last weekend’s graduation at the University of Notre Dame and “graduation season” in general, consider these pieces of financial advice that hold meaning for nearly everyone at every age:

Some financial advice holds meaning for nearly everyone at every age, not just recent grads.
Photo by Emily Ranquist on Pexels.com

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Are Tax Rates Going Higher?

The question of whether or when tax rates may go higher is one asked after many a US Presidential election. The actuality of taxes going up is altogether another issue with its own timing depending on the President, party and Congress involved. There can be signals of both higher and lower taxes that certain candidates and Presidents communicate to win friends (and elections) and influence people.

In fact, in reading this week the obituary of Walter Mondale it seems that his transparent insistency on a proposal to raise taxes in his mid-1980’s US Presidential bid was a major factor behind his losing the election to Ronald Reagan (Reagan’s 2nd term run). That was then, this is now. One could say that now President Biden ran on a platform to raise taxes – in part winning him the election. Taxes and tax plans may always be part of US elections as they say the only things certain in life are death and taxes.

There is no “magic bullet” strategy to avoiding tax increases.

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Better, Faster, Cheaper

The title of this edition could also be called “A Deeper Dive into Inflation.” Inflation is serious stuff – for people of all ages. Consider that lots of younger people (under the age of 45) have far less awareness of inflation because they have not experienced serious and sustained inflation in their lifetimes. Those of us in our 50’s and older have likely been stung by this invisible enemy – sometimes really stung!

The reason why inflation matters so much is because it is like a thief who literally takes a chunk of your money every time you go to buy something – especially something you really need or want. So then, you must reach deeper into your pockets to pay more for whatever you were about to buy. What if you were already spending pretty close to 100% of what you make? Or what if you are retired (or close to retirement) and are on a fixed income… and already figured out the life of your dreams and what it would cost?

The title of today’s edition is “Better, Faster, Cheaper” because there are handful of items whose cost has stayed steady or gone down over time.

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The $1,100 Cell Phone…Again!

From the Archives of TGIF 2 Minutes… read on for 2021 updates. Originally sent, April 2019.

Cash flow. Wouldn’t you like to have more of it around tax time? Well then, it may be time to delay or reconsider that new cell phone purchase.

Recently [in 2019] this “sticker shock” issue came to the forefront when I forked over $1,100 for my new Samsung Galaxy Note cell phone. OK, you may say, “Why didn’t you go with the zero-interest payment plan?” or, “Where have you been, Kerrie?” To which I would respond,

Having in place a stash of cash savings, “rainy day” fund, or emergency fund is one of the first things I discuss with all of my clients, no matter their income.

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Last Year’s Paycheck

Believe it or not, lots of people do not know how much they get paid. That is, in terms of total compensation. Of course, there are that handful of people who know exactly what they make – and most people know precisely their “net pay” that gets deposited into their bank account periodically. But in my years of discussing total compensation with my clients (who typically make a fair amount of money) a great deal of the time they do not know accurately enough how much they made in a given year.

Believe it or not, lots of people do not know how much they get paid.

January is an ideal time to take a closer look at a print-out of last year’s year-end pay stub to learn valuable details and information. Why is this important?

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The Biggest Winners

It is only fair that if there was an edition two weeks ago titled “Biggest Losers” there be an accompanying edition, “Biggest Winners.” Because there are A LOT of winners out there. But the financial and news media do not sell advertising talking about winners.

Here are the most obvious Winners, especially financially speaking:

Several of my clients and I painfully combed through their spending as part of the financial planning process. In most cases, these people came out with a greater awareness of who and what is most important to them.

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The Elephant in the Room

“Elephant in the room,” “ticking time bomb”…whatever you wish to call it, there is an issue currently present but not talked about nearly enough. The issue hits a nerve with nearly everyone – investor/saver or not. The issue is taxes – more specifically future taxes on retirement savings. Unfortunately, the issue has become so politicized that its true impact has almost been forgotten.

 Tax rates and total taxes paid may be higher or the same as today for lots of savers in retirement.

Back in 2016, I discussed part of this topic in TGIF 2 Minutes. (Click Death & Taxes to read.) At that time, the focus was soaring healthcare costs.

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Goals Gut Check

From the TGIF 2 Minutes Archives earlier this year PRE-coronavirus…

Earlier this year in February things were GOOD! The economy was cranking, unemployment was low, wages were up, and it was a somewhat perfect time of the year to set goals. Think: it was pre-tax filing time and after the holidays.

Fast forward to today… the world has changed. Our savings have been tapped in the pandemic — and new savings and other goals need to be reset! While the kids may now be going back to school (followed by maybe not??) using this precious time to set just a handful of goals can pay off toward achieving those goals.

silver and gold coins
Give yourself a “Goals Gut Check” with this precious time before things potentially go a little haywire.

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Why Do We Save Money?

As we persevere through the coronavirus pandemic, consider the following message from the 2019 Archives of TGIF 2 Minutes….

What is your reason for saving money? Is it retirement? Or are there “mini-goals” that would feel really great to achieve today?

Of course, retirement is often a primary long-term savings goal, but not always. “Retirement” encompasses more than simply stopping work and being on a “permanent vacation.” In fact, research published in the Journal of Financial Planning* reports that quitting work cold turkey often is not reality – for a number of reasons.

green typewriter on brown wooden table
What is your reason for saving money? Is it retirement? Or are there “mini-goals” that would feel really great to achieve today?

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“Hanging In There” in Tough Markets

How many times in the past going on 10 weeks has someone said to you, “Hang in there”? How many times have YOU perhaps said to someone you care about, “Hang in there”?

Hanging in there is often all we can do – and a brave thing to do at that. When it comes to tough markets like the ones we are currently experiencing, “hanging in there” translates to discipline in the midst of bravery. Discipline and bravery are two of the ultimate challenges in life.

KWD Chart

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