Mind the Piggy Bank
Dominique’ Reese, Financial Adviser and Educator, CEO CommuniTree LLC.
Parents, does your child ask for toys, games, clothes, food, while youre out taking care of business? If your child is like most, your answer is yes! In today’s times, it is becoming ever more important to use these moments as opportunities to teach your child about personal finance. You don’t have to do much or even spend money to teach them, although, there are services available if you did. Businesses such as CommuniTree LLC, where we teach youth and adults about money and deliver one-on-one money management counseling could be an affordable solution for you and your child to learn about money together. However, below, I will share with you four ways to teach your child (ren) about money and how to have fun while doing it!
1) LOANS 101–Before you and the young one(s) head out of the house to run those errands, give them $5, $10, $20, depending on their age, in an envelope. Explain to them that the money you’ve given them is a loan, borrowed money, that they can use to purchase whatever they want while you’re out. Your kid will think you’re the greatest parent ever…until you drop the bomb on them that they have to pay you back in full based on chores or other tasks you give them for a whole week!
2) COIN ID– If you have a really little one, he/she probably isn’t ready for money management and debt just yet! Instead you may need to start with identifying coins and bills. When teaching kids as young as 6 years old about money, you can have tons of fun and make it a learning experience beyond money. Pull out your pennies, nickels, dimes, and quarters. Get blank sheets of paper and colored pens. Trace the coins on your paper and instruct your budding money maker to do the same! Now the fun begins! Write the name of the coin and the amounts of the coin below each coin. Lastly, write the president associated with each coin and let the teaching begin! Allow your money maker to color the coins, using their budding imagination!
3) CIRCULAR SHOPPING– So you’ve heard of window shopping, but what about “circular shopping?” As adults, we do it fairly often on Sundays, when the weekly sales papers and coupons are delivered! This is a great way to include your kids in the shopping experience! Pull out your wallet, take out your cash, grab a calculator (or your cell phone!), get the circulars and a blank piece of paper. Create a list of 10 to 20 items you need or want. Give your child $20 to shop with and challenge them to shop for as many of the items as they can without going over! See how well they do and explain to them that budgeting is important for the reason that they just learned. Shopping for what we need can be expensive, but making a list and checking it twice will keep more cents and dollars in your wallet!
4) iSave—In this day and age, it is more important than ever to teach your child (ren) about saving their money! Do you have a savings goal? Have you met that goal? Unfortunately, if you, as an adult, don’t have any savings, chances are your child will not know the value of saving. A recent study conducted by FINRA Investor Education Foundation in 2009 says that of Americans ages 18-29, only 31% had an emergency fund. The other 69% of this cohort is on their way to be a “lack of savings” generation. They’ve got to have it now! In order to break this cycle, engage your child in saving by opening a student savings account for them NOW! Mostly all banks offer this type of account and for no cost. You’ll need your ID, your child’s ID, a deposit to open the account, and basic demographic information. Be prepared with your Social Security cards as well. Every week or bi-weekly, visit the bank with your child and allow them to deposit a portion of their allowance, birthday/gift monies and offer to match their savings! This will excite them and encourage them to save even more, just to get Mom or Dad’s match!
–Dominique’ Reese, CEO, CommuniTree LLC
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© 2011 Dominique’ Reese. All Rights Reserved
Shareeke Edmead-Nesi, Financial Literacy Specialist
Financial advisors are professionals, who provide essential services to every person who strives to achieve financial stability. Knowing when and how to select a financial advisor can significantly improve the benefit that you receive from having one on your financial team.
I’m often asked, when is the appropriate time to hire a financial advisor? I suggest that before you venture out to find the right financial advisor, make sure that your financial house is in order. The value that a financial advisor provides to a person is maximized when an individual has taken the right steps fiscally.
An initial step is to identify your financial goals. A financial advisor can help lead you on the right path, but you must decide where the road ends. Do you have a budget? Do you stick to your budget? It is helpful to know how much you spend on needs and wants on a periodic basis. A financial advisor may have suggestions to assist you in attaining your goals, but you need to know whether you can realistically adjust your spending habits to meet those goals. How much of your paycheck or earnings is diverted towards your savings? Being a conscious spender will allow you to allocate more of your earnings to your savings or increase your investing capability. A financial advisor can help you devise a plan that enables you to continue to build your savings for your retirement or buy your dream home by helping you to determine how to allocate your resources to accomplish your goals. A financial advisor can help you to devise a plan to obtain the resources you will need to accomplish your goals if it seems that your current resources are inadequate. But first, you should establish a basic understanding of your financial standing by tracking your spending and savings habits. Then you should decide what you want to achieve.
Once you have tidied up your financial house, identified your financial standing, begun to become more financially literate and have established goals that you want to achieve, it is time to select an advisor that is right for you. There are a number of important characteristics that differentiate financial advisors in the field. Understanding these differences can be vitally important as you search for the best advisor for you. The characteristics include the advisor’s professional qualifications, designations (i.e. CFP, PFP, etc.), personality, and investment style, to name a few.
There are several different designations that a financial advisor can attain. CFP is a Certified Financial Planner. This designation informs you that this individual has been in the industry for a few years. A CFP has also completed additional course work and passed an exam to receive that designation. There are other designations that are specific to certain needs like the Certified Long Term Care (CLTC) designation. Someone who is a CLTC may be a good resource if, for example, you are single with no children or have aging parents that depend on you financially in their retirement. Your goal may be to invest more money in the stock market. One way to do that is through mutual funds. If you are looking for a diverse set of mutual funds then a Certified Fund Specialist (CFS) may be your answer.
The main objective in selecting an advisor is doing your homework. Do your due diligence to make sure the individual is qualified. Ask friends and family for recommendations just like you would for a doctor as word of mouth is one of the best ways to find valuable advisors. You can also check trade organizations or regulatory bodies to see if there have been any violations or other disciplinary actions against an advisor. See a listing of some places to check.
- Certified Financial Planner Board of Standards, Inc.
- North American Securities Administrators Association
- National Association of Insurance Commissioners
- Financial Industry Regulatory Authority
- Securities and Exchange Commission
Lastly, the most important aspect of selecting an advisor is making sure you are comfortable. An advisor is an integral part of your life plan and you will share intimate details of your financial history and goals. You need to ensure that you can and are willing to talk to them freely and openly. Good luck in choosing an advisor and congratulations on the steps you’re taking to better financial health.
Mrs.Shareeke Edmead-Nesi is a financial literacy expert, who offers a “life planning” approach to personal finance. She is a conscious spending lifestyle coach, who provides a progressive method of financial education to those interested in improving their current lifestyles for the better. Shareeke is an engaging speaker, trainer and blogger at www.theconsciousspender.com
You can contact Mrs. Edmead-Nesi at:
© 2011 Shareeke Edmead-Nesi. All Rights Reserved
Divorcing Your Finances
Bathabile K. S. Mthombeni, J.D.
One of the more shocking experiences that a divorcing couple can face is realizing stark realities of the impact that divorce will have on their budgets. Navigating the necessary tasks of dividing property and setting the amounts that one or the other spouse will contribute to items like child support and spousal maintenance requires a careful look at a couple’s finances. Often, this is the first time that a couple has looked at its finances in such detail. For some, this is the first time that one spouse learns the truth of the family’s financial situation.
The task of sorting through the family’s finances and making plans for the future can be overwhelming. Help, however, is available. There are financial advisers who are specially trained to work with couples who are going through a divorce. A Certified Divorce Financial Analyst (CDF) can significantly reduce the stress and anxiety of making decisions about post-divorce finances.
I interviewed Lauren Prince, CDFA™, to find out more about what she does and how a CDFA’s services can be invaluable to a couple going through a divorce.
When should a couple consider hiring a CDFA™?
A Certified Divorce Financial Analyst™ [or “analyst”] is especially helpful in situations where a couple is ending a long-term marriage – one that has lasted for 10 years or more – the couple may have many different kinds of assets, and the couple has children. A divorce dissolves a financial partnership so it is especially important for a couple to know what kinds of financial decisions must be made and how to make them so that they can remain financially stable in the long term.
Too many couples believe that they are saving money by doing the financial analysis and decision-making on their own. However, that decision could end up costing them a lot more money in the future. Some people are highly organized to begin with and know how to create spreadsheets – know what data needs to go into the spreadsheet, how to calculate the present value of a pension, understand the details of their life insurance policy, and so forth.
Most people, however, will need someone to help them to construct a budget so that they are sure to have a good handle on what they do spend and whether that amount is reasonable and customary. Doing this can be a real stumbling block for one or the other of the spouses – they can become paralyzed when they realize how much they spend on things – perhaps because they were not involved in it during the marriage or they never thought to ask about it. This experience can be traumatic. Those are the people who wind up in financial difficulties.
What special value does a Certified Divorce Financial Analyst™ bring to his or her practice that is different from any other type of financial advisor?
Financial advisers trained as Certified Divorce Financial Analysts™ are different from other financial advisers because they are trained to be especially sensitive to the uniquely difficult process that a divorcing couple is going through. They understand the special decisions a divorcing couple must make. An analyst who is trained to work with divorcing couples has the tools to determine maintenance payments, child support, and knows the ins and outs of analyzing a settlement proposal. An analyst can also recommend a proposal: if a couple’s proposal isn’t working, she or he can make suggestions for improving the settlement. An analyst can come up with creative divisions of assets. For example, if one spouse is concerned about taxes an analyst can suggest characterizing a certain amount as child support and another amount as maintenance. Having the right tools and knowledge regarding the financial aspects of divorce is essential.
An analyst who specializes in the divorce context is also sensitive to the emotional turmoil involved and understands the value of being a calming influence. Having empathy and compassion are important in the practice.
What does a CDFA™ do to help a couple going through a divorce?
Specialized understanding of money and divorce
An analyst can help a divorcing couple to maximize the way that their money works in the context of a divorce. For example, while an analyst won’t give tax advice, he or she can suggest and recommend ways to take advantage of the tax code to limit tax liabilities and maximize credits.
Without guidance, a party may find herself or himself stuck with the bigger tax bill because she or he didn’t realize that the settlement gave him or her the assets with the higher liabilities – like the capital gains tax on non-primary residence. The analyst can point out the different kinds of tax deductions and tax credits that an attorney or even a CPA can miss.
The analyst can also help the couple to understand the need for insurance such as disability insurance, and should it be term life insurance or permanent life insurance, so that the spouse and/or children is/are covered if anything happens to the major breadwinner.
For example, I worked with a couple where the husband had a very adequate life insurance policy. When I asked to look at the policy I found that it would collapse because no premiums had been paid. The payments for the premiums had been coming out of the cash value of the policy but the cash value would be depleted in a year. The couple hadn’t considered that. They were relying on that insurance policy to cover support payments if anything happened to the husband but I caught the fact that the insurance policy was only going to last for another year.
Sometimes an analyst can also look at a tax return to see if one spouse has hidden assets.
Developing the post divorce budget
Most couples know their current budget as a married couple. They need to project what their budgets will be as single people – as single parents perhaps. Now they might have both a mortgage and rent to consider. Food costs will be different. Entertainment could be different. The adviser helps them to develop a post divorce budget.
Developing the budget involves data gathering: collecting all of their tax returns for the last couple years, making a detailed list of their expenses, looking at their insurance policies, retirement plans, liabilities like credit cards, personal debts, student loans, mortgages, home equity [lines of credit], listing out all credit cards and the interest rates that are charged and the minimum balances, getting down to that level of detail.
Creating cash flow statements and financial projections
People going through a divorce generally don’t focus on post divorce economics. In the moment, their focus is generally on the emotional and legal aspects of the divorce. It seems that only after the divorce is over do they realize the true impact of the financial aspects of it. That is when they begin to ask, “How will I survive on this [money] now that the emotional and legal issues are fading away?” People will sign an agreement and complain they got a lousy settlement. But they should have figured it out [before it was finalized].
If one spouse is reluctant to agree on a settlement because they’re afraid they won’t be able to meet their needs, an analyst can show whether the settlement will or will not last and can end the negotiations with the facts. The analyst can create a statement that projects what each person’s finances will look like 5, 10, even 15 years into the future using agreed upon variable such as the inflation rate.
Knowing how much each person can spend after the divorce is important. The analyst can help the couple to develop a spending plan that factors in regular expenses, major one-time expenses and inflation and demonstrates where the money will come from to satisfy the spending plan. That is what the cash flow statement is about. Preparing a balance statement that lists all assets to see where income can be generated to fill any gaps in the cash flow or to even take care of all the expenses – to see how long the money will last. That is where net worth comes in: can be a real eye opener to see that one spouse will be set for life while the other’s money will only last 10 years. What looked like a fair settlement has to go back to the drawing board because it won’t work.
Creating the financial agreement
A couple working with a Divorce Mediator can come up with a proposal for how to manage their post-divorce finances. They can give that proposal to the adviser who will do a reality check to see if the proposed settlement will actually work over the long run. The adviser can help the couple understand the relative benefits of arranging the settlement one way versus another: should the couple opt for spousal maintenance versus a property settlement? Or, would it help one spouse with tax liability to characterize payments as alimony versus maintenance or child support? The tax consequences are different. For example, child support is neither taxable nor tax deductible but maintenance is tax deductable to the person paying it and taxable to the person receiving it.
If one person has been a homemaker, the budget can include a projection of what that person could earn by going back to work. The budget can project how one level of income versus another will affect both income and tax liabilities. The couple can then consider what to do if, for example, childcare expenses and commuting costs exceed the projected salary. The analyst can also suggest career counseling when it seems that the clients could benefit from that.
How did you get into the field?
I stumbled onto the specialty. My parents went through a divorce and that is when I discovered that there was training offered. I became certified in 1994 and I have spent 15 years in the field.
More about Lauren
“Lauren Prince is the owner of Prince Financial Advisory,LLC. She is an independent CERTIFIED FINANCIAL PLANNER™ certificant, a certified mutual fund specialist, a certified divorce financial analyst™ and a certified long term care consultant. Her business specializes in personal financial planning, investment management, and pre/post divorce financial analysis”
For more information please feel free to contact Ms. Prince at 212-286-1372,
© 2011 Bathabile K. S. Mthombeni, J.D. All Rights Reserved
We’re Going to the Accountant and We’re . . .
Troy Kirschner, Professional Organizer
Yes it is that time of year again, tax time. Well let’s get started with organizing your papers. Your accountant will absolutely love you! The first thing to do is separate your papers into to main categories; Income & Expenses. You should have two large envelopes preferably 9” X 12” to separate your income documents in one and your expense receipts in the other. Once this system is set up for tax year 2010 it will make your life much simpler when you need to go to the accountant next year. You are setting it up now before your appointment to the accountant. Get in the habit of keeping all relevant receipts in the expense envelope at the end of the day. Now that you have gathered up all your receipts, just sort them by categories as listed below.
Income, mostly your day job, other jobs and pay, where you receive a 1099 and other income you want to report if you are self employed. Also included in this category would be interest bearing accounts that you would also receive a 1099. I would also put all your donations in this category, in an itemized list.
Expenses that are allowable vary depending on how your income is derived. I will speak to small business owners that are home based. I suggest that you separate and organize your receipts under these headings:
- Office Supplies & Tools,
- CAR: Gas/Tolls/Parking, Mileage,
- Association/Professional dues,
- Education-seminars/webinars &
Remember it is important to make it a habit to store all your receipts in the expense envelope consistently, preferably in a 9” X 12” envelope.
By having your tax papers organized before going to your accountant you will surely save time and money that you would be charged if your accountant needs to 1st sort and organize before he/she can begin their job.
For more information about how Troy can help you, contact him at:
© 2011 Troy Kirschner. All Rights Reserved