photo credit: dview.us

I’m so close I can taste it.  Today is payday so I sent a chunk of money to the car loan.  God willing, I should make the last payment in two weeks.  Though I haven’t been as good as I could be (still don’t bring my lunch to work), I’ve done a pretty good job of eliminating frivolous spending.

As soon as the loan is paid, I will restart automatic transfers to my IRA.  In addition, I’ll set up an auto transfer to a ‘car fund’.  My car is only six years old and has low miles so I’m not planning to buy another one for at least four years.  However, it would be nice to pay for the next car with cash.  The only problem is that I hate letting savings (other than our emergency fund) accumulate.  I always think the money would be better used to accelerate our mortgage payments.  One of my goals/criteria for early retirement is to have the house paid off.  It’s much easier to retire when your expenses are low.  How do you balance savings vs debt repayment?

Taxes are a bear and I just found out that property taxes will be increasing statewide this year.  Ugh.  So every little bit counts.  Not to mention, we have ~18 years until retirement and compounding interest is your friend.

How many accounts (banking and retirement) do you have?  Are there any that could be consolidated in order to simplify your finances?

photo credit: feverblue

Last year, Suze Orman and TD Ameritrade sponsored a Save Yourself promotion.  You would receive a $100 bonus for opening an IRA at TD Ameritrade and automatically funding it with at least $50/month for twelve months.  I signed up and last week, I received my bonus.  It’s nice to receive a 16% return (on the $600 total that I contributed) for doing nothing.

This year, TD Ameritrade is offering a similiar promotion.  However, this time you must open a NON-retirement account and save at least $100/month.  These terms aren’t as good as the previous offer’s but an 8% return is still nothing to sneeze at.   I’m debating signing up for this promo too.  Anyone else receive a bonus?

Go to Suze’s site to learn more.

Tell us a little about yourself

I am a Fee-Only independent financial advisor, a Certified Financial Planner practitioner (CFP) and a Registered Investment Advisor (RIA) registered with the State of California. I own a firm based in the San Francisco Bay Area, Curtis Financial Planning, and I have been in business for 8 years. I specialize in the finances of women, their families and their businesses.

Why did you become a financial planner?

 My previous career was in sales and marketing management in the food industry.  I gained valuable business experience and made a good, stable living but I didn’t feel like I was making much of a difference in people’s lives. I wanted to be of service as well as enjoy what I was doing.   Financial planning fits the bill for me perfectly.

What advice would you give someone interested in a career in financial planning?

When I left my old career, I was seeking freedom from corporate structure, so I decided to start out on my own.  This is probably the hardest way to build a financial planning practice – not only because you can’t share expenses with anyone, but it can be isolating.  I would recommend starting off with a partner or partners or an established firm  I would also decide what kind of planner you want to be – fee-only, fee-based or commission-based.  I am biased towards the fee-only model because I feel it has the least conflicts of interest and serves my clients well, but investigating the pros and cons of all three is a good idea.  If you do start your own firm, decide early one what how much and what type of fees you will charge for which services, and then decide which tasks you will do yourself and which tasks you want to outsource.  The key to success is not getting bogged down doing everything yourself. Identify your strengths and the let someone else do the rest.

For those who prefer the services of a professional, how do you suggest someone choose a financial planner?

As I mentioned earlier, I am biased toward the fee-only model, which means that the advisor does not earn their fees from commissions on product sales.  The best place to learn more about fee-only advisors is on the NAPFA (National Association of Personal Financial Advisors) website www.napfa.org. On this website, you can also search for a planner in your area.   There are a few steps I recommend in choosing a planner:

• Ask how they are paid
• Find out how they are licensed and if their licenses are current
• Don’t hire someone that asks you to write a check to them.  Find an advisor that uses a custodian where your money is deposited in your name.
• Check out references.
• Interview at least three planners and see if you have personal chemistry and if they listen to you.  

What are series 65 and 66? Is this something that matters when choosing a planner?

Series 65 and 66 are minimum competency examinations given to professionals with the investment industry.  Both exams are assembled by FINRA (Financial Industry Regulatory Agency).  In my opinion, it is more important that you check whether your advisor is registered with the state they live and practice in, or with the SEC (Securities Exchange Commission).  Also, choosing a planner who has achieved the Certified Financial Planner designation is a wise idea.  Fee-only NAPFA registered advisors and Certified Financial Planners are held to the highest fiduciary standards – meaning they are expected to put the clients interest first at all times in order to maintain their designation and membership.

I’ve been seeing mention of t-bills and muni bonds in the news of late, due to all the fearfulness of being in the stock market right now.   What are these and do you suggest for readers?

I can explain what T-bills and muni bonds are, but I would not presume to recommend to anyone unless I knew what their personal risk tolerance, age and financial objectives were.  But these explanations may help.

T-Bills or Treasury Bills are short term (maturities up to one year) government securities. They are very safe as they are backed by the full faith and credit of the United States Government.  Because of this federal backing, they are considered to have a risk-free rate of return.    But the returns are not high, so not always suitable for particular investors.

Muni bonds or Municipal Bonds are debt obligations of a state or local government. The funds raised may support general government needs or special projects.    They are most suitable for investors who have large tax burdens as the interest is generally exempt from federal tax.  In the case that the bond is bought by a resident of the state that issued the bond, the interest payments are also exempt from state tax. Interest payments are further exempt from local tax if they are bought by residents of the locality that issued the bond.  Depending on the issuer and project muni bonds are considered fairly safe investments and can have good returns.

What financial advice do you have for the self-employed among us?

• Separate your personal and business expenses – have a separate checking account and credit card for business and for personal.  Keep a good record of all your business expenses during the year so you are not scrambling and wasting time finding things at tax time.    
• Develop a business plan, even a simple one, and update it every year.  Make sure it includes cash flow projections so you know if you business will generate the cash you need to keep it going and pay you an income.
• Develop a support network of other self-employed people so that you don’t feel isolated and you get the support that you need. 

Last but not least, what is your favorite pf book?

Right now I am reading the updated version of Your Money Or Your Life by Vicki Robin and Joe Dominguez.  It is a book that attempts to teach people how to develop a healthy relationship with money in order to live more deliberately and meaningfully.    It will make you stop and think whenever you pull your wallet out of your pocket or your purse to buy something new.

Once again, thanks so much to Cathy for a wonderful interview!

photo credit: mujitra (´???)

This is a guest post from A, a pf blogger at I Pick Up Pennies. Thanks to A for guest blogging while I’m on vacation!

My husband and I turned 30 in 2008, and I decided it was time to start planning for retirement.

Neither of us have worked for companies with 401(k) matching programs, so no one was going to hold our hands (or match our funds). We were on our own.

Do it yourself (whether you want to or not)

Plenty of jobs out there offer 401(k) matching programs, although these may be in jeopardy as the economy dwindles. Even these people probably shouldn’t rest on their laurels when it comes to IRAs, but at least they have an excuse.

There are, however, plenty of people who don’t have access to a matching-funds program, or even a company-chosen bank to invest with. Whether they’re stay-at-home parents, self-employed or simply with a company that doesn’t provide retirement help, these folks are the ones who need to get going on an IRA.

Maybe they put it off because they think they don’t have enough money to bother. The fact is, there is no magic number when it comes to retirement contributions. Each day you procrastinate, however, can have long-term effects on your future.

In “Deal With Your Debt,” Liz Pulliam Westin gives the perfect example:

There is a pair of twins. One contributes $3,000 every year, from age 22-32. Then she stops and never puts in another nickel. The second contributes $3,000 from 32-62. The early saver will save nearly $100,000 more than her sister: $437,320 vs $339,860. (This assumes an average return of 8%, since this example was written in far more optimistic times.)

Take the first step – however small

The moral of the above story is that the sooner you act, the more benefits you reap. Still, some people think that they couldn’t put enough in the plan to make it worthwhile. And this is where they’re wrong.

Of course, each of you must decide for yourselves what you are comfortable contributing. It will depend greatly on your income, your assets, your debt and basic costs of living. For the two of us, that amount was $20 a week. (Which you probably knew from the title.)

My husband and I have an income of just under $3,150 a month. From that we pay: $700 for rent, $502 for my husband’s health insurance, and about $100 for a medication not covered by Medicare. Beyond food and utilities, most of the rest gets thrown at our debt: $8,600 to the credit card companies and $5,000 to relatives.

Despite this tight budget, we both agreed that we could budget around $20. That amount probably wouldn’t be missed. Anything more than that, though, might hinder our ability to pay down debt as quickly as possible.

Some of you may wonder why we even bother contributing such a small amount. The thing to remember is that those little amounts add up. At $20 per week, we accrue $1040 in a year (minus a $20 bank fee). Maybe that’s still not very impressive for most people. But it’s a step in the right direction – and the first step is usually the hardest.

I look at the IRA as a symbol of our commitment to creating a secure future for ourselves. And it reminds us that, even in this low-income situation, we can start our plans for a better future – just in a slightly smaller way than we might like.

Still not convinced? Okay, then let’s look at the math:

Let’s say our contributions never get beyond $1020 a year (52 weeks x $20/week and minus $20 bank fees). But we contribute for 30 years and get a 3 percent return. (Given the current markets, I think it’s best to be conservative.)  At the end of that 30 years, we would have $49,934, completely tax free (which we’ll address later).  And if in 5 years, my husband is able to start his own IRA, he’d have $42,769 at the end of 25 years. That would make for a total of $92,703.

From $20 a week, we can grow over $90,000. Imagine what we can do when we get out debts paid off.

photo credit: habi

Once again, Kiplinger’s Magazine is offering FREE retirement advice.  Today, you can call or go online (9 am – 6 pm EST) to talk with NAPFA financial planners.  Just call 1-888-919-2345 or go to www.kiplinger.com/yourretirement/jumpstart/.

photo credit: habi

Once again, Kiplinger’s Magazine is offering FREE retirement advice.  Today, you can call or go online (9 am – 6 pm EST) to talk with NAPFA financial planners.  Just call 1-888-919-2345 or go to www.kiplinger.com/yourretirement/jumpstart/.

photo credit: habi

Once again, Kiplinger’s Magazine is offering FREE retirement advice.  On January 13th and January 30th, you can call or go online (9 am – 6 pm EST) to talk with NAPFA financial planners.  Just call 1-888-919-2345 or go to www.kiplinger.com/yourretirement/jumpstart/.

photo credit: sixty69niner

The turning of the calendar to a new year can provide motivation and a fresh start. Leave all your financial garbage behind in 2008. Instead of making resolutions, take action to improve your finances for this year and the years to come.

• Set up a Christmas account – Congratulations if you did all your Christmas spending with cash (or paid your credit card bill in full). Most people don’t. So avoid disaster by starting to plan now. Tally up how much you spent (or would like to spend) and start putting aside a little with each paycheck. Personally, I like ING (you can sign up to the right if you don’t already have an account with them) because they allow for multiple sub-accounts. Simply, create a new account entitled ‘Christmas fund’ (or similar) and set up automatic withdrawals from your checking account. When December rolls around again, you’ll feel no stress because you’ve already got it covered.  

• Set up a freedom fund – This is similar to the Christmas fund but for any irregular expenses you incur throughout the year – i.e. car insurance, homeowner’s insurance, property tax. Add up the yearly amount you’ll need to pay and divide by your amount of paychecks. This is how much you should set aside each pay period. When those expenses occur, you can merely transfer the necessary amount from your savings rather than stressing how you’ll come up with the cash to pay the bill.  

Automate your retirement savings – Don’t leave your retirement to chance. The IRA limit for 2009 has increased to $5000. This is $416/mo. Go ahead and set up an automatic withdrawal now. Technically you have until April 15, 2010 to fund your 2009 IRA. If money is tight, deposit $333/mo from February 2009 to April 2010.
 

 

• Automate your retirement savings – Don’t leave your retirement to chance. The IRA limit for 2009 has increased to $5000. This is $416/mo. Go ahead and set up an automatic withdrawal now. Technically you have until April 15, 2010 to fund your 2009 IRA. If money is tight, deposit $333/mo from February 2009 to April 2010.  

• Adjust your withholdings – If you’re getting a big tax refund every year, you’re giving the government an interest free loan. The IRS withholding calculator (you’ll need your last paystub handy) will tell you how many exemptions you should be claiming. This will increase your cash flow without much effort on your part.  

photo credit: sixty69niner

Kiplinger.com has published a 2009 “money calendar”.  Here are some of those important dates that you should make note of -

• January 15th – Estimated taxes are due for the fourth quarter of 2008
• January 31st – W-2’s and other financial statements for 2008 should begin arriving
• March 15th – Last day to use funds for 2008 HSAs/FSAs
• April 1st – Deadline for taking RMDs
• April 15th – TAX DAY, also deadline to contribute to IRAs for 2008
• June 30th – FAFSA deadline for college financial aid
• October 2nd – Deadline to establish SIMPLE IRA (for the self-employed)
• October 15th – Deadline to file taxes if you have an extension