Finding Your Best Place
If you are considering moving to another town or state but wonder what that will mean in terms of your finances - check out this handy tool on Sperling's Best Places.
In three simple steps they provide a cost of living comparison. In the top menu, choose the 'Compare Cost of Living' link. Then list your current city and where you'd like to move. They show your two cities side-by-side in all the categories you need, such as taxes, housing, food, and other costs.
In addition, you can enter your salary and the built-in salary calculator will determine how much more (or less) you need to maintain your same standard of living.
Being a Your Money or Your Life follower and a believer in money = life energy, I would add one more calculation to this site. I would calculate the TIME you need to work in order to pay for your lifestyle choice. For instance, moving from Petaluma, CA to San Francisco would be an increase of 36% in housing costs as housing is the biggest factor in the cost of living difference. And if I would have to earn $45,000 extra to move to San Francisco - what would that mean in terms of extra hours I'd have to work?
If you have read the book Your Money or Your Life, a New York Times bestseller that I contributed to in 2009, you will be familiar with the concept of your “real hourly rate.”
Calculating Your Real Hourly Rate
Maybe you’ve never considered that it costs you money to go to a job, but once you know how much it does cost, you can then calculate your 'real hourly rate'. It's a little bit of work, but I think you'll find it of interest: first compile a list of work related expenses such as clothes for your job, gift pools, lunches eaten out, gas or commuting fees, including insurance, registration, repairs and maintenance, etc. It is easier to obtain this figure on a weekly or monthly basis, as it is too difficult to measure hourly. Then, once you have your number, break it down to an hourly rate.
As an example, if you were to do your calculation weekly, and you spend $30 in gas, $125 for car payment/gas/insurance, $55 for lunch and coffee, and $80 on clothes, then you are spending $290 per week to work at your job.
Now divide the $290 by how many hours a week you work, say 40 hours, which is $7.25 per hour. That figure is what it costs you per hour to go to your job. Next, figure out what your salary is when broken down to an hourly rate. Say you earn $25 per hour. Now subtract the $7.25 figure that it costs you to go to your job - you may be surprised to discover that your new and real hourly rate is $17.75.
Now imagine that money equals life energy, and since you now know your real hourly rate – in terms of what you are paid at your job in exchange for your time - consider that every item you buy is not costing you money, but life energy. So if you want a new i-Phone that costs $300 and your real hourly rate is $17.75, then you need to be willing to trade almost 17 hours of your life energy to own that i-Phone. If you want a new pair of jeans that cost $40, then you will have to trade 2¼ hours of your life energy for that purchase.
And you may reconsider that move to San Francisco.
Photo credit http://www.flickr.com/photos/thebusybrain/
Based on a recent trip back east to visit my elderly parents and in-laws, I realized that for some, stressing over money never ends. Even though I have reviewed both sets of parent’s financials and showed them they are in fine shape, they still worry that they won’t have enough to last their lifetimes. The one difference is that for both of them, their first priority is making certain the kids get an inheritance. In our case, our parents have plenty of money to see them through the end of their lives, and the inheritances they planned on giving are a reserve to dip into should they need it. I imagine it is part of that generation in having a legacy of giving – so unlike the bumper stickers I often see affixed to RV’s stating “I’m spending my kids inheritances.”
So in addition to working Americans, it appears the retired and even the elderly feel stressed about money and often the cause was that they did not have their financial houses in tip top shape.
With glimmers of hope in the changing economy, many folks are less stressed now than say 2-3 years ago, yet many working Americans are still under financial strain. You wouldn’t think this would be the case, but according to a study by El Segundo, CA, based Financial Finesse, even the least vulnerable demographic groups, a) men between 55-64, and b) workers earning between $150K-$200K annually, are experiencing stress around money.
The study also stated that 83% of employed men have financial stress and for working women, it’s a bit more at 90%.
And the main reason for all this stress? The Survey cites poor money management skills by revealing a direct link to the ways Americans manage expenses, control their debt, and pay bills.
That said, even the folks who stated they weren’t all that stressed about money really should have been since many are clearly not prepared for retirement and do not have long-term plans in place. Their plan is often revealed as “I’ll just work until I die”, which clearly is no plan at all. As I often see, people like this are unfortunately far too casual about the importance of retirement planning. Of the 67% surveyed who reported no financial stress, less than half of them have only the basic estate-planning documents in place. They are leaving their assets wide open and vulnerable which is truly a cause for worry. In this case a little stress would do them a world of good.
And for people like my parents and in-laws, well, I think they actually need something to worry about - it's just who they are.
Image credit http://www.flickr.com/photos/topgold/
The website DailyWorth is a community of women who talk money in a serious way. This week they focused on teaching kids about money in a fun, interactive and interesting format. Here is the link to the DailyWorth post about teaching kids about money and below is a snapshot of the 3 excellent sites that teach kids about money that DailyWorth shared with it's readers. I say it's never too early to start the money conversation.
Zibkids is geared towards elementary school age kids and focuses on kids starting a business, providing a guide, a biz-card template, flyers, a website, and a profit-tracking tool.
Tykoon is for 8-12 year olds and shows kids the values of the family economy. (think tasks and rewards, setting and saving for short-and long-term goals, etc)
My Classroom Economy is for teachers, K-12 and it helps students by creating a mini-economy - while keeping learning about money fun and interesting.
Another great tool for teaching kids about earning money through work is MyJobChart.com. Gregg Murset is a CFP, father of 6 and Founder and CEO of MyJobChart.com – an interactive website that teaches kids about work, being responsible and learning the value of a dollar. My Job Chart is a free, easy to use, online chore chart and reward system for teaching, organizing and motivating your kids to save, share and spend responsibly.
Please check out the very informative 2 minute video to get an overview on how your kids can benefit from My Job Chart.
Image credit - http://www.flickr.com/photos/digitalsextant/29908738/
LearnVest is another excellent financial planning website whose aim it is to empower women and help them take control of their personal finances. LearnVest's goal is for women to "live your richest life." (I wish I had coined that phrase)
Recently they surveyed 10,000 of their readers to see how they managed their finances. They then compiled the data into an infographic so you can compare yourself to others.
I'm not certain of the demographic of LearnVest's readers, but my guess would be that it is geared toward mainly single women between 20-40.
I appreciate the important reminder at the bottom of the infographic:
Your financial life is all about you and your personal choices.
The pressure to spend lots of money during the holidays has arrived. With that pressure comes the urge to pull out your credit cards and buy now, pay later. You might be someone that spent a good part of this year paying off your credit card balances and now that the cards are paid off, you feel tempted to charge away.
Of course, it goes without saying that you and your spouse or partner needs to develop a budget for holiday spending and entertaining. That’s the easy part. But as we all know, sticking to the budget, especially as the holiday cheer kicks in, is a whole different story.
Ask almost anyone that has taken the time to develop a spending plan for the holidays if they stuck to their plan and the answer for the most part is no, not even close. No surprise there. We have the best of intentions when we sit down and actually come up with a plan on how much to spend, but it’s the implementation part that gets us hung up.
Confronting Your Inner Rebel
No one is going to stop you from spending more money than you planned. Your inner rebel doesn’t like to follow rules, particularly when it comes to money and especially during the holidays. That voice inside your head telling you how much you deserve this new something or other is hell bent on breaking all the rules you’ve set for yourself. Your inner rebel loves to sabotage your financial integrity every chance it gets.
One option for keeping your inner rebel unable to sabotage your plans is by changing the way you look at personal commitments you make to yourself. What if you were to accept that there’s a link between manifesting abundance and financial integrity? That the more you increase your financial integrity, the larger your capacity becomes to achieve financial independence. Wouldn’t that be a superb motivator for keeping your word to yourself?
Instead of saying to yourself: I’m going to spend less this year, say to yourself: I’m going to save more this year. The difference, although subtle, makes all the difference in the world. Saving more is your desire and has a higher energy. Thinking about spending less feels restrictive and punishing, all fertile ground for your inner rebel to come out and wreak havoc with your personal honor code.
By saving more will you end up spending less? Of course you will. But words are important and your thoughts are powerful as well.
Your relationship with money is just that, a relationship that grows and hopefully evolves throughout the course of your life. No one can assess your relationship with money better than you and no one will care about your money more that you.
Increasing your financial integrity is not only is a smart and sensible thing to do, it has the added effect of making you feel really good about yourself, and provides you with peace of mind. And who couldn’t use a bit more of that?
Photo by 401K
Although summer is just winding down, it's already time to look at your 4th quarter financial tasks. Here is the last in the four part installment from the Financial Planning Association (FPA) task list.
- Be ready for open enrollment: Many companies set open enrollment for their benefits plans in September and October. Make sure you’ve done some thinking about your benefit choices for the coming year.
- Tax extension deadline: If you had to file for an extension on your federal taxes this year, your final deadline to file is Oct. 17.
- Spend out your flexible savings account money: Check your employer’s rules, but you should spend out the amount you put in your flexible spending account by Dec. 31 or the end of the plan year. Schedule any procedures or medical expenses you’ll have by then.
- Total your potential tax losses: Confer with your tax adviser to see if it makes sense to sell stocks before the end of the year to balance out capital gains or losses in your portfolio or to carry forward losses for future use. Plan mutual fund sales before dividend distributions for less tax impact.
- Give: Make the charitable deductions you want to make for the end of the tax year. Also, remember single taxpayers can make financial gifts of up to $13,000.
Calendar art by drawcity
- Pay deductable expenses early: To lessen your tax impact for the current year, pay mortgage interest or property tax installments early if your tax situation would benefit from it. See if alternating using standard deduction one year and itemizing the next — called “doubling up” — works for you.
If you’re someone that has a hard time making decisions when it comes to money and you find yourself in perpetual procrastination mode about your personal finances, chances are you’ve got part tyrant and part rebel inside of you fighting for control.
Do you ever hear that voice in your head telling you to get your financial house in order, but somehow you never get to it? You know the feeling of empowerment you would get if you just stop using your credit cards in excess, balance your checkbook and review your investment strategy. Yet you put it off – again. That voice in your head, your inner Tyrant, is your voice of reason. Sometimes sounding pretty harsh, the Tyrant tells us what we should and shouldn’t do. The voice is about rules and rigid expectations and can be a controlling and demanding voice.
Which is why the other voice in your head, the Rebel, reacts in total rebellion to the Tyrant’s controlling influence. The Rebel refuses to do anything it’s told to do and trusts no one. When the Tyrant says, “stop spending so much money,” the Rebel refuses to listen, and likely spends even more.
For some, the Rebel is the dominant force in their life, for others it’s the Tyrant. The Rebel learns to distrust and ignore anything remotely controlling, including your internal demands (the inner Tyrant). The Tyrant wants to be heard and wants cooperation. If ignored or rejected, this voice will become frustrated and it will grow louder and more demanding until it’s heard.
What you have in the above scenario is the Tyrant and the Rebel doing battle within you. One part of you says you should really get serious about your money and develop a comprehensive financial plan and the other part shows no interest or downright opposition. Neither the Tyrant nor the Rebel are listening to YOU, they have taken on their own personalities and are working in reaction to each other. When this happens, people feel stuck. Life energy cannot move in a situation where two parts of you are doing battle.
The most valuable action you can take to get positive energy flowing again is to step outside of yourself and observe what you are doing. Shining light on both the Tyrant and Rebel, seeing them as they really are, will lessen their power. You will realize that neither one of them is your intuitive voice talking to you. They are old reactionary voices that continue to run your life. The sooner you can see this, the quicker you can let go of what they are saying to you.
The true source of power that will attract abundance into your life is always going to be your inner voice, receiving guidance, and acting on it. Your inner Rebel and Tyrant will not go away easily. Yet the more you practice being the observer and steeping outside of yourself, the sooner these internal conflicts will fade and allow your true divine power to come shining through.
voices photo by The Textile Blog
It's time to look towards your 3rd quarter tasks, so here is the Financial Planning Association (FPA) task list, my third post in a series of four.
I've had a small pile of documents slowly forming at the edge of my desk that needed updated beneficiary information. After my new nephew was born, I needed to add him as a beneficiary to various documents and this FPA list was just the thing I needed to prompt that action. I hope you are finding these tasklists useful as well.
In case you missed the previous list, not to worry - you can go back and try to catch up, but I'd recommend you just start with July tasks. If you are really ambitious, and determined to get your financial house in order in 2011, you'll find the first quarter financial planning tasklist here. Good luck!
- Do a beneficiary check: Is the beneficiary information on all your investments, insurance policies and bank accounts up to date?
- Check your will: If you haven’t checked your will in five years, see if your instructions are current. Make sure your powers of attorney reflect your intentions.
- Consider whether your salary or benefits are on target with your industry: Every year, it makes sense to do an assessment of where you are in your career, both financially and professionally. This way, you can start thinking about compensation issues well ahead of calendar-year budgets.
- Do a winter energy checkup: Have your furnace checked to make sure it is working properly during the heating season.
- Go over money issues with your college student: Whether they’re freshmen or seniors, take some time to go over how they’ll manage their money at school.
- *Order your last credit report: Get your third and final credit report of the year.
If you are moving along checking items off this list, good for you and congratulations! If you need a little help and want to schedule some hourly financial planning help, you can always give me a call.
*I personally like the FICO site for obtaining credit scores.
Last quarter, I posted the financial task list for January, February and March, taken from the Financial Planning Association (FPA) website. This second post is for tasks that need to be completed for April, May and June, which are quickly approaching.
As both my parents and in-laws are well into their 80's, I so appreciate and value the importance of the task for the month of May; talking to your parents about estate, health and long-term care planning. Please don't put this one off - you will save yourself and your loved ones a huge amount of work and heartache if you address these important and inevitable end of life issues sooner rather than later.
If you missed the previous list, don't worry - it's never too late to catch up - especially when it comes to preparing for your stress free financial future.
- Tax deadline: April 18 is the deadline for postmarking federal and state taxes.
- Education account contribution deadline: Don’t forget that contributions to Coverdell accounts for the previous year are also due on tax day.
Check your insurance coverage: If you have sufficient emergency funds, check to see if a higher deductible on home, auto or health insurance makes sense in terms of premiums savings and fewer potential claims.
Do a mid-year financial checkup: Take the time to do a review of your tax planning, retirement savings, home, health and life insurance needs and do a mid-year check of your spending and emergency fund levels.
Unless your plan for financial independence is based on luck, winning the lottery or an unknown relative that decides to leave you their estate, like most people, you’re going to become financially independent the old fashioned way-you’re going to earn it.
And the way you’re going to earn it is by saving money. And saving money means delaying consumption today (delayed gratification) for a brighter and more prosperous future tomorrow. But that’s easier said than done. The simple truth is spending money is way more fun than saving money.
But saving money, particularly saving enough money so you no longer need to work for money requires three essential elements: discipline, desire, a financial plan.
Perhaps the most challenging aspect of creating a robust savings plan that puts you on track to reach financial independence (FI) sooner rather than later is the discipline required to stick with your plan and follow through. Like any personal goal you set for yourself, make sure it’s realistic. Also, since we’re dealing with money as well as emotions, make sure you design an automatic savings strategy such as having x amount of money debited from your paycheck or checking account each month and automatically transferred into your savings or investment account.
Everything that is created begins in the form of desire. When you have a burning desire to reach financial independence, nothing will stop you; nothing will deter you from reaching this milestone in life. Think about something you had a burning desire to accomplish in life. Now think about what that felt like. Remember how often you imagined that desire being fulfilled, how often you visualized seeing it happen. It’s this type of intensity that I’m referring to that turns desire into reality.
3. Financial Plan
What do all successful people have in common-they had a plan! To save the kind of money you’ll need to reach financial independence, having a detailed financial plan is crucial to your success. And don’t think for a second this plan will be a straight line from here to FI. Life will throw you curve balls as it always does. But what will be different this time is your capacity to bounce back from adversity. That’s because your financial plan will be dynamic and nimble. When your life changes, so will your financial plan.