Here’s the thing about most financial resolutions: They don’t usually last even until the end of January. That’s because making a permanent change in our behavior requires both time and a steely resolve. But I’ve found that we can develop financial character one action at a time.

So in that vein, here are some financial practices to take you from pauper to prince or princess if you add one each year. If you’ve already got one down, move to the next on the list.

#1 MOST CRITICAL: Resolve to become (and stay) debt free. Now, I’m not Dave Ramsey, but there’s a reason why he’s become so popular: his approach works. I’d say that you can have a fixed-rate fixed-year traditional mortgage on your house — but nothing else, please. No equity line of credit on your house. No car payments. Certainly no credit card debt. Because you simply have to learn to live within your income — which, unfortunately, sometimes means going without. The millionaires among us really are frugal. So learn to enjoy that process, and it’s a fantastic start.

#2 Automate your savings (AKA Pay Yourself First). You can start by getting the entire match if your company offers a 401(k) plan. Usually this translates to saving 5% of your salary while the company contributes a 4% match, which is the fastest way to get an 80% return on your money. Most Americans forgo this match, believing they need to spend 100% of their salary. But you can learn to think like a millionaire and live well on 95% of what you make. If you don’t have a 401(k) plan, act like you do, and sock away 5% automatically.

#3 Fully fund your 2012 Roth IRA. This is $5,000 in 2012 and $6,000 if you are older than age 50. If you can’t manage the entire amount in January, put in $416 monthly. Automating deposits in an employer-defined contribution plan is easy. Fortunately, automating saving in a Roth IRA or a taxable savings plan is equally painless. Most brokers offer an automatic money link between your checking account and an investment account. Set your savings on autopilot, baby!

Remember — these steps build off one another, so if you already have done the first 3, here’s your next step:

#4 Save another 5% in a taxable investment account. Automating savings is great, automating investment is even greater. Key word here: automate. At this point, you’re hitting a mark of saving 15-20% of your income. That’s a fast-track to long-term prosperity.

But I’m not quite done, grasshopper. However, I’m going to leave you with these for now, and come back to this again in the weeks ahead.

Happy New Year!

Financial Advisor Richmond
Financial Planner Richmond
Financial Planners Virginia

As of this writing, it’s a fact that almost 60% of Americans don’t have a basic will, and that’s a big problem.

One of the big reasons that most families don’t yet have this kind of plan in place is because of some incorrect thinking about whether it’s right for them, or if it’s even necessary. And sure –some people just haven’t gotten around to creating a will or trust. Others think they don’t need an estate plan because they’re not “rich”.

But here’s the problem–if you continue without an estate plan, you could leave a legacy of bad feelings and attorneys’ fees.

So I wanted to speak to some of the more common misconceptions out there. I’ll start with a couple big ones this week, and when the time is right, address a few more in 2012…

MYTH #1: Only rich people prepare estate plans.
Do you own ANYTHING? Because if so, you need a will. You see, a will allows you to designate who will receive your property should anything happen. Continuing without one ensures that your assets will be distributed under the terms of your state’s “intestate succession” laws. That means your money and property could end up with family members you haven’t spoken to in years, instead of who you’d really like to see control your assets.

I won’t go into all of the different components of a will, trust, health care directive etc., as my purpose here is to emphasize that failing to plan is simply a decision to trust your assets to government bureaucrats who don’t know you from Adam.

Even if you think your situation is pretty straightforward, you may feel more comfortable hiring a lawyer to guide you through the process.

MYTH #2: Everything goes to your spouse, if something happens.
Unfortunately, that’s not always the case. We deal with clients from different states around the country, and state laws vary. In fact, in most states, if you continue without a will (intestate), your inheritance will be divided among your spouse and your children. In New York, for example, when someone dies intestate, the spouse gets the first $50,000 of the estate and what’s left is divided 50-50 among the spouse and the children.

You can imagine how this could create all kinds of problems, particularly if your spouse was financially dependent on you or you have children from a previous marriage.

I’ll send a few more in the future, but I hope you can already see that things are not always as we “think”. And let’s take advantage of tax season and move towards getting this done (or updated) in 2012!

I hope this helps. To your family’s financial and emotional peace…

Financial Advisor Richmond
Financial Planner Richmond
Financial Planners Virginia

Personally, I prefer avoiding this mess altogether, but I just KNOW that many of my clients feel differently. So, if that’s you…here you go:

Expect some Black Friday sales to start on Thursday. Many retailers will start offering discounts online on Thanksgiving day. And some, such as Amazon, will offer Black Friday deals several days before November 25 — so hot items may sell out before the big shopping day after Thanksgiving. And, as you’ve probably seen, some stores (like Target) are even opening on Thursday…

Don’t assume the best deals are only in the stores. It’s a tradition for a lot of people to get up at the crack of dawn and camp out in front of stores to scoop up deals. But a lot of “doorbusters” (those deeply discounted items retailers use to get consumers in the door early Friday) will be available online, too — especially on big-ticket products. And if an Apple product is on your gift list, you’ll probably find it for less online (at Amazon.com, MacMall.com or MacConnection.com) than at an Apple store — AND you may escape sales tax on your purchase (I just had to get that one in there, as a tax pro ).

Only brave the crowds if you’re trying to snag an extremely limited item. You have a better chance of getting the deal if you go to the store – and are first in line. Keep in mind, though, that the items which are marked down dramatically are often cheap items to begin with – not top-selling, name-brand products.

Black Friday is only the beginning. In fact, the best deals on apparel usually appear on Cyber Monday (November 28 this year), when retailers discount items online. Toys will be cheaper the first two weeks of December when Walmart and Amazon go to war with each other to offer the lowest prices and clear out inventory before Christmas. And the best deals on name-brand TVs and luxury items can be found in early December, too.

Watch out for return policy shenanigans. Some retailers tighten their policies around the holidays as a way of compensating for all that discounting they’re up to. Some charge restocking fees if you bring an item back. And some won’t let you exchange items which were manufactured specifically for Black Friday (to be sold at a low price).

This one is pretty universal: Never spring for extended warranties on big-ticket items. There’s a good chance that a salesperson will try to talk you into paying extra for an extended warranty if you purchase a big-ticket item on Black Friday. That’s because revenue from extended warranties helps make up for lost profits on these discounted items. Typically, you’ll pay 10% to 20% more for an item to extend a one-year manufacturer’s warranty through the fifth year of ownership. But most major appliances do not break down within the extended-warranty period. Plus, you might already be covered if you use your credit card to purchase an item.

Just doing my little part to help YOUR economy-stimulation efforts this holiday season get the most bang.

Financial Advisor Richmond
Financial Planner Richmond
Financial Planners Virginia

I have a few questions for you, which won’t take very long to answer, but can help US help you keep your taxes down, even for this year.

You see, I’m doing something a little different here this week. As you know, I love to write about current events, personal finance issues and information that matters to YOU with my Weekly Note (we try to keep the tax information concise and as pertinent as possible — knowing that most of our clients prefer we handle that all for them), as we did, for example, last week with the information about the looming higher ed bubble.

Well, with two months (less!) remaining in 2011, there may be a few moves we can make that can help your tax hit before we’re forced into “reaction mode” — which is the only mode out of which after-the-fact tax work can be done. So, if at all possible, I’d like to change that paradigm for you by having you answer a few short questions…

So, without further ado — some questions for you:

1) Have you had a significant change in your wage income this year?

2) Have you taken capital gains or losses this year? Are you planning to?

3) Did you start or sell a business this year?
BONUS QUESTION: Do you know anyone who did, that would like input on their tax situation?

4) Did you purchase real estate?

5) Did you make your full contributions to retirement accounts?

6) Have you considered a Roth IRA?

7) Did you withdraw from retirement accounts, and for what purpose?

**8) Have you sent your family and friends our way — and, if not, is there something which we can help you with to make this easier?

9) Are there any other issues you think we should know about?

Now — the answers to these questions form the “tip of the iceberg”, and they will help us to know which direction to take as we work with you over the next two months to prepare for year-end. With your permission, we’ll contact you back, as appropriate, and set up a time to discuss them further with you, whether by phone or other method.

Financial Advisor Richmond
Financial Planner Richmond
Financial Planners Virginia

According to the most recent College Board Annual Survey of Colleges, the sticker price of a college education keeps rising, faster than the price of groceries, health care and almost everything else in the basket of goods used to determine the Consumer Price Index (CPI). In the last 10 years, in-state tuition and fees at public four-year colleges increased 5.6% annually on top of a CPI growth of 2%. The average estimated total expenses for most public in-state four-year students (depending on the state) vary in the astounding range of $65,000 to $90,000.

S0, that means that if you were blessed with the birth of a child recently, you will need to save $430 monthly to pay for in-state college tuition, fees, room and board. Double this rate to cover the full costs at the average private institution. And this doesn’t even include money for a cell phone, pizza, room decor or other stuff that college students deem “necessities.”

Now it’s true: most students don’t pay full price for college. In 2009-10, undergraduate students received an average of $12,894 in financial aid, split almost equally between loans and grants. Grants are the most attractive because students are not saddled with a repayment plan after college. Federal grants make up 26% of total aid. Institutional college grants account for 17%, state grants for 6% and private and employer grants (scholarships) for 4%.

But that hasn’t stopped the fact that students are graduating with larger debt loads than they were 10 years ago. This is one of the driving factors of the recent-graduate-laden Occupy Wall Street movement. Public four-year college borrowers graduate with an average of $19,800 in debt; their nonprofit private college counterparts graduate owing $26,100. This private college debt is 17% more than it was 10 years earlier, even after accounting for inflation. In addition, a growing percentage of all college debt is unsubsidized and begins accruing interest immediately.

Perhaps there are some good things which are shaking out here. That is to say, degrees might have to be evaluated a little more closely — that anthropological art history degree might should be scrutinized a little more, yes?

So, students will have to make smarter education choices. Today’s global marketplace places more value on hard skills such as engineering, computer technology, teaching and finance. Technical degrees and certificate programs will become commonplace. A liberal arts education will likely diminish in popularity and become more focused at the elite institutions. More students are likely to begin their education at lower cost community colleges and complete a four-year degree at schools that specialize in their concentration.

Parents may feel overwhelmed about the amount they need to save for college. But college education is one of the two lifetime investments for which we approve borrowing money (the other is a home mortgage). Students should plan to graduate with a debt load no higher than half of what they can reasonably expect from their first year’s salary. For example, those with a starting salary of $40,000 should keep their debt at or below $20,000. Thus graduates can dedicate 10% of their annual salary to school debt and pay it off in five years.

New parents who are able should immediately begin saving $430 a month for college. Alternatively, a onetime $50,000 investment should cover tuition, fees, room and board at an in-state college 18 years from now. Yes, this is pretty scary. But there’s other options…

Giving a child the gift of a college education and a debt-free start to adulthood is one choice. Other parents believe their children should participate in financing their college education and can apply the 50/50 savings approach. Parents commit to saving half of the money needed, and their children commit to the other half. Students participate by working hard in high school, applying for scholarships, taking summer jobs, seeking out work study opportunities and accepting reasonable loan levels.

The support of grandparents can help tremendously. The vast majority of the college accounts that I’ve seen are owned and funded by grandparents. Instead of buying the latest gadgets for their grandchildren, they make annual contributions to a college savings account. If the grandparents own the account, it has the added advantage of not being included as a resource on the student’s financial aid forms — and that is a beautiful advantage, trust me!

One last thing: I’m not a stocks advisor, but–I do NOT recommend prepaid college tuition plans. At best, they tend to match college inflation, and if used at an out-of-state institution, returns are based on money market rates, which are abysmally low right now. Even worse … who knows? This bubble may just burst, and you don’t want to have locked into a tuition which might fall through the floor on its own some years from now.

I do hope this helps, if it didn’t scare you too much! Let me know if there’s anything I or my team can do to help. As you can see, both with taxes and family finances, we make it our mission to think ahead on your behalf!

Financial Advisor Richmond
Financial Planner Richmond
Financial Planners Virginia

First off, I’d like to say, again, that I’m not an expert in these matters — but I’ve had many conversations with wise clients who have shared a thing or two over the years. I have clients, with great material means, who have children that remain “unspoiled”, and don’t carry an expectant spirit.

Likewise, I have clients who have shared their struggles with us about their children always wanting MORE MORE! (these are brave and wonderful clients to share such private details), and this, even, when some of these families don’t have large incomes.

And then there are the holidays — coming faster than we all think.

So how do we hold back the flood of consumerism, and teach our children the true meaning of gifts, giving and the upcoming holiday season? Well, some of my wiser clients might say …

1) Explicitly Limit The Number Of Gifts Given
Parents often tend to go overboard buying presents for their little ones around birthdays and holidays — after all, it often feels like an overflow of love AND children sure do love it.

But I know families who have always put a stated limit on Christmas and birthday presents — and yet their children don’t seem to act like they feel deprived. Christians can link Christmas gift-giving to the three gifts of the magi; others can find different spiritual reasons to not simply pour a truckload of gifts on their children. The key seems to be in creating a happy atmosphere around it, and remaining consistent.

2) Have Your Children Buy Their Friends Gifts
Why not let your kids experience what it feels like to sacrifice and give? After all, we’d all want to give ALL of our friends a gift, but the truth of the matter is that we simply cannot buy a gift for everyone on our list. We have finite resources and have to allocate them accordingly. There is a line that we all have to draw in the sand for who will get gifts and who will get a card.

Giving your children a certain dollar amount to spend on gifts, or simply making them pay for their friends’ gifts out of their own pocket, will teach them about making the hard choices of whom to give to, and how much, within their very limited resources.

And, of course, this assumes that they ARE giving gifts! If not, that’s a great place to start.

3) Share Pertinent Financial Details
Children should be protected from adult concerns. But that doesn’t mean that they should be blissfully ignorant about how money works. In fact, we owe it to our children to properly explain where the family’s money comes from, how it gets into the bank account, and how expenses and budgets work. With a little explanation about how your family’s budget is structured, you may be able to hold back the tide of consumerism.

Again, they don’t need to feel a pinch — but they SHOULD know that gifts and items have a monetary value, and don’t just get plucked from the shelves without cost.

These are just ideas to start with. It’s extremely hard to curb the allure of consumerism in our culture. But in my opinion, it’s a fight that every parent should consider waging in today’s society of overspending and consumer debt.

Again, every family has their own approach … but I do hope that you’ve thought yours through. To your family’s financial health!

Financial Advisor Richmond
Financial Planner Richmond
Financial Planners Virginia

Working with my clients’ finances over the years has given me a bit of a crash course in human behavior. Often, I’m floored by the generosity I see displayed by many clients–even those without significant means.

Other times…well, I think that we all could use the reminder that our human flaws show up very clearly in our family’s finances. The fact is that we ALL lie to ourselves, from time to time, about what’s really happening in our wallets.

This habit of lying to ourselves threatens our financial stability. Instead of spending $5, we spend $20. Instead of recognizing that we *want* that new shirt, car, or fine dinner at a restaurant, we lie to ourselves until we are convinced that, for one reason or another, we *need* that new shirt, car, or fine dinner. The current credit crunch can partly be blamed on a nation full of people who convinced themselves, for example, that a $500,000 home was necessary–even though a $250,000 home was sufficient. We must learn to live within our income … and this means, we must stop lying!

So, I’ve compiled a short list of ideas on how to stop lying to ourselves and face the truth when making purchase decisions…
1. Have (and stick to) a budget. Is this purchase in my budget? For example, my family budgets a certain amount each month to spend on clothing. We’ve agreed that this amount is sufficient to meet our needs. We set this amount before facing a purchase decision. If during the month we want to exceed the budget because Kohl’s is having a fantastic sale, then we are now lying to ourselves. We aren’t saving money by exceeding our budget during a sale. In fact, now I have to dip into savings to pay for my overspending.

2. Set a per-purchase spending limit. A wise man said, “The four most caring words for those we love are ‘We can’t afford it.’” Take some time with your spouse to set what I call a “What I can spend without having to ask my wife if it’s ok” spending limit. My wife and I have decided that neither one of us is allowed to spend more than $50 at any given time without calling and asking the other one if it’s okay (this does not apply to groceries). Let me tell you right now, my wife has stopped me from making a lot of unnecessary purchases by telling me, “We can’t afford it.” Even though we had a budget for the purchase, we still didn’t need it.

3. Replace bad habits with enjoyable, inexpensive activities. Shopping or overspending is a habit that we have likely formed over years. Since our brains are programmed to react in a certain way in specific situations, any change is met by resistance. The existing habit is simply more comfortable and natural. To help change your behavior, replace the bad habit with another activity.

For example, instead of going to the mall to pass time, go to a local park with a soccer ball and spend some time with family or friends. Start or re-start a hobby. Your new hobby might even be a low cost home business where you make money!

4. Make sure that the reason you tell yourself you are making the purchase and the *actual* reason you are making the purchase are the same. Ask yourself, “Why am I really making this purchase?” Am I buying this dress for my wife because I love her and want to show my appreciation, or am I trying to prove to her and the world that I am a good provider? We lie to ourselves to cover our true motives. If the real reason you are making a purchase isn’t in-line with your principles and budget, then don’t buy it.

5. Take stock of and enjoy everything that you already have! Develop gratitude for what you already have in your life. Purchasing new things is often a sign of ingratitude for what life has already afforded us … or a sign that we feel deficient in some area.

Overcoming bad habits and addictions is a process that requires concerted effort. Face each day one at a time and stop lying to yourself! Don’t believe the story you’ve created in your mind that justifies unnecessary and financially harmful purchases.

Financial Advisor Richmond
Financial Planner Richmond
Financial Planners Virginia

Sure, commonly-advertised services for regular families can seem like an easy button. But the problem is that most of these products are unnecessary or ineffective, or they duplicate things you can do yourself–for free.

Here are some basic things you can set into place right now, which will cover you in the vast majority of circumstances:

1) Please don’t carry your SSN in your wallet. Ever.

2) Don’t post your full DOB on your social profiles. If you really like the messages on your wall for your birthday, just take out the year at least! (Besides, it makes you more mysterious!)

3) Don’t check your bank balances on public wi-fi. Even if you do it on a secure connection, hacker programs to “snift” your info are as commonly-accessible as pirated video on the internet. This includes your mobile phone.

4) Um, don’t let your wallet get stolen.

5) In case it does, keep a photocopy of every important item in there. (Except cash, of course. That’s, er, against the law.)

6) Check your credit annually. www.AnnualCreditReport.com is the one where you don’t have to pay for it.

7) Shred important stuff you don’t need — including credit card solicitation offers. In fact, stop those for good by going here: www.optoutprescreen.com or calling 888-567-8688. Opting out should stop most offers, and it’s free.

There. I said it would be short, sweet, and full of common sense. As usual, I hope!

Financial Advisor Richmond
Financial Planner Richmond
Financial Planners Virginia

As I wrote last week, you pay your bills on time. You try to save as much as you can. You even follow the advice which you read in books and hear on the radio about how to keep your finances in check.

But perhaps you’re still not getting ahead.

Well, sometimes, it’s the unchallenged assumptions about how we’re handling our money which rise up and hurt us.

So, in the course of working with clients, I’ve identified some mistakes I see (as well as ones I’ve made myself!), which can be fixed. Last week, I gave you two:

Hidden Mistake #1: Inappropriate Mental Accounting
Hidden Mistake #2: Manipulative Price Anchoring

Let us know if you missed last week’s email, and would like to receive it again. Now here are the rest…

Hidden Mistake #3: Loss Aversion Costing You
Definition: Our consistent tendency to avoid loss, rather than acquiring gain.

Typical Example: An investor is more likely to sell a stock which has increased in value, rather than selling stock that decreased. Over time, her investment portfolio is made up of investments that have decreased.

Cure: Don’t think of selling a stock for less than you paid for it as being a loss. It can actually work as a gain for two reasons:

* Tax deduction (which can really help!)
* The other side of opportunity cost: opportunity GAINED (i.e. you can better utilize that money elsewhere)

So, don’t check your portfolio so often. If you don’t know you’ve lost money, you don’t experience the pain. (And riding the roller-coaster of your portfolio’s value is a waste of emotional space.)

Since stock prices go up in the long-run, the longer you go without looking at your portfolio, the greater chance of seeing a gain.

Sometimes taking that loss really is the best thing you can do.

Hidden Mistake #4: Following the Herd
Definition: The tendency for us to want to do the same thing as a large group of others, with no thought to whether that action is rational or irrational.

Typical Example #1: Buying when prices are high because everyone else is.

Typical Example #2: Selling when prices are low because everyone else is.
opposite

Cure: Warren Buffett said, “Be fearful when others are greedy and greedy when others are fearful.”

Keep this in mind when making your next financial decision. If everyone is telling you to buy this or buy that (i.e. gold, silver, real estate) do the opposite.

In the financial investment world, if it’s too good to be true, it usually is.

Write up an investment policy statement or contract.

Include factors such as:

* Investment objective
* Investment goals
* Desired asset allocation and diversification
* Summary of your risk tolerance
* Rebalancing schedule

Before making any changes, consult with this contract.

You can also take advantage of this inherent tendency to do what’s approved by others to affect positive behavior. For example, let’s say you trying to pay off debt. Tell your 3 closest friends, make an informal contract, sign your name at the bottom, and then email it to them. The pain you would incur from breaking that contract is high relative to the pain of breaking your behavior if you went about it alone.

Don’t forget — we’re only a phone call or email away, and our consistent question for you is this: “What more could we do for you to help?”

Financial Advisor Richmond
Financial Planner Richmond
Financial Planners Virginia

You pay your bills on time. You try to save as much as you can. You even follow the advice which you read in books and hear on the radio about how to keep your finances in check.

But you’re still not getting ahead.

Well, sometimes, it’s the unchallenged assumptions about how we’re handling our money which rise up and bite us in the keister.

So, in the course of working with clients, I’ve identified some mistakes I see (as well as ones I’ve made myself!), which can be fixed. All it takes is thinking a little differently…

Hidden Mistake #1: Inappropriate Mental Accounting
Definition: Tendency for families to divide money into separate accounts based on subjective criteria.

Typical Example: Treating $100 you received as a gift from Grandma, differently than a $100 bill earned.

Typical Example #2: Having money languishing in a savings account earning 0.25%, while carrying high-interest debt to pay off at 12%.

Cure: Funnel income, no matter the source, into one savings account.

Any “found money”, such as a tax refund or gift from Grandma, quickly decide where that money is best utilized.

As for expenses, occasionally change how you pay. If you always pay with a credit card, try cash. This will get you remembering that all of it, for the purposes of your mental “books”, should be lumped into one, monthly bucket.

Hidden Mistake #2: Manipulative Price Anchoring
Definition: Our tendency to relate the value of a purchase to a price point which, rationally, should have no bearing on the amount spent.

Typical Example: The “rule of thumb” to spend two months’ salary on an engagement ring.

Typical Example #2: A realtor will tell you that “in 2007 this house was going for $500,000 and is now listed at only $350,000!” … causing you to think this house is undervalued.

Cure: For big ticket purchases like a house, car, or engagement ring, ask a friend whose financial values you respect for their input.

For everyday purchases, avoid looking at the MSRP or sticker price.

Ask yourself:

Can I afford this today?
What do I really want to spend?
What is this really worth to me?

Marketers are experts at this sort of price-anchoring, and we really should know better … but yet we still fall prey to it. Try not to let outside sources set up the comparison by which you should be considering such large purchases.

I think I have a couple more up my sleeve, but I’ll save those for next week. But let me know: is this helpful to you? And what more could we do for you to help?

Financial Advisor Richmond
Financial Planner Richmond
Financial Planning Virginia