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It’s Here!

Thank you to everyone who has followed my posts for the last few years. I am extremely excited to announce that my book is now available on Amazon!

Save Yourself is a comprehensive guide to saving for retirement and shoring up your financial security so you can do whatever it is you want. Through the stories of real people, it shows you exactly how you can make the changes that will allow you to save for a long and secure retirement so that you don’t need to work for pay. In addition, it covers other aspects of true financial security, giving you peace of mind throughout your life.

Early reviews are very positive. Here’s one that a reader was kind enough to post on Amazon.

The Save Yourself guide to retirement planning justifies the need to take control of your financial security with meticulous statistical research and lays out the step-by-step plan to reduce debt, budget and achieve financial independence. If you are putting planning off, author Grandstaff’s remark that “The monthly savings requirement more than doubles for every ten years you delay” is a sobering statement to prompt action to read her work and get started today.”

Happy reading! Reviews are very important to help other readers find the book, so please post one back at the same Amazon page. Again thank you for your kind attention, and have a wonderful holiday season.

On The First Day of Christmas…

Last year, I posted this financial redo of the classic 12 Days of Christmas. My daughter and I actually sang it in a video, which was fun. This year I’ll spare you that. If you’d like to see it, you can find it in last year’s post. Here’s wishing you love and joy and true financial security!


On the first day of Christmas my true love gave to me a fund for emergencies

On the second day of Christmas my true love gave to me a budget for expenses and a fund for emergencies

On the third day of Christmas my true love gave to me a maxed out retirement, a budget for expenses and a fund for emergencies

On the fourth day of Christmas my true love gave to me a pay-down on my visa, a maxed out retirement, a budget for expenses and a fund for emergencies

On the fifth day of Christmas my true love gave to me a Roth IRA, a pay-down on my visa, a maxed out retirement, a budget for expenses and a fund for emergencies

On the sixth day of Christmas my true love gave to me full estate planning, a Roth IRA, a pay-down on my visa, a maxed out retirement, a budget for expenses and a fund for emergencies

On the seventh day of Christmas my true love gave to me insurance for disabilities, full estate planning, a Roth IRA, a pay-down on my visa, a maxed out retirement, a budget for expenses and a fund for emergencies

On the eighth day of Christmas my true love gave to me a 529 for my kids, insurance for disabilities, full estate planning, a Roth IRA, a pay-down on my visa, a maxed out retirement, a budget for expenses and a fund for emergencies

On the ninth day of Christmas my true love gave to me a pay-down on my student loans, a 529 for my kids, insurance for disabilities, full estate planning, a Roth IRA, a pay-down on my visa, a maxed out retirement, a budget for expenses and a fund for emergencies

On the tenth day of Christmas my true love gave to me a sound investment strategy, a pay-down on my student loans, a 529 for my kids, insurance for disabilities, full estate planning, a Roth IRA, a pay-down on my visa, a maxed out retirement, a budget for expenses and a fund for emergencies.

On the eleventh day of Christmas my true love gave to me a long-term care policy, a sound investment strategy, a pay-down on my student loans, a 529 for my kids, insurance for disabilities, full estate planning, a Roth IRA, a pay-down on my visa, a maxed out retirement, a budget for expenses and a fund for emergencies.

On the twelfth day of Christmas my true love gave to me, a pledge to be mortgage free, a long-term care policy, a sound investment strategy, a pay-down on my student loans, a 529 for my kids, insurance for disabilities, full estate planning, a Roth IRA, a pay-down on my visa, a maxed out retirement, a budget for expenses and a fund for emergencies.

Merry Christmas everyone!

Photo by rawpixel on Unsplash

Give the Gift of Education for Christmas

From the archives: Here is an article to help reduce the stress of Christmas and bolster your college savings all at once.

The holidays are upon us. I’ve always thought Christmas was mostly about the kids. There is nothing better than seeing a little face light up at the decorations or the absolute glee in your child when she receives that one thing she wanted most of all. But all the gifts can get out of hand.

With grandparents and aunts and uncles all giving to your children, your kids could be on overload before breakfast Christmas morning. If your kids’ eyes are glazed over before they’re done opening all their presents, consider a different tactic that can cut down on the volume of gifts and help with your children’s future. Ask your relatives to make a contribution to a College 529 plan instead of buying the usual gifts that may be forgotten in a corner before long.

A College 529 plan is a tax advantaged savings program for post high school educational expenses. And now, some states allow you to use the money for K-12 private school tuition. Investment earnings grow tax free and withdrawals for educational purposes are tax exempt.

An AARP survey found that 36 percent of grandparents believe it is their job to spoil their grandchildren by buying them lots of stuff, mostly at the holidays. Of grandparents surveyed, 25 percent will spend more than $1,000 in a year on their grandchildren, and 40 percent will spend more than $500.

Those amounts can add up to substantial college savings by the time your children are ready for school. If your children were to receive a total of $500 in gifts each holiday season from their relatives beginning when they are babies, a 529 plan could grow to well over $14,000 by the time they are 18, assuming a 5.0 percent annual return. Smaller amounts also help. Some 529 plans accept deposits on existing accounts as low as $15.

The gift giver benefits as well. Contributions to a 529 plan in 34 states are state tax deductible, and in two thirds of those states, you don’t need to be the owner of the account to get the deduction. In Oregon, for example, a single person can deduct up to $2,300 of their contribution, and a married couple can deduct up to $4,600. If a larger gift is made, the extra over the deductible limit can be deducted in future years.

For the states where you do need to be the owner to get a deduction, the gifter would open their own account and simply name the child as the beneficiary. There is no limit to the number of accounts that can be opened for a single beneficiary.

For the 16 states that don’t offer a 529 plan, an account can be opened in any other state’s plan. While contributions are not deductible, the investment earnings will still grow tax free. There is no obligation to attend school in the state where the account is opened. Savings in 529 plans can be used for educational expenses at a wide variety of schools nationwide.

There are no limits to annual contributions for 529 plans. Gifts greater than $14,000, which is the gift tax exclusion amount, require the filing of a gift tax return. However that does not mean the gift will be taxable. It can remain tax exempt under the lifetime exclusion for estate taxes, currently at $5.49 million per individual for federal tax purposes. The maximum lifetime 529 plan contribution limit is $300,000

If your child doesn’t attend school, the money can continue to grow tax free in case they change their mind later. The money can remain in the plan as long as there is a living beneficiary, and you can change the beneficiary if school isn’t in the cards for the first one.

If the money is not used for educational purposes, you will pay income tax and a 10 percent penalty on the earnings. While that sounds terrible, if you’ve had the money invested for a while, chances are your earnings will have grown, and you will still come out ahead.

Instead of your parents buying gifts that won’t last or will be set aside to gather dust, have them invest in your child’s future. Toys wear out. Clothes are outgrown. Electronics become obsolete in no time. Most kids can only take so much unwrapping on Christmas. A College 529 plan contribution is a gift that will have a lasting impact, and have your child remembering Grandma and Grandpa’s gift all their life.

Photo by Thought Catalog on Unsplash

Three Tips to Save at the Grocery Store

The holiday season is a time for entertaining. Whether you’re having folks over to your house, or making a dish to take to someone else’s, this time of year your grocery bill can be eye popping. Here are a few tips to help you save some money at the grocery store.

Change Where You Shop

There can be a large disparity in the prices that grocery stores charge. There are the high-end stores like Whole Foods, there are discount grocers, and several in between. Our local news outlet here in Portland did a comparison of seven chains in the metro area on a list of five common grocery items. There was a difference of 30 percent between the highest-priced store and the lowest-priced store.

The prospect of saving almost a third on your grocery bill is an incentive to at least check out your alternatives. Even if you are shopping organic or have other specialty food requirements, you may be surprised at the selection offered by the lower-cost grocery stores.

Avoid Paying for Packaging

Another grocery store savings trick is to avoid paying for packaging. The more that goes into making food portable and presentable, the more it costs. If you can slice it, divide it, or put it in your own container, you will save. In many cases, just a few extra minutes of your time can give you all the advantages offered by the packaged products and save you lots of money. The following table compares a few packaged food items to their unpackaged alternatives.

PrepackagedUnpackaged
Bottled ice tea
(6 pack)
$9.89Home-brewed
ice tea (same volume)
$1.00
Steel-cut oatmeal
(24 oz package)
$3.00Bulk steel-cut oats 
(24 oz)
$0.60
GoGo squeeZ
applesauce (12 pack)
$8.79Applesauce
(Same volume)
$3.84
McCormick ground
cinnamon (2.4 oz)
$2.37Bulk cinnamon
(2.4 oz)
$0.58
Sliced apples
(multipack, 10 oz total)
$4.49Apples (10 oz)$2.18

Shopping the Sales

The final tool for squeezing every last penny out of your grocery store visit is couponing and shopping the sales. Carrie Rocha manages a website, www.pocketyourdollars.com, with a coupon database and currently running deals at a variety of national chain stores. She also wrote the book Pocket YourDollars: 5 Attitude Changes That Will Help You Pay Down Debt, Avoid FinancialStress, and Keep More of What You Make. She advocates shopping the sales and claims that you can shave 30 to 40 percent off your grocery bill if you buy what you use when it is on sale instead of when you need it.

This time of year, it’s easy for your grocery bill to get out of hand. But with a little planning and a rethink of how and where you buy your food, there are big savings to be had.


Photo by NeONBRAND on Unsplash

Gratitude Isn’t Just for Thanksgiving

This week of Thanksgiving is a good time to reflect on what we’re grateful for. But gratitude is something we should be practicing all year. Instead of “keep the spirit of Christmas in your hearts all year long”, maybe the saying should be “keep gratitude in your hearts all year long.”

In this age of steady information on social media about your friends’ vacations and constant advertising for the latest new gizmos, it’s easy to focus on the things you feel you’re missing out on. But for your mental and financial health, a focus on working toward your goals and all the good things you already have would be better.

In The Paradox of Choice, by Barry Schwartz, Dr. Schwartz talked about how rising incomes in the US have had little impact on our individual happiness. The reason is two-fold. Reason one is that we tend to adapt to new situations quickly. While buying something new gives us a dose of pleasure, we quickly come to take our new thing for granted.

The second reason is that our expectations rise. We have an idea of how someone in our income bracket should be living. We see how our Facebook friends and colleagues are living and believe we should have the same lifestyle.

Unfortunately, the lifestyle we think we should have may be based on inaccurate information. After all, we really don’t know much about anyone’s financial situation but our own, and assuming we should be living like someone else doesn’t factor in how that other person is making ends meet or whether they have the same financial goals.

If instead you focus your attention on meeting your own goals and appreciating what you already have, you can derive pleasure from your achievements and knowing how fortunate you are.

In the words of DavidSteindl-Rast, “Happiness doesn’t make us grateful. Gratitude makes us happy.”

The next time you pull on an old sweater, think of all the fun times you had while wearing it. Or when you sit in your car, think of all the trips you’ve taken in it, or the songs you sang with your kids in it. When you see your friend’s exotic vacation photos on Instagram, be happy for them, and remember all the things you loved about the last trip you took.

It’s human nature to seek out new things and to compare ourselves to those around us. Our culture seems to have let these instincts run amok. It’s easy to get caught up in the chase for more material possessions and ever escalating lifestyles. But if you pause for a moment, once in a while, and think about how good your life already is, you may find that you have all that you need, and for this you can be grateful.

Photo by Priscilla Du Preez on Unsplash

Five Tips to Keep the Holiday Buying Frenzy From Becoming Post Holiday Clutter

Our big spending season is looming just around the corner. According to the National Retail Federation, Americans are expected to spend more than $1,000 per household this holiday season. There are few that don’t love to give as well as get a gift. But before you head off to do your holiday shopping, consider what you and your loved ones will do with all the stuff you buy.

Americans have too much stuff. Evidence that we have too much stuff lies in data on the Self Storage industry. In 2017, there was seven square feet of storage space for every man, woman, and child in America, and 90 percent of it was in use.

The industry expects the need to store stuff to continue to rise. Spending to build more space in 2017 was almost double what was spent in 2016. In an article on InvestorManagementServices.com, there was little concern there would be a drop in demand any time soon.

A 2015 survey done by Gladiator Garage Works, a firm that makes organizational systems for garages, found that one in four households could not get a car into their garage due to all the stuff that’s in there. Not only are the garages full, but the closets, attics, and basements are too.

Holiday shopping has the ability to cloud our judgement. We get caught up in the festivity, the pressure, and even the competition of buying things. And we are the perfect consumers. We have a basic need for novelty and new experiences. That is one of the reasons we love Christmas so much. Unfortunately, many of the things we buy will wind up relegated to the closet, then the garage, and for too many, finally the storage unit.

When your gifts go unused, not only has your money been wasted, but you are also contributing to the stress of those who receive your gifts. Clutter has a negative impact on mental health. It has been linked to depression and fatigue, overeating, and isolation.

Here are a few tips to help avoid wasting money and contributing to your receivers pile of stuff this holiday season.

  • Don’t go shopping looking for inspiration. Know what you will buy before you go and have a budget for each person on your list.
  • Coordinate your gift giving with family members. Check in with others to get a good idea of what each person on your list needs or has really had their eye on.
  • Consider pairing at least adult family members, so each one is only buying and receiving one gift.
  • To cut down on children’s holiday overload, consider making a contribution to a college fund, instead of buying toys or clothes.
  • If you’re at a loss for what to give, make it consumable. Home baked goodies rarely go to waste and won’t be stored.

We look forward to the holidays every year. But the buying frenzy that comes with them can be a waste. Too much of what is bought will wind up as stuff that needs to be stored when the excitement wears off. So, this year, take a more thoughtful approach to gift buying. Buy fewer gifts and make them count. You’ll save money and your gifts will be truly valued.

Photo by Dieter de Vroomen on Unsplash

Eight Financial Things to Check Along With Your Smoke Detector Battery

A common bit of advice for the change of seasons and daylight savings time is to check your smoke detector batteries. It’s a good guidepost on the calendar for ensuring you take this important safety precaution. The end of daylight savings is as good a time as any to check up on your financial preparations as well. Here are the important things to review:

Employer Benefits

  • November is also open enrollment month for many company benefit plans. Your options and premiums may have changed. If you work for one of the many companies who are moving to a high deductible health care plan, check how your deductible has changed. If it has gone up, plan on adding to your savings to cover the difference either in a health savings account, or if that isn’t available, your own emergency savings. If the premiums have gone up, prepare your budget for this increased expense.
  • Review your selections in your retirement savings plan. Make sure you are contributing at least enough to get the employer match. If you’ve got an emergency fund and have paid down your non-mortgage debt, increase your contribution. In 2019, you can contribute up to $19,000 if you’re younger than fifty and $25,000 if you are over fifty.
  • If you are investing on your own, make sure your allocation is appropriate for your age. A common rule of thumb is to have the amount equal to 110 minus your age in stocks. The remainder should be in more conservative bonds. If you are using a managed account, update your information with the manager, so they can make sure your allocation is still correct. If you are using a target-date retirement fund, you don’t have to do anything.
  • Check the beneficiary designation on your retirement account and life insurance. Update them if appropriate. Your beneficiary designation determines who gets your retirement savings and insurance benefits regardless of what other documentation you may have. Do not make your children who are younger than eighteen the beneficiary of either. Minor children cannot receive distributions until they become legal adults.

Other Things to Review

  • If you have IRA accounts outside your company retirement plan, review the beneficiary designations on those too. If you plan to make a contribution in 2019, the new limit is $6,000 for those under fifty and $7,000 for those over fifty.
  • Review your life insurance. You can calculate how much you should have given your circumstances at Lifehappens.org. Update your beneficiaries on these policies too.
  • If you don’t already have disability insurance through work, consider buying your own policy. Lifehappens also has a calculator to help you know what to buy. While most understand the need for life insurance, only about a third of working people have disability insurance. You are much more likely to become disabled than you are to die prematurely.
  • If you have a will, a healthcare directive, and medical and financial powers of attorney, now is a good time to review what you put in those documents and update them if needed. If you don’t have any of these, put getting them on your New Year’s resolution list. See my previous article on preparing these documents to help you get started.

Your financial security needs constant upkeep. It’s easy to forget to maintain what you’ve put in place. Calendaring a time of year for a regular review will ensure your important decisions don’t become out of date. Now that the seasons have changed and the sun is going down earlier, review your own financial preparations.

Photo by Wil Stewart on Unsplash

What You Should Do When the Stock Market Swoons

Nothing.

Now, what would be really great is if we could invest more money in the stock markets when they are going up and get out of the stock markets when they are going down. Our return would be much better if we could avoid those nasty market downturns. Many attempt to do just that, but few are any good at it.

The trouble is if you missed just the months with the top 5 percent of returns in the market since 1950, you would have cut your returns almost in half. Of course, if you were able to avoid the bottom 5 percent of months in the process, you would perform just about as well as the market. But given the uncertainty of when those occur, that doesn’t seem like a good trade-off.

To illustrate, take a look at what happened during and after the financial crisis. The following chart shows the total return for the S&P 500 and cash flows in (bars going up) and out (bars going down) of equity mutual funds during the crisis and through the recovery to 2012.

S&P chart

The peak in value for the S&P 500 prior to the crisis came in September of 2007. From there the stock market began a gradual decline, with some investors selling sporadically. However, in September of 2008, the floodgates opened, and mutual fund investors began pouring out of equity funds. The S&P 500 had already lost more than 36 percent of its value.

The bottom of the market came in February of 2009, just four months and 16 percent later. But money kept leaving the stock markets. Even as the stock market crested its prior peak, equity funds saw growing withdrawals through the end of 2012.

If you had perfect foresight, you would have sold in September of 2007 at the peak. You would have avoided the following drop in value of 51 percent. Then you would have bought back your investment at the low in February of 2009. If you had done that, then ten years later—by September 2017—your investment would have risen by almost four times, or 14.2 percent per year.

But be realistic. You only have perfect hindsight. You know nothing about the future. You can’t tell whether the market is at a peak or just a nice viewpoint along the way. And you certainly can’t tell when the market has hit bottom.

The biggest monthly net sale of equity funds was in October of 2008, and the biggest monthly net buy following that was January of 2013. If you had sold and bought back in those months, as many other market participants did, your return for the ten years ending in September 2017 would have been just 10 percent, or about 1 percent per year.

What if you had done nothing? If you had not touched your stock market investments, in the following ten years your money would have more than doubled for an annualized return of 7.3 percent. Doing nothing is certainly easier than picking both the top and bottom of the stock market. Steadily adding to your investments, as you would in your retirement account, would have been even better.

Timing the market is a fool’s game. Seeing your nest egg shrink is no fun for anyone, but if you don’t have to spend your money right away, it can recover. So, as the market is adjusting, your task is simply to do nothing.

Photo by Chris Liverani on Unsplash

When Your Money Makes More Money Than You Put In

Saving money is hard. As human beings we are naturally wired to place our immediate needs (or wants) ahead of our future needs. Long term goals, like retirement, seem particularly daunting. The numbers are large, and the payoff is a long way off. Would it help to know that it gets easier the longer you do it?

Yes, the more consistently you set money aside the easier it becomes, because you are developing a habit of saving money. If you save through your company retirement savings plan, it’s even easier, because the money is whisked away before you get it.

But that isn’t what I’m talking about. The more money you save, the more your money works for you. Your money starts making money through the magic – actually the math- of compounding. Here’s what you could look forward to if you were to save the same amount of money each year, and earn an annual investment return of 7 percent.

  • In eleven years, the earnings on your total savings will match your contribution in that year.
  • In about six more years, the earnings on your total savings will be double your contribution in that year.
  • In about three more years after that, the earnings on your total savings will be triple your contribution in that year.

Of course if your investment return is lower, it takes a bit longer for your investment earnings to match your savings contribution. If your return were only 5 percent per year, it would take about fifteen years for the earnings to match your contribution. But there is a similar pattern of doubling and tripling your contribution over ever shorter time frames following that.

Admittedly, I’m both a money and a math nerd. I find this half-life of time to essentially gain an extra year of savings through the earnings on what you’ve already saved exciting. Who wouldn’t appreciate their money working harder than they do?

That is why it is so important to begin saving for your long term goals as soon as possible. The more time you have, the more your money can do the heavy lifting for you. Your total contributions toward your goal can be smaller.

If you are struggling to find the motivation to save for something that is decades away, keep in mind that you don’t have to do all the work. Saving money is hard, so make it as easy as you possibly can. Take advantage of the magic of compounding. Save early and save often, and you won’t have to save as much.

Photo by Mert Guller on Unsplash

 

 

 

The Key to Following Through on Your Good Intentions

Do you find it hard to follow through with your intentions? Whether it’s sticking to a budget or signing up for your company retirement plan, it’s easy to get off track. Everyone is busy, and your good intentions may fall victim to life’s frenetic pace. The key to following through with all you want to accomplish is to have a plan.

Of course you need a plan to achieve the big goals in your life. But you also need a plan to just get through your day. Simply knowing what you will do will make your life easier.

Say that you intend to cut back on eating out so you will have some extra money to save for your emergency fund. After a long day at work, you’re tired and hungry. Instead of making something from the groceries you have at home, you head off to the local Thai restaurant. You weren’t planning to go out to dinner. But in the moment it just seemed easier.

Though you have groceries at home, if you don’t know specifically what you will do with them, you have to decide what to cook under stress. The decision making process takes energy you simply don’t have, so your good intentions go out the window.

Scientists have found that under stress an enzyme attacks a synaptic regulatory molecule in the brain. As a result, fewer neural connections are made, and we think less clearly. We are physically less able to make good decisions. Our judgment in these circumstances is literally impaired.

The key to sticking with your good intentions is to not have to make a decision when your synapses are under attack. Just knowing what you will do will help you follow through. If you know exactly what you will make for dinner, it’s easier to carry out that plan than it is to decide when you’re tired and hungry. The following example illustrates why a plan works.

Plan No Plan
Planned to make meat loaf, green beans and steamed potatoes for dinner Check refrigerator for options
All ingredients on hand and defrosted Nothing is thawed, so need to wait for meat to defrost in the microwave. Choose ground turkey
Mix ingredients for meat loaf and put in the oven Out of eggs, so meat loaf is out – opt for turkey burgers
Steam green beans and potatoes in microwave No buns. Burgers are out, maybe pasta
Serve dinner What else do I have?

It’s the figuring it out that drains you, not the doing. You could make that meat loaf in your sleep. But without a plan, it’s no wonder you would choose to go out for dinner.

Simply planning what you will do will help you carry out all of your good intentions. If you’ve been meaning to sign up for your retirement plan or even just call your mother, but you are always too busy, try putting it on your calendar on a specific time and day. It  will substantially increase the likelihood that you will actually do it.

If you are committed to following through on your intentions, make a plan.  If you know specifically what you will do and when you will do it, you are much more likely to follow through. Your plan eliminates the need to make a decision, which if made at the last moment, may not be a good one.

Which of your good intentions could use a plan? Leave me a comment.

Photo by The Journal Garden | Vera Bitterer on Unsplash
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