Prepare Your Family for Money It Will be Inheriting

It is estimated that 20,000 families will each transfer over $20,000,000 to the next generation next year. They will continue doing so, it is forecasted, for the next twenty-nine years. Although this may sound fortuitous, research tells us that 70% of these families will find their wealth gone by the end of the second generation and by the end of the third generation 90% of these families will find their wealth squandered or spent. Unless they take steps to keep the wealth, families will find themselves falling into this statistic.

Money that has been amassed, will be gone, for most families, by the time their grandchildren are thinking about what they can pass to their heirs.  The great estate and trust planning coupled with the precise tax and investment positioning, although essential, is not enough. There is an element that most families do not put in place to ensure that their money passes to next generations intact. And that missing element is the preparation of the family for the receipt of the money.

Heirs need a blueprint and a roadmap to know how to sustain the wealth through the generations. They need to master skills of leadership, and family cohesion to successfully steward their new responsibilities associated with the money. Only when families have and master the roadmap to success, will they be able to grow cohesively as a family for many generations.

 

Let me know how your family is attending to preparing the family for its roles as financial beneficiaries. What kind of conversations are you having? How do family members feel about this forthcoming transfer? How is the family talking about the transfer of financial stewardship?

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Consumer Debt Gnaws at the Fabric of Freedom and Self-Worth

Debt is back, big time. The tightening that occurred after the crash of 2008 has been replaced by debt approaching $1 trillion dollars. And it shows no signs of abating.

 

Student loans and credit cards may be good for the issuers who capture more revenue through high interest loans and late fees but they are creating a pool of consumers sinking deeper and deeper into debt.

 

Credit card debt has already surpassed the pre-2008 crash levels, per WalletHub. Thirty-four billion dollars was added to credit cards in the last quarter of 2016 alone WalletHub found. To add to that increase, in the same period there was a record low payback of debt.

 

In my conversations with Millennials, I hear a range of concern about their debt. Some do all they can to avoid debt by delaying college until they can afford to pay for it or work for companies that will pay for their college education. I know one Millennial who has $300,000 in student loans. She told me that it is the price she has had to pay to attain her law degree. Although the debt does add stress to her life, she does not want it to confine her life to just working. She figures she will have this debt all her life and hopes that the government will one day forgive it.  

 

What have we done, where we have created a society saddled with debt as a way of life? Is this a sustainable model? I do not think so. It may seem to work for a generation but it is not a sustainable model for financial strength. Ongoing and mounting debt gnaws at the edges of the fabric of freedom, independence and self-worth. Debt is a burden. It may not direct all our actions but it directs our thoughts on how we think of ourselves.

 

Tell me your thoughts and how you deal with debt in your own life. I would love to hear your thoughts on this mighty subject.

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Saving Money Is Easier When You Do This

Saving money is difficult for some people. It’s just too easy to part with those bills taking up space in your wallet. Plus, those bills are worn and small denominations. Why keep them when you can just get rid of them on a mindless transaction.

 

There have been several studies, and a recent one, found in the Journal of Consumer Research, stated that: “The physical appearance of money can alter spending behavior. Consumers tend to infer that worn bills are used and contaminated, whereas crisp bills give them a sense of pride in owning bills that can be spent around others,” concluded authors Fabrizio Di Muro an Theodore j. Noseworthy.

 

Participants in several studies were given worn or new bills and their behaviors were observed as they went shopping. The participants favored the newer and crisper bills and they favored larger bills. By favoring, the participants were less eager to part with the crisper bills and would exchange worn bills for goods even if a crisper bill was of a smaller and more appropriate denomination.

 

So, if you want to save money, give yourself crisper bills. If you want someone else to save the money you give them, give them crisper bills as well.

 

Look at how you use your worn versus crisper bills and if you do not have crisp bills, ask the cashier for them when requesting change or ask your bank teller for crisp bills when they give you cash. Tell me your experience with your worn and crisp bills. Which do you favor?   img_5829

Statistics Show We are not Raising Financially Literate Kids

Kids, ages 10-14 scored a 54%, ages 15-18 scored a 60% on a 30 question national financial literacy test. This test measured their ability to save, earn and grow money.

 

Kids have access to money but do they understand how to use money? According to this financial literacy test, no. Of course, they know how to spend but can they count the change they have received? Is it the correct amount?  Next time you have a transaction where you give a $20 bill for an item costing less than $10 watch the change making ability of the cashier. How easy or hard is it for your child to determine if the cashier gave them right change when the register does not tell them what the correct change should be?

 

Do kids check their receipts to make sure they were charged correctly?  Research conducted in 2012 by uSwitch found that 70% of consumers were overcharged on a bill in the last year…and did not know it until it was pointed out to them.

 

Just how familiar are kids with making change, with being charged correctly, or with being overcharged? When they see these habits in adults who show them how to model behaviors, it is easier for them to do the same. When kids do not see a model to imitate, checking receipts or counting change can be embarrassing. They feel uncomfortable not trusting or believing the cashier. They have not been taught how to properly deal with this.

 

It’s time to teach kids about money. After all they use it every day and checking their receipts and counting their change is a good habit to learn. You might even decide to reward them for discrepancies they find.  This will go a long way to raising health financially literate kids.

 

Leave a comment and tell me what you do to encourage and build your kids’ healthy money habits? Let me know if you need help with this endeavor. We can help.

Sometimes a Quote Can Say It All

I was reading some quotes I have and wanted to share with you a few of the money quotes. I find them to be thought provoking. I offer them to you in the same spirit in which I have read them:

 

Money, it takes a lifetime to build it, an instant to lose it. What are you doing to safeguard your money?

 

Money, it is easier to make money than it is to keep it. With the marketing machine constantly reaching out to us, we have to know the purpose of our money or we will most likely part with it too easily.

 

The secret to money is knowing what yours is for. Yes, yes and yes to this one! You make good choices because of the heroes, models, mentors and experiences who guide your thinking in the proper way. Who are your money and financial role models?

 

Money without meaning is like candy without a wrapper. It’s too easy to devour without restraint.

 

This year, money and I will be friends, and not part company as easily and as often as last year. Put the processes in place and use the tools to make this so. Measure your behaviors so you can tweak your progress.

 

Let me know which quote resonates with you. If you have another money quote you like, let me know that too.

Pay Yourself Second, You Will Come Out Ahead

Everywhere you go there seems to be a line whether you are buying your coffee or tea, getting through airport security, waiting for a table at a restaurant, there is always a line.

 

It may not be as visible, but your money has a line forming for it also. Who is always first in line for it? Why, your favorite uncle, Uncle Sam. Uncle Sam demands to get paid and does what he can to stay #1 in line for his portion. Taxes always come out first in a financial transaction. Uncle Sam demands immediate compensation from a deal. But who is second in line for your money?

 

It depends. For many it is the merchant like the grocery or retail store. For some it is the account that you have agreed to pay second like a settlement, alimony, or a collection payout. I want you to reconsider who should be second in line and if this person is not already there, I want you to put them second in line.

 

I want you to place yourself second in line, after that demanding Uncle.  I want you to be as adamant about being second as Uncle Sam is about being first in line.  And be as adamant about that as Uncle Sam is about being first. I want you to take your position seriously and responsibly by having a plan and manifesting that plan so the money you have for yourself builds and supports the life you want.

 

Think of the 5 S.I.D.E.S. of Money© and determine how you are going to allocate the money you will have by paying yourself second to Saving, Investing, Donating, Earning, and Spending. When the money comes you then are ready to allocate it as you planned to those five S.I.D.E.S. of your financial life.

 

Be fanatical about putting money into those 5 S.I.D.E.S every time you have money pass through your hands-without exception and you will become a steward of your own money. You will come out ahead.

 

Leave a comment on how you make sure you pay yourself second.

Is the Financial Retirement Model Broken?

A recent article from Motley Fool revealed startling numbers about retirement savings. While ten percent of 55-64 year olds have a nest egg of $730,405 or more, the vast majority have $305,302 or less in their retirement nest egg. The Government Accountability Office released a report last year ( http://www.gao.gov/assets/680/670153.pdf ) which, in part, spoke to the financial status of people ages 55-64. They found that 41% of households had no retirement savings while an additional 20% had up to $100,000 saved.

Rather than lash out at potential consequences to this today, I am going to look at it from another point of view.

We are now looking at the third generation of retiree’s preparedness for retirement and finding it the same as the last two: not enough in savings….by a long shot. Why?

I think this is so because I think that the financial retirement model is primarily geared for three paradigms: the rare individual who saves like crazy, the individual who is lucky in the company they keep (stock grants) and those individuals who either inherit or have a career, winnings, pension, or golden parachute that ensures their financial security.

I am going to go out on a limb and say saving for retirement is not within reach of most people. Our culture, while promoting saving does little to encourage it. Instead, our culture invests a lot of effort to help and guide people to part with their money.

We have tried to “make” and encourage people to save. They are not or cannot do it There is something broken here.

I’m just sayin’. What about you? Leave me a comment on your reaction to this.

Thank You for Being Part of My Fulfilling Year

Reflecting

 

Thank you for who you are to me—people of grace and profound commitment to bringing a richer weave to the fabric of life-your own and the world around you.

 

When I reflect on you,

You who have deliberately chosen to direct your lives

Purposefully and with great meaning

I see shimmering stars lighting my path

I see the beauty of persistence and determination in you.

 

As I think of you

I feel the essence of the freedom you feel

When enduring strength and power replace your initial fears and doubt.

I am touched by your commitment to being your best

With your Legacy, your Life and your Money

 

HAPPY HOLIDAYS

We welcome your comments

Money Phrases You Can Take to Your Bank

For this blog I want to share with you seven pithy quotes on money for you to reflect on. As you read each one think about its relevance to your life

Money:

  1. It can take a lifetime to build and a year to lose
  2. It’s easier to make money than it is to keep it
  3. The secret to keeping your money is knowing what yours is for
  4. You make good choices because of the heroes, models, mentors and experiences who guide your thinking in the proper way
  5. Money without meaning is like candy without a wrapper. It’s too easy to devour without restraint.
  6. This year, money and I will be friends, and not part company as easily and as often as last year.
  7. Commitment is a promise and pledge to something. Make your commitment to the purpose for your money that strong.

Which statement got you to think about your money in a more profound way? Which statement made you reconsider an aspect to your money that is not in alignment with your intention with that money?

I find that #5 is a zinger for me today as I can find myself easily justifying an expense I don’t need but act upon. I like the reminder that #7 gives me to have a pledge with my money and to honor that pledge.

Leave me your comments. I’d like to hear what caught your attention.

Don’t Send Your Kids to College without Using These 2 Tips about Money

The teen years are challenging transition years. Along with the hormonal, emotional, psychological and physical changes, as if that weren’t enough, teens are wrestling with the space between dependence and independence. Many teens express their independence by taking jobs. They begin to fill their pockets with “their” money, money outside the allowance framework, money outside the extra chores they convinced you to pay them for. This money is theirs, given to them by someone else in exchange for skills and/or time.

This raises important questions:

  • What are productive ways to divide the things parents pay for and the things the teenager pays for?
  • What are productive ways to develop habits built around the understanding of the 5 S.I.D.E.S. of Money©?
  • How can this time of transition progress smoothly to adults with productive habits and behaviors around money?

Susi, a teen girl, initiated a conversation with her parents by saying when she earned more than $150 a month that she would begin to pay for her social activities, some clothes and things she wanted, like an upgraded phone, above her parent’s phone commitment to her. She wanted to feel a sense of responsibility and independence with her money and from her parents.

Peter, a teen boy, decided that his earned money would be put aside for his college personal expenses. He wanted to experience college with a sense of freedom and opportunity on his own and without having to justify his expenditures.

Courtney, a third teen, didn’t want her parents to know anything about what she made and always underreported her earnings to them. She made sure she was paid in cash when she did chores, babysitting or errands for people in her neighborhood. She wanted to have that money to do whatever she wanted to do with it and still have her accustomed allowance and special asks.

Each treated their money differently. There are many more stories of teens with their money. As you can well imagine, how a teen treats and views their money will influence their behaviors and habits as adults.

From the three examples above, the first teen, when she became a young adult, was used to paying for things herself. Her transition from allowance to her own earnings went fairly smoothly. She understood boundaries with money and that what she couldn’t pay for or put a plan together to make happen, she couldn’t purchase.

The second teen amassed a nice little nest egg for his college years. In his freshman year at college he was investing part of his money. He also kept some of his money in savings. He was glad he did because, as he said, he saw a decline in the market during spring semester and it scared him. He thought he wouldn’t have enough for the extras he wanted for the next few years. Maybe money didn’t grow on trees after all…at least not that easily.

The third teen did not see the value in saving for her “College Experience.” Her parents would come up for the money for that. As a young adult in college, she quickly spent her money and asked for additions to her college allowance to fund the pressures of peer acceptance. This created unspoken tension between she and her parents. They couldn’t talk about their resentment at being seen as an unlimited source of funds, while she couldn’t understand why they didn’t understand her needs were important. She did not like money but she liked what it did for her. Money was like water to her, pouring onto and through her hands.

As you look over the landscape of your kids or grandkids role with money, take a moment to consider what you want them to know about money, their money. Here a couple of tips for you to use with your teens.

  • Create an opportunity to talk to them about what they want their stewardship with money to look like and what initial steps or further steps they can take to make that happen.
  • Talk to them about how they will use, track and celebrate their 5 S.I.D.E.S. of Money© habits so when they go off on their own, they are prepared stewards of their money.

 

I would love to hear from you with your questions or comments about your teens’ behaviors with money. Use the following two questions to help you shape your thoughts as you leave a comment here.