Thursday, December 28, 2017

Countdown to Financial Fitness: Mitigating Holiday Expense

Countdown to Financial Fitness: Mitigating Holiday Expense: Christmas is over, most of the financial damage from holiday spending is done. Here are some tips to help you get back on track: 1.     ...

Mitigating Holiday Expense

Christmas is over, most of the financial damage from holiday spending is done. Here are some tips to help you get back on track:

1.      Return unwanted gifts promptly. No use keeping something that doesn’t fit or cluttering your life with items you’ll never use. Turn them into cash or exchange them for something you really want or need. Many stores have restricted refund policies, so maximize the value of these new possessions by getting this task done as soon as possible.

2.      Return unused decorations and party supplies. Some stores have “all sales final” policies on seasonal items; if so, put these away where you’ll remember to use them next year. Holiday cards and wrapping paper will still be good for another Christmas. But maybe you bought extra cases of soda or bottled water for a holiday gathering, and now you’re stuck with more than you’ll ever drink? See if the store will take them back.

3.      Use gift cards promptly, before they get lost or the value expires. What if you received a gift card for a store or restaurant you don’t patronize? There are a number of websites where you can sell or exchange them online.

4.      If you received cash or checks as gifts, deposit the money right away. You can decide later if you want to treat yourself to something you really want, or use the funds to pay off holiday bills first.

5.      If you’ve put your holiday purchases on a credit card that offers reward points, see if you’ve earned enough to cash in. Redeem those rewards before they expire or the program changes and the benefits are devalued.

6.      Purge your holiday greeting card list. Update addresses that have changed since last year. If a card was returned as undeliverable, remove that person from your list until you make contact again. Next year, you’ll save yourself some cards, time, and postage.

7.     Clean out your closets, including unwanted gifts you can’t exchange. Pack everything up and donate it to a local charity. Get a receipt so you can take a deduction on your 2017 income tax return.

What tips do you have for mitigating the bite of holiday expenses? I'd love to hear your comments.

Monday, November 27, 2017

Countdown to Financial Fitness: Holiday Layoffs

Countdown to Financial Fitness: Holiday Layoffs: Maybe it's my imagination, but it seems like companies often choose the holiday season to announce their most massive layoffs. I suspec...

Holiday Layoffs

Maybe it's my imagination, but it seems like companies often choose the holiday season to announce their most massive layoffs. I suspect it has more to do with removing excess overhead from the books by the end of the year than with the desire to play Scrooge. Nevertheless, a pink slip can deal a devastating blow at a time when everyone should be celebrating... and when people are about to increase their spending.

What if you're one of those workers affected by end-of-the-year downsizing? Ho, ho, ho! Happy holidays.

First of all, don't put off applying for unemployment, a severance package, a pension, food stamps, or any other benefits you might be eligible for. The goal is to mitigate the upcoming losses to your income stream.

You might be tempted to wait until after the first of the year to apply for unemployment; after all, you're supposed to be looking for work to receive a check. Why not relax and bury your troubles in the holiday spirit? But you can send out resumes, register at online job search sites, and still meet the "looking for work" qualification. Chances you'll be offered a job that starts before the end of the year are slim, so you might still be able to enjoy your newfound time off.

If you're serious about finding new employment as soon as possible, take advantage of your network. The holiday season is an excellent time to reconnect. Accept invitations to social events or reach out proactively, and let your contacts know you're available. But keep an upbeat facade. No feeling sorry for your plight and dampening the holiday spirit.

Look for ways you can cut expenses. Perhaps some planned, but not-yet-paid-for holiday festivities could be trimmed. Instead of a full bar at your annual Christmas party, make a special punch and have some inexpensive wine, beer, and soft drinks on hand. Take guests up on their offers to bring something. If you haven't started your shopping, think about paring your gift list. For example, the boss and co-workers...

Don't automatically cancel a scheduled trip, especially if you'll incur hefty penalties for doing so. The vacation might be a welcome escape from the depressing drudgery of looking for work. But reduce the travel budget where possible: pack smartly, refrain from buying a lot of souvenirs, and cut back on high-dollar extras like alcohol, spa treatments, new travel wardrobe, etc.

The end of the year is a good time anyway to examine your lifestyle, to explore how you can shrink your financial footprint without compromising your values. Are you paying for subscriptions to magazines or newspapers you never find time to read? That Amazon prime account you signed up for last year when you had enough purchases to make it worthwhile? What about a gym or golf membership you don't use? Are you getting the best rates for the phone and TV service that fits your needs? Cutting expenses for things you won't miss is a great way to put more money in your pocket for when your income slows to a trickle.

What tips do you have for people who have recently been laid off? I'd love to hear your comments.

Monday, November 20, 2017

Countdown to Financial Fitness: The Link Between Financial and Physical Health

Countdown to Financial Fitness: The Link Between Financial and Physical Health: Studies have shown a direct correlation between financial fitness and overall health. Think about it. When you worry about how you’re going...

The Link Between Financial and Physical Health

Studies have shown a direct correlation between financial fitness and overall health. Think about it. When you worry about how you’re going to pay the bills, when you feel guilty about how much you’ve spent, how you're buried in debt, your physical well-being may be affected.

Financial stress can cause depression or anxiety. It can elevate your blood pressure, even give you ulcers. You might have trouble sleeping. 

Whether it manifests itself in junk food binges or whether your stomach is too nervous to digest a proper meal, your body may be deprived of the nutrition it needs to maintain optimal performance.

Obsessing about money can lead to drug or alcohol abuse. Which in turn can create more problems in your life, both physical and financial.

Your relationships may suffer. At a well-meaning spouse’s mention of the overdue bills, or a child’s need for school supplies, you may lash out without thinking, consequently hurting people you love. Obsession over money can cause you to miss those special moments with family and friends, like watching a child take a first step or celebrating someone’s accomplishment. Important moments that shouldn’t cost anything.

So how do you avoid feeling stressed if your finances are indeed out of control?

Think of the serenity prayer: “God grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference.”

Have the courage to stop the bleeding. Now. Don’t wait until after the holidays. The longer you wait, the harder it will be. Write down everything coming in and everything going out, and then prepare a budget. Cut out unnecessary expenditures like subscriptions to magazines you don’t read, membership in clubs you don’t frequent, premium cable channels you don’t watch, etc. Maybe you can get by a little longer between haircuts, manicures, professional cleanings. Make a list when you go shopping—on a full stomach—and resist the impulse to splurge on items you don’t need. Complete transformation won’t happen overnight, but if you make small, steady, permanent lifestyle changes to help you live within your means, you will soon see progress.

Accept that there will always be someone who lives in a bigger house, drives a newer car, gives better presents, wears nicer clothes than you. Stop trying to keep up with people who have more money than you do. Buy only what you can afford, and learn to be happy with what you have. If you’re reading this, undoubtedly, there are others who have a lot less.

What tips do you have for reducing financial stress? I'd love to hear your comments.

Monday, November 13, 2017

Countdown to Financial Fitness: Navigating the Holiday Season

Countdown to Financial Fitness: Navigating the Holiday Season: I've been a Lifetime Weight Watchers member for more than a decade, and this time of year is always the most challenging for those who ...

Navigating the Holiday Season

I've been a Lifetime Weight Watchers member for more than a decade, and this time of year is always the most challenging for those who are trying to lose weight or keep it off. You have to make trade-offs. Enjoy your favorite foods—especially those once-a-year treats—but don't let them hijack your SmartPoints budget.

The holiday season is also challenging for people who are trying to get on the right track financially, or just making ends meet. You want the holidays to be special, but you dread starting out the next year deeper in debt.

The key to staying trim—and financially responsible—is moderation. What do you value most about the season? The spiked eggnog and frosted gingerbread men, or the fellowship with friends at a holiday gathering? Giving the most expensive present, or being with family?

Even though this is the season for holiday celebrations, not every day during November and December calls for overeating. Dieters can balance days of extra workouts and eating a green salad for lunch to save up enough SmartPoints for a slice of Grandma’s homemade pumpkin pie. One slice. Savored.

The same principle applies to spending money during the holidays. There will probably be more lunches out, more office parties and gift exchanges, more reasons to shop. Prioritize and participate in those activities from which you derive the most value.

Instead of going out and buying something new for the dirty Santa / white elephant gift exchange, why not scour your closet and recycle that item you received last year and had no use for? (If you’re afraid someone will recognize it, use it with a different group.)

Are there people you buy presents for every year out of habit? And the items they give you end up re-gifted or donated to charity? Make the suggestion to change the tradition, perhaps get together for a meal or a movie instead. Depending on your talents, substitute giving homemade goodies or flowers from your garden. Chances are, it’s not the gift that’s important to the person, it’s the relationship, the act of being remembered and acknowledged.

Throwing a holiday party? Cut down on costs by allowing guests to add to the bounty with a favorite dish or bottle of spirits to share. Most people will ask what they can bring or what they can do to help. Take them up on their offers. Most guests won’t care how much you’ve spent on food and decorations; they’re more interested in the opportunity to catch up with friends and neighbors in a relaxed environment.

I used to spend a lot of money on Christmas cards, postage, and printing a year-in-review letter with color photos. More and more friends and family now send their holiday greetings by email, so my mailing list for physical cards has shrunk over the years. Saves postage, and delivery is much faster.

If you decorate heavily, it’s tempting to add more adornments each year to replace worn items or freshen the look. Try to make do with last year’s stash, and then stock up on new stuff toward the end of the season. Years ago, the big sales happened the day after Christmas. Now it seems that by December 26, Christmas has been erased, and the big half-price sales on cards, wrapping paper, decorations, trees, etc., happen the week before the holiday. In time to add to your collection this year, if you’re patient.

And speaking of wrapping paper, I can’t seem to shake an old habit instilled in me by my mother: unwrap packages with care so you can reuse the paper. Especially if it’s pretty. And expensive, i.e., from someone outside our family.

What tips do you have for saving money during the holiday season? I'd love to hear your comments.

Sunday, October 29, 2017

Countdown to Financial Fitness: Open Enrollment

Countdown to Financial Fitness: Open Enrollment: My husband and I are fortunate enough to be covered by health insurance through his employer. Even though our premiums have increased and b...

Open Enrollment

My husband and I are fortunate enough to be covered by health insurance through his employer. Even though our premiums have increased and benefits have decreased over the years, we're still better off compared to those who have to purchase health insurance through the exchanges.

This time of year brings open enrollment for most plans, when it's a good idea to take a look at your coverage options for 2018 and make changes if necessary. Do you need to add or drop a family member? Go for a richer plan to keep or upgrade to the coverage you need, or drop down to something cheaper to save on premiums? Adjust contributions to a Health Savings or Flexible Spending Account?

Another consideration is to avoid leaving money on the table. If you have a Flexible Spending Account, you most likely must use the money for qualified medical/dental/vision expenses before the end of the year, or risk losing it. How about making an appointment with an eye doctor, getting your teeth cleaned, or having a skin cancer screening if you have not yet done so?

Health Savings Accounts (HSAs) are portable and the balance carries over from year to year, so no need to worry about spending that money now if you don't have to. But check to see if you've reached your funding limit, and back out any excess contributions.

An individual can contribute up to $3400 to an HSA for 2017; if the account covers other family members, the limit increases to $6750. If you're over 55, you can contribute an additional $1000. If the account is associated with your workplace high-deductible healthcare plan, you can probably make regular, automatic contributions on a pre-tax basis. If you transfer after-tax money from your bank account to your HSA, you may deduct those contributions on your income tax return. Fortunately, you have until April 15, 2018, to fund your 2017 HSA, so if you can't afford to make all your contributions before the holidays, you haven't lost out.

Like many companies these days, my husband's employer gives incentives for completing certain health actions (completing a survey, having an annual physical, being tobacco-free, achieving favorable biometric results, etc.) which translate into real money deposited into his HSA. Most of these health actions must be completed by the end of the year if not sooner; if you have such an opportunity, don't pass it up.

Open enrollment is the best time for an annual financial check-up to ensure you're taking advantage of all the benefits of your healthcare plan, and to make the best possible health insurance decisions for 2018 for you and your family.

What suggestions do you have for making the most of your healthcare dollars? I'd love to hear your comments.

Tuesday, October 10, 2017

Countdown to Financial Fitness: Protecting Memory-Impaired Loved Ones

Countdown to Financial Fitness: Protecting Memory-Impaired Loved Ones: I participate in the Walk to End Alzheimer's every year and find comfort connecting with others who have lost someone to Alzheimer'...

Protecting Memory-Impaired Loved Ones

I participate in the Walk to End Alzheimer's every year and find comfort connecting with others who have lost someone to Alzheimer's. Both my mother and my mother-in-law suffered from the disease.

One of the early symptoms of age-related dementia, and diseases such as Alzheimer's, is financial irresponsibility. A parent who used to meticulously record every expenditure in her checkbook one day stops. The person forgets to open the mail. Forgets to pay bills. Can't come up with the correct change for a purchase.

I once observed my mother staring at a dividend check like she didn't know what to do with it. Then she wadded it up and started to throw it away.

My mother-in-law cut the routing information off her annuity check before she deposited it. The bank bounced it. We had to call the insurance company to have the check reissued. Told them it must have been damaged in the mail. After she did it again, we set up direct deposit.

People with memory impairments--often seniors--are at risk of being scammed. Example: phone calls soliciting personal or financial information, claiming to be bill collectors or government officials. Unscrupulous contractors knocking on doors and insisting on doing work that isn't needed. Or demanding payment for work that was never done.

Fortunately, neither my mother nor my mother-in-law used email, so they never wired money to Nigerian princes or clicked on attachments that unleashed a virus. They never fell victim to the scam by the caller who claims to be from Microsoft, offering to "fix" your computer remotely.

But my mother-in-law would receive 13-15 pieces of snail mail every day, mostly solicitations from fake charities or "tax" bills that looked like they came from the government. Her favorite letters were notifications from make-believe sweepstakes and foreign lotteries she hadn't entered, stating she had won millions; she just needed to send them a check to cover the processing fee to claim her prize. She loved writing checks. And the more checks she'd write, the more mailing lists she'd inadvertently join.

Some of those crooked companies took the routing numbers off the check she'd written them and set up automatic withdrawals from her checking account, with the notation "signature on file." It took us six months to stop one of them from charging her monthly for "prize verification." Apparently there was some fine print on the form she signed to claim her supposed winnings (which she never received) giving them authorization to access her account on a regular basis to keep her "entry" in the sweepstakes active.

When we hid her checkbook, she called the credit union and ordered more checks.

Getting a parent to relinquish control of finances is a difficult transition. It's a loss of independence, like giving up driving. It takes away dignity.

And if your name is not on the account and you don't have power of attorney, the bank won't help; you're lucky if they'll even talk to you. My mother-in-law's credit union knowingly processed fraudulent debits to her checking account because the crooks could provide evidence that she had authorized them.

So how do you mitigate some of these problems?

We tried having the mail redirected, although a lot of junk mail like my mother-in-law received didn't get forwarded. And the post office hesitates to stop it, because junk mail is a source of revenue for them.

Advance planning helps. Talk to your parents and your spouse before memory problems arise. Find out how they like to spend their money, such as what charities they support, whether they always buy lottery tickets, whether they do a lot of online shopping, etc., so it will be easier to recognize irregularities. Gather important financial documents so you're aware of what the person owns and owes. I had been preparing my mother-in-law's tax returns for many years, so we had a pretty good handle on her situation.

Request auto-pay for bills and direct deposit for income. Help the person set up online access to accounts and then ask if you can have the password for emergencies. My mother-in-law consented to this, although she sometimes accused me of "spying on her."

Some insurance companies that sell life and long-term care policies suggest designating an individual to notify if a premium payment is missed. This can help keep important coverage from lapsing.

None of us knows what the future holds. Therefore, everyone should have a financial/durable power of attorney, as well as an advanced directive for healthcare, which designates someone you trust to make financial, and, respectively, healthcare decisions for you when you are unable. This will save your family members the time and expense of going to court to have you declared incapacitated so they can keep the lights on in your home and pay your medical bills.

These documents should be part of your estate planning, but you can also find simple forms online. Just print out and sign in front of two unbiased witnesses (who must also sign).

What tips do you have for protecting loved ones with memory impairments? I'd love to hear your comments.

Friday, September 29, 2017

Countdown to Financial Fitness: Repair Rip-offs / A Second Assault

Countdown to Financial Fitness: Repair Rip-offs / A Second Assault: Thousands of people suffered property damage from the recent hurricanes, and the season isn't over yet. If you've been affected, af...

Repair Rip-offs / A Second Assault

Thousands of people suffered property damage from the recent hurricanes, and the season isn't over yet. If you've been affected, after you've ensured your family and friends are safe, it's understandable you want to make your life whole again as quickly as possible.

Just as every disaster brings stories of strangers unselfishly helping each other, disaster also brings out opportunists who take advantage of victims when they're most vulnerable. Here are some tips to consider as you recover from the storms:

Beware of contractors who go door-to-door soliciting your business, promising to do the needed repairs right away at too-good-to-be-true prices. Hiring someone on the spot can be tempting, especially when every legitimate contractor in town is inundated with calls.

Contact your insurance adjustor first to verify the scope of the damage and to determine what your policy will cover. One year, after a big hailstorm, a roofing company went door-to-door in our neighborhood offering to replace everyone's roof; some homeowners did not even have roof damage.

Research and referrals. Even though you may be anxious to get repairs underway, try to be patient. Shop around. Get estimates and references. Check out the company with the Better Business Bureau. Research online how long they've been in business, and how many complaints they've had.

Get everything in writing. Have the contractor spell out the work to be done, materials used, cost, timeline. While you might have to pay something up front to cover materials, resist making full payment until the job is complete and you're satisfied with the work.

Permits and inspections. If you live in an area where permits and inspections are required for the type of project you're doing, make sure those permits are obtained before work begins and inspection takes place before final payment is made. Ask to see the permit. The company that replaced our furnace charged $125 for a permit to install it. When my husband asked to see the permit, not only did they not have one, they didn't even know the process for obtaining one! Yet for years, they had been padding every customer's bill with a charge for a permit.

Beware when buying a used car. Massive flooding during hurricanes Harvey, Irma, and Maria damaged hundreds of vehicles beyond repair. After the claims are settled, many will be sent to auto parts recyclers for dismantling, but others will be assigned salvage titles and shipped to dealer lots. While a reputable dealer will disclose a car's provenance, some unscrupulous sellers willingly pass flood-damaged vehicles to unsuspecting buyers.

Watch for telltale signs that the vehicle might have been underwater: a musty odor, covered up by strong air freshener; shorts in the instrument panel lights or other electronics; fog or moisture beads in the lights; mud or silt in the glove compartment or under the seat. Examine the title and ask for a complete CARFAX history. And, as with any used-car purchase, have the car inspected by a trusted mechanic before you agree to buy it.

What tips do you have to avoid getting ripped off after disaster strikes? I'd love to hear your comments.

Monday, September 11, 2017

Countdown to Financial Fitness: Don't Let Fake Charities Take Advantage of Your Co...

Countdown to Financial Fitness: Don't Let Fake Charities Take Advantage of Your Co...: My heart goes out to the victims of Hurricane Harvey. I lived in Houston for 10 years, and I recognize a lot of the locations that flooded....

Don't Let Fake Charities Take Advantage of Your Compassion

My heart goes out to the victims of Hurricane Harvey. I lived in Houston for 10 years, and I recognize a lot of the locations that flooded. Many people lost everything they own.

And as I write this post, Hurricane Irma is wreaking havoc.

Fortunately whenever disaster strikes, others jump in to help. We open our checkbooks and donate to the organizations on the ground providing relief. Some of us even volunteer our labor. There are many wonderful organizations that offer life-saving assistance to people and animals affected by a disaster, and they could not do their good work without the generosity of donors and volunteers.

But just as the looters crawl out of their holes to take advantage of fellow human beings and businesses when they're down, fake charities and "disaster funds" pop up to part sympathetic donors from their money, with no intention of giving it to the intended recipients. Disasters seem to bring out the best, and unfortunately, the worst in people.

You want to help. But how do you ensure your hard-earned dollars and goods really go to the people who need them?

First of all, choose organizations you are familiar with, or research the charity on sites such as Guidestar, Charity Navigator, or the Better Business Bureau. Google the name of the organization for reported scams and complaints. Verify on the IRS website that your donation is tax deductible.

Many fake charities will come up with names that sound like real, respected charitable organizations. Be suspicious if the person asking for money uses high pressure tactics, dodges your questions, or refuses a site visit. Legitimate charities are happy to provide you with all the information you request.

When you do your research, pay attention to what percentage of contributions collected goes to fundraising, salaries, and administrative costs. If you're solicited by a paid fundraiser, ask how much of your donation that person, or the agency employing the fundraiser, will receive. I resent making a "donation" that pads the salary of someone who earns more than I do.

Avoid making a donation in cash, and never send a wire transfer. For tax and record-keeping purposes, it's best to write a check made out to the charitable organization (not to an individual!) or pay by credit card through the charity's secure website.

People who have lost everything need clothing, linens, diapers, toiletries, bottled water, food, pet supplies, etc., so you may choose to donate goods instead of money. Just make sure your donation is really wanted by checking the organization's website for its wish list. If you're far away from the disaster site, unless there's a clear infrastructure for transporting and distributing donations-in-kind to the victims, it might be more effective for you to make a monetary donation. Then the charity can purchase the needed items locally from a vendor who can use the business. I'm still haunted by photos showing trash piles of goods donated to disaster victims in Haiti, going to waste while the Haitians continued to suffer.

You may be tempted to rush to the devastated location and volunteer your services. Again, check with the relief organization coordinating the response to see what skills are needed and wait to be deployed. Having too many inexperienced volunteers descend on a disaster site can strain resources and divert first responders from tending to the original victims.

During a high-profile event like 9/11 or a major hurricane, even the legitimate charities may receive more donations than they need to handle that particular disaster. When this happens, the excess contributions may be funneled to other programs or placed in reserve to help with future disasters. So be aware that your donation may not be used exactly how you thought it would be. But if you've sent it to a legitimate, efficient charity, you can rest assured it will go to aid someone in need.

What charities do you believe do the best job with disaster response? I'd love to hear your comments.

Tuesday, August 22, 2017

Countdown to Financial Fitness: Local Transportation

Countdown to Financial Fitness: Local Transportation: Most cruise lines do not usually provide a lot of information for passengers to get around on their own in the ports of call. The shore exc...

Local Transportation

Most cruise lines do not usually provide a lot of information for passengers to get around on their own in the ports of call. The shore excursion business is too lucrative.

Sometimes you can research options in advance. Sometimes you'll discover them by accident.

For example, we just returned from a Baltic cruise, where we had a stop in Copenhagen. The last time we were there (over 15 years ago), the cruise ship docked within walking distance of many attractions. Now there is a new cruise port out in the middle of nowhere. For those not booked on a high-priced excursion, the cruise line was charging $18 for a shuttle from the port to the downtown area.

Standing on the upper deck, surveying our surroundings, trying to decide what to do for the day, we noticed what looked like a public bus stop just outside the cruise port. A city bus pulled up; people got off and on.

When we disembarked the ship, we walked past the solicitous taxi drivers, Hop On Hop Off bus sales people, and the now-loading ship's shuttle to visit a small Tourist Information office, where we asked about the local bus service. The agent gave us a free map that showed where the various bus lines went. He advised us a two-hour ticket cost 20 DKK, slightly over three U.S. dollars. He was able to sell us the tickets and accepted credit cards, USD, or Euros as well as Danish kroner. So we took the public bus right into the center of town, for a fraction of what the cruise line's shuttle bus would have cost us.

We had a similar experience in Stockholm, where we'd embarked on the cruise two weeks earlier. At the airport, we discovered Flygbussarna, the airport bus that takes you directly to the Central Station for 110 SEK (about $15 USD). We found out you can buy tickets online for 99 SEK (just over $12 USD), so we took advantage of that savings.

At the Central Station, we learned we could catch the Number 1 bus (a couple other lines go there as well) to the Frihamnen cruise port. Tickets are sold in a magazine store inside the railway station, kind of like a tabac in France. A single ride costs 30 SEK (reduced to 20 SEK for over age 65 or under age 20). Since our cruise ship had an overnight stay in Stockholm before we set sail, we opted for the 24-hour ticket (120 SEK regular, 80 SEK reduced--around $10 each). This enabled us to check in, stow our baggage, and then go back out to explore the city. We even went out again the next morning, took a tour of Parliament, and got back on a bus headed for the cruise port before our tickets turned into pumpkins.

It's about a 10-minute walk from the Frihamnen bus stop to the cruise port check-in area, so if you're mobility-challenged or have a lot of luggage, changing buses and schlepping your bags that far might not appeal to you. If there are several people in your party, the cost of a taxi might be less prohibitive (about $100-150 from the international airport to the cruise port; most likely a lot less from Central Station).

But for able-bodied budget travelers like us, the bus adventure suited us just fine. We can find lots better ways to spend our savings.

What money-saving travel tips can you share? I'd love to hear your comments.

Monday, July 10, 2017

Countdown to Financial Fitness: Know Your Tolerance for Risk

Countdown to Financial Fitness: Know Your Tolerance for Risk: You've paid down debt, built an emergency fund, and now you've finally saved up some money to invest. But before you hand your hard...

Know Your Tolerance for Risk

You've paid down debt, built an emergency fund, and now you've finally saved up some money to invest. But before you hand your hard-earned dollars to a broker, determine your tolerance for risk.

You can find sample "risk tolerance" questionnaires on the internet. It's almost like a personality test. If you work with a financial planner or investment counselor, he or she will most likely have you take such a quiz, or at least ask you similar questions before setting you up with a suitable investment plan.

Besides your age, income, assets, expenses, and plans for your money, you will be asked questions like, "What percentage of your investment are you prepared to lose?" and "How important is it for you to keep up with inflation?" "Can you stomach putting some, or all, of your principal at risk?" Some quizzes ask you what synonym for "risk" comes to mind. Danger? Opportunity? Thrill? You might be given scenarios to choose from: an investment that would never go down more than 10% but would only gain a maximum of 5% versus an investment with the potential of returning 30% but could lose 30% or more. Or you might see a question like, would you prefer Door Number 1—$1000 as a sure thing—or Door Number 2, with a 25% chance to win $10,000?

It's important to understand how you react to risk before choosing an investment. If an investment constantly keeps you awake at night, it might not be appropriate for your portfolio. If you have to check your account balance hourly and rush to sell your stock the first time its price goes down, investing in the stock market might not be the right choice for you. The stock market goes up and down, and if you get euphoric and buy when it's up and panic-sell when it's down, you will lose money.

The younger you are, the more risk you can handle with long-term investments, such as a retirement fund, provided you have the courage to stay invested despite market fluctuations. Historically, the stock market has yielded better returns than bonds or cash equivalents. Downturns actually provide opportunity to grow your wealth by purchasing more shares of stock or a mutual fund at a discount—if you stick to a plan of investing regularly. (You can do this automatically by reinvesting dividends and capital gains, i.e., dollar-cost averaging.)

What some risk-averse investors don't realize is that, by not investing in stocks or more aggressive mutual funds, by keeping all their money in cash accounts where the principal is secure but growth is almost non-existent, their nest egg may not keep up with inflation. And despite their cautious approach, they still won't have enough money to live on in retirement. So they are accepting risk whether they like it or not.

The closer you get to retirement, to the time when you will begin living off your assets, the more conservative you'll want to become with your investment allocation. Like with your emergency fund, you'll no longer have time to weather a major downturn, and if you have to start withdrawing the money, you'll be locking in losses.

Risk and reward go hand in hand. Aggressive investors are willing to risk losing a chunk of money in exchange for the prospect of greater reward. Conservative investors prefer to preserve their principal, but in exchange for that security, they must accept more modest returns.

What kind of investor are you, and have your views changed over time? I'd love to hear your comments. 

Monday, June 12, 2017

Countdown to Financial Fitness: The Emotional Side of Spending

Countdown to Financial Fitness: The Emotional Side of Spending: Most people understand that overspending can wreak havoc with their financial goals. Spend less than you earn, don't take on unnecessar...

The Emotional Side of Spending

Most people understand that overspending can wreak havoc with their financial goals. Spend less than you earn, don't take on unnecessary debt. Our rational mind gets it.

But there are external forces at work, out to undermine our resolve. Advertising is notorious. Look at the beautiful, happy couple using this product. Translation: I, too, will become beautiful and happy if I buy this product. My life will be perfect, just like theirs.

My movie idol endorses that product. It must be good.

And we care too much what other people think. The old adage, "Keep up with the Joneses," comes into play. Everyone on my block drives a new car. What will the neighbors whisper to each other if I don't trade in my five-year-old Honda for the latest Lexus? I want them to know I'm doing just as well as they are—maybe even better.

Even if you don't care what others think, your children do. Your child needs designer sneakers. Do you want him bullied at school for wearing some uncool generic brand? What will his friends say about him—and about his parents—if he doesn't upgrade to the latest iPhone? And don't be surprised if he makes you park that five-year-old Honda down the street when you pick him up.

Some people equate love with how much money they spend on others. You buy the flashiest, most expensive bouquet so the recipient won't think you're cheap, or that you don't really love her. I once had a vacuum-cleaner salesman tell me I was jeopardizing my family's health, that I must not love them, because I wouldn't buy his over-priced product.

Guilt is another reason people overspend. You miss your child's game, so you make it up to her by buying her that fancy new toy she's been talking about. You fight with your wife and then try to make amends with a pair of diamond earrings. You lend your sister money you can't spare because she reminds you that you were always the favorite, the reason she could never catch a break. You invest in a cousin's ill-conceived start-up because he's family, and you don't want your refusal to help to be the reason his business fails.

We spend to treat ourselves, to celebrate a victory or other joyous event. We indulge in "retail therapy" when we're depressed.

And if something is billed as a bargain, we can't resist, because we want everyone to know we are savvy shoppers. Save 75%! Buy a pair of $400 shoes for only $100! Hurry, before the deal disappears! Of course, if you didn't plan to buy those shoes in the first place, you could save 100%, and use that $100 for something you really need.

My husband and I used to drive past a furniture store that had a "Going out of Business Sale" sign up every week. A year later, they were still having a "Going out of Business" sale. We joked that they must have made enough money from the "Going out of Business" sales to stay in business.

Product placement is also designed to lure us into forsaking our budgets. Necessities like milk are located at the back of the grocery store. Impulse indulgences—a mouth-watering candy bar you've seen advertised, a magazine with a salacious story about the latest celebrity romance, lottery tickets promising you instant wealth—are right by the register, so the cashier can ring them up before you've had time to decide you really don't need them.

One of the lessons I learned in Weight Watchers is, before taking a bite, ask yourself why you are eating. If the reason is emotional and not hunger, stop. Visualize your future slim, healthy self. Think again about what you must do to get there. This lesson can be applied to spending as well.

What tips can you share about controlling spending? I'd love to hear your comments.

Friday, June 2, 2017

Countdown to Financial Fitness: Navigating Cuban Currency

Countdown to Financial Fitness: Navigating Cuban Currency: I returned last week from a cruise to Cuba, and I wish I had done more research on that country's currency system before I left. I ...

Navigating Cuban Currency

I returned last week from a cruise to Cuba, and I wish I had done more research on that country's currency system before I left.

I knew businesses in Cuba don't accept credit cards drawn on U.S. banks. And certainly not American Express. So I was prepared to pay in cash for anything I bought. Because we were visiting the country on a cruise ship, taking excursions organized by the cruise line, I didn't expect to have to buy much. Maybe just a few beverages and a souvenir or two.

And tips. Cubans expect tips for everything. Including using their bathrooms. Once we got on board, the cruise line provided us with a wallet-sized tipping guide.

Friends who had visited Cuba reported that dollars were widely accepted. Yes, at the currency exchange.

Although the cruise line told us we must exchange our money because Cubans are not allowed to accept foreign currency—even for tips—I'm not sure this was entirely accurate. Plenty of cab drivers and vendors approached us and offered their services in exchange for U.S. dollars. But I imagine the cruise line, calling on Cuban ports at the permission of the government, was obligated to communicate official policy.

Cuba has a dual currency system, and neither currency is traded internationally. That means you can't buy Cuban pesos until you arrive in the country, and you can't get rid of them when you get home—or on board the cruise ship. (Technically, you're not even supposed to transport Cuban pesos out of the country.)

The Cuban Convertible Peso (CUC), with a 1:1 exchange rate pegged to the U.S. dollar, is the legal tender given to tourists at banks and currency exchange kiosks. A passport is required to exchange money. The CUC is approximately 25 times more valuable than the Cuban Peso (CUP), the currency used by locals at ration stores. Most state shops, especially those catering to tourists, post prices in both currencies.

There is a 3% service charge on foreign currency exchange. Plus, there is a 10% surcharge/penalty on U.S. dollars. So for my $60 cash, I received only 52 CUCs. My husband flies to Europe frequently and always has euros; too bad we didn't know to bring them with us to Cuba, as we could have exchanged those and avoided the 10% penalty.

We were warned about a common tourist scam where a vendor will accept payment in CUCs and then when returning change, will substitute lower-value CUPs for CUCs. An easy way to distinguish between the two currencies is that CUPs have faces of people on the bills, and CUCs have pictures of monuments. Fortunately, no one we talked to had fallen victim to this scam.

The closest we came was when we were heading back to the ship in our last port, having spent our last CUC, and a young man greeted us. "I'm a teacher," he said. "And I'm trying to meet tourists." He asked us our names and where we were from. "I have a gift for you," he said, and presented me with one CUP. "A souvenir from my country." I thanked him and started to walk away. "Wait," he called. "You can give me a CUC for that." When we told him we didn't have any more CUCs, he wanted his "gift" back.

To summarize, here are my suggestions if you plan to visit Cuba:
·        Bring adequate cash, as you won't be able to rely on credit cards or ATMs.
·        If you have euros, Canadian dollars, British pounds, or most any currency besides USD, exchange that instead, in order to avoid the 10% fee.
·        Exchange as you go, and get only as much local currency as you think you'll need. (But plan for gratuities.) Our ship ended up skipping one of our planned ports, and many passengers had to wait in line for hours to exchange their Cuban money back into dollars, paying another 3% service charge.
·        Learn to distinguish between CUCs and CUPs, and watch your change.
What tips do you have about exchanging currency abroad? I'd love to hear your comments.

Friday, May 5, 2017

Countdown to Financial Fitness: Remembering my Frugal Mother

Countdown to Financial Fitness: Remembering my Frugal Mother: My mother liked to be acknowledged on Mother's Day, but she bristled at the thought of money being spent on her. No gifts, a card was f...

Remembering my Frugal Mother

My mother liked to be acknowledged on Mother's Day, but she bristled at the thought of money being spent on her. No gifts, a card was fine.

Flowers (unless picked from one's garden) were too extravagant. When I got a job and became self-sufficient, I sent her flowers on Mother's Day and her birthday. "They're beautiful, honey, but you shouldn't have." And she meant it. I don't think she was ever able to enjoy them, she was so worried about how much the flowers--and the delivery--had cost me. After a while, I stopped sending her flowers, because they made her so uncomfortable.

My mother died before unlimited domestic calling was a common feature of most cell and landline plans. Back then, long-distance phone calls, with the charges escalating by the minute, made her nervous. As soon as she heard my voice on the line, she'd squeal, "Oh Sharon, how nice to talk to you. Thanks for calling." And sometimes she'd hang up before I had a chance to tell her the reason for my call.

Only the direst of emergencies warranted a long-distance telephone call. When my grandmother died, my mother wrote a letter to give me the news. (To her credit, she splurged on a special-edition, handwritten letter and thus an extra stamp; she didn't save that piece of information for the monthly family newsletter.) Still, I almost missed the funeral. My brother did miss the funeral, because he had a less-flexible work schedule than I and he didn't work for an airline that gave him free flight benefits.

When I moved to Los Angeles from Houston and drove with a friend across the desert in my semi-reliable 1976 Subaru, my parents wanted reassurance that I had arrived safely. "But don't waste money on a long-distance call," Mom instructed. "Tell the operator you want to make a person-to-person collect call to Sharon. When I answer and the operator asks for Sharon, I'll tell her Sharon isn't here. That will be our code. We'll know you arrived safely, and you won't have to pay for a long-distance call."

I inherited frugality from my mother, but I hope mine is less extreme.

My mother's attitude about long-distance calls changed a little when my brother got a job at Bell Labs. One of his employment perks was reduced-rate long-distance service; I think the company gave him an allotment of free minutes. Gradually, he convinced our mother that it wasn't breaking the bank for him to have a relaxed long-distance phone conversation with her.

I often wonder what my mother would do now that most cell phone plans offer unlimited domestic calling. Would she ever get used to it? Unfortunately, I'll never get to find out.

What endearing quirks does/did your mother have to save money? I'd love to hear your comments.

Saturday, April 22, 2017

Countdown to Financial Fitness: Earth Day Thoughts for Lawn and Garden Savings

Countdown to Financial Fitness: Earth Day Thoughts for Lawn and Garden Savings: One lesson I learned from earning a Master Gardener certification is that many people waste money on lawn and garden care. By working with ...

Earth Day Thoughts for Lawn and Garden Savings

One lesson I learned from earning a Master Gardener certification is that many people waste money on lawn and garden care. By working with the environment instead of against it, homeowners could spare themselves endless frustration—not to mention saving cash.

Put the right plant in the right place. Don't fight nature. Plan!

I used to buy impatiens every spring to fill the clay pots on my patio with color. One year, the very next day after I'd planted my new purchases, the deer ate them all. I awoke the next morning to chewed-down stems. Now I grow onions and oregano in those pots. The deer don't seem to bother them... yet.

Many homeowners have a love affair with turf grass. A lush, green carpet. It looks so easy. But grass has to be fertilized so it will grow. If it doesn't rain enough, it has to be watered. Don't get it too wet, though, or it's susceptible to disease. When it grows too tall, it has to be mowed. All that work takes time, costs money.

You apply pre-emergent in the spring and fall to keep the weeds from taking over. Left unattended, your lawn will revert to its natural state: a meadow of weeds. And what is a weed? It's a plant in the wrong place. For some reason, we want grass covering the lawn, not the plants that thrive there naturally, like dandelions, clover, and henbit.

The type of grass you can grow will be dictated by where you live. When we moved to Georgia, we were appalled that our Bermuda grass went dormant and turned a sickly yellowish-brown in the winter, unlike the verdant fescue we enjoyed in Seattle. But Bermuda is the only grass suited for Atlanta's hot summer weather. So Bermuda it is.

And grass doesn't grow in the shade. We have an area on the side of our house shaded all day by a large cherry tree and three river birches. Every year the trees grew taller and the lawn grew thinner. No amount of water, fertilizer, overseeding, and re-sodding with shade-tolerant cultivars could bring it back. Bermuda needs sun; even the "shade-tolerant" varieties need at least four hours a day.

The area is currently covered with mulch. I'm trying to talk my husband into laying a stone path and planting a shade-loving ground cover around it. Giving up on the lawn idea. Beats feeding the turf grass money pit.

Many homeowners follow an annual ritual of automatically adding lime and 10-10-10 fertilizer to their lawns, spending money without knowing whether these additives are actually needed. We did it, too, when we first moved in, because that's what everyone told us to do.

Then we found out about soil tests. For a nominal fee, our county extension office could analyze our soil and tell us what nutrients were missing, what was the PH factor, and what needed to change for the type of plant we wanted to grow in the space. Turns out we didn't need lime for our lawn. A total waste of money. And extra work to go buy the stuff, schlep it home, and put it down.

Even better if you get a soil test before you start planting...

Having a beautiful yard doesn't have to be as hard as we make it. The more you can incorporate native species, the less maintenance required. Native plants don't require as much water as imports because they're already adapted to the climate. They attract pollinators, which help them propagate. They thrive in the type of soil we have, so they need fewer amendments and less fertilizer. They're not as susceptible to pests and disease—all things that cost money to fix.

This Earth Day, be kind to the environment—and, inadvertently, you may be kind to your pocketbook as well.

What tips do you have for saving money in the garden? I'd love to hear your comments.

Monday, April 10, 2017

Countdown to Financial Fitness: Almost Taken

Countdown to Financial Fitness: Almost Taken: The "docents" saw me coming. I'd stopped to read a sign about ground transportation and got temporarily separated from my hus...

Almost Taken

The "docents" saw me coming. I'd stopped to read a sign about ground transportation and got temporarily separated from my husband as we exited the customs area at the Santiago airport.

"Lady, can I help you?" The "docent" reached for my tote bag, which was about to topple from my rolling suitcase. ("Docent" is the term my husband I have assigned to those obsequious locals who suddenly become your best friend and offer to escort you around their city, or the monument you're trying to visit, usually in expectation of remuneration.)

"Lady, where are you going?" The docent's partner approached. Sharks were closing in. They had spotted a rich, gullible American tourist, bleary-eyed after an overnight flight, lost and bewildered, definitely in need of some Latin chivalry.

"I'm looking for my husband."

Helpful docents immediately started assisting in the search for my husband. In a few moments, we were reunited. And surrounded by my new amigos.

"Did you find out where to catch the bus to Valparaiso?" my husband asked me. Fortunately, I had done some research ahead of time about ground transportation options. Taxis from the Santiago airport to Valparaiso cost approximately $150, but there was a public bus from the airport to Pajaritos station, where we could board another bus bound for Valparaiso, for approximately $10 each. Frugal travelers that we are, we had settled on this plan.

One of the docents pointed out the location of the public bus stop. "But you don't want to do that," he advised. "To get to Valparaiso, you have to go all the way into Santiago and change buses. And the bus will drop you off downtown, where you'll have to take a taxi to your hotel. Three changes of transportation, carrying all your own luggage, and it will cost you about 50. For only 60, you can take the mini-bus directly to your hotel in Valparaiso. And you can pay with a credit card!"

Minibus? I hadn't read about one, but in many of the cities we've visited, there are semi-public buses leaving from the airport that make the rounds of area hotels, often for less money than a private cab would cost.

"Come." Docents started pulling our suitcases toward the minibus boarding area.

"Sixty what?" I asked as I trotted along after my baggage. "Dollars? Pesos?"

"You'll pay in pesos," one docent replied. "By credit card."

"How many pesos to the dollar?" my husband whispered to me.

"The exchange rate is six to one," said one of the docents.

"Sixty pesos sounds pretty good to me," my husband said.

But something wasn't right. I couldn't remember the exact dollar to peso exchange rate, but it seemed like there were a whole lot of them to the dollar. Sixty pesos was probably less than a dollar. No way was anyone going to drive us two hours to Valparaiso for 60 pesos.

"Do you mean 60 dollars?" I asked. The last time we'd taken a cruise out of Valparaiso—about 10 years ago—we'd taken a shuttle from the airport to the cruise terminal for about 60 dollars each, and my husband still felt like we'd gotten ripped off.

"Six to one," replied one of the docents.

We passed a currency exchange booth and I glimpsed the rate for U.S. dollars: 656 Chilean pesos. Not easy math to do in your head. "He can't mean 60 pesos," I murmured to my husband.

The official taxi stand I had passed at the customs exit posted prices starting at 90. At first glance, my addled brain had assumed 90 dollars but now it sunk in that the price had to be in pesos. The 90 in large print was followed by three tiny zeros. Ninety thousand pesos. But still, a ride directly to our hotel in Valparaiso for 60,000 pesos didn't sound bad.

We reached the minivan. It looked like a large private taxi, not a community-type minibus like I'd seen in other cities. The docents loaded our baggage into the trunk. The driver opened the passenger door.

"Wait," I said to the driver. "How much are we paying?"

He grunted and pointed to the credit card machine.

"Sixty dollars," said my docent friend. "But you pay in pesos. With credit card."

"Sixty each," said one of the other docents.

"Sixty each?" I looked at the driver, the one who would be collecting the money and holding our bags hostage until we paid. "Cuantos pesos para las dos?"

He typed into the machine and thrust it toward me: 120,000. Sixty thousand. Each.

"No! Too much." I didn't have time to run the numbers through my calculator but I knew that amount was way more pesos than we wanted to spend. We grabbed our bags before the docents could close the trunk and headed back to the public bus stop.

"Lady! Wait! What's wrong?"

After a stop at an ATM, we boarded a bus for the 20-minute ride to Pajaritos metro station, paying 1200 pesos each. There we purchased tickets for Valparaiso for 3000 pesos each, with comfortable assigned seats for the 90-minute ride. From the downtown bus station where we arrived, we caught another public bus to a major square for 300 pesos, where we hired a taxi for 1100 pesos to take us up the hill to our hotel. A little less convenient than the private taxi directly from the airport, certainly, but our savings covered our two nights in the hotel. Not to mention getting a little local color in the process.

Several lessons we learned—or rather, reinforced—from this experience:
  •        Do your homework.
  •         Know the exchange rate.
  •         Don't engage the docents.

What rip-offs have you encountered while traveling abroad? I'd love to hear your comments.

Thursday, March 16, 2017

Countdown to Financial Fitness: Someone Filed My Taxes for Me

Countdown to Financial Fitness: Someone Filed My Taxes for Me: I should be working on my income taxes today instead of writing this blog. I'm not one of those taxpayers who rushes to file for my ref...

Someone Filed My Taxes for Me

I should be working on my income taxes today instead of writing this blog. I'm not one of those taxpayers who rushes to file for my refund in early February, as soon as the W-2s come out. First of all, I rarely get a refund, and secondly, I have some investments that don't report until March. I take that as my license to procrastinate.

But these days, with identity theft running rampant, it's risky to put off filing your tax return. Two years ago, someone beat me to it.

About this time in 2015, my husband and I received a cashier's check in the mail for $9156.02. Nice sum of money, but we weren't expecting such a payment. I assumed it was a fraudulent check and studied it carefully for the fine print stating that cashing it obligated me to buy something or subscribe to some service I didn't want. My mother-in-law used to receive checks in the mail claiming to be prize money; instructions were included for her to deposit the check and then mail in a "processing fee." But the check we received looked real. I couldn't find the catch.

We even called the police department for advice. "If you got a check you weren't expecting, of course it's fraudulent. Tear it up," they instructed us.

But we were hesitant to tear it up until we knew for sure it was a scam. My husband called the bank that had issued the check and read them the information. "It's real," they told him. "It came out of our San Diego branch that issues refunds for TurboTax."

TurboTax? We've never used TurboTax. And we hadn't even filed our 2014 taxes yet, so how could it be our tax refund?

My husband called the Clark Howard radio show. Clark, a consumer advocate, suggested we go to the IRS website under "Where's My Refund?" and put in my husband's Social Security number, our filing status, and the amount of the check.

Bingo! "Your refund has been processed and $9156.02 has been electronically deposited to your bank account."

Fortunately, the crooks screwed something up, and instead of a direct deposit to a thief's bank account, a paper check was generated and mailed to the address on file with the IRS. Otherwise, we never would have known we'd been scammed.

The fun began. We had to file a police report, alert the credit bureaus, and contact the IRS, who assigned us a special counselor to handle return of the fraudulent check (no, unfortunately, we didn't get to keep the money!) and processing of our real return. Although I'd expected to owe money that year, we actually had a refund due—which we didn't receive until December, after our claim of identity theft had been investigated and resolved.

We never learned how it happened. The same fate had befallen our neighbor the year before; he found out because he filed electronically, and when he pushed the Submit button, he was advised he had already filed a return under that Social Security number. The common denominator was an urgent care facility, where both my husband and neighbor had recently received medical treatment.

So far, thankfully, we have not seen any other evidence of identity theft in our financial lives. The IRS has given us a PIN to use when we file subsequent tax returns. However, we're still experiencing fallout from this incident. Our 2014 state tax return is under audit, because the figures I submitted don't match the numbers the IRS sent them--from the fraudulent return, which arrived first.

Have you ever been a victim of identity theft? What suggestions do you have for preventing it?

Monday, March 6, 2017

Countdown to Financial Fitness: When I Was on Food Stamps

Countdown to Financial Fitness: When I Was on Food Stamps: Over 40 million Americans receive benefits from the Supplemental Nutrition Assistance Program (SNAP), also known as food stamps. I'm g...

When I Was on Food Stamps

Over 40 million Americans receive benefits from the Supplemental Nutrition Assistance Program (SNAP), also known as food stamps. I'm glad our country has this safety net for low-income families, but I hope never to qualify again.

In addition to earning a low income (amount varies according to the number, age, and disability status of the family members), eligible households can only own $2250 in countable resources, or $3250 if at least one person is over 60 or disabled. Most states exclude a home, vehicle(s), and a retirement pension as countable resources. But still, $2250-$3250 is not much of an asset these days.

We've all heard stories of rampant welfare and food-stamp fraud. I read that at one time, approximately 4% of claims were fraudulent; now the number has been reduced to about 1%. That still leaves millions of people truly in need of assistance.

In the mid 1970s, I was pushed out of my job in Houston, Texas, and filed for unemployment. Someone suggested I apply for food stamps as well. I was happy for any help I could get.

I had to make an appointment at my closest Department of Human Resources office, a 20-mile drive from my apartment. (Now many states allow you to apply online.) Although they'd given me a list of what I needed to bring to the interview—copies of every bill I owed, canceled rent checks, bank statements, proof of unemployment claim, etc.—it wasn't quite good enough, because after I arrived, they decided there was one more paper I needed. They were unable to proceed with my application, so we had to schedule a follow-up interview when all of my documentation was in order.

When I slinked out of the office, humiliated that I couldn't even follow simple government instructions, I ran into a guy I knew from college. We'd worked together part-time on the University of Houston campus as French language tutors. Now he was employed as a social worker at the Texas Department of Human Resources. And I was a client applying for food stamps. I'd hoped he hadn't recognized me, but no such luck.

When I finally got my application approved, I received, by mail, an authorization card to purchase $50 worth of food stamps for $37. These days, one might be able to save that much on groceries by using coupons and loyalty cards! I had to redeem my authorization card and pay my $37 in person at a different office—fortunately, no one I knew worked there—also about 20 miles away from my apartment, in order to collect my $50 booklet of food stamps. Now recipients are given a SNAP card that blends in like an ordinary credit or debit card, so they're not as conspicuous in public.

And of course, there were restrictions about what one could buy with food stamps. There still are, as one of the goals of the program is to promote good nutrition. On my first trip to the grocery store using food stamps, I made the mistake of including in my purchases a bag of dry kibble for my pet kitten. "Ma'am, you can't buy cat food with food stamps!" screamed the cashier. The customers behind me in line—and at the other registers—glared at me like I was a criminal. I just knew someone would slap on the handcuffs at any moment.

Fortunately, I was only on food stamps that one month. The Texas Employment Commission offered me a temporary job in their office, which I couldn't very well turn down and expect to continue receiving unemployment insurance benefits. Workers in the temp program were encouraged to test for other state government jobs, and I soon got an offer from the Texas Department of Human Resources.

The next time I saw my old college friend, I was in training to become a social worker, just like him. And I was helping other people get food stamps.

What are your thoughts on public assistance programs? I'd love to hear your comments.

Monday, February 27, 2017

Countdown to Financial Fitness: Winning the Lottery

Countdown to Financial Fitness: Winning the Lottery: I read a story last week about a British woman who won the Euromillions lottery at age 17 and now wants to sue Camelot, the U.K.'s nati...

Winning the Lottery

I read a story last week about a British woman who won the Euromillions lottery at age 17 and now wants to sue Camelot, the U.K.'s national lottery, for ruining her life. Many readers were probably thinking, I'd love to have the opportunity to ruin my life by winning millions...

But many people who suddenly come into a huge fortune find themselves more unhappy than they were before the money.

According to a recent article in Fortune magazine, the Certified Financial Planner Board of Standards says nearly a third of lottery winners end up declaring bankruptcy. Bankruptcy also plagues many pro-athletes who grew up poor and then suddenly signed contracts for multi-million-dollar salaries.

Before you get your hands on a fortune, it's important to understand how to manage it. Or at least enlist advice from someone you trust. Preferably someone who doesn't have a stake in it.

It's almost impossible to keep a huge windfall a secret. Relatives and old friends you haven't seen in years—people who never gave you the time of day before—suddenly become your best friends. Everyone has their hand out. Sob stories. Guilt trips. Debts you'd forgotten about. Childhood promises. Investment proposals. "Expert" advice.

And then there are all those shiny objects. The sports car or yacht you've always dreamed about but knew you could never afford. Real jewelry. Designer clothes. Maybe a better place to live. Luxury travel. And of course, the opportunity to play Santa Claus for your family and friends.

You tell off your boss and quit your job.

But no matter how huge the windfall, it's not a bottomless pit. Up to 45% of your winnings may go to federal and state income taxes. And if you start doling out gifts exceeding $10,000 in value, you pay gift tax. That new mansion has to be maintained, and you may have to hire people to run it. The new sports car comes with expensive insurance.

Still, even after you pay the taxes on a multi-million-dollar jackpot, a lot of money is left. A lot of potential for improving one's life.

Some lottery commissions give winners the option of having the winnings annuitized over 20 or more years. You end up keeping more of the money, with a lower tax bill. While most winners opt for the bird-in-the-hand lump sum, I believe I'd take the deferred pay-out. That way, if I went crazy and blew through my winnings the first year, I'd have another installment to look forward to the following year. Surely after a few years, I'd grow accustomed to the income and learn to manage it sensibly.

I wouldn't make any sudden changes—quitting the job, moving, buying a business—unless plans were already in the works. I'd pay off any debts and fully fund my retirement account. I'd set aside a million or so for an emergency fund / long-term care plan. If I had kids or grandkids, I'd take care of their college funds.

I'd give a lot to charity. Besides supporting causes I believe in, the donation would lower my income tax bill and would not be subject to gift tax.

And of course, I'd have some fun. Take more trips. Buy presents. And invest most of the windfall—after carefully researching opportunities. I'd still stick to no-load, low-fee products I can understand. I still wouldn't pay more than necessary for purchases. I'd still recycle and conserve electricity and water.

Money doesn't guarantee happiness. But when used responsibly, it can make life easier.

What would you do if you suddenly received a huge sum of money? I'd love to hear your comments.