Grown Up Money

You have figured out adulthood. You vote, have a job, a mortgage, a family. When it comes to finance though, you may feel like you are a kid again. What does grown-up money look like?

Bank Accounts: You have a job!

This is the bare bones of grown-up money. You get a paycheck. Some goes to taxes, the rest you put in your bank. This money is kept in cash, some banks pay you interest, some don’t. You have a checking and a savings account, one for bills and everyday spending and the other for rainy days.

Retirement Accounts: Love your old self!

You have a bit extra after you pay all of your bills, have fleshed out an emergency fund and controlled your debt. The retirement account is the next bucket to start filling.

The government wants you to save for your old age, so they incentivize you through tax breaks. One type of break is in the beginning, where they allow you not to pay taxes today. Instead, you pay taxes when you begin taking the money out, during retirement. These accounts are individual retirement accounts (IRAs) or company-sponsored retirement plans (401k, 403b, etc.) You contribute pre-tax money, (either your work does not withholding on your deferral, or you receive a tax deduction if you use an IRA).  In these accounts you hold investments, (stocks, bonds or mutual funds). The after-tax break is when you use a Roth IRA. You invest just like a regular IRA or 401k, but with these you don’t have to pay tax on the earnings when you retire. You can buy and sell what you want in retirement accounts without worrying about taxes but you cannot take the money out of the accounts until you turn 59 ½, or you will have to worry about taxes and penalties.

Investment Accounts; You have checking, savings, and retirement accounts and still have a bit extra. Horray!

These accounts are like bank accounts, but instead of cash you open one of these to buy stocks, bonds and mutual funds. They can be opened at individual mutual fund companies (such as Vanguard) or at a brokerage firm (such as Charles Schwab). You do not have to have an investment advisor.

When you open an account you deposit money and you buy securities (stocks, or bonds, or mutual funds). You pay transaction fees (trading fees). Your stocks, bonds or mutual funds grow (or shrink). When you sell one of your securities, you “realize” either a gain or loss. If you made money “realized a gain” you will have to pay tax on the profit. If you lost money, you can use that loss to reduce your overall taxes for the year. You have to pay taxes on any gain regardless of whether or not you withdraw the money from the account. For example, if you buy a stock for $100, sell it for $150; you will have to pay tax on $50. Not a bad tax problem to have, unless you didn’t know about it and already spent the whole $150 in celebration. The tax ramifications on these accounts are important because unlike retirement accounts, the tax consequences are as you go, not when you retire.

Knowing which investments to buy in your accounts is also part of being a grown up, but knowing how they work is your first step.

Top Five Financial Bombs

1. Live too long: If you are a man aged 65 today, the social security administration expects you to live, on average until 83. If you are a woman, 85. If you retire now, have you saved enough for 20 years of expenses? What if you live 25? Save early, save more, work longer.

2. Live too short: If you have dependents, and you die, do you have enough term life insurance to keep them from having to move to a little tiny apartment and get huge college loans? Term life insurance is cheap, and the term need not be longer than they are dependent.

3. You are disabled:  If you don’t have disability insurance, look into it. If it is too expensive, bank some vacation or sick time so you have some paid weeks in reserve. If you can’t bank time, bank some money, this is one of your biggest reasons to have 3-6 months of expenses in an emergency account.

4. You have kids: These financial time bombs are the best thing that has ever happened to you. At the very least, open a 529 account for college.

5. Procrastination: If you are 35 and haven’t begun saving for retirement, don’t wait until 45. If you are 45 and haven’t begun saving for retirement, don’t wait until 55. If you are 55 and haven’t begun saving for retirement…

We Need To Talk (How to Fight About Money)

"We need to talk." It can only mean the worst, right? You have done something wrong, you have neglected something, a decision has to be made that is more adult than you want to be, or -- the worse worst -- you haven't done anything or neglected anything but your partner has and wants to confess something you don't want to hear.

Or (breathe a sigh of relief) it is time to talk about money. For those of you who think the money talk is boring, it is. Not only dry, but irritating. For those of you who think the talk is so boring it is best silenced, here are a few reasons to grow up before your partner decides to seek adult companionship.  

Neglecting your money, which begins but does not end with the money talk, leads to the kind of excitement functional people don't want to have, such as foreclosure,  ruined credit, lost jobs, chronic underachievement, unrelenting stress, resentful grown children who wish you'd not figured that paying for their college would make them rich enough to pay for your medical expenses in retirement, if you can retire.   

Step One: Cash Flow (Today is the First Day of the Rest of Your Financial Life)

Find out how much you make, per month, after all taxes and benefits and any retirement savings or insurance premiums are nicked out of your paycheck. List this on a spreadsheet, a piece of paper, a free budgeting tool, a notebook, whatever actually works for you (as opposed to what you actually want to work for you but doesn't). Find out how much you spend. ON EVERYTHING. This is the step not-quite grown up people skip because if feels petty. Au contraire, it is very petty to skip this step. Most people have no idea, so don't beat yourself up, just figure it out, then have a talk to the other adult who is in charge, if there is one.  At this point, and only at this point, are you actually prepared to really fight about money, using real numbers. Anything else is fighting about what you think is money but is probably some other control, shame, aggression, insecurity issue (which all feel like money) you have been wrestling with. You will probably have to cut back, but with the numbers right there, it is easy to see where and how. You may have to make more, and the numbers will tell you how much. Having this talk can prevent oh so many other way more awful talks in your future. (see above, add empty college accounts and dashed hopes).

Battle of the Bulge

There was a study last year that pitted clinical weight loss programs (the kind you do through professionally directed treatments) against good old fashioned Weight Watchers.  Clinical programs help you lose weight through tailored nutritional approaches as well as behavior modification. Weight Watchers programs help through “points” and your peers.

Weight Watchers won.

Small sample sizes are my favorite upon which to draw the biggest generalizations, and this study on diets is similar to my own non-clinical, non-peer reviewed professional study of budgets. I work with budgets professionally, and not the advertising or year over year outside vendor types of budgets, but real life individual and family cash flow budgets.

Most people have a problem with cash flow. Just like most people have a problem with their weight. This isn’t to say they are breaking the scales any more than they are blowing all of their cash on Starbucks, but they are tipping the scales and they are spending more than they should. Weight Watcher’s four pillars -- exercise, food, behavior modification and peer support are the foundation of their system that keeps track of your calories while encouraging you to move around and eat more fiber.

The simplicity can be applied to your budget. The math is simplistic. Rounding for illustration, use the following guide to reign in your spending.

WalletWatchers

You have 10 points a month. You can spend your points any way you want, as long as you spend no more than 10. Actually, you can’t spend them any way you want unless you choose to destroy your good credit standing, but you get the picture.

3.5  points for housing

1.5 points for transportation

2 points on food.

1 point for entertainment.

1 point short term saving goal.

1.5 point long term saving goal.

You make 50K a year. You bring home 37.5K. You have $3,125 to spend every month.

The $3,125 breaks down to $312.50 a point.

Housing: $1.093.75

Transportation: $468.75

Food: $625

Entertainment: $312.50

Short term goal savings: $312.50

Long term goal savings: $468.75

If you don’t know where you spend your points, use a simple budget tool like mint.com and find out. Most people skip this step, and it is like not finding out how much you weigh or figuring out what you eat when you want to clean up your diet.

Take a close look at where your points are spent. The broad categories are broken down according to whatever the purchase closest resembles. If you spend $50 a month on gardening, that is either entertainment or housing, depending on how important it is to you. If you spend $100 on shampoo, you spend too much money on shampoo. But generally, soap and other mercantile bought at the grocery store are thrown into groceries. If you buy clothes, that comes out of short term goals, which are defined as what you want to do in a year. Spoiler Alert: you may find out you spend your vacation on new jeans. Utilities are in housing. Car payments, insurance, gas and bus/train fare are in transportation. Long term goal savings should ideally never hit your bank account.

When you find out you are blowing one or more categories, figure out how to save.  This doesn’t have to be the bad part where you have to start buying generic cheese slices, unless you want it to be. Creativity lives close to the bone, your budget should as well.

Save on Housing

Save on Transportation

Save on Groceries

Are those jeans entertainment or basic human need?

Save more for long term.

What is short term savings?

Shrink your Housing Dollar

You may be able to afford your rent or mortgage. If you spend less than 28% of your gross income on housing, the people in charge think you are on top of things. But you may want to spend less than that in order to save more for something else. On the other hand, you may not be able to afford your rent or mortgage. It may eat up half of your paycheck or more. You aren’t looking to save for a vacation, you need to direct some of that money toward groceries.

Here are some ideas to reduce your housing costs.

Move: If you can’t afford your house, start shopping around. It is a simple solution, but the execution of moving is so messy and complex most people overlook it from the start.

1.       Refinance: if you haven’t considered refinancing your home yet, now is the time. If you are planning on selling in less than five years, you probably won’t come out ahead (the cost of the loan will not net out that quickly), but if you plan to stick around you will save thousands.

2.       Get a roommate: Move your desk out of the spare room and find a like-minded soul to share your expense. The more you have in common, the better this will work. Roommates also provide built-in pet sitting, someone to have dinner with, or, someone to occasionally focus your irrational frustration on.

3.       Host an exchange student. If you would prefer a more temporary roommate, try an international college student through ANDEO International Homestays.

4.       Turn into a B and B: If you want even shorter term paying guests, check out airbnb to list your spare room to travelers.

5.       Sell your stuff: a large portion of our housing is sheltering stuff. Do you need to pay for shelter for stuff? Are you already paying for a hotel for your stuff through storage? Ebay it. Craigslist it. Just get rid of it.

Save Money on Transportation

1.       Get rid of your car. You will no longer have to buy gas, insurance, tires, oil, Washmans. If you have a car payment you will see an immediate boost in your cash flow. You can sign up with a car share company if you need occasional wheels, bike more, walk more, carpool more. If you can’t live without a car, try

2.       Renting out your car when you don’t need it. Lyft on the weekends!

3.       Drive less. See 1.

4.       Reduce your insurance. If you have an old car that isn’t worth much, drop the collision coverage. The money you will get should the car get totaled is not enough to replace it. If you are a good driver, see if your insurance company will give you a discount.

5.       Drive a car you can afford. How much does your car cost compared to how much you make? If you can’t afford to pay cash for it, you can’t afford it. (sigh, wishful thinking I know, but you can’t afford a new car, sell it and buy a used car)

Save Money on Groceries

1.       Meal Plan. Meal planning avoids impulse shopping. If your plan runs short, cook out of your pantry. Fried eggs for dinner, yum. It also keeps you from eating junk. If you know what you are going to have for dinner, and you plan out what will be available for snacking, you will trim your budget and improve your health. 

2.       Eat high quality, low cost. This means beans. This also means frozen spinach and no berries out of season. This means grow your own herbs and learn to love spaghetti.

3.       Don’t use coupons if they persuade you to buy packaged convenience food that is both less healthy and more expensive. Do shop sales on staples such as vegetables, meats, toilet paper, cheese, you get the idea.

4.       Don’t join Costco unless you live by a Costco. Their prices do not beat most stores, but you end up consuming way too much deli meat. Do you really want to eat that much sliced ham in a month?

5.       Make enough for leftovers. This alone will save you bundles on work lunches. Or you can experiment by going to Trader Joes, buying a bag of apples and a bag of walnuts, and leave them at the desk for lunch. Many people think this is not a lunch, to which I say, re-think lunch.

Stupid Phone

I have always been under the impression that in order to drive the fancy model smart phones, you have to be locked into an expensive, long-term contract. Because of this underlying belief, I have a dumb phone. It is a hand-me-down, text and voice, Virgin Mobile pay-as-you-go that has been perfectly adequate. I pay about $20 a month to keep it in my pocket and make and receive the occasional call. This has worked out well since I am not one to spend much time on any phone – land, mobile, smart or dumb. My work is spent in-person with clients, or alone with numbers. My kids are little and the subject has not come up.

But then people started texting me pictures. Each picture drains about half of the battery. The portcover to the charger fell off (yet it lives!), I am beginning to have to pop the battery in and out to force it to reboot. Lately, it has been screening my calls, “you have a call, press 1 to accept.” Lastly, while I really try to think of myself as status-neutral, when I am at a meeting and everyone pulls out their smartie-pants devices to book their calendar and I am pulling out paper and pen, well, I admit I feel like the only kid who still has an 8:30 bedtime in junior high.

So I’m getting smarter. It is a sea change for me, but the new waters will not be so deep –I am keeping the dumb plan on my non-standard Virgin carrier, from which I have had no problems in coverage or billing, no matter where I have travelled, for the past many years. This is how it breaks down:

Standard carriers offer you really good hardware (iPhone, Galaxy, etc.) at a substantial discount and sometimes even free. But, for this discount you get a contract. That contract can cost anywhere from $70-$170 a month, depending on your bells and whistles, and how much data you use. If you fall right in the middle of that range, you will be paying $1,440 a year to have the internet in your pocket. Having the internet in your pocket is really cool, don’t get me wrong, but so is going to Hawaii, which you could do instead.

So, I bought this phone for $160. I will pay $35 a month for 300 anytime minutes, with unlimited text and data (such as said data is). This should cost $580 a year, $860 less than standard plans and carriers. It isn’t a Hawaiian vacation, but a quick search said I could go round-trip to NY and still have more than $500 left for a hotel and sandwiches.

It hasn’t come yet. I can’t yet say this is perfect, but I have had a dumb phone that has been nearly perfect for a very long time, so I can only anticipate being able to receive client emails while I wait for the kids at the bus stop will be convenient.

Or maybe it won’t. Maybe I’ll turn into one of those people who never look up. Other technology has illustrated the principle of “can’t go back.” Think of dial-up, then DSL, then high speed wireless. Can you imagine the clumps of hair that would be pulled out if we had to wait for our computers to connect like we used to? Impossible.

It should also be noted that I did none of the original research for this post. It was provided by my resident tech support, AKA the other head of household, who makes all of this easy for me. His commentary is below, for those who really want to know all the options.

For a solo phone person, like you and many others, the no-contract deals are quite good. It ends up being, at least partially, a matter of hardware. And status, of course, which is not insignificant to many folks, cost be damned.

On all of the pay-as-you-go deals, all of the “premium” phones — iPhone 4S or (now) the 5; the Samsung SIII or the Samsung Note; the HTC One X (or S, to a slightly lesser degree) — are ludicrously over-priced for those carriers. On Virgin, the iPhone 4S is $650 (their highest-end non-iPhone is prob the HTC EVO V, which $260). On Cricket, the iPhone is “just” $500. On Ting, the Samsung SIII is $579. On Boost, the Samsung SII (not even the III) is $369. On MetroPCS (another pay-as-you-go), their “best” phone is the LG Esteem ($369), which is not a very good phone.

All of the main carriers – AT&T, Sprint, Verizon and the red-headed step-child, T-Mobile, have their own pay-as-you-go, but there you’re dealing with seriously low-end, “dumb” phones, or phones like yours, which is, for all intents and purposes, a “dumb” phone. They want you to go with their plan phones, so all the premiums go there.

Virgin appears to have the most robust offerings out there, with regards to phone-quality, though Boost and Cricket aren’t far behind.

In terms of plans, well, they vary, and, particularly if you don’t call too much, the Virgin deal is clearly the best. Cricket has a similar one, with unlimited talk, for $45/mo and Boost starts at $50/mo.

Call quality usually isn’t an issue, as these other phone companies use existing hardware – Virgin is on Sprint, Boost is Sprint, Cricket is Sprint and Metro PCS – and are fine, particularly in cities. And, keep in mind, that when using most of the sub-premium phones, most have wi-fi connectivity, so the quality data plan isn’t a huge issue, particularly when at home or at work (if your work has wi-fi) or at the local coffee shop.

Regarding status, one of the things about the pre-pay phones isn’t necessarily that they’re drug-dealer phones from The Wire, but more that, to some, it implies that you got kicked off one of the big carriers for non-payment. At least that’s what I’ve heard from some.

Regarding making a spreadsheet for all this stuff – it’s tough, because so many of the websites make you go through a picking-and-choosing before they tell you how much it will be. I think Virgin’s my fave, though Ting seems like a good deal, particularly as they get more and different phones, which they’re supposed to soon. They are also offering plans for folks who bring in “unlocked” phones, meaning phones that are no longer under contract, so you can just buy a SIM card from Ting (or other carrier) and use it on their network. Others offer this, too, including some of the big carriers, like T-Mobile, which is trying to get iPhone users to come to their network, as they don’t offer them. Some carriers’ phones “brick” (meaning they lock and become useless as a brick) when you try to move them off their home network. I know Virgin’s do.

Here’s some links to plan-comparisons:

For pay-as-you-go:

 http://www.bestbuy.com/site/Mobile-Phones/No-Contract-Carrier-Comparison-Chart/pcmcat208900050014.c?id=pcmcat208900050014

 (Just AT&T and Verizon) http://www.engadget.com/2012/07/18/atandt-and-verizon-shared-data-plans-compared/

 (from 2011) http://www.billshrink.com/blog/10973/cell-phone-plans-comparison-2/

 (scroll down for chart) http://lifehacker.com/5939237/whats-the-best-wireless-carrier

Send Your Kids to College in High School

Parents were high-fiving in grocery stores all over town last week in anticipation of being relieved of their summer duties. Summer is fun — watermelon and tree climbing and camping and Frisbees and Grandma and beaches and campsites – even when run consecutive do not take up 10 weeks.

But it is over! School has started and you have just spent a chunk of wallet on back to school gear. You may not want to be reminded that college is really expensive, and that a 529 account has excellent tax advantages, I have already covered that and other vehicles that can get you closer to this giant sum that may seem far away but looms nonetheless. This post will give you ways your kids can pull their weight, even before they graduate out of high school.

The obvious: they can work. Be a life guard, do that big scanning job nobody has wanted to take on at the office, dog walk, house sit for vacationers, weed gardens, paint living rooms. Even if you don’t want them working during the year, there is no reason not to get them off their duffs in the summer. Getting them to save for college can be trickier than getting them to earn their own disposable income, but you can at least insist that their disposable income is not in addition to continued access to yours and start shuttling their weekly allowance into savings. (They will expect to double dip, and be incredulous when you say no.)

There are other options that would nix the part-time job during the school year but could potentially shave off not only tuition but time as well. Oregon’s dual credit system, as well as advanced placement courses allow students to receive college credit while still in high school, without paying college tuition.

It gets better! Additionally, two Portland high schools, Cleveland and Lincoln, offerInternational Baccalaureate (IB) diplomas, which can allow a student with a score of 30 or above up to 45 college credits and sophomore class standing at many universities. That is a whole year you don’t have to pay for, which if you have a Duck can amount to almost $9,000.

Even better than that! If you are in the Beaverton district, you can send your kids to PCC for the last two years of high school, at the expense of the school district. You can also do this if you move north to Vancouver where Washington State also has a “running start” program that provides two years of college for eligible students.

All of these programs are competitive and demanding, which means if your kids are still in grammar school, make sure they are getting a good grounding in the three Rs. (My sister, a 25-year teaching veteran, likes to terrify me with statistics like “did you know, if your kid doesn’t read at grade level by the 3rd grade, they never will.”) There are reasons you may not want your kid to go to college, or take college credit early — they may not be ready emotionally, socially or academically. These might also be the same reasons that they shouldn’t go to college right after high school, a topic that deserves a post of its own. But if they can handle it, let them get ahead.

Twenty Questions

Recently, our nephew from New Hampshire, having just turned 14 and deemed old enough for the long solo flight, came to visit. We hadn’t seen him in two years and were amazed at the four extra inches, the dropped voice, the same funny gait. He was excited (but couldn’t possibly show that) and nervous (which he couldn’t possibly hide). We were excited (which adults and little kids don’t think to hide) and nervous (which nobody can hide).

Over lunch the first day, there was awkward silence; it had been so long we were all at a loss. I proposed the question game, a game I invented to get to know the little kids I used to babysit, and he thought it sounded stupid. He didn’t actually say that, but his blank face said “that sounds really stupid.” The stupidity factor was raised by the excitement of his 6 and 8 year-old nieces.

The game isn’t twenty questions, where you decide on something and then have someone deduce what you are thinking by asking if it is bigger than a toaster or if it barks. Instead, you ask questions and from the answers try to deduce the person.

The rules:

  1. Whoever asks the questions is in charge.
  2. Whoever answers the questions must choose between one of the two options, even if it is difficult or even impossible to choose between the two.
  3. The respondent cannot launch into long explanations about his choice. He must simply choose.
  4. The one in charge must similarly not launch into long explanations about the question, nor make obvious judgments about the answer (except for having fun, which much be had, see italics).

Example:

  1. What do you like better, cookies or cake? Cookies.
  2. Trains or planes? I’ve never been on a train. OK, train.
  3. Chocolate or vanilla? Depends. OK, vanilla.   

Beaches or mountains? Swimming in the lake or the ocean? Mexican or Chinese food? Red or green? Blue or yellow? Mounds or Almond Joy? Cats or dogs? Rats or hamsters? Broccoli or spinach?  Hydropower or nuclear power? Coal or gas?

With only two choices, there is little room for nuance which the respondent always wants to add, which adds to the fun.

There are myriad variations of this game, and the following you should play at least once. Repeat if you find the questions difficult or impossible to answer. This version explores your relationship to your finances. (You knew it was coming, this is a money blog.)

  1. Do you have an emergency fund or a vacation fund?
  2. Do you like risk or do you crave safety?
  3. Does risk make you think of thrill or danger?
  4. Do you wait to have money to create an investment plan or do you plan how you are going to get money to invest?
  5. Does interest work for you or against you?
  6. Do you have term life insurance or I-hope-I-don’t-die insurance?
  7. Is it too late to save for retirement or too late to save for college?
  8. Can you risk $100 or $10,000?
  9. Is it too late or too early for asset allocation?
  10. What will produce the greatest return, college or retiement saving?

It isn’t as much fun as cookies vs. cake, but these are the questions that most people put off or avoid altogether until worry begins to creep up as their kids approach college – and then they put off the questions again because they are ashamed they put off the questions in the first place. Then their kids go to college on loans anyway. Then their kids put off the questions until they think they can work themselves out of their loan burdens. Most people think financial planning is portfolio-driven, which leads to not planning until you have a portfolio, which means, well, the portfolio is a long time coming.

Avoid all that by a DIY financial checkup in which you make sure you have basic estate plans (like wills), basic insurance (car, health, life), a savings plan (emergency first, then retirement, then college or other big goal), and most importantly, don’t spend as much as you make. Every year, repeat. Every year it will become a tiny bit more complicated as you begin building, but, by then, you can move on to more interesting questions — Do you like scones or muffins? Apples or oranges? Camping or hotels?

Mind Your Own Business

The reasons for starting your own business are as varied as the types of businesses operating. Maybe you got sick of working for the man and decided to contract instead of 9 to 5. Maybe you came up with the best fried tomato sandwich ever and joined the burgeoning cartopia movement. Maybe you were laid off and your only choice was to hang your own shingle.

Whatever the case may be — innovation, necessity, passion — the rewards of choosing yourself over a W-2 paycheck are tremendous. That said, the punishments can be tremendous as well, which will give you years of grindstone tales for your grandchildren. When you are in that future describing your trials and tribulations you will hopefully have a nice nest of eggs that will give your tales a bit more legitimacy. No amount of bootstrap will inspire a future teenager if you are forced to live in a basement for lack of retirement planning.

So start saving. There are several retirement vehicles to choose from based on several variables including your income and whether or not you have any employees. Assuming you have no employees, your deciding factor is usually how much you have left over that you would like to sock away in a tax-deferred account. Lets break the left-overs in the following categories: some, more than some, lots more than some.

If you have some money to save, you can use a traditional individual retirement account (IRA). It isn’t a retirement plan per say, but a retirement savings account that lets you put pre-tax money away ($5000 for 2012 if you are under 50) to invest which will grow tax deferred until you need it when you retire. You could also consider a Roth IRA.

If you have more than some, you may want to consider a retirement plan such as a SIMPLE IRA or a SEP IRA. (yes, they are acronyms, not shouts) Both allow you to contribute a considerable amount more than a traditional IRA, and each are low-cost and easy to administer. Still assuming you have no employees, a SEP will allow you to contribute 20% of your net income. A SIMPLE will allow you to contribute $11,500 a year. Both have strings attached, especially if you begin to hire employees, but there is no such thing as a tax-deferred account that doesn’t have ifs ands and buts. It is the IRS after all.

If you have lots more than some, consider an individual 401(k). Also known as solo-k plans, these accounts allow you to sock away $17,000 plus an additional 20% profit sharing contribution, the maximum of the two totalling up to $50,000. That will feather a nest much faster than $5000 a year you can put into an IRA.

All four types of accounts can be opened at discount brokerages such as Scottrade, Schwab or E*TRADE. Each brokerage has their own internal rules regarding yearly fees and level of support, so it is best to shop around.

You certainly don’t have to use a retirement account to save, there are other types of accounts you can invest your money in. A retirement account has a few features beyond tax deferral that make them attractive, namely, you are punished if you take money out early, which is a great incentive not to touch your retirement savings. You aren’t locked-in-the-closet-with-no-dinner punished, but penalized on withdrawals.

If you are still in the weeds minding your own business, don’t give up. But as soon as you possibly can, make it a point to mind your future as well.

It’s Not Nice to Talk About Money

When I was a kid I asked my grandmother how much money she had. “Jenny, you can’t ask people that.” So of course I also asked my parents how much money we had, that didn’t go over very well either. I imagine had I changed the pronoun to give nod to the fact that I did not contribute to the family coffers, the outcome would have remained the same.

Not to say these were scarring bad experiences, a variation of the same conversation is repeated generation after generation to pass down cultural norms. Absent that norm, I would have experienced far greater embarrassment as I made my way out into the world asking inappropriate questions. The norm supports the belief that we are not a reflection of our net worth and should not be judged as such. (How much we are actually judged by net worth or salary outside the scope of this post.)

To the point, how much money they had was none of my business. Kids always want to know, and quickly learn money questions are almost universally taboo.  Some families handle the question differently, but then have to take extra care to guide their charges through the playground of “my dad makes more than your dad, so there.”

Although the “none of your business” model does strengthen the separation of human value from net worth, it doesn’t lend itself to open conversations about how to handle money. It is yet another money script we walk around with, and like all scripts, should probably be examined if it happens to underlie a behavior that you are beginning to notice is, like credit card interest, working against you.

I knew a man who used to tell outrageously tall tales about money to his young nephews (he also won World War II, invented metal, was a spy, etc.) I also knew a man who believed that to tear down a social construct was healthy and would declare his income and then pressure people in mixed company to lay out their financial life as a way of paving the foundation of the conversation with “honesty.” The man was very funny, the second annoying and offensive.

The first took care to learn about money, the second took care to urge people who made more than him feel like assholes so he could feel morally superior. The first talked about money management, (absent tales) not his net worth.The second talked about money as an evil side effect of late-stage capitalism. The first figured out how to use a retirement account. The second didn’t.

We all like to talk about what we would do if we had more, or complain about not being able to do something because we lack money, but we rarely talk about how to set up buckets, which pours into what and what exactly goes in them. If you haven’t figured out how to put all the pieces of your financial life together, ask a trusted friend or family member if they have figured it out and can guide you. If they don’t have a clue, get a set of tools and figure it out yourself (and then tell your clueless sister). If you aren’t the DIY type, find a fee-only advisor, make an appointment.

Money Scripts

I recently met with a financial therapist recently (yes, there is such a specialty) who forwarded me list of common money scripts from the book Wired for Wealth.  Scripts are what we tell ourselves that shape our thoughts and actions and can be foundational in our approach to our lives.

One script in particular struck me: Money Is Unimportant.

I hear it all the time, most commonly from those in helping professions, or creatives, or those who also believe money is the root of all evil and poverty is virtuous. The good news, built into this script is the belief that money itself does not bring happiness. The bad news, this same script is used as an excuse for poor or non-existent money management.

If money were unimportant, it wouldn’t underpin so many of our choices. When money is unimportant, you don’t pay attention to it. If you don’t pay attention to it, it will break down, like a car that you don’t maintain. It can take you a long way just on gas, but eventually, lack of maintenance will lead to much larger problems than scheduling an oil change or tune up.

Money will eventually be important whether you want it to or not. You can wait to see where your money script takes you, or change the story.

On an unrelated but important note, Motley Fool, a site I generally avoid because of it’s irritating over-hyped get rich leads, is going to publish a series of articles on financial professionals. Find out what a fiduciary is!