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Lauren's Blog

Lauren’s blog covers topics that impact your finances, your family, and your future. Is there a topic you’d like Lauren to tackle? We’d love your suggestions and feedback.

Getting married? Unless you’re royalty, it’s time to talk money!

Getting married? Unless you’re royalty, it’s time to talk money!

On Monday, Prince Harry and Meghan Markle announced their engagement, and the media (and everyone I know!) is buzzing about the news. The royal wedding is scheduled to take place in May at Windsor Castle, and I’m sure the bride-to-be already has her eyes set on a wedding gown. The good news for them is that, while I’m sure they’ll have many challenges of their own to face in the years to come, one issue they’ll happily be able to sidestep is money.

Unfortunately, all too many soon-to-be couples who are far from royalty make the mistake of sidestepping the money talk before marrying. It’s a move that can lead to painful consequences.

  • Angela is money wise and has a generous spirit. Her husband Alex is very controlling, especially about finances. They have a healthy marriage, except when it comes to money. She enjoys spending what they can easily afford, but she knows that even the smallest expense will be an issue for Alex. Rather than argue with him, she regularly borrows or withdraws money from her 401(k). They don’t discuss it—until tax time when her 1099 arrives, and her withdrawals are right there in black and white. Her rationale: at least they only argue about finances once a year.
     
  • Bruce is the self-appointed CFO of his family—but he doesn’t have the skills to do the job well. When money is tight, he tries to keep the shortfall under the radar from his wife, Lisa. But that approach only works for so long. Soon the bills begin to mount and the truth is revealed. It’s a pattern that Lisa (and I) have watched repeat itself over and over again.
     
  • Patricia, a long-time client, died recently, and I’m now working with her adult children to manage their inheritances. Her daughter’s husband is already planning how to spend the windfall; he seems to have mixed emotions about the fact that his wife now has her “own” money. In contrast, Patricia’s son and his wife seem to be excellent financial partners; they’ve already placed the funds in a joint account and are working together to decide whether they want to spend, save, or invest the assets.

I have to wonder how things might be different if these couples had ironed out the details of their financial lives together from day one.

Whether you are marrying for the first time, blending families, or enjoying a later-in-life union, your life partnership is about more than your love for each other. Some of the best marriages have been broken by that troublesome nemesis that is money. The good news is that, with proper planning, money can also serve as a foundation for a wonderfully healthy marriage. But it all starts before you say “I do.”

What every couple should understand is that marriage is (hopefully!) rooted in love, but it’s also a business transaction. When you marry, you are forming a legal partnership that involves many rights and responsibilities. Before you take the next step from two legally and financially independent people to becoming a married couple, take the time to work out the business details of your relationship. Think of it like opening a shop together—and have a little fun.

Start by taking a close look at your current financial reality. Consider each of your personal incomes, what you spend, and what you save and invest. Determine your individual net worth and share your credit scores. This information serves as the starting point for your financial future. Next, combine your balance sheets and agree on how, and if, you want to use your joint assets together.

Next, create a set of bylaws and assign roles and responsibility. Who will serve as the CFO (learn from Bruce: don’t assume the role for yourself!) and who will be the bookkeeper? Agree upon how you will make financial decisions, including your household budget and large purchases such as a new home, a major remodel, or a new car. Talk through a process to handle financial challenges or disagreements. (Yes, they will happen!) If there are children from a prior relationship, what do you need or want to do for them? Will you both help fund their education? Will you pay for their weddings? At what age will you stop offering financial assistance? If you have siblings, friends, or aging parents who may need financial help, how and when will you be willing to step in?

Now comes the fun part: creating your shared vision for the future and drafting your strategic plan. This is when you align your dreams and set the path for a happy tomorrow, and it’s one of the most important things you can do as a couple. If your spouse imagines a simple retirement cabin on a lake and you fantasize about the hustle and bustle of Manhattan, there’s bound to be conflict down the road. Share your vision for five, ten, and twenty years into the future, and discuss how to combine your ideas and bring those dreams to life.

The last step is to put your plan in writing. Like any successful partnership, your agreements must be written down. Putting pen to paper clarifies the details, and it’s the best way to avoid miscommunication now and for years to come. Finally, review it all every year—because as we all know, life happens. And when you need help aligning your reality with your goals—or creating a shared management process that works for both of you—a financial advisor can be a tremendous help. The newest royal couple may never have to worry about managing debt or how to invest their nest egg, but for everyone else tying the knot, now is the time for the money talk! 

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Just for caregivers: 7 Dos and Don’ts to protect your financial future

Just for caregivers: 7 Dos and Don’ts to protect your financial future

Caregiving. It’s something I can speak to firsthand. When my late husband Ed suffered a severe stroke decades ago, I suddenly confronted a whirlwind of emotional, physical, and financial stress. It’s no wonder that I found myself having flashbacks when I read the results of a recent survey of 2,000 caregivers. The findings are frightening, but they tell a story that won’t surprise anyone who has been a caregiver for someone they love.

According to the survey, nearly three out of four respondents said that their personal financial situation causes them stress, and 92% said they help manage the finances of the person for whom they are providing care—from paying bills to handling insurance claims to dealing with debt. While struggling to manage another’s finances is certainly stressful, caregivers also tend to allow caring for a loved one to impact their own finances. Of those who help their family members financially, 30% said they’ve cut back on their living expenses to do so. Twenty-one percent have dipped into retirement savings. And 24% had trouble paying their own bills.

It’s a heavy burden. Financially and emotionally. The vast majority of caregivers—nearly 70% according to the National Center on Caregiving—are women. Since women as a group struggle more than men financially, this puts us in even greater peril to achieve financial security and confidence during our lifetimes.

I’ll tell you straight out that it is our giving nature—not our financial smarts—that puts us in that peril. My own story is a perfect example. There I was, a successful financial advisor, helping my clients make the best possible financial decisions. Yet, during Ed’s long disability, I was challenged by my new reality—being the sole earner while also being a caregiver. I was overwhelmed with the emotional side of the equation. As I was leaving the hospital to take Ed home, the case manager’s words filled my heart with even greater fear: “I guess it’s time to start spending down your assets.” And though I knew better, her chilling words cut me to the core. After all, my goal was to take care of my husband, but I was also a financial planner and swore not to put my financial security at risk.

Ed and I had been on track financially. Yet despite carefully managing spending (and feeling guilty every time I turned my focus to money), by the time Ed died, I had gone from financially comfortable to more than $80,000 in debt. Did I know what we were spending? Yes. But I simply couldn’t get myself to look at the numbers. As a result, I made some major financial missteps.

The good news: you can learn from my mistakes to avoid making them yourself. Here are my 10 “dos and don’ts” that can help every caregiver make better, smarter financial decisions—even when you’re in an emotional fog:

  1. DO recognize that your loved one may no longer have the ability to make wise decisions,financially or otherwise. Like caring for a child, you will need to make hard decisions—even when your loved one resists.
     
  2. DO have proper powers of attorney for healthcareand financial matters in place before a health issue arises—and use them when the time comes!
     
  3. DO have a written record and spending plan. Tracking expenses and knowing your budget is vital.
     
  4. DON’T confuse highest cost and what is best for your loved one. Consider the physical and mental needs of your loved one when choosing the best care option. A beautiful facility with extensive activities may not make sense for someone who is confined to a wheelchair or has advanced dementia.
     
  5. DON’T let your personal relationship with caregiver employees impact financial decisions. Be sure you’re paying the market rate for care, and maintain an arm’s length employer/employee relationship.
     
  6. DON’T give in to emotional blackmail.Make the best decisions based on your loved one’s current health and financial situation—not based on old promises to others or to yourself.
     
  7. DON’T neglect to keep your own financial house in order.Caring for a loved one can easily become your only focus, but caring for yourself and your future is just as important.

I learned the hard way what to do—and what not to do—when managing finances as a caregiver. Since then, I’ve focused my practice on helping women make smarter financial decisions, especially in situations when emotions can lead to disastrous results. One of the most important things you can do to help keep your finances afloat is recognize that your own emotional biases can lead to poor financial decisions—no matter how smart you are. To help stay on track, work with a financial advisor who can help you step back and look at the big picture.

As they say before every flight, in case of emergency, put your own oxygen mask on first so you’re able to help others. The same is true when you’re serving as a caregiver. By making your own financial security a priority, you can increase your capacity to care for your loved one—without sacrificing your own future.

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It’s Open Enrollment time! Act now to be sure you’re covered in 2018

It’s Open Enrollment time! Act now to be sure you’re covered in 2018

If Open Enrollment has you perplexed, you’re not alone. Medicare is a messy can of worms, the menu of corporate benefits seems to get bigger every year, and the Affordable Care Act—also known as Obamacare—seems to be changing by the minute. But picking appropriate coverage is one of the most important things you can do to protect your physical and financial health. Here’s what you need to know to get started:


Medicare

Whether you are already enrolled in Medicare or you’re turning 65 this year and are new to the maze of options, the enrollment process can feel overwhelming. Almost everyone is eligible and must enroll in Medicare Part A, which covers hospitalization. There are many Medicare Part B options, and the choice is not simple. Then there is Part C—Medicare Advantage Plans that often sound too good to be true (think free gym memberships, cheaper drug plans, and more) but come with some limitations and costs. Medicare Advantage plans replace Medicare Part B, and not all Part B options may be available if you change your mind—even during Open Enrollment. Making the best possible decision from the start is vital. There are also multiple drug plans, and your best choice depends on your current prescription needs, which means an annual reassessment of your drug plan is a must.

The good news is that help is available. HICAP (the Health Insurance Counseling & Advocacy Program) provides objective information and counseling about Medicare. The service is very good—and it’s free. Of course, we’re always here to help as well. Open Enrollment for Medicare closes on December 7, so be sure to explore your options now rather than rush your decision as the deadline looms.


Corporate Benefits

If you’re fortunate enough to have a corporate benefit plan, take advantage of Open Enrollment (which is likely happening right now) to review and update your benefit elections and make the most of your options.

  • Health Insurance. Most companies offer a variety of options, including PPO, HMO, and HealthSave plans. The costs for these plans vary widely, so it’s important to explore the options carefully to choose the plan that balances premium fees with out-of-pocket expenses based on your family’s expected health needs. If you have access to dental and vision insurance, take what’s available to be sure you and your family are covered.
     
  • Life Insurance. Life insurance is not for you, per se, but to replace your income to support your dependents. Group life insurance offered through your employer is often priced well, so do take advantage of it. However, corporate coverage does not protect your insurability when you leave the company due to a job change or retirement. Plus, because the premiums for group life insurance go up every year, private, level-term insurance is sometimes a better option. Work with your advisor to determine if supplemental private life insurance makes sense in your situation. And while many plans offer coverage for your children, this typically makes sense only if you don’t have funds for funeral expenses.
     
  • Disability Insurance (DI) and Long-term Disability Insurance (LTD). Knowing that the chance of becoming disabled in some way is much greater than the chance of dying early, this is likely the most important insurance you can buy. It’s expensive, but considering that it covers 60-70% of your salary should you become unable to work, it’s well worth the price tag. Note that because you pay for group DI with pre-tax dollars, the benefits are taxable income. Private DI is paid with after-tax dollars, so the benefits are tax-free, which can make it even more valuable. Talk to your advisor to determine your best option.
     
  • Health Saving Accounts (HSAs). If you have access to an HSA and can afford to pay the high deductible required, these plans can be a great retirement savings tool. HSAs allow you to contribute using pre-tax money, invest that money in mutual or other funds to maximize growth potential, and then withdraw assets for qualified medical expenses tax-free.
     
  • Flexible Spending Accounts (FSAs). Unlike HSA contributions that can be used at any time, contributions to an FSA accounts must be used in the same calendar year. FSA contributions can be used for health care and dependent care, and they can help reduce your taxable income. The key with FSAs is to plan well to be sure every penny is spent before December 31.
     
  • Accidental Death & Dismemberment (AD&D). This is one benefit that I rarely recommend. Yes, it’s cheap, and yes, it offers an extra boost to your life insurance benefits in certain cases, but this is one lottery you don’t want to win. Your dollars are probably better spent elsewhere.
     
  • Pre-paid Legal Plans. It’s easy to overlook a legal plan, but it can be one of the more valuable benefits, primarily because these plans offer low-cost access to legal assistance that could otherwise come with a hefty price tag. While I don’t recommend using this type of service for complex legal needs, from updating your Will and Powers of Attorney to reviewing rental and other agreements, a pre-paid plan may be the key to taking care of these important tasks sooner rather than later.

The Affordable Care Act (Obamacare)

Thanks to the current administration’s push to derail Obamacare, there is more confusion than ever about choosing ACA health plans. In California, the Open Enrollment period for 2018 opens November 1 and closes January 31, 2018. This is for all plans selected through Covered California and in the open market. Despite all of the news in Washington, the plan still offers tax credits and cost-sharing subsidies to help those who qualify afford premiums and reduce out-of-pocket costs. That doesn’t mean nothing has changed. Rates for all plans are being raised by about 12% due to the annual rate hike, and silver-level plans are increasing by an additional 12.4%. Actual premiums depend on factors such as where you live, your income, what level of coverage you choose, and which insurer you pick.

Just like with Medicare, it’s wise to get help when choosing your options. The Covered California website offers online videos and information on where to get in-person help from a certified insurance agent.


Choosing your benefits may not be the most exciting item on your to-do list, but Open Enrollment is only open for a limited time, so be sure to make the time to explore your options and make smart choices for you and your family. If you need more guidance, please reach out. We’re always here to help!

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Saving the vacuum cleaner: a lesson in disaster preparation

Saving the vacuum cleaner: a lesson in disaster preparation

Years ago, I was told a story by a woman who had been a child in England during World War II. She and her sister had gotten so used to the bombings that the spectacle seemed more exciting than frightening, and the two girls would climb to their attic and peer out of tiny windows as the bombs dropped in the distance. One day, as the planes flew over her neighborhood, for the first time she was afraid. In that wave of fear, she did the only thing that seemed to make sense; she grabbed a vacuum cleaner and frantically dragged it away from the window, high onto a dusty table—for safety. And she cried.

That story has stayed with me because it seems like the little girl’s reaction was improbable, illogical, incomprehensible, and even a little funny. Why the vacuum cleaner? Why was that the one thing that seemed like it needed saving as the bombs fell? I expect it’s a typical reaction… to grab what we can, no matter what it is. The inner child takes over because we haven’t planned ahead.

For months we’ve watched from afar as natural disasters wreaked devastation across the country. This month, it was our turn. More than 9,217 acres were burned, 25 structures were destroyed, and 55 more were damaged in the Canyon 2 fires in Anaheim Hills that was finally fully contained on Tuesday. And while “our” fire was mild in comparison to the wine country wildfires that burned at the same time, it certainly made the reality of such a disaster much more concrete. It brought home the need for each of us to take the necessary steps to prepare for a swift and well-planned evacuation in the event of any emergency.

As the fire worsened last week and our skies turned orange, I found myself in conversations I never thought I’d have. Friends and clients watched in fear as the fire swept closer to their homes. Most who faced evacuation were scrambling to figure out their next steps. “I have no idea what to take!,” Sara told me as she sat in my office last Thursday. “My son put together an earthquake kit last year, so I felt prepared for that kind of thing. But leaving everything behind feels even worse somehow.” Sara wasn’t alone. So many people I spoke to felt unprepared and vulnerable at the thought of having to evacuate their homes.

And then I talked to my friend Linda. Unlike most of us (myself included), Linda seems prepared for anything. She told me that when she’d worked at the fire department, they gave every employee a laminated list of what to grab in an emergency. As she named all of the items on her “grab and go” list, I saw how different this was from a typical earthquake kit (at least any list I’ve ever seen). Here are just a few things that stood out to me:

  • A waterproof bag with one full change of clothes, including underwear and outerwear, and comfortable walking shoes
  • Electronics (mobile phones, laptops, iPads) and chargers—including a portable back-up charger
  • Plastic sheeting, duct tape, and dust masks in case you need to seal your home or shelter from airborne contaminants such as smoke
  • Medications for you and your pets
  • A ziplock bag with copies of essential papers such as your driver’s license, proof of insurance, passports, social security cards, and printed list of personal contacts
  • Cash, ideally at least $500 in small bills in case a disruption in banking services renders your ATM and credit cards useless

I began to think about what my laminated list should include. Sara and so many others seemed overwhelmed with choices. I could suddenly see how, in the midst of the chaos, a little girl might choose to save a vacuum cleaner. I decided it was time to stop thinking about planning for an emergency and start doing.

I started with Linda’s list, which also included the usual supplies. Enough water and non-perishable food to care for every family member, including pets, for at least one week. A well-stocked first-aid kit. Flashlights and batteries. Even a whistle to call for help. (For a complete list of what to include in emergency kits for your home and car, see the Build a Kit guide at ready.gov.)

But what about the emotional things? Would I remember to grab my grandmother’s pearl necklace in a panic? What about baby pictures of my children that I haven’t stored anywhere else? If, like Sara, I faced the possibility of losing everything I left behind, what would I want to take with me? After some careful thought, I have the answers. They are written down in the Notes app on my iPhone, ready to “grab and go.”

I hope you too will take our local fires as an urgent call to action. Build your emergency kit. Be sure you’ve uploaded your important papers to a secure online vault like eMoney (which we offer at no cost to every client) or our online Sharefile tool. Include your birth and marriage certificates, wills, insurance policies, military documents, retirement account statements, loan statements, and deeds. Create your laminated or electronic list of what to grab if you have to leave your home urgently.

Hopefully,none of us will be forced to evacuate our homes or cope with a disaster, but by putting your plan in place ahead of time, you’ll have what you need if and when you need it. Plus, you’ll be much more prepared to preserve those items that matter most in your heart—whether or not your list includes a vacuum cleaner.

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In Your Best Interest: Our Fall 2017 Newsletter

Click here to view the full newsletter, including recent news, important dates, financial tips & tools, and more.


MARKET HIGHLIGHTS: Q3 2017

Thinking back over the quarter— and the entire year to date—I feel… breathless. Amid the whirlwind of global events, at least the economic and market news remains a bright spot, so let’s start the quarter review with some good news: 

In Q3, equity markets experienced gains, fueled by a late-August rally that pushed security prices upward. As the quarter came to an end, the benchmark indexes continued to rise. The Nasdaq and the Russell 2000 posted gains of more than 5.0%, followed closely by the Global Dow and the Dow. The S&P 500 trailed the other indexes listed here, yet still managed to increase by almost 4.0% since the end of Q2.

In September, the Federal Open Market Committee (FOMC) decided to hold the benchmark interest rate between 1 and 1.25% while setting expectations for an increase next quarter. The Fed noted that the labor market is continuing to strengthen, economic activity has been rising, job gains have remained solid, and unemployment rates are low. At the same time, household spending has expanded moderately, growth in business fixed investment has picked up, and inflation is running below 2%. 

In the rest of the news, the world is a mess. Donald Trump remains in the White House amid an accelerating Russia investigation, a frightening standoff with North Korea, and another failed attempt by Republicans to repeal the ACA. The Equifax data breach and the company’s inadequate response had everyone scrambling to secure their personal information. Protesters clashed in Charlottesville, Colin Kaepernick triggered a national debate, terrorist attacks escalated across Europe, and the US witnessed another mass shooting. Nature, too, was ill-tempered, with hurricanes devastating the Southern US, Cuba, Puerto Rico, and other regions; earthquakes in Mexico killing hundreds, and flooding causing record deaths around the globe. It’s been a year for the record books, and not in a good way. 

As we enter the final three months of 2017, it’s important to stay focused on what truly matters: love, health, and happiness. Know that our team will be doing our part by continuing to monitor your plan and your portfolio closely. For your part, do what you can to focus on what you can control… and to finally, hopefully, catch your breath.

 
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Index

09 November 2016

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Disclosure

All written content on this site is for information purposes only. Opinions expressed herein are solely those of Lauren S. Klein, President, Klein Financial Advisors, Inc. Material presented is believed to be from reliable sources and we make no representations as to its accuracy or completeness. Read More >