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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.

Declare your (financial) freedom!

Declare your (financial) freedom!

As we head into the Fourth of July weekend, almost everyone I know is making plans for a celebration. Barbecues. Fireworks. Family and friends. It’s a time-honored tradition of celebrating the declaration of our independence from England way back in 1776. And while we should never take those liberties for granted, one thing that can give you a great reason to celebrate every day is your personal financial freedom.

Sound like an impossible dream? No matter what the state of your finances today, here are five steps to help pave your way toward true financial freedom:

  1. Freedom from illiteracy. According to this 2015 S&P Global Financial Literacy Study, nearly half of the U.S. population rates as financially illiterate. Financial illiteracy’s close companion, innumeracy, or mathematical illiteracy, is also a challenge. Even many highly educated people don’t understand the impact of compounding, the difference between “good debt” and “bad debt,” or why working with a financial fiduciary is vital to financial success. No matter where you are on the spectrum, make it your mission to be a lifetime learner when it comes to money, investing, and your finances. The more you know, the better your decisions will be. A great place to start: read How to Think About Money by Jonathan Clements. This easy read will have you on your way to worrying less about money, making smarter financial choices, and squeezing more happiness out of every dollar.
  2. Freedom from chaos. If your financial files are in a constant state of chaos, you can bet your financial life is in pretty bad shape as well. No matter what the reason, know this: you’re not alone. Finances are complicated, but the longer you procrastinate, the more complex the challenge will be. If you can’t get yourself to dive into that growing stack of papers, or if you simply don’t know where or how to begin, set your pride aside and reach out to your financial advisor to get help now. Need more inspiration? Read my blog For your finances, getting organized can be the greatest challenge.
  3. Freedom from debt. Debt is a huge problem in the US. In 2017, the average US household held more than $8,000 in credit card debt, up 6% from last year. And that doesn’t even include auto loans and other “bad debt” which, in contrast to “good debt” such as a home mortgage, student loans, and business loans, doesn’t have the potential to generate benefits over time. Because “bad debt” reduces your income, adds no value to your wealth, and forces you to pay more every month for an item that is losing value, it’s one of biggest threats to your financial freedom. Use a debt snowball to reduce and eliminate the debt you have today, and avoid taking on more debt in the future. For more on how debt can impact your future, read my blog There’s no such thing as an unexpected expense.
  4. Freedom from mindless spending. Financial independence requires understanding that every dollar matters, and being mindful about how you spend each and every dollar you have. Does that mean every dollar has to be relegated to paying down debt or saving for the future? No. But it does mean creating a budget to plan how much you need to save and how much you can spend every month. By creating a cash budget, you’ll already feel liberated because you’ll be in charge of your finances, instead of letting your finances be in charge of you. To dive deeper into budgeting and learn how making mindful choices with your money can help you relax about your finances, read my blog Cold, hard cash! (Are you paying attention?).
  5. Freedom from the unexpected. A recent survey from Bankrate revealed that 57% of Americans don’t have enough cash to cover a $500 unexpected expense. If you too are living paycheck to paycheck, it’s time to create a “freedom fund” to cover 6-12 months of living expenses. While that may sound like a lot of cash, think of it like paying off a debt to your future self now, build it into your budget, and pay yourself first every month. Once your “freedom fund” is at the ready, you’ll be amazed by the sense of relief you’ll experience when you’re no longer living paycheck to paycheck. Want to learn more about this approach? See my blog Celebrate retirement planning week: Create a “freedom fund.”

Financial independence isn’t only for the wealthy. By being mindful about your finances now, you can intentionally work toward a level of freedom that ensures you can always stand on your own two feet. Best of all you’ll have financial peace of mind so you can relax about your money. That’s the kind of freedom you’ll want to celebrate every day of your life! If you need help getting there, I’m always here to help!

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There’s no such thing as an unexpected expense!

There’s no such thing as an unexpected expense!

When I met Carolyn for the first time in January, she was distraught. What finally got her to pick up the phone and get financial help was this year’s extreme rainy season—and a big financial surprise. “I didn’t even realize how old my roof was, or that it needed repair, until the water started coming in!” And come in it did. Carolyn had been out of town on business when the leaks opened up, and her home was a mess by the time she found it three days later. Her homeowner's insurance was covering the interior damage (minus a hefty deductible), but she was told she needed a whole new roof. The cost: $22,000. A high-earning corporate executive, Carolyn had lots of credit, but her emergency fund was non-existent, and a new roof was one thing she couldn’t put on a credit card and pay off over the next few months. She needed cash, and she needed it now. “I thought I was in great shape financially,” she told me. “Who knew I’d need so much cash with no notice?”

The answer? I knew. Or at least I could have provided a pretty close estimate, even though I’d never met Carolyn until she walked through my office door that afternoon. I’m no psychic (if I were, there’d be no need for financial planning!). How did I know Carolyn would need that much cash for a home repair? It’s all in the numbers. It’s all in the budget. I repeat: There’s no such thing as an unexpected expense!

All I needed to know was this: Carolyn owns a home in Newport Beach. If her home is worth anything close to the median price of about $2M, a 1-percent rule tells me that her home maintenance will average about 1% of the purchase price of her home—or $20,000—per year. Suddenly $22,000 doesn’t sound that surprising at all! But without a budget, every expense was unexpected. Without a budget, Carolyn didn’t have a clue.

The 1-percent “rule” means that when you purchase a large, illiquid, expensive-to-own asset like a personal residence, almost everything will have to be repaired or replaced eventually. I guide people to set aside a replacement fund of 1% of the purchase price each year for these very predictable costs. The work may not occur each year. It could be a roof, a kitchen, a driveway, plumbing… but it will be something. It always is.

The new roof is just a drop in the bucket (pun intended) when it comes to Carolyn’s money challenges. She was earning a substantial income but wasn’t setting aside cash for irregular discretionary expenses. She had no revolving debt, and she was saving for retirement. But her cash flow planning was a non-starter. In hindsight, maybe her leaking roof was a good thing; it was just the wake-up call she needed to get her to take action.

We began by finding the cash she needed to fix her roof (thank goodness for her good credit and a good chunk of home equity!). But we didn’t stop there. Next, we worked together to create a budget so she knows what she earns, what she spends, and what she can afford. She began to use eMoney (my favorite personal financial management software) to be sure she stays on track. She’s now building an emergency fund rather than relying on credit cards, and she’s earmarking cash reserves for those not-so-surprising expenses such as car replacements, home repairs, annual vacations, and even a planned future nip-and-tuck. The next time a large expense hits her, I have no doubt she’ll have the funds in place to cover the bill.

What Carolyn has discovered is that cash planning is the foundation for a solid financial plan. A cash budget creates a wonderful sense of financial freedom. “I always thought budgeting was like dieting—that I’d always feel deprived—so I just didn't look at how I was spending,” she told me. “Now, I feel the exact opposite. Because I know how much I have and where I want to use it, I don’t get stressed about an expensive dinner that I know is in the budget. Even better, I know I’ll never have surprises, and I don’t worry when I see my credit card statement arrive!” She’s also building a “freedom fund” to be sure she has the funds to support her dreams down the road, whatever they may be. (Read my blog Celebrate Retirement Planning Week: Create a “freedom fund” to learn more!)

Like many of my clients, Carolyn has discovered one of the great financial secrets: cash planning is empowering. Remember, there’s no such thing as an unexpected expense! Making intentional, conscious choices about when, where, and how to spend your hard-earned dollars is key. Align what you want with what you need and (finally!) relax about your finances.

Ready to get started? Check out 7 Steps to a Budget Made Easyor use NAPFA’s find an advisor guideto find a fee-only financial advisor near you.

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Cold, hard cash! (Are you paying attention?)

Cold, hard cash! (Are you paying attention?)

Cash. It’s by far the most important piece of wealth management. And yet it is often the very last thing most people want to focus on. Time and time again, when I sit down with a new client, the first thing on their agenda is reviewing their account statements, while the first thing on my agenda—always—is to take a look at how they’re spending and saving their hard-earned cash. It’s not the sexy part of finance, but much like building that less-than-beautiful foundation to support your beautiful home, careful attention to cash flow and cash management is vital to building and preserving long-term wealth.

Tonya and Ray came to meet with me last week. In their mid-50s, they want to be sure they’re on track by saving enough for retirement and making smart choices about pre- and post-retirement taxation. They’ve also decided it’s time to get help with their investments (better late than never!). They came armed with lots of documentation: account statements, tax returns, and even a monthly budget. They seemed to have all their ducks in a row.

Then I took a closer look at the budget they had set in front of me. There were buckets for mortgage, utilities, insurance, and car payments. But everything I saw listed was a fixed expense. These are the expenses that are predictable and unchangeable. What was missing were buckets for their non-fixed expenses—the very items we can manage to achieve the two biggest goals of wealth management: eliminating debt and growing assets.

I asked the obvious question: “How are you spending your cash?” Tonya was quick with an answer: “It’s right there, in the ‘credit card’ bucket. We charge everything so we can easily keep track of it all.” Sure enough, there was a line item labeled ‘credit card’ with a budgeted amount of $2,000/month. “Ok, I asked, but where is that $2,000 going? Exactly?” They both chimed in with a lot of answers. Groceries. Gas. Restaurants. Car maintenance. Pet food. Prescriptions. Theatre tickets. Clothes. And they were clearly very proud that it was all contained in one manageable bucket. They assured me this method was working well for them.

But was it?

Luckily, in Tonya and Ray’s case, because these expenses were all on a single statement, we were able to track every expense. We drilled down into the details and looked at just a single month to see exactly where their cash was going. The numbers surprised us all. While they guessed they had spent $1,000 a month on meals and entertainment with another $1,000 slotted for necessities, the numbers told a different story. Two concert tickets at $125 each; monthly gym memberships of $120 each; one movie night at $36; four rounds of golf at $195 each (which they assured me was an unusual splurge), including two lunches at the resort for $90 a pop. While they were limiting themselves to one “nice” dinner out each week, they had spent $485 in that category, plus they’d added a handful of less extravagant meals, lunches, and lattes that racked up to $530. Total on meals and entertainment: $2,501. When we added in the other items included in the ‘credit card’ bucket (plus a few other surprises like $260 for housekeeping and $100 on supplements), what they were spending was more than double their original $2,000 monthly budget. Clearly, the budget wasn’t working after all. Without a method for closely managing cash, Tonya and Ray had been blind to the enormous rippling effect of their lack of daily money management and their invisible spending habits.  

Tonya and Ray are not alone. All too often I find that even the most financially diligent investors fail to have a basic financial planning document that includes a detailed record of their cash flow. Twisting arms doesn’t work (trust me, I’ve tried!), but by biting the bullet and following these three steps, they (and you) may finally get on the right path:

  1. Identify your top 3 goals—and make building an emergency cash fund #1. Regardless of the state of your finances, having cash on hand to cover unbudgeted expenses is key. Having an emergency fund equal to at least three months of your total household income is essential to avoid having to take on new debt in the future. Goals #2 and #3 might include paying off credit card debt, saving for a car, or funding next year’s vacation. (Read more on the power of an emergency fund in my blog When did it become ok to be financially illiterate?)

  2. Identify your income and your fixed expenses. Income is what you’re bringing home each month—salary, distributions, etc. Fixed expenses include mortgage or rent payments, insurance, utilities, and non-credit-card debt such as car payments. Be sure you know what’s coming in and what’s going out every month.

  3. Build your detailed budget. Err on the side of too much detail, and create a line item for every expense category. Separate your needs from your wants, and keep an eye on your top 3 goals from Step 1, includingcontributing to your emergency savings and paying yourself first for retirement (see my blog Getting back to basics in the New Year for more on this important topic).Be specific, and be certain your expenses don’t exceed your income! I encourage you to use a basic household budget worksheet like this one from Kiplinger. While there are apps available to help, none of them can do this work for you, and they can be more of a distraction than a benefit.

If the word “budget” reeks of giving up your spending freedom, rest assured that careful management of your cash flow is certain to have the opposite effect. By parsing your spending, aligning your spending habits with your personal goals, and projecting your cash flow into the future, you will gain the financial freedom you’ve been seeking all along—guaranteed. And the effects are long lasting too. When done well year after year, you’ll slowly but surely develop a comfort level with your actual life costs. You’ll realize you know whether something is “in the budget” without having to look at the numbers. And when changes happen like buying a home, changing jobs, growing a family, or ending a relationship? It will be that much easier to adjust to life’s transitions, whatever they may be, and rest easy knowing you (finally!) have your cold, hard cash under control.

Need help taking charge of your cash flow? This email address is being protected from spambots. You need JavaScript enabled to view it.  to schedule a time to meet. As always, I’m here to help!

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Facing divorce? 5 tips to protect your financial future

Facing divorce? 5 tips to protect your financial future

I don’t think there’s anyone among us who doesn’t have a story about 2008. Whether you lost a significant chunk of your retirement savings (at least temporarily), watched your parents struggle, or saw your colleagues panic and your friends lose their homes, it was a devastating period. The market has been volatile ever since even as it slowly and surely climbs to new highs. However, there’s a situation many people—especially older couples—face all the time that has the power to bring on even greater long-term financial devastation. What is this monstrous risk? Divorce.

Denise emailed me last week, and I was surprised to hear the elation and relief in her voice. “I’m finally doing it,” she said. “I’ve wanted a divorce for years, but I finally got the courage to make the leap. Even better, Doug feels the same, so I think it will be pretty easy. Amicable even.”

Before the words were out of her mouth, I felt my stomach drop. I hated to burst her bubble, but I also know the reality all too well. When couples divorce, no matter how “amicable” the situation may be, financial distress is inevitable. Add even the slightest bit of hostility to the mix, and you can be sure that distress will increase.

While I wish there was a way to ease the road ahead, or at least add even a tiny sugar coating, the fact is that there’s rarely a way to avoid the personal financial downturn that comes with divorce. No matter how much you’d both like a different outcome, this will be your “personal 2008.” Your assets will be divided in half. You will have two households to support, two retirements to fund and, if children are involved, two “family” vacations to pay for—all further compounded by legal fees to iron out custody details on top of everything else.

Don’t get me wrong: I would never wish for anyone to stay in a marriage only for financial reasons. Life is too short for a couple to stay in a non-productive, dysfunctional relationship. However, the sooner both parting parties face the fiscal realities of divorce, the sooner they can begin to make the appropriate adjustments to move forward financially. It’s a tough mandate considering the emotional turmoil in motion, but it’s a must.

Rather than breaking the news to Denise on the phone, we scheduled a meeting to look at the details. When we sat face to face, here’s what I shared:

  1. Be prepared for a lifestyle change. I’ve seen people stuck in faulty assumptions, unable to let go of lifestyle changes, even keeping an unaffordable house “for the kids’ sake.” Often, downsizing in every way is not only optimal, but mandatory. If your happiness is based on living in the same place and affording the same luxuries, you’re in for a rude awakening. This shift is huge, and you need to understand the ramifications at the outset.
  2. Be realistic about your budget. Yes, this includes supporting two households, and that will eat up a major chunk of any expendable income, but mortgage and rent are not the only factors. As soon as you have a clear picture of your monthly income, you’ll need to create a budget that matches that number to avoid an increase in debt due to overspending.
  3. Include retirement in your planning. Couples who remain together can anticipate the reduced expenses that come with a single dwelling and shared expenses. Going solo means you’ll need even more to support your non-earning years. If you’re over 50, consider making “catch-up” contributions to your retirement. If that’s not possible, at the very least, be sure you are contributing every month to help ensure you don’t outlive your assets as a single.
  4. Don’t count on the promises of your attorney. While I do hope that most divorce attorneys are striving to act in your best interest, we’re all optimists at heart and, even more so, some attorneys will tell you only what you want to hear. Wait until your case is closed to spend money that’s not yet in your pocket. Once your Marital Settlement Agreement is final, you’ll have an accurate sense of your financial capacity. Until then, keep your wallet closed as much as possible.
  5. Keep an eye on the details. If you’re on your spouse’s health insurance plan, those benefits may end when your divorce is final. If you decide to sell your home post-divorce, you may face capital gains taxes if the appreciation is greater than $250K. However, if you sell “incident to divorce,” you and your spouse may both qualify for a $500K exemption from capital gains instead of just half that amount. (A transfer is incident to divorce if it occurs within one year after the marriage ceases, or if it is related to cessation of the marriage.) Details add up and have a major impact on your financial health—now and down the road. Work with a professional advisor to be sure you know which decisions matter most, and when.

When Denise and I finished talking, she wasn’t on the same cloud nine. Reality checks are rarely comfortable. But she did tell me she felt much more prepared for what was to come. “It may not be as easy as I thought it could be,” she said, “but I’m still certain we’ll all be happier over the long term. I know I have some serious homework to do!”

If you’re facing divorce, I urge you to take a close look at your finances and make the best possible decisions as you walk this new path. Whether you’re wearing rose-colored glasses or are mired in the common distress and shock of it all, taking time out to review the money side of the equation may make it much easier to find joy as you enter a whole new phase of life. 

Need help working out the financial details of your divorce?  This email address is being protected from spambots. You need JavaScript enabled to view it.  me to schedule a confidential session. As always, I’m here to help.



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Mental health, money, and breaking the silence

Mental health, money, and breaking the silence

Here we are again, talking about another month dedicated to something, but this is one I simply couldn’t let pass by without addressing it. May is Mental Health Month, and it’s something near and dear to my heart. While this awareness campaign has been happening every May since 1949, this year’s theme of Life with a Mental Illness calls on individuals to share what life with a mental illness feels like for them and tagging their social media posts with #mentalillnessfeelslike. (You can read the collected posts on the Mental Health America site.) The goal is to break down negative attitudes and misperceptions surrounding mental illness and to let people suffering from mental illness know they’re not alone in their feelings or their symptoms. Breaking the silence is an important mission. All too often, mental health issues are hidden away, giving them the power to have a negative impact on our lives.

I read an article in The Atlantic a few years ago by a successful professional and Duke graduate who felt that impact heavily. Despite her passion for telling her story, she used a pen name because “The stigma that surrounds mental health is suffocating, and I don’t feel comfortable talking about it with most of my friends and family, and certainly not my boss or colleagues.” She talks about how the need to keep her mental illness a secret has impacted her professional life, as well as relationships with friends and family. It’s a sad and all-too-common story that, hopefully, is beginning to shift.

As a financial advisor, I’m very aware of another often hidden consequence of mental illness: financial distress. I’ve learned firsthand that, in many cases, high levels of debt and financial chaos are directly tied to mental health, with financial issues either resulting from or leading to mental health issues. I’m not alone in my findings. A 2011 study by a team of UK researchers found that “financial strain and debt are strong risk factors for mental-health problems.” A separate study in 2012 found that “adults in debt were three times more likely than those not in debt to have (common mental disorders).”

It’s easy to see the connection. Binging, which often involves spending, is one way to numb the feelings of anxiety, stress, and depression that can come with mental illness. “Retail therapy” is something people often joke about, but shopping binges are a very real problem for many people with mental health issues. If you’re depressed, shopping gives you a way to surround yourself with cheerful people and boost your endorphins with the pleasure of a new purchase. But when shopping becomes binging, it can result in skyrocketing debt—which causes more stress and, yes, more depression. It’s a vicious cycle, and the best way to break that cycle is awareness.

Clinical psychologist and mental health advocate David Susman offers these five steps to reduce stigma about mental illness:

1.     Don’t label people who have a mental illness.
Don’t say, “He’s bipolar” or “she’s schizophrenic.” People are people, not diagnoses. Instead, say “He has a bipolar disorder” or “She has schizophrenia.” All of this is known as “person-first” language, and it’s far more respectful, for it recognizes that the illness doesn’t define the person.

2.     Don’t be afraid of people with mental illness.
Sure, they may sometimes display unusual behaviors when their illness is more severe, but people with mental illness aren’t more likely to be violent than the general population. In fact, they are more likely to be victims of violence. Don’t fall prey to other inaccurate stereotypes, such as the deranged killer or the weird co-worker depicted in the movies.

3.     Don’t use disrespectful terms for people with mental illness.
In a research study with British 14-year-olds, the teens came up with over 250 terms to describe mental illness, and the majority were negative. These terms are far too common in our everyday conversations. Also, be careful about using “diagnostic” terms to describe behavior, like “that’s my OCD” or “she’s so borderline.” Given that 1 in 4 adults experience a mental illness, you quite likely may be offending someone and not be aware of it.

4.     Don’t be insensitive or blame people with mental illness.
It would be silly to tell someone to just “buckle down” and “get over” cancer, and the same applies to mental illness. Also, don’t assume that someone is okay just because they look or act okay or sometimes smile or laugh. Depression, anxiety and other mental illnesses can often be hidden, but the person can still be in considerable internal distress. Provide support and reassurance when you know someone is having difficulty managing their illness.

5.     Be a role model.
Stigma is fueled by lack of awareness and inaccurate information. Model these stigma-reducing strategies through your comments and behavior and politely teach them to your friends, family, co-workers and others in your sphere of influence. Spread the word that treatment works and recovery is possible. Changing attitudes takes time, but repetition is the key, so keep getting the word out to bring about a positive shift in how we treat others.

I would add one more to his list:

6.     Don’t be afraid to share your experience with mental illness.
I’m proud of my daughter Jamie for sharing her story on Facebook as part of Mental Health Awareness Month. In her post, she shares her experience living with anxiety, OCD, and bi-polar disease, and writes, “There is nothing wrong with you, and there is nothing wrong with me. It’s a real issue probably facing more people than you will ever realize. Be proud like me that you were able to face your issues, confront them, talk to someone about them and treat them. We all deserve a normal life. We all have struggles. If yours is some kind of mental illness, don’t be ashamed. You are not alone. Don’t be afraid to share with others…”

While changing perceptions about mental health may not come easily, the shift is happening slowly but surely. My friend’s daughter Emma is another great example. In her junior year of high school, she was suffering from severe anxiety and depression. A star student, her condition got so bad that she had to withdraw from regular classes for a semester and continue through independent study. When she returned for her senior year, she agreed to talk about her experience in the school newspaper. The day the paper was distributed, Emma’s mother got an urgent call from a close friend. “Have you seen the paper?! Did you know she was doing this? Are you ok?” And while the friend’s reaction was full-blown alarm, when Emma got home from school, she shared a completely different experience. “It was great Mom,” she said. “So many people came up to me and thanked me for doing the interview…they thought they were the only ones at school who had an issue until I spoke out.”

Hopefully, Jamie and Emma’s generation will erase the stigma of mental illness. If they do succeed, I have no doubt we’ll all be better off for it—mentally, socially, and financially.

Has a mental health issue impacted your personal finances? This email address is being protected from spambots. You need JavaScript enabled to view it.  to schedule a time to talk about how to get back on track and regain your financial confidence.

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When did it become ok to be financially illiterate?

April is Financial Literacy Month, and echoing my blog on Retirement Planning Week, all of these dedicated days, weeks, and months get tiresome. But when it comes to financial literacy, I believe the focus is critical. What concerns me is that many people outside the world of financial planning seem to view understanding basic finance as a luxury. For many, it has become acceptable to be financially illiterate. Sadly, this is especially true for women; I’ve observed far too many otherwise smart women laugh off their lack of financial knowledge, and it sets off all my inner alarm bells. (At the risk of being curt, I will say that ignorance is never cute or endearing. Can you imagine someone—anyone—joking about being illiterate in any other context?) Male or female, each of us is responsible for our financial future, and being numerate and understanding basic financial concepts is vital to be sure you’re making smart choices along the way.

If my concern has you wondering about your own financial literacy, now is a great time to review the basics. Let’s start with three of the biggies: debt, compounding, and the value of a fiduciary:

How is good debt different from bad debt? Debt is a huge problem in the US. In 2015, the average US household held “bad debt” of more than $15,700 in credit card debt and $27,000 in auto loans, and “good debt” that included about $48,000 in student loans and $169,000 in home loans. When used wisely, “good debt” such as a home mortgage, student loans, and business loans has the potential to generate benefits over time (though the decision to assume any debt deserves careful consideration). In contrast, “bad debt” like auto loans and credit card debt (which is also a loan) reduces your income and adds no value to your wealth. Every month that you don’t pay off your credit account in full, you are charged interest, so you’re paying more (and more!) for an item that is losing value.

What is compounding and how does it affect my retirement savings? The advice to “save early and often” is based on the idea of compounding. Simply put, compounding is the ability of an asset to grow exponentially—to generate earnings, which are then reinvested to generate more earnings. To illustrate: if you invest $1,200 annually beginning at age 25 and that money earns 11% annually (based on the historical long-term average of the S&P 500), in 10 years your savings will reach $22,000. With compounding, in 20 years you’ll have saved not just double the amount, but $85,000. In 30 years, that number jumps to $265,000, and in 40 years you’ll have socked away $775,000 to help fund your pending retirement. Time is the Archimedes’ Lever of investing. The earlier you start saving, the more you can leverage the power of compounding, and the easier it is to meet your goals.

What is a fiduciary? The recent DOL fiduciary rule has been making headlines lately, which has put a spotlight on fiduciaries. If the term is new to you, a fiduciary is required to always actin the best interest of the client. This is in contrast to non-fiduciary “advisors” who may receive a commission for products they recommend, adding their wallet to the list of priorities. Working with a fee-only advisor who is a fiduciary is a necessary part of financial planning. At the same time, it’s important to be your own fiduciary. I was recently working with a client whose husband died suddenly at just 52 years old. When I asked about his earnings and their joint assets, she had no clue. “When you reviewed your tax return last year, what were the numbers?” I asked. She had no idea. Every year she simply signed her name. By paying attention to your taxes, attending meetings with your advisor, and participating in the estate planning process, you can gain financial literacy and actively serve in your best interest.

Of course, financial literacy isn’t just about understanding the terms. It’s also about learning how money works in the real world, how to budget and invest, and how to make informed and effective financial decisions to ensure you have the resources you need to support yourself in the future. Start with these three concepts to be sure you’re on the right path:

Set a realistic spending plan that includes emergency and retirement savings. A study by the Federal Reserve Board recently reported the shocking statistic that 47% of respondents said they would have to rely on credit cards or selling belongings to come up with cash for a $400 emergency. To avoid the same fate (or change it if you’re already there), review your income and expenses, set a realistic budget, and include building an emergency fund (much more than $400 please!) and “saving early and often” for retirement as part of your plan.

Be sure you know the truth about your financial situation: MaryAnn and her husband had been living high on the hog for years. Their extravagant lifestyle included houses, cars, boats, horses, and world travel. Both she and her husband had sizable incomes, and MaryAnn assumed their finances were in great shape. When her husband lost his job, she quickly learned that their lifestyle was a house of cards built on debt. When she and her husband divorced after a 30-year marriage, her choice to remain in the dark about their joint finances had a tremendous impact on her life. No matter how much you trust your partner to take charge of the finances, be sure you know the facts and that you’re acting as a fiduciary to you and your family.

Work with an advisor you trust: Unveiling your finances—especially any financial missteps—requires a huge amount of trust in any situation. If you were raised to believe that finances should remain a secret, it’s time to become a family rebel. Be sure you know the basics, and then put your trust in an advisor who is truly acting in your best interest and can help you get on track financially as quickly as possible.

Want to learn more about financial planning and how it can impact your life—today and in the future?  This email address is being protected from spambots. You need JavaScript enabled to view it.  to schedule a time to chat. As always, I’m here to help.

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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 >