How To Make Worry Melt

How to make worry melt: As an expert worrier, I often wonder why I worry, even when I know the answer: Worry gives me a (false) sense that I will be prepared and in control. It’s my fallback when I feel out of my league.

Take this example. One of my biggest worrying times happens before I head to the airport. What am I so worried about? Unlike many, it’s not the actual flight. It’s about missing the plane. It feels silly to even write this.

And yet,

Butterflies in my stomach.

Little waves of nausea.

Tight chest.

It happens nearly every time.

And I have coping mechanisms: I tell myself things like, “Breathe.“ “Calm down.” “It’s going to be ok.” I even have a special spirit animal – a deer – that I think about to help me feel better.

Additionally, as a result of this predictable worry, I have an irrational need to leave home at least two hours ahead, get to the gate an hour before the flight, and, when I get there, to sit where I can see the gate agent and the boarding door.

Then there is this acute physical transformation. Once I can see the gate and hear the agent, my entire nervous system relaxes. It feels like the worry just melts.

Expected and Unexpected Worries

How silly this feels. And yet, it seems I am not the only one to worry about expected and routine things like a departing plane. It’s expected and routine, yet a source of great worry, that teenage children will start driving, and that 90-year-old parents should probably stop. In working with money, it’s a source of great worry, yet expected and routine, that stockmarkets, interest rates, and gas prices will rise and fall repeatedly.

Upcoming retirement is expected and routine, yet a source of great worry (and excitement). Understandably, it’s a big step into an unknown future. That can especially bring on the jitters.

Adding to everyday events are unexpected random ones, like pandemics. Further, sudden market meltdowns, tsunamis, cancer, dementia, layoffs, election surprises, terrorists, and hacker attacks are all things we know aren’t probable, but are possible.

Just checking in – how’s your heart rate now? Butterflies? Tight chest?

Although we might prepare as best we can, worry on top of preparation helps some feel as though we are doing something about the problem. But what toll does worry take? Does it help us to prepare that much better? As a result of worry, I’m quite sure I have shortened telomeres and life expectancy. That’s a pretty high cost.

How To Melt the Worry Away

When I get to the gate and see the agent, I feel the worry melt away.

But it’s strange – I don’t think too many airline employees worry about the same thing I worry about. There’s something about having exposure every day to systems and knowledge that produces confidence. Aviation is now one of the safest modes of travel in the world. While airplanes are subject to all kinds of random threats, there are protections in place against as many as possible. Some are fairly simple, such as passengers wearing seatbelts. Others are fairly complex, like running through a 57-item cockpit checklist before every takeoff and landing. That’s what professionals of many stripes get paid to do – develop and run proven processes, and then amend them as lessons arise.

In other words, having a specialized understanding and process makes it easier to

  • distinguish what’s actually controllable,
  • accept what’s not, and
  • feel confident the process will handle 90% – 95% of unexpected random events.

Airlines have meticulous training and checklists, but accept there will be equipment failures, unruly passengers, weather delays, technological shutdowns, and other events we haven’t yet seen.

Melting Money Worry

Similarly, what most people worry about with money isn’t what most financial professionals worry about for them.

Most financial professionals know what can be done to reduce risks, and what can’t. While we might make client-specific plans, we also know there will be unexpected random events. We put plans in place to prepare for both as best we can. For some people, having that kind of professional help and confidence helps money worry melt away.

For me, worry melts upon seeing that I’m part of the boarding process. For others, it’s being part of a financial planning process.

Either way, the exhalation of a deep sigh, unwrinkling eyebrows, and shoulders unhooking from our earlobes send the signal the professional and the process have provided what we come for after all – the feeling it will be ok and we will get where we want to go.

When have you felt worry melt away? Who were you with? What seemed to be the key for you?

Leave a comment for readers below.

For more psychology of money, tax, and funny video tips, subscribe to the award-winning monthly e-letter, “The View From the Porch,” at https://bit.ly/3t2uwfn. Or check out Chapter 6 of the book, The Mindful Money Mentality: How To Find Balance in Your Financial Future.

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You Might Want a Trust If….

Trust Legal documents

You might want a trust if….

“Do I need a trust?” Although it’s a legal question, it’s frequently asked of financial advisors. What do they say? 

  • “Hey, I’m not an attorney,” is one possible—but maybe not the most helpful—answer. 
  • “Hey, I’m not an attorney, but I can play one,” may be polite, but inadvisable. 
  • “That’s interesting you bring that up. I’m curious how you heard about trusts.” This reply seems a little better. It keeps the focus on the questioner, and it’s pretty safe legally. 

Pros and Cons of Trusts 

Answers people may give for curiosity about trusts range from, “I dunno,” to citations of articles, websites, conversations with friends, family members, or even an estate planning attorney. All of the mixed messages about them can get pretty confusing. 

For some people, trusts are a mysterious-yet-evil domain of the ultra-rich. This belief isn’t surprising. When was the last time you saw positive media coverage of a trust? It typically pops up when a billionaire’s “trust fund baby” is arrested. 

There are dozens of kinds of trusts. For this post, “trust” means a revocable living trust. They tend to be the most common and relevant. 

Trusts aren’t for everyone. They are costly to set up. Some people have difficulty implementing and maintaining them. They are powerful. Scary powerful, sometimes.

Rather than answering, “Do I need a trust?” directly, I prefer to channel comedian Jeff Foxworthy’s famous phrase, “You might be a redneck if …” (anyone under 40 may have to look him up). It seems to help people discover for themselves whether a trust might be useful.

7 Reasons You Might Want a Trust

1. If you own property in more than one state or country, you might want a trust.

Trusts avoid probate—if drafted, executed, and implemented properly. Property in two states/countries means probate in two states/countries. In many states, probate attorneys charge a percentage of the probated asset value. Dollars spent now on a trust could seem small compared to the dollars spent on lawyers and court fees in two places later.

2. If you are concerned about a grown child’s ability to handle money, you might want a trust.

A child gets the money with no strings attached if left through a joint account, will, payable-on-death (POD) designation, or beneficiary designation. Trusts let you build strings. One common example is to pay one-third of principal at age 30, one-third at age 35, and the remainder at age 40. As your family ages and changes, you can revise trust provisions like these. Revocable living trusts are amendable.

3. If you have a concern about a child’s current marriage, you might want a trust.

Trusts can be written so that inherited assets can be protected in a divorce. Assets inherited other ways, especially if commingled with other marital assets, can be harder to protect.

4. If you have a concern about a child’s future marriage, you might want a trust.

Trust provisions can be written for future spouses, too.

5. If you aren’t as concerned about dying so much as living a long time with chronic illness or dementia, you might want a trust.

What happens if you’re unable to manage your finances? People often don’t consider that a will only applies upon death. That’s why they should have a power of attorney (POA). Although much work has been done to get institutional agreement on POAs, your designated POA person might still face a custodian, attorney, or title company who won’t recognize it, or who at least gives your person a hard time about it.

If an asset is in a trust, your person—the trustee or co-trustee—generally faces fewer roadblocks than with the POA.

6. If you are in a second (or more) marriage and have children from a previous one, you might want a trust.

Let’s say you both agree that the spouse gets the house, but the kids get the money you brought to the marriage. With a will and beneficiary designations, this basic idea can be accomplished. Sometimes life (and death) work out that simply. Yet sometimes they don’t. (See points 4 and 5.)

It’s possible your spouse could be left without enough money to live in the house, or the kids could be left with nothing. If either of those scenarios bothers you, a trust can allow for changing circumstances as you both age.

7. If you are concerned about a loved one’s vulnerability in their time of grief, you might want a trust.

Probate is public. If you’ve ever known someone who has been through it, then you are familiar with the annoying phone calls and direct mail received after losing someone. If you haven’t, you might be shocked to know that … people troll public records.

Some trolls, I mean, people, especially like the records that declare which investment account(s) and which beach condo go to whom. Then, out of the goodness of their hearts, they find the grieving loved one and offer to provide assistance and support in their time of need. (Ahem.)

Unlike probate, transferring property through a trust happens privately.

Ask Your Attorney

In summary, these are only seven of several reasons you might want a trust. But the best person to ask is a board-certified estate planning attorney. Find one through your local estate planning council (www.naepc.org) or ask your financial advisor for references.

For a simple list of 25 steps to complete for estate planning, click here.

For monthly tips on managing your money in retirement, taxes, and typical snafus, subscribe to the award-winning e-letter, “The View From the Porch.”

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What Does Qualify for Florida’s Back to School Sales Tax Holiday?

What does qualify for Florida’s Back to School Sales Tax Holiday this year? The sales-tax-free dates run from Monday, July 24 to Sunday, August 6.

The list of items you can save on is long; more than simple pencils and paper. Before you think you know what qualifies, though, check twice.

Here is the general description of items that qualify:
– “clothing, footwear, and accessories selling for $100 or less”;
– “certain school supplies selling for $50 or less”;
– “and the first $1500 of personal computers and computer-related accessories.”

Read The Fine Print

Before shopping, you may want to know what actually counts, and what doesn’t, under the three general categories.

You can find all the details in Tax Information Publication #23A01-06, issued 6/15/23: https://floridarevenue.com/taxes/tips/Documents/TIP_23A01-06.pdf

Following are a few examples.

What counts as “clothing”? Lingerie – yes. Athletic pads – no.

“School supplies”? Backpacks – yes. Briefcases – no.

“Computers”? Tablet – yes. Smartphone – no.

How about payment terms? Layaway – yes. Rain checks and gift cards – no.

All of the above probably make some sense. Yet, other qualifiers/non-starters might make shoppers scratch their heads:

Kindle- Yes. Books- No.
Hunting vests – Yep. Life jackets – Nope.
Snow ski suits – Yeah. Scuba suits – Nah.
Youth bicycle helmet – Uh-huh. Youth motorcycle helmet – Uh-uh.
Rain poncho – Check. Umbrella – Not.
Garden gloves – You got it. Athletic gloves – Not a chance.
Receiving blankets – Yep. Crib blankets – Nope.
Notebook paper – For sure. Computer paper – Not.
Scotch tape – Si si. Masking tape – No no.
Computer batteries – Yes. All other batteries – No.
Blank CD – Ok. Recorded CD – Not ok.
All-in-one printer – Yep. Copy machine – Nope. Fax machine – Nope.
Docking station – Yes. Surge protector – No.
Monitor – You’re in. Television – Sorry.
Bowling shoes, purchased – Strike. Bowling shoes, rented – Gutter ball.
Lab coat – Of course. Hard hat – Are you kidding?
Book bag – Yep. Computer bag – Nope.
Cleats – Score. Skates – Robbed.
Hat – Oui. Wig – No.
Karate gi – Ha! Shin guards – Ouch!

And really,
Bowties – Yes. Masks – No.

How Did They Derive This List?

A sales tax holiday is a nice way to give families a break and provide economic stimulus. One wonders, though, how these qualifying decisions were made. “Let’s make it necessities only.” Clearly that wasn’t it. “Only things Florida schools can use.” Snow suits rule that one out. Got any ideas? Leave them in the comments below.

Nevertheless, make your list, save up until July 24 and go to town to save 6% – 7%. Or maybe don’t go to town. Maybe work your list from your favorite special shopping chair or couch and wait for the boxes to show up. And leave something nice for the delivery driver, like, I don’t know, a lab coat. Or a sales-tax-free snow suit.

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2023 Summer Freedom From Sales Tax Items

kayaking

2023 Summer freedom from sales tax items:

This annual sales tax holiday began during the pandemic in 2020 as a week-long holiday surrounding July 4. Live concert tickets, camping supplies, paddle boards, kayaks, binoculars, grills, and bicycles are some of the larger ticket items included in the holiday.

Of note also – annual or season passes for museums, theater series, ballet, and state parks.

Pool supplies and parts were added in 2022. And in 2023 – children’s athletic equipment under $100 and toys under $75.

The sales tax holiday for 2023 was extended from the week of July 4 to the entire summer. Sales tax exemptions run from May 29 – September 4, 2023.

The complete list for events, tickets and supplies is here:

https://floridarevenue.com/taxes/tips/Documents/TIP_23A01-03.pdf

Enjoy saving 6% – 7% this summer!

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What’s Your Closet Type? Thrifty Penny, Generous J-Lo, Savvy Suze or Imelda Galore

What’s your closet type? Thrifty Penny, Generous J-Lo, Savvy Suze or Imelda Galore

On a 2004 visit to Ghana, a west African country, I noticed lots of people wearing second-hand Western clothes. While others donned beautiful traditional garments of their country, it was equally common to see second-hand t-shirts, khakis and jeans. The second hand clothes were sold in nearly every street market. My hosts told me these were commonly called obruni waawu, which literally means, “dead white people’s clothes.”

I understood that the clothes looked like those of white Westerners, but “Why dead?” I wondered. Before long, an answer dawned on me. Maybe to Ghanians, many of whom don’t have closets, the only reason a white Westerner would give away perfectly wearable clothes would be because they are dead. To them, clothes might be something you use up until the day they are no longer needed at all.

I don’t know if this is the actual reason, but it led me to compare and wonder how often we buy new clothes and get rid of old ones. For some, it’s quite frequent, and not so much for others. Having seen over 400 budgets in my lifetime, I’ve noticed spending on new clothes that ranged from $2,000 to $50,000 a year. But what I have not asked and do not know is, how often are the old clothes being thrown out or given away?

Money Velocity and Money Supply: Closet Velocity and Clothing Supply

There are two concepts in economics that come to mind – money velocity and money supply. Money velocity refers to how many times a dollar changes hands in an economy. There is also money supply, which is the amount of money available in an economy to be spent at any time.

Taking this to the closet analogy, what would closet velocity and clothing supply be? Let’s say closet velocity refers to how often the clothes on hand are changing. This would mean not only how often new ones are bought, but how often old ones are discarded or donated. Correspondingly, the amount of clothes we have on hand at any point in time would be our clothing supply.

Taking four combinations from these two concepts and having some fun with the names, what’s your closet type?

Closet Type: Thrifty Penny, Generous J-Lo, Savvy Suze or Imelda Galore

If you have a low clothing supply and low closet velocity, you might be a Thrifty Penny closet type. This means:

  • you have a small number of clothes that you wear until they have holes, stains, or are otherwise unusable before you replace them
  • you feel ok not being trendy
  • there aren’t a lot of choices of what to wear, and
  • you don’t require a large closet.

Conversely, if you have a high clothing supply and high closet velocity, you started with lots of clothes, are buying lots of new clothes, and are also giving or throwing away old or never-worn ones fairly frequently. This would be the Generous J-Lo closet type.

  • You have a large closet with lots of choices and
  • the latest looks, and
  • you feel ok only wearing a few items a few times, once, or never because you are going to give them away anyway.

If you have a low clothing supply and high closet velocity, you have a small, actively-traded closet. This would be the Savvy Suze closet type (after Suze Orman, who claimed to own one pair of earrings, her signature diamond studs.)

  • New clothes are entering constantly, getting worn, and old clothes are constantly going out.
  • You always look up to date from a carefully curated closet.

If you have a high clothing supply and low closet velocity,

  • you have a large closet of seldom-worn items, with plenty to choose from, and
  • not many clothes going out.

This would be the Imelda Galore closet type, as in Imelda Marcos, the in?famous Phillippine first lady with an enormous shoe collection.

What Could Closet Type Say About Your Money Attitudes?

How we spend on clothes can indicate one aspect of our attitudes about money. In her work with Money Habitudes(TM), Dr. Syble Solomon identified six primary attitudes toward money: spontaneous, selfless, targeted (as in with goals), security, free spirit, and status.

Anyone with a puritanical upbringing might see the last one – “status” – as a negative. Status is something many people want but are supposed to pretend not to, right?

Rather than taking a strictly negative view toward status, though, Solomon recognizes that status purchases like clothing are needed to help us make a good impression. However, if you tend to spend lavishly on clothes you will never wear, or spend more than you can afford for the sake of trendiness, you may have a tendency toward status overspending. Conversely, if you show up in old or frayed clothes a lot, you may have a problem with status underspending. Spending enough so you can suit up and show up when it matters, with care, fun and spontaneity, shows a healthy attitude about status spending.

What About You?

With Dr. Solomon’s more balanced view in mind, I am going to take a second look at my closet. I don’t plan on being a dead white person anytime soon, but I may find potential obruni waawu destined for Goodwill or, ultimately, Ghana.

Which closet type do you best relate to? Did you find yourself spending more or less on clothes during the pandemic? How did the pandemic change your closet? Have you changed your donation or throwing-out patterns? Leave a comment below.

For more on conscious spending patterns and balancing old with new, read Chapters 2 and 4 of The Mindful Money Mentality: How to Find Balance in Your Financial Future.

And for monthly tips on money psychology, tax savings, and good humor, subscribe to the award-winning e-letter, “The View From the Porch.”

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Using A Retirement Income Buckets Approach

buckets

Using a retirement income buckets approach: One of the most common questions financial planners receive from soon-to-be-retirees is, “What’s the safest way to give myself a paycheck once I quit working?”

The question often stems from the knowledge that needing to withdraw funds in a down market can be both ill-advised and scary.

Those who have been around long enough probably know someone who retired close to a particularly bad market year, like 2001, 2007, 2008, or now 2022. Because that someone had to, or chose to, sell some investments at that terrible time, they ended up living off of much less than they originally thought. This can be a scary thing to watch. It makes one wonder, “How do I make sure that doesn’t happen to me?”

A Buckets Approach

Enter a buckets approach to retirement income. Below is a link to a video excerpt from the online course, “Retirement Readiness,” outlining the approach in more detail. (A link to the course can be found at the bottom of this article and here.) A description for each of the buckets follows below.

https://youtu.be/mkeqzgJfeFc

Bucket 1 – Cash and Money Market Accounts

The first bucket will provide your paycheck. Here is how it works.

  1. Calculate any retirement income you will have (pension, Social Security, dividends, interest, rental property, for examples);
  2. Figure your annual recurring expenses (do not include one-time expenses such as replacing a car, roof, or paying for a special trip or wedding);
  3. Subtract 2 from 1 to come up with the difference; and
  4. Keep 1 to 2 years of that difference in Bucket 1.

For example, Justine retires at 65. She expects to live past age 82 so she is waiting until 70 to claim Social Security. She has a pension of $800/month ($9600/year). Her recurring expenses are $70,000 annually. The annual difference is $70,000 – $9,600 = $60,400. To start retirement, she decides to keep 1.5 years of the difference in Bucket 1 so $60,400 x 1.5 = $90,600. She puts that in a high-yield money market account and sets up an automatic transfer of $5833.33 monthly to her checking account. Voila – she has a new paycheck.

When she turns 70, she will collect $45,000 in Social Security. At that time the annual difference will fall to $70,000 – ($9,600 + $45,000) = $15,400. She decides to keep 2 years of the new difference in Bucket 1, so $15,400 x 2 = $30,800. She reduces the monthly transfer from the money market to $1283.33 per month.

Bucket 2 – Bonds, CDs, and Bond Funds

The second bucket replenishes Bucket 1. As the paychecks come out, the principal in the money market account will naturally decrease. Eventually it will decrease to a level that makes you say, “Yikes! I only have xx in my checking and money market.” Everyone has a different level of “Yikes.” When the balance approaches your unique Yikes level, a transfer is made from Bucket 2 into Bucket 1.

Bucket 2 is comprised of a combination of CDs, bonds, and/or bond funds. CDs and bonds have maturity dates, so they are structured in a ladder (staggered maturity dates usually 6 to 12 months apart into the future). As each one in the ladder matures, the principal is either transferred to Bucket 1, or, if Bucket 1 is comfortably above the Yikes level, redeployed into a new CD or bond with a maturity date at the end of the ladder. If bond funds are used, they are laddered according to the duration in the fund, and funds are sold as needed to replenish Bucket 1. Using bond funds is a bit riskier due to the lack of maturity dates, so at least some portion in CD and individual bonds are recommended.

Bucket 3 – Stocks and Stock Funds

Bucket 3 replenishes Bucket 2 through harvesting gains in stocks. Here is how that works.

  1. Review Bucket 3 on a regular but infrequent schedule (at most quarterly and at least annually).
  2. If there are gains, transfer those to replenish Bucket 2.
  3. If there are no gains (i.e. the market is in a correction), then do nothing until the next scheduled review.

In this way, stocks are not sold at the most inopportune time. With up to 5 years of paychecks in hand in Buckets 1 and 2, you have provided yourself a secure cushion from market corrections.

Final Notes

Whether each bucket is held in a tax-deferred account or a taxable account makes a big difference. Buckets may be spread across accounts in different combinations to minimize taxes.

You can find many varieties of Bucket approaches online. The goal of this particular Bucket approach is not to generate the best returns of any retirement portfolio ever on record, but rather to help prevent retirees from selling during downturns by providing security in Buckets 1 and 2. It works best for people who want the feeling of security from retirement income but don’ t need the high cost of an annuity to get it.

For monthly tips on retirement income, taxes, and psychology of money in retirement, subscribe to the free e-letter, “The View from the Porch, ” at https://bit.ly/3t2uwfn. And for a short online course on retirement readiness, see Simple Finance Retirement Readiness: https://bit.ly/3p3BkXE.

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3 Myths About Ideal Retirement: More Than Money at Stake

view from the porch

3 myths about ideal retirement: more than money at stake.

I knew a man who couldn’t wait to retire from his government job. With a good financial plan, a few decades of hard work and wise money decisions, he was able to call it quits at 55. Thrilled with his newfound financial freedom, he immediately took to cooking, golf, dating, traveling, fishing, and having fun. For the first few years, every time I saw him, it appeared the lifted burden of work had lightened his step and his heart.

At 65, he moved to a Florida retirement community. It’s the kind with restrictions on residents’ age (55+), house colors, landscaping, and mailbox designs. One of the few ways to stand out is by the cover on your golf cart. To outsiders, everyone looks the same, dresses the same, exercises the same, and seems to adore their life in the sunshine.

No One to Talk To?

Yet, one day on the phone he said, “Y’know, I really like talking with you. I don’t have anybody to talk to here.”

This was a shock. “What?” I said, “What about golf and pickleball friends? Aren’t there some retired CEOs, executives, people that think like you, that you have something in common with?”

“Nah,” he said, “I don’t have that much in common with anybody here.”

I thought that was crazy. He talked like them, dressed like them, shopped like them, and exercised like them. He probably was just as well off, financially, as any of them. How could he not have someone to talk to?

Unfortunately at that time, I was unfamiliar with the signs of depression. Five years later, it took his life.

Three Myths About the Ideal Retirement Life

According to Mitch Anthony, author of many books on retirement, there are three myths about the ideal retirement life.

Myth 1: “This part of my life is going to be about ME.”
Anthony says, “This is a formula for emptiness.”

Myth 2: “I am going to surround myself with people like ME.”
Anthony’s reply: “This is a formula for stagnation.”

Myth 3: “I am going to do nothing but relax.”
Anthony: “This is a formula for boredom.”

Emptiness, stagnation, and boredom don’t sound much like the ideal retirement. Yet, these three myths form the basis of a lot of financial plans.

A Mayo Clinic gerontologist told Anthony, “A life of total ease is two steps removed from a life of total disease. The first step is they get bored, the second step is they grow pessimistic, and then they get ill.”

I’m afraid that’s what happened to the man who appeared to have the ideal retirement plan, but ended up having no one to talk to.

The Dark Side of Retirement Plans

Writer Robert Laura describes the “dark side” of retirement. For some who don’t think about how to bring meaning and purpose to their life after work, serious mental health maladies like depression and addiction await. Surprisingly to some, the U.S. age group with the highest suicide rate is adults over age 75. In fact, Florida retirement communities have some of the highest suicide rates in the country.

Of course not everyone in retirement communities is depressed. It’s more common to see residents who live vibrantly, filling time with volunteering, mentoring, and close social circles. Ironically, few of these things require much money.

5 Parts to Plan For More Than Money

For those like the man above, jumping from the work treadmill onto the retirement scene with only the financial part of a plan can be risky. Instead, consider suggestions for the non-financial parts of a well-thought-out plan:

  • Ask yourself how much of your identity is tied up in what you do, rather than who you are.
  • Start creating a life to retire “to” rather than simply a job or business to retire “from.”
  • Consider gradually reducing to part time and taking extended vacations, rather than showing up one day, and having nowhere to go the next.
  • In your ideal week, identify how would you spend your time, and with whom?
  • Have a diverse social network outside of work.

The best retirement plans start with a plan for a fulfilling life first in order to match up those parts with money decisions. Many people go at it the other way around, asking “How much income can I get with the amount of money I have?” and assuming that answer will dictate their lifestyle.

That’s why good planners ask first how you want to spend your time, before asking about your money. If you define what an ideal retirement means first for you, then your retirement plan and your retirement life have far better chances of success.

Dedication to Mental Health Awareness

Following May’s Mental Health Awareness month, every June I republish this story in memory of the man who inspired it. Retirement is a life transition that has an under appreciated impact on mental health.

Resources for Ideal Retirement Plans:

Dori Mintzer, Ph.D. has a weekly live interview series and podcast called “Revolutionize Retirement.” In it, she interviews experts on retirement life.

See, The Mindful Money Mentality: How To Find Balance in Your Financial Future (Porchview Publishing, 2013).

Sign up for a free monthly e-letter with retirement readiness tips, “The View From the Porch.”

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Florida’s Sales Tax Holidays

Florida’s sales tax holidays. Florida sales tax runs anywhere from 6% to 8%, depending upon the county where you are making the purchase. Several years ago the Florida legislature started sales tax “holidays,” beginning with the back-to-school season.

Flush with a budget surplus again this year, the legislature passed several more holidays which begin in May. Some of them last a week, while others last up to 2 years. For a major purchase you might be considering, it pays to know the timetables.

Disaster Preparedness: June 1 – 14 and August 24 – September 6

There has been an annual sales tax holiday for disaster preparedness for a few years now. If you are in or near Florida, and getting low on batteries, bungee cords, coolers, tarps, portable generator(s?), or several other items listed in the link below, you can save the sales tax by waiting until the week of the holiday to stock up.

The second sales tax holiday in late August occurs right before the busiest part of hurricane season.

Of note, the holiday includes all kinds of pet provisions – pet food, pet kennels, pet beds, leashes, and even pet waste disposal bags.

Also new last yaer, consumable household goods like paper goods, soap, hand sanitizer, and trash bags.

Here is the link to the list of exempted disaster preparedness items: https://floridarevenue.com/taxes/tips/Documents/TIP_24A01-04.pdf

Big Deal – Home Hardening Disaster Preparedness: July 1, 2022 – June 30, 2024

This one is a bigger deal and can save major bucks. Impact-resistant windows, doors, and garage doors will be fully exempt from sales tax through the end of June.

So if you are planning a major home improvement, talk to your contractor about placing the order. On a $5,000 order, in a 7% sales tax county, that’s a $350 savings.

Unlike most of the other holidays, this exemption also applies to commercial orders.

More detail on home hardening exemptions here: https://floridarevenue.com/taxes/tips/Documents/TIP_22A01-07.pdf

Fun Events, Outdoor Supplies and Annual Passes: The whole month of July

This sales tax holiday began during the pandemic. Event tickets, camping supplies, paddle boards, kayaks, binoculars, grills, and bicycles are some of the larger ticket items included in the holiday.

Of note also – annual or season passes for museums, theater series, ballet, and state parks.

The complete list for events and supplies during “Freedom Month” is here: https://floridarevenue.com/FreedomMonth/Documents/2024/FM%20poster%2011×17.pdf

Back-to-School: July 29 – August 11

The list of back-to-school items has a few surprises in it. Items you would assume are included are not, and others you assume are not, are. (Example: snowsuits included, swimsuits not). More information on the strange list of exemptions here: What Does Qualify for Florida’s Back to School Sales Tax Holiday?

Also, see the back-to-school flyer (complete list not available yet as of publication): https://floridarevenue.com/backtoschool/Documents/2024/BTS_poster11x17.pdf

Labor Day/Tool Time Tax Savings: September 1- September 7

Larger-ticket items on the “Tool Time” holiday include power tools under $300, power tool batteries, toolboxes, and work boots. It also includes shop lights, plumbing tools, and duffle bags.

More detail on “Tool Time” exemptions from 2022 here: https://floridarevenue.com/taxes/tips/Documents/TIP_22A01-09.pdf

A Lack of Preparation Story

During Hurricane Irma in 2017, the middle of the spaghetti models 5 days out showed the storm was likely going up Florida’s east coast. This is the opposite coast from where we live. My husband and I got double-busy with clients who wanted to squeeze in appointments before it hit. We got caught up in the work and ignored our own preparations. I didn’t fill up my car, and we didn’t check our stock of Coleman stove propane canisters. By the time the forecast shifted, there was no gas to be found – for the car, for the stove – of any kind, anywhere.

Irma left us without power for 7 days. Cooking on a tiny charcoal grill in the backyard got old quickly. After 3 days, when the charcoal started getting low, the temperature inside climbed to 83 with humidity of 100, and the frozen fish was rotting, we called it quits and found a hotel with electricity that had managed to reopen.

For a Florida native, experienced with hurricanes, whose job title includes the word “planner,” it felt like I should have done better.

Lesson Learned

For Ian in 2023, I paid more attention to all the strings on the spaghetti model, not just the ones in the middle. We stocked up, and I evacuated to a location outside of the projected storm surge zone. Although we ended up safe from storm surge, it was nice to feel better prepared this time around.

The sales tax waiver was a nice nudge for procrastinators like me. Disasters of all different sorts happen. Take advantage of the holidays to prepare yourself, and enjoy a little inflation relief.

Have you found a great deal using a sales tax holiday? Please share by leaving a comment.

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What’s that IRS Form 5498 arriving in May?

Tax calendar

What’s that IRS Form 5498 arriving in May? You might receive a Form 5498 if you have a Health Savings Account, a Roth IRA, or other IRA. 

Now, you might have just filed after compiling all your forms and statements, but now your financial institution sends another form? Hello, isn’t that a little late? Do you have to call your accountant or financial planner, again?

Hold the calls. You may remember reporting to your accountant (or TurboTax) that you made some contributions to an HSA or IRA. Perhaps you made them last year, or perhaps you made them before the April 18 deadline and had them count for 2022. Or, you took money out of these accounts or are getting ready to start your required minimum distributions (RMDs). These are reasons why you are receiving the form.

What’s Form 5498 for?

One purpose of the Form 5498 is for the financial institution that holds your account (called a “custodian”) to verify to the IRS that you did indeed make the contribution that you claim you did on your tax return.

Since everyone usually has until the tax filing deadline to make contributions, the IRS gives custodians until May 31 to send Form 5498 to account holders.

Another is to verify distributions. If you are over the age for required minimum distributions (RMDs), Form 5498 also tells the IRS what your RMD will be for the current year. The RMD is determined by the account balance on the final day of the previous year (December 31, 2022 for 2023).

So all you need to do with it is check that it matches up with what actually happened and what you actually reported on your return.

Check Form 5498 For Errors

Before you file the 5498 away, make sure it’s correct. Mistakes are common.

In 2018, my husband and I both received erroneous 5498’s for our Health Savings Accounts (HSAs). Mine showed $0 contributions for 2017 and his showed 2 years’ worth. What the….? So we called the bank, got the records straight, and had them send corrected 5498s to the IRS.

Why go to the trouble? If your 5498 contribution or distribution differs from what you reported on your 1040, at some point it could get noticed. One fantastic sunny day in the future as you skip to your mailbox, you may find inside a skinny white envelope with “Internal Revenue Service” in the return address. Fantastic day ruined.

More than likely, all the letter will say, essentially, is, “Hey, we noticed your 5498 doesn’t match your 1040. What gives?” But still. It will be in IRS-Speak and look and sound and feel serious, with a deadline for giving them an answer. Save yourself the trouble of having to answer (or pay your accountant to answer for you) and do a quick check now.

It only takes a few minutes.

  • Does your contribution amount for 2022 look correct?
  • Did you take any 2022 HSA or IRA distributions, and if so, do those look correct?
  • (If not, make sure the distributions say $0.)
  • Does the reported year-end account balance look accurate?
  • Is your SSN correct?
  • How about your name, including your middle initial?

If anything looks amiss, contact your custodian to get a corrected 5498 issued ASAP.

One More Tax Task

By this time of year, it’s normal to feel sick of tax stuff. The last thing you may want to do is deal with another form, especially an erroneous one. If you don’t want the bother, at least forward it to your financial or tax professional to check it out and help. We deal with tax stuff all year long. Even in May.

If it feels like you could be paying less in taxes, start by subscribing to our award-winning monthly e-letter, “The View From the Porch” for monthly tax tips sprinkled with fun and reader-only event offerings.

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Financial Anorexia? Stuck like Scrooge

blank stare or self-doubt emoji

Financial anorexia: Stuck like Scrooge. What is financial anorexia? Financial anorexia is a type of spending disorder. People who suffer from the eating disorder of anorexia may obsess about food and the number on the scale. People who suffer from the financial disorder may obsess about money and the number on their bank statement. For those suffering from financial anorexia, they never believe they have enough to enjoy what they’ve got.

According to Ken Donaldson, LMHC, a licensed mental health counselor in Seminole, Florida, “Anorexia is characterized by a distortion of perception.” Someone suffering from the eating disorder believes they still need to lose extra pounds, when to everyone else it’s clear they are harming themselves. Someone suffering from the financial one believes they still need more money, when it’s clear they are depriving themselves.

While the eating disorder of anorexia is deadly serious and can be fatal, financial anorexia can be dangerous in other ways – to mental health, friendships, and family relationships. Financial anorexics can seem to be more engaged in extreme deprivation than in enjoying life’s simple pleasures. Family members are most often affected by the wealthy relative whose reluctance, reclusiveness or reticence are, at a minimum, puzzling, but more often, hurtful.

Where Does Financial Anorexia Come From?

According to Donaldson, anorexia is fueled by isolation – the more the sufferer depends upon their own distorted perception, the worse their condition becomes. Ebenezer Scrooge (in the beginning of Dickens’ tale) is an isolated penny-pincher and money hoarder. He is the stereotype of the financial anorexic.

Another root cause can be fear. What are anorexics often afraid of? Stated fears might include:

  • a catastrophic world event;
  • a very expensive health issue;
  • hyper-inflation; or
  • “spoiling” family members or friends.

Certainly some of these things can and do happen. Yet our societal messages, and brains wired to look out for danger, emphasize catastrophic scenarios like these past the point of their actual probability.

Yet, other fears might be at work that aren’t as overt. Unstated fears might include loss of self-worth or security.

Anorexia is also fueled by our cultural norms. Western society still worships conspicuous wealth and Twiggy-like figures. “You can’t be too rich or too thin,” sums it up.

Most people understand the “too thin” part, but “too rich”? Is it possible to be “too rich”? Financial anorexics, like Scrooge, typically amass abundant resources. However, their wealth does not come from a healthy relationship with money. They might be “too rich” for their actual needs. Further, the more they have, the more they have to fear losing. The hoarding-like behavior only gets worse the more successful they are at it.

What Can Be Done About It?

At some point in life, many financial anorexics realize, to their immense regret, that they worried more about what might happen, and didn’t, than enjoyed what they actually had.

Exposure to new information sources is one method of help. According to Donaldson, “New information will disrupt the pattern.” Support groups, a counselor, and therapy can provide external points of view. For financial anorexia, a visit with an understanding financial professional, who can provide concrete reassurance, often is a good first step. All of this exposure also helps break the distorted perceptions brought about by isolation.

Sometimes the new information has to come from, unfortunately, a painful life-altering event. How did Scrooge turn around? The Ghosts of Christmas Past, Present and Future showed him more to be afraid of – and how his isolation and withholding were harming others – than the fears he made up for himself.

At some point, it makes sense to ask a few questions:

  • What have all the years of saving been for?
  • How much is too much to spend on seeing family or friends? 
  • How soon is too soon to leave a stressful, unhappy job if it’s taking years off of your life?
  • What is it truly worth to take the trip you have been dreaming about for so many years?
  • How much is too much to spend on self-care like massage, therapy sessions, or a manicure?
  • What if the thing you are afraid of is completely unknowable? What if it wouldn’t be solved with money anyway?

Working With an Understanding Professional

A 2017 study sponsored by the CFP Board supported the psychological benefits of working with a financial professional. The study concluded, based upon a survey of over 800 consumers, that, “Working with a CFP® professional ultimately removes the negativity consumers experience relating to their finances and instead elicits feelings of confidence, optimism, ease, and security.”

Confidence, optimism, ease, and security. Those sound better than catastrophes, worry, and fear.

How do you want to feel about your financial future? Share your thoughts below.

Want more information about financial psychology? Sign up for our monthly e-letterschedule a call, or check out  The Mindful Money Mentality: How To Find Balance in Your Financial Future.​

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