Fee-Only Financial Planner

Fee-only financial planner category: A collection of blog posts on fee-only financial planning topics by Holly Donaldson, CFP®.

CERTIFIED FINANCIAL PLANNER™ and author Holly Donaldson writes a regular blog on topics for those interested in financial planning. Her speciality is the psychology of money in preparing for and transitioning to retirement. Many people find that, after saving well for a few decades, that the idea of actually spending and enjoying what they have saved requires a much different mentality. It is for these people Holly wrote her book, The Mindful Money Mentality: How to Find Balance in Your Financial Future.

The balance in being sure you have enough for the future, while also enjoying the present, is the highwire act of retirement. With Holly’s guidance, clients find they have greater security and confidence. They learn how to strike the right mix between enjoying the present and investing for the future.

Additionally, they appreciate that as a fee-only financial planner Holly does not sell any products, receive commissions or referral fees. Clients most interested in Holly’s services are those who do not feel well-served by advisors who require an ongoing engagement or fees. They don’t need a chauffeur for their money. Only a financial navigator.

Enjoy a monthly award-winning e-letter on psychology of money in retirement. Subscribe to “The View from the Porch” at https://bit.ly/3t2uwfn.

To speak with Holly about your own circumstances, select a day and time on the calendar below.  She will call you then at the number you provide: https://bit.ly/3GWZNrc

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…

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Read more about the article Using A Retirement Income Buckets Approach

Using A Retirement Income Buckets Approach

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. Calculate any retirement income you will have (pension, Social Security, dividends, interest, rental property, for examples); 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); Subtract 2 from 1 to come up with the difference; and 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…

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Read more about the article 3 Myths About Ideal Retirement: More Than Money at Stake

3 Myths About Ideal Retirement: More Than Money at Stake

The best retirement plans start with a plan for a fulfilling life first, then match up the plan with money decisions. That's why good planners ask, what's the money for? For most, it's not to support boredom, stagnation and decline. 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.

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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%2011x17.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.…

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What’s that IRS Form 5498 arriving in May?

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…

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Financial Anorexia? Stuck like Scrooge

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…

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Digital Assets: How To Document

Digital assets: How to document. Imagine you have a nearly $1 billion empire of digital assets - music, movies, and royalties. Sound good? Now imagine you have no will, aren't in a committed relationship, and have no children. What happens to those digital assets if something happens to you? Prince's untimely death in 2016, and his lack of estate planning, brought to mind that the more we have, especially digital assets, the more we have to plan. Celebrities have a team of advisors who try to keep up with constant changes to their clients' property, especially when it comes to protecting intellectual property. The longer a celebrity waits to address an ever-growing empire, the harder the decisions are to make for everyone involved. Their advisors find it's better to address changes as they happen, even if it means more frequent revisions. Back in the Real World So what does this have to do with non-celebrities? While you may not feel as though you have a digital empire, your online life might be more complicated than you think. It's estimated the average American has between 30 and 80 online accounts with passwords. For example, an attorney had a father-in-law who ran three businesses from his digital devices. When he died suddenly in 2011, she was shocked at how difficult it was to access his emails, accounts, and online life. Every online provider had different requirements. Many of them would not honor court documents asserting her authority over his affairs. This was her introduction to the concept of the "digital asset," and, as a result, she became an expert in that niche. Keeping track of digital assets can be overwhelming, but you can begin by thinking about them in four main types - personal, financial, business, and social. Personal Digital Assets Photos, movies, books, e-books, music, and podcasts. Unlike your Simon and Garfunkel records, Michael Jackson CD's, or Rocky DVDs that the kids will get whether they want them or not, there are some e-libraries you can't leave to anyone. For example, access to Kindle and iTunes libraries die with their owners. Upon notice of death, all content in an iCloud account is deleted. Therefore, for photos and videos stored in the cloud, make sure you have a backup, especially if it's iCloud. Leave instructions somewhere on how to get into iCloud, and how to get to the backup. Financial Digital Assets Bank, brokerage, PayPal, Venmo, frequent flyer, crypto, and Treasury Direct accounts. Did you sign up for paperless statements? Then there will be no paper trail. Make sure you have documented somewhere that online accounts exist. Email is one of the most critical items for heirs to access. If no one can get into your email, and you haven't kept good notes somewhere, they may not know you even have a crypto, Venmo, Treasury Direct or I-bonds account. Business Digital Assets Blogs, e-books, audiobooks, e-commerce sites. Intellectual property is often housed digitally. Have you inventoried any copyrighted works and addressed them in…

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As a Child-Free Elder, Who Will Be On Your Team?

“Who will take care of you when you’re old?” someone once asked me when I told her I had no children. It seemed like an old-fashioned kind of question. Nevertheless, it caused a mini panic attack. Knowing the statistics, I had made the vague assumption that I would need to make arrangements for care, but something about her question made that statistical probability more real. About 14 percent of 40- to 44-year-old women had no children in 2018 – up from about 10 percent in 1980, U.S. Census data shows. This is and will be an issue for millions of Americans. As anyone who has served as a caregiver knows, there are four main questions to ask from the beginning. Answering these can lead to the formation of an elder care support team. The team members may come from two areas - friends and family, professionals, or both. Where will I live? Who will make medical decisions for me? Who will handle my finances? How will I get transportation? Team Member 1: Where will I live? The first part of figuring out the team is to know where you will be living. The vast majority of Americans want to age in their homes. For some people that home might be the place they have lived for several decades. If so, then the team member will likely be a home health care company. For others, home might be a place they move to - with a supportive community, but not a facility (perhaps at first). If that's you, building a network of friends and professionals in the community can be one of the best ways to reinforce your support team. Although it's not in many people's plans, sometimes aging at home isn't an option. For people aging without children, it's more important to get to know assisted living and continuing care facilities, and figure out how you would pay for them. (For myself, I purchased a traditional long-term care policy. But that doesn't mean that is the right solution for everyone.) Team Member 2: Who will make medical decisions for me if I can’t? Preferably someone close by. Ideally this person could be available at a moment's notice and will not have to travel far to attend appointments with you. Having a strong primary care physician relationship is also highly beneficial. Some doctors, especially those who specialize in concierge medicine, can and will serve as your legal health care surrogate. Team Member 3: Who will handle my financial affairs? Many attorneys recommend having a different person named for financial matters than for health care decisions. As aging progresses, it's a lot to ask of one person to handle bill paying, money management, and doctor appointments (as anyone who has served as a sole caregiver can attest). Money management involves several duties. To name a few, Paying bills and making renewal decisions (such as memberships, subscriptions, and/or insurance policies) Making gifts Making transfers between accounts, such as taking IRA withdrawals Managing investments…

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How To Let Go of Money Self-Doubt

How to let go of money self-doubt: What is money self-doubt Money self-doubt is an inner belief that one cannot trust themselves with a decision about money. Sometimes these beliefs operate in the background, quietly driving decisions when we don't realize it. Other times they're front and center. What does money self-doubt sound like? Money self-doubt beliefs often sound like critical messages: "I knew I'd screw it up." "I'll never be good with money." "If I can't manage my own finances, I'm a failure."   "Why am I so stupid with money?" Money Self-Doubt Origins Where does money self-doubt come from?  It could be a single traumatic event or a repetition of harmful moments that lead to flawed beliefs about our financial capabilities. One time being taken by a scammer, or many times being told by an abuser we aren't capable. Without counterbalancing mantras like, "You're still OK." "You just made a mistake." "You can do this." the self-doubt can take hold. Society and media also don't help, offering a choice of money self-image as either, "good with money," or not. Individual instruction is rarely given in school, or in families, much to our society's detriment. While financial professionals are often proficient in finance, many are not good educators. A few even try to make money more complex than it is, to keep clients feeling less than sure about themselves. Case Study: Sondra (not her real name) is a highly educated and accomplished professional. Her parents came from Depression-era families where money was tight in their younger years. Money was never talked about in Sondra's home, although she was given everything she needed. She grew up with the belief that her parents didn't discuss it with her because they believed money was something she was not capable of handling. When she went to talk with a financial advisor, he threw so much jargon at her that she was too uncomfortable to admit she didn't understand what he was talking about. Money Self-Doubt Results Without realizing these beliefs exist, we can allow them to influence what actions we take or fail to take. Self-doubt can affect who we allow into our lives, and who we don't. It can affect our choice of career. Or how we spend, or choose not to, on our own needs, wants, and wishes. Ironically, money self-doubt can lead to overspending with some people, and over-deprivation with others. Sondra chose a career where she was assured a salary and the chance of a bonus if she worked hard enough. She worked longer hours than she wanted to. She lived minimally, foregoing many comforts and rewards of her hard work. Her dreams of having more work-life balance were put on hold because she never felt financially secure. In her personal life, she chose friends and partners who also didn't talk about money, leaving a gap in her closest relationships. How To Let Go of Money Self-Doubt If you've been operating under flawed assumptions, and now you know it,…

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Read more about the article 6 Top Books For Booklovers – 2022 Edition

6 Top Books For Booklovers – 2022 Edition

6 top books for booklovers: What books made an impact on you in 2022? Every March this blog publishes a few selections from the prior year's reading. For 2022, below are 6 favorites from finance, fiction, and self-help. (For past recommended books, check the Resources page or enter "books" in the blog search.) Psychology of Money The top book recommendation this year is The Secret Meaning of Money: How To Prevent Financial Problems from Destroying Our Most Intimate Relationships, by Cloé Madanes. Ms. Madanes is a family therapist, not a financial adviser. But she gets to the heart of what ails so many couples and families - money behaviors and beliefs. Although published in 1994, there's nothing outdated about her observations and advice. She covers common money mistakes in the lifecycle of a couple, from younger years, through children, divorce, second marriages and stepchildren, long-time marriages, and end of life. Understanding the impact of one's upbringing on behaviors and beliefs goes a long way toward beginning to break patterns that no longer serve us. Poverty, eviction, and even great wealth all have childhood impacts that can be seen in adult relationships. The book concludes with chapters on using money in positive ways, and a list of common irrational behaviors rooted in money and power family dynamics. Fiction On the fun side, here were my 2 picks for fiction, out of about 20 total. First is The Storied Life of AJ Fikry, by Gabrielle Zevin. In one word, it's sweet. AJ Fikry is a recently-widowed, lonely, angry, snobbish owner of a bookstore on Block Island, Rhode Island. He gets entangled in a community problem. There are financial issues at stake. A new young book wholesaler from Boston enters and things get more complicated. Of course it's heartwarming to read about love emerging between two people, but even moreso to read about a bigger sort of love emerging within a community that found itself divided. I also appreciated that finances, so often left out of both fiction and non-fiction, were a front-and-center concern. How will AJ manage to keep the mortgage payments going when no one is coming to his store? How could his love interest possibly afford to leave her job in Boston and move to Block Island? Zevin tied everything up at the end with a slight twist that left me smiling. The second novel, Bring Me Back, by B.A. Paris, is a psychological thriller. It kept me guessing the. whole. time. The constant twists and turns reminded me of an old movie, "Death Trap," with Christopher Reeve. You're never sure who's the good guy, who's the bad guy, or perhaps they're both playing bad-guy cat and mouse with each other? What do you mean they're not dead after all? The appearance of creepy emails felt like a new tool for psychological suspense. This one had a resolution that was both surprising and satisfying. Life Improvement: (also known as "self-help") Two psychology books made the list this year: The Illustrated…

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