5 Top Books Read in 2023

5 top books read in 2023: What books made an impact on you last year?

top books read

Each year a few selections from the prior year’s reading are highlighted here. For 2023, below are 5 favorites (actually, 4 books and 1 app) from finance and retirement, self-help, and fiction.

Finance and Retirement

The finance and retirement book recommendation this year is Get What’s Yours: The Secrets to Maxing Out Your Social Security, by Lawrence Kotlikoff, Paul Solomon, and Philip Moeller. Although published in 2016 it’s been updated for current changes to the claiming rules. Do you really need to read a book about Social Security? Isn’t filing pretty straightforward? Maybe, maybe not.

It’s easier to say who would not necessarily benefit from the book than who would. The book might not be for you if:

  • you already filed for Social Security more than 12 months ago (because, did you know everyone gets a one-time filing do-over in the first 12 months?); or
  • you are not yet 62 and you and your spouse have never been
  • divorced,
  • disabled,
  • widowed, or
  • worked for an employer who opted out of participating in Social Security (generally this would be certain railroad companies or municipal governments).

These rule out a few million people, but for the other tens of millions, there is probably something useful inside this book that could save anywhere from a few thousand to a few hundred thousand dollars over the rest of their lives.

Life Improvement: (also known as “self-help”)

Fierce Self-Compassion: How Women Can Harness Kindness to Speak Up, Claim Their Power, and Thrive by Kristen Neff, Ph.D.. Neff’s specialty reminds me of Brene’ Brown’s – a narrow niche of psychological research for which she has chosen to become a deep expert. In Brown’s case it’s empathy while in Neff’s case it’s self-compassion. I didn’t even know what self-compassion meant when I began reading and studying Neff’s work about three years ago. Lest it be confused with becoming a tender-hearted wuss, Neff makes clear that self-compassion requires a ferociousness that is societally frowned upon in women. How to act on that feeling while also expressing self-compassion is the balancing act which she skillfully examines and explains.

Not a book, but an app: Insight Timer. I keep this one in my Mental Health folder on the first screen of my phone. It’s my go-to app first thing in the morning for a guided meditation or simple calming wake-up music (try for example, “A New Day,” by Wakes/Ada and Nathan). Later I consult it again when I need to get to (or get back to) sleep. The teachers are well-vetted by IT and then rated by worldwide listeners. Guided practices span the gamut of spiritual and religious traditions. There are musicians in varied stress-relieving genres to choose from (calming piano – try Chris Collins; cello – try The Wong Janice; recorded nature sounds – Insight Timer Earth). Currently IT claims 28 million listeners.

Fiction

On the fun side, here were 2 picks for fiction.

First is Skeletons at the Feast, by Chris Bohjalian. I have a hard time with World War II novels, or actually any war novels, because I’m skittish about violence. (Probably because I have spent most of my life in relative peacetime and so I am duly thankful for that.) Sometimes I can’t bear to turn the page because I fear what’s coming next. But Bohjalian’s storytelling is so good, it kept me turning pages. While at it, I learned what and where Prussia was, and a little of what it must be like to live in constant uncertainty about one’s chance of surviving the next year, then month, then day, then hour. It reminded me of Viktor Frankl or John Steinbeck. There’s a great deal of loss, of course, but the ending still felt satisfying in a realistic way.

The second novel, Animal Dreams, by Barbara Kingsolver, follows a young woman home to Oklahoma after she drops out of medical residency in Arizona. She’s gone home to check on her ailing father, the small town’s only physician, while her sister is in central America helping victims of gang violence. She finds new purpose teaching school and falling in love yet still believes she will return to practicing medicine in the big city. Meanwhile, other parts of her childhood emerge like pieces of a giant memory puzzle. She remembers doing something wrong, but can’t recall quite what it was. As the puzzle comes together, she realizes her father might not be the man she thought he was. There are people who remember her as a young person, but not many seem willing to help her make sense of it. Kingsolver’s puzzle is an intriguing one for the reader to solve.

See other book recommendations on our Resources webpage.

What books were life-changing, or just entertaining, for you last year? Leave a comment below.

Continue Reading5 Top Books Read in 2023

When Money-Opposites Attract

when money opposites attract

When money-opposites attract: One’s a saver. One’s a spender. One would rather be at the mall. The other is into investments. While they love their differences overall, they struggle with disagreements about money.

Money is the third most frequent topic of marital arguments, after chores and children. Ironing out the wrinkles in money beliefs, behaviors and decisions can go a long way toward reaching financial goals with peace and harmony – whether those goals be at the mall, or in the savings account.

How can couples handle mixed money messages?

Try three steps.

Step 1: Money Script Awareness

Sometimes we don’t realize the underlying money beliefs that drive our own and our partner’s decisions. These are often called money “scripts.” (You can find yours using an online test developed by Dr. Brad Klontz here.) Share with each other the money messages you grew up with. Examples might include “Money doesn’t grow on trees,” or “You only live once.” The goal in sharing is to begin to reach an understanding of the other’s background.

Share who influenced you when it came to handling money. Money script influences can come from various authority figures – parents, grandparents, teachers, coaches, or spiritual leaders.

Share what you believe is the most important value that money provides to you. Values derived from money can include security, achievement, sharing, and spontaneity/having fun. Even a general rejection of money (think 1960s hippie culture) can be a money value.

Step 2: Concentrate on conversation

Now that the money differences are on the table, how do conversations about it go? It’s important to communicate about how you communicate. The goal is for each partner to feel heard and understood.

If one or both are falling short on feeling heard and understood, “active listening” is one tool to try. In an abbreviated form of active listening, each partner takes a turn being the sharer and the listener. The sharer tells their story or shares their statement about a topic. The listener then completes three steps.

  • mirror back what they thought they heard,
  • check for understanding, and
  • empathize if appropriate.

For example, say the sharer talks about feeling discounted or ignored with important money decisions. The listening partner listens without comment. The listening partner’s three steps might begin like this:

  • “So what I heard you say was…” (repeat back, even if it’s verbatim, what you heard)
  • “Did I get it all?” (If yes, go to next step. If no, listen to what was missed, and go back to mirroring what you heard.)
  • “I can see how that would be difficult/challenging/etc. for you.” Or, if it’s true, “If I were in your shoes I would feel the same.” This empathetic statement is not necessarily an agreement (although it’s nice), but at a minimum an acknowledgement of understanding.

All three of these must be completed before it’s time to switch roles.

Step 3: Respectful Negotiation

With enhanced understanding, a couple is better equipped to come to a mutually agreeable solution.

Several years ago a couple of young successful professionals debated in the financial advisor’s office whether they should be saving 10% or 20% of their income. One felt strongly that with the lower savings they could hire help at home for the house and lawn. But it was equally important to the other partner to be debt-free by age 40.

After discussion, awareness, communication, and negotiation, they compromised to agree that they would both be satisfied saving 15% of their income, hiring some house help, and keeping their debt-free status as a goal, but not a rigid expectation. 

What about you? What challenges have you encountered in a romantic partnership when it comes to money differences? How were you successful in overcoming them? Or are you still challenged by them? Share in a comment below.

If anything in this post resonates with you, I help people in three primary ways:

Continue ReadingWhen Money-Opposites Attract

Challenges and CoastFire: My Story

Headshot of Holly Donaldson

My story: The following is an updated excerpt from the introduction to my book, The Mindful Money Mentality: How To Find Balance in Your Financial Future (Porchview Publishing, $20).

As a behavioral economist (in a field that studies the psychology of personal economic decisions), I have a keen interest in our relationships with money. I care about maximizing its usefulness as a tool rather than elevating its status as an end.

But for much of my life, I had those two reversed.

I did my own financial planning backwards. I put the pursuit of money first, life second, and myself last. In other words, I floated in a fog about my attachment to money, swept along by society’s encouragement and my own beliefs. My money mentality was not aware, awake, or intentional. It was unconscious. It was anything but mindful. 

Ironically, I was one of those successful savers. Starting when I was a teenager, I kept track of every penny I spent. I could not wait until my 21st birthday so I could start contributing to the 401(k) at work. 

Money as the Main Goal

In my 20s and 30s, I focused on money as an end, determined to define my success as a person by the amount of money I made. As a result, I made some choices that caused me, and those around me, to suffer unnecessarily. I fretted over how much essential things cost. It hurt me to spend on myself for anything nice, much less on anybody else. I now realize that having money was a way to feel good about myself. In my mind, my earnings defined my success as a person. This is the area where I was most imbalanced, and I regret some of the decisions I made then. 

After college, I joined a Miami bank training program. I saw that most of the trainees chose to live in a new suburban complex requiring a Metro commute. I chose to live in cheaper North Miami, only ten minutes from downtown, proud that I was saving on rent, gas, and Metro fares. The building was newly renovated but occupied mostly by taxi drivers who kept odd hours, and the crime rate was higher in my neighborhood. My car was broken into in the parking garage. I did not get much exercise because, as a 5-foot-3-inch 20-year-old, I didn’t feel safe going outside. 

Further, while my coworkers were discussing the fun evenings they had had at south Miami neighborhood restaurants, I thought, “Bah, humbug!” I was proud not to “waste” my money on frivolities. I ate mostly sauteed vegetables and microwave popcorn in my apartment. Over the seven-month training program, I not only did not exercise enough, I unconsciously distanced myself from the camaraderie of the other trainees. While I eventually fixed the exercise deficiency later in life, the friendships I might have made and enjoyed today are absent. 

A Vicious Cycle

It was not easy for me to accept that what you have is not who you are. I didn’t understand that if you looked to your net worth to find your self-worth, your net worth would never be high enough. It was a vicious cycle: I never felt good enough, so clearly I didn’t have enough; when I had more, I still didn’t feel good enough, so clearly I still didn’t have enough, and so on. 

The Turning Point

When I was 39 in 2005, my then-employer, a regional bank, merged with another one. The new bank had very different priorities. A startup division of a brokerage company had been trying to recruit me, so as part of the decision to make a jump, I ran a financial analysis to see how much risk my then-husband and I could take on.

I told him, “I have done these calculations six ways to Sunday. It appears that right now, if we do not save another dime, when we are 60 we are guaranteed a double-wide mobile home and early-bird specials at Denny’s.” I was being facetious, but it was clear to me that this was not good enough. We would need to keep working and saving for more. 

To my surprise, he said, “Sounds good!” 

I had always assumed that I would have to maximize my earnings as much as possible until age 60 because that was what everyone was supposed to do. Suddenly I had the space to step back and think: what do we really need? I thought: “I guess it’s not too bad to be nearly 40 and know I have at least what I have now. In fact, if I had to, I could definitely live with that.” Nowadays my story would be called “reaching CoastFIRE.”

I felt liberated. Suddenly I had a world of choices before me. 

New Choices

When I began to understand the meaning of “enough,” the pursuit of money ceased to control me. As a result of changing my money mentality, within a few years I was able to:

  • start my own business
  • write a book about money and mindfulness
  • realize I would rather be debt-free than live in a big house in the city
  • build a small house in the country
  • spend more time on my new porch.

From that point on, I made more decisions from a position of security and confidence, rather than pursuing the vague goal of achieving another dollar without knowing why. 

Sacrifices Without Regrets

As I near 60, I have no regrets about the decision to leave corporate life. Financially, I have made sacrifices. I have had to pay (a lot) more for health and disability insurance. I won’t have as big of a pension as if I had stayed for seven more years. (But oh, how long those seven years would have been.) I haven’t had an employer match to my retirement plan. On paper, becoming self-employed vs. staying as a corporate executive is not a move many financial advisors would recommend making.

But even with a divorce and remarriage in my story in the meantime, I’ll still be okay. Looking back, the best investment over the past nearly 20 years has been the freedom of time to work how I wanted, doing what I love to do in the way that suits me best. It’s also meant plenty of time for important people in my life, as well as for my physical and mental health. 

It’s Never Too Late

Money is not the destination; it is merely the vehicle. The hardest work for me has been to figure out what life I wanted to live to be happy. Once that became clear, the tough decisions fell into place. 

If I had figured out what I wanted first, I might have saved myself a couple of decades of unnecessary work and worry about not having enough. The irony is, those years probably shortened my life, which is one way to avoid running out of money!

CoastFire isn’t for everyone. But the principle of mindfully paying attention to the pursuit of money is. It’s a joy for me when a successful saver discovers that they might actually have a choice to hop off the savings hamster wheel and start enjoying what they’ve got.

Got a similar story? Share your thoughts below.

Continue ReadingChallenges and CoastFire: My Story

Fall Planning Reminders Before You Click “Renew”

Fall planning reminders before you click “renew.”

When it comes to employer, private health, and Medicare benefits, it’s easy to simply renew last year’s choices.

However, it can be worth the extra time to look closely at all options, and how they might have changed.

“Research shows employees only spend 17 minutes electing their benefits, while Netflix users spend an average of 18 minutes deciding what to watch,” according to Kiplinger’s: http://bit.ly/Kiplingers-Benefits.

Under 65: Health Insurance

If you are under 65, check for HSA (Health Savings Account) eligibility on your policy. Contributing to a family HSA can save roughly $2000/year in taxes (depending on your marginal tax bracket). Plus, if you are relatively healthy and do not use the HSA, your earnings grow tax-free until retirement. Click here [https://www.hollydonaldsonfinancialplanner.com/hsas-over-iras/] for the reasons why HSA’s beat IRA’s as retirement accounts.

HSA eligibility, unlike IRA eligibility, is not dependent upon having earned income. The last year you can contribute to an HSA is the year before you turn 65.

65 or Over: Medicare

If you are 65 or over, your first opportunity to enroll begins 3 months before you turn 65 and continues until 3 months after, unless you are still employed. Sign up for Part B at the first opportunity (after leaving your employer), otherwise your premiums increase 8% – 10% per year.

Enrollment for existing Medicare beneficiaries runs from October 15 – December 7.

If you are on prescriptions, the formulary – the list of drugs that Part D covers – might have changed. Make sure your prescriptions will still be covered. Stories abound of huge jumps in co-pays after January 1. At www.medicare.gov, you can input your prescriptions and the site will advise you which Part D plan covers the meds you need.

Long-Term Care Insurance

Group long-term care offerings through employers are becoming a benefit of the past. Private policies can be bought with better coverage, but premiums are increasing. If you are at least 40 and have access to a group policy, strongly consider enrollment. Most group policies are portable if you leave the employer. Also consider shopping your group coverage against a private policy.

Long-Term Disability

The younger you are, and the more education you have, then the more likely that your potential earnings capacity over your lifetime, known as your “human capital,” is your biggest financial asset. Protect it with LTD coverage.

We are all more likely to be disabled than to die. Most employers provide short-term disability for 90 days.

Long-term disability coverage, if offered, varies from 40% to 80% of compensation until age 65. Some employers provide the opportunity to purchase supplemental coverage; others don’t.

Finally, check whether you are covered for “own-occupation” or “any-occupation.”

Group Life Insurance

Many employers provide one year’s salary as a default for group life insurance, with the option to purchase more for the employee or the employee’s spouse or domestic partner. It’s usually a good deal.

If you didn’t sign up at your initial enrollment, you may need to submit to a paramedic exam if you request more coverage.

Employer Stock Options/Restricted Stock Purchases

The most common error among holders of options and restricted stock is concentration of investments, and future earnings, in that employer. This is usually because those employees own employer stock outright, plus options, plus more stock in a retirement plan through a company match. That’s a lot of eggs in one basket.

You may be highly satisfied with the company’s potential.  (So were Enron employees.) Stuff happens. Before making major moves, consult a CPA or CFP. Employer stock decisions can have major tax consequences.

These are just a few of several benefits options commonly found with larger employers. Walking through elections with your financial planner is a good idea at enrollment time. Make a special appointment to do so in advance of the holiday crunch. (Book a 90-minute planning appointment for a Financial Checkup direct at: https://go.oncehub.com/HollyDMeetings)

For questions about planning services, pick the best time for Holly to call you: https://go.oncehub.com/hollypthomas.

Continue ReadingFall Planning Reminders Before You Click “Renew”

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.

Continue ReadingHow To Make Worry Melt

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.”

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

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.

Continue ReadingUsing A Retirement Income Buckets Approach

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.”

Continue Reading3 Myths About Ideal Retirement: More Than Money at Stake

Florida’s 2023 Sales Tax Holidays

Florida’s 2023 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.

Because the legislature waited until May 5 to pass this year’s changes, the Department of Revenue has not yet published all of the changes. Below are a few of the immediate changes as we know it from the bill passed 5 days ago.

Disaster Preparedness: May 27 – June 9 and August 26 – September 8

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.

In 2023, a second week has been added in late August, 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 for 2023, consumable household goods like paper goods, soap, hand sanitizer, and trash bags.

Here is the link to the 2022 list of exempted disaster preparedness items: (as of post time the updated list of 2023 items had not yet been published)

https://revenuelaw.floridarevenue.com/LawLibraryDocuments/2020/05/TIP-123007_TIP_20A01-02_FINAL_RLL.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 until June 2024.

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

Also Big Deal – Appliances: July 1, 2022 – June 30, 2023

Thinking about replacing appliances? The tax exemption was scheduled to expire in June. With this exemption you can save the sales tax on Energy Star appliances. High-end appliances are not included, and the definition of “high-end” appears to be about $1500 ($3000 for refrigerators). $1500 x 7% = $105 in possible savings.

More detail on appliance exemptions here: https://floridarevenue.com/taxes/tips/Documents/TIP_22A01-05.pdf

Fun Events, Outdoor Supplies and Annual Passes: Usually the week of July 4

This sales tax holiday began during the pandemic in 2020. 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.

New for 2022: pool supplies and parts. Stay tuned for 2023 changes

The complete list for events and supplies during “Freedom Week” is here: https://floridarevenue.com/taxes/tips/Documents/TIP_22A01-04.pdf

Children’s Diapers, Clothing and Shoes: July 1, 2022 – June 30, 2023

This has been proposed but blocked in the past. Finally parents and guardians of young kids got a little relief in 2022.

But this is one of two holidays (the other being back-to-school) where the state outlines what is excluded, in addition to what is included. And, as I wrote in 2021, the inclusions and exclusions aren’t always easy to guess.

What constitutes “clothing” and “shoes” for this holiday for toddlers and babies? A few head-scratchers:

Snow ski boots – Yes; Fishing boots/waders – No

Snow ski suits – Yes; Skin diving suits – No

Hunting vests – Yes; Life jackets – No

Garden gloves – Yes; Bicycle gloves – No

Click for the complete list of diapers, clothing and shoes: https://floridarevenue.com/taxes/tips/Documents/TIP_22A01-06.pdf

Back-to-School: Usually late July – early August

See 2022’s complete back-to-school list: https://floridarevenue.com/taxes/tips/Documents/TIP_22A01-08.pdf

Labor Day/Skilled Workers

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.

Continue ReadingFlorida’s 2023 Sales Tax Holidays

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.​

Continue ReadingFinancial Anorexia? Stuck like Scrooge