Psychology of Money

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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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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Read more about the article Using A Retirement Income Buckets Approach

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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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

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 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.

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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-letter, schedule a call, or check out  The Mindful Money Mentality: How To Find Balance in Your Financial Future.​

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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

Your financial team might involve two members – someone who does the day-to-day management, plus a professional investment manager. Most professional investment managers do not provide billpaying and cash flow management. Professional investment managers may charge a fee that is a percentage of the amount they manager, or a flat fee. If a friend or family member is taking over the day-to-day, it’s important to pay that person a fair fee, too.

Or you can find a fiduciary who will cover it all. Trust companies are one example of fiduciaries who will handle all financial duties if they are named as trustee or co-trustee on your documents.

My choice for now is an independent fiduciary. She happens to have a law degree and serves in this capacity full-time. Her services won’t begin unless I’m alone and losing the ability to handle things myself. Hopefully that’s a very long time from now, if ever.

Team Member 4: How will I get transportation?

If you move to a community with many transportation alternatives, you might not need a separate team member for transportation. This is my goal – a walkable community with good public transportation alternatives. The EPA even publishes a National Walkability Index.

But if you are staying in a home or community without many alternatives to your own car, and you don’t want to use ridesharing with strangers like Uber or Lyft, you could assemble a network of friends and acquaintances on whom to rely. So together they will be your transportation team member.

How can I make my affairs easier to manage for the team?

Consolidate and simplify with one financial institution. It will be far easier for your financial surrogate, and the institution may even show you some extra appreciation. Some people are concerned that this is not being “diversified.” Nowadays, most institutions can hold a diversity of cash and investments all under the same roof. Just make sure to keep under the FDIC limit in any bank accounts.

Use the health apps provided by your healthcare providers to give easy access to your electronic medical records.

Have all of your digital passwords in one digital password manager. Most people don’t realize they have on average over 200 accounts with passwords. See “Document Your Digital Assets.”

How do I make it all legal?

Once you have decided who you would like to name as your surrogates, have either a durable power of attorney (DPOA) or living trust drafted by a board-certified estate planning attorney. (See “Do I need a trust?” for more on the topic of trusts.) The same attorney will often also draft your living will and healthcare power of attorney, too. For qualified attorney recommendations, check for your local chapter members of the National Association of Estate Planning Councils.

For more information on planning for aging, check out the e-book, How Does Your Money Flow? A Guide to Common Saving, Spending, and Sharing Decisions (Porchview Publishing, $3.99, available in e-reader-friendly formats). Or, join the list for our free award-winning monthly e-letter, “The View From the Porch.”

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

How To Let Go of Money Self-Doubt

blank stare or self-doubt emoji

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, you’ve taken the first step to reset your relationship with money.

What else can you do? Here are 4 suggestions:

1) Be aware of body messages. Self-doubt, sometimes manifesting as shame, has a feeling to it. It might be tightness in the chest, throat construction, shortness of breath, nausea or butterflies. Instead of trying to get rid of the feeling, breathe through it and name it: “I am feeling shame/doubt about a money issue.” Redirect your thoughts to positive truths: You are smart. You are capable. You know how to ask for help. This is something you can handle.

2) Ask yourself a simple question: “Is this true?”

For example if you have a belief that “I’ll never be good with money,” and you had to prove that in a court of law, what evidence do you have? Sometimes asking this question can be one way to help our brain separate facts from fictional beliefs.

3) Call someone supportive to talk about your feelings. (But make sure they truly are supportive.) If you’d like professional help specifically about money psychology, check out the Financial Therapy Association.

4) Become aware of those in your life who are too willing to reinforce doubt-based messages – family members, partners, friends, or even (especially) financial professionals. Instead, seek the company of those who say, “I am confident you can handle this,” and will walk alongside you, not put themselves ahead or above you.

After talking with a friend, Sondra decided to educate herself about money. She began to read books that explained things simply, and take online courses that took a simple approach. Patiently, she interviewed many financial professionals. The more she talked about money, the more confident she became. In the end, she found someone who prioritized her financial education and independence. She began to feel more secure, and gained the courage to consider a daring career move.

The Gift of Letting Go

Letting go of money self-doubt can be one of the greatest gifts we give ourselves to reach peace and security about our financial future.

For more on unspoken money messages see Chapters 2 and 3 of The Mindful Money Mentality: How to Find Balance in Your Financial Future, or this 5-minute video with mental health counselor Ken Donaldson on Money Shame.

Continue ReadingHow To Let Go of Money Self-Doubt

A CFP® Who Bounced Her IRS Check

A CFP® who bounced her IRS check. That would be me.

Yes, I wrote a bad check to the IRS.

Accidentally, of course, but still. Behind my name are the initials “CFP,” for Certified Financial Planner™, so supposedly I’m some kind of financial expert. And yet, I did a very un-expert thing that even most financial un-experts do not do.

Brain Fog

The bad check was written in April 2014. The tax year in question was 2013, which was the same year I got an unexpected biopsy (which came out clean after several weeks), an unexpected audit by state regulators (which came out clean after several weeks), and an unexpected divorce (which came out after several weeks and much of it wasn’t clean). All of these – the biopsy, the audit, and the unexpected divorce – happened between August and November.

If you’ve ever been through one or more of the above, perhaps you can relate to the feeling of going through the rollercoaster of life, trying to act like a rational person, but getting hijacked by emotions. Wishing you could concentrate better, focus like you used to, but the brain just won’t cooperate. I wasn’t aware I was in that much of a fog. I thought I was keeping it all together pretty well, considering.

Until the IRS notice showed up.

“Check Payment Not Accepted By Bank: The bank did not accept the enclosed check for the following reason: INSUFFICIENT FUNDS. Please return the bottom portion of this form with a certified check…The PENALTY amount is…The current Interest Charge is...”

Shock and Shame

“Wut?” I thought.

My first reaction was to get mad at the bank. It only took a few minutes, though, to research there was no mistake. Shock, embarrassment, humiliation, shame. My jaw and knees dropped to the floor simultaneously.

I bounced a check to the IRS?!?

That’s when it dawned on me that the events of 2013 were still affecting me or I wouldn’t have written a check on one of my new post-divorce checking accounts without putting any money in it first.

So, the next paragraph caught my eye.

“You can request penalty relief by explaining why you believed the bank would accept the Check and by providing any supporting evidence.”

My backbone straightened up. Although it was not the bank’s error, I needed to plead my case to keep my sanity.

Making the Case for Penalty Relief

It turns out the IRS will seriously consider applications for relief, although that doesn’t mean they will blanketly grant them.

First, I immediately deposited more money in the account and had the cashier’s check, including the penalty and interest, sent.

Then, I sat down to write to the human being who would be reading my request. I crossed my fingers that it would be a 40- or 50-something who had been jilted in a 20+ year marriage. There are quite a few of us out there, and maybe even a few who work for the IRS. I fell on my sword, admitting the mistake, and explaining temporary loss of rational thinking.

The bottom line is that I got a partial waiver.

The main point, however, is that I refused to let the IRS add to my stress. The notice was a wake-up call that I was under more stress than I knew, and I made a conscious decision not to add to it.

Correspondending with the IRS

My letter was dated May 22, 2014:

“I am writing for penalty relief….the bank did not make a mistake. I made the mistake. At the end of 2013 I was suddenly divorced after a 26 year marriage. Perhaps if the person reading this has ever been through such an experience, you might understand that in getting situated with my new life, including my finances, I have made a few absent-minded mistakes I would not normally make. In this case I forgot to fund my new checking account.

As requested by your notice of April 29, 2014, I have sent a cashier’s check for the entire amount due including penalties and interest.. I hope the IRS will examine my history of prompt payment for 30+ years and consider this in your determination for relief.”

On May 26, 2014 I received a notice which said:

“You have unpaid taxes for 2013” which showed the amount due, plus the following:

“Failure to pay proper estimated tax penalty – $58.00

Dishonored payment penalty – $65.54

Failure-to-pay penalty – $32.19

Interest charges – $10.87“

Because they had cashed my cashier’s check by then, I decided to wait. Maybe they hadn’t read my letter yet.

On June 12, 2014:

“Thank you for your inquiry dated May 22. We have accepted your explanation of why the bank didn’t accept your check…and we removed the penalty.”

Whew, ok. Sigh of relief. Will they actually refund the penalties, or what? Again I decided to wait.

On July 2, 2014:

“We received one of the following items from you on May 27, 2014…We’re working on your account…we need an additional 45 days to let you know what action we are taking… You don’t need to take any further action now…“

Wut? What did this mean? I thought I was ok, and now they are thinking about it? Again, because I excel at going down worry rabbit holes, I put it aside.

On July 18, 2014:

“Thank you for your recent letter dated May 22 that asked us to remove the penalty for failure to pay…We are pleased to inform you that your request to remove the penalty.. has been granted. However, this action has been taken based solely on the fact that you have a good history of timely filing and timely paying. This type of penalty removal is a one-time consideration….”

The final notice, on August 4

“Changes to your 2013 Form 1040: Decrease in failure-to-pay penalty. You are due a refund of $32.19.”

So, I didn’t get all the other fees/penalties waived. No sympathy for the divorce part, but appreciation for the 30+ years of paying on time.

Well, by then it didn’t matter anymore. I had advocated for myself and received a compromise. It wasn’t worth another minute of worry or effort. Heck, I was just glad I hadn’t bounced checks to anyone else that year.

The Bottom Line

Nearly all of us will have a time in our lives when our brains get discombobulated – divorce, death, health issue, job loss, new baby, relocating, and/or retirement. When we mess up, it’s important to let our minds rest, go easy on ourselves, and be strong enough to ask for help and forgiveness. Even financial “experts” make head-slapping mistakes.

And sometimes, even the IRS respects that.

For more mistakes I made so you don’t have to, subscribe to the award-winning monthly e-letter, “The View from the Porch,” or see the book, The Mindful Money Mentality: How to Find Balance in your Financial Future.

Continue ReadingA CFP® Who Bounced Her IRS Check

Honey, Ain’t Money Funny? 4 Conversation Ideas

Couples and money honey ain't money funny

Honey, ain’t money funny? Sometimes, not so much.

As Valentine’s Day came and went, a couple struggled with questions about consumerism, the meaning behind gifts, and how money affected their relationship. Whether it was financial inequality, overspending, or miserliness (a la Scrooge), humor was hard to find at a time when they were surrounded by hearts-and-happiness messages.

What can couples do to have a better relationship with money? Following are 4 ideas.

As you try each one, it’s a good idea to plan a special fun reward or celebration at the end. The more you practice at these, the easier the conversations will get. You may find your differences become predictable, manageable, and even laughable.

Idea 1: Monthly Money Date

For monthly money dates, quickies are best. These are for checking the dashboard indicators in your household finances. Agree to limit the conversations to about 15 minutes.

Build in fun and humor by focusing on your progress, positive wins, and gratitude for what you’ve got so far. For big ideas and thorny issues, make a separate date to discuss those using one of the following 3 formats. Then move on to the “real” date part!

A 2 1/2 minute video on 3-Part Money Dates can be found here: https://www.youtube.com/watch?v=7TWFKfF0vRQ.

Idea 2: 48-Hour Relationship Conference

No you don’t have to talk about money for 2 days. What a buzzkill!

Instead, in a Relationship Conference, each partner takes a turn being a pure listener to the other partner’s issues. Being the listener in a relationship conference means saying nothing while your partner talks. You can decide on the timeframe, but make it somewhere between 15 and 45 minutes. You can take notes.

After the first partner shares, take a break from anything money-related for 24 to 48 hours. Allow thoughts and feelings to arise to reflect on what you heard. Then reverse roles. This is the first partner’s turn to simply listen. Then wait again for whatever timeframe you decide – 24 to 48 hours.

Finally, take turns to summarize what feelings and issues came up. Make sure you give space for listening to each partner’s perspective, checking in to make sure you heard them well.

Remember to have an activity planned in advance to celebrate your ability to tackle tough stuff.

Idea 3: Take Turns Active Listening

Another option is to take turns all in one setting being the active listener. Active listening means being fully present to your partner’s issues and emotions without bringing up your own responses or emotions. (Tip: This is really hard for most people who have never done it before.)

You do this by

  1. repeating back what you heard,
  2. checking in to make sure you got it all (“Did I get it all?”), and
  3. asking to hear more about the emotions underlying each statement (“You said you felt excluded. Tell me more about that.”) Once your partner agrees they feel completely heard and understood, then it’s your turn.
  4. Again, remember to have something planned in advance to celebrate and give yourselves credit for your progress with active listening about money.

Idea 4: Ask For PracticeHelp

Are there some money issues in your relationship that seem too difficult to talk about on your own?

Sometimes each of these exercises work best if practiced with a counselor first. And that’s ok. Sometimes we need training wheels before we’re ready to ride the conversation bicycle on our own. Give yourselves the gift of an enhanced relationship by getting some professional tips on how to have a healthy conversation about money.

Finally Feel Free

Remember when you learned to let go of the bike’s handlebars? Imagine feeling that free in your relationship with money and each other. One’s Scrooge to the other’s spending might actually be something you learn to laugh about for years to come.

You know you’ve arrived when you find yourselves saying, “Honey, ain’t money funny?”

For more tips on the psychology of money, subscribe to our award-winning monthly e-letter, “The View From the Porch,” at https://bit.ly/3t2uwfn.

Or, check out Holly’s book: The Mindful Money Mentality: How To Find Balance in Your Financial Future.

Continue ReadingHoney, Ain’t Money Funny? 4 Conversation Ideas