Psychology of Money

Before You Click Renew: Fall Enrollment Reminders

Before you click Renew - Fall Enrollment Reminders. 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 for 2022 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…

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Death By A Thousand Indecisions

“Then indecision brings its own delays, And days are lost lamenting over lost days. Are you in earnest? Seize this very minute; What you can do, or dream you can do, begin it; Boldness has genius, power and magic in it." Johann Wolfgang von Goethe, Faust Death by a thousand indecisions. As Goethe asked, are you “in earnest”? When it comes to decisionmaking, sometimes it's quick: Ready-Fire-Aim. With other decisions, we take our sweet time. How much is indecision costing you? Like death from a thousand cuts, indecisions can slowly deplete our energy, leaving little behind for ourselves or others. Decisions are Draining That's because decisions are draining. Neuropsychologists like Dr. Moira Somers tell us that decisionmaking depletes our mental energy. According to Dr. Somers, every day we wake up with a finite amount of mental energy. As the day goes by, the more decisions we make, the less energy we have. And the bigger they are, the more energy they use. Think about life's transitions. One reason transition times, good or sad, are so stressful and exhausting – a move, a death, retirement, a child, a divorce – is the many seemingly small, plus a few momentous, decisions. Further, lack of sleep, hunger, grief or even excitement can start the whole day off depleted. Then, every indecision we "make" is a decision. In fact, a pattern of indecisions can take physical form, and stress us out every time we see it. What does not-deciding look like? A pile of unfiled papers. Empty boxes stacked in the garage. The “miscellaneous drawer” in the kitchen. The “junk room." Scattered financial accounts in too many places. Unfinished projects. With a finite amount of mental energy at hand, who can blame any of us for having some kind of to-be-decided pile/stack/assortment hanging over us all the time? Dealing with Indecision What to do about it? Make big decisions in the morning, before depletion sets in. Automate it: Use a system to take care of small decisions automaticallyEliminate it: Ask often, "How important is it?"Date-Activate it: Calendar the decision to deal with and be doneDelegate it: Ask for help Automate It An automation example I love and have yet to implement is the decision of what to wear. Michael Kitces, a noted financial expert, famously has a closet full of the same blue shirts, pants, and shoes. One less decision each day for a busy guy. Another example is cooking. Thanks to Cassy Joy Garcia's book, Cook Once: Eat All Week, our household now pre-preps ingredients on Sunday. Then, each work night is 15-30 minutes to assemble and cook the ingredients with pre-planned healthy recipes. The meals are delicious, but the best part is not having to make the decision of what's for dinner. Hallelujah. Eliminate It In the summer of 2021 I began thinking about a new car. My financial plan called for me to sell my would-be 7 year old car in January 2022 and buy another one. I couldn't decide what…

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Money: Values, Behaviors, Habits and Change

Money values, behaviors, habits, and change: Perhaps there is something about middle age, or a pandemic, that creates the urge to examine values, behaviors, habits, and change. At my 25th college reunion, I had breakfast with a college friend who worked for our alma mater, Davidson College. She had attended lots of reunions. I asked about her observations of reunion attendees. She said something like, “At the 10-year mark, everyone’s comparing notes – who has how many kids, who has graduate degrees, what they did for vacations, what kind of home they live in, etc." In other words, their money values tended to be focused on status. "By the 25th, nearly everyone has experienced some kind of life event, and they are a lot more mellow. The other stuff must not seem as important.” So, values shift as life unfolds. Values drive behaviors, which become habits. When we begin to question the behaviors and habits, we become ready for change. And that's how growth happens. Eventually this process can work its way into finances. Beginning to Examine Behaviors - Eating Habits My own path to behavior change didn't start with money. It started with eating. One of my first experiences with behavior change was through Weight Watchers. I was 35 years old, 5'3" and 15 pounds overweight. I decided that I valued being healthy more than enjoying unhealthy food. I lost 20 pounds and gained 5 back, but kept it off. How did I do it? Tracking and accountability. Whenever my clothes got tight, I would write down everything I ate. This helped me track and change my eating behaviors permanently. Ironically, tracking and accountability had come naturally to me with money. I wrote my first budget at age 9, and had tracked my money ever since. This made me a good saver, but later I learned it didn't necessarily mean I had a good relationship with money. Conversational Habits Next I moved to healthier conversation habits. The values of listening well and feeling heard became more important. I learned that “listening” does not mean, “Wait until the other person is finished talking so I can say what I want to say.” Listening means to suspend all noise and chatter in my head; and reflect on what I am hearing. To eliminate the noise and chatter, I acquired a rule: Anything that I want to say while someone else is talking, I am not allowed to say. Like any other habit change, it took conscious effort at first. When I think of something I want to say, I let it go, stay present, and listen. I found that, if I truly wanted to understand someone then what I wanted to say would have gotten in the way of that. My conversational habits, and relationships, improved. Money Values, Behavior, Habits and Change My money habits needed improvement too. I used to overtrack my spending and worry unnecessarily about it. This led to a habit of denying myself some things that would…

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Estate Planning, Opioids and Addiction

Estate planning, opioids and addiction: Addiction is one of those common issues everyone thinks is uncommon. But if it was talked about more, more people would realize addiction is a widespread illness, affecting many families. Before Covid-19, the opioid crisis was one of the worst epidemics to affect the U.S. Like Covid-19, there were outbreaks and hotspots. Unlike Covid-19, the opioid epidemic was brought about by unscrupulous doctors and pharmaceutical companies. Below is an excerpt from a guest blog post by Mike Mastry, Esq. of Mastry Law in St. Petersburg, Florida. In it, he details how opioids and addiction are affecting families and attorneys as they document their estate planning. Mike Mastry is an estate planning attorney located in St. Petersburg, Florida. Mike’s goal is to simplify the process of estate planning by crafting individualized plans that provide each client with peace of mind. He does this by maintaining a client centered practice that focuses on creating comprehensive estate plans that are tailored to fit each client’s unique circumstances. Mike's ideas are relevant for planning involving any kind of addiction - the kinds that are easier to see, like drugs and alcohol, as well as the kinds that aren't - like gambling, sex, or porn. All addictions, seen or unseen, hurt the addict and the people who love them. Having a good estate plan in place can't take away the hurt, but it can hedge against making it worse. Opioid Epidemic Now Impacting Estate Planning, by Mike Mastry, Esq. "Estate planning often serves as a reflection of a family's experiences. In this instance, estate planning is used to protect the family and individuals with substance abuse problems. Estate planning attorneys hear all kinds of stories about bizarre family dynamics and difficult relatives. However, the national opioid epidemic is relatively new to the estate planning world. Sadly, it is likely here to stay. The Pittsburgh Tribune-Review's recent article, "Pittsburgh attorney sets up 'opioid trusts' for beneficiaries with addiction issues," https://archive.triblive.com/local/regional/pittsburgh-attorney-sets-up-opioid-trusts-for-beneficiaries-with-addiction-issues/ reports that the American Family Survey, commissioned annually by the Deseret News, found that 12% of families in 2017 said they had an opioid-addicted relative. Opioid overdoses nationally were the leading cause of death for people younger than 50, according to the Centers for Disease Control and Prevention in 2017. Attorneys Getting Creative The opioid epidemic has led some attorneys to get creative and establish what are being called "opioid trusts." Some folks don't want to leave anything outright to a child with a dependency issue, because of what can happen to the money. Estate planning attorneys are regularly asked to create trusts for beneficiaries with intellectual disabilities, who are entitled to public-health benefits through Social Security or Medicaid and receive supplemental trust payments that add to those. However, the so-called opioid trust is somewhat different. Parents may be paying for the child's basic support needs. However, is that money going to buy drugs? If so, have they cut him or her off completely? With an opioid trust, there's no support to…

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Read more about the article The Ideal Retirement Plan: It’s About More Than Money

The Ideal Retirement Plan: It’s About More Than Money

The best retirement plans start with a plan for a fulfilling life first, then match up the plan with money decisions. That's why good planners ask, what's the money for? For most, it's not to support boredom, stagnation and decline. If you define what an ideal retirement means first for you, then your retirement plan and your retirement life have far better chances of success.

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The ABCs of Behavioral Economics

Behavioral economics, with its long lexicon of “biases,” has enjoyed great popularity for a couple of decades. However, it's also one area where financial planning students feel the least prepared. Experienced advisors, too, find this relatively new field fascinating, but yearn for practical ways to apply it, especially amid the market volatility of the past couple of years.

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Inflation Relief: Florida 2022 Sales Tax Holidays

Inflation relief: Florida 2022 Sales Tax Holidays. In inflationary times, every bit of savings can help. 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 this year, the legislature passed several more holidays which begin this summer. Some of them last a week, while others last up to 2 years. For a major purchase you might be considering, it pays to know the timetables. Disaster Preparedness: May 28 - June 10, 2022 This has been an annual sales tax holiday 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 May 28 to stock up. Of note, the holiday includes all kinds of pet provisions - pet food, pet kennels, pet beds, leashes, and even pet waste disposal bags. Here is the link to the 2022 list of exempted disaster preparedness items: 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 for 2 years starting July 1. So if you are planning a major home improvement, talk to your contractor about placing the order after June 30. 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? Wait until July 1 and 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 Children's Books: May 14 - August 14, 2022 Sales tax on any book written for children under 12 is waived all summer. One of my personal favorites: The Four Money Bears by Mac Gardner. This website also has a fun financial literacy game for kids called "Berryville." Fun Events, Outdoor Supplies and Annual Passes: July 1 - July 7, 2022 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. 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…

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Why am I getting a Tax Form 5498 in May?

Why am I getting a tax Form 5498 in May?You may be receiving a Form 5498 in May If you have a Health Savings Account, a Roth IRA, or other IRA.  It might seem like you just got done receiving and compiling all your tax forms and now your financial institution sends another? Hello, isn’t that a little late? Or were they lazy because of the extended deadline this year? Do you have to call your accountant or financial planner, again? Hold the calls. You may remember reporting to your accountant (or TurboTax) that you made some contributions to these accounts. Perhaps you made them last year, or perhaps you made them before the April 18 deadline and had them “count” for 2021. What's a Form 5498 for? One purpose of the Form 5498 is for the financial institution (called a “custodian”) to verify to the IRS that you did indeed make the contribution that you claim you did on your tax return. It also tells the IRS what your Required Minimum Distribution will be for the current year, if you are over 72. Since everyone usually has until the tax filing deadline to make contributions, the IRS usually gives custodians until May 31 to send Form 5498. Check Form 5498 For Errors Before you file the 5498 away, make sure it’s correct. Mistakes are common. In 2018, my husband and I both had erroneous 5498’s for our Health Savings Accounts. I made my 2017 contribution in February 2018 and he made his on an ongoing quarterly basis. Mine showed $0 contributions for 2017 and his showed 2 years’ worth. So we called the bank where they were held and got corrected ones sent to the IRS for 2018. If your 5498 differs from what you reported on your 1040, at some point it could get noticed. One fantastic sunny day in the future, as you skip to your mailbox, you may find inside a skinny white envelope with “Internal Revenue Service” in the return address. Fantastic day ruined. More than likely, all the letter will say is, “Hey, we noticed your 5498 doesn’t match your 1040. What gives?” But still. Save yourself the trouble of having to answer (or pay your accountant to answer for you) and do a quick check now. It only takes a few minutes. Does your contribution amount for 2021 look correct? Did you take any 2021 HSA or IRA distributions, and if so, do those look correct? (If not, make sure the distributions say $0.) Is your SSN correct? How about your name, including your middle initial? If anything looks amiss, contact your custodian to get a corrected 5498 issued ASAP. One More Tax Task By this time of year, it’s normal to feel sick of tax stuff. The last thing you may want to do is deal with another form, especially an erroneous one. If you don’t want the bother, at least forward it to your financial or tax professional to check it…

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Guest Rap Song Post: It Won’t Go To Zero

Guest rap song post: It Won't Go To Zero. In early 2010, Ken Robinson, JD and CERTIFIED FINANCIAL PLANNER in Ohio, produced a funny rap video with a serious educational message: "It Won't Go to Zero." Whenever markets start back on their once-in-a-while roller coaster ride, it's a good time to resurrect Ken's lyrics and rap-star antics. Thank you Ken! In 2007, the stock market began falling and didn't hit bottom until 2009. Although it recovered throughout 2009 and 2010, it took several months to 2 years for the investing public to actually believe it. Who could blame them after the traumatic crash - a 50% drop in the S&P 500 - in the fall of 2008? Ken's video in early 2010 occurred during a recovery many didn't yet recognize. During those couple of years, people and pundits asked, "Is this time different?" "Will it ever come back?" "Is this the New Normal?" "What if it goes to zero?" In times like these, it is usually confusing and difficult to separate reality-based facts from emotional actions. Get to the Chorus The chorus of Ken's song goes, "The markets are resilient, and although they may bend, they won't break, the stock downturn will come to an end. I can't say what might finally make things turn around, but eventually we will get back on solid ground. I'm not here to be some investment hero, I'm just letting you know; the markets won't go to zero." The lyrics are just as relevant today, in a different decade, under a different New Normal. I wouldn't change a thing he's saying. In fact, yesterday I had nearly this exact conversation. I just wish I'd had the talent to say it in a rap song. Check it out: https://www.youtube.com/watch?v=C3GtxtWSZxE Choose Composure Ken's message is to keep our composure. After a recent NBA playoff win over the Memphis Grizzlies, Steph Curry of the Golden State Warriors was asked by the reporter, "You were down 13 points. How did your team come back to win?" His answer: "Composure." Fortunately for the Warriors they did not have pundits on the sidelines screaming, "You're finished!" "A comeback is impossible!" "This time it's different!" Unfortunately for the investing public, scary messages are way too available on nearly any media source we choose. And the primitive part of our brains is hard-wired to look for danger, whether or not it might truly exist. Choose media messages wisely. When things get scary, no matter what you are hearing and reading, choose composure. For more on the ways our brains mix up our money messages, see chapters 6 and 7 of The Mindful Money Mentality: How to Find Balance in Your Financial Future, or any of the books on our Recommendations page.

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