“That which nourishes me destroys me.” –Christopher Marlowe

Turkey, stuffing, Christmas cookies, things made out of pumpkin-so many good things to eat this time of year. How do your spending habits on food stack up to the average American? Let’s take a look.

Food accounts for 12.5%, or just over $7,000 in the average budget according to the Bureau of Labor Statistics.

And with so many good things to eat, and some many great places to do that eating, an incredible thing happened since that most recent survey from the Bureau of Labor Statistics; Americans began spending more money at restaurants and bars than they did on groceries. How you react to that information is probably telling regarding your eating behaviors.

And how does this fit into the 50 20 30 budget model? This is trickier than you might think because technically, food falls into the Needs category. But, going out to dinner at your favorite restaurant bleeds over into the Wants section. And when I say “bleeds over,” I mean it moves completely over to the Wants section. Therefore, for many Americans, the money they are spending on food has moved from the 50% Needs category, to the 30% Wants category, and without knowing the details of their personal budget, I’m going to assume it wrecks it.

Going out to eat is one of my favorite things to do, as it is for so many of us. It’s also a quick and easy way to wreak havoc on our budgets. Be mindful and strong this Holiday Season!


Americans have always had a love affair with cars. But are they messing up our finances? Are you paying too much for your car (or even for multiple cars)?

Here are some stats for perspective:

  • 1 percent of total petroleum consumption is by people in the United States
  • In 1960, Americans owned more than 61 million passenger cars—about one car for every three people.  In 2008, Americans owned 137 million passenger cars—a little less than one car for every two people
  • The average new car cost in 2017 was $31,400 after incentives

Experian Automotive 2017 reports show:

  • 86% of new cars were bought with the help of financing, higher than in previous years
  • The average car loan was $30,000, the highest since Experian began tracking the data
  • The average length for a new-car loan was 68 months—or five and a half years—and some loans are for as long as seven years.
  • Auto leases are becoming more popular, accounting for more than 30% of new-car transactions in the first quarter

The annual cost to own and operate a vehicle in the United States in 2016 was $8,558 according to AAA’s 2016 Your Driving Costs  study. Here’s how that breaks down:

Fuel $1267.50
Insurance $1,222
Depreciation $3,759
Maintenance $792
License, Registration, Taxes $687
Finance Charges $683
Tires $150

In 2015, Americans spent $1,184 billion on transportation, or 9.6% of all personal consumption expenditures per household.

Bankrate provides a tool to encourage better car buying habits. Remember the 20/4/10 rule:

  • Aim to put down at least 20% of the car’s price in cash
  • Take a loan for no more than four years
  • Keep the cost of transportation to no more than 10% of after tax household income.

Care for an example or two to see this in action?

  • Assuming an annual income of $75,000 and income taxes of $11,925 (15.9%), you should spend no more than $6,307 (or 10%) per year on a car.
  • Assuming an annual income of $150,000 and income taxes of $28,200 (18.8%), you should spend no more than $12,180 (or 10%) per year on a car.

*Find a table to figure out your tax bracket here.*

Add up your auto loan, car insurance, monthly gas expense and any other auto related expenses. How are you doing? Is your auto expense 10% of your after-tax income? More? Less?


In 2014, the U.S. government allocated over $32 billion for economic assistance to other countries. In 2016, Americans gave over $389 billion to charitable causes, a 4.2% increase from 2015. Corporate giving was over $18 billion, a 3.5% increase and Foundation giving was over $58 billion, an increase of 3.5% as well.

It’s difficult to pinpoint the exact amount raised for disaster relief over the past several months, but estimates suggest it’s over $150,000,000.


Bottom line: Americans give.


If you’re like me, you want to help, but don’t want to give to an organization that’s inefficient, ineffective, or worst case, fraudulent. For example, after the 2010 earthquake in Haiti, NPR reported the Red Cross spent over a quarter of the money raised– $125 Million – on internal expenses. So, what can you do to have the greatest impact, while at the same time vet the organization you’re donating to?


Consider these four things according to the New York Times:


  • Sending money is almost always best—Transporting, storing and sorting goods can divert resources from more pressing work.
  • Pick the issue with your heart and the organization with your head.
  • Do your research before you give—organizations like Charity Navigator can help you to vet charitable organizations.
  • Follow up because recovery takes a long time—if you’re donating to disaster relief, keep in mind that donations surge in the immediate aftermath, but recovery takes place over a much longer timeline.


What should you know about charitable donations and your taxes?


  • Check that the organization you donate to is a tax-exempt 501(c)(3) organization by using the IRS’sonline tool.
  • Charitable contributions of money or property can be deducted if you do not receive anything in return—otherwise, the value of what was received must be subtracted from the contribution for deduction purposes.
    • Example: a $50 cash donation to a tax-exempt organization would qualify for a full tax deduction if you receive nothing in return.
    • Example: if you purchase a ticket to a charity’s gala for $250 and the value of the meal and entertainment is worth $100, then you can only deduct $150.
  • Donations of material goods can be deducted for the fair market value or the price the property would sell at in the open market on the date of the contribution.
  • Use the Charity Navigator giving calculator for more scenarios

Stop Giving Yourself So Much Credit

There are days I feel like a broken record (and you probably feel the same way) but I’ll say it again: our goal should be to live as debt free as possible.

Recently, I read about how American credit card debt has just gone over $1,000,000,000,000 (one trillion dollars) for the first time since 2008.

This article had a bothersome statement:

With consumers feeling better about the economy, the amount of money borrowed has reached its highest level since the Great Recession.

 It implies that when someone feels good, they buy things they can’t truly afford. It’s not that Americans are relying on credit because of emergencies, it’s because times are good and we feel good.

 Maybe this applies to you, maybe it doesn’t. But, the way you feel should not dictate your use of credit. In fact, you should leave feelings and emotions out of every financial/buying decision such as purchasing a home, selling a stock, or even buying clothes.

Borrowing is what led to the 2008 collapse, an event that caused many of us to “tighten our belts” and reduce spending and expenses. It appears that enough time has passed and we’ve forgotten the feelings of uncertainly and angst that the financial crisis brought. Don’t fall victim to overspending.

One more thing: it’s time for the adults in the room to do their job and stop letting their kids take on astronomical amounts of student loan debt. That number just crossed over $1.4 trillion with an average balance of just under $35,000.

Is it possible to attend college and leave debt free? Of course it is: ASU costs $10,792 a year. Minimum wage in Arizona is currently $10 an hour. Working part time, 20 hours a week, for 50 weeks earns your kid $10,000 a year.


Not sure if you’ve heard or not, but there are allegations that Russia hacked the last Presidential election. Recently, a friend of mine had her identity hacked—or as more commonly stated: stolen. The thief filed her taxes and applied for a home mortgage and credit cards. This was a scary, unsettling and cumbersome problem to fix.


In 2016, identity theft and fraud cost Americans more than $16 billion, according to CNBC. That’s a 16% increase from 2015 and a problem that affected more than 15.4 million people.


Cybercrime is probably not news to you. It’s important to recognize the potential impact on you and your family. I encourage everyone to evaluate the available protections, including purchasing cyber “insurance” services to cover the risk. Comprehensive coverage for a family will cost between $20 and $30 per month. These insurance services focus on five primary areas:


  • Daily 3-Bureau Credit Reports
  • Credit-Monitoring Tools and Services
  • Customer Alerts
  • Recovery Assistance
  • Customer Service


Remember, just as health insurance does not prevent you from becoming sick or life insurance does not prevent you from death, cyber insurance does not prevent your identity from being stolen. What it will do is monitor your credit profile and help minimize damage when a breach occurs by quickly notifying you and providing resources for reversing any damage. Most options provide up to $1 million coverage for financial liabilities including:


  • Lawyers and experts needed to help resolve identify theft cases
  • Reimbursement of money stolen due to ID theft
  • Reimbursement of costs for documents, travel, and lost wages

To be proactive in preventing ID theft from happening, follow these steps:

  • Access financial information only on a private Internet connection and never with a mobile device
  • Don’t email private information like birth dates, Social Security numbers or credit card information
  • Avoid social media posts with personal information that could take a hacker inside a family’s home or divulge whereabouts on vacation
  • Establish passwords (the most common security breach) no one can guess or decode by creating a combination of letters, numbers, and symbols

When it comes to protecting yourself and your family from cyber threats, an ounce of prevention is worth a pound of cure. Just ask my friend.

Here’s a great additional resource to check out!

Online Identity Theft: What Is It and How to Protect Yourself

Delayed Gratification

Hopefully everyone had a great 4th of July holiday. When I was looking back at the specific events of our Nation’s independence, I forgot just how long the war lasted. Although independence from England was declared on July 4th, 1776, it took until September 3rd, 1783 to finally win the Revolutionary War and be recognized as a sovereign nation. We had to wait over seven years to officially recognize our freedom—but it was well worth the wait!


There’s value to holding off and waiting. For example, you may not have had the experience of rewinding or fast-forwarding a tape cassette (a technology to be celebrated!), but when you finally got to the spot you wanted to listen to, the sound was that much sweeter! In our one-click world where you can download your favorite tunes in an instant or most anything can arrive at our door within 24 hours, has delayed gratification gone out of style?


In the 60’s, the somewhat famous marshmallow experiment was held with kids as the test subjects. Here’s the gist of it: the scientist would give kids one marshmallow, tell them they could eat it immediately…or wait and get a second marshmallow. The kid would then be left alone for 15 minutes and, as you would guess, some ate the marshmallow immediately while others were able to hold off. The interesting part of the experiment came later in life when the researchers found that the kids who were able to hold off had fewer behavioral problems, lower stress, stronger friendships and higher SAT scores. A great lesson for the parents out there, but there’s also value for us grownups.


Often times, succumbing to instant gratification results in buying things on credit or installment instead of saving up and paying cash. While not a universal truth, I believe most of us would eventually like to be debt free.


Personally, I was terrible at this (meaning I bought things with credit cards and never waited) up until I met my wife. I’m happy to say we’ve done a pretty good job over the past 10 years of saving up for larger purchases.


If you’re already great at this, excellent! If you could use a little improvement, I want to challenge you the next time you’re thinking about making a purchase of greater than $1,000; instead of using your credit card or some form of installment payments, save up and pay with cash.


Doing so will get you closer to living debt free and, like our Nation’s Independence, an independent future is worth the wait.


There was a time when many Americans thought they’d work for the same company for 30 years, have a party at age 65, at which they’d be given a gold watch and retire to a life of leisure.  However, fewer and fewer Americans are achieving that milestone and many have to remain in the workforce.  In fact, for one group, priorities and plans are intentionally changing.

FOMO because YOLO.  In the interest of full disclosure, this Generation Xer had to Google what those acronyms meant.  To potentially save you the trouble, they stand for “fear of missing out” and “you only live once.”

Many Millennials have changed their savings habits, according to a recent survey, that suggests this generation saves upwards of 19% of their annual income.  They’re shifting from traditional long-term retirement saving, though, to a short-term approach.

Why defer gratification until age 70, at which point you may or may not be able to enjoy it? According to the report, “the majority [of millennials] say they’re more likely to spend money on travel (81 percent), dining (65 percent) and fitness (55 percent) than save for their financial future.”

The priority for this group is about living their desired lifestyle both now and during retirement years.  They want to do what they want and buy what they want now. This means the majority of Millennials intend to work during those retirement years.

One size doesn’t fit all and the traditional prescription for retirement planning doesn’t work for everyone. There are many options and variables to consider when saving money like time horizon, liquidity and risk. But those are just the details.

What’s your plan?  What are your wants and desires for the next five, 10 and 40 years?  Start with those questions. Once you’ve worked those out, there’s plenty of help and resources available to figure out the details.

You only live once, and nobody likes missing out.

True Values


What if there were an advertising executive who worked 24 hours a day, 7 days a week that knew everything about you and your friends, as well as your likes and dislikes? Imagine if the only job this executive had was to influence, persuade and, if necessary, manipulate you. What if this executive had a core set of values it wanted to impose on you, as well and products it wanted you to buy or candidates it wanted you to vote for? If you had your own clear and well thought out values, no big deal. This advertising executive would have a hard time making you alienate your core values. But what if you didn’t? What if your values weren’t crystal clear? In that case, would you be at risk of that advertising executive’s values becoming your own?

While this may be overly dramatic, the average American spends nearly one hour a day on Facebook. That’s more than any other leisure activity with the exception of watching TV. For every second of that hour on Facebook, their infamous Algorithm is hard at work, determining what content and advertisements to show on your timeline. The fictitious advertising executive mentioned above is Facebook’s code. Ignoring the influence it has on us is irresponsible.

To help you reaffirm and or solidify your true values, please complete the exercise below. Whether you’ve done an exercise like this before or not, it’s always valuable to reflect on what we truly believe.

Step one: What are my True Values? Here are some common examples.

         

Authenticity  Achievement  Adventure  Authority  Autonomy  Balance  Beauty  Boldness  Compassion  Challenge 

Citizenship  Community  Competency  Contribution  Creativity  Curiosity  Determination  Fairness  Faith  Fame 

Friendships  Fun  Growth  Happiness  Honesty  Humor  Influence Inner HarmonyJustice Kindness

  

Knowledge  Leadership  Learning  Love  Loyalty  Meaningful  Work Openness Optimism Peace

   

Pleasure  Poise  Popularity  Recognition  Religion  Reputation  Respect  Responsibility  Security Self-Respect

Service Spirituality Stability Success
Status Trustworthiness Wealth Wisdom

Why are the values I selected most important to me? How do they make me feel?

Step two: How am I living my True Values? Have I been successful at embodying them? Think about examples of how you’ve lived these values.

Step three: How can I do better at living my True Values? Are there areas I’m struggling with or coming up short? What can I do on a daily basis to fully live my True Values?

I encourage you to share this exercise with your friends and loved ones. If you have children, talk with them about it as well. As Alexander Hamilton famously said, “If you don’t stand for something, you will fall for anything.”

Mortgaging Our Futures

A recent article listed Arizona as the #1 housing market in the nation.   As a state and as a country, we’ve been on roller coaster over the past decade. The article got me thinking about how retirees and pre-retirees are handling the real estate market.

The answer is: not well.


A recent report spotlights the mortgage debt challenges faced by a growing number of older Americans:

  • Exponentially more seniors have mortgages.
  • Median mortgage debt for seniors increased by 82% from 2001 to 2011.
  • Available housing is less affordable.
  • Senior delinquency and foreclosure rates increased fivexs after financial crisis.


And then I remembered hearing about how Americans used to have parties after making their final mortgage payment to the bank. Wikipedia says these parties are now a forgotten practice and highlights the reasons behind the disappearance of them.   Interestingly, the article cautions against holding these parties because doing so would be tacky.  It’s troubling to think that such a party would be in poor taste and that having one today would be considered bragging.


I think the opposite. I think paying off your home mortgage is absolutely a cause for celebration.


Dave Ramsey has the same idea and invites people onto his show to do their “Debt Free Scream.” The basic idea is celebrating people’s journey of getting out of debt. It’s been an important part of his show for a long time and there’s even a waiting list. If you haven’t seen it, it’s pretty fantastic.


So what’s your plan?


You and I don’t have time to worry about what the media, government, financial institutions, or your friends and neighbors have to say about the housing market or how to manage your home mortgage. In order to ensure you’re in a good financial position at retirement age, the time to act is now.

An Inside Job

“Jill, this is sergeant Sacker. Listen to me. We’ve traced the call… it’s coming from inside the house. Now a squad car’s coming over there right now, just get out of that house!”

This is the famous line from the 1979 horror film “When a Stranger Calls” letting the terrified babysitter know her would be attacker is in the house. If you’ve not seen the movie, or it’s been a little while, it’s worth checking out.

In today’s dynamic information-overload environment of social media, news and now, fake news, we can find ourselves in an echo chamber (for example, a sports bar outside of Wrigley Field in Chicago filled with only Cubs fans).   With that in mind, each of us knows we should take an objective view on new information as we receive it, but that doesn’t mean that our brains are cooperating.

Financial losses are processed in the same area of the brain that responds to mortal danger, so losing money in the stock market is treated the same as the threat of being eaten by a lion.

This threat makes us want to pull money out of an investment when it goes down in value. Similarly, our minds scream “run” if we encounter a hungry predator like a lion. With investments, the loss has already occurred—the value has gone down (you’ve been eaten by the lion)—so it may be wise to leave your money in the investment with the knowledge that it could go back up to its previous value.

There are dozens and dozens of cognitive biases we can fall prey to and in order to avoid doing so, we need to be aware of them. Those that relate to investing behavior include:

  • Overconfidence Bias– We’re more confident in our abilities than we really are. “I’m an excellent driver and all the other drivers are not.” “I’m better at spotting investment opportunities than others.”
  • Illusion of control– If we invest only in the things we are familiar with, somehow we have more control over our portfolios. “I worked at GE for 30 years, so I know it will always be a great investment.”
  • Regret avoidance– Once bitten, twice shy. “My 401(k) at my last job went down so I’m not going to participate at my new job because that will likely happen again.”
  • Loss Aversion– How we deal with losses as opposed to how we deal with gains. Often, the pain or fear of loss can be twice as strong as the potential for gain. “I’d rather invest in more conservative vehicles so I don’t lose money.”

On a broader scale, Confirmation bias, the most common bias, is very important to be aware of in today’s polarized world. Often referred to as “myside bias,” it’s the tendency to seek out information that justifies our pre-existing beliefs. This can manifest itself in almost every aspect of our lives, for example going to the Boston Globe for information on the Patriots.

Knowing that our minds can play tricks on us, it can be helpful to play devil’s advocate with ourselves; to clarify our current thinking or position on an issue and to then seek out the other side. As Americans, if half of us can’t have a civil dialogue with the other half on many of the major issues of today, we’re in for a rocky future.