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7 habits of money-wise couples

January 12, 2015

| Money Rates Columnist

Given its magical atmosphere and twinkling lights, it's perhaps no surprise that December is a peak time for marriage proposals. Wedding site TheKnot.com reports that 16 percent of proposals occurred during the final 31 days of 2013, making it the most popular month for engagements.

However, after the holidays comes divorce season. According to the website FindLaw.com, divorces jump dramatically in January before peaking in March.

How do happy couples who pledge their devotion one December become weary partners who call it quits during some future spring? There are numerous answers to this question, but New York City-based divorce attorney Bruce Provda says that money often plays a major role in whether a marriage survives.

Provda says research indicates that couples fight twice as much about money as they do about sex, and that some surveys find that more than half of divorced couples say finances were a significant factor in their decision to split. "Money, whether we want to admit it, is a key to a stable relationship," he says.

To help keep their relationship healthy, newly engaged couples may want to take a cue from those who are already married and in-sync on their finances. Experts say these seven habits are typical of money-wise couples.

1. Entering into a marriage with eyes wide open

Healthy marriages start long before the bride and groom say "I do." Money-wise couples make a point to discuss finances and get on the same page prior to their wedding day.

"If one is in the habit of spending as much or more than they make, a real conversation has to be had explaining your concerns," says Provda. "Love alone will not solve the problem."

2. Scheduling regular financial meetings

Steven Elwell, a certified financial planner and vice president at Schroeder, Braxton & Vogt in Amherst, New York, says regular money meetings should be a priority for every couple.

"That can be in the form of a one-hour recap each month or a more in-depth view twice a year," he says. "At this meeting, they can discuss what's going on with their finances and what they want to accomplish."

Even if there is nothing new to discuss, Elwell says couples often benefit simply by ensuring they are both on the same page as far as finances are concerned.

3. Keeping emotions out of financial discussions

"Marriages involve complex emotions, and one of the strongest is being safe and secure," says Provda. He says that money is key to creating that security.

Unfortunately, since money plays such an important role in marriages, it also has the potential to become an emotional topic. Smart couples understand keeping their emotions in check when discussing financial matters minimizes the risk of walking away from a disagreement with hurt feelings.

Elwell suggests having frequent discussions to help keep emotions from boiling over. "Without communication, financial issues or differences can build to a breaking point, so the topic should be addressed early and often."

4. Making budgeting and record-keeping a joint effort

Both Elwell and Provda recommend couples keep good financial records.

"Get in the habit of keeping records of what you make, spend and need," says Provda.

For couples who aren't sure where to start, Elwell says websites like Mint.com offer a way to easily track spending and plan a budget. Couples may also want to read money-management books or take courses on personal finance together.

"Once people learn what is happening and how that is bad, they become more inclined to correct it," says Elwell.

5. Splurging from time to time

When making their budget, money-wise couples are smart enough to carve out a line-item for small splurges.

"Plan and keep to a budget, (but) put away something to splurge every so often," says Provda, "like a nice romantic evening so it's something you both can share in."

Couples with tight budgets might not be able to afford much, but making a point to go out and enjoy each other's company on a regular basis can strengthen marriage bonds.

6. Creating manageable goals and realistic expectations

Another smart money habit for couples is to break down large goals into smaller, more attainable ones.

"For instance, retiring at age 60 with $1 million dollars sounds really hard to a 35-year-old couple," says Elwell. "But saving $100 a month to a Roth IRA with the goal of having a $1,200 balance at the end of the year is much easier to swallow."

Setting realistic goals can avoid resentments that might occur when goals are missed and one half of a couple blames the other.

7. Getting help when it's needed

Finally, money-wise couples aren't afraid to ask for help when they need it. That may mean going to a finance professional for advice or, for deeper problems, heading to a counselor's office.

Sometimes money problems aren't money problems. Instead, they are trust problems or communication problems. Provda says couples shouldn't shy away from seeking help to address these underlying issues.

"Speaking to a therapist or a marriage guidance counselor is a must," he says. "You need to be able to open up and get an unbiased, emotionally cool person who will understand and help push you to a clear goal."

Ultimately, money-wise couples are proactive about their financial situation. They work together to address money problems head-on and create manageable goals for their future. By adopting these same habits, you too may avoid becoming a victim of the springtime divorce season.

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5 signs your teen is ready to handle credit

January 5, 2015

By Dan Rafter | Money Rates Columnist

When used properly, credit cards can teach teenagers how to manage money and help them establish a credit history. When used improperly, they can lead to huge amounts of debt and missed obligations -- two things that can wreck your teen's credit before it's really gotten started.

How can you know when your teen is ready for a first credit card? Financial experts say that there is no one age at which teens can handle that first piece of plastic. Some teens are ready to manage credit at 16 while others won't be ready at 19. It's up to parents to look for the signs that their teens are mature enough to handle the responsibility of a credit card.

"You don't just out of the blue get a credit card for your kid because he's doing well or done his chores," says Janet Lehman, a child behavior therapist and co-creator of the Total Transformation Program in Westbrook, Maine. "A kid should never be given a card carte blanche, because you will start something you'll regret. We need to teach kids how to use them and what they're all about, and how to manage money in a responsible way. It's all about teaching and coaching."

The good news? College students are getting better at managing credit cards. Thirty-two percent of students with credit cards in 2013 carried a zero balance, and 46 percent had a balance under $500, according to Sallie Mae. Additionally, just 2 percent carried more than $4,000 of credit-card debt.

Here are some signs that your teen will fall closer to the zero-balance group than the $4,000 one.

1. Your teen talks about money

Dr. Susan Kuczmarski, Chicago-based author of three books on parenting and family and a business teacher at the Kellogg School of Management at Northwestern University and Loyola University Chicago, says that before they get their first credit cards, teens should already be involved in the financial decisions their family makes.

For instance, a teen might give input into how much family members should spend on holiday presents or how much they should set aside for a summer vacation. This financial decision-making can help them make better choices with their first credit card, Kuczmarski says.

"Teens learn a great deal about decision-making by experiencing it firsthand," Kuczmarski says. "Follow this general rule: As teens get older, increase their involvement in decision-making.They are often capable of making informed decisions and have valuable information to offer."

2. Your teen is ready to accept limits

Lots of teens may ask for a credit card, but teens who are ready for them will sit with their parents to discuss limits on what they can use their cards for, says Elle Kaplan, chief executive officer and founder of LexION Capital Management in New York City. Teens who won't accept limits -- say, that their cards can only be used for buying school supplies or textbooks -- aren't ready for that first card.

"Set very clear expectations about what the credit card is to be used for," Kaplan says. "Emergencies only? School supplies? Gas?"

3. Your teen is already successfully managing a bank account

Teens need to learn about money -- and show that they can handle it -- before they get a credit card. Andrew Johnson, communications and public relations manager with the Troy, Michigan, office of GreenPath Debt Solutions, recommends that parents set up savings accounts for their teens.

If their teens regularly deposit money in these accounts and refrain from draining it, they might be ready for the responsibility of a credit card, Johnson says.

4. Your teen has a job

Lehman says that teens should be holding down a job and earning income before they get a credit card. Working can help teach them the value of money, and might make them think twice before running up too much debt.

To qualify for a credit card, teens will need an income anyway. According to the Credit CARD Act of 2009, credit card applicants under the age of 21 now need to show proof of income to qualify for an account in their names.

5. Your teen handles peer pressure well

Does your teen succumb to peer pressure on a regular basis? If so, then that teen might not be ready for a credit card, Johnson says. Those teens that can resist the whims of their peers? They might be mature enough.

"They need to be diligent and not cave in to peer pressure from friends to use the card on a whim," Johnson says.

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    10 signs you've gone from frugal to cheap

    December 19, 2014

    | Money Rates Columnist

    In his parody of the song "Whatever You Like," "Weird Al" Yankovic runs through the many cringe-worthy ways people can be cheap, from taking a date to the Golden Arches to stealing cable from the neighbors.

    But though Yankovic can turn miserly habits into laughs, the real downside of extreme cheapness is hardly amusing: Savings experts say that holding your purse strings too tightly can lead to a lower quality of life and may negatively affect your relationships with others.

    "If you want to feel poorer than you actually are, be a cheapskate," says Josh Elledge, the "chief executive angel" at coupon and savings site SavingsAngel.com.

    Aries Jimenez, director of business development for San Diego Wealth Management, adds that being cheap isn't necessarily a virtue.

    "Cheap is, in some ways, a form of greed," he says. "Being cheap could be an obsession too."

    Elledge says there is a key difference between being frugal -- which is a generally a good thing -- and being cheap.

    "Being cheap puts the focus on scarcity," he says. "I believe the focus of being frugal, on the other hand, is being mindful of what we have."

    The line between frugality and cheapness is often thin, however, and if you find yourself doing any of the following things, you may have crossed it.

    1. You break the rules

    The movie theater clearly states no outside food, yet you sneak in water bottles and boxes of candy. You invite yourself to the wedding reception buffet even though you don't know the bride or groom. You say your 6-year old is actually 5 so you get the discounted rate.

    Will you go to jail for breaking these spoken and unspoken rules? Probably not.

    Does it mean you're cheap? You bet.

    2. You steal

    Sometimes, in their zeal to save a buck, individuals go from breaking rules to breaking the law. They may "borrow" their neighbor's WiFi, watch pirated movies online or even cheat on their taxes.

    These things not only mean your cheap, but they can also -- particularly in the case of cheating on your taxes -- do more to harm your finances than help them.

    3. You pressure people for freebies

    Your friend may be an accountant, but it's unfair to expect him to review your tax return for free. The same could be said for anyone who has a talent of some kind or specialized knowledge. And telling a band they should perform for free at your daughter's Sweet 16 party because it will give them "concert experience" isn't a good sign either.

    "When you ask artists, performers, writers, and musicians to work for free -- or for some supposed exposure -- you're not acknowledging years of practice and skill-building which has led to their talents," says Elledge.

    4. You don't tip

    You can debate the merits of tipping the garbage man or the teen working the ice cream stand, but there is no question that giving a tip to restaurant servers, who typically earn a mere $2.13 an hour, is expected and the norm.

    You don't have to tip 20 percent for mediocre service, but if the server did their job, they should get something, 10 percent being the customary minimum.

    5. You're penny-wise and pound-foolish

    Rewiring your house using YouTube videos as your guide may seem like an inexpensive way to get the work done. That is, until faulty wiring burns your house down.

    That's an extreme example, but it's the type of outcome you can get with a cheap mentality. Cheap people are sometimes so focused on saving money right now that they end up spending more in the long run.

    "I do taxes and come across people who do not see the value in paying someone to prepare their returns," Jimenez says. "That person could miss out on some deductions or credits."

    6. You hoard

    If you can't bear to part with broken items because they might be useful someday, you might be cheap. Some people are so cheap they don't want to spend money ever ... on anything. So they save everything.

    But as anyone who's watched a reality show or two on hoarding can attest, there's little virtue in this sort of "thriftiness."

    7. You don't value your time

    Being cheap can save you money, but it could cost you time -- as in, time spent rummaging through mounds of clutter to find what you need or time spent doing tasks you could pay others to do more quickly.

    "(People) need to balance the value of time and money," advises Jimenez.

    8. You find an excuse to not pay your fair share

    Do you conveniently forget to have cash every time you go out with friends? Do you ask if someone else can cover your portion of the boss' holiday gift and then "forget" to pay them back? This is called mooching, and it means you're cheap.

    9. You complain about the price of everything

    There is no better way to proclaim to the world that you're cheap than to complain loudly about the price of everything. Go ahead, let the convenience store clerk know you think the price of gas is a rip-off. Tell the waitress the meals are outrageously expensive. And don't forget to gripe about the prices at the local craft show.

    But soon, your friends may stop inviting you anywhere and you won't need to worry about mooching your way out of your share of the bill.

    10. You have no social life

    Finally, there is no better sign you're cheap than the utter and complete lack of a social life -- not because you don't have friends, but because you refuse to go out with them. They may be going to a restaurant you deem too expensive or seeing a movie you can't imagine spending money on. Most of the time, when cheap people say they "can't afford it," they really mean they don't want to spend money on it.

    That's certainly your prerogative, but as Elledge says: "People who are cheap live a life of 'I'll be happy when ...' Instead, choose to be happy now."

    You might have to spend a few dollars to try this, but it may just be money well spent.

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    How financial stress can hurt your career

    November 21, 2014

    By Dan Rafter | Money Rates Columnist

    Dave Edwards knows that financial worries can make employees less productive at work. He's seen it happen.

    Edwards, president of New York City's Heron Financial Group, once hired an employee who had racked up massive amounts of debt. Edwards, not surprisingly, gave the employee plenty of guidance on gradually erasing that debt. The problem? The employee became obsessed with his debt. He spent hours each workday viewing his bank account and transferring balances from one credit card to the next.

    As a result, the employee was no longer producing quality work. Edwards says he had no choice but to fire him.

    "I gave him three warnings," Edwards says. "But it got to the point where he was no longer functioning at work. I needed him to get his personal life under control so that he could do the job I was paying him to do. He couldn't do it, so I had to take action."

    Edwards isn't alone. Employers commonly struggle with workers who are too distracted by financial worries to be productive at work. A total of 70 percent of human resource executives in a new study by the Society for Human Resource Management said that they have seen financial worries have a large or at least some negative impact on employees at their companies.

    The good news? Employers and employees can each take steps to make sure that financial worries don't torpedo workers' job performance.

    Financial stress at work

    Shawn Gilfedder, president and chief executive officer of East Windsor, N.J.-based McGraw-Hill Federal Credit Union -- the financial institution that sponsored the Society for Human Resource Management study -- says that employers shouldn't be surprised when their workers let financial fears drag down their on-the-job performance. It's not easy for workers to concentrate on invoices and spreadsheets when they're worried about paying their rent.

    "Financial worries don't go away just because someone's at work," Gilfedder says.

    How serious is this issue? According to the Financial Wellness in the Workplace study, 41 percent of human resource executives said that at least some employees at their firms were struggling with work tasks because they were worried about an overall lack of funds to cover their personal expenses. Nearly 25 percent of respondents said that employees at their companies were experiencing more financial challenges now than they were 12 months ago.

    In a result that doesn't bode well for retirement planning, 60 percent of human resource executives said that employees at their companies were more likely to request a loan from their retirement savings today than they were in previous years.

    Approaches for employers

    What can employers do to ease some of this financial stress? Gilfedder says that employers can attack the problem by offering financial education programs to their employees.

    Many employers already offer health seminars designed to help employees quit smoking or lose weight. They should consider boosting the financial knowledge of their employees as a health matter too, Gilfedder says.

    "Many employees are struggling just to cover their daily expenses," Gilfedder says. "They are dealing with increases in the cost of living. They might be working in areas where the cost to have children in daycare is equivalent to a mortgage payment. These issues place real stress on people, and it can negatively impact their health."

    Financial wellness programs should include workshops on budgeting, reducing expenses, managing credit card debt and maintaining healthy debt-to-income ratios, Gilfedder says. They should also be targeted to specific groups of employees.

    Millennials are probably more interested in budgeting, saving and paying off student-loan debts. Baby boomers and members of Generation X might worry more about determining how much money they need for retirement. Employers, then, should offer workshops or seminars geared to employees of all ages. Merely holding retirement-planning seminars isn't effective when many workers are just out of college, Gilfedder says.

    Tony D'Amico with the Fidato Group, a wealth management company in Strongsville, Ohio, says that employees have to avoid financial education that steers their workers toward a particular financial product or provider. He adds that employers need to offer their financial wellness programs at a time that is convenient for employees. Attendance at these events will be higher if they are held in the middle of the work day. They'll be lower if employers hold them after hours, D'Amico says.

    Approaches for employees

    The onus of relieving financial stress doesn't lie only with employers. As D'Amico says, employees should bear some of this burden too."It's not enough for employees to just attend these seminars," D'Amico says. "It can't just be an intellectual exercise. Employees need to take action too.

    Fortunately, even small changes can help employees manage their financial stress. Something as small as updating an outdated beneficiary form can have a positive impact, D'Amico says.

    "Sometimes it's all about taking baby steps," he says. "Those little steps can provide a bit of relief. Employees feel like they are finally getting their ducks in a row. That leads to them taking another step. It builds positive momentum."

    While the human resource study does contain some alarming statistics, Gilfedder says that businesses are increasingly taking steps to boost their employees' financial security.

    "This is an emerging trend," Gilfedder says. "Businesses are increasingly recognizing that their employees will be more effective if they're not weighed down with financial worries. You can't force employees to make better financial decisions. But you can give them the tools they need. I think businesses recognize that providing this education is a tool that they can use to create a more productive workplace. And that's a powerful incentive for them."

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    How information overload can hurt your retirement

    November 11, 2014

    | Money Rates Columnist

    There is no shortage of retirement advice and products today. In fact, according to the Deloitte Center for Financial Services, companies spent $1.14 billion advertising retirement products in 2011.

    Beyond all that advertising, you only have to type in the words "retirement advice" into your favorite search engine to find page after page of information on retirement services and strategies.

    But according to some finance professionals, all that incoming information isn't necessarily a good thing.

    "Both the volume and speed (of information) seems to be increasing," says Russ Thornton, a financial adviser specializing in services for women and a vice president at Wealthcare Capital Management in Atlanta. "I think a lot of people stick their head in the sand as a result."

    Thornton isn't alone in questioning whether all this information is really helping consumers as they plan for retirement. Several studies indicate that access to retirement information doesn't necessarily translate into smarter decision-making or greater understanding of financial products.

    Information doesn't equal understanding

    For example, Deloitte found that despite the more than $1 billion spent on product advertising, the following percentage of survey respondents said they knew nothing about or did not understand how these common retirement investment products work.

    Target date mutual funds: 60 percent
    Fixed income securities (bonds): 44 percent
    Annuities: 38 percent
    Mutual funds other than target date funds: 37 percent
    Dividend stocks: 34 percent

    But the complexity of certain products isn't the only challenge facing consumers here. In some cases, having more investment options may lead workers to simply bow out of the investment process because of the work required to sort through their choices.

    In 2009, a study conducted jointly by retirement services firm T. Rowe Price and researchers at Columbia University found too many choices led to lower participation in certain plans. That finding was backed up by a 2011 study from Columbia Business School.

    In that second study, researchers discovered allocations to equity funds dropped 3.28 percentage points for every additional 10 funds offered to investors. In addition, for every 10 funds added to a plan, there was a 2.87 percent increase in the chance an individual would opt out of equity funds completely.

    Equity funds are often among the most lucrative investments in a retirement portfolio. By declining to put money in these funds, or by putting in less money, workers could find themselves with less cash to use at retirement time.

    When announcing its findings, Columbia Business School summed up the report this way.

    This research joins a growing body of research in psychology and economics that demonstrates why consumers can be better off with a strictly smaller choice set.

    Cutting the noise around retirement

    If you're feeling paralyzed by your choices or confused by financial jargon, Thornton says the best thing may be to block out all the "noise."

    "What I tell people, regardless of their age or wealth, is to focus on things they can control," he says when asked how to combat information overload.

    For example, stock market prices and interest rate trends tend to impact retirement choices, but they can't be controlled by investors. Instead of fixating on that type of investment news and information, Thornton says workers should pay more attention to the following.

    How much they spend/save (cash flow)
    The timing of their retirement age
    Their level of investment risk (asset allocation)

    Once an individual understands, for example, their tolerance for investment risk, they can make smart choices without obsessing over the daily movements of the stock market.

    "The most important thing you can do first is to step back and decide what it is you want to accomplish," says Thornton.

    Keeping emotions out of retirement planning

    For Craig Bartlett, vice president and division consulting manager for U.S. Bancorp., how some people respond to information may be a bigger issue than the information itself.

    "What derails people is not the information, but their reaction to it," he says.

    Bartlett advises people to take the emotion out of the retirement planning process by using online tools or by relying on a trusted financial adviser to help navigate available options. He points to the U.S. Bank RealSteps Retirement process as an example of the type of free service available to anyone looking for help sorting through an avalanche of retirement advice and information.

    With free resources available, from online calculators to in-person consultations, Bartlett says no one should let information overload get in the way of planning for the future.

    "The first and most important step is to begin," he says.

    Thornton concurs, adding that early starters enjoy the best opportunities in preparing for retirement. "Retirement planning at age 35 looks different than at age 55," he says.

    In the end, remember that much of the retirement information available is generalized rather than customized. Instead of obsessing over the perfect retirement savings formula or stressing over stock trends, a better approach may be to evaluate your personal financial resources and goals, look for ways to get advice tailored to your situation and then tune out all the background chatter.

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