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5 signs your date is a financial mess

May 20, 2015

By Dan Rafter | Money Rates Columnist

Your date reaches for the check at the end of your meal, but the waiter returns with embarrassing news: the credit card provided has been declined.

Is this a sign your date has financial problems? Maybe. It's important for couples to talk about their finances as a relationship progresses. It is equally important to look for indicators that your partner is keeping money secrets from you.

"This is your financial future on the line, too," says Bruce McClary, vice president of public relations for the National Foundation for Credit Counseling. "If your spouse has a bad credit score, you might struggle to qualify for a loan in the future if you decide to apply for one together. Your spouse's bad credit might keep you from qualifying for a mortgage."

While clues might indicate your partner is struggling financially, be careful not to jump to conclusions.

"There are signs, but it can be very difficult to decipher them," says Armando Roman, wealth manager with AXIOM Financial Advisory Group. "People who are financially stable can have some of the exact same habits of people in the opposite camp, those who are financially unstable."

The best advice? Look for these five warning signs of financial trouble:

1. The denied credit card

There are few things as embarrassing as having your credit card denied. If it happens to your date, you are right to be wary. This situation may be a result of money mismanagement: exceeding the credit limit or late payments -- both financially irresponsible.

Credit card debt can be one of the worst financial traps to fall in to. Credit card debt comes with high interest rates -- as high as 19 percent in some cases -- and can take a long time to pay off.

2. A debit card but no credit card

Roman also suggests looking at how your partner pays for items -- are they only using debit cards to make purchases? That's not necessarily bad, unless it's a sign that your significant other's finances are so bad they can't qualify for a credit card.

"A debit card is available to people who don't even qualify for a credit card," Roman says. "Maybe the person you are dating is using a debit card because that's the only option available."

3. Refusing to talk about finances

You bring up money matters, but your partner won't reciprocate, even as the relationship progresses -- potentially, a big red flag.

Be nervous if you have no clue whether your beloved is carrying a credit card balance, has a miserable credit score or has been receiving ominous letters from the power company. Money issues can quickly strain a relationship. Your partner won't talk about finances? There could be trouble.

"It is so important to talk about financial issues," says Kemberley Washington, a CPA and business professor at Dillard University. "Too often people talk about anything but their financial situations. If you haven't had that talk, you need to have it."

4. They don't make a lot of money but spend a ton

You know what your date does for a living. You know, in general, the range of income their particular profession makes. Yet, he or she spends big dollars on expensive computers, TVs and video-game systems that are seemingly out of financial reach.

This could be a sign of people who are spending more money than they make. People who overspend their incomes rarely escape debt-free.

5. Look at their phone

Does your date use a prepaid cell phone? It's not always the case, but such a phone could be a sign of financial distress.

As Roman says, people who can afford or qualify for a monthly or yearly cell phone plan will usually get one. Those who can't? They are the ones who choose prepaid phones.

While none of these clues are sure signs that the person you are dating is in financial distress, they are warning signs to watch out for. If you're concerned, use these clues to spur a conversation about money. Sit down with your partner and share your finances and then encourage them to do the same. If you are moving your relationship to a more serious level, this type of honesty is important.

What if you see problems such as big credit card debt or a nearly empty savings account? It's time for an even longer discussion.

"If you get to the point where you are trying to come up with a joint budget and the numbers don't add up, you need to talk with your partner," McClary says. "Numbers don't lie. The numbers are the ultimate lie detector. If they are telling you things are fine and the numbers don't add up, go with the numbers."

Over 40 with no retirement savings? Take these 6 steps

April 28, 2015

By Dan Rafter | Money Rates Columnist

When Leslie Tayne turned 40, her retirement savings, like those of many Americans, were nonexistent.

Tayne, founder of New York City-based law firm Tayne Law Group, says that when she was building her business and career throughout her 20s and 30s, she didn't have any extra funds for retirement. She also went through a divorce that set her back financially.

Ideally, it's best to start saving for retirement as early as possible -- and certainly before your 40th birthday. But as Tayne's story proves, there are still ways to turn a late start into a well-funded retirement.

Today, her business is stable. She's earning more money. So she's been able to quickly build her retirement savings.

"Money was not plentiful when I was building my business," Tayne says. "I had student loans until my late 30s because of law school. So don't have a heart attack if you look down and you don't have any retirement savings when you turn 40. I say, look at what you've accomplished, not what you haven't accomplished. You may have done some great things career-wise. Now it's time to shift priorities and work on retirement."

Here are six steps for getting back on track if you're 40 or older with little or no retirement savings.

1. Crunch the numbers

Laurie Samay, a financial planner and associate at Palisades Hudson Financial Group in Scarsdale, New York, says that 40-year-olds need to first determine how much they need to save to cover all of their expenses for their retirement years.

This means first determining your guaranteed income during your retirement years. This is the amount of money you'll receive each year from Social Security, retirement accounts, pensions, annuities and other sources. You'll then need to estimate your retirement expenses, focusing on big-ticket bills like food, housing, utilities, transportation and health care.

The difference between your guaranteed retirement income and your projected retirement expenses is your savings gap.

"This is the amount that you'll need to save using a combination of tax-deferred retirement plans and taxable accounts," Samay says.

Once you determine how much you need to live on, you can start making adjustments. Samay says that cutting the amount of money that you plan to spend on cable, dining out, entertainment and clothes shopping can make a big difference in freeing up funds for saving.

2. Get aggressive

Bob Stammers, director of investor education at the CFA Institute, says that those who wait until their 40s to start saving need to be aggressive. This means putting aside as much as you possibly can from every paycheck to make up ground. This is easiest if you have a 401(k) plan at work. Stammers says that you need to max out your annual 401(k) contribution to $18,000 a year, the government-set limit for 2015.

"If you're behind in the savings race, you have a lot of ground to make up," Stammers said.

And if you max out your tax-advantaged savings options, such as 401(k)s and IRAs, there's no reason you can't stash more in other savings accounts. The key is to make sure you're saving at a rate that will eventually cover the savings gap mentioned above.

3. Play the catch-up game

The IRS wants you to start saving more too, particularly if you're nearing retirement age. That's why the agency allows people who are 50 or older to make what it calls annual catch-up contributions -- extra contributions to retirement savings accounts that can help people boost their savings. While this might not help people when they are only 40, Stammers recommends that those who are behind in their savings in their 50s take advantage of this.

According to the IRS, if you are 50 or older, you can deposit an extra $6,000 every year in retirement savings in a 401(k), 403(b), SARSEP or governmental 457(b) plan.

You can only make an annual contribution to an IRA of $5,500. But if you are 50 or older, the IRS allows you to make an additional $1,000 of contributions to these accounts every year.

4. Rethink your retirement plans

Joe Sicchitano, head of wealth planning for SunTrust Private Wealth Management, says that rethinking retirement might make a difference. You might retire from your current full-time job. But this doesn't mean that you have to stop earning an income.

Instead, you might decide to work part-time in a field that you've always wanted to explore. This might mean teaching on a part-time basis, offering consulting services for small-business owners or even taking a part-time job at your local grocery store.

The money you earn can help cover for any shortfalls in your retirement savings, Sicchitano says.

"Maybe retirement doesn't mean stopping (work) altogether," Sicchitano says. "We can think of retirement as starting on a new season."

Make time your friend: Two key factors for ensuring a well-funded retirement are time and savings. If you've skimped on the savings, you can always add to the time part of the equation. Working for one, two or more years after you originally planned to retire can add a significant amount of money to your pool of retirement savings, Sicchitano says.

5. Scale back as necessary

Kendrick Wakeman, founder and chief executive officer of FinMason in Boston, says that too many people have no concrete plans for their retirement years. When asked what they want to do after leaving the working world, they might say they want to travel. But is that realistic? You can't travel every day, and travel is expensive.

Wakeman says that writing a detailed plan for how you will spend your time after retirement can help you determine just how far behind you really are in your savings. If you plan to spend time volunteering, visiting with your grandkids and learning a new language or skill, you might not need to save as much money. But if you want a lavish retirement with cruises and international flights, then you better be ready to save much more of your income until then.

The best time to start saving is always now

Regardless of your goals, it's key to not let a late start discourage you from beginning to save -- no matter what your age.

"There is hope," says Wakeman."There is a retirement plan for everybody. If you are just starting to save at age 40, you'll probably have to save with more gusto than someone who started earlier. You have to be more serious about putting aside money. But you can develop a plan to make your retirement work."

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9 ways to hurt your finances in your 30s

April 6, 2015

| Money Rates Columnist

Your 20s are a unique time. You may have gotten your first real job, but you may also have few financial obligations, allowing you to spend money -- and make minor financial errors -- somewhat freely.

But your financial life may become very different in your 30s. A mortgage payment could appear in your expenses. Old debts might begin to take a toll. Children may add significant new costs.

That makes your 30s a great time to leave those elementary financial mistakes behind for good. Here are nine money missteps that can derail the financial growth that should mark your 30s.

Mistake No. 1: Keeping the same old financial strategy

Andrew Meadows, consumer and brand ambassador for Ubiquity Retirement + Savings in San Francisco, says 30-year-olds often bring home increasingly large paychecks and have opportunities that weren't available to them 10 years ago.

"One of the biggest mistakes we make is not recognizing that change has happened," he says.

Instead, some 30-year-olds continue living like there is no financial tomorrow -- despite their new ability to both live comfortably and plan for the future.

Kelsa Dickey, owner of Fiscal Fitness Phoenix, an Arizona-based financial coaching firm, says there's no reason to let your old habits define your financial future.

"Your values change as you grow, and your spending should too," says Dickey.

Mistake No. 2: Starting a family without a plan

Getting married and having children aren't purely financial decisions, but they shouldn't be made without consideration of how they will impact your household's bottom line. Being a parent can be stressful enough without the added burden of financial shortfalls.

Meadows suggests couples look at whether they might want to delay having children in order to set more money aside for retirement or otherwise shore up their finances.

Mistake No. 3: Putting your kids' wants before your needs

When the kids do come along, they often bring a variety of expenses, particularly as they get older. Dickey says that while most parents want to give their children the best life possible, no parent should put their kids' wants ahead of their own financial needs.

She says parents need to focus on getting out of debt and funding their retirement before draining the bank account for voluntary kid expenses, such as enrolling in sports or pursuing other costly extracurricular activities.

Mistake No. 4: Overlooking your children's financial education

Another mistake 30-something parents make is failing to talk to their kids about money matters.

"It's so easy to have a conversation once in a while," Dickey says. "It doesn't have to be that complicated."

To help your kids gain critical financial knowledge, use everyday opportunities -- such as visiting an ATM or sitting down to calculate your monthly budget -- to explain basic financial concepts to your children.

Failing to do so might not hurt your finances immediately, but raising financially inept children can lead to significant costs down the road.

Mistake No. 5: Not talking to your parents about money

"We want to do it on our own," Meadows says. "But not talking to the rest of the family about finances is a mistake."

Meadows says that parents of 30-somethings might be able to share useful financial wisdom -- if their children are open to the conversation.

Also, some 30-year-olds may also believe that they are in line for a big inheritance or that money will be coming from their parents to help pay for their children's college expenses. However, without actually discussing these issues, they may be setting themselves up for an unpleasant surprise in the future.

Mistake No. 6: Planning for the best-case scenario

By the time they're in their 30s, people may begin to think life will only get better in the future: Incomes will go up, expenses will go down and their vision of the American Dream will become reality.

"Most people in their 30s are riding that upward wave," Dickey says. "They're not prepared for a setback."

Unfortunately, setbacks are a reality for many workers, whether that comes in the form of a lay-off, disability or natural disaster. Dickey says it's a mistake for 30-somethings to plan their finances around the best-case scenario. Instead, they should hope for the best -- but plan for the worst.

A strong emergency fund can be a good first defense against the unexpected.

Mistake No. 7: Not increasing retirement savings

Ubiquity Retirement + Savings specializes in 401(k) and retirement accounts for millennials, and Meadows says he sees some young adults take the "set it and forget it" style of retirement savings a little too far.

Specifically, he says 30-year-olds may neglect to update the contributions to their plan.

"Retirement savings should evolve along with paychecks," he says. "Make one small change to put more in when you get bonuses and raises."

Mistake No. 8: Trying too hard to impress on social media

In the past, it was called "keeping up with the Joneses." Today's electronic twist on this phenomenon might lead some 30-somethings to squander their raises and bonuses on items designed to impressed their friends on Facebook or other networks.

"It's always the splurging," says Meadows about what he sees as 30-somethings' biggest financial mistakes. "It's getting that crucial promotion and buying that thing you didn't need."

Mistake No. 9: Failing to take budgeting seriously

Dickey says young adults shouldn't worry about creating a yearly or even a monthly budget right from the start. Instead, they should begin with a single paycheck and decide where every dollar from that check is going.

Meadows adds that this knowledge can have the side effect of reducing the number of sleepless nights related to financial uncertainty.

"As long as you know where (your money) going, you'll feel so much better in your day-to-day life," he says.

Progress over perfection

Although avoiding all mistakes is the ideal, Dickey says it's unrealistic to think that you can always manage your money perfectly. Fortunately, she says there is no such thing as a dumb mistake -- provided you only make the error once.

"What's dumb is not learning from the mistake," she says.

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5 habits of money-savvy 20-somethings

March 30, 2015

By Dan Rafter | Money Rates Columnist

Even when you're in your 20s, burdened with student-loan debt and earning an entry-level salary, it's still possible to make savvy financial decisions that will positively impact the rest of your life. Katie Kiihnl, an associate with Atlanta-based law firm Boyd Collar Nolen & Tuggle, is proof of this.

As soon as Kiihnl graduated from the University of Memphis School of Law, she did something rare among 20-somethings: She met with a financial planner.

"There are a ton of financial advisers out there who have smaller firms and who would be happy to work with young professionals, even when these young people don't have a lot of assets," Kiihnl says. "This was the best move I could have made. Meeting with a financial adviser at a young age helped me form my financial goals. I've followed them ever since."

Want to make smart money moves in your 20s? Then follow Kiihnl's advice: You need to start saving, budgeting and paying down debt early in your career. When you boil it down, taking a proactive approach is what being financially savvy 20s-something is all about.

Here are five smart habits that wise 20-somethings use to keep their finances in order.

Smart habit No. 1: Prioritizing debt reduction

Kiihnl's financial planner gave her an important lesson: The best move that 20-something professionals can make is to pay down their student-loan debt as quickly as possible.

"Put all your money into paying down your student loans before you look at investing," Kiihnl says. "Focus on your debts."

Kiihnl left law school with $80,000 in debt. She worked out a plan with her financial planner that will pay down this debt in five-and-a-half years. That's significant: During this time, Kiihnl will pay $20,000 in interest. That's a lot, but it's not nearly as much as the $75,000 in interest she'd pay if she instead only made her minimum student-loan payments each month and carried her loans to their full terms.

Smart habit No. 2: Taking their budget seriously

Rachel Cruze, a financial speaker and author based in Franklin, Tennessee, says that smart 20-somethings learn early on that they have to live on a budget.

"Too many 20-somethings don't live on a budget," Cruze says. "Their paychecks come in and their money goes out. They have no control over the money. They think that living on a budget means that they can't have any fun. But what smart 20-somethings find is that they have more fun if they have some control over their money, some boundaries in place."

Why? If you live on a budget, and you follow that budget, you can spend money without guilt or shame.

Smart habit No. 3: Using credit cards to their advantage

There is nothing wrong with using credit cards. Using credit cards wisely helps 20-somethings build a strong credit score.

Michael Meese, chief operating officer of the American Armed Forces Mutual Aid Association in Ft. Meyer, Virginia, says that too many 20-somethings build up massive amounts of credit-card debt. That debt comes with high interest, and can prove a financial burden as 20-somethings move into their 30s, 40s and beyond.

"With all the credit-card applications you get in your 20s, it can be easy to get into trouble," Meese says. "Smart 20-somethings realize that they don't have to use all the credit they get. They have the perspective that they need to save up for the things they want. They don't just charge what they can't afford today."

Smart habit No. 4: Getting a head start on retirement

Retirement seems a long way off when you're in your 20s. But you should start saving for retirement as soon you start working. If your company offers a 401(k) plan, you should participate. Even if it doesn't, you should set aside a portion of your paycheck -- even if it's a small amount -- for your retirement years.

"The way retirement savings goes is, 'the earlier, the better,'" says Jim Poolman, executive director of the Indexed Annuity Leadership Council.

You might think it makes sense to wait until you're earning more money. But, as financial professionals will remind you, as you get older, your costs of living rise too. You might start a family or take on a mortgage. There's never a perfect time, then, to start saving for retirement.

Poolman says that smart 20-somethings start saving for retirement, and enjoying the benefits of compound interest, as soon as they enter the workforce.

Smart habit No. 5: Building an emergency fund

Bad things happen, and often these bad things require a quick infusion of cash. If you don't have an emergency fund built up, you could easily fall into debt should you suffer a car accident, get injured at work or have to replace your home's water heater.

And what if you lose your job? If you have an emergency fund, you can tap those dollars to help support yourself while you search for a new job. That fund might keep you from running up credit-card debt while you're hunting for new work.

That's why Kiihnl says that 20-somethings need to steadily build up an emergency fund that can cover up to six months of their expenses. This isn't easy, and it takes time. Kiihnl says that her goal has always been to put 10 percent of her income into a savings account to cover unexpected purchases.

"I've done that ever since I graduated," Kiihnl says. "Sometimes you can't do the whole 10 percent. But you should always put something in that account."

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5 things financially reckless young people say

March 20, 2015

By Dan Rafter | Money Rates Columnist

Michael Chadwick has a simple message for 20-somethings: You can't have everything you want right away.

You can't live in the same kind of home your parents have. You can't motor around town in the same kind of car your parents drive. And you can't afford to follow your parents' example and take two vacations a year.

"Unfortunately, too many young people want the same things that it took their parents 10 or 20 years to get," says Chadwick, chief executive officer of Chadwick Financial Advisors in Unionville, Connecticut. "There is no more delayed gratification. And that's what can get young people into financial trouble."

Chadwick isn't alone in this theory. Financial advisers say that too many 20-somethings make serious financial mistakes in an effort to live a lifestyle that is beyond their means. Many, after all, are still paying off piles of student-loan debt. The financial mistakes that 20-somethings make can haunt them throughout their 30s, 40s and beyond.

Sometimes, these grave errors may follow a few simple words. Want to avoid the financial chaos that characterizes some people's youth? Then think very carefully about what you're doing when you find yourself making the five statements below.

1. "I can pay for it on my card."

Credit cards are important financial tools if used properly, especially for young consumers. Those who pay their credit-card bills on time every month are taking steps to build a solid credit score. But it's far too easy for 20-somethings to misuse their cards. They use plastic to purchase big-ticket items that they can't afford, from high-end flat-screen TVs to rooms full of furniture.

Soon they're staring up at a mountain of credit-card debt, which often comes with exorbitant interest rates.

"Running up credit-card debt is the biggest mistake I see young people make," says Melinda Kibler, certified financial planner with Fort Lauderdale, Florida-based Palisades Hudson Financial Group. "The interest rate is so high that it is extremely difficult to dig yourself out. It becomes a vicious cycle."

2. "I've got years to save for retirement."

Retirement seems a long way off for consumers in their 20s. But David Lyon, chief executive officer of Chicago's Main St. Advisor, says that young people need to start saving for retirement in their 20s. It's the easiest way for them to guarantee that they'll have enough money for a happy and satisfying retirement.

Too many people, though, don't save a dime for retirement in their 20s, Lyon says.

"When you're in your 20s, it's easy to convince yourself that you'll put money away for retirement when you start making a bigger salary," Lyon says. "But what happens is, as your salary increases so does your cost of living. You buy a bigger house. You get married. You have kids. So people keep pushing off their retirement savings."

Lyon says that young people should start saving at least a small amount of money each month for retirement as soon as they enter the workforce. That little bit of savings will grow, thanks to the magic of compound interest, into a solid nest egg.

3. "I deserve a few nice things."

There was a time when 20-somethings lived on Ramen noodles in cramped studio apartments as they saved for their first house or new car.

Too many 20-somethings today, though, skip this period of austerity, says Kelley Long, resident financial planner for El Segundo, California-based Financial Finesse and a spokesperson with the National CPA Financial Literacy Commission. Instead, they borrow huge amounts of money for homes and cars that they can't afford on their entry-level salaries.

"Young people too often borrow against their future earnings to elevate their lifestyle so that it matches the lifestyle they experienced when growing up," Long says. "They don't recognize that it took their parents 20, 30 years to get to where they are. The austerity days of 20-somethings seem to be coming to an end. Instant gratification is the crux of the problem."

4. "I don't make enough to save for emergencies."

Chadwick says that it is essential for young adults to build an emergency fund that they can tap if they get into a car accident, run into unexpected medical bills or experience some other financial calamity. A good rule of thumb is for young people to save at least six months of living expenses in an emergency fund.

But too many 20-somethings instead spend their extra $20 or $30 on items that they don't really need. Chadwick says that this is a problem that is only getting worse.

"There are far more things for people to spend their discretionary income on today," Chadwick says. "They can Uber their way home instead of taking public transportation. They can subscribe to Netflix. It's so easy to order in delivery food. This is all a burn on people's disposable incomes."

5. "I'll look into investments when my salary is better."

A good way to build up wealth is to invest in the stock market or in mutual funds. But many 20-somethings don't do this, Kibler says, thinking that they'll invest once they start earning a higher salary. But in doing so, these young adults are wasting valuable time.

And those 20-somethings who do invest, often invest too conservatively. They might set up their 401(k) plans so that they are sinking their dollars in only the safest of investment vehicles, Kibler says. That's a mistake: Young people have plenty of time to experiment with higher-risk but higher-reward investments.

"Don't be afraid to take risks when investing," Kibler says. "Without that growth it can be hard to save for retirement. You have to depend on the market even if it can be volatile. When you are young is the best time to put up with that."

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