Financially Savvy

Career Shift Budgeting (Part 1): Finding Your Next Career

2011-05-25T10:01:00.000-07:00

Are you dissatisfied with your career and want to make a change? Did you recently lose your job due to a layoff and want to pursue a new career? The first step to making such a shift is to identify potential careers to pursue. There are many resources available to assist you with this process, including working with a career development professional. For you do-it-yourself types, here are a few of my favorite resources for finding a fulfilling career:

Once you've narrowed in on a few potential careers, you will want to explore the following:

Nature of the work - What does the day in the life of a person doing this job entail? What is the work environment (hours, stress level, travel required, level of autonomy, etc.) Meet with professionals already working in your desired professional and get the inside scoop on what the job entails. Explore both the pros and cons before committing to the new career. You're investing time and money in this change so make sure it is one that you can live with for the long-term.
Training and other qualifications needed - Do you have transferable skills or will you need additional education or credentials? If you need training, what will be the cost? Does your state require special licensing or qualifications (example: most states require a license to be an aesthetician). What are the costs associated with licensing or credentialing? Some careers, such as Pharmacist and Registered Dietician require college degrees in the specialty along with an internship. You must consider this when calculating the financial aspect of your career change.
Job outlook - Is there high demand for people in this role? What are the future growth prospects for jobs in this arena? you want to avoid pursuing a career with low growth or one that could become obsolete; both situations could force you to make an other career change in the near future.
Earnings and advancement - Money isn't everything but your new career must be able to support your financial needs. How much can you realistically make in the first few years of your career shift? Research the average salary + bonus for the early years to determine if you can live off these earnings. Here are a few resources for determining earnings:

Are you considering a career shift? If so, please use the comments box to share your ideas, questions and suggested resources with fellow readers.

Paperwork that Could Clue You into a Scam

2011-02-15T12:28:00.000-08:00

Today I read an article about a financial adviser whose husband, also a financial adviser, had been scamming his clients for over 20 years and she never knew! Of course, looking back she realized there were some red flags that should have alerted her to the situation. These are the three things she observed:

Red Flag 1: His clients' portfolios enjoyed consistently good returns even when the market was performing poorly.(This is not impossible but very unlikely to occur).
Red Flag 2: He did not provide his clients with detailed trade confirmations for buys or sells.
Red Flag 3: He instructed his clients to make checks deposited to their accounts for investments payable to HIS firm rather than the custodian firm that actually held the investments. I will explain more about the roles of advisers, custodians and brokerage firms in future posts.

In an article on CBS MoneyWatch, she offers advice on what to do if you spot any of these red flags with your adviser. Click here to read the article (keep in mind that in this article she creates more questions than she answers, quite possibly as a way to promote the sales of her book. You can learn more about the terms and concepts she discusses through free research online).

I want to address red flag 2, no detailed trade confirmations provided to the clients for trades. When you or your adviser places trades in your investment account (brokerage, mutual fund, IRA, etc.), you will receive a trade confirmation of the transaction detailing such things as the name of the investment you purchased or sold, quantity of shares or bonds, price paid or received per share/bond, commission paid, etc. A trade confirmation is essential for responsible investing for two reasons:

Verification that the broker has filled your order according to your instructions - carefully review the document for accuracy and report any errors to your adviser as soon as possible so corrections can be made. If you wait to long to point out irregularities in the transaction, you could lose the ability to rectify the situation.
Documentation for taxes and gains/losses tracking - account statements do not contain sufficient details to support your declaration of gains or losses. The IRS requires a valid trade confirmation as proof of the buy or sell transaction. This confirmation can be on paper or electronic (a method many brokers now utilize to minimize paperwork you must maintain. Be sure you keep a backup of the electronic files).

For those of you not familiar with my philosophy of personal finance, I believe we are all responsible for our own money decisions. Anyone who takes responsibility for their financial well-being understands that attention to detail, education and a bit of skepticism go a long way to putting one on the path to personal finance success. If something seems too good to be true...it is! If something seems a bit off or suspicious...it is! If a financial adviser's style or recommendations rub you the wrong way...you are probably wise to find a new adviser.

Saving Money on Your Food Bill

2010-01-13T11:43:00.000-08:00

According to an article from PLoS One, food waste in the USA has progressively increased from about 30% of the available food supply in 1974 to almost 40% in recent years. For a family of 2 with 1 income, this translates into a throwing out $3,266 worth of food (source: Bureau of Labor Statistics: Consumer Expenditure Survey 2008).

To minimize the amount of food I throw out, I conduct a quarterly eat-down. What is an eat-down? It is when you focus on creating meals using only what you have on hand (fridge, freezer and pantry). Rather than stop at the grocery store once a week, I'll simply go "shopping" in my own kitchen, using up items before they spoil and saving money in the long run. It’s actually fun trying to come up with creative recipes. Anyone have a good recipe that calls for cream of celery soup and jar of cocktail onions?

If you decide to implement an eat-down at your house, I’d like to hear your strategies and results. Simply add your comments to this post. I’ll do the same.

Why should I get my credit report annually?

2009-03-25T17:14:00.001-07:00

Under the Fair Credit Reporting Act you are entitled to a free copy of your credit report once every 12 months from each of the nationwide consumer reporting companies – Equifax, Experian, and TransUnion. If you want to order your free annual credit report online, there is only one authorized website, www.annualcreditreport.com. The Federal Trade Commission has a link on their website (click here to access the FTC section on free credit reports).

So why should you get your credit reports annually?

To detect identity theft - Your report will show you any new accounts opened in your name as well as who has been checking your credit. If an account appears on the report that you did not open or if a company (especially a retail store where you have not applied for financing) inquires into your creditworthiness, you can take action to prevent potential identity theft from taking place or at least minimize the impact.

Uncover errors - The reporting agencies make mistakes, trust me! Equifax still has my married name on my report even though I changed back to my maiden name 14 years ago (and, yes, I changed it with the Social Security Administration so that isn't the issue as Equifax claims. You won't believe the hoops I have to jump through to fix it but that's for a future post.) Fortunately, this error hasn't impacted my credit worthiness. Other mistakes, such as reporting a late payment on a credit card when you paid on time, can have a significant impact on your credit score and will result in you paying a higher interest rate on loans or being turned down for a loan.

Personally, I recommend you view your credit reports at least every six months (many things can happen in 12 months). Of course, you will have to pay for the mid-year reports that you obtain but the small investment can save you a great deal of headaches.

2009-03-05T13:28:00.000-08:00

Making Home Affordable

You may have heard about the government's "Making Home Affordable" program. Aundrea Beach-Greco, a Certified Mortgage Planner in the Las Vegas area, provided some much needed clarification regarding this latest development in the housing market on her blog today. To learn more, check out her latest post.

2009-02-18T16:55:00.000-08:00

I have a tough time giving politicians any slack when they fail to pay their taxes. I'm a honest tax paying citizen of the USA. I have several businesses and I declare all of my income (yes, including cash payments). I carefully account for every sale and source of revenue as well as tracking legitimate expenses. The law states that you do not have to pay more tax than you owe under the law. Law is not about just "word" but also "spirit".

The article that follows is in regards to a politician owing taxes on expenses she (or more likely, her financial advisers) claimed as "Per Diem". Anyone with any understanding of the concept of Per Diem can see that these payments do not qualify for this classification but, instead, fall under the category of income. The spirit of the law was violated. But who violated it?

Was she an innocent in this situation? Did some financial adviser steer her down a slippery slope? Could be. If your employer sends you a W-2 or other tax statement showing the income you must declare, you trust their knowledge of the matter, right? Perhaps someone on her financial advisory staff told her that her expenses while living at her home could be considered travel expenses for work. If they did, they need to be sanctioned and fired pronto!

Unfortunately, ignorance is no excuse under the law. Let this story serve as a lesson to you...You need to know as much if not more than your advisers. You need to give everything they say the "gut test". If it seems too good to be true, it probably is.

http://politicalticker.blogs.cnn.com/2009/02/18/palin-told-to-pay-back-taxes/

2008-11-13T10:57:00.000-08:00

Money thought of the day...

"Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver." ~Ayn Rand, Atlas Shrugged

The key to success in financial matters rests in planning. It all starts by establishing your financial goals. Take the time to contemplate what you want your life to look like. Go beyond "I want to retire" by describing what you will do in retirement. Will you travel? Will you take up new hobbies? Let your imagination run wild. Visualize yourself retired. Ask yourself, "What do I need my money to do for me and when? Envision the "Quality Life" you want to achieve. Let this vision drive your financial goals.

To help you drive the financial planning process, check out the Goal Setting Worksheet.

2006-06-19T09:16:00.001-07:00

I came across some interesting statistics today while reading Journal of Financial Planning:

America ranks as number 1 among 42 countries for highest percentage (22%) of citizens who have no money left after paying essential bills and spending discretionary dollars (ACNielsen)
28% of Americans with no money left to save at the end of the month in a similar ACNielsen survey six months before (ACNielsen)
9 out of 10 affluent families will lose their fortune by the end of the third generation (Chrisitian Science Monitor)

In my own business I've noticed an increase in the number of clients who hire me to help them figure out why they are still living paycheck to paycheck. In the 1990's, most of my clients wanted to learn how to invest. Today they want to learn how to make their money go further.

I don't pretend to know the reason for this shift or the scary statistics above. I have a guess to offer - overuse of credit to finance daily existence. Financial Planners recommend that payments on your consumer debt (credit cards, car loans and unsecured loans) not exceed 20% of your net monthly income. How does your financial situation look in regards to this standard?
If you're overextended (i.e., payments total more than 20% of your net monthly income), there are a few things you can do to get back on track.

Cut back on spending - divert the savings to your debt payments; dine at home and/or pack a lunch for work to enjoy instant savings
Stop using your credit cards and debit card for purchases - if the money isn't in your bank account to write the check or you don't have cash on hand, don't make the purchase
Curtail impulse buying by only shopping with a list - whether going to the grocery store or the mall, have a list of specific items you need and only buy those items
Forego this year's vacation trip - use the money saved to pay down the balance on your highest interest credit card/loan

These are just a few ways to improve your financial health. Take a look at your spending over the last three months (your check register is a good place to start). Identify the "luxury" items or events you bought that you could forego in the near term until your financial situation shapes up. Where will you cut back in your spending this month?
- Catie Fitzgerald

2006-02-20T11:35:00.000-08:00

Okay, the New Year has begun. As is par for the course, we've drafted our resolutions for change and self-improvement in 2006. Do you remember last year's resolutions? Did you achieve them? If you're like most people you answered "no" to both questions. You can't remember last year's resolutions and therefore you didn't reach their fruition. So, why is it that "the best laid plans of mice and men are soon laid awry"? By the way, the first person to email me at cfitz@financiallysavvy.com with the correct name of the person who first coined this phrase, or it's close proximity...hint, hint, hint...will receive a gift certificate for a free teleseminar, a $12.95 value.

In my opinion, we break our resolutions for one key reason: we select results we can not control rather than actions we can take. This year, write your resolutions but keep this rule in mind: set goals for results. Let me give you a few examples:

Eliminate debt (result) versus stop using my credit cards (action)
Retire at age 60 (result) versus contribute 15% of my income to my retirement account (action)
Grow my portfolio by 10% (result) versus evaluate my current investments to identify and sell the losers

This approach to resolutions puts the control in your hands. If you take the action planned, you will achieve the desired goal. You can not affect the outcome but you have complete control over the input. Give it a try. Rewrite your annual financial resolutions to focus on specific action you will take rather than the results you hope to achieve.

This process works for other resolutions beyond those of a financial nature. So, if you wrote down that you'd like to lose weight or get fit this year, what action could you take to get one step closer to achieving your resolution? If you set to paper that you will spend more time with family, what one action can you take to make that a reality? Go for RESULTS!

2005-11-18T07:59:00.000-08:00

A friend of mine shared this story with me the other day. I felt it had a really valuable lesson for us all to keep in mind as we go about managing our money.

A group of working adults got together to visit their University lecturer. The Lecturer was happy to see them. Conversation soon turned into complaints about stress in work and life. The Lecturer just smiled and went to the kitchen to get an assortment of cups - some porcelain, some in plastic, some in glass, some plain looking and some looked rather expensive and exquisite.

The Lecturer offered his former students the cups to get drinks for themselves. When all the students had a cup in hand with water, the Lecturer spoke:

"If you noticed, all the nice looking, expensive cups were taken up, leaving behind the plain and cheap ones. While it is normal that you only want the best for yourselves, that is the source of your problems and stress. What all you wanted was water, not the cup, but you unconsciously went for the better cups." "

Just like in life, if Life is Water, then the jobs, money and position in society are the cups. They are just tools to hold/maintain Life, but the quality of Life doesn't change."

"If we only concentrate on the cup, we won't have time to enjoy or taste the water in it."

2005-11-05T10:30:00.000-08:00

5 reasons the Fed will fumble in 2006

I came across this article by Jim Jubak. It makes for interestingreading."Even with a new chief at the helm, the Fed is heading toward a policyblunder that will inflict a lot of pain on investors. Here are five bigreasons why."

http://moneycentral.msn.com/content/P131828.asp

Happy reading!

Catie Fitzgerald
Personal Finance Coach
www.financiallysavvy.com

2005-10-31T16:30:00.000-08:00

With approximately 75 million baby boomers gearing up for retirement, some investors are concerned that this huge wave of retirees will cause a stock market meltdown. The team at the Vanguard Group considers this event unlikely. Here are the reasons they give for a more optimistic point of view:

Withdrawals will happen gradually rather than a mass exodus.
The riches 10% of the US are likely to sell their investments during retirement, living off of dividends generated by their portfolios. This group owns 88% of the stock owned by individuals.
The market has other participants besides the Boomers (other generations, foundations, international investors, etc.).
The normal risks of stocks outweigh the demographics (the state of the economy, the level of interest rates, the tax environment, and the outlook for corporate earnings).

What do you think? Will the retirement of the baby boomers lead to a melt down in the stock market?

2005-10-26T21:40:00.000-07:00

Mutual Fund Overdose!

I came across an article today about a woman who owned 84 mutual funds. So what, you might say? Well, having too many mutual funds can lead to several problems:

Time crunch – difficulty finding the time to stay up on developments that could negatively impact your portfolio performance such as a fund manager retirement
Increased risk - due to overweighting in a particular stock owned by several different mutual funds
Diluted returns – if you have too many mutual funds, you could see the returns canceled by the losses in a one-to-one ratio such that your portfolio performance goes nowhere. How many mutual funds should you own to achieve effective diversification? The answer to this question varies depending upon your investment goals but you can use a standard rule of thumb to help make this decision.

The Asset Classes
Investors can choose from 15 different asset classes to include in their portfolio. In light of this, your portfolio should have no more than 11-13 mutual funds. You can further reduce that number in several ways:

Balanced asset allocation funds – also known as hybrid funds, the balanced fund invests in a mix of domestic stocks, bonds and cash within one fund
Blended fund – invests in domestic stocks of various sizes (large-, mid-, and small-cap) and mixed characteristics (value and growth) within one fund; typically you will find blended funds that focus on large/mid-caps and separate funds that focus on small-caps
Index funds – using index funds would allow you to have as few as 4 mutual funds: one fund representing the entire US stock market (i.e., Wilshire 5000 Index), one fund covering the international stock market (i.e., tracking the Total International Composite Index), one fund investing in the total domestic bond market (i.e., Lehman Aggregate Bond Index) and one money market fund

If you have more than 13 mutual funds, start paring back. Morningstar has some excellent tools to help you with this task. Check out their Portfolio Allocator and Instant X-ray.

2005-10-09T11:51:00.000-07:00

Do You Know Your Credit Score?

While doing a little research on credit card statistics, I came accross an interesting story on www.CardWeb.com. The article discussed the impact of FICO credit scores on tha annual interest charges paid by consumers. Apparently, a 30-point increase in a consumer's credit score could save more than $16 billion in annual interest charges! The most dramatic savings occurs when the FICO credit score moves above 660. For a full view of the statistics from this study conducted by Providian check out the article "Score Savings".

So, I have to ask. Do you know your credit score? Do you know what impacts your FICO credit score? Some of the tactics most sane people consider sound money management, such as closing credit cards you don't use or need, can actually hurt your score. I encourage you to check out your FICO credit score and learn more about what impacts that score.

To learn more about the FICO credit score, visit the credit education section of TransUnion, Equifax, or Experian. To get a free estimate of your FICO credit, check out the FICO estimator at MyFICO.com. You can also pay to get your real FICO credit score from all three reporting agencies. Once you know your score, take action to improve it so you can save money on interest charges.