Downsizing: Tough decisions and new beginnings

 What do we keep? What do we give away? Who do we give it to?  These are all questions that come when it's time to downsize. Selling a home to move into a smaller living space is a decision many retirees are faced with today.  Downsizing is not a simple task because it not only involves finding a different home, it also means problem-solving the practical logistics of a move, and the emotional work of sorting through the personal belongings we accumulate over a lifetime.  Securing smaller quarters and reducing personal possessions is a process that can include multiple family members coming together to make decisions about the disposition of treasured belongings and mementos.

According to Catherine Lysack, PhD, an occupational therapist and the Deputy Director of the Institute of Gerontology at Wayne State, these questions about keeping and getting rid of things resonate with older adults and their families.  The answers are often based in emotion because they involve personal evaluations of value and worth. Downsizing is therefore a very personal process that reflects who we are and what we envision for the future.  Dr. Lysack cautions, “While some items are easily given to charity and sold in yard sales the most cherished items require special placement—most often with family and friends.”

While the reasons for downsizing are many and varied for seniors here are 5 common triggering events:

• Health reasons
• Death of a spouse
• Desire to live closer to family
• Financial limitations
• Desire for a new beginning

Downsizing is so much more than packing boxes and moving.  Demographic trends today highlight the fact that baby boomers are on the march to middle and older age.  The downsizing conversation is an important discussion to have with your financial planner and family members. To learn more about an upcoming educational event where Dr. Lysack will be the featured speaker contact me at laurie.renchik@centerfinplan.com.

What is Your Greatest Investment in Life?

 A common perception of the phrase “return on Investment” is what you make on your money.  Contrary to usual thinking, I am not talking about monetary investment.  In this case, I am referring to the people we hire to help us achieve the important goals in our lives.  We may not realize how vital this investment is.  After we invest in ourselves, investing our resources in others is the most important thing we can do.  These investments in various relationships come in many forms.

It might be your doctor, a therapist, a trainer, or even a nutritionist.  What could be more important than investing in these relationships to manage your health?   Health is a quintessential asset of life.  Relationships with people are important investments of time and/or money.  The distinguishing factor about money and time are that they are finite resources for most of us. 

For most, time is even more precious than money, and we can’t take it - we can only spend it!  We never seem to have enough time, to do all the things we want to see and do.  After family, work, exercise, and all of our various commitments, there is very little time left.  Therefore, delegation becomes a tool of utmost importance.  Learning how to leverage our time is vital. Focus on giving up almost everything except those components of your life that you consider the most important and fulfilling.

Try brainstorming a list of the top 50 ways to spend your time that are fulfilling, meaningful, and necessary in your work/life balance.  If financial management did not come up or it lies outside your area of interest, consider hiring a specialist. 

Grasping a clear understanding of life goals and the progress made toward achieving those goals is a good “return on investment.”  Holistic Financial Planning is one way to connect your values with your resources. Your time is valuable.  It’s sacred!  Working together, we are determining the roadmap of your life.   

Charting progress toward goals and objectives on an ongoing basis helps keep time, resources and energy working in tandem, so that the financial management piece of the puzzle integrates seamlessly into your life plan.  You desire a return on your time and money.  Know that all of our energy is focused on this being a positive outcome.  Know that our goal for this relationship is to provide value.  Working with The Center, know that we strive to help clients enjoy richer more fulfilling lives because of our discussions and the stewardship of your finances.

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Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.  Any opinions are those of RJFS or Raymond James.

Financial Empowerment for Women Today

 How do you keep control and focus in your busy life? For many, the creation of a to-do list and the eventual checking off of items is essential.  Busy multi-taskers (code word for most women) have made lists work for them for generations.  My problem, however, is that I make too many lists and then forget where I put them.  They exist all over – on the back of envelopes, on my smart phone, or zipped securely in a pocket in my purse. 

Whether you have one list or ten, are diligent or more creative with your check list system I think it is fair to say that clearly, to-do lists empower those who partake.  Check!  When I talk with groups of women; either informally with my friends and family or professionally with clients and colleagues, the subject of financial empowerment is a popular topic and many times comes to the top of everyone’s to-do list.  Especially in today’s economy, with new financial realities affecting many families in many different ways.

What does financial empowerment look like for women today?  In my experience there is no single correct answer to this question.   Creating your own financial to-do list is one way to focus your energy and check your progress toward achieving financial empowerment.  Here is a “list” of anecdotal responses, in no particular order, culled from the many conversations I have had with women on this important topic.

What Needs to be on Your Financial To-Do List?

• My decisions about spending money will be made in a way that honors my values and responsibilities
• I will learn from my financial mistakes
• I will understand that taking care of myself financially is just as important as taking care of others
• I will delegate without abdicating responsibility for managing my money
• I will set and make progress toward financial goals
• I will know my value in the marketplace and initiate the compensation conversation

Imagine the satisfaction and confidence you will feel, and the empowerment that will emerge crossing the financial to-dos off your list. 

Want to share your financial to-do list with me?   Send me an email or give me a call! 

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.

Donor Advised Fund – A Way to Manage Your Charitable Giving

 It is better to give than to receive.

Whether it is giving of your time, talents or financial resources, there is a lot to be gained by simply being generous. As a professional financial advisor, one of my many great pleasures is helping clients plan and then efficiently give to causes near and dear to them.  Recently, I helped long-time clients do just that.  After conducting a Financial Independence analysis that provided confidence that they were in a position to provide financial assistance to others, they decided to earmark a significant amount for charitable giving.  However, like many, these clients were not sure which charity to give support … just yet.

Enter the DONOR ADVISED FUND. Donor Advised Funds have been around for a while – but I am still surprised at how little they are used. Many firms and organizations offer them – Southeast MI Community Foundation, Fidelity, Raymond James, etc. There are many situations where a donor advised fund might make sense.

Hopefully you are aware of the advantages of gifting appreciated securities, which allow you to avoid capital gains taxation (note that I said avoid and not evade).  When you gift appreciated securities to a charity or donor advised fund held for longer than 12 months, you are able to deduct the fair market value of the securities and avoid capital gains. I like to say that there are three parties to a charitable donation; you, the charity, and your silent partner the IRS.  We want you and the charity to benefit the most.

A donor advised fund allows you to lock in the gain by transferring the shares to the donor advised fund. Next, you get an immediate income tax deduction. And then, you can decide on the specific charity or charities to benefit at a later date. For more information visit the web site www.myfamilyfoundation.org. If you would like additional assistance – give us a call – we’d like nothing more than to help you with your charitable giving.

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The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material.  The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.  Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.

Charitable Giving: Your Annual Giving Plan

 Once you have determined the causes you want to support and have done your homework on those chosen charities, it’s time to put together your giving plan.  A giving plan can help you track your giving on an annual basis, to document your legacy giving wishes, and to communicate your giving desires to your family. 

Your annual giving plan could look something like this and helps you outline your giving based on:

• Funding areas – Cultural arts, education, social programs, the environment, animals, religious affiliations, support programs, health/research, etc.
• Local versus Global reach – Determine your desire to support organizations that serve close to home versus those that serve a broader/global community.
• Identify the Specific Organization(s) in each funding area
• Identify specific organizations and specific gifting – Determine your annual giving amount in dollars and/or percentages and track when you’ve met each annual goal.
• Identify your Legacy Gifting Wishes – Document the organizations you have identified to receive charitable dollars from your estate.  While this form does not have any legal authority and does not replace the needed legal documents (trusts, wills, etc.), it is a way to communicate your charitable giving desires.

Your annual giving plan will help you (1) plan and track your annual giving and (2) provide a tool with which to communicate your charitable giving with your family.  Feel free to use our Giving Plan (link form here) form, or develop a format that works best for you.  The important part is to develop your personal giving goals based on what is important to you, to verify the organizations you choose use your gifts to provide the most good, and to make sure that your gifting fits into your overall financial plan.

“What we have done for ourselves alone dies with us; what we have done for others and the world remains and is immortal.” ~Albert Pike

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Changes in tax laws may occur at any time and could have a substantial impact upon each person’s situation.  Please discuss tax matters with the appropriate professional.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.

Charitable Giving: Researching Your Charities

 In my previous post, I addressed the reasons that individuals decide to give to charities.  Once you have made the conscious decision to give, how do you make sure your contributions are making a real difference and not just funding the salaries of the organization’s executives?

The internet makes it easier than ever to do your own investigating.  By doing your own due diligence, you can make better decisions about which charitable organizations most deserve your hard-earned dollars.  Here are a few things to look for:

• Look for IRS-Approved Charities – Verifying that a charity is an IRS-approved nonprofit organization will not only ensure that your contribution will be tax deductible, but IRS-approved charities have stringent application and reporting requirements, which generally weeds out those organizations that are ill-intended.
• Look at the Financial Strength and Practices of the Charities – Web sites like Charity Navigator (also a tax-exempt charity) rates over 3,000 of the largest charities by looking at their financial practices (revenue spent on executing programs and services, overall financial strength, etc.). You may have to dig a little deeper on the web to get information on smaller charities.  Your local United Way may be of assistance with local charities.
• Look at the Programs and Services Provided by the Charities – The name of the charity itself may not define the scope of the programs or services provided.  Be sure you understand whom the organization serves and how they serve them. This way you can make sure you are supporting the cause you are aiming to support.

Once you’ve narrowed down your list of high-quality charities that satisfy your desire to give, you need to put together an annual giving plan. Watch for my next post where I discuss how to put together such a plan.

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Changes in tax laws may occur at any time and could have a substantial impact upon each person’s situation.  Please discuss tax matters with the appropriate professional.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.

Charitable Giving: Why Do We Give?

 Tax-deductible charitable donations are a great way to get even more deductions on your tax return. By itemizing those donations to qualified charities on your 1040 Schedule A, you may be able to reduce your taxable income. In her ‘Tis the Season to Give blog written late last year, Julie Hall, CFP® outlined the different ways to give on a tax-efficient basis.  But aside from the attractive benefit of potentially lower taxes, why do we give to charities?

Individuals give to charities for many different reasons:

• Support a Personal Connection– We may know someone who works for a charity or benefits from the organization in some way (i.e. a relative is a breast cancer survivor, so a donation to the Susan G. Komen Foundation feels like the right way to give back).
• Support Society as a Whole – We may feel like, because we are fortunate to be financially comfortable, we should do our part and give back to those who are less fortunate (i.e. a local food bank).
• Support a Cause We Truly Believe In – We have a passion for a cause (i.e. animal lovers may choose to support the Humane Society).
• Support an alma mater – We give back to our local high school or college as a “thank you” for the educational experience.
• Support a Religious Affiliation – We tithe to our church on a local, national, or international level.

If you’ve made the conscious decision to give to charities, it is important to (1) research the charities you’re interested in to make sure that they are legitimate and that your donations will be used responsibly for the intended cause and (2) track your giving and communicate your giving plan to your family.

In my next post, I will take a closer look at the best ways to research your charities.

The Financial Benefits of a Healthy Lifestyle

 Spring seems to be the time to get moving and get healthy in preparation for the coming summer months (and the need to sport a bathing suit at the beach!!!).  Many of my co-workers and I are in training mode for various events – 5k runs, Triathlons, you name it.  And it turns out that our healthy behavior could have more benefits to us than just our fit and trim bodies and strong heart rates – we could be developing healthy wallets, as well!

Recent studies by the University of Rutgers in New Jersey have found that physical health and financial health are highly correlated to each other, and to a person’s overall happiness.  It appears that the habits that lead to a healthy lifestyle, like the ability to stay disciplined, make good choices and see the future implications of decisions, lead individuals to have a more positive outlook on life, including their current and future financial success.

Interestingly, these are some of the specific relationships that the Rutgers studies identified between health status or behaviors and finances:

• Studies show that physical appearance affects a person’s earning ability; smokers typically earn less than non-smokers who do similar work.
• Healthy people pay lower health insurance premiums now, and typically have lower health care costs throughout their lives.
• Inactivity has been estimated to cost $670 to $1,125 per person per year due to the impact of obesity on overall health.
• Eliminating unhealthy habits saves dollars that can be redirected to investments for future goals.  For instance, eliminating a junk food habit could save $3,650 or more annually.

For the chance at a financially successful future, get up, get moving and get healthy!!

Source:  Rutgers University Health Finance and Health Behaviors Studies (http://njaes.rutgers.edu)

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The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily of RJFS or Raymond James.  Links are being provided for information purposes only.  Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors.  Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members.

Lessons in Delayed Gratification from a 4 year old

 On Easter morning my daughter, Lilly, who is 4 years old, awoke with great anticipation as every child does.  Knowing the Easter Bunny came the prior night, she ran downstairs to hunt for her basket and was thrilled to find it.  She turned to me and said, “Mommy the Easter Bunny left me a basket full of c-AN-dy,” stretching the word out for emphasis.  I know, I know, I’m not winning any parent of the year award by filling the basket with candy but, hey, it’s a special occasion.  So then she said, “Come on Mommy let’s go upstairs and lay out all of the candy and you can tell me about each one.”  So we did this and she didn’t even ask to eat a piece.  I was blown away!  When I asked if she wanted anything she said, “No I’ll wait until after breakfast when I can eat more than one piece of it without getting a belly ache,” which is often my reasoning when telling her she has to wait until after breakfast for a treat.  

Her Easter morning restraint reminded me of the study done on deferred gratification by a psychologist at Stanford in the late 1960’s.  Here’s a great YouTube of what came to be known as the Marshmallow experiment. In the experiment, each child was offered a marshmallow now or, if they could resist eating the marshmallow, they could receive two.  The children that participated were later studied to determine if this resulted in future success.  In fact, it did.   The children that waited showed higher SAT scores, had higher self-esteem, and weren’t so easily frustrated. 

Deferred gratification is a very important life lesson and one of the keys to financial success.  In order to meet future financial goals, something has to be given up today, but that doesn’t always have to be difficult.  Here are a few easy steps: 

1. Avoid the temptation of spending money now, for example, not taking that extra vacation this year in order to make my Roth IRA contribution (which is still painful for me even though I know it is the right thing to do). 
2. You need to find an alternative because you still have to make life worth living in the present.  So for me that ends up being a local “staycation” instead of that big vacation. 
3. It is always important to focus on the reward, which in my case is hopefully a comfortable retirement, or in my daughter’s, lots of candy after breakfast. 

While I’d like to take credit for my superior parenting skills by pointing out my 4 year old grasps the concept of delayed gratification better than most adults, I don’t think I can.  That one she came up with all on her own.  And it is a lesson that we all need to incorporate into our lives to become better savers and investors.  

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The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.

April is Financial Literacy Month

 It is a sad statement about our society that we need to have an entire month dedicated to financial literacy.  Today, a large percentage of individuals and families are experiencing some kind of financial difficulty that is negatively impacting their everyday lives.  Money Management International recently reported that Americans carry more than $2 trillion in consumer debt and 30 percent report having no extra cash.  This is just Americans – you can only imagine what the figures might be worldwide! 

Much of our problem, in my opinion, is lack of education.  We need to start teaching basic financial education to children, so that good financial habits are built over a lifetime.  The problem is, there are very few schools teaching financial education, and many parents don’t have the resources (or sometimes the knowledge) to teach their children these important lessons. 

The good news is that we have a great resource locally.  Detroit is home to Junior Achievement Finance Park, a hands-on financial learning center.  I recently spent the day volunteering with the FPA of Michigan at JA Park with a classroom of 8^th graders from Detroit. I saw first-hand how this high-tech facility can help students learn the basics of money management by spending the day in the life of an adult.  Students were assigned a life scenario and were responsible for:

• Calculating their Net Income (salary after taxes)
• Managing monthly expenses by making lifestyle choices
• Setting aside a portion of the budget for savings and charitable giving
• AND, ultimately, creating a balanced budget 

As we all know, this is not always an easy task.  The day provided students with some real-life perspective on how difficult it can be to manage money, and on why Mom and Dad sometimes have to say “No” to their daily wants. 

In honor of Financial Literacy month, you have the opportunity to visit JA Park with your children FREE of charge this Saturday, April 28^th, from 9 a.m. to a 1 p.m. for JA Family Day.  I encourage you to attend with the children in your life…let’s work together to help the next generation become financially literate!

Please feel free to e-mail me for additional financial literacy resources for children and adults.

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Raymond James is not affiliated with Junior Achievement.