Should You Disinherit a Child?

Most parents choose to leave their estates equally to their children. But sometimes, parents intentionally choose to not leave anything to a child. There may be what the parents consider to be a legitimate reason: one child has been more financially successful than the others; not wanting a special needs child to lose government benefits; or not wanting to leave an inheritance to an irresponsible or drug-dependent child. Sometimes a parent wants to disinherit a child who is estranged from the family, or to use disinheritance as a way to get even and have the last word.

Regardless of the reason, disinheriting a child is hurtful, permanent, and will affect that child’s relationship with his or her siblings. The courts are full of siblings who sue each other over inheritances but even if they don’t sue, it is highly unlikely they will be having family dinners together. Money aside, there is symbolic meaning to receiving something from a parent’s estate. 

Disinheriting a child may be short-sighted and even completely unnecessary. For example:

• A child who appears to be more successful financially may have trouble behind the scenes. The inheritance may be needed now or in the future: finances can change, marriages can collapse, and people can become ill. And unless specific provision is made for them, grandchildren from this child will also be disinherited.
• A spouse, child, sibling, parent or other loved one who is physically, mentally or developmentally disabled—from birth, illness, injury or even substance abuse—may be entitled to government benefits now or in the future. Most of these benefits are available only to those with very minimal assets and income. But you do not have to disinherit this person. A special needs trust can be carefully designed to supplement and not jeopardize benefits provided by local, state, federal or private agencies.
• A child who is irresponsible with money or is under the influence of drugs or alcohol may not be the ideal candidate to receive an inheritance of any size. But this child may need financial help now or in the future, and may even become a responsible adult. Instead of disinheriting the child, establish a trust and give the trustee discretion in providing or withholding financial assistance; you can stipulate any requirements you want the child to meet.

How we choose to include our children in our estate plans says a good deal about our values and faith. Not disinheriting a child who has caused grief and heartache can convey a message of love and forgiveness, while disinheriting a child, even for what seems to be good cause, can convey a lack of love, anger and resentment.

If you have previously disinherited a child and you have since reconciled, update your plan immediately. If your decision to disinherit a child is final, your attorney will know the best way to handle it. Consider telling your child that you are disinheriting him or her so it doesn’t come as a complete surprise. Explaining your reasons will allow for honest discussion, may help deter the child from blaming siblings later and may prevent a costly court battle.

Contact Bobby Sawyer at (704) 944.3275 or bobby@csjlawonline.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.  

Blended Families and the Need for Estate Planning

Anyone with children or modest assets should seriously consider some minimal estate planning, but the increasing number of blended families underscores the need for proper estate planning.

Blended families can involve children from a prior marriage as well as joint children, sometimes joking referred to as “his, hers and theirs.”  And blended families involve both younger and older couples, and nearly everyone in between.

When the new spouse is significantly younger, this sometimes means that the older spouse’s children are close in age to the younger.  These relationships can cause more than friction between the step-parent and step-children.

Most parents want to ensure that their assets will pass to their children, not their stepchildren.  However, absent good estate planning, there is no guarantee that their children will inherit their assets.  In fact, if the couple creates common “I love you” wills such that their assets pass to the survivor of them, there is a significant likelihood their children will be totally disinherited.

This is because all of their assets will pass to the surviving spouse to do with as he or she pleases. More often than not this means excluding the stepchildren, who then receive nothing. 

The fact that Americans are living longer, and sometimes remarrying much later in life, means that blended family issues come into play there too. A recent USA Today article, titled With more blended families, estate planning gets ugly, highlights some of these issues.  The full article is available online.

As this article states, “[a]dd the gaping generational divide between Depression-era parents, who valued frugality above all else, and their Baby Boomer children, who relish self-reward, and the dynamics can be explosive.”

Thus, baby boomer children expecting an inheritance may have to wait much longer than expected. But perhaps more difficult, who should pay for the cost of the surviving spouse’s care? Should the stepchildren be forced to use their inheritance to pay for an aging step-parent’s care, particularly after only a short-term marriage?  Or should this burden fall on the children?

There is no one right answer here, but these questions epitomize the many questions that arise with blended families. These questions should be answered with the help of counsel and proper planning.

Contact Bobby Sawyer at (704) 944.3275 or bobby@csjlawonline.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.  

Are You Wasting Money? Part 3: Taxes, Insurance, Not Bidding and/or Negotiating

So far in this series on wasting money (part 1 and part 2), we have looked at how people may overpay for housing, interest, transportation, food, clothing and entertainment. In this last part, we will look at a few more areas in which we may pay more than necessary—taxes, insurance, not obtaining bids for services, and not negotiating for large purchases.

While you may already be astute in these areas, sharing good financial practices like these with your children and/or grandchildren can be part of your legacy, as you help them prepare to be prudent and responsible beneficiaries. And, for tax management and risk management (via insurance coverage), your legal and advisory team can produce integrated tools to assist you in keeping more of your money within the family than having it leak out unnecessarily.

The Key Takeaways

• Any time you pay more for something than you have to, money is wasted.
• Reviewing tax deductions and insurance coverage, comparison shopping, bidding out services and repairs, and negotiating—these take time, but they can help save significantly.
• Any time you save money, you are being financially responsible and will find more money for the expenses in life that are really important to you.

Where People Waste Money…And Actions to Consider

1. Taxes. Take every deduction to which you are entitled. Even if a professional prepares your tax returns, it is a good idea to become familiar with allowable deductions. For example, charitable deductions, even small ones, add up—if you volunteer, keep track of your mileage and financial contributions; fill out the form when you make clothing and household donations; and instead of dropping cash into the offering box at your place of worship, write a check or set up automatic payments.  Of course, if you have significant charitable interests, trust-based strategies offer you cost effectiveness and a disciplined structure.

2. Insurance. Review your policies every year. Property values change, and it’s important to not over- (or under-) insure. For example, an older car may not need collision insurance. Increasing deductibles will save on premiums. Bundling various policies (home, autos, personal liability, jewelry) under one insurer will probably earn you discounts and save time.

3. Not getting bids when hiring workers. Asking friends and neighbors for references is a good start, but it is also important to get at least three estimates. And remember, the lowest price is not always the best value.

4. Not periodically rebidding current products and services. Being loyal is commendable, but not if it causes you to pay more than necessary. If you are able to find a lower price, your current provider may match it to keep you as a customer.

5. Not negotiating for large purchases. We all know there is profit margin built into pricing, and there is usually a larger margin on expensive items. Some vendors actually expect to negotiate. Learning how to negotiate fairly and respectfully will frequently save you some money.

What You Need to Know: It’s easy to get caught up in the current culture of instant gratification and impulse spending. We could all benefit from slowing down a bit and becoming better consumers. Taking the time to evaluate purchases and comparison shop will not only help avoid overspending and wasting money, but it results in satisfaction from being responsible and efficient with money. 

More Actions to Consider

• Evaluate how you may be overspending in these areas. Commit to following through on some of these suggestions and note how much money you save.
• Think where you could use that extra money. Would you like to pay off some debt, or save for a family vacation, car, home, college, or charitable gift?
• Start to prioritize spending and set some money-saving goals. Creating a budget and monitoring spending on a regular basis will help avoid wasting money and start meeting goals you set. (For more on this, read the previous blogs on budgeting and setting spending priorities.) 

Contact Bobby Sawyer at (704) 944.3275 or bobby@csjlawonline.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.

Are You Wasting Money? Part 2: Food, Clothing and Entertainment

In Part One of this series on wasting money, we looked at housing, interest and transportation—areas in which you or your loved ones may be wasting larger amounts of money. In Part Two, we will look at how money can be wasted in everyday areas of life—specifically food, clothing and entertainment.  

In many ways, it is the routine purchases that occur without planning that subsequently accumulate to large amounts. An area of high importance when making beneficiary distributions is for the money to be used in meaningful ways such as home purchases, education, and investing and not simply to cover shortfalls in month-to-month expenditures. These simple lessons are helpful reminders for everyone.

The Key Takeaways

• Money is wasted when we pay more for convenience, excess, impulse buying and bad habits.
• While this may be okay if it happens occasionally, living a lifestyle that consistently wastes money can cause people to live beyond their means and incur debt, which causes more money to be wasted by paying interest on that debt.
• Recognizing areas in which money is wasted, and taking steps to change buying habits, helps keep people out of debt and give more money to spend on the things that really matter.

Where People Waste Money…And Actions to Consider

Groceries. We’ve all been guilty of buying more at the grocery store than we intended. Here are a few tips that will likely fit within a current routine:

1. Plan meals for a week, make a shopping list and stick with it. Make an exception only if something regularly used is on sale. 
2. Use coupons only for items regularly purchased (and don’t buy things you don’t normally use, just to use the coupon). 
3. Buy in bulk; split the purchases with a friend if storage space is lacking. 
4. Shop without young children whenever possible to save money, time and frustration.

Eating out. If the amount of money spent in this area is unknown, track it for a month or two and consider other ways that this money could be spent. Socializing with friends over meals is important, but this is one area that usually can be reined in. Meet over lunch or an early dinner. Watch the alcohol; bar drinks are expensive, add up quickly and make an affordable meal completely unaffordable. Consider entertaining at home; it is less expensive and more personal.

Clothing. Take a look at how much is spent on clothing, especially on items purchased and not worn. Avoid shopping as a hobby or because of boredom; retailers are great at making people think something is needed.

Entertainment. Evaluate cable or satellite TV subscriptions and drop the premium channels not being used. Monitor cell phone bills. Investigate bundling phone, internet and TV services under one carrier. When going to the movie theater, go to early showings, buy discounted tickets, shop for bargain-priced theaters, and bring snacks. Check out community theater productions.

What You Need to Know:
Cash expenditures are usually the most difficult to track. Consider the envelope system (cash set aside in envelopes marked for specific cash purchases); place the receipts inside the envelope so it is easy to remember how cash was spent. Or use a debit card for even the smallest purchases.

More Actions to Consider

• Review how money is currently spent. If not using a personal accounting program like Quicken to track spending, now would be a good time to start. Carefully evaluate areas where overspending occurs.
• Start comparison shopping. Make a list of items bought regularly, including size and the last price paid. Keep the list handy for other shopping trips and compare prices. Then make a new shopping list for items at the stores with the best prices.
• Keep a running grocery list. As an item gets in short supply, add it to the list. This will make grocery shopping more efficient and save time by not having to make frequent trips.

Contact Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.

Are You Wasting Money? Part 1 - Housing, Interest and Transportation

Most of us are guilty of wasting money in one way or another. Often we are so busy that we pay too much for convenience, and we don’t comparison shop or look for bargains. Sometimes we waste money because we just stay in the same routines—shopping at the same stores, eating at the same places, using the same services. And sometimes, especially if we don’t keep good records of how we spend our money, we may not even realize how much money we are wasting.

In this three-part series, we look at ways that money is wasted. While it may not apply to you, there are others in your life such as children or grandchildren that will benefit from these lessons. For those with budgeting discipline, an element of your financial legacy is to teach and train others to live within their means. And, as these disciplines are learned by your beneficiaries, you gain greater comfort that valued purposes will be pursued with distributions.

The Key Takeaways

• Tracking and evaluating how money is spent helps illustrate areas of waste.
• Overspending can drive people into debt and prevent them from having money for things that really matter.
• Reducing wasteful spending helps people to live within their means and provide more money for things that are most important.

Major Spending Areas … And Actions to Consider

1. Housing. Living close to where one works definitely can save time and money on a commute, but moving to a neighborhood that is just a little farther out can save a bundle. If someone is retired or works from home, moving to a less expensive part of the country is an attractive option. 
2. Interest. Credit cards, student loans, car loans, home mortgage, home equity line of credit, other consumer loans—any time money is borrowed, interest payments accumulate. The most expensive of all is credit card debt. By renegotiating interest rates, not only are monthly payments reduced but considerable amounts of accumulated interest are also saved. Of course, great care needs to be taken when considering buying anything via debt.
3. Transportation. Car payments, insurance, gas, maintenance and repairs are necessary expenses, but there may be ways to economize. Some people can work from home one or two days a week. Since a new car depreciates the minute it is driven off the lot, buying a previously owned car can save thousands.

What You Need to Know: 

Eliminating wasteful spending is especially important for people who need to watch their expenses—retirees who may be on a fixed budget, those who have been laid off or are working part time, young families, and college graduates who are trying to start a career while repaying student loans. But even if plenty of money is at hand for living expenses, being a careful consumer helps money go further and adds important lessons to be passed to loved ones as a component of a financial legacy.

Other Actions to Consider

• Evaluate housing, interest and transportation expenses.
• Determine how much to spend in these high-cost areas and how much can be cut.
• Check out different neighborhoods and transportation options and see how much money can be saved.
• Call lenders and their competitors to see if better interest rates can be negotiated.
• Pay off debt as soon as possible. 

Contact Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.

Passion Investing as a Spark to Your Life

Bill Gates, Warren Buffet and over 50% of the Fortune 400’s The Richest People in America list have decided to give away their wealth for charitable pursuits. Of course, not many of us have that kind of money or are inclined to give away all we own. However, giving to charitable organizations is something that anyone can do, and we can all derive a similar satisfaction by investing in causes that light our passion.

The Key Takeaways

• Investing in a cause that we feel passionate about can give our lives new purpose.
• Even if we have limited finances, we can still find ways to contribute by giving of our time and/or talents.
• Our giving can influence subsequent generations and others around us by setting an example and communicating our values.

Finding Your Passion and Renewing Your Life

Americans like helping people and giving back to our communities. You may have already found your passion and are doing what you can to help. But if you are still searching for a way to make a difference, give some thought to what inspires you or what you care about deeply. It could be the arts, reading, the elderly, our military, disadvantaged children, teen mothers, or a clean planet. There are many organizations that need volunteers and financial help to do their good works. And, of course, most churches and religious organizations offer numerous ways to volunteer in your community and around the world.

What You Need to Know: 

One traditional way to benefit a charity is to leave a donation through a will or trust. This is good, of course, but if you contribute while you are living, there is the additional benefit of seeing the results of your contributions. You can also network with others who share your passion, which often results in greater contributions.

Actions to Consider

• If you have children at home, include them in your volunteer work. If you make a donation, deliver the check in person and take your children with you.
• If you are retired or nearing retirement, you have the benefit of extra time to donate to your favorite causes. Some people choose to work part time in retirement so they will have extra money for living expenses and for donations.
• Include all cash donations in your spending plan so they are part of your monthly expenses. Otherwise, you risk being an emotional or impulsive giver, which can have a negative impact on your finances.
• If you aren’t sure how to contribute, ask the organization you want to help. They are sure to have a number of suggestions with different time and money commitments.
• Whenever possible, work with local organizations that benefit your community. Get to know the people running the organization so you will know if they can be trusted with your contributions. This will also allow you to see the progress firsthand.
• If you have more substantial means, a charitable trust is an excellent way to give, and such a trust gives you many financial and non-financial benefits.

Contact Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.

Organize Information for Your Family

Think for a few moments about what would happen if you suddenly became incapacitated or died. Would your spouse or family know what to do? Would they know where to find important records, assets and insurance documents? Would they be able to access (or even know about) online accounts or files on your computer? Would they know whom to ask if they need help?  Putting the effort in now to establish a formal document inventory can alleviate unnecessary anxiety and turmoil in the future.

The Key Takeaways

• If you should suddenly become incapacitated or die, your family would need to know where to find the information they would need.
• Let your key relationships know where to find your document inventory.
• Do not assume your process will be readily understood by others; have a trial run to make sure they can find and understand your records.
• Keep your inventory current with an annual review.

What Information Would They Need?

There is a large volume of documents and information that your family would need during a calamitous event such as incapacitation (even temporary) or death. This basic list will help you start thinking of the critical information you would want your family to have.

• legal documents (will, living trust, health care documents);
• list of medications you are taking;
• list of your advisors (attorney, CPA, banker, insurance agent, financial advisor, physicians);
• insurance policies (health and life);
• year-end bank and investment account statements;
• storage facility location, access method, and inventory;
• list of other assets, including location, account numbers, date purchased and purchase price;
• safe deposit box location, list of contents and location of key;
• list of people to whom you owe money (mortgage, credit cards, etc.);
• list of people who owe you money;
• death or disability benefits from organizations;
• past tax returns.

Also, many of your records are probably on a computer or stored online. If you scan documents or receive financial statements electronically, someone else may not even know they exist. If you use a computer accounting program such as Quicken, QuickBooks or Mint, those records would be on your computer. Family photos may be stored digitally or online. Much of this information is password protected.

What You Need to Know

Your document inventory requires a methodical listing of both hard copy and digital forms.  While the effort will be more challenging at the start, the maintenance of the inventory is much simpler.  Be mindful that your digital footprint will likely grow much faster in the future than it has in the past. 

Actions to Consider

• Give current copies of your health care documents to your physicians and designated agent(s). 
• Keep your original documents in one safe place, like a fireproof safe or safe deposit box. Make copies for the notebook described next.
• Buy one or two three-ring binders to organize your personal and financial information. You can enter it by hand or create spreadsheets on your computer, but having it all in one or two binders will make it easy for your family to find and use. (If you leave it on your computer, they may never find it.) Include locations, contact information, account numbers and amounts.
• Include a list of online accounts and how to access them (including passwords).
• Clean up your computer desktop and put important files in an easy-to-find desktop folder.
• Have a trial run. Ask your spouse or other family member (or your successor trustee or executor) to pretend that he or she needs to access needed information.
• At least once a year, review and update your notebook, computer desktop files and passwords for online accounts.

Contact Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.

Five Things You Need to Know About the Recently Enacted ABLE Act

On December 19, 2014, President Obama signed the Achieving a Better Life Experience Act (ABLE
Act) into law.  The ABLE Act will allow certain individuals with disabilities to establish tax-free savings accounts that can be used to cover expenses not otherwise covered by government sponsored programs. These accounts can be a great alternative or supplement to special needs or supplemental needs trusts.

Here are five important things you need to know about the ABLE Act.

1. What is an ABLE account?  An ABLE account is similar to a 529 education savings account that helps families save for college.  It is a tax-free, state-based private savings account that can be used to pay for the care of people with disabilities.  Although income earned in the account will not be taxed, contributions to the account will not be tax deductible.

2. Who is eligible for an ABLE account?  Eligibility will be limited to individuals with significant disabilities with an age of onset of disability before turning 26 years of age. If an individual meets these criteria and is also receiving benefits under SSI and/or SSDI, they are automatically eligible to establish an ABLE account.  If the individual is not a recipient of SSI and/or SSDI but still meets the age of onset disability requirement, they will still be eligible to open an ABLE account if the SSI criteria regarding significant functional limitations are met.  In addition, the disabled individual may be over the age of 26 and establish an account if the individual has documentation of their disability that shows the age of onset occurred before the age of 26.

3. What are the limits for contributions to an ABLE account?  Each individual state will determine the total limit that can be contributed to an ABLE account over time.  Although we’ll need to wait for regulations to know the exact amount that can be contributed, the Act states that any individual can make annual contributions to an ABLE account up to the gift tax exemption limit (which is $14,000 in 2015).  If the disabled individual is receiving SSI and Medicaid, the first $100,000 held in an ABLE account will be exempted from the SSI $2,000 individual resource limit.  If an ABLE account exceeds $100,000, the account beneficiary will be suspended from eligibility for SSI benefits but will continue to be eligible for Medicaid.  Upon the death of the account beneficiary, assets remaining in the ABLE account will be reimbursed to any state Medicaid plan that provided assistance from the day the ABLE account was established.

4. What types of expenses can be paid from an ABLE account?  An ABLE account may be used to pay for a “qualified disability expense,” which means any expense related to the beneficiary as a result of living with their disability.  These expenses may include medical and dental care, education, employment training, housing, assistive technology, personal support services, health care expenses, financial management, and administrative services.  

5. When will able accounts be available?  Although the ABLE Act was signed into law in December 2014, regulations will need to be established by the Department of Treasury before states can begin to set up procedures for managing ABLE accounts.  Once these regulations are issued (which is anticipated to occur later in 2015), each state will be responsible for establishing and operating their own ABLE program.

Since the money in an ABLE account can grow tax free and be accessed on a tax-free basis for qualifying expenses, these accounts could be a valuable resource for certain disabled individuals and their families. Although we’re waiting on regulations to be adopted, now is the time to begin thinking about whether an ABLE account is a good fit for your family’s circumstances. Please contact us today to learn more about ABLE accounts and disability planning.

Contact Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.

Are These Common Concerns on Your Worry List?

A comprehensive financial plan that is effectively executed delivers dollar savings in improved investment returns, lower taxes, lower fees, more efficient wealth and more stable income. However, an important outcome of this process addresses what may be on your worry list: running out of money, family strife, unexpected losses and making financial mistakes.

The Key Takeaways

• Financial stress can negatively affect the health and emotional well-being of you and other family members.
• Working with a financial planning professional can help you handle your financial situation, alleviate worry and, in general, help you feel more in control of your life.

Financial Worry is Common

If money worries keep you awake at night, you’re not alone. People are living longer and health care costs, especially for long-term care, continue to rise. As a result, retirement savings must last longer and stretch farther than most anticipated. Even those who thought they were prepared for retirement may now be afraid of running out of money, especially for the surviving spouse. Many families are still recovering from losses in the stock market and job market. Credit card debt is at an all-time high, as is the cost of a college education. Many families find themselves in the middle of the sandwich: taking care of elderly parents and raising their own children.

What You Need to Know

Worry about financial matters can negatively affect your health. It can lead to unhealthy coping behaviors like drinking, smoking and overeating. Cutting back on health care in an effort to save money allows small health problems to escalate into larger ones. If you have trouble sleeping, your mood, immune system and cognitive functions can be affected. All of these inevitably lead to more stress and can cause friction within the family.

Actions to Consider

• Planning is an essential activity. A comprehensive plan incorporates budgeting, income planning, tax planning, retirement analysis, insurance and trusts.
• A plan that isn’t executed lacks value. Expect to work with specialists to bring your plan to fruition: an advisor for planning and investments; a trust and estate attorney to draft the trust and estate documents; a CPA to implement tax strategies; an insurance agent to institute insurance products. If your resources are insufficient or uncertain, be open to changes that will alleviate financial stress and help you meet your financial priorities. For example, you may need to move to a less expensive neighborhood (or state). Your children may need to go to community college or state school instead of a four-year private university. A parent may need to live with you. 
• The sooner you take action, the sooner you can stop worrying. 

Contact Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.

Budgeting, Part 3 - Instilling Money Values in Children and Grandchildren

Money values can be a guiding light that is a component of your legacy. If communicated frequently and purposefully, these values can be an important reference for your loved ones as they learn to handle money.

The Key Takeaways

• Having regular family discussions about household finances, shared money goals and general money concepts will, over time, communicate your values to your children and help them learn to be financially responsible adults. These discussions can also bring family members closer.
• Even young children can learn about setting spending priorities, working within a budget, saving for a larger purchase, and giving to others.

Family Meetings About Money

Money discussions can start when children are as young as ten years old. While there is no need to go into detail about income and specific expenses, you can explain that there is only a certain amount of money and everyone needs to be careful with how it is spent. You can talk about your budget in general terms and let them know that some things, like housing and food, are at the top of your priority list. You could let the family decide how to spend the monthly entertainment budget or which charity (or even a friend) should benefit from your giving budget. You can discuss where to go on a family vacation and how everyone could help save money for it. And, by your example, you can illustrate the importance of saving.

As your children mature, you can start to teach them money management principles—how to balance a checkbook; how credit cards work; how companies make money; how simple and compound interest works; how to make and follow a budget.

What You Need to Know

Parents often don’t want their children to know how much or how little money they have. But kids spend time in other kids’ homes, and they are quick to pick up on the differences. How you earn your money—and how you prioritize spending, saving and giving—says a lot about your values. Talking about this with your children and including them in the process will help them learn your values and guide them as they mature.

Actions to Consider

• Create a plan to purchase an item for your family, like a new TV or camping equipment. Include your children as you shop and compare prices in stores or online. Figure out how much your family would need to save each month to reach your goal, and encourage everyone to find ways to save. This will show your children how to plan to make large purchases without going into debt.
• Give your children allowances so they can learn to handle their own money. Some families give each child a small allowance just for being part of the family, with opportunities to perform household chores to earn more. You could give teenagers their clothing allowance for each school semester and let them make their own purchases. However, resist the temptation to bail them out if they overspend and run short of funds—you want them to learn responsibility and make smarter purchases next time.
• Have monthly family meetings. The regular frequency lets everyone feel they are truly involved with the family finances, gives them opportunities to ask questions, and lets them see progress and make adjustments in spending.
• If you see your finances are going to suffer (for example, if you are laid off or incur unexpected medical expenses), let your family know right away so they will all understand the situation. They may even have some creative ways to help cut expenses or increase income. 

Find Part 1 in this series here, and part 2 here.

Contact Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com with any questions or issues, or if you would like to discuss some strategies for budgeting.

Budgeting, Part 2 - A Fulfilling Method for Setting Spending Priorities

Setting spending priorities will allow you to process your income in a rational way, while giving you the satisfaction that your wealth objectives are on their way to fulfillment.

The Key Takeaways

How you spend your money shows what you value in life.

• Setting spending priorities will help you align your spending with your values, resulting in a much more fulfilling life—financially, emotionally and spiritually.

How to Set Spending Priorities

Determine what is most important to you. Envision how you would like to see yourself living life. What kind of example do you want to be for your children? You may want to have enough money for retirement so you won’t be a burden to your children. Paying for your kids’ college may be a priority for you. You may want to pay off your mortgage, or pay off credit cards and live debt-free. Tithing may be important to you. Maybe you want to travel.

Next, look at how you are currently spending your money. Look for areas you currently spend money on that are not as important as your desires. Could you stop eating out as much and pay an extra $100 a month on your mortgage? Could you drive your current car a few years longer and apply the amount of a new car payment toward paying off credit card debt?

Now you are ready to work on a budget. Reallocate your income in ways that meet your priorities and values. What may have seemed impossible may actually be within reach, once you have your priorities and spending in synch.

What You Need to Know

If your income is reduced or your expenses increase (due to loss of a job, illness or medical emergency), set new spending priorities right away. Discretionary spending will probably have to be reduced in order to meet necessary expenses. Some necessary expenses may even need to be reduced, for example by moving to less expensive housing or temporarily sharing a car. Cutting expenses to match your income instead of running up credit card debt will be much more rewarding in the long run. Being frank with your family will help them understand the situation and give them opportunities to help save money and/or increase income.

Actions to Consider

• If you don’t know what you are currently spending, go back through credit card statements and checkbook registers and tally your spending by category. Using a computer accounting program like Quicken will make it easier to track expenses.
• Separate necessary expenses (like rent or mortgage, insurance, groceries, utilities) from discretionary expenses (clothing, dining out, entertainment, personal care, etc.).
• Annual expenses (like insurance or property taxes) should be broken down into monthly amounts and those amounts set aside into a separate account so the money will be available when needed.
• Look around your home and in your closets. How much do you think you have spent on clothing and furnishings? How much of that was unnecessarily spent? Could you do better in the future?
• Spouses need to talk openly about spending priorities; some compromises may need to be made, but sharing the same values, priorities and goals will help alleviate tensions about finances. 

Find Part 1 in this series here.

Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com with any questions or issues, or if you would like to discuss some strategies for budgeting.

Budgeting, Part 1 - Budgeting is a Friend, Not a Foe

Budgets do control spending behavior. However, budgets also allocate resources to the areas of highest impact or interest. When a budget is structured based on priorities and values, much of the controlling element is removed.

Using budgets at work is understood and expected. A company has a limited amount of money and so must allocate that money based on priorities—by budgeting. But often the discipline workers use at work does not carry over at home. The result is often overspending, debt, arguments between spouses/partners, loss of control, and unrealized dreams and goals.

The Key Takeaways

• Using a budget helps to allocate limited resources to the areas that matter the most.
• The same discipline used to follow budgets at work can be used for budgets at home.

Making a Budget Your Friend

Creating and staying on budget can empower you and help you feel in control of your earnings, your spending and your future. When you and your spouse/partner are in agreement about spending priorities and have shared goals, your relationship is likely to be more harmonious and less stressful.

What You Need to Know

You probably already have the skills needed to set and follow a budget. Use your common sense to create a budget that helps you. 

Actions to Consider

• Draw upon your work experience with budgets.
• Determine spending priorities with your spouse or partner.
• Include dreams or goals to save toward together.
• Include fun in your budget. Everyone needs some fun, even if your budget is tight. Having separate fun money for each spouse/partner (with no questions or accountability) provides a little freedom and independence for both of you.
• Look for ways to reign in impulse spending and unnecessary expenses to fund your spending priorities.
• Don’t spend more than you bring in. If you cannot cut your budget enough to live within your means, think of ways to earn extra money.
• Start saving. Even small amounts saved consistently will grow into larger amounts.
• Review your budget and finances periodically to see how you are doing. Seeing progress toward your goals will make  you proud of your accomplishment!
• Reward yourself for staying on or under budget. Think of inexpensive or free ways to celebrate.

Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com with any questions or issues, or if you would like to discuss some strategies for budgeting.

Learning from Your Mistakes Can Become Your Teaching Moment

Everyone makes financial mistakes. The key is to learn from them, try not to repeat them and then pass on this hard-earned wisdom to your loved ones as an element of your financial legacy.

The Key Takeaways

• We can learn not only from our own mistakes but also from those of others. 
• Sharing the wisdom gained from these errors can help others avoid them—and the pain and regret that usually accompany them.

One part of advancing ourselves is learning from our own mistakes; another part is learning from the mistakes of others. The latter is decidedly less painful to us than the former! As Eleanor Roosevelt said, “Learn from the mistakes of others. You can’t live long enough to make them all yourself.”

Even the savviest investors make mistakes or have regrets. Learning from others’ mistakes can help us to gain wisdom without the pain of having to go through the experience ourselves.

In many ways the key to long-term investing is learning our lessons well. For your loved ones, identify the top mistakes you’ve made in your financial life and explain why the lessons you’ve learned are important to pass along.

What You Need to Know

Imparting the wisdom you have gained over the years is part of your financial and family legacy. Being candid about your mistakes and regrets also can provide your loved ones a glimpse of the person you once were and have become because of these experiences. 

Actions to Consider

• Think about the things you've learned over the years related to money. Create a list of your lessons, principles and practices. Don’t worry about the wording or order at this point.
• Next, consider the items on the list based on the impact they had on you. Impact is not just financial loss but also anxiety, strife and confusion. One way to judge impact is to read the item and see what thoughts flood your mind or how much your stomach churns; you can be certain that these impact you measurably.
• Now, group your list by greatest impact to least impact.
• Set a schedule, say, each month or quarter, to write out your lessons and how you've applied them, and share this with your loved ones.

Feel free to contact Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com with any questions or issues, or if you would like to discuss some strategies for preserving your legacy.

Tips for the Family CFO

Stress and concerns over the family budget are perhaps the most common instigator for marriage fights.  Often, the lack of money itself is not the problem, rather an underlying issue.  These tips may not solve the root cause, but they should help ease the stress of the never-ending struggle to make ends meet.

It's Not a One Person Job.  I'm having trouble coming up with a part of marriage and raising a family that is a one-person job.  Sure, one person may actually do the work like mowing the lawn, folding laundry or cooking dinner; but, the other partner is watching the kids or taking care of something else that has to be done.  When it comes to finances, both partners should be familiar enough with the ins and outs that if something happens to one, the other can function so that the electricity stays on and there aren't any overdraft fees.

Your Financial Planner Should be a Fiduciary.  A fiduciary is someone who is required to act in your best interest.  There are plenty of investing coaches and mutual fund managers who are more interested in the commission from selling you a particular stock or fund.  A registered investment adviser is a different breed, and he / she is obligated to tell you what is best for you, not for his / her commission.  One of the best ways to ensure your financial adviser's interests are aligned with yours is to pay based on your portfolio's performance.  If you do well, so does the financial adviser and, more importantly, vice versa.

Manage Credit Cards.  Credit card companies make their money off people not paying the balances off.  Credit cards can be a useful tool, and the rewards can be utilized in very creative ways.  However, if you're carrying large credit card debt and paying interest on it, you're on the losing end of that equation.  It's like Vegas - play long enough, and the house always wins.  I recommend paying off the bill each month and tracking credit card spending as if it were cash.  This isn't easy, especially with 3 credit card offers showing up in the mail every day.

Make a Plan.  At a minimum, there should be a budget.  Quicken has an outstanding program for tracking and managing personal finances, and it is compatible with most banks' online features.  You can download your transactions and then review and categorize them to get a very detailed picture on where your money goes each month.  Next, get an estate plan so that all those dollars you saved by following your budget aren't wasted paying unnecessary fees and taxes.

Have a System for Important Documents.  Keep it old school with a filing cabinet and hanging folders, or scan all your important documents and save them as PDF's on your computer.  If you opt for the PDF route, make sure you have a regular backup service like Carbonite so that when your computer crashes, you don't lose every important document along with the hard drive.

If you have questions on how to get any of these accomplished, or you would like more information on how a Family Legacy Plan can help with the CFO duties, feel free to contact Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com.

6 Check-Ups to Get Your Finances In Order

I don't like looking at my finances primarily because I am instantly reminded of how far I am from my goals.  With 3 kids (which includes twins), my plan for college tuition right now consists primarily of Powerball tickets.  I'm kidding.

Regardless of the size of your 401(k), IRA or college savings, plan, it's important to give your portfolio a regular check-up to make sure the plan reflects your current life and goals.  Here are 6 steps that will get you headed in the right direction.

1. Check the balances and allocations in your various investment accounts.  Call your financial adviser and tell him you'd like to review the allocations in your investment accounts. Depending on where you are in your life, the state of the market and several other factors, your investments could use some readjustment.  For example, if a stock has split, it may now occupy a larger than ideal portion of your investment.  If you play your cards right, you might even be able to get your adviser to pick up the bill for lunch!
2. Review insurance coverage.  Make sure your life and disability insurance coverage reflect reality.  If you've received a raise, had another child, bought a new house, then you need to make sure your insurance reflects these changes.
3. Review and update beneficiaries.  This is an important one, especially if you have minor children.  If you don't have a revocable living trust and something were to happen to you while your children were still under 18, then the children would receive the life insurance proceeds and retirement accounts outright.  You may have the most responsible kids on the planet, but an 18-year old with hundreds of thousands of dollars (or more) is simply not a good idea.
4. Assess and review your estate plan.  "But I don't have an estate plan!"  Yes, you do.  The state has one for you, and it's time-consuming, a burden for your family, and usually expensive.  If you have a will or, even better, a Family Legacy Plan, then it's a good idea to review it to make sure the plan still reflects your current wishes and goals.
5. Guardians for minor children.  If you have a plan in place, make sure it is still consistent with your wishes.  If you don't have a plan, make one.
6. Review your advanced health care directive.  Make sure you have a healthcare power of attorney and living will.

If you have questions on how to get any of these accomplished, or you would like more information on how a Family Legacy Plan can take care of most of this list, feel free to contact Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com.