Ann Hartz’s Common Financial Mistakes (Part 1)

Ann Hartz’s Common Financial Mistakes (Part 1)

You pay your bills on time. You try to save as much as you can. You even follow the advice you read in the books and hear on the radio about how to keep your finances in check.

But you’re still not getting ahead.

Well, sometimes, it’s the unchallenged, mental assumptions about how we’re handling our money that rise up and bite us in the keister.

You see, in the course of our daily work around here, we not only work with tax forms and legal/financial documents a TON … but we also get a regular crash course, via those documents, on how people (our Des Moines clients, mostly) have arrived to the place where they actually have something to *protect*.

In short, we get to be around a great many well-accomplished families and individuals from Des Moines.

So, perhaps it’s odd to you, but I’ve learned to pay attention to the little lessons I can learn from my clients, and from people of means around the country.

I’ve discovered a few things along the way about what keeps people from the kind of accomplishment and means that so many of them are looking for, at least when it comes to their finances.

Let me know what you think…

 

Ann Hartz’s Common Financial Mistakes (Part 1)

“Remember that not getting what you want is sometimes a wonderful stroke of luck.” – Dalai Lama

 

In the course of working with clients, I’ve identified some financial mistakes I see (as well as ones I’ve made myself!), which can be fixed.

These are the sorts of financial mistakes that don’t normally show up in balance books, but are revealed after looking at overall trends. In some ways, they can be VERY difficult to fix … but that’s often because we aren’t even aware we’re making them.

Once we gain that awareness, however … well, you begin to notice that your finances are “suddenly” in a much better place. At that point, it’s easy. Because all it takes is thinking a little differently…

Self-Sabotage Trap #1: Wrong Mental Accounting

Definition: Tendency for families to divide money into separate accounts based on subjective criteria.

Typical Example #1: Treating $100 you received as a gift from Grandma, differently than a $100 bill earned.

Typical Example #2: Having money languishing in a savings account earning 0.25%, while carrying high-interest debt to pay off at 12%.

Cure: Funnel income, no matter the source, into one savings account.

For any “found money”, such as a tax refund or gift from Grandma, quickly decide where that money is best utilized.

As for expenses, occasionally change how you pay. If you always pay with a credit card, try cash. This will get you remembering that all of it, for the purposes of your mental “books”, should be lumped into one monthly bucket.

Self-Sabotage Trap #2: Subtle Price Anchoring

Definition: Our tendency to relate the value of a purchase to a price point which, rationally, should have no bearing on the amount spent.

Typical Example: The “rule of thumb” to spend two months’ salary on an engagement ring.

Typical Example #2: A realtor will tell you that “in 2015, this house was going for $500,000 — and is now listed at only $350,000!” … causing you to think this house is undervalued.

Cure: For big ticket purchases like a house, car, or engagement ring, ask a friend whose financial values you respect for their input.

For everyday purchases, avoid looking at the MSRP or sticker price.

Ask yourself:

    Can I afford this today?

    What do I really want to spend?

    What is this really worth to me?

Marketers are experts at this sort of price-anchoring, and we really should know better … but yet we still fall prey to it. Try not to let outside sources set up the comparison by which you should be considering such large purchases.

There are a few more big ones, but for the sake of brevity I’ll save those for another week.

But do let me know: is this helpful to you?

And what more could we do for you, to help? Shoot me back an email through the button at the top of the page. I read every one.

Until next week,

 

Ann Hartz

(515) 259-7779

Ann M. Hartz, CPA

 

Getting Your Mental State Out Of Fear And Anxiety By Ann Hartz

Getting Your Mental State Out Of Fear And Anxiety By Ann Hartz

I might be wrong, but I get the sense that many of my friends and clients in Des Moines are getting wiser about the dangers of our digital age.

Because they are, indeed, quite real.

There is a famous clip of an interview with NYT-bestselling author, and cultural commentator Simon Sinek that made the rounds about a year ago on the way millenials have been trained to think by the always-online lifestyle.

But if we think that the things he discusses in that video are only pertinent to younger people, we are fooling ourselves. Many things that have defined this millennial generation have trickled upwards into every generation via the mass media.

And look — I do taxes and help with finances for a living. I’m not an expert in these matters.

However, I do see what happens to my Des Moines clients who get wrapped up in the media cycle of fear and negativity, and, well, what often happens to their finances as a result.

Frankly, I’m tired of seeing clients and friends who are “beaten down” by all the fear and anxiety in their lives.

And there is one major source for it — which is entirely optional.

And I suggest you “opt-out”, if you will.

So if you’ll pardon this diversion from my normal financial fare, here goes…

Getting Your Mental State Out Of Fear And Anxiety By Ann Hartz

“Time sets the stage; fate writes the script; but only we may choose our character.” – Liam Thomas Ryder

Life in the modern world isn’t always a trip in the sunshine.

But it’s made so much harder by the tendency of our world to suffocate you with mental junk and global negativity.

I believe that the number 1 danger for ALL of us moving forward in 2018 is allowing today’s world to starve your brain with “junk food” and deaden your spirit with the overwhelming feeling that you are small, insignificant … helpless.

I’ve learned to avoid the 24-7 news channels, and the sites online that traffic in fear. I figure that I’ll see what I need to when seeking out resources for our clients about current events. But let’s look, for example, at CNN.

CNN is about as bland as you can get — it’s “normal” to “normal” people. But I also realize, most “normal” people accomplish relatively little in their time on this planet (at least on the outside). Those of us who are going somewhere in life must have better things to do than to listen to talking heads opine about political gamesmanship and the dozens of tragedies that we can’t (and won’t) be able to do anything about.

Right now, the world is swimming in negativity. And you need to be serious and proactive about it. Because — if you don’t — it’ll kill your vocation, kill your career growth, kill your dreams and everything you really care about.

The mass news media is NOT your friend.

They feed on fear, and they sell paranoia, division and hyperbole. It’s what they do.

And not only must you protect yourself from this drip, drip, drip of depression, you need to fight it on behalf of your family and friends, your coworkers and customers.

Tell them what’s good. Greet them with a smile and with encouragement. Tell them what they’re doing right. Give them a voice to the hope still latent within their bones — which is too often buried in a junkpile of media-fueled negativity.

You (and they) need to celebrate little tiny victories. Every. Day.

This is an essential skill for a business owner, for a careerist, for a parent at home — and for all of us: when you have a major victory in your life, you need to find encouraging people who will celebrate it with you. Because good news is good news indeed.

Until next week,

Ann Hartz

(515) 259-7779

Ann M. Hartz, CPA

Six Steps To Debt Recovery By Ann Hartz

Six Steps To Debt Recovery By Ann Hartz

Our hearts are with the Carolinas, and with the cleanup process that is just beginning over there. With all of the the flooding that is hampering efforts to get in and even evaluate the damage, we know this will be a long road to recovery.

The slow onset of these hurricanes is a mixed bag, isn’t it? We prepare for doom, but doom doesn’t strike at every point … and then there is the inevitable frustration with media and public officials who didn’t get it exactly right or aren’t doing enough or should be handling things differently.

It’s very understandable, but I think we could all benefit from extending grace to everyone involved. Hurricanes are hard to deal with, full stop. So let’s all do what we can to help, and avoid pointing fingers.

And last week I wrote about preparing to deal with potential disasters in your future, on the financial front. I realized after the fact that I didn’t spend enough time on the earlier portion of the note, which went into the steps I recommend for climbing out of a hole — “cleaning up from a financial disaster”, if you will.

So this week I thought I’d dig a little deeper into how I’d suggest you go about doing that.

Six Steps To Debt Recovery By Ann Hartz

“It’s not whether you get knocked down. It’s whether you get up.” – Vince Lombardi

As I sat down to write this article, it made me think about some Des Moines clients that I’ve walked with over the years who fought their way — successfully — out of debt that would have crushed other families.

How did they do that? Today I’ll tell you.

Here’s something they did NOT do: Borrow money to pay off more borrowed money (and call it savings).

That only works for Uncle Sam, apparently.

In general, with these issues, I’m a big fan of automation — but not in all instances.

[For example, do NOT “automate” your tax preparation process with off-the-shelf software. Especially of the “free” variety. We have to clean up so many mistakes made by these products (and their users!), that I cannot, in good conscience, recommend them.

Yes, I’m obviously biased. But the facts are the facts. Take a gander at this, for just one small example: http://www.customerservicescoreboard.com/TurboTax]

Anyway, moving on from that.

To answer some of the questions we occasionally get from Des Moines clients facing tough times, I’ve put together a step-by-step debt recovery process which we often help people work through.

1. First, pay more than the minimums

If you only pay the minimum payment each month, your bill could continue to INCREASE, even if you completely stop using your card. This is called “negative amortization”–where you think you are paying on your debt but the additional fees and finance charges are more than the minimum payment. The bottom line is: Pay more than your minimum or you will eventually be in debt over your head.  

2. Create an automated system

With online banking and automatic payment options, there are GREAT tools for ensuring you don’t mess up because of administrative chaos. If you feel you can’t manage all your bills by pen and paper, there are several good software programs available for keeping track of your financial records.

In fact, I recommend that you automate a payment ABOVE the minimum monthly payment, just to be certain that you start getting ahead of the game. Those minimum payments are rigged against you, and the only way to get ahead is to … get ahead. I have some more thoughts on automation in a moment.

3. Yes, you can negotiate

No, you do not need to be an attorney or other professional to negotiate with your credit card company (negotiating with the IRS, on the other hand, is a very different story!). The rising amount of consumer debt in this country has made creditors realize that they need to be more understanding of their customers — if they hope to get any money back. If you file bankruptcy they are only going to get pennies on the dollar, so they are often willing to make deals.

4. Proactively contact your creditors — in writing

Open communication always helps. Usually credit card companies get ignored and end up sending delinquent files to a collections agency. So they’ll actually appreciate your openness in contacting them, and may be more understanding of your situation. Proactively dealing with your debt problem, rather than hiding, will not only help your financial problem, but will make you feel better about yourself as well.

5. Develop a simple tracking system

If you are not able to pay the full amount of your credit each month, you should still pay something to stay on top of it. You should work off of a written budget so you know exactly where you stand. Some experts suggest that you divide your monthly debt budget by the percentage each bill makes of the total and pay that amount.

Here’s an example: If you owe a total of $1,000, and one credit card is $800 and the other is $200, and you only have $100 available to pay for that month… You should pay $80 on the $800 balance, and $20 on the $200 balance. This way you are reducing each debt by the same percentage.  

6. Do NOT be intimidated

No matter how forthcoming and honest you are, some creditors have been taught to be mean and downright nasty. Hang in there, and don’t let this tactic intimidate you.

Give us a call today, for help.

Until next week,

Ann Hartz

(515) 259-7779

Ann M. Hartz, CPA

A Family Budget Plan By Ann Hartz

A Family Budget Plan By Ann Hartz

Last week I wrote to you about a few financial conversations worth having within a marriage, or any close partnership.

As we turn the page into the end of summer, there are a swath of newlyweds out there, and this (and the previous note) might be something useful to send their way.

But before I get there, a word about a different sort of exercise, one which I commend to you.

Take the last two weeks of summer and give yourself a politics cleanse.

Because of the work we do around here in Des Moines, we have to pay attention to the news media, at least as it revolves around tax policy and financial markets, etc. But that doesn’t mean we have to like it.

The nation seems to be simmering in a frying pan of collective angst. Whether your politics are left or right, there are so many sources online and on television whose sole purpose is to gin up frustration, anger and chaos. In the ever-increasing arms race for clicks and eyeballs, the media and prominent social media voices have discovered (some time ago) that chaos and anger sell.

But you would be amazed and gratified to discover that taking even just a couple weeks — say the rest of the month of August — away from ANY political news, that not much will have changed in your absence. The only thing that is certain to have shifted would be your peace of mind and your mindset.

So, as one friend to another … consider unsubscribing from the political emails, NOT clicking on that article your friend posted in order to stir up frustration or to rally the believing troops, and perhaps even taking a full break from any of the major news sites or 24-7 “news” channels.

Try it for two weeks. See what happens. Let us pay attention to the important financial news, and keep your head clear from the rest. Your soul might thank you.

But back to the topic at hand. I don’t pretend to be a marriage guru, but we have lots of couples stream through our doors, and there are certain commonalities among those whose partnership reflects a strength within their financial house.

A Family Budget Plan By Ann Hartz
“Don’t just count your years, make your years count.” – Ernest Meyers

In my previous note, I wrote about some “big picture” exercises to have with your partner, or for your own financial reconfiguration.

Those were: 1) Writing Your Money Story and 2) Imagining Your Ideal Financial Scenario. Both of these exercises were to lay the foundation for getting practical — because the practical outworking that comes from these exercises is where steady foundations are built, or becomes the place at which change actually occurs.

So, this is a small bit of practical advice, building upon those first exercises…

Create Your Family Budget Plan Now
As a couple, begin with the assumption that you will pool your money.

Couples enjoy an economic bonus because two can live more cheaply than both could alone. However, do not expect to achieve financial peace without a plan!

I highly recommend that you plan to live on one salary for the first several years. This is a challenge that too few couples in Des Moines accept. If you max your lifestyle to pay for a mortgage, car payments, gym memberships, and the like, you will have no flexibility to adjust when children come. Your first years of marriage offer a great opportunity to save for an emergency fund and a down payment on your first house.

Start by tracking your current expenses to give you a starting point for creating your own budget. Budgeting is like healthy eating. You need to maintain balance and avoid excessive indulgences.

Going through this exercise will likely reveal who has the greater interest in paying the bills. Even when only one of you will be paying the bills, you can only build trust if you decide together how your money will be spent.

Don’t forget to allocate some savings. After all, as I’ve written, wealth is not what you spend but what you save and invest.

Now you can build a financial fortress that re-writes your story, and which takes you to the place of your greatest hopes.

And remember: we are in your corner.

Until next week,

Ann Hartz
 (515) 707-0884
 Ann M. Hartz, CPA 

Ann Hartz’s Two Financial Exercises To Strengthen Your Family Finances

Ann Hartz’s Two Financial Exercises To Strengthen Your Family Finances

All of the tax media outlets (and even some non-tax ones) were shouting about a new Government Accountability Office (GAO) report that showed that (gasp) millions of taxpayers are underwithholding, and that they will face a tax bill come 2019. Apparently, there was an increase of 3% of those who will owe the IRS due to not adjusting withholding per the new tax law.

Fortunately, the IRS does have a handy calculator, updated with all of the new tables, that can give you a general sense for what you should be withholding.

But, as usual, there is a side to this story that most people in Des Moines aren’t noticing. The actual percentage of people who are underwithholding is 21% (up from 18%). But the number of people who are OVERwithholding is 73%.

THAT is the story, in my opinion: almost three-quarters of taxpayers are loaning the government their money throughout the year, simply because they haven’t taken the time to run the numbers. Or maybe it’s because they like the feeling of getting a refund, come tax time.

But as I’ve nagged said to you before, getting a refund just means that you didn’t project properly. You’re giving a multi-trillion dollar organization (the federal government) a loan from YOUR accounts, instead of having use of that money throughout the year.

If that’s fine with you, so be it.

Only 6% of the population are striking that golden mean of withholding just the right amount.

But either way, let’s not make this decision simply by default, and not planning ahead!

That’s why it’s helpful to have someone in your corner who can help you get the numbers right. If you haven’t had a tax planning meeting with us this summer, there’s still plenty of time to do so before the end of the year. Don’t miss out on the opportunities available to you to save lots of your hard-earned income from the grasping hands of the IRS.

If you are married, these are the sort of things that you should decide together with your spouse, or at least have clarity about how these decisions should be made, if one partner is tasked with these kinds of choices.

And as we are turning the corner into the end of summer, the wedding season is winding down, and I thought I would offer some unsolicited advice for the newlyweds among us, as well as those who have been “seasoned” a bit in their marital journey.

And I also think that even for those who are single, there are some things in here you should think through…

Ann Hartz’s Two Financial Exercises To Strengthen Your Family Finances
“If one does not know to which port one is sailing, no wind is favorable.” – Lucius Annaeus Seneca

Wedding season is almost over. For many of my clients in Des Moines, that ship has sailed … but this is a great opportunity to pass on something smart to your children. Or, perhaps you need a refresher for your existing marriage.

Either way, your marriage is sure to have many challenges, and mastering money is a big one. Expect a few good money fights. “You bought ___ !?” is often the first sign that the dam is breaking and a torrent is about to flow.

Couples who fail to prepare for a shared money maturing process will likely experience longer and sharper growing pains. Because the fact is that most people bring in emotional baggage from their childhood years that can complicate the matter.

So that being the case, I’ve put together a series of exercises which are useful conversations for any engaged couple — or, even, those with some years under their marriage belt.

And because of the length of this, I’ll make it a two-parter, and be back with more of these money exercises next week.

Exercise 1: Start With Your Money Story
Begin by separately writing an autobiography that focuses on your relationship to the money you have acquired. The fact is, you’ve been shaped by experiences with money management, and you picked up most of them through implicit observation.

Now, if you are like me, you may want to just list bullet points, or you may prefer to compose several paragraphs. Some people end up writing a small book! What events have shaped your thinking?

What fears do you have about money? What voices remain inside your head? For example, “I don’t want to act like my Uncle Tommy who…” Some voices are helpful and others not so much; be sure to name them all.

This exercise can be most powerful when shared with other couples, both married and engaged. As you share these stories and ask questions to better understand each other more deeply, you are developing the kind of communication skills that big money questions will require of you.

Exercise 2: The Dream Scenario
Begin by reflecting on this question:

“Imagine you are fully financially secure, that you have enough money to take care of your needs now and in the future. How would you live your life?”

Would you change anything? Let yourself go. Don’t hold back on your dreams. Describe a life that is completely and richly yoursBecause here’s the truth: you can be sure that any unspoken goals will never be fulfilled.

This exercise is particularly helpful when you feel financially stuck. Naming our desires forces us to confront our associated fears. Speaking these goals brings them into the light. Your future (or current) spouse can respond and offer support or constructive criticism.

You can expect that this exercise might bring about a reprioritization of your time and money. You will find the work of life comes much easier when it is aligned with your passions and aptitudes. Perhaps, for example, you might be led to a downsizing of your lifestyle so you’re able to work for that nonprofit you’ve always had your eye on.

All of this may sound too fuzzy or creative, but nothing is more important in your financial management.

Why do I say that?

In all of my years of working with family finances, I’ve seen this truth: financial woes often don’t come from a lack of income … but from our failure to live according to our true values.

Get those right, and the rest begins to follow.

More to come next week.

I do hope this helps  … and no matter where you find yourself, there is “no shame in our game”. We are in your corner.

Until next week,

Ann Hartz
(515) 707-0884
Ann M. Hartz, CPA

 

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