Rich People Problems

Ever wonder what kind of money problems multimillionaires have?  I’ll let you in on a little secret…

They have the same problems as everyone else, except on a grander scale.

  • they spend more than they earn – sometimes hundreds of thousands more
  • they can’t retire when they want – some of them will never be able to retire
  • they worry about how to pay for their kid’s college education (on top how to pay for a private elementary, middle and high school that costs them at least $20,000 a year per kid)
  • they have to take out second mortgages to fund major purchases like home remodels and their children’s weddings
  • they have credit card debt

How do I know all this?  Because these are the people I work with daily.

Why am I telling you this?  To show you that the answer to most of your financial problems is not earning, inheriting or winning more money.

You know what will fix your financial problems?

  • Spending less than you earn
  • Saving for retirement (early and often)
  • Saving up for major expenses (cars, home remodels, weddings) instead of taking out additional loans

For my clients who can retire comfortably, those are always the top 3 traits they all have in common.

Social Security Changes Part 3 – Who Should File and Suspend?

I haven’t had time to draft my final post for Social Security but I still wanted to share the information before the file and suspend deadline, which is this Friday, April 29th.

Here is an article that does a pretty good job of summarizing who qualifies for this strategy:

Who Should File-And-Suspend For Social Security Benefits By The April 29 Deadline?

Social Security Changes Part 2 – Social Security Claiming Strategy

Last week, I gave a simple example of how Social Security benefits work.  Today I’ll explain the Social Security claiming strategy that many couples have used to increased their combined Social Security benefit.  The strategy has 2 parts: Part 1 is called File & Suspend and Part 2 is called Restricted Application for Spousal Benefits.

File & Suspend must happen first.  In my previous example, Wife was only allowed to take that extra spousal benefit because Husband started taking his personal benefit already.  He took it at age 66, giving up the 8% growth that he could’ve gotten on his benefit each year he waited till age 70.  With the file & suspend strategy, Husband does NOT need to start taking his benefit in order for Wife to start taking a spousal benefit.  All Husband would have to do is call the Social Security office and tell them that he wants to file and immediately suspend his benefit so that his wife can start taking a spousal benefit.  Once this step is done, Wife can now do step 2, which is call the Social Security office and tell them she would like to file for a restricted application for spousal benefits.

Like the previous example, she now gets to collect a spousal benefit (half of Husband’s personal benefit), while continuing to delay her own benefit and earning that 8% growth each year.

When Husband turns 70, he has delayed taking his benefit as long as Social Security will allow and will start taking his now increased benefit.  When Wife turns 70, she will switch from taking her spousal benefit to taking her own (also increased) benefit.  Together, they will each be collecting their maximum benefit in addition to having collected a spousal benefit for 4 years.

Sadly, this strategy will go away starting April 29th of this year (2016) with only a handful of exceptions.  Come back next week to find out who gets grandfathered in and what steps they’ll need to take before the April deadline to secure this benefit!

Social Security Changes Part 1 – How Social Security Benefits Work

The Budget Act that Obama signed late last year eliminates a major Social Security claiming strategy currently available to retirees.

To understand what’s going to change, you should first know how Social Security benefits work. It’s a complicated system so I think the best way to understand it is by seeing it played out in an example:

Husband and Wife are both currently 66 years old.  Since they have reached their full retirement age, they can start collecting their Social Security benefits.  However, if they choose to delay taking their benefits, it will grow by 8% each year until they reach age 70 (that’s the latest you can delay till).

But let’s just say Husband decided to take the money now (at age 66) because he needs it to pay for expenses.  By him taking his benefit, he activates the spousal benefit, which now becomes available to Wife.  The spousal benefit equates to half of his benefit.  So if he is collecting $2,000/month, she gets to collect a spousal benefit on top of that of $1,000/month.

The nice thing about this is, if they don’t need more than that combined total of $3,000 a month right now, Wife can still delay taking her own personal Social Security benefit, letting it grow that 8% a year.  Once she turns 70, she will switch from taking a spousal benefit to taking her increased personal benefit.  (Unfortunately, you can’t take both.)

That was a very straightforward and simple example of how claiming Social Security benefits works.  There are, of course, a ton of other more complicated scenarios like if they were different ages, if they were divorced, if they were single instead of married, etc.  But, one thing at a time.

Next week, I will talk about the awesome claiming strategy some people have been using to increase their combined benefit even more.  And the week after that, I’ll explain how the Budget Act changes this strategy and which people are the exceptions to the rule.

Getting on-top of your finances – Where to start

The best time to get on-top of your finance is any time, really, but people are most motivated at the beginning of a new year.  So here is a step-by-step guide for those of you who’ve made getting on-top of your finances one of your 2016 goals but don’t really know where to start:

Step 1)  If you’re working and have a 401(k), find out if your company has a 401(k) employer match and make sure you are contributing at least up to the match.  If they match up to 3% of your salary, then start contributing 3% of your salary to your 401(k).  The reason this is step 1 is because this is FREE money you’re leaving on the table.  Side note: It helps to know your company’s vesting schedule.

Step 2)  This step can actually be done in conjunction with Step 1.  Find out if your company has a Roth 401(k) option.  If they do, get it set up and start contributing to your Roth 401(k) instead of your regular 401(k) UNLESS your company doesn’t match Roth contributions.  In that case, contribute to your regular 401(k) first (up to the match) and then the rest into your Roth 401(k).  Reasons why a Roth is usually better for millennials can be found here.

Step 3)  Pay Yourself First

Step 4)  Pay Your Credit Card Balance Every Week

Step 5)  Track Your Spending

If you’re already doing all 5, congratulations!  You’re already way ahead of the game.  I’ll cover some more advance stuff another time like investments and insurance.

Happy New Year!

Guest Post #3 from Aaron – Holiday MBTI x Love Languages

Today we have another guest post from Aaron!  He analyzes two of my favorite topics (personality types and love languages!) and provides some interesting insights that are good to keep in mind as the season of shopping is upon us.  Don’t forget to also check out his first and second guest post if you haven’t already.

From Aaron:

Recently Heidi Priebe conducted a survey that asked for participants’ personality types and love languages and found the top love language for each personality type. This article has been making its rounds through social media, and with good reason; the Myers Brigg’s Type Indicator is very popular and the more recent “Love Languages” has been gaining ground.  It’s interesting to see people begin indicating their MBTI in lieu of their horoscope on dating sites. If you don’t know your personality type, you can discover yours with these 64 questions. You can find your love language(s) here.

I took things a step further.

I placed all the results side by side, heat mapped it by personality type and by love language, and searched for correlations and outliers. I began wondering if the population in general leans in a certain direction so I added in % of population for each category.  MBTI population numbers are pulled from the authoritative CAPT.  Love language data was more dispersed, but every poll I found in general had Quality Time at the top, followed by Words of Affirmation, Physical Touch, and Acts of Service in a close middle, and Receiving Gifts at the bottom.

Take a look!







Artisans have the most extremes. Expressive in their own way.  _S_Ps show up multiple times in the Takeaways.  

I tried slicing and dicing by, for example, all Es, or all INs, but that didn’t give me anything insightful. If you like, feel free to play with the data here.

The biggest takeaway is that it’s ironic that our hyper materialistic society appreciates gifts the least.  Perhaps this is just another telltale sign that Americans overemphasize our careers and wealth. The illusion that if we can simply buy ourselves and others enough gifts we will have loved and felt loved is complete farce. Or is it simply that humans innately require relationships and physical touch? Everyone is so busy these days and we all have so little time.  It’s been often said that with the internet and our smartphones we’re all more connected than ever, but at the same time, more lonely than ever.  Does “feeling lonely in a crowded room” strike a chord?  In this age where we set up dinners a month in advance lest everyone is booked, and a few button clicks gets our Christmas shopping done, gifts, and even acts of service where there is an app for everything from doing your laundry to filling up your gas, are cheap. We all gravitate towards that which the internet and our electronics have stolen away from us and aren’t able to provide, even through instant messaging and video chat–constructive face to face time where we truly connect with one another and affirm our care for each other, sealed with a hug when we say goodbye.  So next time you want to love on someone, simply take a moment, put your phone away, break from outside distractions, and tell them you care.  But if you’re dealing with an ISTP, pick up a coffee for them and give them a hug. =]

Remember what the true meaning of Christmas is. It’s not about gifts, it’s about the relationships: friends, family, and God’s gift of Jesus so we might have a relationship with him.

Merry Christmas everyone.