Divorce, do you litigate or mediate? Well, do you want to be right or happy?

Someone once said:

“You can be right or happy.”

It’s true; and it’s a choice!

Okay, but how does that apply to divorce?

Trying to prove you are right usually means going to court, hoping that the judge affirms your view and declares you the just one. When you try to persuade a judge to adopt your view of “right,” you enter lengthy and costly litigation. In contrast, seeking to be happy usually means using mediation to work out a settlement so you can move on with your life. You save time and money.

Leaving aside situations involving abuse or criminal activity, couples should choose mediation over litigation. When you separate and divorce, you are dissolving a partnership. As with any other financial separation, if you minimize emotional reactions, you are can reach a fair outcome more quickly with fewer lasting scars. And you have are more likely to find happiness in your new, separate lives.

When emotions guide your finances, the outcome is not often the best. Going to court for your divorce will certainly cost more and take longer, but it is also unlikely to result in an outcome with which you are happy.

Costs

The typical cost for mediation in Massachusetts is $3,500. If you choose to go to trial, your cost will exceed $30,000. Add in depositions and expert testimony, and your total will easily exceed $100,000.

Time

The time to complete mediation and sign a separation agreement to sign is up to you. Typically, you can be done in a couple of months. Litigated divorce depends on the judge’s schedule. This means that your first appearance could be six months or more from the date you file. If you have multiple days in court, the total time to completing trial and receiving a final decree from the judge could take well over a year.

Emotions

Litigated divorce involves a battle to show who is right. Attorneys vigorously representing their clients can make the process seem quite nasty. This can lead to anger and hurt feelings that mediation may avoid.

Children

Going to court to fight over finances does not project the best message to children who need love and understanding during the upheaval of their parents separating. The emotional impact of fighting in court can spill over into how parents interact when dealing with their children.

Better Outcome

Successful mediation often reveals possible solutions that other dispute resolution methods may not. If these solutions provide a better result for both parties, then mediation has created a better outcome. s

Save your time and money, use mediation. Then move on. You are likely to be happier this way.

Amplify Cash Flow by Maximizing Credit Card Rewards – Playing the Rewards Game

With a bit of planning and discipline, credit cards can provide users with real benefits.

These steps can help you maximize the available rewards:

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1. Reward types: Before you begin your search, determine the type of reward you are looking for: cash back, travel, gift cards, etc. Once you know what you are looking for, begin your search for the best card for each type of reward.

2. Strategy: After you review available cards and select one or more for the rewards you want, develop a strategy to use your cards to get the most out of their reward terms. You may find that some cards offer different rewards for different types of purchases. For example, a card my offer 6% back for food purchases, another may offer 3% for gas, while another may offer 2% back on all purchases. Develop your “credit card portfolio” based on what is being offered. Understand the cards’ rules and be prepared to play by them.

3. Fees: You want to avoid paying any late fees, which average $34, because these fees quickly undermine any rewards you may earn. On the other hand, annual fees may be worth paying depending on the rewards being offered. For example, if you earn 6% back on purchases, then a $75 annual fee may make sense. You can always call the company and try to have the fee waived. If you signing up just for the sign-up bonus, then you will probably want to cancel the card before the fee is incurred.

4. Apply: Once you have narrowed down the cards with the best offers for you, apply for the credit cards within a two day period to minimize the number of inquiries recorded on your credit report. Multiple inquiries may damage your score.

5. Tracking: Develop a method to ensure you are using the right card for the right purchases. This can be anything from notes, to an Excel workbook to using QuickBooks.

6. Card balances: Keep your credit usage to 20% to 30% of your available credit because your credit score is affected by the amount of credit you use.

7. Payments: Pay off your balance every month. If you allow yourself to carry a balance, the interest rates you incur will diminish or wipe out any rewards you earned.

If you try any of these ideas, let me know how they worked for you!

Data and Document Security; Protect Your Stuff!

There are now more tools available than ever to help you organize, access and protect your sensitive data and documents.
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Mobile Devices
The amount of information we store on our mobile devices is staggering: emails, personal contacts, client contacts, banking information, music, and pictures represent only a fraction. You can easily protect this data by enabling the password service, or, in the case of the newer iPhones and iPads, by enabling the fingerprint recognition software.

We have become heavily dependent on these devices that, if we lose them or they malfunction, we could spend days trying restore or replace the data on the device. To protect against this potential headache, you should back up the device regularly. You can also shift more application content to cloud services such as iCloud or G Cloud.

Computer Safety
If you know the sickening feeling of losing an important file that you saved on our computer, then you know you do not want to risk losing all the data on your laptop. That’s why we recommend backing up your important files to an external hard drive, remote server, cloud storage or online back-up program. Some of you may want to make the backup occur automatically, so that all files are stored on a regular basis. Others may prefer to do so manually. If so, be sure to set a reminder that works for you so that you frequently safeguard as much of your important data as possible.

In addition to backing up your files regularly to an external location, we recommend you install anti-virus and malware software. When you buy a computer, an anti-virus program is often included. Make sure the virus definitions are updated constantly. Also, you can add more projection for free, such as Malwarebytes.

Original Documents
There are certain documents that deserve an extra level of security, like original copies of your estate plan (link to planning) for the inevitable. For these documents that hold significant legal and personal importance, place them in Ziplock bags to prevent water damage and store them in either a fireproof safe or a safety deposit box.

Conclusion
Taking these small steps each of you can take now to protect your tax and financial information will prove invaluable if the unexpected occurs.

Make customer service calls work for you – Get them on your side

Years ago, I read a compelling account of success in handling customer service issues and was transformed from the angry guy making threats to the customer rep’s new friend. My new attitude brought great results, like the time Verizon Wireless effectively paid me (via a new phone, billing refund and free headsets) to replace a malfunctioning cell phone.

Your goal on these calls is to convert the customer service rep to your side so that their goal is to make you happy. Most people in customer service are there because they want to please others; you want tap into that bent.

Here is how:

  1. Be Respectful: Make them feel important and validated. Ask them their name, if they did not give it, and use that in the conversation.
  2. Show Gratitude: thank them.
  3. Recruit Them: Use terms like “we” and clearly state your objective so you turn the call into a mission, with the representative committed to helping you accomplish it.
  4. Remain Calm: Avoid trigger words, anger and any swearing. Otherwise you risk losing the bond you created. Maintain the position of being empowered to get what you, as the customer, deserve.
  5. Communicate Your Determination: Be clear that you are not going anywhere until your mission is accomplished. Be clear that you are not taking any brush off.
  6. Escalate: If you are not making progress, then escalate: ask to speak to a manager. Many representatives are judged by the number of calls referred to managers or supervisors, so asking may prompt them to be more helpful.

This approach may take practice (and patience). However, it is quite effective.  Good luck and I hope you experience good results!

Robo-Advisors may be just what we need!

Should you really fear Robo-Advisors?

Reading financial news, you see many posts warning of robo-advisors, telling you how you really need a human advisor, how you can robo-proof your investment business, or how robo-advisors are merely a fad and will die off when everyone realizes how evil they are.

All these posts have it backwards. They are apologists for entrenched firms attempting to protect their turf when individuals need help.

Shift from pensions to 401(k) plans hurt individuals

Last century, many large employers provided pensions as a benefit. These were large portfolios that could hire good advisors and thus performed well. However, by the end of last century, retirement funds had shifted to 401(k) and similar plans, where individuals managed their own portfolios.

Institutional portfolios hire great managers so many are able to beat their various market indices. In contrast, individual investors historically achieve less than half the returns of their related indices.

Poor performance by individuals managing their own retirement funds is a key factor in the current crisis facing Boomers who are under-funded for retirement. (Note to Millennials: don’t just speak to your parents, do your own planning so this doesn’t happen to you!)

Why do individuals invest poorly?

Individual investors are seen as a contrary indicator:

  • If they are buying, then the market is near its peak and it is time to sell; and
  • If they are selling, the market has reached its bottom and it is time to buy.

Here is a case in point:

We saw the regret and pride response in action beginning in March 2000, the largest purchase of mutual funds in the history of the stock market. Fast forward to 2008, just before the “Great Recession” market downturn, and stock prices were falling, but investors refused to sell at a loss. As the market continued to fall, investors held off until they simply couldn’t take it any longer. Many sold their stock near the bottom and missed the following upswing that began March 2009. Forbes – Why average investors returns are so low.

To summarize, individual investors perform poorly due to these factors:

  1. Lack of access to good investment advice; and
  2. Investment psychology. For more on the psychological factors to which individuals fall prey, see Seven deadly sins of investing to avoid.

There is a third factor: High expenses in form of commissions and other fees.

Robo-advisors address all three factors. 

  • First, automating advice permits good advisors to offer services to small investors. Betterment with automated rebalancing and tax-loss harvesting is a good example.
  • Second, automation lowers costs, so fees charged can be reduced. Combine that with use of ETFs and you have dramatically reduced expenses.
  • Last, robo-advisors are immune to greed and fear so their performance will not suffer the way performance of individuals may. No robo-advisor would wait until the market hit bottom to sell, as in the case of 2008 summarized above.  

Bring on the Robos!

What is my conclusion? Not only are robo-advisors here to stay, they may be just what individual investors need so they can retire well!