Millennials – Don’t let this happen to you (part III in the financial literacy trilogy)

[Originally published at Don’t Let This Happen to You – Learn from your Parents; Mistakes – Part III in a trilogy, this is the last in our trilogy, with Part I: “Financial Literacy – Millennials received poor marks, but they can fix that” and Part II: “Millennials: Don’t just Speak to Your Parents, Do your own Planning” as originally posted at Millennials, Don’t Just Speak to Your Parents, Do your own Planning)

Millennials have the time horizon that should allow them to save well, and thus avoid the need to save much more in later years. Otherwise, they will end up like those now nearing retirement that Theresa Ghilarducci describes in her 2012 article on retirement:
Seventy-five percent of Americans nearing retirement age in 2010 had less than $30,000 in their retirement accounts. The specter of downward mobility in retirement is a looming reality for both middle- and higher-income workers. Almost half of middle-class workers, 49 percent, will be poor or near poor in retirement, living on a food budget of about $5 a day. See “Our Ridiculous Approach to Retirement” at Our Ridiculous Approach to Retirement

Acting now is crucial, but what do you do?

Step 1 – As a Millennial, accept that you need to start saving now and commit to acting. For encouragement, remember that:
The 35-year-old would need to boost her contribution rate to 9 percent to achieve the same result as the 25-year-old starter who was saving 6 percent. (from Retirment Saving for Young People) See our post “You can Ignore Most Financial Planning Rules – here is why” at You can ignore most financial planning rules, here is why

Step 2 – Identify how much you need to save by using a retirement calculator. There are many calculators you can use – see what we listed in our post “The results from retirement calculations on different websites vary. Why?” at The results from retirement calculations on different websites vary why

Step 3 – Follow this hierarchy for how to set up accounts for your savings:
Start with your employer plan, 401(k), 403(b) or if you are self-employed, SEP-IRA. The contributions you make to a 401(k) or 403(b) are made from payroll deductions, so you never get a chance to spend this money. The deductions reduce your taxable income now, so the government is effectively helping you to save. Also, the amounts invested grow “tax sheltered,” meaning that you pay no tax on any interest, dividends and capital gains. However, when you retire and withdraw from the plan, you are taxed on that amount as regular income.

If you save more, use a Roth IRA next. Set up an auto debit from your checking to fund your Roth IRA, so contributing works like payroll deductions. The amount contributed to a Roth IRA is not deductible, but amounts withdrawn at retirement are not subject to income tax. The amounts invested grow tax sheltered.

Finally, if you still need to save more, set up a “taxable account,” meaning an account with no tax sheltering benefit. You can use auto-debit to add to this account.

Note: for the Roth IRA, you must qualify and have earned income from which to make contributions to the account. Also note that, for any of these tax sheltered plans, withdrawing funds before age 59½ may subject you to a 10% penalty in addition to income taxes, so do not fund any plan when you expect to need withdraw the money before retirement.

Step 4 – Invest. And when you invest, stick to the plan you set in place (this cannot be over-emphasized). The time to retirement is decades away so you can afford to take risks, some of which will take many years to pay off. If you panic and sell, you only lock in a loss; but if you weather the ups and downs, you will be far ahead. (see Start your investment plan now your future portfolio will thank you)

Creating an asset allocation, where you diversify among stocks, bonds, real estate and cash. Include large cap, mid-cap and small-cap stocks, as well as international stocks. You man also include invest in real estate investment trusts (“REITs”) and hard assets. You can use exchange traded funds (“ETFs”). The low fees of ETFs leave more invested to grow, compared to high fee and load funds.
If you on-going advice, you may want to check out alternatives such as LearnVest and the new Future Advisor site: new Future Advisor site

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Millennials – Don’t just Speak to Your Parents, Do your own Planning (part II in the financial literacy trilogy)

(this is Part II of our trilogy that began with: “Financial Literacy – Millennials received poor marks, but they can fix that” as originally posted on https://millennialsmny.wordpress.com/ )

As Millennials graduate, become employed, start businesses and have families, their finances change. With increasing complexity come many options they must evaluate, as well as new responsibilities. Millennials are more educated that prior generations, but they are also saddled with greater student loan debt than any prior generation. And, despite their higher level of education, they get low marks for financial literacy according to a recent U.S. Treasury Department and Department of Education assessment.

What are they doing about their finances? Sources like Pew Research Center tell us that many Millennials seek advice from their parents. Unlike Boomers who did not want to speak to their parents, Millennials often share interests with their parents and correspondingly seek their counsel.

However, taking financial advice from their parents may not a good approach because many of their parents lack sufficient savings to fund their retirement needs. Mark Grimaldi, co-author of “The Money Compass: Where Your Money Went and How to Get It Back” says “never take advice from someone less successful than you are.” He continues: “With almost 30 years investment experience, I can say with complete confidence that many baby boomers, the parents of Gen Yers, are in a financial mess.”

What, then, should Millennials do then? Talking to their parents is not inherently bad, so long as that is not their sole source. “Of course, there’s a difference between receiving [parental] advice and relying solely on the advice given,” says Kristen Robinson, senior vice president of Fidelity Investments’ women and young investors’ products. “Gen Y should listen to what parents have to say. But at the end of the day, financial decisions are personal matters and best made after carefully considering a number of factors and doing research.” From Millennials: Stop Taking Financial Advice From Mom and Dad at Millennials stop taking financial advice from mom and dad . She concludes that Millennials really need to do is find ethical professionals for help.

So, how do they do this? They search the internet of things, of course! But, wait, is that how to find truly ethical professionals? Yes, if you search with care.
Look for:
 Credentials – check out their bio, are they CFP, JD, or CPA? these are a good start to validation of the advisor;
 Content – are they providing original advice that is sound, helpful?
 Website design – professional, kept up-to-date?
 Clients – who is using them for advice?;
 References – who is willing to put their own reputation at stake for this website?;
 Community – who are their partners and advisors?;
 followers, fans, subscribers and user testimonials – more validation;
 Website design – professional, kept up-to-date?
Avoid:
 tacky websites, “smell test” – if it “smells bad,” then it probably is;
 old content and closed comments;
 too many ads and pop up pop up ads directing you to buy life insurance, etc.;
 no links to anyone you have ever heard of,

For example, companies like LearnVest (see Learnvest knowledge center ) and Workable Wealth (see: Workablewealth ) provide general advice to educate before you pay. Workable Wealth has stated in blog post the hope that educating will lessen the stress of handling your finances.

Disclaimer: Our soon-to-be-launched website intends to offer advice with no hidden agenda, and be judged on providing the planning advice and tools Millennials need.

Watch for the third post of the trilogy, which tells you why taking action now is crucial.

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Don’t Rush to Pay off Your Student Loan – make a plan first

Recently posted at MillennialsMny blog on wordpress

This may surprise you: you should worry more about saving for retirement than paying off your student loan. Yes, there are many bloggers testifying to how they paid off their loans, and many trying to tell you that you need to too. The frequency of such posts does not mean that they are right, or that they have factored in all that you need to for a “best use of cash flow over time” plan. In fact, paying off student loans that have relatively low interest rather than investing will be a costly mistake.

Compare student loan payoff blog posts to the many advisors who encourage paying off your mortgage. The urgency to retire your mortgage belongs to the Silent Generation, who survived the Great Depression and are risk adverse. Paying off a mortgage is usually not the way to maximize your net worth. (Watch for a post on “rent vs. buy” discussing investing and use of mortgage debt.) Furthermore, tying up so much capital in a house lacks for diversification and liquidity – you cannot sell your daughter’s room to cover tuition when she goes off to college.

How do you decide what loan to pay off when? Start with this rule: whenever the interest rate on debt is less than the annualized return on investments, only pay the minimum on the loans (that is, paying off the debt does not maximize your net worth). The term “annualized” returns is key here, as one good year is not a good measure, nor is a recent bad year; you want the 5 or better 10 year average return.

Next, when applying this general rule to yourself, be sure to use after-tax values. You can deduct home mortgage interest in most cases, a portion of student loans in some cases, and credit card debt in almost no cases, while you can deduct your investment in your retirement plan and what you invest grows tax-free until withdrawn. Roth IRAs do not give you a deduction now, but do grow tax free and withdrawals are tax-free.

Here is a quick example: say your retirement plan is all in ETFs, so it grows at about 7% per year over time, say you have a student loan with an interest rate of 3%, because you consolidated all your undergrad loans, and it has a minimum payment of $500 per month, and say you have $1,000 per month for which you want to devise the best plan. Apply no more than the required minimum to student loan and invest all the rest, maxing out your 401(k) or 403(b) plan first, and then investing in a Roth IRA next. In 10 years, you will be so much better off than the person who used the full $1,000 to pay her student loan. What if you had a loan with an interest rate of 8%? Tough call. However, because the loan is compounding over time at a higher rate, that persuades me to apply more to the loan, provided that doing so did not give up an employer match on a 401(k) plan.

These examples are overly simple, I realize. Many of you face the quandary of student loan vs. retirement funding vs. rent or buy a home and more. I am working on that …. (Watch for a post on integrating decisions on buying a home, paying off student loans, investing for retirement and all the other issues you are likely to face.)

Oh, and who am I? Steven A. Branson, see about Steven A. Branson

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When “free” is not free, when paying is worth it …. and how Millennials-Money.com fits in

as recently posted on MillennialsMny Blog on WordPress

First, nothing on the internet is truly free. Many sites are lead generation sites, and most social media websites track our every move to get paid. If you any doubts, please read this article: “Mark Zuckerberg, Let Me Pay for Facebook – ‘Free’ social networking sites cost more than we think.” at Mark Zuckerberg, Let Me Pay for Facebook – ‘Free’ social networking sites cost more than we think

With that in mind:

If you search financial planning and other sites on the web for retirement calculators, you will find many options. See our prior post explaining why they can differ so much The results from retirement calculations on different websites vary why

On of these websites provides “free” use of a gamified retirement calculator. However, when you delve deeper (I read the company form ADV as of May, 2015), you learn that the website may receive compensation from vendors for referring users to financial products and solutions in order to fulfill action steps, such as lenders for a user who needs to refinance her mortgage. The website receives a referral fee from the mortgage lender. The same for a rollover of a 401(k), a fee from Schwab, Fidelity or TD Ameritrade, or for life insurance, a fee from the insurance. Furthermore, management of the website own a registered investment adviser and many are insurance sales people.

Hardly sounds free; websites like this are lead generation portals. Compare to those “free” seminars on estate planning put on by insurance salesmen to sell life insurance and other products.

In contrast, there are good tools, for which you pay. One example is the investment firm Betterment, which recently introduced a new tool available to its paying customers called “RetireGuide.” The firm describes it as “a new planning tool, available for free to all Betterment customers, that helps investors work through scenarios, like …. RetireGuide provides sophisticated retirement guidance that is easy to understand, always up-to-date, and simple to change as your life changes. RetireGuide uses information you provide and the balances from your Betterment accounts, as well as assets outside of Betterment, to answer these questions. It also provides a seamless way to start saving more in a globally diversified portfolio of ETFs based on your retirement plan’s recommendations … This is the only retirement planning tool available to investors today that merges an advice engine with a way to automatically save and invest in a diversified portfolio.”

RetireGuide looks very good, as a tool to help you keep with your retirement plan.

Where are we at Millennials-Money.com in all this? We provide calculators for retirement as well as life insurance, college saving, and buy vs. rent. These are all free. For more, see What millennials-money.com still under construction will allow you to do You can use our free tools, and we will not use any of your data for leads we can sell.

If you pay, you gain access to our knowledge base of “how to” steps, so you can implement a good plan now. Also, you gain access to us to ask questions and can arrange for a more detailed financial plan from an approved planner.

What do you think of this? Your comments would interest me, thanks.

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Scam alert: your secrets are not safe with the IRS

As recently published at MillennialsMny Blog on WordPress

The IRS recently announced that the tax information of 104,000 filers was stolen by hackers and used to file false returns. The same thieves attempted to steal tax data from an additional 100,000 filers, but were unsuccessful.

The unauthorized access of records occurred between February and May of 2015, when hackers used the IRS’s “Get a Transcript” web tool to access filers’ tax return transcripts. The hackers had previously obtained social security numbers of these 200,000 filers from other sources. The IRS pointed out that their servers were not hacked, but their online service allowed resourceful thieves to access filers’ information.

This breach is especially alarming because IRS Transcripts contain sensitive information about filers. Specifically, they include much of the information reported to the IRS on 1040 and the supporting forms, such as W-2s. The stolen information was then used to file 36,500 fraudulent tax returns seeking refunds. As many as 13,000 of those phony returns were accepted by the IRS, for a total of $39 million in refunds paid.

The IRS acted after discovering the breach by closing down the “Get a Transcript” tool for individual filers. Filers may still request their transcripts, but must do so by mailing in a completed form 4506. The IRS has not indicated when it will provide the online service again.

Their next step was to notify all 200,000 victims, informing them that their social security numbers and possibly other personal data was stolen. For those 104,000 whose tax information was stolen, the IRS is offering credit monitoring services. These victims will receive instructions to sign up for the credit monitoring note: these outreach letters will not request any personal identification information from taxpayers). In addition, the IRS will continue to monitor those tax accounts.

As always, victims may apply for identity protection numbers to prevent the filing of future returns using their information. Additionally, the IRS plans to strengthen its authentication procedures.

The hackers were able to answer many of the “out of wallet” security questions by using information that can be easily found on credit reports and social media sites like Facebook. As a result, the IRS will use questions that are more difficult to answer.

The IRS plans to employ a more proactive approach to prevent future breaches by partnering with private tax software companies, payroll companies and state agencies to share data on uncovered scams. Congress may act as well and may move up the date that W-2 forms must be filed with the government to January 31. This change would make it more difficult for scammers to e-file fake 1040s.

If you were affected by this breach, you will receive a notice in the mail from the IRS. If you do not receive a notice, we still recommend you access your free credit reports annually and stay vigilant about keeping your sensitive data protected.

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Investment advice – trilogy on ETFs

Many people hiring managers are paying too much for little or no value-added investment advice. You do not want to be the typical individual investor, who is buying when the market is nearing a peak, and you would be better off to sell, or selling when the market is nearing a bottom, and you would be better off to buy. Individuals are a contrary indicator! Avoid that with passive investing with ETFs.

For more, see the trilogy:

Start your investment plan – now! Your future portfolio will thank you (part I of ETF investing) see Start your investment plan now your future portfolio will thank you

Invest passively, using index funds, so you save fees. Your portfolio will thank you now (part II of ETF investing) see Invest passively using index funds so you save fees your portfolio will thank you now

And soon to come, You have accepted passive investing for market returns now buy a diverse set of ETFs you set up your portfolio and can sleep until you rebalance next year Part III of EFT investing

The Millennials-Money website will have “how to” steps, so you can setup a passive portfolio, avoid the fees, and end up better off in the future.

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Steve Jobs said: “Stay Hungry. Stay Foolish” – so how does that help your career path?

(originally posted at MillennialsMny Blog on WordPress )

Michael Simmons recalled the impact of Steve Jobs last January (see his post at: Top predictor of career success 2015)

Simmons then says: “We think we understand what caused his success. We don’t. We dismiss usable principles of success by labeling them as personality quirks. What’s often missed is the paradoxical interplay of two of his seemingly opposite qualities; maniacal focus and insatiable curiosity. These weren’t just two random strengths. They may have been his most important as they helped lead to everything else … Jobs’ curiosity fueled his passion and provided him with access to unique insights, skills, values, and world-class people who complemented his own skillset. Jobs’ focus brought those to bear in the world of personal electronics.”

In the post, he quotes Steve Jobs form 1995: “Creativity is just connecting things. When you ask creative people how they did something, they feel a little guilty because they didn’t really do it, they just saw something.”

How does any of this relate to you and your career? Simmons reports from his 2013 interview of an expert on networks that a key indicator is being in “open networks.” He then indicates how that is beneficial:

• More accurate view of the world. It provides them with the ability to pull information from diverse clusters so errors cancel themselves out. Research by Philip Tetlock shows that people with open networks are better forecasters than people with closed networks.
• Ability to control the timing of information sharing. While they may not be the first to hear information, they can be the first to introduce information to another cluster. As a result, they can leverage the first move advantage.
• Ability to serve as a translator / connector between groups. They can create value by serving as an intermediary and connecting two people or organizations who can help each other who wouldn’t normally run into each other.
• More breakthrough ideas. Brian Uzzi, professor of leadership and organizational change at the Kellogg School of Management, performed a landmark study where he delved into the tens of millions of academic studies throughout history. He compared their results by the number of citations (links from other research papers) they received and the other papers they referenced. A fascinating pattern emerged. The top performing studies had references that were 90% conventional and 10% atypical (i.e., pulling from other fields). This rule has held constant over time and across fields. People with open networks are more easily able to create atypical combinations.

Here is a quote that I find interesting (and can relate to):

This is challenging in that it can lead to feeling like an outsider as a result of being misunderstood and under-appreciated because few people understand why you think the way you do. It is also challenging, because it requires assimilating different and conflicting perspectives into one worldview.

And this really does ultimately get back to Steve Jobs, who said “Stay Hungry. Stay Foolish” If you have not read, or better yet, watched this, find time to do so: The 2005 Stanford commencement address Jobs – “Stay Hungry. Stay Foolish”

Michael Simmons is a bestselling author and the co-founder of Empact, a global entrepreneurship education organization that has held 500+ entrepreneurship events including Summits at the White House, US Chamber of Commerce, and United Nations. More at Michael Simmons

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Millennials-Money.com for Transparency in Personal Finances – update on the new website

(What our landing page may look like)

As a Millennial, you, like older generations, do not enjoy financial planning. Unlike older generations, you have serious immediate distractions like student loans.

Our website, www.millennials-money.com (“M$M”), was born out of a desire to provide Millennials with quality financial planning with no hidden fees or complicated jargon. Our goal is to enable you to create your own plan that you understand and that you can implement without incurring enormous fees or entanglement in a hidden agenda (like “free” sites that get paid for selling your information when you tell them you want a mortgage or want to open an IRA).

At M$M, we provide on-line financial analysis, individualized planning and educational resources. Simply enter your demographic and financial information and you get results on planning for retirement, “buy vs. rent” for a home, college funding and life insurance purchases to protect your family. For no cost, our tools provide you with a financial analysis detailing what you need to save for retirement, whether it is better to rent or buy a home, how much life insurance you need to purchase, and how much to save for college for your children, or yourself.

Then, for a startup fee of $15.00 and then $9.99/month, you gain access our knowledge base of “how to” steps, our interactive forum and our Financial Planner Marketplace. The financial plan is your roadmap to personal investing, using company benefits, tax strategies, evaluating renting versus buying a home, life insurance and so forth. You can use our Interactive Forum to ask questions, and use our Financial Planner Marketplace, inspired by companies like Uber and AirBnB, to pair you with financial planners, based on bids they make in response to your questions.

We keep you current with our blog, with posts addressing a variety of finance-related subject that you can apply to your finances, as well as other matters of interest.

We hope this becomes your trusted site for advice on all financial matters.

(Look for our post at MillennialsMny Blog on WordPress on how some “free” websites are actually just covers for lead generation or other sales of your information.)

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What we are reading – for laughs, for serious thought and discussion, and just because

She’s right: This Is The Fourth-Grader Who Asked Obama To Put A Woman On The $20 Bill, from BuzzFeed News – http://www.buzzfeed.com/juliekliegman/meet-the-9-year-old-who-asked-obama-to-put-a-woman-on-the-20#.mvlgK35pJ
Technology: Musk Plots Energy Storage Fix Where Utility Industry Failed, from Bloomberg – http://www.bloomberg.com/news/articles/2015-04-28/elon-musk-bulks-up-tesla-batteries-in-leap-beyond-cars-to-grid
Humor: Cookie Monster, Life Coach – on YouTube – https://www.youtube.com/watch?v=HDxgn-LS520&app=desktop
Health: A 2-Minute Walk May Counter the Harms of Sitting – Even a few minutes per hour of moving instead of remaining in a chair might substantially reduce the risk of premature death. http://well.blogs.nytimes.com/2015/05/13/a-2-minute-walk-may-counter-the-harms-of-sitting/?smid=nytnow-share&smprod=nytnow
Language: 20 Common Phrases Even the Smartest People Misuse, from The Muse – https://www.themuse.com/advice/20-common-phrases-even-the-smartest-people-misuse
Comedy: Penn Jillette’s Big Dumb American Crush on Howard Johnson’s, from Eater – http://www.eater.com/2015/4/22/8467017/outliving-the-future-at-howard-johnsons
How to Be Emotionally Intelligent – What makes a leader? Knowledge, smarts and vision, but also the ability to identify and monitor emotions and manage relationships. From the NY Times – http://www.nytimes.com/2015/04/12/education/edlife/how-to-be-emotionally-intelligent.html?smid=nytnow-share&smprod=nytnow
Comedy: The Man Who Makes the World’s Funniest People Even Funnier. As comedies become increasingly improvisational, they need an editor like Brent White to sew them together. From the NY Times – http://www.nytimes.com/2015/04/19/magazine/the-man-who-makes-the-worlds-funniest-people-even-funnier.html?smid=nytnow-share&smprod=nytnow Quote: “Sometimes you just create a joke out of nothing.”
How Music Hijacks Our Perception of Time, from Nautilus – http://nautil.us/issue/22/slow/how-music-hijacks-our-perception-of-time-rp Quote: The Royal Automobile Club deemed Wagner’s Ride of the Valkyrie the most dangerous music to listen to while driving.
What Is Your Purpose? We need to forge new ways to seriously discuss the deepest questions in life with modern tools. This is a start. From the NY Times – http://www.nytimes.com/2015/05/05/opinion/david-brooks-what-is-your-purpose.html?smid=nytnow-share&smprod=nytnow

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5 Things Every Millennial Should Know About Retirement – You’ve got time, so use that time well!

You’ve got time, and if you use that time well, you may even make up for no pension and no Social Security benefits (as originally posted on MillennialsMny Blog on WordPress )

1. You won’t have what your parents had – no pension and no social security. Millennials are the first post-war generation to face retirement with virtually no pension. Fewer than 7% of Fortune 500 companies offer pension plans to new hires. Also, the way that the Social Security system is currently funded, there will be no reserves by 2033. Social security benefits are paid to retirees from the tax withholdings of the current workforce and also from the Social Security Reserves. Once the reserves are depleted, it is estimated the tax revenues the collected at that time will only be enough to pay out three quarters of the scheduled benefits. There are measures Congress could take to head off this eventual depletion, like changing the benefit formulas, raising payroll taxes or increasing the cap on taxable wage income. Until any changes are actually implemented, don’t count on any benefits!

2. Learn how to save and spend – now! It’s never too late to adopt good spending and saving habits, and the sooner you do it, the better. The more you can set aside that is invested now, the better off you will be. Also, avoid accruing any high interest rate debts. You can make your coffee at home if that is what allows you to max-out contributions to your 401(k) plan, especially if your employer matches what you contribute. If you do not have employer-sponsored plan, open a Roth IRA or even a traditional IRA. It’s a lot easier to put money aside now than it is to play catch-up in your 40s. And you can set up auto-debits so the investments are made as soon as your paycheck hits your bank account – keeping it out of your shopping slush fund!

3. We’re living longer, healthier lives. Longer, healthier lives are good, but they also require more investments at retirement. If you hit the Social Security full retirement of 67 now, the Center for Disease Control estimates you will live to around 86. That’s 19 years of retirement that you need to fund. But, if you are younger, living a longer, healthier life, then you will likely live longer, requiring more funds, unless you choose to work later in your life.

4. The good news is you have time. The Center for Retirement Research at Boston College suggests that, by setting aside money at age 25, you will need to save only about 10% of your annual income to retire at 65. If you wait to save, the percentage you need each year increases. If you wait ten years, starting at age 35, your target savings increases to 15%. Wait until you’re 45 and you’ll need to save 27% of your annual income. Imagine if you were 55 today and wanted to retire at age 67? The message is: don’t wait!

5. You also have great resources. With smartphone apps and do-it-yourself trading services, investing is more accessible and less costly than ever. Also, there are more affordable investment products available like ETFs (see our post), so you avoid high fund manager fees. Saving on fees means more to grow for your retirement. Over the course of 40 years, those fund manager fees add up to real money.

In sum, start saving now. Set up a simple portfolio and adjust it as you go along. The time you’ve got now will reward you later!

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Scam update for more on Cyber-Attackers, Cloud Computing – be Vigilant!

We wrote before about the need for vigilance to protect you from cybercriminals. We drew on input from Norton Antivirus about social media scams. In this post, we draw upon the Kiplinger’s Tax Letter and SingleHop.com site.

IRS e-mails – You might not think that tax preparers would fall for e-mail scams, but some do. The 2-27-15 Kiplinger’s Tax Letter describes use of bogus e-mails asking professionals to “update their IRS e-services accounts and their electronic filing ID numbers plus provide personal data.” As we have said in prior posts, the IRS categorically states that they do not send out e-mails.

Cloud Computing – SingleHop is a company endeavoring to be private cloud experts. They champion users holding cloud servers accountable for maintaining high level, monitored and updated security for all client files. Their recent newsletter notes that over 250,000 complaints were filed with the FBI’s Internet Crime Complaint Center (ic3.gov) in 2013 alone, of which over 20% were under age 30. (For more on how “private cloud” computing fits in the internet infrastructure, here is a helpful SingleHop page: SingleHop site)

They caution you not to rely on links from e-mails to the websites you frequent. Instead, they encourage you to create bookmarks for these websites to ensure that you are logging onto the site you intend. They also favor sites that use two levels to authenticate you before granting access to personal information. “With such methods, after logging in with your password, the site will text or email you a single-use code that must be entered. Only the registered phone number or email address will receive the code, making it that much harder for hackers to gain unauthorized access to your accounts.”

Scam Update – With the cautions from both sources in mind, we updated our post, to help you remain vigilant:

Hidden URLs – Those shortened URLs are convenient, but they may be links to websites you don’t want to visit, or worse, they could install malware on your computer. SingleHop admonishes, “Especially look out for slightly misspelled words or words that use unexpected characters, such as substituting a “0” (number) for a “0” (letter) — for example, HOME DEPOT. If something looks even a little bit fishy, delete the email or close the site immediately.”
Phishing Requests – When you get an invitation to click on any link, think twice. When you click, you may be taken to a fake Twitter or Facebook or to a bank, credit card issuer, or another financial institution login page. SingleHop says “Phishers will design their sites to look exactly like the website of your” institutions. If you fall for the fake website, and enter you username and password, the cybercriminals can use your information on the real website to gain complete control of your account.
Hidden Charges – Be wary of those online quizzes that offer to tell you interesting information about yourself like which 1960s sitcom star you resemble. If the quiz asks you for personal information, such as your phone number, stop. If you continue, you many end up subscribing to some service that charges a recurring monthly fee.
Cash Grabs – It’s great to make new friends, but maybe not by “friending” strangers on Facebook. That person you just friended on Facebook may soon be asking you for money. You can avoid this situation by limiting your social media connections to people you know personally. Ignore friend requests when you do not know the person and have no friends in common.
Chain Letters – Sure, you want to be sure that Microsoft will donate the millions it promised to some worthy charity if you keep the online chain letter going. However, such “chain letter” e-mails are a way for spammers to access your friends to connect with them later. Also, you never know to whom your friends will forward the letter.

Sites that are popular with users are popular with criminals, so remain vigilant when you are on line, and, of course, keep your antivirus and anti-malware software up to date. Be wary and think twice before clicking on a suspicious link!

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Green Investing or Investing in Green – How to Invest in an Environmental IRA

For an increasing number of investors, “doing good” with their investments is as important as doing well. Tapping into this new environmentally conscious market, more not-for-profit organizations are teaming up with money managers to create a new line of impact investments. Here are some examples:
 Green Century Funds at Green Century Funds;
 Aquinas Funds at Aquinas Funds; and
 Calvert at Calvert
Caution: before you pick any, use a resource to evaluate and compare, such as Kiplinger’s Finance at Kiplinger’s Finance on investing.
While there is no “green IRA”, you can pick a mutual fund, such as the ones mentioned above, or select stocks yourself in within your IRA or Roth IRA – for more, see Financial literacy millennials received poor marks but they can fix that That is, when you contribute cash to your IRA, it sits in a money market account, doing little until you invest it. If you want to invest in environmentally conscious companies, you can, as follows:

1. Select type of IRA: Before opening and IRA, decide whether a Roth IRA or a traditional IRA suits your needs (see the Financial Literacy post).
2. Open an IRA: Opening an IRA has never been easier. You can contact a financial institution, by phone or online, that offers IRAs, usually a bank, brokerage or mutual fund company. Do your research and be sure the broker offers a self-directed IRA, so you can pick your investment options. Also, be mindful of fees charged for trades, that is the buying and selling of stocks or funds. You want a discount broker. Finally, name beneficiaries in case something happens to you.
3. Choose your Investments: Your IRA can be made of stocks, mutual funds or a mixture. In choosing stocks, experts such as Jennifer Schonberger of The Motley Fool, suggest that you focus on particular countries as you make green stock or mutual fund selections for your IRA. She notes that China is an innovator in green technology, though it is also known as one of the world’s biggest polluters.
4. Fund your Account: Make a plan to fund your account and stick to it! Starting early and contributing regularly can have an enormous impact your account’s value due to tax-free compounding of returns (see “Save 10% of Income” at Savec 10% of Income )

As with any stock market investing, your Green IRA may show you a roller coaster ride of value swings; however, if you have a long-term horizon, the significant growth potential should out-weigh this volatility risk. Also, if you pick a loser, you can always sell your investment (tax-free) and invest in another. Good luck!

P.S. – you can always decide to invest well, this is both easier and yields better returns, and then donate to environmental groups.

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

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 are some easy tips:
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, so you are likely to see good results.

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Financial Literacy – Millennials received poor marks, but they can fix that

While Millennials have proven themselves an increasingly budget conscious group, e.g., employing smart phone apps to ensure they get the best prices for their purchases, they have also shown themselves to have poor financial literacy. This generation is heavily laden with debt, with young adults holding an average debt load of $45,000. So, having a strong understanding of money management may be more important than ever.

The U.S. Treasury Department and Department of Education recently assessed Millennials’ level of financial literacy, and they scored a D+. Fortunately for Millennials, there are a multitude of resources available to help them become educated. However, recent surveys conducted by Fidelity Investments and TIAA-CREF indicate Millennials turn primarily to their parents for advice. The TIAA-CREF survey found that 47% of its 1,000 participants identified their parents as having a major influence in financial counseling. While parental input can be useful, it’s not always sufficient.

Financial education starts as early as pre-kindergarten and is best implemented by parents and schools. Studies show that children who learn money management skills at a young age enjoy long-term benefits throughout adulthood. A 2011 survey by the Council for Economic Education showed that students who studied personal finance in school were more likely to avoid accruing credit card debt, to be less likely to become compulsive shoppers and more likely to save money.

Young adults with poor financial literacy and money management skills can have a negative effect on society as a whole. Individuals with too much debt, whether credit or student loans, can be prevented from making major life changes such as buying a home, getting married or having children. Additionally, job seekers with too much credit card debt may be precluded from obtaining certain types of employment. There are also psychological and emotional implications, which affect physical health.

There are many resources available to Millennials either to start their financial education or to enhance what they already know. The key is to know where to start and whom to trust. Young people would do well to reach out to a broad set of resources including 401(k) administrators, employers, and financial planning firms that understand the diverse needs of Millennials. (We designed much of the content of our website with this in mind.)

Test your financial literacy at http://www.forbes.com/sites/financialfinesse/2013/04/04/7-questions-to-test-your-financial-literacy/ Also see http://www.usfinancialcapability.org/quiz.php
Here is a useful list of resources: http://money.usnews.com/money/personal-finance/articles/2008/04/02/financial-literacy-resources-online

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Achieving a Better Life Experience Act – first look

President Barack Obama recently signed the Achieving a Better Life Experience Act (ABLE Act). The ABLE Act allows individuals and families to open tax-free savings accounts to save for long-term needs associated with an individual’s disability.

These accounts are modeled after 529 college savings accounts. To qualify, a person must be diagnosed with a disability resulting in “marked and severe functional limitations” by the age of 26. An account can be established for an individual without jeopardizing that person’s eligibility for federal programs such as Medicaid. The funds saved in these accounts can be used for a variety of expenses including transportation, housing, employment support and health care.

Like 529 plans, earnings in these accounts grow tax-free, but contributions are made with after-tax dollars. Accounts can be set up at financial institutions and the annual contribution limit is $14,000. ABLE accounts are allowed to accrue up to $100,000 in savings without affecting a person’s eligibility for government aid such as Social Security. This is a great improvement for ABLE account holders over the current asset limit of $2,000. Medicaid coverage would continue no matter how much money is in the accounts.

These accounts can be a useful planning tool for those living with or caring for someone with a physical or developmental disability.

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Plan now to avoid surprises from the Affordable Care Act when filing 2014 taxes

2014 was the first year Americans had access to health insurance options through the Affordable Care Act (the “ACA”). With this new access to insurance came the obligation to purchase it or face new tax consequences. If you opted not to buy health insurance in 2014, you may be faced with a penalty when you file your 2014 tax returns. Even if you did buy insurance through one of the insurance marketplaces, you may have new tax forms to complete and some surprises when it comes to your refund or tax bill.

For most taxpayers, the impact on their tax filing will be minimal, requiring those who were covered to simply check a box indicating they had insurance throughout the year. Those who received subsidies to purchase insurance and who later had increases in their 2014 salary may be required to pay back some of that subsidy. Those whose salary decreased may receive a larger than expected refund.

As these provisions are new to everyone, there may be confusion for taxpayers and tax preparers alike. Unfortunately, due to recent budget cuts, the IRS expects to be able to speak with only half of the people who call in for assistance.

While gearing up for the 2014 tax season, it’s helpful to understand some the most important provisions of the ACA:

  • 1. Exemptions: The ACA provided some exemptions that allow taxpayers to opt out of purchasing insurance without any penalties, including hardship, affordability and religion. There are different methods for applying for an exemption depending on the type of exemption you are requesting. To learn more, go to: https://www.healthcare.gov/fees-exemptions/apply-for-exemption/
  • 2. Penalties: Those who do not qualify for an exemption, were insured for only part of the year, or remain uninsured will be required to pay a penalty called “The Individual Shared Responsibility Payment.” The penalty is set to increase over the coming years, so compare not to see if it is more beneficial for you to pay the penalty or buy insurance. The Tax Policy Center has designed a calculator to help you determine your penalty is you opt to remain uninsured: http://taxpolicycenter.org/taxfacts/acacalculator.cfm.
  • 3. Reconciling: Those who purchased subsidized insurance on the exchanges received an advance on a tax credit. At the time of requesting the subsidy for insurance in 2014, the amount of the subsidy was calculated based on the taxpayer’s 2012 income. The amount of the subsidy granted will be reconciled in the taxpayer’s 2014 filing using the taxpayer’s actual 2014 income and that will affect the taxpayer’s refund or bill. Changes in an individual’s personal circumstances, such as divorce, marriage or a new child can also impact those numbers.
  • There’s still time to plan. Taxpayers facing a loss in premium subsidies because of an increase in income can reduce their income to qualify for the credits. For example, they can contribute to an IRA by April 15, 2015, for the 2014 tax year.

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    Side Hussle Series – Declutter & Make Money

    [from a post scheduled to appear on www.millennials-money.com when launched in 2015]

    We all have things lying around our homes that we have no use for anymore. Instead of holding on to them, sell them to someone who wants them and who will pay you for them. Look around, if you have unwanted electronics, clothes, furniture, books or CDs and DVDs, there’s a market.

    Used Electronics – Those old phones, computers and tablets sitting around your home could make you some quick cash. Companies such as www.Gazelle.com, www.BuyMyTronics.com, www.NextWorth.com and www.uSell.com want your used electronics and will pay you for them. The items don’t even need to work! The process is largely the same for all four companies. Simply go to their websites, get a quote for your unwanted electronics, ship the items and get paid. These companies all provide free shipping and some are associated with national retailers so you can get paid right away.

    Clothes, Shoes & Handbags – If you’re like me, you have items in your closet that you haven’t worn in years and chances are, you will never wear them! Consignment shops are a great option for helping you free up some closet space while making a little extra dough. A quick Google search will bring up consignment shops in your area. If you don’t have one nearby, try www.thredup.com. Thredup will mail you a bag for your unwanted items, with a shipping label so you can send your goods to them at no cost to you. They review your items and pay you up to 80% of the resale value of your clothes. Items that they don’t accept are either donated to a charity, recycled or mailed back to you.

    If you have luxury clothing, jewelry or bags, you can try selling them through www.therealreal.com. They pay up to 70% of the item’s sale price. Like Thredup, The RealReal will send you a bag to mail in your luxury items. Alternatively, you may schedule a “White Glove Pick-up” with your Luxury Manager.

    Furniture & Home Accessories – Like selling used clothing, consignment shops may be a good solution for selling your unwanted furniture and home accessories. These shops generally charge 50% of the sale price, but there are some advantages to selling this way. Namely that the consignment shops do the marketing for you and secondly, you don’t have to worry about strangers coming to your home. If you want to cut out the middleman, try www.Craigslist.com. Craigslist allows you to list items for free and buyers come to you. 100% of the sales proceeds are yours.

    CDs and DVDs – Many independent music stores sell used CDs and DVDs. Search online for local shops in your area. Depending on the number of CDs and DVDs you are wanting to sell, they can often sort through your goods and let you know how much they can offer while you wait.

    Books – There are plenty of online companies that are willing to buy back your unwanted books and text books. www.BookScouter.com will simplify the work for your by scanning 40 other websites and let you know which one will offer you the best price. For text books, www.amazon.com offers the most competitive buyback prices according to www.ExtraBucks.com.

    With a little effort and some “letting go” you can free up some extra space and make a few extra bucks!

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    Seven Deadly Sins of investing

    [from a post scheduled to appear on www.millennials-money.com when launched in 2015]

    The single most important risk to a portfolio of investments is a poorly defined or constantly changing strategy. You must have a long-term approach to which you adhere over time regardless of the current favor of the particular strategy. You will need to resist the psychological pressures of investing:

    Consider these “seven deadly sins of investing”:

    • gluttony– hoarding cash when you should invest or evaluating by only one category when you should look at the big picture;
    • greed– looking for big winnings when time and patience pay off;
    • pride– not selling your losers or old, familiar holdings when a new idea is better;
    • lust– listening to the information barrage and adjusting your portfolio constantly rather than filtering it out to stick with a plan;
    • envy– chasing fads or looking at a friend who has “winners”, making investing look more like gambling, when actually you should sell your best and buy trailing but good positions (as in the “dogs of the Dow” technique);
    • anger– not forgiving yourself for mistakes and moving on; and
    • sloth– changing beliefs to fit your decisions or portfolio rather than applying the lesson that you should review a portfolio intellectually and objectively and decide if you would still buy the holdings today.

    You should review your asset allocation at least annually. A stock market rise will leave you over-weighted in stocks, meaning that you should sell out of stocks and buy into bonds and cash to maintain the allocation. If the stock market goes down, you should do the reverse. In fact, you should sell from your better mutual fund managers and buy the managers that have not done as well recently because those excelling and those lagging are both likely to return to the mean over time. Reallocating may seem wrong, especially when bond yields are low and CD rates are low. Nonetheless, history tells us to override the psychological urges, take “profits” from those currently doing well, and re-deploy them with assets that are more likely to provide future returns.

    Adhering to a sensible investment strategy is how money is made over time. You may feel that you missed out compared to someone who is all in the right stocks now. However, you will also be glad to miss out when that person’s holdings go down faster than the market and you have non-stock investments that increase in value. Also, when there is a new influx of capital, you need to have a strategy so you can sensibly filter the barrage of information from people wanting to help you handle you finances.

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    Ignore Most Financial Planning Rules

    [from a post scheduled to appear on www.millennials-money.com when launched in 2015]

    General rules of thumb for financial planning rarely work. Here are some with my critiques:

    “Stocks minus your age should equal 100” Bad rule– your investment allocation depends on your risk tolerance, the rate of return required to achieve your goals, when you add to investments from annual savings or stock option exercises and when you remove investments to fund lifestyle needs.

    “Life insurance must equal six times compensation” Bad rule– your spouse or partner would use all of your resources, including insurance, to fund lifestyle needs after you die. If you review this and determine a short-fall, that is the amount to be funded by insurance. It could be more or less than the six-fold multiple but ensures that your survivors have adequate resources to be protected.

    “Save 10% of income annually” Decent rule– however, some may need to save even more and others may have no savings need. As with life insurance, the question is whether the return from assets plus annual savings over your life expectancy will fund your lifestyle.

    “You only need 70% of income in retirement” Bad rule– in fact, many people spend more in the first years of retirement as they travel more while spending far less in their 70’s and 80’s as their needs become fewer. This can be further complicated by estate planning goals of gifting to children or charities.

    “Hold six months after-tax income for a rainy day” Decent rule– however, this depends on liquidity, borrowing ability (e.g., home equity line) and cash flow. If annual income permits substantial savings, such that you could pay for a new roof without affecting lifestyle, your “rainy day” reserve can be much less.

    “Monthly payments on debt should not exceed 20% of income” Decent rule– in fact, the rule is somewhat irrelevant in that most lenders apply rules to limit mortgage payments plus home insurance and property taxes to a percentage of income. As with the savings rule, your level of debt may be more or less depending on assets available, risk tolerance and lifestyle costs.

    “Do not refinance until rates drop 2%”–Bad rule– the test is simple: how soon will the cost of refinancing be recouped by lower payments? With no points/no closing cost loans, this can a year or less. Buying down a rate by paying points will make sense if the pay-off is in 12 to 24 months and if you plan to stay in the residence for seven years or more.

    “Delete collision coverage on a car more than 7 years old” Decent rule– as with the “rainy day” reserve, this depends on cash flow and other resources. It also depends on whether the car is your “antique.”

    “Do not spend more than 7% of income on long-term care insurance”Uncertain rule– some people may have sufficient assets to self-insure. Some people will not risk nursing care due to bad family health history; they will want to pay for full insurance.

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