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Achieve Retirement Success - How to Stress Test Your Plan Now
Stress-testing your retirement plan is a crucial step to reduce the risk that life will blind-side you and take you down. That means looking at all sorts of really bad possible situations, and seeing how they’d impact your retirement plan. Here's what the pros do and how they do it.
Read more…Are 401(k) Plans Really Worth It? Savings, Risks, and Benefits
From my personal experience investing for retirement through 401(k) and 403(b) plans for 25 years, the benefits far outweigh the drawbacks and risks. However, if the same would be true for you depends on a variety of factors such as whether or not your employer matches your contribution (and how much), the investment choices, etc. Here's a deep-dive look at all that with help from several financial professionals.
Read more…Know What 401k Balance Progress Says About Your Retirement Hope?
What you can learn from looking at your 401k balance: (1) compare it to the median and average balances by age, (2) compare it to how much financial professionals say you should have by now given your age, and (3) figure out what (if anything) you need to do to change the trajectory of your retirement plan execution. Here's what you need to know.
Read more…Are You a Nervous Tech Worker? Financial Pros Offer Tips for Uncertain Times
If you're in high-tech (or many other sectors) and nervous about your job evaporating. here's a collection of tips from financial professionals that should help reduce your stress and help you make it through to the other side in even better shape.
Read more…7 Nasty Investor Mistakes to Beware in Down Markets
Going through a bear market isn’t fun. Frankly, even if you’re not about to retire or already retired, it’s plenty stressful. However, by avoiding these seven mistakes, and following the professional advice here instead, you may well come out the other side of the downturn even better off than when you entered it.
Read more…7 Simple Tips for Surviving and Thriving Through Every Bear Market
These 7 tips for investing through a bear market are simple, but no less powerful for their simplicity. Also, simple doesn’t equal easy, especially in the emotional sense. However, if you want extraordinary results, you can’t do the ordinary thing like most people.
Read more…Know When Better Interest Rates Are Really the Wrong Choice?
All other things being equal, of course paying a lower interest rate is better. The problem is that all things aren't always equal. Here's an example where refinancing a loan to get a better interest rate could lock you out of a far more lucarative opportunity.
Read more…3 Really Simple Factors Determine If You'll Ever Become Wealthy
There are three simple factors that determine whether or not you can reach whatever level of wealth you desire. How much money you can invest, how much risk you’re willing to take, and how long you’re willing to continue investing. Here's how to use that for building your wealth.
Read more…Ultimate 50-Point Checklist for Effective Layoff Prevention and Preparation
Recessions are notorious as times when companies try to reduce their spending, which usually leads to layoffs. This 50-point combined checklist can help you proactively prepare yourself emotionally, practically, and financially for a possible job loss, as well as if and when the risk of a layoff turns into an unwelcome reality.
Read more…What Hurts Your Money Now? Inflation, Recession & Bears Oh My
Unless you’re fabulously wealthy, the current economic situation must be worrying you. While you can't do anything to change the overall situation, here's what you can do to protect yourself...
Read more…5 Ways out of an Intolerable High-Interest HELOC Trap
Most HELOCs are variable-rate, which can become a trap when interest rates spike, because your payments can easily double or more. If you're in such a situation, here are 5 ways to escape.
Read more…Why the Market Crash May Actually Bring Surprising Blessings
If you take these bear-market lessons to heart, do what you can and should, and avoid what you should not do, in the long run, this market crash can end up being a blessing in a scary disguise. Here are the blessings, the actions to take, and those to avoid.
Read more…3 Ways Financial Plans Can Help Save You from Yourself
The best time to start financial planning is yesterday. Next best is today. A saying goes, ‘It’s easier to prepare than repair.’ While this applies especially to your finances, it extends to the rest of your life.
Read more…IRA? 401(k)? Both? What's Really Best for Your Retirement Money?
Both IRAs and 401(k) plans offer great tax advantages. Each has its own pros and cons, which apply differently to people's different specific situations. Here's how to extract the most from each.
Read more…Does High Inflation Make You a Winner or Loser?
Recent US inflation numbers are higher than they've been in 40+ years. Looking in the context of instances of true hyper-inflation can offer some comfort. However... by no means does this mean we should not worry about the impacts of inflation as high as we're seeing in the present. Research suggests that current inflation is the second highest it's been in the modern era, and isn't all that much lower than the highest readings since WW-II. As with nearly all unusual situations, there are winners and losers to what's developing. Here are a list of such winners, a list of such losers, and 10 things you can do to get yourself more like the former and less like the latter.
Read more…5 Emotional Benefits of Starting Your Own New Business
Starting your own business isn’t for everyone. You need to have a service or product to sell that people want to buy. You need to be willing to take full responsibility for your outcome — be it success or failure. You need to have a long enough financial runway to be able to take off before (figuratively) crashing into the fence. However, if you have what it takes, there are few paths in life that offer the emotional (and financial) benefits of working for yourself.
Read more…Annuities - Shrewd Solution or Really Part of a Big Problem?
One of my clients had the majority of her retirement funds in annuities. That could have been the right choice for her, or she might have been misled by a financial advisor. If a financial advisor is pushing you to buy an annuity (or if you're considering it for any other reason), here are the factors affecting whether or not it’s a good choice for your specific situation, the questions you should ask, and the red flags you should watch out for.
Read more…The Bear Is Here! Why That's (Mostly) Awesome Portfolio News
If you're following the stock market daily, and despairing to see your portfolio being decimated, I have good news (at least if you're not retired or need to retire in the next 2-3 years). For most of us, a market crash can be the best news, and a wonderful opportunity to build real wealth. But only if you have the stomach to do the right things, rather than running for the exits. Here's why.
Read more…How I Protect My Portfolio Through Crashes, Keep My Retirement on Track, and Sleep Nights
The stock market rises and falls from day to day. Over time it periodically drops, and sometimes crashes. If you're not prepared for that, both mentally and in terms of how you position your portfolio, you'll be hard-pressed to stay the course, and may panic-sell at the bottom, locking in your losses, Here's how I prepared myself for the current correction, which I think will very likely continue into bear-market territory, or even a full-blown crash.
Read more…Quitting? Simple "Avoid Penalty, (Never) Do This" 401k Assets Guide
Too many Americans forget old 401(k) Plans, while too many others cash them out. Both are bad mistakes (in most cases). If you're leaving your current job and have a balance in your 401(k) account, you need to make an informed decision as to what you want to do with it. Here are your 4 options, with the pros and cons of each, and other important details to consider.
Read more…9 Surprising S&P 500 Facts You Better Know Before Investing Money
If you choose to follow Warren Buffet’s advice to invest in low-cost index funds, you can find many ETFs and mutual funds that follow the S&P 500. Your money would then join over $5.4 trillion invested in funds tracking the index, and would likely outperform 80% of actively managed mutual funds. However, it would slightly underperform the market due to fees, as well as the remaining 20% of mutual funds. If you're considering an investment in a fund following this index, here are 9 things you should probably learn about it first.
Read more…How to Make Sure Your Spending Decisions Support a Bright Future
If you aren’t intentional about your discretionary spending, you very likely live paycheck-to-paycheck, and risk spiraling into debt if any unexpected expense comes up. To avoid this, and have a good chance for a comfortable retirement, use this framework to make better spending decisions. Your future self will thank you, and your present self won’t find it very hard to stick with, because you’ll still spend on your priorities.
Read more…Are You Missing This Epic Little $10 Million Tax Benefit?
"...nothing can be said to be certain, except death and taxes," wrote Benjamin Franklin in a 1789 letter. As it turns out, taxes aren't necessarily certain and unavoidable. Here's a little-known way that (some) people can avoid paying taxes on multi-million-dollar windfalls. Even if that's not you, knowing how and why Congress decided this was a good idea can be instructive (though it might cause you to experience a bit of jealousy...).
Read more…Are Stocks Really a Risky Way to Wealth? The Answer May Surprise You
Historical data from Yale economist Robert Shiller dating back to 1871 show that investing in stocks for the long haul handily beats investing in bonds. Comparing worst-case outcomes after 30 years shows stocks win by a landslide. In general, the longer you invest, the less growth you’ll need; but perhaps perversely, the less risky it will be to invest in the stock market. That’s why you need to start investing as soon as possible, as much as possible consistent with living a life worth living. It’s also why investing in stocks (with at least a healthy portion of your portfolio) is likely to give you a better outcome.
Read more…Innovative Way to Save Money by Legally Avoiding 401k RMDs
After working a lifetime to build your nest egg, RMDs may force you to deplete your tax-advantaged retirement plans faster than you need or want. There are at least 7 ways to reduce or delay your RMDs, but most throw out the baby with the bathwater. Instead, here's an innovative approach that lets owners of small businesses legally sidestep RMDs for as long as they want. In some cases, it could help workers who don't own the business.
Read more…11 Worst Retirement Investing Pitfalls You Need to Avoid
Personal finance, as I often point out, is exactly that – personal. What’s right for me could be completely wrong for you. However, as the well-known quip goes, “The race isn’t always to the swift, nor the battle to the bold. But that’s the way to bet.” You may choose to go against any or all of these 11 recommendations, and may even be better off for it. However, in my experience, the odds will be against you.
Read more…Easy How to Guide - Your Retirement Investing Made Super Simple
Investing for retirement now is crucial for your future self’s wellbeing. Here are the 5 critical, yet simple steps to do exactly that. Whether you’re a complete investing novice, a middling-fair investor, or can beat the pants off the pros, these will help you chart your path to financial success.
Read more…3 Great Ways You Can Quickly Dig Out of High Credit Card Debt
If you’re deep in credit card debt, your first and immediate concern is to stop digging yourself deeper. Next, there are several good debt consolidation options. If that’s not an option, cutting expenses even a little and bumping your payments over the minimum can save you thousands of dollars and years of debt servitude. Here are the details of what to do and how big an impact each method can have.
Read more…Your Ultimate Guide: How to Safely Establish Forever Retirement Paychecks
Retirement income planning has two big pieces: first, accumulating as large a nest egg as possible; second, establishing a forever retirement paycheck for your drawdown stage. In this article, I cover that second stage in detail (including what I'm doing personally) with guidance to create sustainable retirement income throughout your golden years.
Read more…My Personal Approach – How to Actually Keep Retirement Money Safer
My approach to retirement planning is vastly different than conventional wisdom, and while I agree with some of Wade Pfau’s ideas, I chart a different path than he suggests. My approach starts with 4 critical questions, and uses my experience building our by-now-comfortable nest egg. Finally, I’ve come up with an extra “strings to my bow” that reduces our risk and increases my confidence that my retirement plan should work. Here are the details.
Read more…4 Critical Questions – Know How to Keep Your Retirement Money Safer
Figuring out your stock allocation as you approach retirement is crucial, and not intuitive. You have to consider 4 critical questions. Your answers will determine whether you should be more or less aggressive. And what’s right for you may be very different than what’s right for me. Here are those questions and how they affect your ideal allocation.
Read more…How to Keep Your Retirement Money Safe – a More Practical Way
Retirement planning, like visits to your dentist, is unpleasant but crucial. You have to take into account and address multiple uncertainties, and 7 significant risks. The simplest and most ideal solution is to have a lot more money than you’d expect to need. However, given how little most Americans manage to save for retirement, telling you that even if you’re ahead of 90% of Americans approaching retirement you need to double your nest egg and/or cut your retirement budget in half isn’t practical. Here's what you can do instead.
Read more…3 Super Simple Guidelines for Setting the Right Financial Goals
If you own your own professional business, financial goals are crucial for success. However, you need to do it right. First, your goals need to be SMART (and that all-caps is because it's an acronym, not merely "shouting" about its importance). Then, you need to follow these 3 simple guidelines to make sure you’re setting the right goals — in other words, that you’re climbing the right mountain, or (with a nod to my dogs) that you’re barking up the right tree.
Read more…Know the Best & Worst Places for Coders to Make Good Money?
While this is hardly a definitive study, it’s does show that coder incomes vary widely from state to state and even inside states. If you’re willing and able to move, you can pick and choose where to look for a job. This could be crucial, as the cost-of-living-adjusted average coder salary in the best location is 3-fold higher than in the worst! When comparing offers from different locations, consider the local cost of living to see how easily you’ll be able to afford living there, and how much of your admittedly high income will be left over. Ideally, you may be able to earn more from a company located in one of the higher-income parts of the nation, while working remotely from a low-cost location, assuming that company doesn't penalize remote workers.
Read more…15 Sure Reasons Renting Benefits You Over Buying a Home
One of the hottest controversies in personal finance is whether people should buy or rent their home. I tend to fall more on the buy side, but I can’t think of many financial rules that have no exceptions, and the buy vs. rent is certainly not one such. In fact, here are 15 sure reasons and situations where you should avoid buying a home. However, if none of these are true for you, I'm still confident you’d be better off buying.
Read more…Your Portfolio Behind? 3 Reasons It’s Safer to Not Care
Missing out on a ton of money is a pretty good reason for regret. However, I keep in mind that hindsight is always 20-20. Trying to time the market, or making high-risk bets with a large chunk of your nest egg (e.g., day-trading, crypto, meme stocks, etc.) is almost never a good idea. And if you allow regret to inform your future investments, you’re more likely than not to regret it even more. Here's why I look at things from a different perspective...
Read more…Build Wealth on a Median Income in 3 Really Simple Steps
Even on a median income, which is less than 1/7 of the top-1% income, you can build real wealth. By that I mean a nest-egg large enough to cover your retirement spending. All it takes is a bit of knowledge, a bit of planning, a good bit of grit to keep on plan when (not if) things go sideways for a while, and following these 3 simple steps.
Read more…Why High Interest Bank Accounts Aren't Really Worth Your Time and Effort
High-interest checking accounts beat the national average by over 100x, which is nice. However, is it worth the effort of jumping through all those hoops? For me, the answer is no. After experimenting with such a high-interest account for 5 months, I’ve concluded the time, effort, and attention I spend to earn that interest are simply not worth it. Here's why, and what I'll probably do instead to keep my money ahead of the recent 7.2% annual inflation rate.
Read more…How Using a Personal Finance App Can Change Your Life
Whether you’re looking to improve your money management in your private practice, personal life, or both, a finance app could prove invaluable. Consider this information and advice as you search for the apps to help you accomplish your goals. In no time, your friends might be looking to you for expert financial advice!
Read more…3 Ways Big Corporations Take Advantage and Take Your Money
Like the old proverb says, “Fool me once, shame on you. Fool me twice, shame on me.” To prevent big corporations from misbehaving and taking your money, you need to pay close attention, not let inertia stop you from protecting your financial interests, and not let setups intended to discourage you from making the best choice for yourself deter you from doing just that. Here's how I saved hundreds of dollars by doing just that, and how you too can likely do the same.
Read more…7 Opportunities and Advantages of Starting a New Professional Business
Tens of millions of Americans run their own businesses already. About a million new businesses start each year (though in honesty, about 900,000 cease operations, after an average of 4.5 years in business). Here are the 7 top opportunities and advantages of starting your own professional business (#2 is the opportunity to pick who you work with...). If these resonate for you, it may be time to consider striking out on your own. With a bit of good fortune and good deal of grit, it could be the best professional decision you'll ever make.
Read more…A Reassuring Truth: Are New Cars Really So Very Expensive?
In their haste to publish sensationalist headlines, mainstream media tends to overlook important factors. Whereas they claim that new-car prices are “through the roof,” that's beyond hyperbole and into outright error when you compare to new-car prices of a decade ago or more. Plus, today’s new cars come with a suite of safety features that would have been in the realm of science fiction back then. Here's a comparison of my last car's price when new to a similar car today, along with a tip on how to get the best price possible on a new car in today's environment.
Read more…Simple Rules, False Comfort – How Much Do You Really Need?
Knowing how much you really need to save for retirement is far from simple, and a “rule” like 10x income is woefully oversimplified. If you want to have a decent estimate, here's a 5-point roadmap to figure out your own personalized answer. If you’re too far from retirement (or don’t trust your financial literacy), consider hiring a fee-only financial planner, or at least using the more-nuanced estimates from JP Morgan or T. Rowe Price. Regardless of the answer you arrive at, try to lead a balanced life, where you spend enough to enjoy your present, while saving and investing enough for your future self. Finally, know that the majority of Americans fail to achieve 10x income by retirement age (let alone more than that even if they need it). Don’t let that be you. Start saving and investing as soon as you can.
Read more…7 Attractive Yet Overlooked Benefits of Starting a New Business
I know it from personal experience. Starting your own business is scary. Having to cover expenses for months, with no income and no guarantee of success is no walk in the park. However, if successful, you’ll reap significant benefits. Here are 7 of those that are often overlooked.
Read more…More Money: 3 Benefits, One with a Very Big Downside
If offered, few people would turn down more money. This is completely understandable. More money offers greater security, greater freedom and control, and a way to improve your standard of living. However, one of these comes with a big downside, that you have to take into account and mitigate. Here are the details of the benefits and downside, and how to enjoy the former while avoiding the latter.
Read more…This Small-Business Retirement Plan Can Really Build Wealth
If your practice is raking in high profits, and you want to build wealth for retirement, you should open a small-business retirement plan asap and max it out. Do that for a decade or more and you may easily become a (multi-)millionaire! Here's a comparison between the three most popular small-business retirement plans, along with an example of what your results would have been had you maxed out the best plan for 15 years starting in 2006.
Read more…3 Important Reasons Your Happiness Depends on Your Next Raise
It’s not hard to believe that your next raise is good for your happiness, but there are more reasons why that’s so, beyond the simplest – more dollars hitting your bank account. Once you know how important that next raise is to your happiness, present and future, you’ll be well armed to overcome any trepidation in pursuing the biggest raise you can achieve. Then, my bonus tips will help you strategically pursue it.
Read more…A Super Simple Way to Double Your Income and 10x Your Savings
If you're like most of my clients, there's a simple change you can make that could double your profits and 10x your savings rate. However, just because it's simple doesn't make it easy. Here's the change, and what it will take to implement it.
Read more…Inflation Is High – Can Debt Actually Make It Your Best Friend?
For many people, fast increases in prices, as happens when inflation soars, makes life harder. However, in certain situations, high inflation can be your best friend! Here are the four factors that determine how inflation affects your own personal finances.
Read more…5 Solid Money and Related Life Tips for Near-Retirees
Here are 5 solid tips around money and related life choices for near-retirees (and retirees too!). They revolve around staying active and engaged, transitioning into retirement gradually, and if needed putting off full retirement until your retirement income sources cover your retirement budget. They also emphasize doing things you enjoy and spending time with family and friends as much as you can.
Read more…Top Finance Writers' Money Tips for Your Peak Earning Years
Your 40s and 50s are likely your peak earning years. This is your last best chance to optimize your finances to reach that elusive financial freedom that will allow you to downshift your hard work, and even fully retire if you choose, while still healthy enough to enjoy your "golden years." Here are 7 top tips from four top finance writers on Medium.
Read more…How Much Money Should You Really Pay for Cars & Homes? Top Finance Writers’ Life Advice
As all of us personal finance writers acknowledge, personal finance is just that — personal. What’s right for me may be completely wrong for you. However, it’s probably a good idea to at least consider what people who routinely write about personal finance do with our own finances when trying to decide what to do with yours. Here's advice from 4 top finance writers on Medium as to how much you should consider paying for a car or a house, given your income.
Read more…Just Starting Out? Top Money Tips from Top Finance Writers
Four of us, top finance writers on Medium, pulled together our top tips for people just starting out, in their 20s and 30s. Two of us are almost out of their 30s, one is in his 40s, and I'm in my 50s. As financial writers, we all agreed on the importance of living under your means and investing as much as you can. However, beyond that (unsurprising) tip, we each emphasized different aspects of the best way toward financial freedom. Some of the tips, surprisingly, had less to do with earning, cutting spending, or investing, and more to do with self reliance and flexibility...
Read more…Know Top Finance Authors' Best and Worst Ever Money Decisions?
Financial mistakes come in all shapes and sizes. It could be spending more than you should on something and paying for it using debt. It could be paying for something you end up not using. Or it could be missing an opportunity for a long time or altogether. For our panel of personal finance authors, our best money decisions were to take a leap of faith and pursuing financial freedom doing something we enjoy.
Read more…7 Attractive Financial Benefits and Freedoms of Starting New Practices
Over 30 million Americans felt their best path forward was to start a small business - they probably know something others haven’t thought of (or at least haven’t acted on)! Over the past 11 years, I started 3 solo businesses including a full-time consulting practice. Starting my own businesses brought me multiple attractive benefits, and here are the top 7. If you’re considering doing the same, make sure you have marketable skills, enough resources to tide you over until you become profitable, and the “intestinal fortitude” to ride the roller-coaster without bailing out.
Read more…Living Paycheck to Paycheck? Stop It Using Profit First Method
To escape the “paycheck to paycheck” trap that holds so many Americans (and others), you need to disconnect the metaphorical firehose through which your money shoots out of your pocket from where you keep all your money. By making it harder to overspend, you gain control and safety. Here's how and why it works for businesses, and a step-by-step guide on using it to free yourself financially.
Read more…The Real Reason You Never Feel Rich, and How to Think Differently
Feeling rich has much less to do with your objective wealth than you might imagine. You can reach this feeling by bringing balance to the different domains of your life, and by staying present to what you have and feeling grateful for it. You also need to accept that as much as comparing yourself to others around you can inspire you to work harder and improve your objective lot, it comes with a price of dissatisfaction and emotional pain, so don’t overdo it. These and several other mindset factors are what's missing for you to feel rich, even if you're not wealthy by most "objective" criteria.
Read more…Why "I'll Work Until I'm Dead" Really Means "I'm not Willing to Manage My Money"
Even if you love your work (as I love mine), or if you plan to develop a side hustle and build it into a business you love, planning to never retire is not a plan. It’s just being unwilling to tackle a hard task. It’s calling the ability to retire “sour grapes” so you feel better about giving up on it. To be clear, there are certainly people who suffer truly crushing poverty, and can’t even cover today’s expenses, let alone save and invest for the future. This article isn’t addressed to them. It’s addressed to those of us who have a reasonable (or even great) income, but due to lifestyle inflation always live paycheck to paycheck, never saving and investing.
Read more…Can I Retire Yet? Answer Question with One Simple Wealth Formula
Have you ever faced a crucial financial decision, and felt anxious because you really didn’t want to take the wrong path? For example, you may be sick and tired of your 9-5 job, hate your boss, or just feel totally done with the rate race; but pulling the trigger and quitting for good is, well, frankly terrifying. You’ve spent your entire adult life working. You’ve done your best to set aside money for retirement, despite all the emergencies (and if you’re like me, the occasional large purchases that are anything but emergencies…). So, can you finally call it a career, and kick back and enjoy your “golden years?” How can you tell if what you have now is enough to retire on?
Read more…Are Employee Benefits Actually Worth as Much Money as You Think?
After being laid off from a high-paying job, I decided to open my own one-man company. Things worked out well. Over the decade plus I've been doing it, several companies tried to entice me to shutter my business and come in as a highly compensated employee. Some salaries mentioned were high enough to make me at least consider it. Here's how I calculated the value of benefits to decide if it was worth it to become an employee again.
Read more…3 Reasons Pay Cuts for Remote Workers Are Absolutely Unconscionable
If you’re an employee of some of the largest tech companies, you may have recently faced a tough choice. According to a Reuters report, Google recently informed employees that if they choose to work remotely, their pay could be cut significantly – some employees report cuts as high as 25%! Other large tech players such as Facebook and Twitter also cut pay for remote employees who move to lower-cost areas. What's the ethical justification for such cuts?
Read more…Debt Isn't Bad (or Good), Painful Truth Is You Don't Know How to Use It Right
Think of debt not as borrowing from the lender, but rather as taking (more money) from your future self so you can spend it now. You get to use money today without taking it out of your current resources. However, your future self will need to pay it back, with interest. This is why, while debt is neither bad nor good, you have to know when and how to use it, or suffer potentially devastating consequences.
Read more…How Refis and High Inflation Turned 3 Mortgages into Assets that Actually Make Money
In an article I published 3 years ago, I made the argument on general principles that prepaying a mortgage is a terrible mistake for most people. Now, reality proved that not only is the real cost of a mortgage far lower than most people understand, in the right circumstances, like we’re seeing now, mortgages actually make you a tidy profit on the bank’s money. Given how banks normally set things up, it’s nice to be able to turn the tables on them.
Read more…Thoughtful Ways to Rate Every Money Action Good to Best, Bad to Worst
Scripture doesn't say money is the root of all evil, as some misquote. It's actually the love of money – “For the love of money is the root of all evil: which while some coveted after, they have erred from the faith, and pierced themselves through with many sorrows.” 1 Timothy 6:10. And to quote my own grandmother’s pithy thoughts on money, “Money is the least important thing in the world, so long as you have enough.” The important thing is to have a healthy relationship with money. I hope this piece will help achieve that.
Read more…Why Your First Year Investing Is the Most Important of Your Lifetime
There are many reasons why investing is important, not least of which is that if you never invest you will almost certainly never be able to retire. However, there are also reasons why it's important to start your investing path as early as possible. The blow that delaying another year will deal to your eventual financial wellbeing is impossible to overstate. Here's a brief synopsis of my investing path, mistakes I made, and lessons I learned from those. Especially about the critical importance of your first year investing.
Read more…5 Super Simple Ways that Help Avoid Burning Out When You're Your Own Boss
When you're self-employed, you can never avoid your boss. You're also on the hook for everything that needs to be done. This almost inevitably leads to taking on too much, stressing, and a variety of poor choices. Unchecked, this can easily lead you to burnout. Follow these 5 simple tips to help you avoid doing that to yourself (and those around you, who suffer as a result of your choices).
Read more…Practical Math Reveals Why Getting Rich Is Hard but Gets Way Easier over Time
The math of wealth building isn’t terribly complicated in principle. However, that doesn’t make building wealth easy for those of us who start at zero, let alone owing more than we own. I agree that you can get rich slowly at first, but rather than say “then suddenly,” I’d say “gradually faster, until your investment returns zoom past whatever you can bring in from working.” Here's the math that proves it.
Read more…How Does Net Worth Actually Develop over a Lifetime?
It’s disheartening that most Americans never manage to build enough wealth for a decent retirement, and for most it’s likely not because of poor choices, lack of talent, or laziness. However, it’s important that we look at the data as they are, and learn whatever lessons we can about what we can control in our own lives, so we can work toward better outcomes. Here's how wealth accumulation (or lack thereof) looks like for the poor, the median, the top 25%, the top 10%, and the top 1% in the US.
Read more…How Much Money Makes You Wealthy, Wealthier, or Wealthiest?
Having a lot of money isn’t the only, or even most important thing, but… As my wise grandmother used to say, “Money is the least important thing, as long as you have plenty of it.” This article shows where you stand relative to other Americans in terms of your net worth, either with or without counting your primary residence equity. Further, it'll show you how to figure out where you stand relative to where you “should be” based on your age and income.
Read more…7 Easily Avoided Mistakes that Make Approving Your Mortgage Hard
Especially since Covid, getting mortgages approved is harder than ever. If you want to make it easier for your chosen lender to help you, avoid the above 7 mistakes. Doing any of these (let alone more than one) is a great way to make the already difficult into (nearly) impossible. However, if you follow the “Do This Instead” advice, your lender will likely be able to get your loan approved more quickly and easily (assuming you meet the loan-to-value and payments-to-income ratios, the home appraises, etc.).
Read more…Is Your Salary Spectacular, Ok, or Needs a Little Help Compared to State Data?
Comparing your situation to others around you or in your country or state is a very human things to do. There’s nothing to be ashamed of in doing it. However, rather than stopping at that, whether it shows your income is epic or sad, consider following these suggestions, to enhance your finances in both the present and future. Your future self will thank you profusely.
Read more…Why Social Security Timing Isn't About Maximizing Lifetime Benefits
Trying to maximize your payout will indeed, on average, give you more money over your lifetime. However, it increases your long-term financial risk. The question you should ask yourself then is not, “How do I get the most money out of Social Security over my lifetime?” Instead, it should be, “What claim timing makes the most sense given my retirement needs and my other available resources?”
Read more…Can I Safely Retire at 60 Years Old with a $500k Portfolio?
If you’re 60 and want to retire now with a $500k portfolio, you may be able to do it, if you can live in retirement on just over $30k a year. If you can’t or don’t want to squeeze your budget and the retirement it enables that far, here are 3 viable paths to make it work. Obviously, the changes you’ll need to implement will be smaller if you put off by a few years the date when you call it a career.
Read more…Is Using Past Results to Pick Your Investments Really Crazy or Actually Smart?
There are two commonly accepted pieces of investing wisdom that I mostly reject. First, Warren Buffet’s assertion that investing in low-cost index funds is the best way to invest. I’ve invested almost every dollar in actively managed funds, and my picks beat the S&P 500 (including dividends) by about 1% per year over nearly 2 decades. Second, that using past results to pick investments is like “driving while looking in the rear-view mirror.” Let’s look at that second assertion a bit more closely, and see if it’s really crazy, or actually smart (or as I prefer to say, crazy like a fox :)).
Read more…Prices Keep Soaring; Which Ones Really Hurt You Most?
Inflation is running hotter than in decades, and it seems to just keep going up. The Fed insists (hopes?) this is a temporary situation, and that prices will go back to the much more sedate inflation we’ve experienced for 20+ years. Even if it is, nobody expects prices to drop back down. In fact, they may continue to soar for months or even a year or more. This is really bad news for most consumers, especially those on fixed income, and most especially those whose income doesn’t benefit from any cost of living adjustments (COLAs). Some categories have seen price increases far greater than the overall 5.4% of the overall CPI, some as much as 87%! Paying attention to prices, and especially which categories are seeing the fastest price increases, will let you pick and choose where you can and should economize, what purchases you may want to delay, and which ones you may decide to hurry up with, before prices shoot up even higher.
Read more…High Inflation Is Here Now; How Badly Will It Hurt Your Wallet?
Inflation in general isn’t good for consumers, and is especially bad for people living on fixed income. Even if you're not on fixed income, your personal rate of inflation can be lower or higher than the official CPI number from the Bureau of Labor Statistics (BLS). Here's how to calculate your personal inflation rate using BLS data, so you know what to prepare for.
Read more…3 Simple Business Mistakes All Practice Owners Need to Avoid to See Success
There are many benefits to opening your own practice and being your own boss. At the same time, it means that you’re responsible for making sure everything gets done, correctly and on time. Paraphrasing a sage saying, “The wise person learns from others’ experience.” Here are the three top mistakes I’ve made myself or seen clients make in their practices. Hopefully, knowing about them will help you be wiser.
Read more…How to Actually Use the $1000-a-Month Retirement Savings Rule
Here's an example of a hypothetical 40-year-old figuring out how much he needs to amass to be able to retire, with a step-by-step method to figure out how to use the corrected $1000-a-month retirement savings rule, and how to make it work if your income and spending don’t quite allow you to reach the level of retirement investing you might first think you’d need. All this without letting despair overwhelm you.
Read more…What the Simple $1000-a-Month Retirement Savings Rule Really Means Now
As I’m fond of saying, personal finance is… personal. What’s right for me could be totally wrong for you, or mostly wrong, or somewhat right, or even totally right. It depends on too many factors to be able to rely on rules of thumb and follow them blindly, not knowing whether they apply to your personal situation or not. Perhaps the only personal finance rule of thumb I’d sign off on for (almost) everyone is this: “If it fits in a tweet or on a bumper sticker, don’t count on it being accurate for you.” However, that doesn’t mean you can’t or shouldn’t personalize a rule of thumb to your personal situation, as long as you periodically reevaluate if it still seems to fit. Here's how to do that with the so-called $1000-a-month retirement savings rule.
Read more…Liquid Net Worth – Easy Definition, Why You Should Care, and a Quick Calculation
While your net worth is an important measure, and lets you track your financial progress (up or down), your liquid net worth is a far more useful gauge of what you can survive and what opportunities you might be able to afford getting into. The above shows you a simple way to define and calculate that liquid net worth, whether for the survival situation or the opportunity one.
Read more…To Reach Financial Independence Some Day, Conquer the Wealth Effect
There’s an almost magical allure to the thought of being the master of your own time. Being able to pick and choose what to work on, when, how long, and how hard, without your financial survival hanging in the balance. That magical time is called Financial Independence (FI for short). If you’re striving for your own FI, know that there are two monsters lurking in the dark, like vampires waiting to suck the life out of your dreams.
Read more…7 Revealing Questions to Know You Found a Solid Used Car
Cars are one of the largest budget items for most Americans. Used cars aren't necessarily less expensive to own overall than new ones, but if you decide that buying used is the path for you, here are 7 questions you want answered, and where you need to pay close attention not just to the content of the answers, but also to the non-verbal cues you pick up when the seller answers.
Read more…A Dollar Saved Is a Dollar Earned – Why It's Wrong and What Time Has to Do With It
Here is why a dollar earned is worth (potentially far) less than a dollar, while a dollar saved can be worth far far more than a dollar. All told, the saved dollar could end up improving your lot by 1942x more than the earned dollar!
Read more…Do these Little Investing Mistakes Cost You Money each Time?
My experience with investing has taught me many lessons, including some painful ones. Here are 7 little investing mistakes that could be costing you money time after time. Be wise, and learn from my experience, avoiding having to pay with your own money to consider them.
Read more…7 Distractions You Look at that Make Investing Success Harder
The noise from market mavens, pundits, and assorted talking heads who get paid to keep your attention makes it hard to just do your investing thing. Paying attention to those distractions just makes it harder to reach your own financial goals. Whenever you’re tempted to listen to them, just remember that if they truly knew what’s coming next in the markets, they wouldn’t be wasting their time talking at you. They’d be online, making their next guaranteed 10-bagger investments. Here are 7 simple yet crucial lessons I learned over several decades. I only wish I didn't have to lose thousands of dollars in the learning.
Read more…7 Practical Ways to Reach Your Financial Independence Faster
These are the top 7 financial lessons I learned over the decades it took me to go from negative net worth to being financially successful. Following them may not, by itself, make you financially independent since there’s a lot that’s outside our control. However, I’d be very surprised if they won’t help you do better than you'd do ignoring them.
Read more…What Retirement Can You Actually Afford with $500k, $1 Million, or $2 Million in Assets
Retiring on $500k was sort of possible in the 1990s. Doing the same today would require $1 million, if not more, given inflation over the past 30 years and the more muted market returns expected in the coming decades. If you want to retire on even $1 million, you’ll likely be able to safely draw only $30k - $35k in your first year. This means you’d better be prepared to forgo most if not all luxuries, move to a low-cost country, and probably continue working part-time doing something you enjoy for which others would be willing to pay you. However, there are several things you can do to improve your retirement standard of living.
Read more…5 Annoying Ways Your Job Costs You Lots of Money
Being your own boss comes with many perks, but also with lots of risk. Not everyone is cut out for this path, and not everyone who tries succeeds. However, if you stay an employee for your entire career, be aware that you’re very likely losing a lot of money as a result. Here are 5 ways I experienced first-hand.
Read more…Can Credit Cards Actually Help You Get Debt Free Faster?
If you’re deep in credit card debt, it isn’t easy to get out. However, if you stop digging (i.e., don’t use the cards for any purchase you can’t pay at the end of the month), and use the snowball or avalanche method, you can save yourself a ton of money and years of debt-servitude. Even better, there are ways to use credit card perks to reduce your costs and time in debt, a lot!
Read more…Private Practice Cheat Sheet: How to Plan Your Time for Growth and Success
"How should I plan my time to run my business?" is a deceptively simple question. Inside it hide multiple other, bigger questions. What are your financial goals? Do you want a solo or group practice? Do you want a private-pay-only practice, or do you plan to take insurance? Are you keeping a full- or part-time job while building your practice and potentially beyond then? Do you have other business(es) to run? Do you consult/supervise/mentor others? What non-work activities do you do (e.g., family, volunteering, leisure activities, etc.)? Here is a step-by-step plan for planning your time for growth and success.
Read more…Is Contrarian Money Advice Really Good for Your Financial Health?
When you read something that offers a contrarian point of view, understand that being contrarian just means it’s different. This could be good different or bad different. You need to be a critical reader, consider if the advice is well-thought-out and supported by logic and/or data. See if it’s relevant to your situation. See if the person presenting it has a vested interest in your following their advice, even or especially if it’s bad for your financial wellbeing.
Read more…Here Is How to Save Money on Your Business Checking Account Fees
If your practice or small business is just starting out and you can’t afford to burn your cash by giving a big bank an interest-free loan of $5000 per account in perpetuity, or paying account fees, you may be better served going with a smaller bank, likely an online one. This is especially true if you plan to follow the “Profit First” model. In that book the author recommends opening 7 checking accounts for your business across 2 banks, and even says, “When in doubt, add an account.” Here's what happened that had me start going in this direction, and the online bank I chose.
Read more…Can Buying Your Next Car New Actually Save You Money?
Many financial experts (with or without quotation marks) harp on and on about what a terrible financial choice it is to buy a new car. Almost invariably, their main point is how the car drops in value by 10%, 20%, even 30% (so they claim) “as soon as you drive it off the dealer’s lot.” It’s so much more financially savvy, they say, to buy the car when it’s used, letting the poor sucker who bought it new pay for the massive depreciation of the first year or three. If you buy it used, say they, you’ll save massive amounts of money that you can then, e.g., invest for retirement. But is it really so?
Read more…Should I (Continue to) Take Insurance?
One of the most common (and vexing) questions private practitioners ask is whether to take (or continue to take) insurance. Personally, I fall firmly in the “no” side of that, for reasons you can read in Are You a Walmart Therapist? However, if you see it as a life goal to provide therapy to everyone who needs it, overriding your own wellbeing and prosperity; and/or if you’re completely unwilling to do the (ethical) marketing needed to make sure your ideal clients know about your services so they can choose to call you, taking insurance may be the right choice for you. If you make that choice, here's how you can do it sustainably.
Read more…Affected by COVID-19? Keep Your Small Business Going with These Growth Strategies
Life coach Elena Stewart faced the challenges of COVID-19 to her coaching practice and found a host of ideas and resources to turn this massive upheaval into an opportunity. Here are her best ideas and how she is using them to not only survive, but actually grow her practice in these unprecedented times.
Read more…How What You Know Can Hurt Your Finances
My most recent financial debate was with Jason Clendenen, about whether your home should be counted as an asset or a liability. In short, I hold that it’s an asset while Mr. Clendenen, citing Robert Kiyosaki (of Rich Dad, Poor Dad fame), insists it’s a liability. Read on, and decide for yourself. It could save you hundreds of thousands of dollars!
Read more…Do You Really Need a Massive Emergency Fund After All?
You must have an emergency fund! So say almost all financial professionals. And I agree, for most people. But what if you really don’t need an emergency fund, at least not in the conventional sense? What if you don't need to sideline tens of thousands of dollars earning next to nothing and gradually losing value to inflation and taxes?
Read more…3 Overlooked Secrets You Need to Know to Help Win a Bidding War
It was spring 2005, and it was a sellers’ market out of hell, at least for buyers like us. We were getting married, and couldn’t find a house to buy in our neighborhood that didn’t immediately get multiple offers, with many buyers willing to pay far above the asking price. It was getting close to our wedding day, and it became increasingly clear we would not be able to buy our new house before that day. Here’s what we did to win the bidding war.
Read more…3 Things You Need to Do to Conquer the New Normal
As upside-down as it may feel to us, it looks like the current situation isn’t going back anytime soon to what we used to call normal. This means it’s time to embrace it as our new normal. There are three arenas for mastering this new situation, making it sustainable for the long haul, and even making it work to your advantage. Here are the three arenas with specific suggestions.
Read more…5 Effective Ways to Make Your Kid's College Costs Affordable
The cost of a college education appears to always go up. This is especially true when compared to the flat or even drooping inflation-adjusted income of most Americans. If you’re a parent, and especially if your kid is young, here are 5 effective tips (plus a bonus one) that will help put your kid through college without breaking the bank or taking on enormous student-loan debt.
Read more…How to Ace Your Holiday Shopping in 10 Simple Steps
With the Holiday season fast approaching, you need to read this now so you don't run out of time and spend far too much on Holiday gifts. Here are 10 steps that will help you "ace" this year's Holiday shopping by getting your mind right and not succumbing to external pressures.
Read more…How to Overcome the 7 Scariest Risks to Your Retirement
Life is full of surprises, many of the unpleasant variety. As humans, we’re far more committed to avoiding pain or failure than we are to achieving great results. In professional terms, that’s called being “risk averse.” The more important a goal, the less willing we are to fail, which makes us less willing to take risks, even calculated ones. The problem is that by doing this, we cheat ourselves of bigger wins. If you want bigger wins in life, here’s a simplified version of what I learned from NASA on managing risk, and how you can apply it to your retirement plan, since “Failure is not an option!”
Read more…No Myth – You Absolutely Can Create Passive Income
Unless it’s a matter of someone gifting you cash or a winning lottery ticket, there’s no way you can create a stream of passive income without investing time, money, and expertise upfront. That’s not the point, however. The point is that while creating passive income does take that upfront investment, once you’ve invested in it, you can reap the benefits over the long haul. You can’t, and shouldn’t, expect to have a stream of cash come in without ever providing any benefit to anyone. Once you accept this, you’re ready to build the machine that will bring in truly passive income at some future point, with little or no additional time and effort spent by you. Here are seven plausible paths for building such a future edifice for yourself and your family.
Read more…How to Improve Your Financial Decisions Using Net Worth
If you’re trying to get someplace, whether a physical location or a financial goal, you’re very likely to fail if you don’t know where you are now, and if you don’t keep track of your progress over time. Calculating your net worth, both classical and accessible, and using this calculation to project your possible outcomes, lets you make optimal financial and business decisions. Here's how you can do it, with examples of several decisions where I used this tool.
Read more…How to Avoid Credit Card Debt in 3 Simple Methodical Steps
Credit card debt is no joke. First, the interest you pay drains your financial ability to buy things you need. Second, the stress and anxiety mount as you spiral deeper and deeper into debt. Third, your credit score can drop by 250 points just by letting your credit card debt go too high! Here's a simple 3-step method to avoid that.
Read more…4 Reasons to not Charge More (and How to Change Things)
I’m a big believer that professionals in general, and therapists especially, undercharge for their services far more often than not. That was one of the main reasons why I asked a while back, “Are You a Walmart Therapist?” Since nearly a thousand people have already read that article, it seems to have struck a nerve. Today, however, I’m asking the opposite question. Are you already charging as much as you should, if not more? Here are 4 signs this may be the case, and what to do to change that situation.
Read more…How to Get Your Grocer to Send You on Vacation
Did you ever think you could get your grocer to send you on vacation? Or your cell phone provider or insurance company? Here's a simple and easy to implement way to do just that, without spending a dime more than you normally do.
Read more…How to Give Your Kid a Great Head-Start with Small Gifts
What if I could show you a way you could make your kid wealthy. For real. No get-rich-quick schemes. No summer jobs. No complicated financial shenanigans. All it takes is small gifts. If that sounds interesting, read on...
Read more…How to Avoid Poverty in Retirement
Most of us have retirement savings (if any) that lag far behind where they should be to provide a comfortable retirement. As a result, many say they plan to continue working longer, at least part-time. If possible, this is a great way to delay and reduce how much you draw down your nest egg. However, it’s not a given that you’ll be able to do as you plan, which may force you to retire into poverty. Here are the 5 steps to take now that could save you...
Read more…This Is Why You Really Need to Avoid Elizabeth Warren’s Budget Method
Budgeting. It’s probably right up there in your list of favorite things to do (sarcasm alert!)... along with visiting your dentist. Unfortunately, like visiting your dentist, it’s important that you do it. The consequences of not doing a decent job of it is likely responsible at least in part for the dismal retirement outlook for so many of us. However, over-simplifying a moderately complex task, like Senator Elizabeth Warren's so-called "50/30/20 rule" does, may devastate your finances.
Read more…How to Reach Financial Independence Even if You Do not Earn 6 Figures
Wouldn’t it be awesome if there was a real method to get rich quickly? Unfortunately, the only ones who get rich from get-rich-quick schemes are the scammers who sell them to people desperate to escape poverty. There are multiple paths to financial independence, and if you use several of them, you’ll need less time to achieve it. Here's a 4-step path to doing just that.
Read more…If You’re Ready to Expand – Here’s Your Detailed 28-Step Checklist Before You Hire Associates
Hiring employees isn’t something you do on a whim. It’s a long process with many critical and non-trivial steps. The right support team will help you avoid expensive missteps. It also requires a significant investment of your time and money. Make sure you know in advance what’s needed, so you have all the needed resources available and don’t get stuck halfway through the process. Here's a 28-step checklist to help you organize your thoughts.
Read more…Should You (Plan to) Retire Early and If So, What Do You Need to Plan?
Why Do You Want to Retire Early or (Dare I Ask) at All? The answer could be that you’ve had a series of jerk bosses and want to be done with working for them. Or your boss has you working 60 hours a week, but only pays you for 40 and even that at miserly pay. It could be your stress level at work is through the roof and it’s affecting your health and your family. I’m sure there’s any number of other possible answers. Whatever your answers are, how do you know if you’re ready to “retire" and how do you put together a bullet-proof plan for it?
Read more…How to Prioritize Your Money When You Don’t Have Enough
A famous psychological paradigm called Maslow’s Hierarchy of Needs is built like a pyramid. “Needs lower down in the hierarchy must be satisfied before individuals can attend to needs higher up.” Maslow started with physiological needs: food, water, warmth, rest (if you’re an astronaut, you’d put air in front of all those). Next, safety needs: physical safety and personal security. Then he proceeded to psychological needs such as belonging and love, esteem, and self-actualization. Similarly, when considering how to allocate your money, there are needs you must attend to first, then other needs, and only once all needs are attended to can you proceed to your wants. Here's how you can use this Maslow-like pyramid to prioritize your own financial needs and goals.
Read more…The 4 Pillars of Healthy-Couple Money and How You Can Build Them
Money may make the world go ‘round, but for most of us, it also triggers negative feelings - shame, guilt, obsession, blame, fear. It’s no wonder more than two of every three couples regularly argue about it, and that it’s one of the main contributing causes to divorce. Partners accuse each other of frivolous spending, out-of-control credit card debt, and debilitating frugality. You name it, if it’s a negative money-connected issue, it causes friction. But it doesn’t have to be that way for you.
Read more…Your Optimal Path to Being Able to Retire Comfortably
As I shared elsewhere, when I was 30, a financial advisor looking to sign me on asked me when I’d like to retire. Given that I loved what I was doing, my answer was, “Never.” Why would I ever want to stop doing what I loved (as long as I was able to continue)?He then asked a better question. “When would you like to be able to retire?” That got me to engage. Here's how you can get to being able to retire at a plausible age, without having to tighten your belt (well, if you're setting aside nothing now, you'd have to tighten it just a bit now, but never again after).
Read more…Pay Off Your Mortgage ASAP, but then Again, Maybe Not?
Like almost every homeowner in the US, I purchased each home with a mortgage. Like many, I had to decide if I wanted to make extra payments toward principal, paying off the mortgage sooner, or divert the extra cash to savings and investments. As in all things personal finance, the answer to the question, “Which is the right choice?” starts with, “It depends...” In this case, it depends on how comfortable you are with the psychological factors that arise from picking the option that is financially smarter.
Read more…The Long-Term Impact of COVID-19 on Your Practice
As current trends continue to evolve, you must reinvent your practice at least somewhat, to make sure you survive and even thrive in the new normal situation. As a business expert I know says, the only thing you can be sure of is that things will never be the same. This means some will be more challenged, while others come out better than before. Implementing at least some of these changes will increase the likelihood that your practice comes out ahead, and that you’re better able to help your clients.
Read more…Why Retiring Can Be Dangerous (Plan for This Instead)
A 2016 study published by the Institute of Economic Affairs, a London-based think-tank, found that retirement “increases the probability of suffering from clinical depression by 41 percent.” Further, doubling the number of years spent in retirement was found to “increase the probability of suffering from clinical depression by 17 percent.” Here's what you should strive for instead...
Read more…What Do You Know About Credit Cards? I Guarantee You Don’t Know at Least Some of These…
Credit cards are incredibly convenient. A wallet-sized piece of plastic weighing as little as 5 grams (about 1/6 of an ounce), with zero intrinsic value, lets you make purchases of thousands of dollars or more (depending on your credit limit). Learning everything you can about credit cards so you maximize your rewards and minimize your costs can free up money to juice up your path to achieving your financial goals. Here's some information that can help you do just that.
Read more…Refinancing? Use This Insider Trick to Quickly Boost Your Credit Score
Over the past 20 years, I’ve taken out over a dozen mortgages. On many occasions, it was to reduce my mortgage costs by refinancing loans as interest rates dropped. During that entire two-decade period, I worked with one specific mortgage guy because he always provides outstanding service, saves me money, and makes sure there are never any hiccups at closing. I’ve even followed him from lender to lender as his career progressed. My loyalty is to him, not a specific bank. Here’s one insider tip he gave me, which I’ve used several times to score the best possible mortgage interest rate.
Read more…7 Simple Things I Do to Make Money Off My Credit Cards (that You Can Do Too)
Finding simple ways to turn a potential financial trap into a money-maker can help you achieve your goals. On average, each year my net savings get “juiced” an extra 1.5% due to credit card rebates, rewards, and promos. Here are 7 simple tips on how you can do the same.
Read more…Go Ahead and Buy It, It’s OK
While it's important to be thoughtful when you choose what to spend money on, how much to spend, and when, don't overdo frugality to the point that you can’t enjoy your life. Too many adherents of Financial Independence, Retire Early (FIRE) go so far overboard that after a few months or years, they fall off the wagon completely, and then go too far in the opposite direction. Avoid that by following Seneca the Younger’s admonition: “Everything that exceeds the bounds of moderation has an unstable foundation,” while keeping in mind Oscar Wilde’s rejoinder, “Everything in moderation, including moderation.” Here's how you can tell if and when it's ok to go ahead and buy what you want.
Read more…Low Inflation Helps Your (Taxable) Portfolio
The U.S. tax code is famously complicated. Congress, over decades, has enacted tax measures (and will continue to do so) that it believes will benefit society (or at least segments of society that they care more about than others, a.k.a., earmarking or pork). One aspect that bewilders me is that we’re required to calculate as income interest and capital gains in nominal dollars, which means that you have to pay income taxes when you don’t really make money. Here's how it happens.
Read more…Uncomfortable Charging Sustainable Session Fees? Shift Your Paradigm!
Until you’re comfortable charging a sustainable rate, you won’t be able to provide what you owe your clients - your best therapist self, each and every session. That’s why you need to shift your paradigm and start thinking of your fees as tied to the difference you make. Here's the first step in making that shift.
Read more…Use a 529 Plan to Save for College (and Save Thousands of Dollars)
Talking with a friend who has four kids, I suggested he look into using 529 plans for their college savings. I’m not sure if he ended up following the advice, but my guesstimate is that it would have saved him tens of thousands of dollars over more than a decade. The savings are greatest if you start saving as soon as your child is born, but if your state has income taxes and provides a tax benefit for 529 plans, you can save thousands even if you never save a penny for college expenses. Here's how.
Read more…How Your Opportunity Costs Shrink Over Time
It's not every day you'll hear a financial person suggest you spend more, but in certain circumstances, that's the right thing. As my grandmother would say, “Ever since they invented death, nobody is safe in this life.” Nobody promises us we’ll actually live to retire, so make sure to enjoy at least some of your hard-earned cash today. Balance your future self’s needs and wants with those of your current self. But remember that this balance changes over time. Here's why.
Read more…Your Crucial Money Moves for the Next Few Months
As a financial strategist, I'm constantly looking for ways to improve our personal and business finances, and then extracting from what I come up with ideas that can benefit others like you. Recently, the things I've been working on include trimming discretionary spending, finding ways to reduce interest on debt (e.g., refinancing our mortgage), and increasing our emergency fund. The ongoing pandemic-caused upheaval has brought financial and health emergency situations far too close to home for far too many of us. That's why I've tried to distill my thoughts on what the crucial next steps are for people in different circumstances.
Read more…3 Simple Reasons You Should Grow Your Practice (and 15 Reasons Why You May Prefer to Not)
As a professional, whether in therapy or not, you have to choose whether to get a job in someone else’s practice, or go out on your own. The latter entails more risk and more work, but potentially far more rewards. Assuming that latter is what you chose to do, at some point you may have to make another decision – do you stay solo or do you grow your practice. If you already made that jump and grew your solo practice to a group practice, you may or may not want to keep all those employees. Here's what's involved, why it may be time to grow your practice, keep it as-is, or possibly shrink it.
Read more…Make the Most of Your Employer’s 401(k) Match
A while back, one of my daughters made my day by asking me a question. A question may seem like an odd thing to make one’s day, but this one did… She asked me how to make the most of her employer’s 401(k) match. This made my day for several reasons. (1) She trusts me enough to ask financial questions (no small thing for a parent!). (2) She’s saving for retirement even though she’s still in her 20s. (3) She’s savvy enough to make sure she’s getting the most “free money” possible from her employer. Here's how I suggested she make the most of her employer's 401(k) match. If your employer matches retirement plan contributions, it should help you too.
Read more…What Are Your Job and Time Really Worth?
When I started doing contract work on the side, I was shocked by how much more I made from that side hustle than I did at my day job. My first gig brought in almost three times more than my regular job! And yes, not only does this say something good about the gig, it also says something sad about my salary back then. Had you asked me then what my hourly rate of pay was at my job, I’d quickly calculate it for you since I’ve always been great with numbers. Only one problem… my answer would have been dead wrong. Here’s why.
Read more…How to Maximize Social Security Benefits for Your Spouse
Social Security benefit rules seem to be designed for maximum complexity and confusion. With multiple benefits, requirements, and amounts depending on specific scenarios, it’s impossible to cover all of it in one go. Since the information on SSA.gov leaves something to be desired, here’s how to maximize your spouse’s benefits, especially important if your income isn't in the top couple of percentiles.
Read more…When Interest-Free Offers Aren’t
I had just moved my family to the U.S. and bought a used Ford for $8000, financing $6000 of that with a 3-year auto loan with a 10.4% interest rate. Ouch! Salvation came in the form of an incredible convenience-check offer. That was then. Today’s convenience check offers are simply a thinly veiled invitation to get yourself into financial trouble by borrowing more against your credit than you would otherwise, thereby routing much more of your hard-earned cash to line the pockets of your credit card issuers.
Read more…Managing Your Money in a Crisis
There’s no question. We’re in a major financial and economic crisis, worse than any most of us have ever lived through. In just 2 weeks, 10 million workers filed new unemployment claims. The Congressional Budget Office projects unemployment to exceed 10% during this 2nd quarter of 2020, and the economy may contract faster than a 28% annualized rate! If you’re still working, your employer may have cut your hours, and may be considering furloughing or even letting go employees. If you’re self-employed, clients may be staying away, cutting back, putting plans on hold, or outright canceling them as they try to stem the tide of red ink. Scary. But all is not lost…
Read more…Your First Step Toward Retirement - a Step-by-Step Guide to a Plausible Budget
If you want to ever be able to retire, you have to start building the foundation now. Your first step is to know what income you’ll need in retirement. Here's a 4-step guide for creating a plausible retirement budget, an alternative method that lets you double-check your results, and 5 under-appreciated big-ticket items that risk your retirement success.
Read more…If You’re Scared to Invest in Stocks, You’re Scared of the Wrong Thing
It was the early 90s, I was in my 30s and having to support a family of 4 on a $31,000 salary. Finally, I managed to scrape together $1000 to set aside for retirement. It was time to decide how to allocate the investment. Frankly, I knew next to nothing about any options beyond a savings account, so I spent dozens of hours at the university library reading the Morningstar Mutual Fund Directory to educate myself. It was an eye-opening exercise. It was immediately clear that unless I could set aside a lot more than I thought I’d ever be able to, I couldn’t expect to ever retire if my investments didn’t return a lot more than the interest of a savings account. That meant taking on more risk in the short and intermediate term, but less risk in the long run, by allocating most or all of my investments to stock mutual funds. Especially in the current situation, with the S&P 500 recently as much as 34% off its recent peak, and still more than 26% off that peak, investing in stocks seems scarier than it has been in a very long time. However, if you're afraid of investing in stocks, you're not afraid of the right thing.
Read more…15 Coronavirus Pandemic Silver Linings to Brighten Your Day
I tend to be an optimist. Not a Pollyannaish one, but I always try to see the bright side of things. It’s part of how I stay focused on things I can affect, without letting the things that are out of my control paralyze me. Still, like almost everyone, I’m finding this a trying time. Whether its concern about those directly affected by COVID-19, or about what our economy will look like in a month, two months, six months, a year; or something as relatively mundane as whether my favorite neighborhood gym will survive to reopen its doors when the pandemic is over. To help cope with these dark thoughts, I put together a list of things to be grateful for, silver linings in a dark storm. I hope these will brighten your day at least a bit, like they have mine.
Read more…Here’s How You’re Taxed on Money You Don’t Earn (and What to Do About It)
Without taxes, the government wouldn’t be able to fund the military that keeps us safe. More timely, it wouldn't be able to fund medical response to pandemics, medical research, or support for the economy in national or global emergencies. It couldn’t provide the bare minimum (less actually, but at least something) to the poor, the disabled, and the elderly. It couldn’t pay for maintaining our roads and bridges, and building new ones on occasion. There’d be no way to pay for regulatory bodies that protect the air we breathe, the water we drink, the food we eat, the markets we invest in, etc. Having said all that, there’s one specific problem with our income tax system that should be fixed before any more tax cuts get enacted. It’s when we’re taxed on money we don’t really earn. Here are two scenarios where this happens.
Read more…Survive the Bear Market without Losing Your Mind or Your Shirt
First, let’s acknowledge that the COVID-19 pandemic has far more urgent and critical implications than what’s happening in the stock market. There are tens of thousands of people worldwide in intensive care, in comas, dying, and dead! As much as we hate to think about it, short of a vaccine being developed, tested, and massively deployed in far less time than most experts believe to be possible, those figures will grow by orders of magnitude! However, beyond trying to minimize the risk that we personally infect or get infected by others, and not hoarding hand sanitizers or toilet paper (Really?! Toilet paper?!), there isn’t much that most Americans can do to help the broader situation. All that said, our financial behavior in the coming days, weeks, and months will have a major impact on our long-term financial outcomes, and those of our families. This is especially so when it comes to planning and investing for your retirement (you're already doing that, right?). Here's how you can survive the ongoing market bloodbath without losing your mind or your shirt.
Read more…18 Sensible (Financial) Coronavirus Response Ideas for Your Practice
If you haven’t been living under a rock for the past several weeks, you’ve been bombarded with stories about COVID-19 caused by the novel coronavirus. We’re all watching with concern, if not fear, a rapidly escalating health crisis with an expanding geographic footprint and ever-increasing numbers of people testing positive for the virus, people becoming severely ill, and people dying. My wife Risa and I were talking about what she should do around her practice as a result - should she close the office and do teletherapy only? Should she keep the office open and put bottles of hand sanitizer everywhere (if she can even find any after the panic-buying of the past few weeks)? I then wrote a whole article about sensible responses for your practice. Just one problem - I'm not an epidemiologist, and you can find online the same things I find there so what's the point of my writing it? Then Risa suggested that I concentrate on what is in my wheelhouse and offer you a financial coronavirus response plan for your practice. So, with thanks to Risa for the idea, here it is.
Read more…Here Are 3 Ways Investing in Mutual Funds Can Cost You a Lot
I’ve been investing through mutual funds for decades now. It’s not the sexiest way to invest, I know. It also can have some serious drawbacks if you’re not careful and/or get unlucky. Here are 3 ways it can hurt your results, and what to do about it.
Read more…The Legal Theft Called Private Mortgage Insurance (and How to Avoid It)
When we bought our first home, we couldn’t afford the recommended 20% down payment. Heck, we could barely afford to bring $10,000 cash to the closing table. We could have done what many people do in similar circumstances, and taken out a mortgage for more than 80% of the value of the home. However, that would have required us to pay for private mortgage insurance, PMI, which can cost up to 5% of the total costs of the mortgage, and only helps the lender. Here's why that's such a bad idea, and what you can do instead.
Read more…Group Practice 101 (for Associates Too)
Several therapists I work with either own a group practice, or are considering expanding their solo practice to a group in the future. Many therapists I’ve talked with over the years were (and may still be) associates in someone else’s group practice. If you’re in either situation, here’s a roundup of resources for you…
Read more…7 Budgeting Mistakes You May Be Making and What to Do Differently
We had just moved to the US. We were 30 and had two toddlers. My salary was $31k and my wife wasn't allowed to work. Budgeting wasn't optional. Almost obsessively, I’d review our budget over and over, trying to figure out what we could remove or at least trim. I’d try to convince myself that we could cut our grocery budget by $100 or even $50. Somehow, by the end of the month the total spent on groceries was the same as it was before. Lunch was a sandwich from home, or at most a fast-food “meal.” Dinner was often a few $0.20 packets of supermarket ramen noodles. When we discovered that we could get a cooked meal from the local hospital cafeteria for the same $3 as a Big-Mac Meal, that was a huge deal. Here's what I learned during our journey from there to our very different present situation.
Read more…Use a Roth IRA to Counter the Costs of the SECURE Act
When I made my first IRA contribution of $1000 back in the early 90s, I got a $262 inflation-adjusted tax benefit. Had there been a Roth option back then, my ultimate benefit would have been $3800, more than 15-fold higher. Since their establishment, Roth IRAs have always been a sweet deal for most people (though only ~10% of IRA balances are in such accounts). However, with the SECURE Act just implemented, Roth accounts offer an even more important estate-planning tool. Here's why and how Roth IRAs could give you and your inheritors millions of dollars more than traditional IRAs.
Read more…How the SECURE Act Hurts Your Retirement Planning and What You Can Do About It…
As lawmakers like to do, they recently tucked into a must-pass bill some last-minute changes to the tax code. These specific changes will hurt retirement planning even for the middle class. The so-called “SECURE Act” was inserted into a $1.4 trillion spending bill that had to pass to avoid another government shutdown. President Trump signed the bill into law on December 20. Here’s how the new law is supposed to help you, how it actually hurts you, and what you can do to minimize the damage.
Read more…If You’re Renting Your Home You Need to See This
I was in my late 30s and still renting. I knew I was throwing money away each month. Hundreds of thousands of dollars down the drain by then. I knew I had to do something about it. But just thinking of scraping together a down payment and paying a mortgage on pain of losing the house seemed overwhelming. Then I did the actual math and realized I actually could afford to buy a home. A couple of months later, when I first stepped into the first home we owned, the feeling was indescribable. Now, doing the math to compare renting to buying in general, I show that (with a few important exceptions) if you're renting you need to seriously consider buying a home as quickly as possible. Here's the proof.
Read more…Save Money on a New Car in 4 Simple Steps - A Definitive Guide
Since arriving here in 1992, I bought a grand total of 5 cars. Each time I bought a car, I learned something new. For example, I learned that it’s much better to buy cars new and drive them for at least 10 years. Next, I learned the importance of buying reliable cars that get good gas mileage. I also learned the critical importance of a good credit score. The most important thing I learned is that even if you're not a born negotiator, spending some time to educate yourself on the market for the car you want can save you thousands of dollars. Here's a step-by-step guide on how to do that.
Read more…How a Side Hustle Lets You Reach Financial Independence Faster
There are three separate but related ways to reach financial independence earlier. Increase your savings rate, decrease your planned retirement budget, and/or increase your income while investing the new money. Any of these will work. The first two are harder to sustain than the third, but even that one isn’t easy. Here's a table that shows you in actual numbers what it would take.
Read more…IRS Updates Affect Your 20% QBI Deduction
It's January 2020, so you (or better yet, your accountant) should be busy preparing your 2019 tax returns and starting to plan for tax year 2020. As I wrote about before, the Tax Cuts and Jobs Act (TCJA) went into effect in 2018, establishing a 20% qualified business income (QBI) deduction for passthrough businesses (sole proprietorships, LLCs, S-corps). The QBID lets you deduct 20% of your qualified business income, on top of the specific business deductions you can claim on your Schedule C or corporate tax return. However, the IRS considers therapy practices and other professional-service businesses as specified service businesses (SSBs), limiting your ability to claim the 20% deduction. For such businesses, the law established thresholds on taxable income where the 20% deduction begins to phase out, and limits beyond which it cannot be claimed at all. In a bit of welcome news, the IRS has updated these limits for 2019, and again for 2020. Here's how this could affect your taxes.
Read more…Why Buying a New Car Makes More Sense than Buying Used
You’ve thought about it and ruled out walking, public transportation, Ubers, and even renting a car only when you must. None of that works for you. You’re getting a car of your own and that’s that. Your options are to (a) buy new, (b) buy used, or (c) lease new. Which makes the most sense? Many financial experts will tell you that buying a used car is your best bet. Here's why they're (mostly) wrong.
Read more…Here’s How to Shock-Proof Your Retirement Plan (Once You Have One…)
Dad was several years older than Mom, and toward the end of their lives, in poorer health than hers. "Do you guys have a plan in place to take care of you if and when Dad passes away before you?" I asked. For obvious emotional reasons, she refused to even think about it. Less than two years later, Dad passed away and we had to scramble to make sure Mom was financially secure. Dad’s pension and social security benefits dropped more than 40% once he passed, while Mom's expenses dropped by only 20%. Shocks like this can derail your retirement plan, if you even have one. The following details some of the more likely shocks, and tells you how to keep your plan on track.
Read more…Over a Trillion Dollars! The Costs You Pay for High Credit Card Debt
Credit card debt in the US recently topped a trillion dollars, $1.08T, according to debt.org. That’s over 26% of the $4T-plus total US consumer debt. On average, each household with credit card debt owes nearly $8400 on their average of four-plus credit cards. If you’re part of those statistics, do you really know all the costs you pay? Check it out…
Read more…How to Safeguard Your Retirement Plan from the 7 Biggest Risks - Abridged Version
You spend a lifetime working hard, and saving as much as you can for when you no longer can or want to work (a.k.a. retirement). The last thing you want is to get to that point, only to have something devastate your retirement fund just as you're about to start drawing it down. Here are the top 7 risks, and what you can do to minimize them.
Read more…You May Need a Lot More (or Less) than you Thought to Retire
The well-known 4% retirement rule says that you can expect to safely withdraw 4% of your retirement portfolio in your first year of retirement as your initial draw amount. Inverting that, you'd need 25x what you expect to need in your first year in retirement. However, new research points out that your personal situation can change your personal safe withdrawal to a lot more or less than 4%. Here's what that research says.
Read more…Associates – You’re Asking the Wrong Question
If you’re a clinician working as an associate in a group practice, or considering joining such a practice, you’re probably asking the wrong question on how you’d be paid. It’s not your fault, since it’s based on how so many group practices have been operating for decades. Still, it doesn’t serve you well, and here I discuss why, and what you should do instead. If you're the owner of a group practice, the following can help you decide how to structure your offers and how to educate prospective associates about them.
Read more…Here Are the States Whose Residents Are Really Best at Managing Their Money
CreditCards.com recently reported that the state whose residents are best at managing their money is South Dakota, followed by Montana and a three-way tie between Wisconsin, Maine, and Vermont for 3rd place. This ranking places Texas, Maryland, and Washington DC at the bottom of the pile. As a Maryland resident, I smelled something fishy here, so I started digging at the data. Here's what I found.
Read more…How Soon Can You Reach Your Personal FIRE Point?
FIRE, the acronym for Financial Independence, Retire Early, connects with many people’s dream of “firing” their boss. Do you know how long it’ll be before you reach that point? If you're self-employed, how soon can you get to the point when you don't have to work, and can afford to only do whatever you enjoy doing (which can certainly include your practice)?
Read more…Why a Roth IRA Is Almost Certainly Better for You than a Traditional IRA (and When It Isn't)
It was 1993 and I was a post-doc at Texas Tech. I had just had a conversation about saving for retirement with a grad student from UCSD. Although he was still in his twenties, he was already setting aside money and investing it for retirement. I guess I should be doing the same, I thought, and invested in a traditional IRA. Back then, the Roth IRA had yet to be established. Now that it is available, you would most likely be better served by a Roth than a traditional IRA. Here's why, and the few situations where it might not be so for you...
Read more…Here's What You Need to Know About Business Credit Cards
As a small-business owner (and if you have a private practice, you own a business), you need a credit card. Whether it’s to pay for extra memory in that sleek new smart phone, place orders on Amazon, or just so you don’t have to carry a lot of cash or an unwieldy checkbook to the store when you buy supplies. The question is, should you use a personal credit card, or get a business credit card?
Read more…3 Things You Need to Know About Advice from Financial Gurus (that They Won’t Tell You)
I love quotes with a delicious twist like “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” or “Always remember that you are absolutely unique, just like everyone else…” (apparently both mis-attributed, the first to Mark Twain, the second to Margaret Mead). Here’s another, that may have originated from Albert Einstein, “Everything should be made as simple as possible, but not simpler.” So, what do all these quotes have to do with advice from financial gurus? Simple (pun intended), finances are complicated, the right thing to do depends on your unique circumstances, and following gurus’ advice slavishly will frequently get you in trouble because you think you know something, but in your specific case it may just not be so. Here are some examples where advice that's great for most people may be the worst advice for your personal situation.
Read more…When Is enough (money) enough? A simple step-by-step guide
If you’re a successful professional (or on your way to becoming one), you’re probably working too hard. You may not be taking the time to be with your family, taking vacations and recharging, working out, or simply taking some well-deserved down time. If this describes you, how will you know when you have enough? You can always aspire to more. If you’re like most of us, you haven't made your first million, at least not yet. But if and when you do, reaching the second million is much easier. Reaching the third, fourth, fifth, tenth, etc. becomes progressively easier. However, at some point, making the next buck makes no appreciable difference in anything you (should) care about. Here's how to avoid continuing to work too hard beyond when you need to.
Read more…Easily figure out your average expenses (and a plausible budget)
Article after article on personal (and business) finance exhorts you to create a budget and a financial plan. You’re finally (reluctantly) willing to do it. But if you’re gonna do it, you really want to get it done already. Waiting with that budget for months to track your spending doesn’t cut it. You wish somebody would tell you at least if your spending is in line with your income, without having to go through every line of every statement of every account for the past year! Well, wish no more. Here’s a quick hack that will tell you exactly how much you spent in the last 12 months by just adding and subtracting a few numbers, and help you create a plausible budget from it.
Read more…Three simple secrets to financial success (that don’t involve budgeting and forgoing a daily latte)
“When I was trying to buy my first home, I wasn’t buying smashed avocado for $19 and four coffees at $4 each” - Tim Gurner, Australian multi-millionaire. Deriding millennials for eating out too much isn't new, nor more true of them than other American generations. Any number of financial gurus have repeatedly suggested that people bootstrap themselves out of financial problems by brown-bagging lunch instead of buying a sandwich, forgoing a daily latte, or avoiding any other of a host of small daily or weekly purchases. However, that advice simply ignores our humanity. Here are three simple ways that don't involve denying yourself small daily pleasures, that are mostly within your control, and that will help you reach financial independence more quickly.
Read more…A Simple Free Way to Reach More Clients
According to Business Insider, a large majority of economists expect a recession to occur by the end of 2021, with most of them expecting it in 2020. This is bad news especially for private-pay-only therapy practices, as client traffic will probably slow when the economy contracts, the outlook is gloomy, people get laid off, and wages stagnate or even drop. My work with therapists shows that rent is typically their largest ongoing expense, or close to it. This has therapists make significant decisions regarding their practice based to a great extent on the rent they’d have to pay. Covering rent becomes even more challenging and anxiety-provoking when the economy slows and client traffic drops as a result. But what if I could suggest a simple and (mostly) free way for you to reach double the prospective clients that you reach now?
Read more…Achieve Financial Freedom by Asking Yourself This Before Buying Anything Significant
... and It Isn't "Do I buy or not?" As I shared previously in "Embrace Your Humanness – A Practical Guide to Having More," I would have been better off had someone shared with me this hard-won piece of financial wisdom when I was 30. It was November ’92, and I was looking at the first car I’d ever buy in the US, a 3-year-old 3.8-liter Ford Taurus LX. Buying it took most of my cash on hand, plus $6000 borrowed at 10.4% annual interest rate. The payments were almost 10% of my after-tax salary! I could have, heck, should have found a car that cost half as much, even if it meant buying a 5- or 6-year-old midsize. But I was hooked, and the used-car salesman reeled me in. Here's what I wish someone had taught me.
Read more…Should You Buy or Rent a Home
I recently read a piece called “Buying vs Renting A Home (DEBUNKED),” where the author makes the case that renting is much better than buying for a variety of reasons mostly having to do with how little of your mortgage payment goes toward the principal for many years, and all the other expenses of home ownership. As a landlord myself, I’m all for people wanting to rent, especially my properties :). However, I believe most people in most situations would do better buying their own homes. Here's why.
Read more…Make a Massive Difference in Your Life Through 1% Changes
When I moved to the US many years ago, I was married plus two, just out of grad school, and in debt. My salary was a whopping $31,000, and being over 11,500 miles from home, Ramen noodles frequently served as dinner— you know, the type that comes dried, powdered, and sells for under $0.30 a packet? When we discovered that a hot meal at a local hospital cafeteria was under $3, that became our new go-to place for lunch. Creating a plausible budget and sticking with it wasn't easy, so I was always on the lookout for opportunities to improve our situation. Fast forward many years, and our situation is frankly unrecognizable (in a good way). Here's what worked, and how.
Read more…Is your Practice Model Setting You Up for a $300,000 fine? Ours was
It was about two years ago. My wife Risa, a Marriage and Family Therapist with a thriving group practice, met with a colleague. When she came home, what she told me was shocking. His group practice had just been audited by the state. The audit had concluded that his associates, who had been classified as independent contractor for years, should have been classified as employees. The state fined him $300,000! That was a wake-up call...
Read more…Embrace Your Humanness – A Practical Guide to Having More
At first glance, personal finance may seem disconnected from running a practice, but it’s really all part of one (financial) system. How much you need to support your family informs how much you need to charge clients. Your ability to control spending at home translates to a similar ability in your practice. What’s left over after you cover business expenses determines what goes into your personal account. Here's a simple painless strategy for saving a lot more for the future without scrimping on your current budget.
Read more…Do You Know How to Speak to Your Ideal Client?
Imagine that it’s morning and you’re sipping a delicious cappuccino (or tea, if you don’t share my coffee vice). You open your calendar to see what your day will be like. Oh look, your first appointment is with Jane. That’s so great. You love working with her because there’s never any BS. You don’t have to struggle to get her to share what’s going on. It doesn’t hurt that she’s such a nice person, you know, someone you’d have been happy to have as a friend (if she wasn’t a client, that is). After Jane, it’s Sarah. Another great client. Then lunch, followed by appointments with Tim and then Sam. Two more clients you love working with. After that, you have to catch up on some notes (sigh…) but not too many, and then you’re done for the day! What would it feel like to know that’s what your day will be like? What would it feel like if that was your day every day at your practice? How would you like knowing you’ll only be working with people who let you make the biggest difference with the least struggle? That’s what happens when you focus on your ideal clients. As a bonus, they’re also the ones most likely to want to be your clients.
Read more…Second Tip to Get More Clients from Your Website – Add Relevant, Fresh, and Valuable Content
You’re walking along a familiar city street. You’re approaching a bakery you know and like. Still, you’re in a bit of a rush so you’ll keep walking past it. Suddenly, your nose gets tickled by the amazing scent of freshly baked bread. You can’t resist and go in. What just happened? The combination of knowing and liking the bakery, and knowing and experiencing the scent of fresh bread overrode your initial intention to walk by. If your website can emulate that experience for your prospective clients, they’ll spend time there. Over time, assuming they find your fresh content valuable, they'll start trusting you as an authority, recommend you to others, and be more likely to reach out when they need your services. Here's what content's most likely to work.
Read more…Working with a Coach – Why Do It and What It’s Like
Judy's been practicing for many years, seeing 25 or more clients a week on average, mostly from Medicaid (and spending too many hours chasing reimbursements). Despite all those hours of work and the difference she was making for her clients, she had a hard time getting ahead. She felt frustrated, upset, and resentful at how the system (including insurance providers, Medicaid, and even client expectations) kept her stuck with her head just above water financially, working much harder than justified by her income.
Read more…A Year In: 9 CPA Tips on How the New Tax Law Can Save You Money
It’s been just over a year since the Tax Cuts and Jobs Act (TCJA) went into effect, establishing a 20% deduction on so-called qualified business income for passthrough businesses (ones where the income is taxed through your personal tax return). Since most therapy practices are set up as such passthrough entities, you can almost certainly take advantage of this 20% deduction as you work on your 2018 tax return. We certainly plan to :). Early last year, I wrote a short Q&A about how the TCJA would affect your private therapy practice. However, now that it’s been in effect for a full tax year, I interviewed our CPA to find out what they learned over the past year on the ways a therapist in private practice could benefit from the new tax law.
Read more…First Tip to Get More Clients from Your Website – Show Up
A website doesn’t guarantee clients, but having no website (almost) guarantees a struggling practice. As I mentioned before, almost all therapy websites I’ve seen have major issues that prevent them from getting as many clients as possible. But our first deep dive tip talks to those of you who haven’t yet put up your own website. As long as you haven’t done that, how would most clients even find you? If you do already have a website live, use my checklist to make sure your site ticks all the boxes.
Read more…How Solving 3 Problems in Your Practice Can Make Your Life Easier
Building and running a successful therapy practice isn’t easy. You have to figure out who your ideal clients are and what services you want to offer them. You have to choose how to set up the business. You have to find the right space, lease or buy it, and furnish it. Then, you have to build your referral network and set up your marketing to get clients to start calling and coming in. And all that is just the logistics. Once clients start coming in, you have to provide therapy. You know, sit in the chair for hours on end hearing people pour out their pain, day in and day out. My wife Risa loves being a therapist, but some days she comes home and she’s completely wrung out from all the pain she witnesses. If you’re a therapist, I’m sure you know what that’s like. Aside from the therapy part, these are all challenges that a good coach can help you solve. Today I want to tell you about three challenges that I helped one therapist (let’s call her Jane) overcome that made her life much easier. So much so that she recently told me, “Your help gave me the SPACE, the breathing room to get creative. I couldn’t stop the flow of ideas now if I tried! I have more money with less time spent… though I feel busier, with meaningful, nourishing steps toward my goals and dreams.”
Read more…5 Numbers Critical to Your Private Practice Success
First, to be clear, the most important thing for the success of your private practice is obviously not a number. It’s the quality of therapy you provide your clients. No matter any numbers, if you aren’t a good therapist, current clients will leave because you’re not solving their issues, new clients will stop coming because word will get out, and your practice will languish. Justifiably. Having said that, being a great therapist isn’t enough. You also need to run your practice in a way that reaches your ideal clients and keeps them in therapy long enough for you to make a difference for them. So, assuming you do provide great therapy, here are 5 numbers critical to your success.
Read more…10 Tips to Get More Clients from Your Website
If you have a practice, you have a website (you do, right?). However, almost all therapy sites out there have major issues. Here are 10 tips on improving your site so your ideal clients find and contact you. These include “search engine optimization” (SEO) that gets you ranked higher. If your site isn't optimized, you're whispering in a loud auditorium – not very effective. However, just showing up in search results doesn’t guarantee your ideal client will call. For that, he has to feel understood when visiting your site, which the rest of the tips address.
Read more…To Slide or Not to Slide?
A common question many therapists struggle with, especially if their practice is private-pay only, is whether or not to offer sliding scale fees, and if yes, how much to charge. If you’re struggling with this yourself, know that there’s no single “right answer” for everyone, so whatever you choose to do is fine, as long as you’re comfortable with it. Having said that, here are the pros and cons to help you make an informed decision, and best practices if you choose to “slide.”
Read more…Financial and Other Business Routines Can Save Your Practice
Do you feel overwhelmed by too many moving parts, too many reports, too many things to track in your private practice? Do your keep missing payment due dates and/or feel sure that many payments owed to you disappear and you never even know? When tax time arrives, are you sure your accountant hates you because you hand over to them a huge, messy pile of receipts, statements, and other assorted piles of paper? Business routines can help you tame the paperwork beast, and here’s your checklist, culled from over a decade of running multiple small businesses, including a Marriage and Family therapy practice.
Read more…I Have Good News and Bad News for You
I love telling stories, and this time I have a few short ones to share that all combined in my head and led me to an important insight on dealing with the ups and downs of life in general, and our practices in particular.
Read more…Best Way to Pay Yourself from Your Practice
You have your very own private practice, and even paying clients – congratulations! You’re officially the owner of a business with revenue (and hopefully profit too!). How do you pay yourself out of your profits? Is that the best way? Can doing it differently save you money? Here are some ways practice owners pay themselves, their pros and cons, and which one is best for what situation.
Read more…Reframe Your Procrastination to Power Breakthroughs in Your Practice
Mark Twain jokingly attributed to Benjamin Franklin a celebration of procrastination – “Never put off till to-morrow what you can do day after to-morrow just as well.” Joking aside, I’ve come to appreciate my own instances of procrastination as a deep probe into what my mind shies away from. If you’re like me, when you find yourself procrastinating, it’s almost always because your subconscious mind finds the task overwhelming, unpleasant, or unclear. Here’s how you can reframe that procrastination from something you might be ashamed of to a source of breakthroughs, both personal and in your practice.
Read more…Categorizing Your Business Expenses Wrong Can Cost You
A therapist I coach was making a couple of mistakes in how she categorizes her business expenses, which would cost her hundreds of dollars a year. Here’s what I suggested she do, which should put a nice chunk of change in her pocket. If you’re making the same mistakes, my advice may do the same for you.
Read more…Rental Space Checklist - What your Private Practice Needs
It’s one of the biggest, if not the biggest expense in your business budget. Getting it right can attract more of your ideal clients. Getting it wrong can be a painful and expensive mistake from which it’ll be hard to extract yourself anytime soon. It’s renting the right space for your private practice. Here’s the 15-point checklist we used to choose rental space when my wife was still renting from others. I use the same list when coaching therapists today.
Read more…Are You Setting a Trap for Yourself?
If you’re a member of online therapist groups, I’m sure you’ve seen plenty of threads that start off something like: “I’m looking for intake forms for my private practice. If you don’t mind sharing, please…TIA.” There’s nothing wrong with frugality, and I’m all for reducing business expenses. However, being frugal has its time, place, and appropriate targets. Your intake forms are not one of those! If you’ve been collecting forms shared by other therapists here and there, you’ve been setting up a trap that may well spring on you one day… when you’re audited for HIPPA compliance or worse, when someone sues you for breaching their health information privacy.
Read more…Are You a “Walmart Therapist?”
“You get paid what per session?!” I asked my wife after noticing her low monthly payment from the group practice. “On average insurance pays them $60 so my split is $30,” she replied. “That’s outrageous!” It wasn’t her fault, and if you’re getting paid similarly ridiculous amounts per session, it’s not your fault either. You’ve probably become what I call a “Walmart therapist,” suffering from an extreme imbalance of power.
Read more…5 Secrets You Can Use to Achieve Long-Term Success - Part 2
In the first part of this article, we looked at how acknowledging our emotional/cognitive limitations is a crucial, if perhaps non-intuitive part of your long-term financial success. I also explained why I disagree with financial “gurus” and much of their advice on buying homes and prepaying mortgages. In this part, we start with another non-intuitive but compelling factor to your success, follow with a system/process “secret,” and conclude with how and why opening your own practice can be a critical part of your roadmap to success.
Read more…5 Secrets You Can Use to Achieve Long-Term Success - Part 1
If you’re a fan of Suze Orman or Dave Ramsey, this article will challenge you. My advice on how to achieve financial success is very different from what such financial “gurus” have to say, but I have good reasons for it as you’ll read here. While I don’t know of any way to get rich quickly without unacceptably high risk (e.g., playing the lottery or day trading), you can achieve long-term financial success. Good fortune (think great stock market returns or marrying somebody who’s already wealthy ;)) helps but isn’t up to you or me. In this two-part article I cover five things you can control in your professional and personal life that help achieve long-term success.
Read more…7 Crucial Considerations When Renting Out Space to Others
If you see clients in person in your practice, office rent or mortgage is one of your largest business expenses. If the space is large enough, subleasing or renting out to others is a great way to offset a big part of that cost. When my wife Risa’s practice reached full-time, she rented a 5-office suite and subleased several offices to other therapists. Several years later, we bought and built out our own suite, renting space to six therapists. Several of them have now been with Risa for over nine years, moving with us when we established our own suite. Here are the most important lessons we’ve learned over the years on how to get the best renters, and how to keep them. Whether you’re considering becoming a landlord or renting space in someone else’s suite, this post is for you.
Read more…The Surprising Reason Why Charging Higher Fees Helps Your Clients as much as It Does Your Wallet
Therapists in private practice are mostly driven by two commitments, not necessarily in the following order. First, to help their clients find relief from their traumas, emotional pain, and relationship problems. Second, to help their own families achieve a prosperous future. My commitment when coaching therapists is to help them realize that even when the two commitments appear to conflict, you can reframe them and see how not only are they not in conflict but are actually intimately aligned, like the pronghorns in the photo.
Read more…Are You Leaving Money on the Table?
If like me you live in a high-tax state, you’re suffering the huge impact of the new $10,000 limitation on deducting state and local taxes plus property taxes. This means you probably get to keep just slightly more than half of the last dollar of your income! Now I get that reading about taxes is about as delightful for most of us as going to the dentist for a root canal job, but if you’re not diligent about maximizing your business deductions, you’re leaving a ton of money on the table which will be even more painful. So, grit your teeth (bad pun intended) and read on to avoid the pain of needlessly paying more taxes than you must…
Read more…The Simple Mistake that's Costing You Thousands of Dollars Each Year
If you’re like most therapists in private practice, I can almost guarantee that you’re making this simple mental mistake that’s costing you thousands of dollars every year. If your practice is full, that may even be tens of thousands of dollars. What’s worse, beyond the simple loss of income, it’s forcing you to see too many clients, making it harder to keep bringing your best self to the chair.
Read more…Are You Getting the Same Benefits as Employee Associates at Other Group Practices?
If you’re an employee associate or are considering becoming one, here are lists of benefits employee associates get at some practices. If nothing else, this offers a sanity check to see if you're incredibly pampered, taken advantage of, or somewhere in-between.
Read more…Transitioning Your Group Practice from Independent Contractors to Employees
If you have a group practice based on independent contractors and are contemplating transitioning to an employee-based model, here are the steps we took to transition my wife’s practice to an employee-based model, including deciding on benefits for the staff, and best practices of managing the team through the change.
Read more…Associates in a Group Practice – Independent Contractor vs. Employee
Many therapists in private practice at some point expand their practice by bringing in associates, either as independent contractors or as employees. If you joined such a group practice as an IC, or if you’re considering joining, there are certain things you should be aware of so you know your rights as a contractor, and know the possible consequences that risk your source of income if the practice owner misclassified you.
Read more…Choosing the Right Group Practice Model – Independent Contractors vs. Employees
Not every practice has to become a group practice, but those that don’t will reach a ceiling of how much of a difference they can make, dictated by the limited time of a sole practitioner, especially if she also does all her own marketing, purchasing, appointment-setting, etc. If you want to expand to a group practice, you can add associates either as independent contractors or as employees. Whether you run a group practice or are planning to expand into a group practice, here are some critical things you must consider when choosing how to add associates.
Read more…How Does Your State’s Median Income Stack Up (and Why It Matters)?
One of the most human things is to want to compare yourself, your town, your school, your state, your country, etc. to others. So when I saw this headline “This Map Shows the Average Income in Every State—and What It's Really Worth” I was intrigued. Why does your state’s median income matter to you, and where does it rank compared to the rest of the country?
Read more…3 Things to Remember that will Help Reframe the Sliding Scale Discussion
Some clinicians have concerns about clients possibly claiming to only be able to afford a fraction of your full fee while driving a much nicer car than yours. This is a completely human thought, resulting from seeing sliding scale discounts as pitting your client’s interest (getting the best therapy at the lowest price) against your own (providing the best therapy while maintaining sufficient profitability). Here are some thoughts on how you can set things up to reframe the sliding scale discussion so it doesn’t trigger your own emotions.
Read more…3 Things to Remember if You Struggle with Raising Your Fees
Setting rates is hard for any solo business owner. I still struggle with it myself. A few weeks ago, a new client asked for help with something he was working on, and I didn’t think he could afford my full rate. Ultimately, he asked for a discount for the first few hours and paid my full rate after that. So many therapists also struggle when it comes to setting their fees, agonizing that some clients may be left suffering because they can’t afford therapy. While such concerns prove your empathy, in the final analysis they serve neither you nor your clients. In the following, I point out three things that can help you win this struggle within yourself.
Read more…Lessons from My Accidental Journey into Entrepreneurship
Have you ever found yourself in a job where you’re required to do things you don’t care to do, paid less than you’re worth and less than others in similar positions, underappreciated by your supervisor, and with no path forward? That’s exactly how I felt. Despite years of attempts to change things without leaving, or to find a position at a different institution, I couldn’t seem to get unstuck. After 16 years with a mostly stagnant salary, fear was stopping me from making the sort of radical change that was my only hope. This was not a situation unique to me, and my journey from that low holds some important lessons about entrepreneurship and starting your own private practice.
Read more…What Does the new Tax Law Mean for Your Therapy Practice
The US tax code is infamous for its complexity, and the 2017 Tax Cuts and Jobs Act (love it or hate it) makes things even more complicated than before for therapists in private practice. Does the new 20% deduction apply to therapy practices set up as sole proprietorships? LLCs? PLLCs? S-corps? Is a therapy practice considered a Specified Service Business? If it is, does this mean you don’t get the 20% deduction? Does the 20% deduction apply to all your income from a pass-through business? What is a pass-through business anyway? Since my wife is a therapist in private practice and I’m a consultant in private practice, I’ve been researching all these questions and more, and want to try and make sense of this mess for all of us. Based on that research, and vetted by my own CPA, here are the most important implications for your therapy practice in just seven questions and answers.
Read more…How to Make Your Kid a Tax-Free Millionaire
Year-end is a good time to think about your taxes, especially in a year that saw the biggest changes (like them or not) to our federal tax code in more than a generation. The famous (and often misattributed) quote goes, “‘Tis impossible to be sure of any thing but death and taxes.” (Christopher Bullock, 1716). More than 200 years later, medical researchers keep trying to disprove the certainty of the former, while Washington DC keeps proving that of the latter. A while back, I found a loophole that lets you legally help your teenager become a millionaire without his or her paying a dime of income tax, for less than $20,000! This loophole seems to be unaffected by the new tax law, and I can show exactly how to take advantage of it.
Read more…Holidays Checklist for Your Practice
You know the old saying, "Can’t see the forest for the trees"? Holidays serve a really important purpose for us humans, beyond any religious or cultural reason. They help demarcate our lives, and give us an opportunity to stop, take stock, and see our context (the forest), rather than just the day-to-day details of our lives (the trees). So, what should you be doing this Holiday season, looking at your practice's big picture, to ensure next year is a success?
Read more…Avoid Tax-Time Sticker Shock
Does writing checks for taxes out of your personal account feel like the government is violating your personal finances? For me, once money is in my personal account, I want to know that I can count on it to pay for the mortgage, groceries, and yes, even the occasional vacation. I don’t want to ever write a check to the US Treasury and realize that I just emptied out my checking account so I need to scramble to cover our expenses. Here's how I guided a client to address these concerns.
Read more…Plug the Money Leaks in Your Practice
When you think about it, water can be a good metaphor for money in your practice. It flows in and out, once you use it it’s gone, and without it your business withers and dies. Unless you’re a business mega-star (I’m not), your business has a bunch of money leaks that leave your practice thirstier than it needs to be. Do you know where these money leaks are in your practice?
Read more…Figure Out Your Perfect Office Space Solution in under 5 Minutes
Rent is the biggest budget item for many practices, so you need to choose the right space solution. My wife Risa started by renting daily office space and gradually worked her way up to where we now own our office suite and rent out excess space to other clinicians. This means that not only have we seen it all, we’ve experienced most of it firsthand. Based on that experience, we've come up with a few simple questions that will guide you in figuring out what your own perfect space solution will be.
Read more…The Best Way to Pay Off all Your Debt
We’ve all been there. Student loans to help pay for tuition, a business loan to help rent an office space and furnish it before you see any paying clients, or credit card debt to cover expenses while you start building your practice – it’s tough to get your education and start a practice without incurring debt, and usually many sorts of debt. If that describes you, what’s the best way to pay off all that debt?
Read more…Financial Myths that Can Hurt Your Practice – Expensive CEUs
Mark Twain is quoted as having said, “It's not what you don't know that kills you, it's what you know for sure that ain't true.” So, what is it that you know for sure that ain’t true about the business of your practice? Let's start with the CEU. You know, that pesky requirement that catches you unaware at the end of the year because you forgot to plan for it?
Read more…11 more Ways to Make Your Solo Practice more Profitable - Services
These 11 tips are based on lessons my wife Risa and I learned on how to reduce our costs for business services while running her therapy practice and my consulting business. You can use these to cut your own practice's costs and increase your profits. For example, we see health insurance as an affordable means to prevent financial ruin, not a way to avoid paying for any health services. That lets us buy much cheaper coverage.
Read more…Next 11 Ways to Make Your Solo Practice more Profitable – Financial Wisdom
Like my wife Risa, I’m sure you work very hard to make a difference for your clients, which makes it that much harder to focus on keeping your practice profitable. Here are 11 more tips to make smart financial choices that will help do that. This isn't about pinching pennies, but rather cutting where you can do so without being miserable, so you have more money to invest in bringing in clients, making a difference for them, and making your own life simpler and easier.
Read more…First 12 Tips Guaranteed to Make Your Practice more Profitable – Your Space
From our experience with my wife Risa’s practice, I’m sure you often feel overwhelmed trying to not only make a difference for your clients, but also juggle all the hats you have to wear to make your practice profitable. Here are 12 tips to make smart choices about your space that will increase your profit. This is not about pinching pennies, but rather cutting where it makes sense so you have more money to invest in bringing in clients and making your life simpler and easier.
Read more…You CAN Recover from Slowdowns in Client Traffic
It’s a fact of life – slowdowns in client traffic are a matter of when, not if. However, there’s no reason why such a slowdown should lead to financial or business ruin. In fact, it may be a blessing in (albeit very effective) disguise! When a slowdown come knocking at your door, if you respond by keeping a positive outlook and taking immediate and effective action, you may find yourself piercing its frightening disguise and seeing it for the opportunity it hides.
Read more…Retirement Plans for Solo Practitioners
Retirement plans are an important topic for solo practitioners, which I plan to cover more fully in my upcoming video course. However, I don’t want to hold off
Read more…Business Budget Sanity Check
For the purpose of this post, you’ll need to refer to my free “Set Your Rates the Right Way” worksheet. In the sheet, fill in the blanks on page 4 with your numbers, referring as needed to the sample sheet on the following page (if you have questions or comments, post those at the bottom of this related post and I promise to respond). After filling in your numbers, compare them to the sample entries. Unless you simply copied entries over, I’d bet a nickel your budget is very different.
Read more…Why Free Isn’t Always so Great
It almost seems like you can get something free anywhere you turn these days. That’s because people don’t hesitate to accept something for free, where they may be very reluctant to pay for it. It’s no surprise that the threshold for saying “yes” to something is much lower if it’s free. If you’re trying to establish yourself in a new niche, offering something for free allows you to reach a wider audience, which is great. And if you make that giveaway really valuable, it helps you establish credibility with that audience, which is even better.
Read more…Choosing the Right Business Entity Type
Business entity? Really? Don’t I have more urgent and important things to deal with? That would have been my response when I started my first small business. The problem with that response is that when you start a business, you don’t get to not choose a business entity type. Either you choose it yourself, or it’s chosen for you by default.
Read more…Set Your Rates the Right Way
If you’re a mental health provider, grad school taught you all about how to be a clinician. You learned to diagnose and treat the seemingly endless variety of ways in which we humans make a mess of our emotions and those of our loved ones. Then, you learned how to implement all that knowledge in a clinical setting through supervised therapy, learning from teachers, supervisors, and mentors, perfecting your ability to provide therapy. What you probably did not study nearly as much (if at all) is how to run your practice as a business. One aspect, the one that determines how much money your practice brings in, is setting your rates.
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