Tana Gildea provides helpful tips for women who are suddenly single and need to get their finances and financial documents in order.

For more information reach out to your client service team or call 404.264.1400.

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As I was thinking about being a mom and all the ways that moms care for their children, I couldn’t help but think of the financial impact of moms. The traditional mother role was the nurturing and physical care of the kids while dad was out hunting and gathering to provide food, clothing, and shelter. We have certainly come a long way from those drag-home-the-kill days for both men and women. Moms are now a big part of the workforce and can be major contributors to the household income, while still managing the household. According to Motherly’s 2022 State of Motherhood Survey Report, “47% of moms surveyed in 2022 contribute more than half of the household income. In 2018, 37% of moms were contributing half or more to their household income.” It also stated, “Today, almost half (48%) are the family financial planner, meaning moms pay all the bills and manage the household finances.”¹

For every mom, working outside the home or not:

• Do you have a current will, valid in your state of residence, which names a guardian for your children in the event of your death? Even if their dad is still living and you are still married to him, you should name him as the guardian and provide a successor guardian in case you were both involved in a common accident.
  • Does your spouse have a will? Do you know where it is? Do you know what it says?

Do you have financial and health care powers of attorney so that someone could step in should you be incapacitated? This is normally part of the estate documents package. If you have them, review the information to make sure it is still complying with your wishes and the named agents are appropriate.

• Do you have life insurance on yourself which would pay off the family’s debt, fund college for your kids, and provide your spouse with money to pay for help in the event of your death? You should at least be able to provide a year or two of extra money for childcare while your spouse gets back on his feet. Of course, if you are providing a large part of the financial support for the family, you will want to replace your income as well. Talk to a financial planner or insurance agent for the right amount for your situation, age, and budget.
  • There are good life insurance calculators online that you can use to get any idea of how much is enough. Term insurance is not very expensive for nonsmokers, so I urge you to investigate this option while you are healthy.
  • If you have had life insurance for a while now, do you know the expiration date of the term? Twenty years can go by fast so make sure you know when those expire so you can plan ahead to replace the policy if needed.
• Does your spouse have life insurance, and if so, do you know with which company, how much, and how you would access it in the event of his death? This is not a fun topic, but it is important for you to be in the know.
  • Be sure you know the policy date and the term so you can track the expiration and get new policies if needed.
• Do you know where the money is? All the accounts, passwords, and balances?
  • With all the two factor authenticators in use, can you access his email or phone to “get the code?”
• Do all the working adults have disability insurance? Anyone contributing money to the support of the household should have disability insurance in case of illness, accident, or other incapacity.
• Do you have a stash of cash at home, locked up, that you could access if needed in an emergency?
  • Consider getting a safe, chaining it in an out-of-sight place and putting all your important documents, cash, and passwords in it. Wills, passports, social security cards, life insurance policies and any other important documents should be in there. The office supply stores have inexpensive safes that are small and have a built-in chain.
• If you are in your late fifties/early sixties, do you have long-term care insurance which would help cover the cost of your care if you had to go into assisted living or a nursing home? This is a huge help to your children when you get to the age of needing such assistance.

If there has been a divorce, have you updated the beneficiaries on all life insurance and employer benefit plans? Sometimes that is missed in the turmoil of divorce. You always need to update estate documents accordingly.

None of these things are fun or seem nurturing or contributing to the care and well-being of your children, but they all are critical aspects of the modern-day protection of our children. As a Mother’s Day present to your kids, take action on one or two of these items this week so that you can know that you have done everything possible to protect and provide for your kids.

To your financial (and parental) success!

To learn more or get help planning your financial goals, please email me at gildea@homrichberg.com.

Download this article here.

¹ Source: https://www.mother.ly/news/2022-state-of-motherhood-survey/#in-the-past-5-years-mothers-have-proven-their-power-heres-whats-changed

Important Disclosures

This article may not be copied, reproduced, or distributed without Homrich Berg’s prior written consent.

All information is as of date above unless otherwise disclosed.  The information is provided for informational purposes only and should not be considered a recommendation to purchase or sell any financial instrument, product or service sponsored by Homrich Berg or its affiliates or agents. The information does not represent legal, tax, accounting, or investment advice; recipients should consult their respective advisors regarding such matters. This material may not be suitable for all investors. Neither Homrich Berg, nor any affiliates, make any representation or warranty as to the accuracy or merit of this analysis for individual use. Information contained herein has been obtained from sources believed to be reliable but are not guaranteed. Investors are advised to consult with their investment professional about their specific financial needs and goals before making any investment decision.

©2023 Homrich Berg.

 A fortress. That word conjures thoughts of a castle, knights in shining armor, and horses galloping to either conquer or defend the fortress. Or maybe your imagination goes to military campaigns and the forts built to hold ground and provide security for troops. Regardless, the image is an imposing one, and the feeling is of safety, longevity, and strength.

Building your financial fortress is all about creating that feeling of safety, security, and refuge against the trials and tribulations that life can bring. It is not about pursuing the material, the shiny, the things that make up the Insta posts that catch our attention and awaken our little green monster. Building the fortress is the ability to keep you and your family safe in an uncertain world. It is about addressing and planning for some of the worst things as we ultimately pursue some of the best. The fortress is the foundation upon which to build a solid, stable life.

As we look at the elements of a financial fortress, saving and creating available cash tops the list of providing security in the face of illness, misfortune, and calamities from the mundane flat tire to the more impactful tree falling through the roof. Building up your “emergency savings” is about as exciting as flossing your teeth so let’s reframe that to adding bricks to the fortress or even adding soldiers to guard the door. Every dollar that you save and accumulate is another brick in the fortress wall, making it stronger. It is not about giving up something; it is about gaining security and freedom from worry should life throw a curveball.

Regardless of how much you accumulate on the cash side of the house, the fortress needs more protection than our own dollars can provide and that comes in the form of insurance. As you build your financial fortress, take a long, hard look at your property and casualty (i.e., homeowners and auto) insurance.

• What is the company?
• What is covered and what is excluded?
• How much are your deductibles? Do you have that saved?
• Is your coverage appropriate and adequate?
• Do you know how to file a claim if you had something happen?
• Have you talked to your agent within the past year or two to update him/her about changes?
• Does the liability coverage at least equal your net worth?

If you have recently graduated from college and moved into a new apartment, have you updated your renter’s insurance? That insurance covers your belongings as well as your liability for things like fire or flood in the dwelling. If you live in an apartment, their insurance only covers the apartment itself not you and your things. Consider your coverage limits as you start to acquire more expensive things. You want to make sure the limits would allow you to place everything in the event of a major catastrophe.

Does someone depend on your paycheck for rent, mortgage, or other support? If so, do you have some life insurance for them to replace your income if the worst happened? Have you thought about how long that person could manage on his or her own given the life insurance you have? When you are young, life insurance is inexpensive, and most people need it for a fairly long time, so it may be time to look at having your own policy beyond what is available at work.

And speaking of the worst, when you start a new job, be sure you have disability insurance which replaces your income should you be unable to work due to illness or injury. You’ll need both short-term and long-term.

Part of your fortress building should include your “speed dial” list. Who are you gonna call (not Ghost-Busters) when something real life crazy happens?

• Speaking of insurance – do you have the company and/or agent’s number on hand?
• Roadside Assistance – you may have this service as part of your car insurance. Do you know how to contact them?
• If you own a home, I’d recommend having the name and number of a good plumber at the ready. Water and other plumbing things are absolutely awful and always seem to come up at very inopportune times!
• How about contact info for your roommate’s or significant other’s family, employer, and best friend? When bad things happen, you need to reach these folks.
• Do you have a tax professional who can help if that IRS notice shows up or you have a more complex tax situation?
• Do you know an attorney who could give you guidance if something came up? There are a lot of specialties within the attorney realm but having at least one person to call can make a huge difference in a difficult situation.
• Who else should be on your “speed dial” list?
  

Other elements of your fortress must include your digital safety and security. Securing and protecting your identity, credit, and reputation in a digital world are critical. Yes, it is also annoying that we must spend time, energy, and money to keep the cyber-villains out of the fortress, but that’s the downside of electronic convenience.

• How do you monitor your credit?
  • Monitoring services can be great but only if you review their alerts and respond if something is amiss.
  • If you don’t use a service, make sure you are watching your credit score and pulling your credit report periodically to review activity, report issues, and resolve problems.
• Digital safety is an ever-present issue to keep top-of-mind. The click bait is getting more and more tempting and even though we all do know that we didn’t inherit from some long-lost foreign emperor, sometimes you just want to click anyway. In those moments of being tired, distracted, or just not paying attention, put down the mouse, and lock the phone. Viruses and bad links abound. Speaking of, keep that anti-virus software up-to-date and run those scans.
• Freezing your credit is a good way to “slam the door shut” but be sure that you keep all the “thawing” instructions in a safe place as you’ll need them from time-to-time.
• Speaking of a safe, do you have a small safe to keep your passport, some cash, credit cards that you don’t want to use, and key passwords in? It’s probably worth a few bucks at the office supply store to have one for yourself.
• Personal activity, posts, pictures, and memes are forever in the land of bits and bytes so be sure that you use the “what if this was printed on the front page” test before you post that sarcastic comment, that crazy picture at that recent party, or that perfect comeback to that jerk. Your reputation is at stake.

Personal Financial Capacity is another element of your financial fortress that takes some thought and consideration. Part of your capacity is liquid assets, like cash in checking and savings accounts. Part of your capacity is access to credit in various forms. Having access to credit can be in the form of multiple credit cards which have available credit, a great credit score, and other credit options. This capacity beyond your own resources expands your ability to fight off the dragon at the fortress door. Manage your use of and access to credit so that in trying times, you have it.

I often recommend that those homeowners who have sufficient equity in their homes look at a home equity line of credit. Get it when you can and don’t use it! A home equity line of credit (HELOC) provides more capacity because in down times, it will be hard, if not impossible, to get. Of course, one must consider the cost of securing additional credit as loans and credit cards can have fees.

As you move beyond the basic protections for today, reducing debt will further fortify your fortress. Although having credit capacity is a great thing, using that capacity should be undertaken very thoughtfully. Debt is necessary but costly, especially now that interest rates have increased. Use debt wisely and develop a plan to pay off consumer debt quickly. It is always a burden, and the interest you pay adds bricks to someone else’s fortress rather than yours!

Life is always a balance between creating safety and security and living boldly, seizing the moment, and enjoying life now. As you consider the status of your financial fortress, think about how it would feel to reinforce your fortress and add some additional bricks versus spending on other discretionary items that are here today, gone tomorrow like another meal out or a few more items thrown in the basket at the store. We always have that choice to build up the reserves or spend them down. I’ve found that I rarely regret having a few more bricks in the wall, but I’ve had plenty of regrets about mindlessly tossing them to others.

If you would like to go a bit deeper into the topic of Building Your Financial Fortress, join me for a free webinar on May 3^rd 12:00 p.m. – 1:00 p.m. ET. Even if you can’t attend live, registrants will receive the links to the video and presentation. You can CLICK HERE to register.

To learn more or get help building your financial fortress, please email me at gildea@homrichberg.com.

Download this article here.

Important Disclosures

This article may not be copied, reproduced, or distributed without Homrich Berg’s prior written consent.

All information is as of date above unless otherwise disclosed.  The information is provided for informational purposes only and should not be considered a recommendation to purchase or sell any financial instrument, product or service sponsored by Homrich Berg or its affiliates or agents. The information does not represent legal, tax, accounting, or investment advice; recipients should consult their respective advisors regarding such matters. This material may not be suitable for all investors. Neither Homrich Berg, nor any affiliates, make any representation or warranty as to the accuracy or merit of this analysis for individual use. Information contained herein has been obtained from sources believed to be reliable but are not guaranteed. Investors are advised to consult with their investment professional about their specific financial needs and goals before making any investment decision.

©2023 Homrich Berg.

In part 1, we talked about the importance of helping our kids March Toward Financial Security by having conversations about saving and how best to allocate a paycheck – or any money that comes their way.

We want to continue that theme by exploring ideas to help them save and invest on their own. An obvious first step is to open accounts like savings and checking accounts. You can walk into your own bank with your teen and open accounts like we did when we were kids (Anybody remember having a “passbook?” I do!). Some banks allow teens to have their own account in their name prior to age 18; others may require a parent to be a joint account holder. Regardless, I recommend setting up balance alerts or some other method of monitoring because there are likely to be a few “oops” moments as your teen is learning the mechanics of banking, and overdraft fees are not cheap (Although they offer a good teaching moment!).

Currently, there are many online options for teens to open an account from the convenience of a cell phone. Do your research and check ratings and user comments. Sites like NerdWallet and The Balance have ratings for such accounts and a quick online search will lead you to articles and resources to help analyze the options. The important part is to make sure that you help your teenager understand how these accounts work and what tools the bank app has for monitoring and tracking.

There are also companies offering debit cards for kids which have a lot of parental oversight, reporting, and monitoring capabilities. In a time when cash is giving way to electronic commerce, learning how to manage money when it is invisible is more important than ever.

I remember my kids struggled with the difference between an ATM card and a gift card. They had plenty of experience with the mechanics of gift cards with a set balance “on the card” which was used and then tossed. They had a harder time understanding that the ATM was not a “card with a balance” but rather a “key” to access an account at a bank. A lost card doesn’t mean the loss of the funds “on the card” but rather a temporary inconvenience to the access of the account. These abstract concepts take some detailed explanations.

The more interesting part comes in working through the mechanics of depositing paychecks and setting up automatic transfers to savings and investment accounts. What a gift it is to teens to get them primed to have a formula for receiving money:

• X% to charity (if that’s important to your family),
• Y% to the emergency savings account, and
• Z% to long-term investing.
• Maybe you add a C% for saving for college or a G% for paying for gas each week.

Teaching teens how to allocate their earnings to important goals and priorities sets them up for financial success throughout their lives. They don’t need a job to be introduced to this structure. It is great to set priorities for any money they receive.

This is also an opportunity to teach them about the differences between interest on a savings account and opportunities for dividends and investment growth in an investment account. Savings accounts have low interest rates because the safety of the principal is guaranteed – lower risk, lower reward (interest). Investing carries a risk of loss so must provide greater reward (higher interest rate, dividends, or the opportunity for increases in the value of the investment).

When your teen does have earned income¹ (wages from a job), we recommend they open a Roth IRA account. The beauty of a Roth IRA is that the owner can invest those funds, and as long as they follow the Roth rules, they will never be taxed on the returns from those investments (called “unearned” income in tax lingo). Wow – that is a great deal! Interest, dividends, and capital gains over their lifetime build up and are never taxed (under the current tax rules anyway). Unearned “ordinary” income in a non-retirement investment account is subject to tax at “ordinary income” rates which go from 10% to 37%. Gains on investment sales and “qualified dividends” are subject to capital gains rates which are currently 0%, 15%, and 20%.

It is important to note that the contribution amount is limited to the lessor of earned income or the limit set in the Tax Code which is $6,000 for 2022 and $6,500 for 2023. Other important points:

• The contribution can be made from any source so a parent could incentivize savings by matching the teen’s contribution. So, if the teen is going to contribute 20% of their income to the Roth, a parent could match that and gift the teen the money to contribute an additional 20%, thus, doubling the contribution to 40% of income. The limit would be that total contributions and cannot exceed the $6,000 (2022) and $6,500 (2023) limits.
• Everyone has until April 15th to make the contribution for the PRIOR tax year so you can fund 2022’s contribution until April 15, 2023. (They must have earned income for 2022, though, so if they just got a job this year, they would be funding their 2023 contribution.)
• Your teen should report the contribution on his or her tax return for the year of contribution but is not required to. If no return was required to be filed or they have already filed for 2022, they can still make the contribution. They should track their contributions, and the custodian of the account will send a Form 5498 each year, usually in May, which they should keep for record-keeping purposes.
• There are income limits for making a direct contribution to a Roth so consult with your advisor if you (or your brilliant teen) has a substantial income.

How should they invest those funds? That is a topic for a different day, but this is a great way to get teens interested in and exploring the differences between stocks, bonds, ETF’s, and mutual funds. All of the online investing platforms like Schwab, TD Ameritrade, and Fidelity have tools and resources to help people learn about investing and are reputable sources of information. There are many commission-free ETFs that provide broad exposure to U.S. and international markets.

Time is your best friend in terms of investing so starting early and investing consistently will make their march toward financial security that much easier.

As part of our Financial Foundations series, we have free webinars which are a great resource for anyone to learn more about the basics of personal finance. Please email info@homrichberg.com to be added to the invitation list for future webinars.

¹Earned income tax is a tax-related term and indicates that wages and other such income for contributions to retirement accounts, like IRAs and Roth IRAs, while unearned income, like interest and dividends, is not available for such contributions. Please talk to your tax accountant if you have any questions.

To learn more or get help talking to your kids about money basics, please email me at gildea@homrichberg.com.

Download a copy of this article.

Important Disclosures
This article may not be copied, reproduced, or distributed without Homrich Berg’s prior written consent.

All information is as of date above unless otherwise disclosed. The information is provided for informational purposes only and should not be considered a recommendation to purchase or sell any financial instrument, product or service sponsored by Homrich Berg or its affiliates or agents. The information does not represent legal, tax, accounting, or investment advice; recipients should consult their respective advisors regarding such matters. This material may not be suitable for all investors. Neither Homrich Berg, nor any affiliates, make any representation or warranty as to the accuracy or merit of this analysis for individual use. Information contained herein has been obtained from sources believed to be reliable but are not guaranteed. Investors are advised to consult with their investment professional about their specific financial needs and goals before making any investment decision.
©2023 Homrich Berg.

As parents, we all want to raise kids to be independent and competent adults. We work hard to build their self-esteem, their confidence, and guide them through life’s many choices. However, we don’t always do a lot to build their financial skills. Sometimes this is because it’s difficult or uncomfortable to talk about money. Sometimes it’s because we don’t feel very confident in our own financial prowess and are concerned about questions that we may not know how to answer ourselves.

Regardless of the reasons, if we want our kids to be financially stable and secure, it is up to us to start teaching them about money basics. One easy way to do that is to teach them about saving once they get their first job or their first dollar of gift money, chore money, or allowance.

Before the paycheck comes, discuss these questions with your kids:

• Does your family believe in tithing or making charitable contributions with those first dollars?

• What percentage of income goes to “emergency” savings? (We recommend at least 10% for those with bills to pay but perhaps much higher for a teen.)
• What percentage of income goes to long-term financial security? (We recommend at least 10% for those with bills to pay but perhaps much higher for a teen.)
• Do you expect your child to contribute toward college expenses? What percentage should be saved for that expense?
• How about buying or maintaining a car? Do they have responsibilities toward that or for gas and insurance? It’s important to learn that those things get expensive!
• Do they need to start paying for their cell phone or clothing?
• How much should be free to spend on “want to have,” fun, and entertainment?

If teens get a check and are free to spend it all on anything they want, they go down a spending path. Their wants can get bigger and bigger, and they can become less and less discerning about how they spend their money. When it is time to pay their own bills, it is a brutal shift in their reality! Most of the money goes to taxes and living expenses. Where’s the fun stuff? (We know, parents feel the pain every payday.)

However, if they learn that funds should be allocated to financial security first, to basic needs next, and then to “fun stuff,” they learn how life really works for adults. They are building up their own resources and starting to create financial security for themselves separate from their parents. We all hope this creates a feeling of pride and independence for them and puts them on a path to self-sufficiency and financial confidence.

We recommend that parents have these discussions with kids of all ages but especially with teens, whether or not they currently have a job, and share their own beliefs and practices around saving. It’s ok to admit to not knowing all the answers but offering to work together to find good answers is key. It’s also important to admit to your own financial mistakes and regrets. No one has been perfect with their money, and there is always much to be learned from mistakes. It is great to teach our kids the power of learning from successes and failures. Henry Ford said it best, “The only real mistake is the one from which we learn nothing.” You bet.

In future posts, we’ll continue to help our kids March Toward Financial Security by discussing the benefits of opening and funding checking and savings accounts, starting Roth IRA accounts, and using other tools to help them improve their financial skills.

To learn more or get help talking to your kids about money basics, please email me at gildea@homrichberg.com.

Download a copy of this article here.

Important Disclosures

This article may not be copied, reproduced, or distributed without Homrich Berg’s prior written consent.

All information is as of date above unless otherwise disclosed.  The information is provided for informational purposes only and should not be considered a recommendation to purchase or sell any financial instrument, product or service sponsored by Homrich Berg or its affiliates or agents. The information does not represent legal, tax, accounting, or investment advice; recipients should consult their respective advisors regarding such matters. This material may not be suitable for all investors. Neither Homrich Berg, nor any affiliates, make any representation or warranty as to the accuracy or merit of this analysis for individual use. Information contained herein has been obtained from sources believed to be reliable but are not guaranteed. Investors are advised to consult with their investment professional about their specific financial needs and goals before making any investment decision.

©2023 Homrich Berg.

It doesn’t have the lyrical style of the Bard but showing your love to your partner and family with financial security is a beautiful and loving thing, nonetheless. Let’s start with a little primer on the Roth IRA as not everyone is able to provide their financial gift of love via a Roth.

For starters, you must have earned income to be eligible to contribute – that means some kind of a job or self-employment income. As you think about teens and college students, this is important because if they are working, they are eligible for a Roth.

For married couples, one partner’s income covers both people so for stay-at-home parents, they are eligible based on their spouse’s income assuming all other criteria are met.

Also, the funds contributed to the Roth don’t necessarily have to come directly from the job like employer retirement plan contributions do (via payroll withholding). A Roth contribution can come from savings or from a gift. For parents, this is a great way to help your working kids have experience with saving and investing – even if it is a small part–time job. And encouraging them to save a percentage of their income will help them create this important financial habit.

• You can directly give them the funds for contribution to their Roth for birthdays or holidays.
• You can match what they contribute to their Roths so that you are incentivizing and rewarding a great financial habit.
• The limit for 2022 is $6,000 and for 2023 it is $6,500; however, the other limit is earned income. A teen earning $2,000 per year would be limited to $2,000 for his or her Roth contribution. However, that $2,000 can come from a savings account or a gift from a parent or other relative.
• For anyone over 50, an additional $1,000 “catch-up” contribution can be added to the annual contribution limit. Again, you must have the earned income to be eligible for this as well.

Benefits of a Roth

• All income earned on assets in a Roth grows tax-free if you follow the Roth rules. All the interest, dividends, and capital gains over someone’s lifetime avoids income tax. That is huge especially for someone in their teens or early 20’s.
• That means in retirement, taking funds from a Roth will be tax-free; this is a great tool for limiting your tax burden in retirement.
• There are no required distributions like there are with traditional IRAs and employer retirement plans.
• Once you have owned the Roth for five years, you can take distributions, without penalty or income tax, for certain expenses (first time home buying and college expenses to name a couple) and you can withdraw contributions without penalty. Hopefully you don’t withdraw the funds early as you want to keep that money earning tax-free income.

Drawbacks of a Roth

• Penalty-free and tax-free withdrawals (except as noted above) begin at age 59 ½ so this is an account meant to be primarily for retirement savings. It can’t be used like a savings account for cash flow.
• There is no tax deduction for a contribution to a Roth in the current year like there may be for a traditional IRA contribution (traditional IRA deductions have income limits as well, though. Anyone can contribute but not everyone can deduct it on their tax return. It’s still valuable, though!).
• There are income limits so those making more money are prohibited from contributing to their Roth directly.
  • Certain taxpayers over the limit of MAGI – modified adjusted income – cannot contribute to a Roth.
    • What is MAGI? Modified adjusted gross income starts with your AGI – adjusted gross income – on your tax return and adds back some income or deduction items that are excluded from AGI. If you are close to the income limit and need to be precise about MAGI, there are calculators online or you can discuss with your CPA or financial advisor.
    • What is the income limit? While these numbers can make your eyes glaze over a bit, they are determined by your “filing status” (single or married filing jointly) and by the year since the limitations change periodically to adjust for inflation.
      • For single taxpayers, MAGI must be under $129,000 for 2022 and under $138,000 for 2023 to get the full Roth contribution.
      • For married filing jointly taxpayers, MAGI must be under $204,000 for 2022 and under $218,000 for 2023 to get the full Roth contribution.
      • There is a range for both taxpayer groups where you may get a partial Roth contribution.
        • For 2022, single taxpayers with MAGI of $129,001 to $143,999 will have a reduced Roth contribution.
        • For 2022, married taxpayers with MAGI of $214,000 to $203,999 will have a reduced Roth contribution.
        • For 2023, single taxpayers with MAGI of $138,001 to $152,999 will have a reduced Roth contribution.
        • For 2023, married taxpayers with MAGI of $218,001 to $227,999 will have a reduced Roth contribution.
      • Once the taxpayer exceeds that upper limit for their filing status, there is no direct Roth contribution allowed. There is a work-around called a back-door Roth, but that is a bit more involved for our discussion today.

The bottom line here is that for most people, if you can get some money into your Roth, it will likely benefit your long-term financial situation. And for your kids, getting them interested in and investing in a Roth of their own from their first dollar of earned income, can be life changing. For anyone under age 18, the parent or guardian will need to open a custodial Roth account until the child reaches the age of majority in their state.

What about a Roth 401K option?

• Some employer 401k plans offer a Roth option for your contributions. I love the Roth option, but you need to think about your cash flow and how much you contribute when you are not getting that tax break for the contributions like you would with the traditional 401k.
• The tax bracket that you are in matters too. For a high-income worker in the 37% bracket, it may be too expensive from a tax perspective to contribute to the Roth especially if you believe you will be in a lower bracket in retirement. There are also other taxes that come into play for high earners, so it is best to discuss with your financial or tax advisor if this is your situation.
• For everyone else, perhaps you can start with 1% Roth and 9% traditional (if 10% is your contribution rate as an example). Then every 3-6 months, shift it by 1% toward the Roth as you see the impact on your cash flow from the extra tax burden.
  • For the younger workers, the power of that Roth growth over your working years will be significant so do your best to work some dollars into the Roth portion consistently.

If you want to give the Roth gift of love to someone in your life, reach out to your advisor to get this set up. It doesn’t have to be the parent setting up the account for their kids – grandparents, aunts, uncles, friends, and relatives can all help the kids in their lives get started on a path to financial security (assuming the student is working). The annual contribution limit applies to all accounts held by the taxpayers, though, so make sure that you know what accounts already exist.

We have until April 15^th to fund Roth contributions for 2022. Note that you can record the Roth contributions on your tax return, and it is a good idea to do so; however, if no return is required to be filed or the return has already been filed, it’s fine to make the contribution. Your account custodian will send a Form 5468 sometime in May to document the contribution, and it’s a good idea to retain those.

How do I love thee? Let me count the Roth dollars contributed. Ok, still not as poetic as Shakespeare but those dollars will accumulate and grow tax-free and that is a gift of love that will keep on giving.

To learn more or discuss your Roth options, please email me at gildea@homrichberg.com.

Download a copy of this article here.

Important Disclosures

This article may not be copied, reproduced, or distributed without Homrich Berg’s prior written consent.

All information is as of date above unless otherwise disclosed.  The information is provided for informational purposes only and should not be considered a recommendation to purchase or sell any financial instrument, product or service sponsored by Homrich Berg or its affiliates or agents. The information does not represent legal, tax, accounting, or investment advice; recipients should consult their respective advisors regarding such matters. This material may not be suitable for all investors. Neither Homrich Berg, nor any affiliates, make any representation or warranty as to the accuracy or merit of this analysis for individual use. Information contained herein has been obtained from sources believed to be reliable but are not guaranteed. Investors are advised to consult with their investment professional about their specific financial needs and goals before making any investment decision.

©2023 Homrich Berg.

Most of us look to the new year as an opportunity to “start again,” clean up our bad habits, make big changes, and reach for the stars! We’ll exercise! Lose weight! Save more! And then Monday comes. It’s another start to another week that feels exactly like those that have come before it. The thrill of the promise crumbles when faced with the reality of packing a lunch, forgoing a latte, or passing up those great sales in favor of a workout.

There are many books, websites, and experts who teach that creating a habit is the clear path to lasting success regardless of what we are trying to change or improve in our lives. So what financial habit is the keystone habit? In my opinion: track your spending.

If a client is having trouble hitting savings goals, I’ll ask them to review three months of spending (don’t you love downloading!) categorize by Giving, Must Do, Want to Do, Stuff, Savings, and Debt Payments. I then suggest they make a little pie chart showing the totals by category. By making a pie chart, everyone can see how the pie divides leading to some great discussions around how the client feels about where the money is going. That can be a great “look back” exercise to help you identify things you want to change. The categories should be those that are important for you but keep it to a few so as not to get overwhelmed. Maybe you need kids, pets, hobbies or travel. Eating out is an interesting one as well!

Analyzing what happened provides some insight but tracking problem areas “in the moment” is what creates awareness and change.

Here are some things to try:

• Track a particular category of spending.
  • Identify your problem area and track it. Eating out tends to be a trouble spot for a lot of people so, for example, every time you eat out, get in the habit of writing it down. This could be the notes section on your phone, a little notepad, or the back of an envelope in the sun visor of the car. Whatever works for you is the best tool. When you know that you are writing it down, you are being accountable to yourself and perhaps to your significant other.
  • It may be helpful to jot down the circumstances like “left lunch in the fridge” or “traveling” or “overslept and went through the drive-through.” You might see patterns of when the spending is happening. This helps you develop strategies to counter these situations.
• Learn from the data that you are collecting.
  • Have a spirit of curiosity and learning around what is happening instead of judgment and condemnation. We don’t thrive when we beat ourselves up mentally so seek understanding and solutions.
  • Don’t expect perfection! Developing a habit and changing behavior is a process and will have ups and downs.
  • Keep trying – knowing what doesn’t work helps us figure out what does work.
• Identify situational triggers that lead to certain types of spending.
  • Author Charles Duhigg describes the “habit cycle,” and it’s clear that a trigger leads to a behavior. If we can identify the trigger and replace the undesirable behavior with a different behavior, we can change a bad habit into a good one or at least a neutral one. For example, if a frantic day at the office triggers the desire for a fast-food fix on the way home, recognize that, and create a new “if I have a frantic day at the office” behavior: “then I’ll go to the gym” or “then I’ll call a friend on the way home.”

Whatever financial goal you have will benefit from having a clear picture of where the money is going. The backward look helps you see what happened and identify what you want to change. Tracking helps you be mindful and aware as it is happening or about to happen. Developing this one habit and looking at it with curiosity and interest can lead you toward a lot of ways to make small, consistent changes that will last long after the resolution has been forgotten.

For Parents

For anyone with children in their lives, modeling some good financial habits teaches kids to be mindful with money. Many of us are fortunate enough to be comfortable with our cash flow and no longer have the need to track every penny. Unfortunately, the “we can spend whatever we want” approach does not help instill in our kids a respect and appreciation for money.

Whether you are flush with cash or barely getting by, it is helpful to discuss money choices with kids. Just because you can afford something doesn’t mean it is wise to buy it. Kids need to see you making conscious and thoughtful choices about money and spending. “We decided that we should only eat out once per week so that we can save for our vacation. Should we do that now or wait for Friday night?” Consistently taking that approach helps kids start to understand money choices.

Help your kids develop their own plan for the cash that they receive as gifts or from allowance or chores. If they get to spend every cent on their desires, they won’t get in the habit of saving, giving to those less fortunate, or handling some of life’s less fun obligations like buying gas for the car or paying for a new tire. At some point we all must learn that every dollar doesn’t get to go toward “fun stuff.” Adulting is full of the not-fun stuff!

Look for opportunities to talk about your own saving and investing choices, how you make money decisions, and let them play a part in planning activities within a spending plan. Letting them help research activities and including the cost of those activities helps them start to compare and think about the value of choices from a financial perspective. “This camp costs $X and this one $Y – do you think that camp is that much better than the other one? What could we do with that extra money if you went to the cheaper camp?”

Challenging family members to come up with ideas for free activities can create a little fun competition and identify the plethora of activities that don’t cost much if anything. This works well for those on a tighter budget or trying to save for a house or trip – get the friends involved in a little competition to replace the happy hour! Perhaps putting the savings into a “Disney” fund (or whatever your kids long to do) will help them see the value of sacrificing smaller things in favor of a bigger goal.

Kids get all kinds of messages about money and most of them are heavy on spending and light on savings, sacrificing, and being frugal. You want to make sure that your values get some airtime as well! In the hustle of daily life, it is hard to be mindful and purposeful about those conversations just as it is hard to be mindful and purposeful about our spending but developing the habit of discussing and deliberating on financial decisions will provide a good model for your kids.

To learn more or get help with your financial habits, please email me at gildea@homrichberg.com.

Download a copy of this post here.

Important Disclosures

This article may not be copied, reproduced, or distributed without Homrich Berg’s prior written consent.

All information is as of date above unless otherwise disclosed.  The information is provided for informational purposes only and should not be considered a recommendation to purchase or sell any financial instrument, product or service sponsored by Homrich Berg or its affiliates or agents. The information does not represent legal, tax, accounting, or investment advice; recipients should consult their respective advisors regarding such matters. This material may not be suitable for all investors. Neither Homrich Berg, nor any affiliates, make any representation or warranty as to the accuracy or merit of this analysis for individual use. Information contained herein has been obtained from sources believed to be reliable but are not guaranteed. Investors are advised to consult with their investment professional about their specific financial needs and goals before making any investment decision.

I love the blank canvas of a new year!  There’s so much possibility and opportunity – the best of life is waiting to happen. It is idealistic and fanciful to say it, believe it, hope, and wish for it, and then do nothing but “wait” for it to happen. Expect the most wonderful things and then plan for them. Opportunity without action is no better than no opportunity at all.

So, this year, what is possible? What opportunity are you longing to seize? What dream are you ready to commit to? What adventure do you long to embark on? Make a list, cut out a picture, do a web search. Put in black and white what you most want to bring into your life in this glorious new year. You must name it to claim it.

Let’s not call it a goal – goals seem very hard and tedious. Let’s call it the destination – what is your desired destination? What wonderful destinations do you have in mind for the new year? A destination could be paying off debt or building savings. It could be taking care of nagging paperwork, getting insurance, filling out forms, resolving tax matters or other nagging tasks that have been weighing you down – destination: burden-free! Destination: hideous tasks completed! It might be buying that house or starting that business or getting that dream job – your destination is as individual as you are and in the wonder of a new year, everything is possible.

Now, sit back, close your eyes and revel in the feeling of your destination. How would it feel to have that debt paid off, that balance in the bank, those tasks complete? How would it feel to have that adventure (paid for!), that trip booked, that business started? As you are basking in the feeling, is your mind starting to percolate? Are ideas, fears, and doubts bubbling up? Good – that means you are human, and humans are part adventurer and part protector. Some people are heavier on the adventurer part – those go-for-it-at-all-costs sorts – and some people are heavier on the protector part – consider-all-the-perils sorts. The good news is that both are needed to reach that glorious destination.

Now comes the fun part – get creative and write down all the little things you could do to move in the direction of the destination. Make them little things as jumping in with big things will make them seem hard, scary, and overwhelming, and then nothing gets done. Don’t make a numbered list; grab a paper, and write all over it – no order, no timeline – just random thoughts and ideas – they can be crazy ideas – it’s just “how could I….” Keep your destination at the top of the page, top of mind, ahead of everything else that competes with that one destination.

Opening yourself up to possibilities feels amazing and light and energizing. And then we look around; we see the bank balance, the credit card balance, the job, and the responsibilities. We see obstacles. We see shortcomings. We see past failures. That’s the other side of the coin – the realist, the protector, the “play-it-safe” part of us.

What cuts the fear is action; it’s taking a small step toward that destination. It’s doing one positive thing and then another, and then another. It’s making the plan to take a small step toward the destination every day. Sometimes those small steps involve money – yes, many of our destinations require money to make them happen hence the “fantastic financial year” in the title. The money part matters most of the time – some destinations don’t require money – losing weight, getting fit – those might save you some money, but realistically, a lot of our destinations involve money – having more, owing less, being able to take a trip or buy a house or start a business.

As you look at the money part, it’s time for choices – this or that? Adventures require sacrifice – what are you willing to give up and do without now so you can move a step closer to that glorious destination? Every little thing – every five bucks – matters. You give up 10 five-buck things and you have 50 bucks. If you do that repeatedly, over, and over, keeping your destination in mind over the “shiny thing” in the now, you will move closer and closer. Make the plan. Make the choice moment by moment – does this move me closer to the destination or farther away? What do you choose? What are you willing to do to get to your glorious destination? How will you look back on this year – as the year that you could have or as the year that you did? As the year you thought about it or the year you took action?

If you are interested in going deeper into creating your plan for a fantastic financial year, join me for a free webinar on January 25^th from 12:00 p.m. – 1:00 p.m. ET – Let’s Plan for a Fantastic Financial Year! During the webinar we’ll delve further into identifying the destination that you want to focus on, creating your plan, and defining some concrete actions you take to make sure your money is supporting your vision of the destination.

You can CLICK HERE to Register.

If you’d like to participate but have a conflict, register anyway as all registrants will receive the recording and the resources after the event. Here’s to your glorious destination!

To learn more or get help planning your financial goals, please email me at gildea@homrichberg.com.

Download a copy of this article here.

Important Disclosures

This article may not be copied, reproduced, or distributed without Homrich Berg’s prior written consent.

All information is as of date above unless otherwise disclosed.  The information is provided for informational purposes only and should not be considered a recommendation to purchase or sell any financial instrument, product or service sponsored by Homrich Berg or its affiliates or agents. The information does not represent legal, tax, accounting, or investment advice; recipients should consult their respective advisors regarding such matters. This material may not be suitable for all investors. Neither Homrich Berg, nor any affiliates, make any representation or warranty as to the accuracy or merit of this analysis for individual use. Information contained herein has been obtained from sources believed to be reliable but are not guaranteed. Investors are advised to consult with their investment professional about their specific financial needs and goals before making any investment decision.

©2023 Homrich Berg.