Money Smarts for the Real World

September 22, 2011

Words of Wisdom

As parents it is our duty -and yes, an occupational benefit - that we get to help shape our children's attitudes, behaviors, and survival skills. If they have dietary issues, we offer better nourishment; if they have learning issues, we give them extra help; and if they have behavioral issues, we patiently work with them so they will acclimate.


We don't merely hope that they will be prepared for life as an adult - we do our best to equip them with what they will need to thrive. One of the greatest gifts you can give your children is financial wisdom. After all, if they never get good at handling money, it doesn't matter what kind of salary they earn - it will never be enough. If they satisfy emptiness or restlessness in their lives with unnecessary spending, they will always mishandle money. If they are unaware of how to look out for their best interests in the financial world, they will always be in danger of getting hoodwinked or taken advantage of by someone or some institution.  Sharing your struggles, decisions, sacrifices, triumphs and blunders in an informative way (i.e., not a lecture) can show them the thought processes and strategies that can help them face their challenges.  In fact, learning how to: weigh their choices (and the consequences); articulate their goals; and formulate a plan is more important to their successes than what they choose as their undergraduate major.  Dare to share your experiences -- the good, the bad and the ugly -- for their benefit.




 Making Your Own Luck


"What's your goal?" My husband's question was simple, but I didn't know if I should bother to share my complete answer, because it seemed unreasonable.


We hadn't started our family yet, which was a goal of ours. But I wondered if winning Lotto was the only ticket to my other dream: to be able to stay home with our kids for as long (or short a time) as I wanted.  Back then, my earnings were almost five times his salary and I doubted we could sustain ourselves on his take home pay alone, especially with the added costs of a baby.  Sharing this thought with him might have made him feel badly; instead it motivated him.


"That's it? That's the goal?" Tony said, as if he had known it all along. "OK, give me some time, I'll figure it out."


I had it drummed into my head from friends and colleagues around me, who were enslaved to the double-income household: "There's no way you can live on one salary - especially a teacher's salary."


Quietly I worried that I had given him a goal that was not within reach. I thought, maybe I could stay home for a year at most. I even started to accept that option, if it came to that. Thankfully, it never did. The more naysayers there were, the more determined he was to make a viable plan.


Stock piling became the first part of the strategy; generating investment income was the other component. We lived as if his salary was the only income we had, and aggressively saved and invested my salary and bonus. That is not to say that we didn't enjoy ourselves. We made time for some travel; we ate out at restaurants within reason - but the savings/investing came first; what was left over was ours to play with. We put off starting a family until we felt we were on solid ground.


An interesting thing happened along the way. We had the opportunity to buy a small cabin in New England for a great price; it was very tempting and we came close to doing it. It was affordable based on our total income; but ultimately it would have taken us off our goal. When another opportunity presented itself -- to move farther from New York City (where I worked) to an area we loved and where we wanted to raise our family-- we struggled with the idea. I didn't want all our savings/investing to dry up because this house was more expensive than the one we were living in. After careful consideration of all the numbers, Tony figured we could swing it, provided I was still willing to commute an extra 2 hours each day until we started our family. With trepidation, I agreed.


Then we faced a series of unexpected events. Click here to read more.  


older golf couple  

Finding Financial Strength:

Understanding Social Security Payout Options

Social Security may make up only a small part of your expected retirement income, but it can be a crucial part, perhaps covering a significant portion of your basic expenses. Figuring out what you'll actually receive, however, can be complicated, and you'll have to choose from among many variables that could make a big difference in the amount of monthly income for you and your spouse. Understanding Social Security's complex rules needs to be an essential part of your retirement planning.

Social Security retirement benefits are generally based on your lifetime earnings and your age when you request the benefits. If you opt to start getting a monthly check at age 62, the earliest possibility, you'll receive less than you would if you started receiving benefits at your full retirement age- between ages 65 to 67, depending on the year you were born. Full retirement age for baby boomers born from 1943 through 1955 is 66.

How much you'll lose by beginning benefits at age 62 ranges between 20% and 30%, again depending on when you were born. For example, the reduction for someone born in 1950 is 25%. So if you would be entitled to a $2,500 monthly benefit at age 66, you would receive only $1,875 if you retired at age 62. The later you were born, the steeper the reduction, which peaks at 30% for those born after 1959.

There's an additional incentive for postponing benefits even longer. If you wait until age 70 to begin taking Social Security, you'll receive a significantly higher monthly amount-an extra 8% for each year you delay benefits-than if you had started at full retirement age. For someone born in 1953, for example, waiting those four extra years, from age 66 to age 70, could add more than 34% to the monthly benefit. Click here to read more.  








$mart Question

Help!  I don't know which I should do first: Create my Emergency Fund or pay off credit card debt?


It's not an easy decision.  I'm a big fan of getting the debt off of your back as soon as possible, because you immediately earn a return.  For example, if you are paying 19% interest on your credit card, when you pay off this debt, it is like you earned 19%.  However, an Emergency Fund is your first line of defense protecting you from running out and charging large and unexpected expenses, such as unforeseen car repairs.  Without funds in place for true emergencies, you can end up back at square one in the blink of an eye.


It's a tough call.  If the rate you are paying is high, try to get it  reduced and pay down as much as you can per month, while socking away the most you can into the Emergency Fund.     

In This Issue
Making Your Own Luck
Finding Financial Strength
$mart Question
$mart Move
 $mart Move:  Start Networking



If you own your own business -- or are considering starting a business, don't  miss

the Building Business in Brookhaven Event, sponsored by the Brookhaven Business Advisory Council on Tuesday, September 27th from 5:30 PM to 8:00 PM. There you can meet with members of the NY State Small Business Development Center and Small Business Administration, as well as local Town of Brookhaven businesses.  Whether you are from Brookhaven Township or not, this is a valuable opportunity to network and explore the resources available to start-ups. 


 Admission is free and complimentary food will be served, but registration is required.   For more information, click here.  


Look for Real$martica, Inc. and ATI Investment Consulting, Inc.  -- we'll be there! We hope to see you, too.  


























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Real$martica, Inc. is available to hold workshops for PTAs, local organizations, schools, and other groups and associations.  Topics include basic personal finance (handling money, using a budget, credit issues, and saving) to more complex issues such as buying versus renting; investing for retirement; managing the college selection, funding and financial aid processes; and estate issues.  Real$martica is also available for one-on-one consultations.   Contact us for more information.
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Dina Isola, President

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