"About Money"

 "About Money" shares information meant to make us all better savers and spenders.
 An Ounce of Prevention  (Inside Tucson Business - November 2011)
We all understand preventative maintenance – we just don’t do it often enough.  Change the oil, seal the deck and get your flu shot.  To that list add a review of your finance.
And I don’t mean just what you spent last year and rebalancing your investments.  I mean revisiting your plan.  What?  Don’t have a plan?  
Most of us don’t.  Only one-third of women have a detailed financial plan in place.
Lacking a plan compounds our problem.  You see, we’re already at a financial disadvantage.  Disadvantage compared to what?  To men.  Despite great advances, the reality is we live longer, earn less, have gaps in our careers, and are risk averse.  And don’t overlook the negative impacts of divorce and widowhood.
This combination – known obstacles with no plan to overcome them – is the perfect storm for women.  It results in some grim statistics; for example, eighty-seven percent of the elderly poor are women.  Why do we find ourselves in this situation and how can we change it? 
Prudential’s 10th annual “Financial Experience & Behaviors Among Women” study suggests several barriers to developing a detailed financial plan:
·  Lack of time and the pull to meet shorter-term financial obligations:  Women successfully juggle jobs, families and community work every day.  And, that’s part of the problem.  They are already busy and their focus tends to be getting through the day and the week.  Time to plan beyond the near term never seems to materialize.  
·  Lack of knowledge:  Even though women are frequently the financial decision makers in their households, a surprising eighty-six percent say they do not know how to choose financial products and services.   It’s easy to procrastinate about something that’s out of your comfort zone.  
·  An unmet desire for assistance and help:  According to Prudential’s study only 19% of women are very comfortable letting a financial professional lead their financial planning while six out of ten rely on family and friends for advice. 
Pat Volkerts, a Tucson psychologist, has seen women forced to make major life changes late in life because of their reduced circumstances.  She cites couples who choose to rely on the husband’s higher pension benefits leaving the widow with no survivor benefits when he dies unexpectedly; wives assuming they would be okay financially if widowed only to find out they had only enough to live on for a few years, not the 20 or more they might live; and the inevitable hardships of divorced women having to re-enter the workforce after taking time out to raise children.  Her sage advice?  Hope for the best but plan for the worst.  Here’s how to start:
·  Plan to start:  Don’t pressure yourself to do a plan right away.  You’ve gone this long without one – you don’t need one in the next 30 minutes!  But do start by simply gathering information about financial plans in general.  Pick up reader friendly personal finance magazines.  Check out the internet.  Make a list of questions and know that no question is too basic.
·  Start the process:  Set a target date for your completed plan.  You will have to create time to accomplish this step.  But, as with most planning, when done right it will save time and money later.  Casual advice from family and friends is fine but here you want to work with a financial professional.  Start interviewing – most will offer a free consultation.  Ask about fees (see “How Planners Charge” at www.fpanet.org) and scope of work.  Select one who is qualified, comfortable to talk to and is genuinely interested in your situation.  Worried that you’re not quite ready to begin?  Don’t let “the perfect become the enemy of the good”- move forward.
·  Work the plan:  Once you have your plan, you’ll find it works its way into your subconscious.  You’ll start referencing it mentally for everyday financial decisions.  And that’s good; it should be your compass. You might choose to share it with key people in your life.  Review it regularly and change it as circumstances change.
·  Congratulate yourself and pass it forward:  Your reward is less stress, more confidence in your financial decisions and a far better chance at a secure future.  Share your story with family and friends, especially the younger ones.  Only one in ten women ages 25-34 has a plan in place.  Just think what they can accomplish if they make a financial plan now!
"About Money" April 17, 2012


Researchers at Kellogg School of Management at Northwestern University created images of college-age survey participants that showed how they might look as they aged. In tests, participants who saw the aged image of themselves saved twice as much for retirement as those who saw their current appearance.


When we think of ourselves in the future, we use the same part of the brain that we use to think about strangers. Saving becomes a choice between spending money today or giving it to a stranger years from now. So, by personalizing our future self, we're more motivated to take care of that person.


Verbs in the Japanese language don't have a future tense; in the German language, the present tense is often substituted for the future tense. These cultures tend to be better savers and some think one reason is because they don't distinguish between the present and the future.


Some of the toughest barriers to saving are psychological - the better your understand them, the better you can control them. Your future starts today!

To help people connect with their futures (and make better decisions now), researchers at New York University used software to “age” them. Above is Hal E. Hershfield, an assistant professor, at age 31.                   
Chinthaka Herath

Professor Hershfield “aged” to 68.

Sources: "Bad Habits? My Future Self Will Deal With That" by Alina Tugend, The New York times, 2/24/2012; "Looking Ahead to the Spend-Down Years" by Jennifer Saranow Schultz, The New York Times, 9/16/2010; "Your (Virtual) Future Self Wants You To Save Up" Jennifer Ludden, NPR, aired 4/11/2012 on All Things Considered; "Your Responsible Future Self" by David Berreby, 9/29/2011, The Responsibility Project by Liberty Mutual Insurance; Professor Hal Ersner-Hershfield, study leader at Kellogg School of Management, Northwestern University now at New York University's Stern School of Business. 


"About Money" June 28, 2012

Two years ago a study by Princeton University’s Woodrow Wilson School found that making over $75,000 a year didn’t make people happier. This spring, a poll by the Marist Institute for Public Opinion found the happiness tipping point is now just $50,000! Has the economy changed our views?

The theory is that once people have covered their basic needs, more money doesn’t mean more happiness. Oftentimes, it just means more stuff.

The Easterlin Paradox says that once you’ve satisfied your basic needs, more money simply resets the “I want” bar.  As one author said “owning an iPod doesn’t make you happier, because you then want an iPod Touch”.

What’s your tipping point? Distinguishing between “needs” and “wants” is fundamental to reaching your long-term financial goals…and your happiness.

Maybe Money Does Buy Happiness After All, David Leonhardt, New York Times, April 16, 2008
Do We Need $75,000 a Year to Be Happy?, Belinda Luscombe, Time Magazine, Sept. 06, 2010
Why $50,000 May Be the (New) Happiness Tipping Point, Josh Sanburn, Time Magazine, April 19, 2012

"About Money" August 15, 2012 

Why do Olympians who finish in third place bronze tend to be happier than those who finish in second place silver? 

In this year’s all-around gymnastics competition, Russian Viktoria Komova cried as she finished second to gold medal winning American Gabby Douglas and said “I really wanted to achieve gold, but unfortunately I didn’t manage it. The mood is really that of disappointment.”  

How could winning an Olympic medal be disappointing? Because of what psychologists call framing. 

Framing is the process of evaluating your success by comparing yourself to others around you – and we often fall short. Someone inevitably has a fancier house, car or wardrobe. 

Bronze finishers compare themselves to all of their competitors. Because they medaled and the rest didn’t, they have cause for celebration! But Silver finishers compare themselves to the Gold winner so they are, of course, disappointed. 

Evaluate yourself against your own realistic goals. In personal finance terms, that means asking yourself “did I reach my savings goal this year?” rather than “why does my co-worker drive a new BMW?” 

Sources: “London 2012”, Wall Street Journal, August 3, 2012; Would You Rather Win Silver or Bronze?  Shankar Vedantam, NPR Morning Edition, August3, 2012.


"About Money" October 2, 2012

Several of my clients spend more than they should at Target.  I’ve wondered – is it because Target is such a great retailer or because they sell everything (groceries, clothing, appliances, etc.), making it hard to track spending by category?

Turns out, it’s that and more. Charles Duhigg, the author of The Power of Habit, suggests that Target works to create shopping habits. An interesting example is their success in identifying shoppers who are pregnant based on their history of buying 25 different items. Once identified, they are “targeted” with coupons for baby products. Target predicts that if they can lure a tired, new mother into shopping with them, she’ll do the bulk of her shopping there and will continue to do so year after year.

Habits account for much of our financial behavior. We can choose to shape our own habits or let someone else (Target) shape them for us. Once we understand how habits are made, we can work to change those that don’t support our goals. Is there a habit you’d like to change?

Source: The Power of Habit: Why We Do What We Do in Life and Business, Charles Duhigg, Random House, 2012.


"About Money" November 13, 2012

Black Friday, the biggest shopping day of the year, is November 23, just 10 days away.

It’s time to brush up on our defensive shopping techniques!

Retailers take advantage of the fact that consumers don’t really know the price of anything. How could we? Thousands of products, hundreds of retailers.

Here are some examples of how they cue us to think a product is a bargain*:

    Pricing: prices ending in 9 ($19.99) signal to us that the product is priced competitively, maybe even discounted, better yet, cheap

    Staging: Williams-Sonoma added a $429 breadmaker next to their $279 model - sales of the cheaper model doubled

    Offers: getting“33% more for free” sounds better than getting less at a 33% discount but, when you do the math, the discount is a better deal

    Highlighting: Literally lighting up a display. Restaurants highlight their most profitable menu items with pictures or boxes, retailers with special displays.

Last but not least, we’ve come to expect the best deals on Black Friday! Turns out that’s not always the case. According to the article“Black Friday 2012 Deals: What Not to Buy This Year” in Huffington Post**, many items are cheaper at other times during the year.

Shop smart!

*Thanks to Viviane Thompson, CPA, who pointed me to the article, “The 11 Ways That Consumers Are Hopeless at Math” in the July 2012 issue of The Atlantic: http://www.theatlantic.com/business/archive/2012/07/the-11-ways-that-consumers-are-hopeless-at-math/259479/


"About Money" December 31, 2012

How do you eat an elephant? One bite at a time...

Whatever your 2013 goals are, take them one bite, one piece, one step, one day at a time for the best results.

Wishing you a happy, healthy and balanced New Year!


"About Money" February 8, 2012

It’s safe to say that about half of the people you know made a New Year’s Resolution. And, by Valentine’s Day, about a third of them will have already given up! In fact, only 8% of resolution makers are successful.

“Spend less, save more” was the #3 New Year’s Resolution, right behind “Lose weight” and “Get organized”. Sound familiar?

How can more of us be successful? A study of Japanese school children might give us a clue.

Dr. Jim Stigler, a Professor of Psychology at UCLA, is best known for his observational work in classrooms.

He tells about a study he did with first graders. He gave the students an impossible math problem and then observed how long they worked on it before they gave up. The American students worked on the problem for less than 30 seconds on average. The Japanese students worked for more than an hour.

Dr. Stigler explains that we Americans equate struggling with weakness or not being intelligent enough to solve the problem whereas the Japanese culture sees struggling as the strength and courage to learn something or overcome a challenge.

This shift in perspective, that struggle is good, may be just what we need to achieve our New Year’s Resolutions.

Sources: Fidelity® 2013 New Year Financial Resolutions Study, Executive Summary; www.thestatisticbrain.com, University of Scranton. Journal of Clinical Psychology, 12/13/2012; www.npr.org, Struggle For Smarts? How Eastern and Western Cultures Tackle Learning by Alix Spiegel, 11/12/2012.


"About Money" March 22, 2013

Dave Ramsey* hates credit and loves cash. Why? He says that when you pay in cash, you can feel the money leaving you and it hurts!

That’s why I tried using his envelope system. Our grocery bill has been creeping up so I put $500 into an envelope to spend last month. I’ve recommended it to my clients - it’s time I walked the walk.

How did it go? It took some getting used to but the results were spot on!

·         First I had to get cash. The ATM limit is $300. Okay, I’ll start with $300.

·         Second, I’m not used to carrying cash. I’d often forget and use my credit card instead. That made for some complicated accounting but I kept track.

·         Many times I grabbed a few twenties, enough to cover my list but not enough to buy the impulse items. After all, that’s the point of using cash!

·         Every time I took cash from the envelope, I could see how much was left ‘til the end of the month – very powerful.

·         Bottomline, we squeaked by with $1.71 left in the envelope spending 10% less than prior months. 

Studies show we spend 12 to 18% more when we use credit cards; Dave Ramsey says 40% more! Grocers say shoppers spend nearly twice as much when they use creditcards. Credit cards are convenient but costly – try cash for a change! 

Note: Food is the 4th largest spending category and, because it’s largely discretionary, can be an area ripe for spending less. Start with picking a grocery store with shopper friendly prices. The Arizona Star recently published a comparison of local stores: http://azstarnet.com/business/local/centsible-mom-price-check-from-past-week-looks-at-a/article_1a84fc4e-63cb-50ab-b3f2-61146be96fb4.html

*Dave Ramsey is a well-known personal finance expert who emphasizes avoiding, reducing and eliminating debt.

"About Money" April 26, 2013

Superman turned 75 last week! His popularity has spanned decades perhaps because he was just a regular guy who also had super powers.

We tend to think we have super powers, too. This has been dubbed “the Lake Wobegon effect” and is defined as the natural tendency to overestimate our own capabilities. 

For example, 93% of drivers sampled thought they were better than average drivers. In a survey of faculty at the University of Nebraska, 68% rated themselves in the top 25% for teaching ability while 87% of MBA students at Stanford rated their academic performance as above the median. A 1976 survey attached to nearly one million SAT exams found that 85% of the students rated themselves above average in their ability to get along well with others.

Our excessive optimism extends to money matters also. We think we spend less than we do and it’s not until we track our spending do we realize just how it adds up. Many of my clients don’t know how much they spend each month or, if they do, they don’t know what they spend it on. 

The single most valuable money exercise is to track your spending – just for a month. Regardless of your income, you’ll find yourself overspending in areas that don’t support your personal and financial goals. Once you know that, you can then decide to spend differently.

Named for the fictional town of Lake Wobegon from the radio series “Prairie Home Companion” where, according to host by Garrison Keillor, “all children are above average”. 
Svenson, O. (February 1981). "Are we all less risky and more skillful than our fellow drivers?". Acta Psychologica 
Cross, P. (1977). "Not can but will college teachers be improved?". New Directions for Higher Education 
"It's Academic." 2000. Stanford GSB Reporter, April 24, pp.14–5. via Zuckerman, Ezra W.; John T. Jost (2001). 

"About Money" June 26, 2013

Question #3 on my Money Quiz asks “Did your family talk about money when you were growing up?” A recent study explored the importance of what families talk about. 

The study by Emory University psychology professors Marshall Duke and Robyn Fivush asked children 20 questions about their family history. The “Do You Know” scale turned out to be the leading indicator of the child’s emotional health and happiness.


The higher the kid ranked on the “Do You Know” scale, the stronger their sense of control over their lives and the higher their resiliency in the face of adversity.


They had heard ascending stories (we came from nothing), descending stories (we lost everything) and oscillating stories (we’ve had our ups and downs). In each case, the family survived to talk about it.


It seems we do our children a favor by sharing information about the tough times as well as the good times including our financial ups and downs. It gives them the opportunity to learn from our mistakes and to see that missteps can be overcome.


Source: “The Stories That Bind Us” by Bruce Feiler, New York Times, March 15, 2013

"About Money" July 31, 2013

Twenty-four percent of American kids think the best way to save $1 million is by becoming famous! 


Becoming famous comes in second to saving in a savings account (32%), while 21% plan to invest in stocks and bonds and 18% are counting on winning the lottery.


This is from T. Rowe Price’s recently published survey of parents and their 8 to 14 year old kids titled Parents, Kids and Money.


The good news is that 73% of parents are talking to their kids about money.


However, parents tend to focus on topics like saving money for near-term purchases (think iPod) while kids would like to learn how banks and credit cards work (34%), how to manage money (29%) and about inflation (27%). Who knew?!


It’s helpful to know that kids want this information and that by sharing it we might change some important statistics: kids leave college today with an average of $4100 in credit card debt and $27,000 in student loan debt.


Twenty-two percent of parents feel well prepared to talk to their kids about finance. For those that don’t, there are personal finance professionals, like me, to turn to.

Follow this link to the complete study: Parents, Kids and Money Survey

"About Money" September 3, 2013
I say “lobster dinner”, you think “expensive.”
So, it’s surprising to learn that fresh lobster is bringing just $2.20 a pound in Maine this summer. Why? Thanks to warmer water, there are more lobsters which drives the price down.
At the same time, lobster dinners are still expensive. Today’s price for a live Maine lobster is $22.40 a pound. Why so much more than the $2.20 a pound? Because it’s priced like a luxury item; it has more to do with mystique than actual value.
In Colonial America, lobster was so plentiful that it was eaten mainly by the poor. Then, with overharvesting, lobster became scarce and, therefore, expensive. It became a food of the rich. A lobster dinner became an indulgence.
That’s why today we find ourselves paying 10 times more than the actual value of the lobster. That’s the equivalent of paying $20 for a dozen eggs.
Lesson:  The pricing of luxury items is as much about psychology as value. We equate higher price with higher value but the higher value comes from the status or prestige of the item. As an example, wine tasters, given two samples of the same wine and told that one was a $10 bottle and the other a $90 bottle, preferred the “more expensive” bottle of wine. When buying a luxury item, it doesn’t hurt to ask yourself “is it really worth it?”
Fine Line Financial works with clients to reset spending and savings priorities so that longterm financial goals are achievable.
Sources: “Clawback” by James Surowiecki, The New Yorker, August 26, 2013; “Consider the Lobster” by David Foster Wallace, Gourmet Magazine, August 2004; and “Your Lobster Roll is a Rip-Off” by Alexander Abad-Santos, The Atlantic Wire.com, August 19, 2013; www.lobsteranywhere.com

"About Money" November 7, 2013

            We’re “downsizing” – moving to a home 1000 square feet smaller than the one we’re in now.
            As we cull our belongings to fit our new space, I can’t help but think of the book “Life at Home in the Twenty-First Century” published last year.
            Based on a four year study of 32 families in the L.A. area, full-color glossy photographs depict the reality of our acquiring culture. A team of archeologists, anthropologists and other scientists             from The Center on Everyday Lives of Families at the University of California, Los Angeles, studied middle-class, dual-income families in L.A.         
            (1)  The more objects attached to the front of a family's refrigerator, the more objects per square foot in the house overall.    
            (2)  Average visible possessions in each home (not counting those in closets or otherwise out of view:
            438 books and magazines, 139 toys and 39 pairs of shoes
            (3)  75% of garages had no room for cars        
            (4)  Despite pools, landscaping and play equipment, adults spent on average just 15 minutes a week and children 40 minutes a week in their backyards            
            (5)  And, saliva tests of family members showed that stress hormones escalated along with the clutter    
            “We spend more than what we have on more than what we need” observed Vicki Robin and Joe Dominguez in their well-known book, “Your Money or Your Life.”
             So, what’s on your refrigerator?
             Source: “The Stuff of Families” WSJ, July 7-8, 2012