Stash Wealth Financial Planning Review – The Planner for HENRYs

Millennials are a lot more interested in their personal financial well-being at a younger age than the members of the two generational cohorts that came before them. But what else would you expect of the kids that came of age during the financial crisis and saddled with an average $30,000 student loan debt?

Luckily, millennials also came of age during the digital revolution, and a number of the cohort’s members have created platforms designed specifically to help millennials handle their finances.

Online financial planner, Stash Wealth, is one of those resources.

What Is Stash Wealth?

Stash Wealth is the online financial planner dedicated to serving the HENRYs (High Earners, Not Rich Yet) of the world. The startup was founded in 2013 by former Wall Street executives Priya Malani and Rob Kovalesky to serve millennial high earners they felt had been ignored by traditional firms or who may be fearful of financial management.

Stash Wealth’s services include personalized financial planning and investment management. Clients can also get personalized advice from Stash’s in-house experts — dubbed “rebels” — on topics like estate planning, investing, taxes, and accounting. For additional assistance, the company provides financial information to the general public through articles on its blog.

This review only covers Stash Wealth’s financial planning offerings, but we briefly touch on their investment management services at the end of this post.

How Do You Know If You’re a HENRY?

Stash Wealth defines a HENRY as an individual — or couple — who’s already earning about six figures annually. That’s a tough bracket to reach considering only 2.7% of millennials earned $100,000 or more in 2015, according to data from the U.S. Census Bureau. But becoming a HENRY isn’t all about income.

Stash has created a quiz to help potential clients figure out if they qualify as a HENRY. If you’re not quite there yet, Stash Wealth has a partnership with invibed, which runs a low-cost Wealth Coaching program for about $450.

How Much Does Stash Wealth Cost?

Stash Wealth’s pricing makes it clear HENRYs are their target audience. You — or you and your partner — can complete a Stash Plan for a one-time fee of $997. The Stash Plan is a financial plan for your life that will address how and when you can reach all of your financial goals.

After your plan is created, you’ll graduate to Stash Management, a full wealth management service, which you’ll be charged for based on how much money Stash is investing for you. It has two payment tiers:

  • $50 per month for those with less than $50,000 in assets managed by Stash
  • 1.2% of the assets Stash manages for you annually ($100,000 invested = $1,200 annually) if Stash is managing more than $50,000 worth of assets

If you’re an entrepreneur, you can build a Stash Plan for Entrepreneurs for $1,597, but you’ll need to call to learn more about the entrepreneur’s plan.

What Do You Get for $997?

Stash Wealth will create a customized Stash Plan, which is a financial plan customized to your current and future needs. You’ll be prompted via email to fill out two documents that will help establish your “baseline,” then you’ll have two meetings with a certified financial planning duo who will create your Stash Plan.

Even at close to $1,000 plus ongoing management fees, Stash’s completely digital service is a cheaper alternative to paying $1,100 to $5,600 a year for the average personal financial adviser.

Unlike some other online financial advisory firms, Stash Wealth doesn’t offer a payment plan. In the FAQ on the website, the company explains the reasoning is because they want to be sure they are attracting clients who truly can afford the service and qualify as HENRYs.

Stash Wealth has a particular client in mind, so their pricing isn’t comparable to competitors like LearnVest, which will run you about a third of the cost at $299 for the initial financial planning fee, and they will charge $19 for ongoing financial planning, although the LearnVest program doesn’t include investment brokerage.

How the Stash Wealth Financial Planning Process Works

Every Stash Wealth client will receive a comprehensive financial plan. MagnifyMoney reviewed the process over the course of several weeks.

Your baseline paperwork

Shortly after you make your online payment to get started, you’ll receive an email from Stash asking you to do three things:

  1. Fill out your profile.

This is one of the two PDF forms that will be attached to the email. It will ask you to fill in basic information about yourself like your name, address, employment, and income. It will also have you enter basics related to your finances such as which banks you have relationships with, who you already use for money-related items like taxes, and how much you have in your emergency fund. This form will also ask for the same information about your significant other if you’re completing the Stash Plan as a couple.

  1. Schedule your baseline meeting.

In the email, you’ll see a link to book a meeting using the online scheduler, TimeTrade. Once it’s booked, you’ll get an email confirmation in your inbox.

  1. Complete and return the Baseline Workbook.

The final thing Stash asks of you before your meeting is to fill out your Baseline Workbook. Your workbook is an 8-page document that will dive deep into your financial business. You will trace where your money goes after you get paid, check off whether you use cash or credit more often, explain what your savings are consist of, and list your debts and assets, in addition to providing other information.

Stash understands this may take a while, so they give you some time and ask that you email the document back at least a couple of days before your scheduled baseline meeting.

Your baseline meeting

This will be your very first meeting with your Stash advisers. It will take place over video chat and recap all of the information you entered into your Baseline paperwork. The meeting should take no longer than an hour. Your planners will share a screen with you during the call to show you a Baseline Results document, which was created from your information. It will show, with charts and diagrams, how you spend your money, what your money map should look like, and how you’re doing so far saving for retirement.

The Stash program is intended to be educational as well, so your advisers may sound very similar to your finance professors in college. They will spend a good portion of the time explaining things like a money map (see above) or how different kinds of retirement accounts work. They’ll also make sure to ask if you understood everything and will re-explain if necessary.

The “reverse budget”

Stash will create what they call a “reverse budget.” The reverse budget calculates how much you can spend guilt-free each month after subtracting your fixed and flexible expenses. They will show you a budget with and without debt, so you’ll be able to imagine how much extra cash you’ll have on hand once your debts are settled.

The homework assignments

After this call, you’ll get some more homework to complete before your second meeting. The second meeting is meant to help align your life to your reverse budget. I was advised to open up an online savings account with Capital One 360 and nickname it “emergency fund” and to keep a checking account open at a brick-and-mortar bank. I had just closed my checking and savings account with my brick-and-mortar bank, Wells Fargo, and opened checking and savings accounts with Ally, so I didn’t take this advice. I was earning 1% on my savings account with Ally anyway, which was slightly more than the 0.75% I would have earned at Capital One.

I did, however, set up multiple savings accounts for emergency, travel, and moving costs to correspond with my savings goals.

My other homework was to find my most-recent monthly statements for my credit card, my retirement accounts, and student loans and send this information to them as soon as I could.

The follow-up email includes a link to schedule your second call, which should take place in about three weeks, and will have a final workbook attached to it. A PDF copy of your Baseline Results will be attached to the email for your use.

Your Stash Plan Workbook: goal setting

Your Stash Plan Workbook will come attached to the follow-up email for your first call. It’s intended to make you think about your financial goals and how you’ll reach them. A major part of this workbook requires you to think of what you want your life to look like in retirement.

You might already keep a few basic goals in mind like saving for retirement (check) or an emergency fund (double check), but your workbook will force you to consider savings goals to which you may not have given any thought. Some examples: traveling twice a year, returning to school for a post-bachelor’s degree, taking a six-month hiatus from work in Europe, remodeling your home, or saving to care for your parents in their old age.

You’ll rate each goal from 1 to 10 based on its importance to you, and make note of how much you think you’ll need and when you’ll need the money. For example, going back to school for a graduate or doctorate degree is about a 7 in importance to me, and I want to have about $25,000 saved for it and (ideally) start my post-college education in 2020. I also want to travel to see family members, who live in Ghana, every few years. I set that travel goal at about a 9 and allocated about $2,000 for a trip every two years.

The workbook continues to a section called “Retirement Lifestyle Goals,” which addresses any big dreams or goals you have for your life in retirement (think: buy a yacht) and asks you to put them down even if you’re not sure if you’ll be able to afford them. You’ll move on to a “Retirement Living Expense” section that asks you important questions like when you plan to retire, what your retirement income will be, and if you’re willing to delay retirement to reach all of your goals.

You’ll finish the workbook by filling out detailed information about all of your current assets, investments, and liabilities. While you’re doing all of this, be sure to gather any supplemental financial documents to send back digitally with your completed workbook. Examples include:

  • Bank and investment statements
  • Retirement account statements
  • College fund account statements
  • Employer benefits
  • Social Security Administration Statement
  • Liability statements
  • Insurance policies

Stash asks that you send in your completed Stash Plan Workbook and documents via email 10 to 14 days before your second call.

Filling out the workbook was a lot of work, but it was worth it. It took about an hour for me, and I only use one bank and one credit card and my only other debt is in student loans. Most of my time went to setting financial goals for the long life ahead of me. It was eye-opening as there were a lot of things I knew I wanted in life — like rental property — that I had yet to set a deadline or budget to. Completing the workbook helped me realize I should start saving now for almost any larger purchases I wanted to make within the next decade like a possible wedding or owning rental property. I was a little confused when it came to the investing and retirement parts of the document like retirement income but was able to complete the form using context clues.

I did have to fill out the form three times, as it had trouble saving some of the information I had input. I’m still unsure whether the problem was the way I was saving it to my computer or the form itself. In the end, it was no big deal. I typed up some of my goals in an email to supplement what the form had held onto.

Your Stash Plan meeting: how to execute your Stash Plan

Your final meeting with your advisers will explain to you exactly how to make your Stash Plan a success. During this meeting, your advisers will first check in with you to ask if anything about your financial situation has changed since you sent in your workbook. For example, I decided within the month to move to a significantly cheaper apartment, so my monthly budget had to be adjusted. My planner made note of that and sent me an updated Stash Plan with the follow-up email at no additional charge.

After your touch base, your advisers should walk you through the details of your new financial plan, which they will have up on a shared screen for you to see. They’ll speak with you about how you should budget for your savings goals and when you’ll likely reach them.

My advisers emphasized making the most of automation for my savings goals and any recurring expenses. This takes some element of human error out of the picture. I’d used automation before and found it would bite me in the ass when I forgot which date I’d set a service to credit my checking accounts. To avoid my unfortunate recurring lapse of memory, I set my automated payments for the day right after payday, and if I couldn’t change the due date, I used the budgeting app Mint, which has a bill reminder feature.

They will also give you a few suggestions for managing your new financial plan. My advisers suggested I open up a 0% balance transfer card (they recommended I use Chase Slate or Citi Simplicity) to help pay down my credit faster. They also recommended an app called Debitize, that lets you use your credit card like a debit card. The app pays off charges to your credit card with money from your checking account so you can build credit without overspending.

They also advised me to channel any extra funds I had to paying down my credit card debt faster, as it’s the highest interest debt I have. After my credit card was paid down, I was to use the extra money to build up my emergency fund.

In addition, the advisers suggested I consider adding a disability insurance policy and some estate planning documents to my life. I was told to ask my employer’s human resources department about disability insurance. For estate planning documents, they included a recommendation to a Stash Expert in the follow-up email. Finally, they explained to me what my next steps would be should I choose to graduate to Stash Management.

Next Steps: Investing with Stash Management

Once you have your financial plan set up, you’ll make the decision to either stop there or continue to Stash Management. This review only covers Stash Wealth’s financial planning offerings, but we did dig a bit deeper to look into their investment management services.

After your plan is created, you can choose to graduate to Stash Management, a full wealth management service, which you’ll be charged for based on how much money Stash is investing for you.

It has two payment tiers:

  • $50 per month for those with less than $50,000 in assets managed by Stash
  • 1.2% of the assets Stash manages for you annually ($100,000 invested = $1,200 annually) if Stash is managing more than $50,000 worth of assets

With Management, you’ll get ongoing help with financial planning. That includes your taxes, purchases, budgeting, combining finances with a significant other, planning for a baby, buying your first home, or anything else. You’ll have access to monitor your accounts and investments through an online portal, but you likely won’t have to do anything.

Stash gives you a unique ID so you can log on to the company’s online platform. You’ll grant Stash’s team permission to implement their suggestions for you like automating your savings and investing your money in the stock market. When you have a question, you can call, email, text, or even use Facebook’s messenger 24/7 to communicate with Stash.

Stash isn’t a robo-adviser like Hedgeable, Wealthfront, or Betterment. A human being will actually invest your money and communicate with you as needed.

Pros and Cons of Stash Wealth for Financial Planning

Pro: Quick responses

I was impressed with Stash’s response time. If I had any problems filling out the PDFs or any questions, I could expect an answer to my email on the same day or within 24 hours at the latest.

Pro: Some face time

Both meetings with your financial planner will take place over a video chat, which adds a personal layer to the totally digital process. You won’t awkwardly stare at your adviser the entire time since they’ll be showing you your results or plan for most of the conversation, but I thought it was nice to put a face (and a smile) to who was handling my sensitive information.

Con: No mobile app

Stash Wealth is only accessible to you on a desktop, which can present an issue if you want to check on your plan or investment on the go. However, you do have the option to download your plan as a PDF, which most smartphones will allow you to pull up without cellular data or Wi-Fi.

Con: No budgeting software

Your Stash plan will lay out what you need to do, but it’s up to you to implement and track your progress — unless you pay for Stash Management. You can use other platforms such as the free version of competitor LearnVest or budgeting services YNAB or Mint to manage your financial information, goals, and more, but it would be convenient to have a budgeting platform to show you your awesome new plan right away.

Con: No credit score information

You’ll need to download a separate app it you want to monitor your credit score. Unlike other popular budgeting apps like Mint, or a credit monitoring service like Credit Karma, you won’t be able to see any information related to credit score or credit report information with Stash Wealth.

Other Financial Planning Platforms to Consider

There are a host of other robo-advisers and online financial planning tools that target millennials cropping up to choose from that you may prefer over Stash Wealth.

LearnVest

LearnVest Premium is a more-affordable alternative for those looking for personalized financial advice from an expert. If you sign up for LearnVest’s premium service, you’ll complete a process similar to Stash’s, where you’ll meet twice with an adviser who will create a plan for you and then have the option to pay for ongoing support. LearnVest costs $299 for the initial setup, then $19 a month for email access to a personal financial planner, in addition to the budgeting and goal setting features online dashboard features. With LearnVest, you won’t get investment advice.

XY Planning Network

The XY Planning Network is a network of fee-only financial advisers who focus specifically on Gen X and Gen Y clients. There are no minimums required to get started as a client, and advisers in the XY Planning Network are not permitted to accept commissions, referral fees, or kickbacks. In other words, no high-pressure sales pitches or hidden agendas. Just practical financial advice doled out at a flat monthly rate. The organization is location independent, offering virtual services that enable any client to connect with any adviser regardless of where the client resides.

Garrett Planning Network

A national network featuring hundreds of financial planners, the Garrett Planning Network checks many key boxes for millennials. All members of the Garrett Planning Network charge for their services by the hour on a fee-only basis. They do not accept commissions, and clients pay only for the time spent working with their adviser. Just as important for millennials, advisers in the Garrett Planning Network require no income or investment account minimums for their hourly services.

Mvelopes

Mvelopes is an app that provides a spinoff of the cash envelope budgeting system popularized by Dave Ramsey. Like Stash Wealth, its basic version is free and allows you to link up to four bank accounts or credit cards. Mvelopes has a second tier called Mvelopes Premier. It costs $95 a year, and you can link an unlimited number of bank accounts and credit cards, among other features. Mvelopes’ top tier, Money4Life Coaching, adds one-on-one coaching tailored to your financial needs, as Stash Wealth Premier does. However, there is no price for this tier specified on the website.

The Final Verdict

Stash Wealth is a great deal if you’re a HENRY, but it’s definitely not a program for everyone. It forces you, as a young high earner, to swiftly exit any present hedonist mindset you may have and consider your future seriously.

For me, it demonstrates how important it is to take advantage of extra funds and invest them into your future while you’re young, handsome, wealthy, and only have yourself to think about. But if you’re not making enough to have an extra $1,000 stashed away for financial planning, there are less-expensive alternatives you can use on your way to HENRY status.

The post Stash Wealth Financial Planning Review – The Planner for HENRYs appeared first on MagnifyMoney.

Financial Adviser or Financial Planner: What’s the Difference?

A financial planner explains what to look for when asking someone for help managing your money.

The financial world is full of confusing acronyms and titles, and it seems everyone touting financial advice has a myriad of bewildering designations after their name. One of the most widely used titles is financial adviser. This label is problematic because it is generic and entirely too broad.

Insurance agents, stock brokers, investment advisers, accountants, bankers, and even some attorneys often refer to themselves as financial advisers. The term is so expansive that it typically covers any area of financial assistance. Unfortunately, there is no regulatory guidance or rules for using such a title. So, when you hire a financial adviser, you should also ask about any areas of specialization. You might find that if you want to hire someone who charges a fee for financial advice, your insurance agent — who calls herself a financial adviser — will not be able to help you.

When people ask me what I do for a living, I say, “I am a financial planner.” They typically respond by saying something like, “Oh yes, my financial adviser is with XYZ Company.” This always makes me cringe a bit because I am not just a financial adviser, but I specialize in financial planning. While financial adviser is a broad category, a financial planner — specifically a Certified Financial Planner (CFP) — specializes in providing comprehensive financial planning services (Full disclosure: I am one). Granted, your financial planner may also offer financial products like insurance or investments, but the key difference is he prepares a comprehensive written financial plan.

There are primarily two reasons why hiring a financial planner is important.

1. It minimizes some conflicts of interest. 

Several years ago, a potential client told me I was the third financial adviser he had interviewed. He said the first two said they would provide retirement projections for him at little or no cost. He wondered why I charged a fee for the plan I provide. I asked him one simple question: “How do you think they will be compensated for their time and expertise?” The answer was clear. They had to sell him something in addition to the plan to make the engagement worth their while.

You expect to pay your physician for his advice, and would never go to one who only is compensated if you fill the prescription that he writes. When I deliver a custom financial plan and am paid for my time and expertise, the plan stands on its own. I do not need to sell additional products or services. If the client decides to implement the plan with me, I can certainly help. If, however, he goes elsewhere, it was a fair and profitable engagement for me; I have already been paid for my advice and the client has a working plan.

2. A comprehensive written financial plan can uncover often overlooked but critical financial issues.

Imagine going to your physician with a complaint of chest pain. After the obligatory blood pressure and pulse readings, he places his stethoscope on your chest, listens to your heart and states, “Let’s schedule you for open-heart surgery tomorrow morning.” What would you think? Obviously, you would want some additional testing before jumping to the conclusion that you need open-heart surgery. Just as recommending surgery without a comprehensive medical exam would not be wise, providing investment advice without a full fiscal exam is equally imprudent.

Tax laws are complex, the investment landscape is volatile, and changes in one part of your plan could wreak havoc on another part. You should have a plan that covers all areas of your financial life and clearly shows how each area is impacted by your decisions to implement one or more financial strategies. Just completing a two-page investment questionnaire from your financial adviser is not enough to ensure high-quality financial advice.

[Editor’s note: Knowing your credit score is a key part of understanding your financial health. You can see how you’re doing with our free credit report snapshot, which includes two free credit scores, updated every 14 days.]

This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its partners.

Image: gradyreese 

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3 Great Financial Planning Networks for Millennials

friends millennials young peopleIt’s often said that if customers speak, the market will listen. Well, when it comes to financial planning, millennials have spoken, and they’ve made it clear the planning and advisement services of generations past will not suffice.

And true to form, the market has responded. After years of shunning or altogether shutting out clients in their 20s and 30s, or at best, attempting to force-feed them the same services as their parents, the finance industry is in the midst of an about-face, as a host of new and innovative financial planning networks designed specifically for the younger generation are making waves in the marketplace.

It’s that last point that matters most. Millennials don’t want just any financial planning services. They want services designed specifically for them. So, what exactly does financial planning designed specifically for millennials look like? In keeping with the millennial spirit, there are no official guidelines, but when you build a shortlist of the best financial planning networks for millennials (we’ll do just that momentarily), you notice they generally revolve around a few core principles. For the most part, they’re all:

  • Millennials seem impervious to sales pitches and are highly cognizant of hidden costs. They want to know exactly how much they’re paying and what they’re getting in return. This means fee-based financial services are a must.
  • Inclusive and flexible. The best planning networks for millennials welcome clients regardless of how much they have to invest or where they’re investing it from. In other words, no required minimum deposits, and no geographic restrictions.
  • Education oriented. Millennials aren’t interested in being told what to do. They want financial advisers to be more like coaches — or better still, partners.
  • Digital and social. Suit-and-tie meetings behind the closed doors of a stuffy office are not for millennials. Millennials want to socialize, interact, and share ideas where they feel most comfortable — online and on their smartphones.

In some form or another, the best financial planning networks for millennials connect in ways traditional approaches never could.

Here are three standouts:

Society of Grownups

If you want proof that millennials have caught the eye of the finance industry, look no further than the Society of Grownups, an independent subsidiary of insurance company MassMutual (although you’d hardly be able to tell — they don’t sell any of their products). Heavily focused on providing educational content that’s practical, social, and engaging, Society of Grownups offers a host of classes and events designed to help young adults identify and achieve their financial goals. Everything from spending to investing to paying down debt is covered across a variety of classes, happy hours, group chats, and supper clubs. The organization is based in Brookline, Mass., but does offer free online classes for nonlocals looking to get in on the experience. For those who want to take the next step beyond just education, Society of Grownups has a team of fee-based financial planners. Clients can choose between high-level checkups that cost $20 per appointment (the first one is free), or full financial planning appointments that run $100 per session.

XY Planning Network

The XY Planning Network is a network of fee-only financial advisers who focus specifically on Gen X and Gen Y clients. There are no minimums required to get started as a client, and advisers in the XY Planning Network are not permitted to accept commissions, referral fees, or kickbacks. In other words, no high-pressure sales pitches or hidden agendas. Just practical financial advice doled out at a flat monthly rate. The organization itself is based in North Carolina, but they offer virtual services that enable any client to connect with any adviser regardless of where they reside.

Garrett Planning Network

A national network featuring hundreds of financial planners, the Garrett Planning Network checks many key boxes for millennials. All members of the Garrett Planning Network charge for their services by the hour on a fee-only basis. They do not accept commissions, and clients pay only for the time spent working with their adviser. Just as important for millennials, advisers in the Garrett Planning Network require no income or investment account minimums for their hourly services.

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5 Money Truths Smart People Forget

We’ve all been there: You’re thinking so hard about how to solve a problem that you don’t notice the solution is right in front of you. Smart people do this all the time, sometimes overcomplicating their personal finances.

By overlooking simple financial truths, otherwise intelligent people can make a mess of their finances.

Take a look at some of these simple financial truths. Which ones deserve more of your attention?

1. Behavior Significantly Affects the Results of Financial Plans

Even the most intricate financial plans are not immune to human behavior.

Unfortunately, it’s really easy to be rational and reasonable on paper, but it’s another story to be rational and reasonable in practice.

Financial planners understand this, as they have experienced firsthand how clients will often drift from the path laid before them — many times capsizing their lives.

Our desire for instant gratification and quick solutions can overshadow long-term plans. For example:

Desperate actions are often followed by sharp consequences.

Never avoid the simple financial truth that, even though you have a financial plan, you must use significant self control to see positive results.

2. Even the Wealthy Need a Budget

Smart people are often good at making a living — a great living.

But that doesn’t mean they don’t need a budget. Sometimes they think they don’t, but they’re wrong. Well, that is, unless they want to be severely ineffective with their funds.

Wealth brings with it a great deal of responsibility. Making big mistakes with few assets results in few losses. Making big mistakes with many assets results in huge losses.

Many wealthy people don’t feel the need to create a budget because they are able to “out pay” their financial negligence. But that comes at a high cost.

Instead, if you’re wealthy, you should truly consider the long-term benefits of creating a budget. By doing so, you should be able to identify several areas where you can save some money, which you could turn around and invest. You’ll also have the opportunity to prioritize your spending so you can make the most of your awesome income.

The smart thing to do is get on a budget — regardless of your financial status.

3. Money Isn’t What Matters Most in Life

Smart people are great at calculations. But sometimes they get wrapped up in finance so much they forget the simple financial truth that money isn’t what matters most.

Money is simply a means to achieve certain financial goals. It can’t buy everything, and it certainly can’t buy the most important things in life.

Think about your family. Think about the meaning behind your work. Think about your friendships and the way you help others. These are all more important than money.

However, money certainly can help your family. It can also enable you to embark on a new career path. And, it can help you go out to have a good time with friends or give to others in need.

Money can certainly help you in many ways. But it isn’t the full story. Money never buys the best relationships or the most meaningful work. That’s because money is a tool. But there’s something deeper that allows the most important things in life to be realized.

4. Flexibility Is As Important As Structure

This might sound somewhat counterintuitive, but when it comes to finance, flexibility is as important as structure.

Imagine, for a moment, that you receive a medical bill in the mail. You open it up, take a look, and gasp as you read the total: $2,150. You don’t have an emergency fund to cover this, and no category in your budget is relevant to this expense.

What should you do? You have a few options:

  1. Don’t pay the bill because it wasn’t in your budget. While this is the strictest way of handling the situation, and while you’d technically be sticking to your budget, there are legal and moral consequences for not paying a bill you rightfully owe. (Not to mention the credit score damage a late payment can have.)
  2. Give up on your budget entirely because it didn’t work and pay the bill. This is the most flexible option, although it destroys your future budget in the process. However, it does meet your legal and moral obligations.
  3. Move some money from a few categories to another and pay the bill. This is a flexible method, but it’s also one that involves some structure. This meets your moral and legal obligation while ensuring that you pay less money for something else while you’re paying more toward something you didn’t expect.

As you can see, the third option is the most reasonable. Going forward, you can also make sure to budget for medical bills. The extremes of absolute structure and absolute flexibility are dangerous extremes.

5. Some People Have to Learn About Money the Hard Way

Smart people often do a face-palm when they see someone else who is about to make a financial mistake. They will often try to prevent them from making the mistake, and rightfully so. The problem is, it doesn’t always work.

If you’re savvy with your finances, don’t be discouraged when those around you make financial mistakes against your better advice. It happens. Some people just have to learn about money the hard way.

As a financial adviser, I see people make financial mistakes all the time. The best thing I can do is keep on proclaiming my message. If they take it, great. If not, I’ll keep trying. You shouldn’t give up either.

Being smart is fantastic. Just don’t forget about the simple financial truths that allow apply your intelligence in practical situations.

More Money-Saving Reads:

Image: level17

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How to Do a Background Check on Your Financial Adviser

Deciding to hire someone to help manage your money requires a lot of trust, and not all people in the industry deserve yours.

About 7% of financial advisers have been disciplined for misconduct or fraud, though that rate is much higher at some firms, according to a working paper from the University of Chicago. Of those who have been disciplined, 38% are repeat offenders.

The Financial Industry Regulatory Authority (FINRA) requires people registered to sell securities or give investment advice to “disclose customer complaints and arbitrations, regulatory actions, employment terminations, bankruptcy filings and criminal or judicial proceedings.”

There are 23 categories of disclosures, and while disclosures don’t necessarily indicate misconduct, they’re good to know about if you’re considering giving that person significant control over your finances. Of those 23, the University of Chicago researchers focused on six that indicate misconduct, including customer disputes that end in favor of the customer, regulatory action and employment separation after an allegation.

The paper, “The Market for Financial Adviser Misconduct,” evaluated data from BrokerCheck, a public tool managed by FINRA, which allows people to see disclosure history for an individual adviser or a firm.

You can also see how long the person has been in the industry and previous firms they have been registered with. It’s a straightforward search tool, allowing you to look up advisers by name, Central Registration Depository (CRD) number, firm or location. Say you’re looking for an adviser within 5 miles of your ZIP code: You’ll likely get a long list people you could potentially work with, but going through the records could help you identify someone you may not want to hire.

Research is crucial whenever you’re making a significant financial decision, whether that’s applying for a credit card, saving for retirement or hiring an investment adviser. To minimize the chances you run into problems in the future, take your time getting as much information as possible so you feel confident whenever you make your decision.

You can monitor your financial goals (like building good credit) for free on Credit.com.

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Social Security Is Changing Soon. Here’s What You Need to Know

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There has been much buzz about Social Security recently—and with good reason.

Section 831 of the Bipartisan Budget Act contains the first major change to Social Security claiming rules since the Senior Citizen Freedom to Work Act in 2000. Finding out who is affected and what they need to do is a challenge. The Social Security Administration sent an emergency message to its field offices in February explaining how its employees should implement the changes. The staff in SSA field offices are still trying to get up to speed. Adding to their confusion is the fact that Social Security policy prohibits its agents from giving advice on claiming strategies.

What’s Changing?

The Budget Act was signed into law in November 2014 but has a six-month grace period during which certain folks can still take advantage of the old rules. Social Security has not firmed up these dates, but the best information available suggests that effective April 30, it will no longer be possible to file for benefits and immediately suspend those benefits — a strategy commonly referred to as “file and suspend.” (More on that strategy later.)

The other strategy being eliminated is “restricted application.” This will no longer be an option for beneficiaries born after Jan. 1, 1954. In short, this strategy involves claiming a spousal benefit between ages 66 and 70, thereby allowing your benefit to grow until age 70. At 70, you switch to your own benefit.

If you were born on or before April 30, 1950, you are still eligible to file and suspend. If you already have a suspended benefit, you will not be affected by the change. There are a few reasons why you may want to take advantage of this before April 30.

How These Strategies Work

First, filing and suspending allows your monthly income to grow by a certain amount every year. This is referred to as Delayed Retirement Credits. The kicker with the file and suspend strategy is that if you decide at any point between your full retirement age (FRA) and 70 that delaying your benefits was a bad move, you can request a lump sum of the benefits you missed out on by not claiming at your FRA. This may make sense if you were planning on working until 70, but were unexpectedly laid off and suddenly need that income. Second, filing for a benefit allows eligible beneficiaries to claim a spousal benefit.

Let’s say you want to continue to work, but your spouse didn’t work long enough (10 years or 40 quarters) to qualify for his/her own benefit. You can file and suspend, which would allow you to continue to work, earn delayed retirement credits, and enable your spouse to take half of your full retirement age benefit (PIA). This can also be a nifty strategy for those 66 or older who have minor children because filing and suspending will allow those children to claim a benefit until they turn 18.

The restricted application is often used in conjunction with the file and suspend strategy. It usually makes sense for couples with similar benefits, as illustrated by the following example:

  • John and Jane are married.
  • John: Age: 66
  • SS Benefit (PIA): $1,500/m
  • Jane: Age: 64
  • SS Benefit (PIA): $1,000/m

In this scenario, Jane could file a restricted application for spousal benefits in two years at age 66 and would receive $750/month (half of John’s PIA). This would allow her benefit to grow by 8% over the four years that she collects a spousal benefit. At 70, she would switch back to her benefits based on her own earning record. At that point, she would receive $1,320/month (8% growth every year for four years = $1,000 x 1.32). Here is the catch: John would have to file for benefits in order for Jane to take advantage of this strategy. If John, too, wants to let his benefit grow until age 70, he can file and suspend, but must do it before April 30.

Considering Your Options

The restricted application and file and suspend claiming strategies are now being called “unintended loopholes” by the Social Security Administration, exploited by financial planners and attorneys and the clients they represent. As one of the former, I can confirm that we do use these strategies for most of our clients. By the way, anyone — regardless of his or her wealth — can put these strategies to work.

At this point we are scrambling to make sure that our clients are considering this advice. At our most recent class, a client told us that it took her three months to get an appointment at her local SSA office. The good news is that these strategies can be implemented by phone, at SSA.gov, or in your local office.

Prior to these changes, there were 567 (not a typo) different ways to claim Social Security benefits. There is no way in this column to cover every scenario or even touch on everyone affected. If you think you may be impacted and don’t know what to do, you can contact your financial planner. If you don’t have a financial planner or he or she doesn’t offer Social Security advice, you can consider seeking out one who does. You can ask a planner run the optimal scenario and give you the language to take to SSA.

[Editor’s Note: You can monitor your financial goals (like building good credit) for free on Credit.com.]

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