Wednesday, March 31, 2021

COVID-19 and Your Finances

 During the past six months, I have presented about a dozen COVID-19 and Your Finances classes and webinars, including this webinar for Cooperative Extension colleagues. I began each presentation by describing similarities between transitions in later life, described in my new book Flipping a Switch, and those experienced by Americans as a result of COVID-19.

Examples of these similar adjustments include managing money  with a changed income, creating a “paycheck” from multiple income sources, keeping busy, too much “togetherness,” and becoming “fraud bait.” People often have more free time for health maintenance activities (e.g., exercise and healthy meal preparation) as a result of not commuting.

In my presentations, I describe three categories of Americans according to financial impacts of COVID-19: 1. Reduced Income and Struggling, 2. Stable Income, But Anxious, and 3. Increased Income with Opportunities. I then describe the following financial tips for all Americans and for those in each of the three impact categories:

All Americans

¨       Get your estate plans in order: will, living will, and durable power of attorney. Over 550,000 COVID-19 victims (and counting) as of 3/31/21 is a major “wake-up” call to not leave any financial “loose ends.”

¨       Prepare a consolidated list of beneficiaries for life insurance policies and retirement savings plans.

¨       Prepare a list of digital assets with user names, PINs, passwords, and other account log-in data.

¨       Determine the impact of COVID-19, the CARES Act, and the American Rescue Act on your income taxes. For example, the charitable donation write-off for non-itemizers and arranging adequate tax withholding.

¨       Create an updated spending plan (budget) to reflect income/expense changes as a result of COVID-19.

¨       Use the Bill Calendar from the Consumer Financial Protection Bureau (CFPB) to summarize expenses.

¨       Identify and act on things that you can control (health practices, saving, spending, gifting, mindset).

¨       Get comfortable making financial and lifestyle plans again after a year of living life in a “holding pattern.”


Group 1: Reduced Income and Struggling

¨       List, and then prioritize, three expense categories: needs (e.g., food, housing, utilities) obligations (e.g., court fees/fines, child support, insurance, taxes, secured and unsecured debts), and wants (everything else).

¨       Reach out for help from government and non-profit agencies. Call 211 or visit to find local services.

¨       Reduce or eliminate subscription services and recurring payments (e.g., gym, satellite radio, streaming TV).

¨       Assess cash flow resources (e.g., emergency fund, cash value life insurance, retirement savings plan).

¨       Access local, state, and federal resources as needed (e.g., unemployment benefits and stimulus payments).

¨       Marshall social capital resources through family and community connections.


Group 2: Stable Income, But Anxious

¨       Prepare for a furlough: multiply daily pay by a number of furlough days to determine potential lost income.

¨       Cut spending to build up an emergency fund and/or accelerate debt repayment using PowerPay as a guide.

¨       Consider making human capital investments (e.g., certification programs, in-service training, short courses).

¨       Start a “side hustle” (freelancing) for additional money to save and to have “fall back” income, if needed.

¨       Consider refinancing your mortgage to take advantage of current low interest rates.


Group 3: Increased Income with Opportunities

¨       Save/invest positive cash flow resulting from increased income and/or reduced expenses.

¨       Make prudent home improvements with a high return on investment (e.g., kitchen and bath remodeling).

¨       Be careful about co-signing, “loans” that become gifts, and/or long-term support of family members. Use this new publication, Tips for Managing Family Lending and Borrowing, from the CFPB to inform financial arrangements.

¨       Consider charitable gifting and serious philanthropic methods (e.g., qualified charitable distributions, donating appreciated securities, and establishing a donor advised fund or charitable trust) to help others.

Every American has been affected by COVID-19 in one or more ways: health, employment, income and assets, education, relationships,  goal-attainment, and more. As noted above, some observers have called COVID-19 lockdowns and layoffs a preview or “dress rehearsal” for transitions in later life. Many are also predicting a disparate “K-shaped” recovery

However COVID-19 has affected your finances, develop an action plan to move forward financially. Your future depends on it!

Wednesday, March 24, 2021

15 Months of Entrepreneurship: Ten More Lessons Learned


Last September, I wrote a blog post with some “Barbservations” about entrepreneurship during a pandemic. In that post, I described five personal learning lessons: be visible on social media, do some pro-bono work, get a video-conferencing license, say “no” to bad fit assignments, and chart a new path.

After decades working in academia, I have now been a full-time financial education entrepreneur for 15 months. Since I have had few role models for how to do this, I have built many bridges as I crossed them. I can count on one hand the number of colleagues I know who left long-time careers and continue to work actively in the field.

In an effort to help other aspiring third-age entrepreneurs, below are 10 additional learning lessons:

1.       Show Up- Fewer people think I am “retired” now than when I first left Rutgers University because I made very conscientious decisions to attend conferences, present webinars and podcasts, respond to media queries, “work out loud,” and share content via social media. I smiled recently when a colleague said “you’re everywhere” because it indicated my strategy was working. Branding, maintaining visibility, and professional development are ongoing processes for all successful entrepreneurs to attend to and are also great antidotes for older adult ageism.

2.       Identify Deliverable Stages and Invoice Accordingly- I did not do this with one large project that extended for six months. There were multiple levels of review that took much more time than either the client that hired me or I ever anticipated. Now I set specific project milestones for clients with a first draft of content being the first deliverable that I invoice for. This strategy evens out cash flow and makes income tax planning easier.

3.       Understand the Client’s Funder- Clients receive external funding to hire me for some of my work projects. Thus, it is key to understand their funder’s requirements and “hot buttons” (e.g. certain topics and/or website links to avoid). Also, accept the fact that projects take longer when more entities are involved and that some funders hold back funding for your client to pay you with until they approve the final project results.

4.       Think Twice About Public Entities- I am very wary now of doing any future work for state governments and public colleges. Their hiring and payment “systems” are simply too onerous and time-consuming for this solo practitioner (e.g., proving my U.S. citizenship, filing an out-of-state business registration, completing elaborate online forms, and undergoing a background check that required unfreezing my credit, which I did not do). My advice: ask plenty of process questions when someone from the public sector wants to hire you.

5.       Get Project Details in Writing- On the other side of the spectrum were clients who did not have any paperwork or hiring process at all. In this case, I provide a simple one-page memorandum of understanding (MOU) that includes a complete description of the deliverable, deliverable milestones (e.g., first draft, first round of revisions, final draft), the project timeline, and the amount that I am charging per hour and in total for the project.

6.       Stick to Your Niche- My niche is writing, speaking, and reviewing personal finance content. Period. I said “no” to requests to conduct research, write grants, and do a curriculum bias review, for which I was not qualified by training or life experience. I also passed on a speaking opportunity because I am not ready to travel by air yet.

7.       “Bookend” Your Day- Much has been written over the past year about “blurred boundaries” with so many people working from home. As a solo entrepreneur, it was quite a change for me from working with others at an office. I exercise before and after work hours to establish boundaries for when my work day starts and ends.

8.       Fill Work Spaces- I have had almost no project down time since January 2020 because I have one ongoing client as an “anchor.” With ad hoc projects, as soon as I finish one, I immediately start another in my queue to create space for new projects that may come along. I fill small time gaps binge-writing blog posts like this one.

9.       Monitor Income Tax Payments- With the exception of the “anchor” client, my first-year income as an entrepreneur was a big unknown at the start of 2020. By December, I had doubled revenue expectations. I used previous tax returns, the IRS tax withholding estimator tool, and the safe harbor rule to avoid under-withholding.

10.   Create Synergies- Several client projects involve creating content for professionals who serve military families. I found that research and learning curves that informed one project also benefitted another. Similarly, I created a number of templates (e.g., for invoices, MOUs, and online quizzes) that can be used across multiple projects.

As I wrote in my recent book, Flipping a Switch, everyone need some “big rocks” (e.g., work, volunteerism, care-giving, socialization) in their day to provide structure and a sense of purpose. Entrepreneurship is one of my “big rocks” and provides fulfillment, an outlet for creativity, and a good income. I hope that my insights are useful.

Thursday, March 18, 2021

Pay Off Debt Quickly and Get to Know Your Credit Card(s)

Are credit card statements containing holiday purchases still arriving? If so, now is a great time to accelerate upcoming debt payments and get to know your credit card’s costs and features better.  

There are many expenses associated with credit cards including annual, late, and over-the-limit fees, and fees for balance transfers. No expense is as costly, however, as the cost of making minimum payments. It can take over a decade, and over $9,000 in interest, to pay off a $10,000 credit card with an 18% annual percentage rate (APR).

There are two ways to avoid the credit card minimum payment trap: 1. “Find” extra money to pay more than the minimum and 2. Pay at least twice the minimum (or more if you can). Below are specific details:

¨      “Find” Money to Pay More Than the Minimum- Action steps will vary from person to person. Author David Bach refers to small expenses that add up over time as “lattes” and everyone has their own. Examples include eating out, buying expensive coffee, and lottery tickets. Fewer or less expensive “lattes” will free up money to pay off debt faster.

¨      Pay at Least Twice the Minimum Payment- Many minimum payments on credit cards are calculated as 3% of the outstanding balance. Double that payment to 6% of the balance (i.e., twice the required minimum payment) and you can save a substantial sum of both interest and repayment time..

Example: Making minimum payments on a credit card with a $1,000 balance and an 18% APR will cost $684 in interest and take 8 years to pay off. Double the minimum payment from 3% of the outstanding balance to 6% of the balance and the interest cost is reduced to $285 (saving $399!) and the debt is repaid in 4 years.

To fully understand features and terms of your credit card(s), carefully read their disclosures (a.k.a., Schumer box) and/or information found on your billing statement. There, you will find information about the following:

¨      Annual Percentage Rate (APR)- Lenders must disclose all types of APRs (interest rates) including introductory “teaser” rates (e.g., 2.9% for six months), standard APRs, and penalty (default) APRs that are charged for specific infractions such as late payments.

¨      Fees- Examples include late fees, over-the-limit fees, and fees for cash advances and balance transfers. These fees are not included in APRs because only some credit card users pay them.

¨      Grace Period- This is the time period, typically 20 to 25 days, between the posting date of a transaction and the payment due date. A grace period is only available to cardholders who paid the previous month’s balance in full and on time.

¨      Balance Calculation Method- Two common methods are “daily balance” and “average daily balance.” New purchases are generally included. With both methods, the sooner in a billing cycle a credit card is paid, the more days with a lower balance and the lower the daily or average daily balance on which interest is charged.

Once you have read some Schumer boxes, make sure that you are using a credit card that’s right for you:

¨      “Convenience users” (i.e., those who always pay their bill in full and do not pay interest) should look for a long grace period, no annual fee, low fees, and a good rewards program.

¨      “Revolvers” who typically carry a balance forward should look for a low interest rate, no annual fee, low fees, and a long “teaser rate” if the balance can be repaid before the introductory rate ends.

Use this worksheet to compare the costs and features of your current credit card(s) and others that might have more favorable terms.

Thursday, March 11, 2021

Seven Tax-Advantaged Charitable Gifting Strategies


As the pandemic continues after one full year, many people are hurting financially. Examples of traumatic impacts include loss of income, food insecurity, depletion of emergency savings, benefit access issues, and continued uncertainty about the extent of leniency provisions for rent, mortgage payments, and utility bills.

On the other side of the spectrum are Americans who have been doing as well as or even better than before throughout the pandemic and whose finances are barely affected. Some may be looking for tax-advantaged strategies to reduce their income taxes. Others may want to help others who are less fortunate than they are.

The good news is there are seven tax-smart strategies to do both; i.e., reduce income taxes and make tax-advantaged donations to help charitable organizations that are helping Americans survive the pandemic. Below is a brief description of each tax-advantaged strategy:

¨      Tax Deduction for Non-Itemizing Taxpayers- As a result of the Omnibus Spending and Coronavirus Relief Law passed in December 2020, there is an income tax deduction for donors who do not benefit from itemizing deductions in 2021. Single taxpayers can deduct $300 and married couples filing jointly can deduct $600. This tax write-off applies to cash contributions only, not to donations of property.

¨      “Bunching Up” Tax Deductions- Unless they have large medical expenses or qualified catastrophic losses, the 10% or so of taxpayers who itemize deductions typically have some type of planning strategy. One is “bunching,” i.e. paying several years of tax-deductible expenses in one tax year. Often, this involves “voluntary” tax deductions such as elective medical procedures and charitable gifts. Typically, people “bunch up” deductions in years where they expect to have an above-average income.

¨      Qualified Charitable Distributions (QCDs) - With QCDs, taxpayers aged 70 ½ and over donate the required minimum distribution (RMD) from their traditional IRA to a qualified charity. The QCD counts toward their RMD withdrawal. The distribution is made directly from the IRA custodian (e.g., a bank or mutual fund company) to the charity. The maximum annual exclusion for QCDs is $100,000 or $200,000 for married couples filing jointly. Funds must be withdrawn by December 31 of the tax year.

¨      Donating Appreciated Securities- Assets that can be donated include stocks, bonds, exchange-traded funds (ETFs), real estate investment trusts (REITs), and even bitcoins. Donors are able to give (and charities able to receive) more than if the securities were sold, capital gains taxes were paid, and the remainder was donated. Donors avoid capital gains taxes and can deduct the fair market value of the assets that were donated. This strategy can also help donors rebalance their investment portfolio assets.

¨      Donor-Advised Funds (DAFs) - DAFs are a tax-deductible irrevocable gift for charitable purposes. First, donors select a custodian (e.g., Fidelity, Schwab, Vanguard, TIAA) by comparing investment options, procedures, and expenses. Next, they contribute cash, investments, or appreciated assets to open a DAF account. Then they set up an asset allocation strategy and invest in one or more asset “pools” (e.g., stocks, fixed income securities, and cash assets). Lastly, donors recommend grants to charities at any time. The custodian makes sure the charity is tax-qualified and sends them the donation.

¨      Charitable Trusts- Charitable trusts require the assistance of an attorney. Donor assets used to fund the trust are retitled in the trust’s name. Ongoing administrative management expenses are involved. The tax deduction for the donor is based on the value of the projected income stream to the charity. Two common types of charitable trusts are charitable lead trusts and charitable remainder trusts.

¨      Private Foundations- Some donors elect to become their own charitable organization by setting up a private foundation. There are strict regulations and tax laws such as the requirement to file an annual Form 990. Private foundations often involve ongoing hands-on donor involvement and provide a high degree of donor control over charitable gifting. Mandatory minimum distribution rules apply.

To learn more about tax-advantaged gifts, review the Charity Navigator webpage, Tax Benefits of Giving.

Thursday, March 4, 2021

Seven Strategies to Achieve Later Life Financial Security

 I recently updated and delivered a presentation that I originally developed in 2004 for an online financial education class series for women sponsored by South Dakota State University Extension. The program topic was investing for retirement and the content was derived from my book Money Talk: A Financial Guide for Women, which was originally written in 2004 and last updated in 2018 (4th edition).

What struck me, as I updated the slides, was how much my personal view of financial planning in later life had changed over the past 17 years. I used to use the word “retirement” all the time in program marketing and materials in my 40s and 50s when I worked for Rutgers Cooperative Extension. Now, as a financial education entrepreneur in my 60s after four decades in academia, I chafe at the “R word” because it seems limiting and has so many misperceptions.

Hence, the title of my new book, Flipping a Switch, and the words used in the title of this post.

Another thing I noticed was the “evergreen-ness” of the 2004 slides. Most of the content is as relevant in 2021 as it was when I originally wrote it. This speaks to the timelessness of many basic investment principles and practices.

Below are seven strategies to achieve financial security for later life and throughout later life:

¨      Determine a Post-Career Income Goal- There is no magic number. The amount that people need depends on factors such as financial goals and lifestyle decisions, work plans, availability of employer benefits, health status, and estimated life expectancy. While 70% to 90% of income earned during full-time working years is often recommended, some older adults may spend 100% to 110%, especially during their “young old” years.

¨      Do the Math- A useful planning tool is the FINRA Retirement Calculator. It has 12 questions about relevant variables including money already saved, annual income need, expected income from other sources (e.g., a pension and/or Social Security), current age and tax rate, and assumed average annual return. The calculator provides a retirement analysis in text and chart form and details about asset accumulation over time.

¨      Determine An Asset Allocation- This is the percentage of investments held in different asset classes including stocks, bonds, and cash assets. Having money in different places spreads out investment risk. Key factors in determining personal asset allocation percentage weights for each asset class are age, investment time frame, and risk tolerance level, which can be determined using this online self-assessment tool.

¨      Rebalance Investments Periodically- The aim is to maintain an investor’s original asset class weightings (e.g., 50% stock, 30% bonds, 20% cash equivalent assets). This can be done by selling securities in an “overweighted” asset class or buying in an “underweighted” asset class with new money. Some people rebalance on a fixed date (e.g., birthday) each year while others rebalance when there is a 5% to 10% shift.

¨      Balance Risk and Reward- Data exist on average returns over time of various combinations of asset classes (e.g., 70% stock and 30% bonds). While past returns are no guarantee of future returns, they are instructive. Generally, the more stock in an investor’s asset allocation mix, the greater the potential for high average returns and the more volatility (i.e., the spread between gains and losses) in an investment portfolio.

¨      Set Later Life Goals- One way to set future goals is to answer several key questions about your planned lifestyle as an older adult: Where do you want to live? Will you continue to work? What hobbies and activities will you spend time on? and What activities are on your “bucket list”? Use this goal-setting worksheet to identify a deadline date and dollar amount for each financial goal.

¨      Anticipate Spending Plan Changes- Spending patterns can change quite a bit as people get older and/or step away from the labor force. Expenses that often increase in later life include medical and dental expenses, health insurance premiums, travel and entertainment, and gifts. Those likely to decrease include auto insurance and expenses, clothing, and utilities, property taxes, and home maintenance if people downsize. Income taxes may increase or decrease depending on factors such as income in later life and required minimum distributions.

Loud Budgeting: A Financial Discipline Strategy

  Have you heard the term “loud budgeting?” It started gaining traction earlier this year on TikTok (where else?) and has been covered by fi...