Wednesday, November 24, 2021

My Key Take-Aways From #AFCPE2021

Last week, I attended the virtual 2021 AFCPE (Association for Financial Counseling and Planning Education) Symposium for financial educators, planners, counselors, coaches, researchers, and content creators worldwide.

Below are seven of my key take-aways about personal finance content and tips for professional practice:

Justice-Involved Populations


Studies have found an association between incarceration and reduced financial well-being. Ex-offenders are twice as likely as others to use check cashers, payday loans, and pawnshop loans and 35% earn less than $25,000 annually. 

Two of the biggest banking issues that this population deals with are lack of a valid ID to open a bank account and mismanagement of previous bank accounts. People going to jail were advised to freeze their credit to deter identity theft and to have a trusted power of attorney to sign documents on their behalf.


Over-Shopping Trends


Pre-COVID, about 6% to 10% of Americans were considered over-shoppers. The pandemic added a “perfect storm” of boredom, “rehearsed lives” on social media leading to FOMO (fear of missing out), and increased online purchasing. Consequences include debt, destroyed relationships, wasted time, and diminished social lives. 

When people over-shop, there is an emotional reason behind it. They may be motivated to change when they see the annual cost of “small” purchases and when they identify healthy alternatives to shopping (e.g., physical activity). The widely studied six-question Richmond Compulsive Buying Scale is a useful self-assessment tool.


Financial Psychology


Outcomes in life are a result of money behaviors. “Money Scripts” are messages about the use of money that are handed down from others. People also experience “Financial Flashpoints,” which are major events in their lives that leave a big impression. Examples include growing up poor and a scarcity mindset, growing up wealthy, and divorce. 

Financial behaviors often make perfect sense when someone understands the money scripts that drive them. A tip to increase savings is to name your savings accounts for a specific purpose.


Tax Concerns


A networking discussion about income taxes included concern that some people who received the advance child tax credit (ACTC) will owe taxes in April 2022 and, in some cases, ACTC payments went to the “wrong” parent in divorced couples that alternate tax credits. 

Other issues raised were short-term capital gains/losses for day traders, new reporting requirements for cryptocurrency brokers, and the fact that the penalty for not filing an income tax return is 10 times higher than the penalty for not paying taxes owed. The IRS has payment programs for delinquent filers.


Financial Infidelity


Financial infidelity is deceptions about money in close relationships such as a spouse/partner or parent/child. “Red flags” include hiding savings accounts, hiding debt, hiding purchases in the trunk of a car until a spouse leaves the house, and “me” and “mine” language in financial counseling sessions. 

An increasing trend, especially among young adults, is for couples to agree on who pays for what but not share money in joint accounts. Couples need to develop a money management process that works for both individuals.


Retirement Planning


In another networking discussion, concerns of older adults included health care costs, inflation, long-term care, keeping busy, and outliving savings. On the other side of the age spectrum, some older Gen Zers (age 9-24 in 2021) express “climate doom” concerns. It is hard to motivate them to save when they do not see themselves (or the planet) being around in 50 years. 

Concerns about the long-term future of Social Security are also common. The best way to start planning for retirement is to start where you are with what you have.


Savings Behavior


Small steps, such as saving $100 per month or 4% of each paycheck, add up over time. A study by Saver Life, a program for people with low and moderate incomes, found that even $100 of savings can have a huge impact: greater likelihood of financial satisfaction, less high-cost borrowing, and better ability to keep utilities on. 

COVID-19 stimulus payments not only provided immediate relief to millions of American families, but they also helped many create a savings buffer against future emergencies.


Starting with Thanksgiving day and lasting through the start of the new year, my best wishes for a happy and healthy holiday season.

Wednesday, November 17, 2021

Do You Need Help? How to Find a Financial Advisor


When seeking assistance with personal finances, two of the most frequent questions that people ask are “where can I find local financial services professionals?” and “how much do they charge?”  

The following are some process steps for selecting a financial advisor:

Define Your Needs - What kind of services do you want?  Are you looking for comprehensive financial planning services which would include someone to give you advice, help you implement that advice, and be there when you need them?  Or, on the other hand, are you simply looking for answers to specific questions or someone to review your financial situation on a one-time basis?

Check Credentials - What credentials, licenses and education does an advisor have?  Look for specialized training in financial planning such as the Certified Financial Planner® (CFP®) license.  To determine if a financial planner is a CFP® licensee, ask to see the planner’s current Certified Financial Planner Board of Standards certificate or check the Web site for the names of CFP licensees.

Look For Registered Investment Advisors - Because investment advice is often involved in financial planning, a financial planner also should be a Registered Investment Advisor or affiliated with a Registered Investment Advisory firm.  This registration is issued by the U. S. Securities and Exchange Commission or a state securities regulatory agency (depending upon the amount of assets under a firm’s management). 

Evaluate Experience - Practical experience counts for a lot in the financial services industry.  Look for someone who is both well trained and has worked with clients for a period of time.  CFP® licensees, for example, must have at least three years of financial services experience.  Also find out what industry organizations an advisor belongs to. Membership indicates a commitment to professional development.

Consider Specializations - Find out what areas and/or types of clients an advisor specializes in.  Because financial planning is such a broad field, many planners concentrate their work in certain areas of personal finance or in with clients of a certain age or other demographic characteristics (e.g., women, military families, and LGBTQ individuals). Determine if a planner’s specialties match your situation.

Consider Compensation – Financial advisors are paid by fees, commissions or a combination of fees and commissions.  Fees may be charged hourly or as a flat amount for a specific set of services. Some advisors also charge fees based on the value of a client’s assets that they manage (e.g., 1.0% of  $1 million in assets = $10,000). Ask how a financial planner is compensated before you enter into a working agreement.

To obtain information about local certified financial planners, check the following sources:

¨     CFP Board:

¨     Financial Planning Association (FPA):

¨     National Association of Personal Financial Advisors (NAPFA):

¨     XY Planning Network (XYPN):

¨     Garrett Planning Network:

At each web site, you will be asked your ZIP code and will be given the names of local CFPs.  Once you receive these names, call several planners and find one that you like and trust.  Several planners may be equally competent, but you should choose the one with whom you feel most comfortable.

For additional information about choosing a financial advisor, review this chapter in the Cooperative Extension Investing for Your Future online home study course.

Thursday, November 11, 2021

More Miscellaneous Insights From Recent Webinars


As I mentioned in three previous posts, I love learning new things and often attend webinars and podcasts to gain knowledge and/or continuing education credits for my CFP® and AFC® as well as to connect virtually with others. 

Below, in no particular order and on a variety of topics, are nine financial “nuggets” that I heard recently.


¨     The Key to Building Wealth- There is no “secret” formula for wealth accumulation. Rather, the way that most people accumulate assets and become millionaires is to save as much as they can as soon as they can. Wealth is built by investing over time and compound interest over four or five decades of regular deposits is the key to success. That said, it is important to acknowledge that many people get a late start. That is reality and late savers need hope, encouragement and options. Saving later in life is still much better than not saving anything at all.


¨     The Power of Empowerment- People often have more power than they think they have, can do with a lot less shame and blame about past mistakes, and need to feel that they are in charge of their life. Financial well-being begins with a strong foundation of positive cash flow. An analogy used in a webinar is that, just like you don’t put on perfume without first taking a shower, you shouldn’t buy investments without having a budget with positive cash flow. Budgeting is the cornerstone for financial well-being.


¨     Key Financial “Need to Knows”- A panel of personal finance teachers on a CNBC webinar for Teacher Appreciation Week described the following concepts that all students need to know: start investing today, invest with low-cost investments, check for licensed sellers and registered investments, develop and follow a budget, understand your retirement savings plans, and consider a target date fund as a retirement plan investment.


¨     COVID-19 Impacts- A speaker at the three-day Wall Street Journal Future of Everything Festival noted that a big post-pandemic issue will be the large amounts of money put into the economy and the inflationary stimulation this is causing. A second issue is the grief experienced by many people, which has focused their priorities and clarified what matters. Many more employees today are vocal about work load concerns and work-life balance. They have also realized that they can be pickier about ways that they “lean in” at work and don’t need to be at every event. They can pick and choose.


¨     COVID-19 Comebacks- We should all expect that the process of re-emerging from the pandemic will be awkward. CDC guidelines will continue to evolve over time and people have different levels of “cautiousness” as they have had throughout the pandemic. Companies in many industries (e.g., restaurants, ball parks, and airlines) are trying to anticipate how their employees and customers are thinking and to make them feel comfortable. Not every company will get it right.


¨     Retirement Plan Withdrawal Caution- A webinar, The Impact of COVID-19 on Retirement Savings, by Consumer Action, noted that the CARES Act made it easier for people to take withdrawals from their retirement savings plans to pay bills. That said, participants were advised not to do this unless they absolutely have to. Alternatives to generate cash include savings that is not in a retirement plan (if any), employer assistance (e.g., giving circles), family and friends (even if it is embarrassing to ask them), and tapping a home equity line of credit.


¨     Womens’ Finances- Women, the majority of U.S. nurses and teachers, have been “beaten down” by COVID-19. As a result, many have stated “I’m out at 62,” so they can collect reduced early Social Security benefits. There is concern, however, as to whether they will be able to live comfortably throughout the remainder of their lives. Using the Rule of 72 with 3% inflation, prices will double in 24 years (e.g., from age 62 to 86). A recent study found that 47% of women cannot afford a $400 emergency expense and 21% use a credit card for emergencies. Another Consumer Action webinar speaker ominously predicted “we will see caravans of homeless women in this country” (a la the movie Nomadland).


¨     Working Past Age 70- People should not plan on doing this when they are calculating how much they need to save for retirement. Ambitious plans can go awry. Ageism is a very real thing and those who plan extended careers must absolutely keep their skills and professional contacts up to date so they can provide value to an employer or clients (if self-employed). Two risk factors, besides ageism, are health and ability to work. Benefits of working longer are delayed withdrawals from savings, more time to save money, and increased formula-based pension and Social Security benefits.


¨     Getting Started is Hard- Many people don’t invest (or take other actions to improve their personal finances) because they don’t know where and how to start. Financial educators need to remember this and break financial actions down into a series of process steps and offer encouragement along the way. Another financial education tip is to make financial planning activities seem urgent and important. For example, investing is important because it is a proven way to build wealth over time. The #1 pre-requisite for making a change is a sense of urgency.

Thursday, November 4, 2021

Behavior Change is a Gradual Process

 According to a leading theory, personal behavior changes, such as saving money and losing weight, take place in defined stages over a period of time.  This theory, called the Transtheoretical Model of Change or TTM, has been applied to a variety of behaviors including weight control, addictions (e.g., smoking) and changes in financial behavior (e.g., reduced spending).

According to the Transtheoretical Model, there are five major stages of change: 

¨     Pre-contemplation stage, where people may not even be aware that a problem (e.g., high debt load) exists or that a change should be made in their life. 

¨     Contemplation stage, where people gain knowledge about alternative behaviors and begin to understand ways to change (e.g., reduce spending). 

¨     Preparation stage, where people commit to make a change and gain required skills (e.g., taking a course in personal finance). 

¨     Action stage, where people “take the plunge” and actually change their behavior. 

¨     Maintenance stage, where people work to sustain their change and reap the rewards of their efforts (e.g., increased bank balance and lost weight).

The Transtheoretical Model also defines major processes of change that relate to one or more of the behavioral change steps. Below are five examples:

Consciousness-Raising- This involves raised awareness about an issue. An example is news stories about the benefits of saving small dollar amounts on a regular basis might cause a person to think, “I should save some money.”  This change process is present in the pre-contemplation and contemplation stages

Emotional Arousal- This is a sudden emotional experience related to a behavioral change that is experienced on a deep, feeling level. Emotional arousal is a powerful change agent whether the behavior being changed is drunk driving, lung cancer and smoking, or reducing interest costs by paying more than the minimum due on credit cards.

Commitment- This process takes place during the preparation stage of change. Here, people acknowledge that “if it is to be, it’s up to me.” An example of commitment is “I will save $25 per paycheck.” 

Countering- This is an important process at the action stage of change. It involves substituting a healthy response (e.g., saving $3 per day) for an unhealthy one (e.g., spending $3 on lottery tickets). 

Environmental Control- This means restructuring your environment to reduce the probability of a problem-causing event. An example is signing up for a mutual fund automatic savings plan (e.g., depositing $50 per month) so money can be invested in fund shares before it is spent.

Personal change is hard and it doesn’t happen just because we want it to. Most successful changes require persistence, positive thoughts, and a strong support system.

Are you ready to make changes in your health habits, interpersonal relationships, or finances? Additional information about the Transtheoretical Model of Change can be found in the book Changing For Good by Prochaska, Norcross, and DiClemente.

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