Got Money

Got money? It may be a little or a lot, but it’s yours.
Whether you’re living paycheck to paycheck, worried about retirement or not really sure where you stand financially, there’s one thing we learned from the experts: If you don’t take charge of your money, it will take charge 
of you. Here’s our guide to everything from smart saving to cleaning out your wallet (really, it matters) to building your wealth to never again saying “I’m no good with money.”

Financial Aid

Stuck with a terrible mortgage? Hate (no, hate) balancing a checkbook? Kurt Jamiel, founder and president of Jamiel Financial Advisors, LLC, comes to the rescue.

A 42-year-old single therapist in Wakefield owes more on her mortgage than her home is worth.

“I thought I just needed to work on saving,” says Debra, who became self-employed fourteen months ago and earns $100,000 per year. Despite a healthy income, she finds herself living paycheck to paycheck, making outrageous interest payments on her mortgage and saddled with old debt. With the value of her home in decline, she has been unable to refinance the mortgage. (Since she is also current on her payments, she is ineligible for loan modification programs.) Her credit card, on which she is carrying a balance of about $10,000, will begin incurring 19 percent interest (up from 15 percent) in a few months. Her student loans carry a balance of $5,500 at a rate of 8.25 percent.

“I never really took the time to understand interest rates,” she says. “I didn’t realize how much all these debts were really affecting me. I thought I would keep getting by and just be able to refinance someday,” she says. Her goal is to pay down debt and increase her savings cushion from $3,000 to $12,000.

Kurt’s advice: Unfortunately, Debra’s situation isn’t unique, but the good news is that she is able to increase her income by working more hours. She is currently “upside down,” paying a $190,000 mortgage on a condo with a market value of $165,000. Until she is able to refinance, she can look into rolling over her previous employer’s 401(k) plan into an “owner-only 401(k),” which ex-clusively allows the self-employed (with no employees) to access their retirement savings as a loan, without either a withdrawal penalty or paying income tax on the funds. Since this loan has a better rate of prime plus 1 percent, she can use it to pay off her other debt. (Update: “I’ve always felt I wasn’t good with money, but I now feel like I can get a handle on it,” says Debra. “Kurt kind of put the fear of God in me. In a good way.”)

CEO of Beltone New England is looking to implement a bonus plan for employees.

Michael andreozzi is the CEO of Beltone New England, a 160-employee company headquartered in Warwick that is the country’s largest dispenser of hearing aids. Like many businesses, Beltone experienced significant declines in sales during late 2008 and early 2009, which forced the CEO to make some tough decisions, including layoffs, but he was able to preserve employee benefits and the company’s charitable gifting program. With the eco-nomy making some recovery, Michael is now focused on investing for the future, which includes developing new products, remodeling locations and adding people to his team. He is particularly interested in retaining good em-ployees and attracting new talent without jeopardizing market share or future growth.

Kurt’s advice: This is a challenge because we don’t know how strong the economy will become, and you don’t want to be in a situation where you’re over-committed. Cutting benefits is a common management decision, so it is impres-sive that Beltone did not go that route.

There are numerous options for Michael, but one solution with flexibility and benefit is the IRC Section 162 Plan, commonly known as the “executive bonus plan.” These plans typically are modeled on employee performance or corporate profitability, and they can be designed as elaborately or simply as the employer chooses. Basically, an employer pays a bonus or salary component into a designated life insurance policy owned by the employee. The money is then available to the employee on a vesting schedule, such as in five or seven years.

The plan gives employers the opportunity to retain and attract talent without putting out a lot of cash at the beginning and also offers some protection if the employee leaves the company before the vesting period ends. For employees, it is a highly tax-efficient savings vehicle with survivor benefit guarantees. It’s a nice win-win for both parties.

A 26-year-old, single web editor in Cumberland is falling behind on her bills.

annalisa“Everything to do with numbers gives me anxiety,” says Annalisa, a successful web editor earning $24,000 a year and whose self-confessed financial strategy has always been “ignoring my finances and hoping everything would be cool.” Her biggest expense is her credit card, which she used to pay her college tuition — after missing two payments, her interest rate was recently jacked up from 17.9 percent to 27.6 percent. Her problem isn’t large purchases as much as keeping track of her day-to-day spending, some-thing she particularly realized after buying a twenty-five-dollar Starbucks gift card to see how long it lasted her. “After three days, no more money on it,” she says, recalling her surprise. “I’ve been weaning myself off Starbucks.” Her goal is to get out of debt and start saving.

Kurt’s advice: Freeing herself from that exorbitant interest rate is the first order of busi-ness: 27 percent is unacceptable. Her balance is $1,400; she can seek a loan through her employer’s retirement savings plan and use that to pay off the credit card debt. A loan will have a lower interest rate, and she would be paying her-self back directly from her earnings. Then she can concentrate on managing her cash flow.

One option is to set up an automatic deduction with her employer so that part of her paycheck goes right into a savings account. (Update: Tech-savvy Annalisa found a checkbook register application for her phone to help her track daily expenses and manage bill due dates and payments. “I find it so much easier to deal with,” she says.)

 Kurt Jamiel is founder and president of Jamiel Financial Advisors, LLC, in Warren, RI.

Star Moves

Take a cue from Jill Schlesinger, CBS Editor-at-Large (and former Rhode Islander). She shares her top strategies for jump-starting your financial life:
Track your cash flow once and for all.
This is my favorite financial advice, because in one afternoon, using a program like Quicken or old-fashioned pen and paper, you can gain a true understanding of how your money’s coming in and going out. From there, you have the opportunity to take control of your financial life. If you think it’s beneath you, then pretend you’re a professional basketball player and I’m telling you to practice foul shots.

Make sure that you have six to twelve months of emergency reserves in cash or cash equivalents.
The financial crisis and skyrocketing unemployment rate has made this invaluable advice for every American worker. If you are nearing retirement, you may want to keep more than a year on hand.

Max out your retirement account.
Regardless of what a broker, adviser, salesperson or agent tells you, use your employer-sponsored plan before doing anything else! I’m a big saver and always have been. After maxing out my retirement account, I have another 15 percent of my pay go into an investment account automatically.

Take a risk assessment questionnaire.
In the last eighteen months, you may have morphed from brave investor to a wimpy one. The good news is that you really know yourself now and can hop online (try and develop a portfolio allocation plan that’s suitable for you.

Face Your Fears

Belinda Fuchs, CPA, and founder of Own Your Money, helps us stop worrying and “address the B.S.”

Financial coach Belinda Fuchs recalls the investment banker who couldn’t deal with her money. “She was overwhelmed and paralyzed,” says Fuchs. “She had the idea that money represented stress and anxiety, so she subconsciously avoided it or gave it away.” Once the exec felt empowered to take control, her poor money behaviors changed fast. “We’re limited by our belief systems,” says Fuchs. “I term it our ‘B.S.’ We think, I’m not good with money. I don’t have what it takes to be wealthy. So we avoid, we procrastinate — and we keep creating the same results.” By working with clients first to tackle their emotional and mental blocks to money management, Fuchs helps to create lasting turnaround. “I believe ‘own your money, own your life,’ ” she says. “Once we’ve moved through the anxiety, we can take action.” Here are some of her steps to a successful money mindset:

Give yourself a break.
“People ‘should’ on themselves. I should know how to do this. The reality is, most of us were never taught.”

Identify your “B.S.”
“I worked with one business owner who realized he wasn’t charging for all of his services because he didn’t want to deal with the checks: If I don’t have the money, I won’t have to worry about managing it. He
believed he wasn’t disciplined enough to maintain the books, or that he’d turn out like his father, who had handled the family’s accounting and was bitter about it.”

Upgrade your thinking.
“Instead of saying, I’m not good with money, choose to believe you have access to the resources you need. Tell yourself I am disciplined and responsible enough to maintain my books. The turnaround is easy; the big step is living it. Something tough happens, and people default to their old thinking. Financial fitness is like physical fitness. It takes time, commitment and focus.”

Bite the bullet.
“The panic most people have comes from not knowing the full facts of their reality. I coached one couple who knew they were stressed and amassing debt, but they never looked at how much of an issue it was. Once they totaled their debt ($78,000) and realized their monthly overspending (about $2,000), we worked on a spending plan and figured out how to increase their income. Even if the reality isn’t a good one, once people track their money and put certainty to it, you can feel their relief.”

Step outside your comfort zone.
“People would often rather be comfortable and unhappy than a little uncomfortable and truly happy. Opportunities are out there, but we literally miss what’s in front of us. I see this with so many business owners who under-charge or don’t think of ideas to generate new streams of income. Or, on a personal basis, people feel resigned to their monthly expenses. They haven’t moved past that resistance to see the many opportunities for increasing income or saving money, often without sacrificing lifestyle. We’ve gotten really comfortable thinking, Money is scarce, times are tough. There is a lot more you can control than you may realize.”

5 Questions
Your underlying beliefs about money shape your entire financial picture.
Ask yourself:

•     What does money mean to you?
•     How would you describe your relationship to money?
•     What are your current money habits?
•     What did your parents tell you about money?
•     When you hear the word “wealth,” what comes to mind?

Belinda’s 2 audio CD set "Invest in Yourself: The 7-Day System to Take Control of Your Money" is available at



Advice for the Decades

Your financial challenges change with each life stage, so your strategies need to age with you. What should you be focusing on at each milestone? We consulted Betsey A. Purinton, vice president and chief financial planner at StrategicPoint Investment Advisors, on the first half of our financial lives. Then we asked Ian Gerrior, partner at Aquidneck Wealth Management, to guide us to the golden years.

Teens l Develop good habits.
Learn how to spend wisely. Open a no-fee checking account. Learn how to balance it and establish spending limits. “You’re not going to get teenagers to draw up formal budgets, but they take great pride in owning a checkbook. That’s where to start,” Purinton says. 

Understand the importance of savings. With part-time job earnings in your pocket, you’ll be tempted to spend it all. Don’t. Keep some for spending, deposit some in your checking for bills, and set the rest aside for longer term savings. Consider opening a Roth IRA now to build your retirement savings.

Establish a good credit history. Accept one credit card offer and be sure to charge no more than half the balance and what you can pay in full and on time. Or, get a car loan and make installment payments on time. When you’re ready for a mortgage, the banks will be too.

Twenties l Become independent.
Establish an emergency reserve in safe, liquid savings, enough for at least three to six months of nondiscretionary expenses to cover you if you lose your job.

Manage debt.
Credit card interest rates and late fees are horribly high, so keep charges to where you can pay them off. If you need a car loan, keep the payments affordable with a reasonable car choice. Consolidate government student loans if it’s advantageous and pay down private student loans with the highest interest rates first.

Save. If your company has a 401(k) or retirement plan, contribute at least the equivalent of the company match. If they don’t, set up your own plan — you’ll soon see the advantage of compound interest. With extra cash, contribute to a Roth IRA or save for a down payment on a house somewhere safe like a money market account. Invest simply, perhaps in a target date fund (a mutual fund that automatically adjusts its mix of assets to suit the investor’s time frame). At this stage, the key is to start making contributions, not try fancy strategies.

Thirties l Line up the future.
Plan your estate. Here’s where all those grown-up documents come in: Get a will, health care proxy and power of attorney. If someone’s life (i.e., children, spouse) is affected by your death, get term life insurance to cover your commitments and supplement any work policies. Make sure you have enough disability insurance.

Invest in real estate. When you have a sufficient (usually 20 percent) down payment, purchase a home and choose an affordable mortgage; ideally a thirty-year fixed, not one with an interest rate that resets.

Determine your risk tolerance. The stock market offers great gain, but great loss as well. How much loss can you handle? Select investments that balance your tolerance and savings goals.

Save. If you have children, start a 529 college savings plan to take advantage of tax-deferred earnings. Begin serious contributions (more than the company match) to your company retirement plan, or to your own IRA.

Forties l Focus on growth.
Address risk. If you procrastinated on your will and planning, take care of it now to protect your family and assets.

Consider an umbrella liability policy if you have children approaching driving age to cover liability above and beyond your auto/home policies.

Consolidate retirement plans if you’ve had a handful of jobs with several 401(k)s to better manage investments. Start a Roth IRA if you’re eligible and max it out. If you start when you’re forty and contribute $5,000 per year with an average 8.5 percent growth rate over twenty-five years, you’ll have about $425,000 at age sixty-five.

Prioritize savings. Don’t neglect your retirement savings for your kid’s college fund. “When your children get to college there are many options — scholarships, loans, work-study programs — but there is no Pell Grant for retirement,” Gerrior says.

Fifties l Power up savings.
Get a handle on debt. Typically your highest earning years, this is the time to clear out credit card or other debt that may have
piled up.

Evaluate your portfolio allocation if you haven’t in a while. Rebalance it to make sure it still fits with how aggressive or conservative you want to be.

Consider long term care insurance.
It’s cheaper when you’re younger and the cost of care is astronomical, now averaging $6,000–$7,000 per month. Be aware the state has changed the look-back provisions (your assets from the past five years now determine your eligibility) for gifting.

Dream and budget. Think about the location and lifestyle you want to enjoy when you eventually retire: winter in Florida, travel to Europe. Then get an idea of how much it will cost to make sure you’re saving enough money.

Take advantage of retirement savings rules.
In your fifties you can add more money as “catch up” provisions. Right now a fifty-year-old can stash an additional $5,000 in a 401(k).

Sixties plus l Retire with peace of mind.
Gather information. Get your pension and Social Security (SS) numbers. Make an appointment with the SS office to understand when you’re eligible and what happens if you keep working or if you collect from other government agencies.

Evaluate disability insurance. Most policies only cover you until age sixty-two or sixty-five, so it may be time to drop that expense and put it toward retirement.

Figure out how you’re going to pay for health insurance. This is a retiree’s biggest expense. Are you covered through your company or government agency? Will you need to bridge a gap if you retire before Medicare kicks in?   

Budgeting basics. Retirement lasts longer than in your parents’ day. People are living longer, so typical retirement savings have to last thirty years. Living on a fixed income is a big difference from being able to spend freely. Take your retirement budget for a test drive for a few months before retiring to make sure you really can live on it. — Diane M. Sterrett