“Are any of you concerned that you may be experiencing signs of early-onset Alzheimer’s?” A social anthropologist recently asked this question of a group of us who were all aging Baby Boomer professionals. Almost every person in the room slowly raised a hand. She then told us we could all relax. The human brain was not designed to multi-task or retain the flood of information and data we experience daily. The sighs of relief were audible.

Information overload aside, some memory loss is normal as we age. Having some trouble remembering names or thinking of the right word to use in a sentence is a normal part of the aging process. Forgetting where you left something, not remembering why you came into a room, and taking longer to learn new things are also normal and not signs of more serious problems.

Continue Reading »

Last week my husband and I hired a painter to put a fresh coat of paint on our hundred year old home. True to form, my husband negotiated a good deal and got the contractor down $600. When he told me he saved this amount of money, he immediately started to brainstorm about how we could spend this “free money.” In my mind, our expenses went down $600. In his mind, we won the lottery and had $600 to spend. We laughed as we talked about our different perspectives and how mental accounting and behavioral finance theory was in play here.

Mental accounting is a concept in behavioral finance that explains how people tend to put money in separate mental buckets related to certain areas of life. This technique is often encouraged by financial advisors as it allows clients to save for retirement or for a big purchase and consider the money off limits. However, money is really just money and it has equal value. Your retirement money, your savings account and your daily checking account really are all in one big bucket when you look at it from a pure monetary standpoint. However, mental accounting which most of us do, allows us to see these separate buckets of cash as different and therefore, the rules we apply to these accounts vary as well.

The $600 in my husband’s mind was “free money” that could be spent elsewhere. However, it really was just an expense we did not incur. Rational financial law dictates that this amount should just not be spent. But when mental accounting and behavioral finance theory is applied an irrational human being like my husband feels wealthier and ready to spend this “savings.”

How do you treat the money you save when you negotiate a deal? Do you consider it money found and get excited about how to spend it? While this makes life exciting, it does not always make rational financial sense.

Kathleen Burns Kingsbury is the author of “How To Give Financial Advice To Women: Attracting and Retaining High-Net-Worth Female Clients” published by McGraw-Hill, 2012. She is the founder of KBK Wealth Connection, and a wealth psychology expert and behavioral change specialist. She teaches financial services professionals how to connect, communicate, and collaborate more effectively with their clients to increase client retention and improve profitability. Her next book:  “How to Give Financial Advice to Couples” will be published in 2013.

Your sweetie has a financial history: school loans, credit card debt, gifts from parents and career choices and plans. You handled money separately until now — what next?

We asked three financial planners what goes into the choice of merging finances or staying independent. Here’s the key takeaway: Try “hers, his, and ours,” with most of your money in the joint pool.

Read entire article here.

Congratulations! You’ve made the courageous decision to commit to financial sobriety. You’ve committed yourself to creating a spending plan, paying off your debt, creating an emergency fund, and fully funding your financial independence.

This probably means you’ve made a conscious choice to downsize your lifestyle. You may be driving a cheaper car, eating out less, shopping less, and traveling less. You may have moved to a smaller house or even a more affordable city. You may have gone back to school to improve your future income.

Whatever you’ve done, it took a lot of courage, focus, and hard work to put yourself on the road to financial sobriety. Here are some reminders to help you stay on that road:

Continue Reading »

From time to time I offer financial courses through Community Education of the Black Hills. Classes on the fundamentals of making good investments and how to do your own financial planning usually fill quickly. A class on “financial sobriety”—how to change your behaviors around money and begin making wiser money decisions—had one person sign up. Based on my 30 years of financial advising, this wasn’t a big surprise.

Research tells us 70% of US citizens have no savings and live month to month or are insolvent. Only 9% have saved over $100,000 and just 3% over $500,000. Why is this? The simple answer is Americans have a significant resistance to saving.

Mathematically, the solution to this is very simple. Continue Reading »

“Be frugal.” “Save for the future.” “Live on less than you make.”

That’s my usual financial advice, and it’s well worth repeating even though too many Americans aren’t following it. Sometimes, though, I find it necessary to work with clients to overcome a different problem—underspending.

Huh? How can underspending possibly be a problem? Isn’t it a virtue to save and accumulate?

Continue Reading »

Be frugal. Live on less than you make. Save for the future. It’s my message, and I’m sticking to it.

Just in case you’re getting tired of that message, though, let’s take a look at thrift from a slightly different perspective. For anyone who wants to throw cash around, here are some effective ways to waste your money:

Continue Reading »

June is traditionally filled with graduations and weddings, rituals that mark two of our most important life transitions. Whether you are a graduate walking across the stage or a newlywed walking down the aisle, you’re focusing on your future. It’s a perfect opportunity to think about what you need to do financially to provide for that future.

Here, adapted from a column I originally wrote a few years ago, is what I might call “Life Planning 101 for Beginning Adults.” It’s a summary of my best financial advice for graduates, newlyweds, and anyone else just starting out in their adult lives and careers. Here’s how anyone can manage money wisely to create a life with more security, flexibility, and opportunity.

Continue Reading »

“Something you keep on buying that just isn’t worth your hard-earned dollars.”

That’s Kristin Colella’s definition of a “money-waster” in her article published March 23 in the online magazine MainStreet.

Colella cited Rick’s recommendation: “Some of the best money a consumer can spend is for a subscription to Consumer Reports.”

Here’s a link to the entire article, How to Spot a Money Waster.

Have you ever seen a Super Bowl ad touting how much money you could save if you bought something second-hand? Of course not. There’s not a lot of encouragement in our culture to buy used stuff. Even the one exception, a used home, is described as “existing.”

Buying used just isn’t cool—that is, unless you’re a wealth builder. Many of them look upon buying used as more of a badge of honor than an embarrassment.

Certainly, there are many items that are best purchased new. Toothbrushes, toilet paper, and underwear come to mind. Yet there’s one thing that’s almost always better to buy used—a vehicle.

Let’s look at a few common myths around buying a new car.

Continue Reading »