How I Use Fear to Make Positive Financial Decisions

 

This article was originally published in GOBankingRates.

 

How I Use Fear to Make Positive Financial Decisions

 

We are not always aware of our feelings around money or how we react to money decisions. Our responses come from the messages we have internalized over the years, as well as our experiences growing up. They are ingrained in us.

For many of us, the biggest influence on our money decisions is fear. It’s the fear that we will not have enough of it.

 

The Positives of Fear

Fear is one of the most common mentalities toward money — and it isn’t necessarily all that bad. I have personally always made money decisions out of a desire to protect myself. In fact, my therapist has said to me that my idea of safety would be if I built a money nest and sat inside of it.

I’m not alone in this fear. Many of my female clients think the exact same way that I do. We love to hoard cash.

Those who fall into this fear category tend to be careful, cautious people who live within or below their means. For example, I like to save 50 percent of what I make. Every time someone hears this, they do a double-take: “What? Are you crazy?” But fear-minded folks are prepared for the unexpected.

The Downsides

While there are positives to this mindset, I can speak personally to the negatives of having a fear-driven relationship with money. Fearful people are very slow to make decisions and might miss opportunities. Case in point, my hesitation cost me in the cutthroat New York City real estate market. My biggest regret is that I never owned property in New York City, and I see now how my mindset played a part in that. You usually have to make a decision the same day, and I never could. I experience anxiety when faced with big commitments and refuse to be rushed on a big money decision. I would rather walk away.

Fear-minded folks often make personal sacrifices to maintain security, too. For instance, I gave up many vacations in my 20s because I could not part with the future value of that money. We overemphasize delayed gratification and often prepare for bad results that never materialize.

 

Fear as an Ally

All that being said, in my case, my instinct for financial self-preservation protected me greatly when I married a man who committed financial infidelity. Financial infidelity occurs when couples with combined finances lie to each other about money. For example, one partner may hide the fact that they are paying against significant debts in a separate account the other partner is unaware of. Another common example is when one partner makes large discretionary expenditures without discussing the matter with their partner.

In my case, it was all of the above. He hid income and assets, to the point of moving assets out of the country. He lied about tax returns, and then kept them under lock and key. He was an attorney and CPA and used his expertise to lie to me, telling me that he was legally required to be listed on all the real estate titles. I was the only one on the mortgage, but I took his lies as truth.

Our divorce exposed the full extent of his financial infidelity. It took me four years and cost me more than six figures to get out of that mess of a marriage. One month, my attorney bill was $30,000, and I had so much money flowing out that I literally could not make it fast enough. But when all my worst financial nightmares had come true, my fear mindset helped me be ready for them.

My fear had made me a saver. My extreme emergency fund — that I saved and invested in for years — rescued me. I can confidently say that being afraid of not having financial protection is what wound up helping me through four years of negative cash flow.

Knowing your mindset when it comes to money can expose both the strengths and drawbacks of your emotional ties to it. I can’t emphasize the importance of this enough. I recommend utilizing a resource such as findyourmoneymind.com, which can lead you on a journey toward a more complete understanding of your financial life. After all, when you know your feelings toward money, you might be able to start using those feelings to your advantage.

 

This article was originally published in GOBankingRates.

 

Get The Money Queens Book by CFP MBA Cary Carbonaro

31 Money-Saving Experts Share What They Splurge On

This article was originally published in GOBankingRates.

31 Money-Saving Experts Share What They Splurge On

 

In general, it’s better to save than to spend — but it’s okay to splurge once in a while.

After all, you work hard for your money, so you should be able to enjoy it. Even money-saving experts splurge from time to time on items and experiences that add a value to their lives that go beyond the monetary.

We asked 31 of our most frugal Smart Money Squad influencers to share the things they splurge on, and their answers ran the gamut from massages to scotch.

But they all had one thing in common: They splurge.

Despite all the money-saving advice and tips they take and dole out daily, even experts like to enjoy their money, and you should, too.

 

Traveling Abroad

“My splurge is traveling out of the country three times per year,” said Whitney Hansen, host of the podcast The Money Nerds. “While I don’t fly first class or stay in luxurious places, I do spend about $3,500 per year on my trips abroad.”

 

Therapy and Yoga

Shannah Compton Game, CFP and host of the Millennial Money podcast, has two splurges: “A couples therapy session every other month to make sure we stay connected, and a monthly unlimited yoga membership to relax away stress,” she said.

 

Outdoor Activity Gear

“I love to splurge on outdoor activity gear,” said Alexis Schroeder, founder of the blog FITnancials. “Living in Colorado offers plenty of outdoor fun, so I love splurging on bikes, hiking gear and trips exploring nature. I recently got back from an Alaskan cruise, and love splurging on nature experiences as well.”

 

Workout Clothes

“The one thing I know I indulge in is workout clothes,” said Miriam Ballesteros, a career development and personal finance blogger. “I wasn’t really aware until my boyfriend told me that all my activewear is actually from high-end brands. And the truth is that I love both the quality and the design of my gym clothes — which helps me stay motivated to be active.”

Kathryn Bradt of Dames in Debt also can’t resist high-end workout attire. “Athleta and Lululemon are my favorites,” she said.

 

Self-Care

“I splurge on monthly mani/pedis, massages and delicious gourmet coffees, smoothies and organic healthy meals,” said Brittney Castro, founder of the financial planning firm Financially Wise Women. “As a busy entrepreneur, self-care is very important, and I have no problem treating myself right when it comes to these splurges.”

 

Flight Upgrades

“When I’m flying long-haul — generally anything over six hours — and if I haven’t hacked my way into business class through the creative use of frequent flyer miles, I seriously consider splurging on a better seat,” said Nora Dunn, founder of The Professional Hobo.

“Cash upgrades to business class are usually too rich for my blood, but sometimes upgrades to premium economy are reasonable and worthwhile if it’s an overnight flight requiring that I get some sleep,” Dunn said. “If that’s still too much, I do whatever I can to reserve a seat in the emergency/bulkhead row, whether it’s paying the airline to reserve this higher-ticket seat with extra legroom, or talking my way into it at check-in, or even at the gate.”

 

Retirement Fun

“I’m nearing the third term of my (hopefully) long life. After years of conservative spending and investing, splurging just makes sense,” said Barbara Friedberg, author of “Personal Finance: An Encyclopedia of Modern Money Management.” “After all, it’s silly to live a life of constant financial monitoring, and even some deprivation, without enjoying the fruits of life. So, now that we’ve reached our financial goals — yes, to those just starting out, there is an end to all the scrimping and saving — we practice tactical splurging.

“My husband and I spend on things that are important to us. We take our daughter and her boyfriend on vacation with us. We travel internationally and in the U.S. — Thailand, Iceland, Slovenia, Florida, Wyoming and more. We’re lucky to pair travel with my husband’s international work. And we consume entertainment including live theater and music.”

 

Socks and Underwear

“I’m a big fan of values-based spending, so I cut back on expenses like cable TV and found a cheaper cell phone plan, but there is one place my spending has gone up in the last few months: my socks and underwear,” said Eric Rosenberg, writer, speaker, consultant and blogger at Personal Profitability.

“I used to buy the inexpensive undergarments at big box retail stores, but I finally gave in after enough people told me about a favorite brand that I bought a $16 pair,” Rosenberg said. “I’m never going back. And after getting a pair of luxury socks for a holiday gift, I’m converting both my sock and underwear drawers to higher-end products. My logic is that if I wear them all day every day, I should have the most comfortable pair.”

 

Private Airbnbs

“I’m frugal in all aspects of my life, but I like to splurge when it comes to travel,” said Sean Cooper, best-selling author of “Burn Your Mortgage.” “Instead of staying at hostels, I like to book my own private Airbnb place. I often work when I’m on the road, so this allows me to get work done in peace and quiet.”

 

Flatbed Seats on Planes

“My splurge is first-class tickets on Delta — and I will do anything to keep my diamond status on Delta, which means I get to fly first-class for free almost always domestically and get one round-trip global upgrade a year,” said Cary Carbonaro, CFP, MBA and personal finance expert.

 

 

“International first-class is crazy expensive, so I book way in advance, and I don’t go over a dollar limit of $3,500 a ticket,” Carbonaro said. “If I have to, I will use miles to upgrade or use miles for the ticket. For me, first class is all about the flatbed. My sleep is priceless.”

 

Ordering Groceries on Amazon Prime Now

“My splurge every week is simply ordering our groceries and other essentials on Amazon Prime Now,” said Robert Farrington, founder of The College Investor. “We have Amazon Prime and pay for it, but it’s totally worth it for not having to put two kids in the car, drive to the store, get a cart and pray there isn’t a breakdown, load the car back up and make it home. I can order everything I need on my phone, and have it on my doorstep within two hours — or whenever is convenient for me. It’s amazing and well worth the slight additional cost.”

 

Designer Shoes

J. Kelly Hoey, author, writer and speaker, said she can’t help but splurge on designer shoes.

“I’m a certified shoe-a-holic,” she said. “I will debate the value of a $20 T-shirt, but drop hundreds on shoes without blinking an eye. I contain my habit by waiting for the shoe sales at Bergdorf Goodman.”

 

Massages

“Every other week, I splurge on a massage,” said Lena Gott, a CPA and blogger at What Mommy Does. “I rarely miss an appointment. My desk job doesn’t lend itself to good posture, so my massage is when I reset myself and do something just for me that doesn’t involve working or taking care of kids.”

Jim Wang of Wallet Hacks said he splurges on massages about six times a year. “I’ve had a renewed focus on getting healthier, stronger and faster, and massages are helpful because they’re functional — getting rid of knots and whatnot — and great as a reward too,” he said. “It’s a splurge since you can live without a massage, but it helps reinforce good behavior so I can also live better, too.”

 

Fancy Dinners

“I love splurging on a nice, fancy dinner once or twice per year,” said Andrew Schrage, partner and editor-in-chief at MoneyCrashers.com. “I enjoy the experience of unique, memorable dishes in a pleasant atmosphere.”

Schrage added that your splurges should depend on your overall financial situation. “If you’re caught up on retirement savings, your emergency fund is well-stocked and you have something set aside for your kids’ college costs, then there’s no reason why you can’t splurge on a nice vacation, a nice pair of shoes or even flying first class,” he said. “Even if you’re not that well set up financially speaking, that doesn’t mean that rewards shouldn’t come your way. If you’re in the midst of serious credit card debt but have a thought-out plan written out along with mini-goals, there’s nothing wrong with indulging in some new fashionable clothing, a mani/pedi or a nice night out at a good restaurant to keep you motivated and excited. Reward yourself with little gifts along the way.”

 

Weekly Brunches

“My splurge is going out to eat,” said Hank Coleman, publisher of Money Q&A. “My wife and I pretend that we’re foodies and try to go out to brunch every weekend — to the tune of about $400 a month. But, we budget for this indulgence, and we knowingly sacrifice other things in the budget to enjoy splurging on eating out at restaurants.”

 

Snowboarding Trips

“I regularly splurge on snowboarding trips, including my Epic Pass for next season — which cost $900 — and gear,” said consultant Claire Tak. “I don’t need anything else, but last season I spent $700 on a new board and other things I ‘needed.’ I even bought a car recently so I could take trips to Tahoe whenever I felt like it.”

Tak also regularly splurges on $300 visits to the hair salon four times a year, music events and coffee.

 

Theater Tickets

“I splurge on theater tickets,” said Sophia Bera, founder of Gen Y Planning. “I try to see a Broadway show each year when I’m in New York City. Next month, I’m going to London to see ‘Hamilton’ on the West End to celebrate my five-year business anniversary since launching Gen Y Planning.”

 

Vacations and Experiences

“I don’t splurge on shoes and material things often, but rather on vacations and experiences,” said real estate agent and “Million Dollar Listing Miami” star Sam DeBianchi. “I am passionate about traveling, and I never want to regret not doing something, trying something or engaging in something. I can quickly get sick of a new dress or material good, but an experience is forever embedded in my brain and memories — and that’s worth every penny.”

DeBianchi has splurged on one-of-a-kind experiences, including paragliding through the mountains in Aspen, cage diving with great whites in South Africa, an African Safari, a helicopter ride through Milford Sound in New Zealand, a helicopter ride to a remote island in Australia in the middle of the Great Barrier Reef, and swimming with pigs, sharks, sea turtles and stingrays in Exumas.

“It’s pricey, but I gain so much from doing these things — knowledge, ideas, happiness and an amazing story — and I come back feeling regenerated, which helps me be that much more productive in my business endeavors,” she said.

Laurie Sepulveda of The Three Year Experiment also sees the value in splurging on travel experiences. “When my husband and I went to Singapore, we booked a night at the pricey Marina Bay Sands hotel — which cost $550 for one night,” she said. “It was completely extravagant and luxurious, but we’ll never forget it. We swam in their iconic infinity pool with a view of the entire city, drank overpriced drinks and gazed out over the botanical gardens from our balcony. It’s an experience we’ll never forget, and I’m so glad we splurged on it.”

 

Clean Eating

“Food is my biggest splurge,” said Bob Lotich of SeedTime. “Eating clean and healthy food not only makes me feel better in the short-term, but I also consider it a long-term investment in my health.”

 

Professional House Cleaning

“As someone who doesn’t love to clean, but knows the value of the dollar, my monthly splurge is definitely our go-to professional house cleaning service, Green Tree Cleaning,” said healthy home expert Lisa Beres. “Three lovely and very energetic ladies arrive, equipped with a nontoxic arsenal to clean our three-story home — and they don’t stop until every surface is sparkling. Knowing that my girls aren’t inhaling the dangerous fumes found in traditional cleaning products while keeping us, the planet and themselves healthy makes me happy. There’s almost nothing like the feeling of a super clean home, from floors and windows to stairs, toilets and tubs. This is one of my favorite ways to treat myself each month.”

 

Manicures and Salon Haircuts

“My splurge is regular manicures and salon haircuts,” said money coach Christine Luken, The Financial Lifeguard. “Most of my one-on-one coaching clients are high-income professionals and small business owners. It’s vitally important that I look the part of a successful money coach. I spend an average of $100 per month on my hair and nails, which I feel is a great investment in my professional image. I also receive plenty of compliments on both, so I know people are noticing.”

 

Scotch

“Over time I have amassed a pretty respectable Scotch collection,” said Scott Sherman, owner and blogger at I Dream of FIRE. “I have 12 expressions at the moment. The most expensive bottle is Johnnie Walker Blue Label, which was about $200.”

 

Designer Handbags

“I have a few splurges I love,” said Michelle Summerfield of The Classy Simple Life. “I travel every year to Hawaii and splurge on business- or first-class seats. I also love designer handbags and shoes.”

 

Toys

“My wife and I definitely splurge on buying ‘impulse items’ for our kids,” said Dave Domzalski, founder of Run the Money. “We’re suckers when our son wants another toy truck. We are so ‘those parents.’”

 

Fine Wine

“My husband and I splurge on our anniversary wine,” said Janine Rogan, CPA and financial educator. “We purchase more expensive bottles to cellar and open for our anniversary each year. Currently, we are cellaring up to our 10-year wedding anniversary. It’s a lovely way to splurge on something we both enjoy, and celebrate another year together.”

 

Bath & Body Works Candles

“I follow a budget so I can splurge on the things I really love, like Bath & Body Works candles,” said Lulu Gal of How I Save Money. “I can’t help it because they smell so great, and they are a wonderful way for me to relax. They tend to be on the pricey side, but I balance that out by only purchasing when they are on sale. I refuse to spend $24 on a three-wick candle, but when they are half off and there are coupons, I can snag one for $10. To me, $10 is worth it to have hours of great scent filling my house. Scent relaxes me, and those candles are worth the splurge.”

 

Organic Food and Wine

“My splurge is organic food and wine,” said Peti Morgan of The Leveraged Mama. “My family eats pretty frugally otherwise, but having good-quality organic wine and food is really important to us.”

 

Makeup

“For me, it’s makeup,” said financial coach Jessi Fearon of her regular splurge. “I buy bareMinerals because as a former cystic acne sufferer, it is the only makeup that doesn’t break out my face or cause an allergic reaction. I bought a drugstore knockoff while we were paying off debt, but the makeup never lasted even half the day. So as soon as our debt was paid off, I started splurging again on bareMinerals. It’s worth every penny.”

 

This article was originally published in GOBankingRates.

 

Get The Money Queens Book by CFP MBA Cary Carbonaro

Cary Carbonaro on GOBankingRates:The Money Lessons She Learned From Her Dad

This article was originally published in GOBankingRates.

The Money Lessons I Learned From My Dad

 

 

My dad loved playing football and golf, but he and I actually bonded over finance, not sports. A brilliant banker and a senior vice president at JP Morgan Chase, he made sure to teach me about money and personal finance at a young age.

In fact, he took me, his oldest daughter of three, to work with him before Take Your Daughter to Work Day became widespread. We went to foreclosure auctions and watched “Straight Talk on Money” with Ken and Daria Dolan. At lunch, we pored over 401k statements and budgets, and he showed me why it is so important to match employer contributions and increase the overall contribution each year.

 

 

My dad’s finance lessons were invaluable. He taught me to spend less than I make, to pay credit cards in full, to remember that my money in the future was worth more than my money today. But his lessons on credit and debt hadn’t yet hit home when I turned 18.

 

 

He said to me, “You can go to a state school, and I will pay 100 percent of your tuition, or you can go to a private school and take on debt in the form of student loans.”

When Dad explained the ins and outs of debt to me, I said, “Why would anyone ever take out debt?” I was so naïve then, but the choice was clear to me: I went with the state school.

 

 

My dad’s lessons rang in my head for the next four years, as I watched what happened when the student loan checks arrived on campus. Almost everyone cashed their loan checks and went on spending sprees. The bars, restaurants and department stores were packed with students spending what seemed to them like free money.

 

 

I was always unhappy on those days. I remember the bitterness of feeling “left out” like it was yesterday. But I remembered what my dad taught me, too.

 

 

Of course, we all know how this ends. The time to pay the piper came for everyone with loans. We know now the average debt on college loans is $37,172. The money those students spent on parties and new clothes dug them into holes of debt that only compounded over time.

 

 

I was fortunate enough to start my first job with zero debt, ready to save for retirement. But I was especially fortunate to have a strong financial education from my dad, a gift I appreciate more with each passing year.

 

This article was originally published in GOBankingRates.

 

Get The Money Queens Book by CFP MBA Cary Carbonaro

Cary Carbonaro Named on Investopedia Top 100 Financial Advisors

Cary Carbonaro, widely known Certified Financial Planner with an MBA in finance and motivational speaker, was named today on the Investopedia Top 100 Financial Advisors.

Investopedia, the premier online source of trusted financial information and services,  announced the Top 100 Financial Advisors, a ranking of influential financial advisors who have contributed significantly to conversations about financial literacy, investing strategies, life-stage planning and wealth management.

 

“While many publishers rank advisors based on their client base or assets under management, we wanted to celebrate advisors who have dedicated their time to educating investors,” Investopedia’s CEO, David Siegel, said in a statement.

 

The full list can be found on Investopedia Top 100 Financial Advisors.

A Stark Warning for FAs Who Can’t Connect With Widows and Divorcees

This article was originally published in Financial Advisor IQ.

 

A STARK WARNING FOR FAS WHO CAN’T CONNECT WITH WIDOWS AND DIVORCEES

What do women want from their financial advisors after the loss of a spouse?

 

In a new study Spectrem Group offers a straightforward response: They want a trustworthy guide who isn’t going to overload them with details. And while advisors agree that’s often the case, they also stress their need to educate clients on the fundamentals of investing and financial planning — even when it comes to hands-off and essentially reluctant clients.

 

“High-level education is key” to bridging the divide between a traumatized client’s unwillingness to know and the advisor’s need to have informed clients. And over time, more specific education is needed as to what’s going on in their accounts.”— Michael Black of MPB Wealth Management in Scottsdale, Ariz

 

There is a practical reason for this. Most recent widows and divorcees — who are “usually receiving funds with little or no experience” — feel “they don’t know enough to be given options to choose from, and would rather be told what to do,” says Black, who is a Certified Divorce Financial Analyst. “This is dangerous from the advisor’s perspective,” as in, for instance, cases where “we get blamed for bad markets” by inattentive clients.

 

How involved newly unmarried women want to be with their investments and financial plans

 

Even before it gets to the question of how involved newly unmarried women want to be with their investments and financial plans, it seems many simply want to get rid of their old advisors.

That women leave their advisors on the demise — through death or divorce — of their marriages at a head-spinning rate is one of the starkest truisms in wealth management. According to the marketing consultancy Iris, 80% of women leave their financial advisors after losing a spouse. If that data point isn’t sobering enough to wealth managers, Iris adds that at some point in their lives, 90% of women will be the financial shot-callers of their households.

In this sobering light, advisors focused on capturing next-generation assets should realize there’s a surviving spouse between them and their millennial pot of gold — and, statistically speaking, it’s a woman.

On a sudden change in their marital status, women skip out on FAs for many reasons. Often, though, it comes down to resentment over perceived favoritism. In a typical scenario described by FAs, a wife has for decades deferred to her husband on financial decisions and on interactions with their FA, especially around investing.

Advisors focused on capturing next-generation assets should realize there’s a surviving spouse between them and their millennial pot of gold — and, statistically speaking, it’s a woman.

When death is behind the marital rupture, a new widow is likely to view the advisor as her late spouse’s confidante rather than her own. She may even feel piqued at not having received much in the way of attention over many years from an advisor preoccupied by a more engaged spouse.

And those ill feelings tend to be exacerbated when a marriage ends in divorce — to the point where the “risk to advisors of potentially losing a client is far greater in divorce than widowhood,” says advisor and CDFA Lucinda Richey of Prosperity Planning in Kansas City, Mo. The reason? More so than in the wake of a spouse’s death, a newly divorced women may view an advisor as allied to an ex-spouse she’s angry with.

Whether they’re mainly grief-stricken or fuming, Sprectrem’s study of widows and divorcees worth at least $500,000 says the drain on these clients’ emotions means that most “do not enjoy the process of investing and do not feel the need to be involved in the day-to-day management of their accounts.”

Chris Chen of Insight Financial Strategists in Waltham, Mass., agrees recent divorce and widowhood are “emotionally overwhelming” experiences — but he thinks the hands-off element is sometimes temporary.

 

“What they want is to avoid anything that reminds them of the trauma that they just experienced,” says the CDFA. “They want to avoid also what they perceive as the real hard work of getting on top of the financial issues.” — Chris Chen

 

But these clients’ emotional scars, temporary or not, don’t let their advisors off the hook, says Sarah Carlson of Fulcrum Financial Group, a firm in Spokane, Wash., focused on “suddenly single” women. In her view, if a client isn’t absorbing what her advisor is saying, it’s up to the FA to find better terminology.

“This industry is overloaded with jargon and acronyms,” says Carlson. “It discourages people even when they aren’t traumatized.” As an antidote to this tendency, advisors dealing with recent widows and divorcees “need to do more about talking to these clients in terms they understand to help build their knowledge — especially as ‘robo advisors’ start to replace us around portfolio building and performance measurement.”

 

Cary Carbonaro

Meanwhile, Cary Carbonaro, a United Capital advisor with offices in Huntington, N.Y., and Clermont, Fla., thinks some of the disengagement of divorcees and widows is a function of their gender.

 

 

“Men are generally less trusting than women. Where men “want to know the details” of finances — especially when it comes to investments — women are more big picture — and more willing to put their trust in another”. — Cary Carbonaro

 

The “big picture” part of that means women may — and Carbonaro stresses there are always exceptions — have less specific financial knowledge than men. But the “trust” part means they make better clients over time.

As for widows and divorcees preferring to delegate to advisors, Carbonaro wholeheartedly agrees that’s the case. But, she adds, in seeking out an advisor like her, who specializes in such clients, they’re coming into the relationship predisposed to trust the new advisor to make their lives less complicated.

“That’s the reason they hire me,” says Carbonaro.

This article was originally published in Financial Advisor IQ.

 

Get The Money Queens Book by CFP MBA Cary Carbonaro

CentSai: Cary Carbonaro On Teaching Kids Delayed Gratification

This article was originally published in CentSai.

 

Cary Carbonaro: Teaching Kids Delayed Gratification

A Childhood Money Lesson

 

Sam X Renick: What is the most important money habit you learned as a child? Briefly share the story of how you learned the habit and what impact it has had on you throughout your life.

Cary Carbonaro: I saw that my dad made the money and my mom stayed home. I wanted to be the one who made the money. I also saw the dynamic of fighting over money. The parent who had the money seemed to have more control over decisions.

I also learned the value of budgeting. I got an allowance and learned when to save, spend, and gift.

 

Being able to budget was an amazing skill. It’s lifelong, and everyone needs to know what’s coming in and going out.

 

Even kids need to learn the value of a dollar and sacrificing to save for what you want. For example, if I wanted a Barbie and my allowance was $5 a week, I would save $1 a week for 12 weeks to get that $12 Barbie. It is kind of like the marshmallow study done at Stanford in the ’60s. It is all about delayed gratification, which is a big lesson to learn early.

I’m an excellent budgeter. I have always spent below my means. I always say that if you spend less than you make, that is where financial freedom comes from. Most people think that a budget is . . . like a diet. But it’s not about not spending — it’s about spending less than you have. It is the most important lesson to learn and to teach children.

Credit cards were an invention for convenience, but unfortunately they get many people to overspend. It comes back to learning to delay gratification. If you can’t pay your credit card balances off in full when you get the bill, you can’t afford it. A person should either pay cash, not buy the item, or save up so they can pay their credit card balance off in full.

 

The Most Important Money Lesson to Teach Kids

 

Renick: If you could only teach a child one money habit, what would it be?

Carbonaro: That money doesn’t grow on trees. Kids need to know the value of a dollar. When my nephews ask me for an Xbox, I make them do math. I have found that it’s one strategy that helps them develop a better understanding of the value of money. Then I might ask them questions like, “How many hours would you have to work at minimum wage to buy it?” If minimum wage is $7.25 an hour and the Xbox costs $269, my nephews figure out they would have to work 37 hours to buy the Xbox.

 

A Final Thought: What If the Research Is Wrong?

 

Renick: Cambridge University research indicates, adult money habits are set by age seven? What if the research is wrong and adult money habits are formed earlier than age seven — perhaps around the age the “give mes” set in? What does this mean for families, schools, and the financial education industry?

Carbonaro: It’s like the marshmallow study at Stanford in the ’60s and ’70s. It’s all about teaching about delayed gratification. Also showing why waiting to spend will be worth more in the future (i.e. the time value of money). At that young age, it helps if you gamify these topics. Maybe there’s an app for that. I also believe children learn by watching positive and negative examples from adults in their lives. I was recently with my niece, and she told me that a person is “soooo” rich.

“How do you know?” I asked.

She said that they have a big house and expensive cars and clothes. I said that you don’t know that person has wealth. What if they borrow all their money and have high credit card and mortgage debt? I said you have to look under the hood and see their assets and liabilities. I explained that that’s what you own and what you owe. Some people who you might think are rich might actually have a negative net worth. I think I may have blown her mind!

 

This article was originally published in CentSai.

 

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Cary Carbonaro is listed in the Notable Women in Finance

Cary Carbonaro listed in Notable Women in Finance

 

The New Yorkers named to this inaugural list of Notable Women in Finance in New York City are pioneers and leaders in the world of finance. They are founders, managers and executives.

 

Crain’s Notable Women in Finance

 

In addition to their careers on Wall Street and beyond, many of these women are engaged in exceptional philanthropic activities, ranging from sitting on the board of major cultural institutions to working as mentors, championing diversity and boosting the careers of other women.

By highlighting these women, Crain’s is acknowledging a talented group whose members are defined by more than their gender. They are remarkable first and foremost for their achievements and commitment to excellence in the financial industry.

That’s especially noteworthy, given that not long ago, women weren’t even able to take out business loans—let alone run the institutions that provide them. In fact, this year marks the 30th anniversary of the passage of HR 5050, the Women’s Business Ownership Act, which ended discriminatory lending practices that favored male business owners, including laws that required women to have a male co-signer on business loans.

 

“In some cases, women couldn’t even buy a car, even if they were going to pay cash,” said Beth Goldberg, district director of the U.S. Small Business Administration.

 

Three decades later, women own about 30% of all the small businesses in the United States, contributing $1.7 trillion to the economy.

The lenders who once restricted the purse strings—whom women could only approach with a man, even if that man was their
18-year-old son—are now women themselves.

 

Meet the inaugural class of Notable Women in Finance

 

Notable Women in Finance - Cary CarbonaroProfessionals whose resumes boast outstanding achievements in the industry and substantial community involvement.

Our list begins with nine trailblazers who have achieved business success and paved the way for women in the industry—and continues with the full list of notable honorees whose stories are equally inspiring. As the year goes on, look for future installments in this series, which will recognize notable women in a variety of industries.

 

 

KBK Wealth Connection features The Money Queen

This article was originally published in KBK Wealth Connection

 

5 Books to Improve Your Financial Literacy

 

We are celebrating Financial Literacy Month at KBK Wealth Connection. April was officially declared Financial Literacy Month in 2003 by Congress and I want to share some of my favorite books that will help you improve your financial literacy.

 

 

1. Raising Financially Fit Kids

Author: Jolene Godfrey

Great book for parents who want to empower their children at various stages of their development.

 

2. On Your Own Two Feet: A Modern Girl’s Guide to Personal Finance

Author: Manisha Thakor and Sharon Kedar

A perfect fit for the twenty-something in your life who is transitioning from living at home to living in the “real world.”

 

3. Age Proof

Author: Jean Chatzy and Michael F. Roizen

Aging talks with our parents and our partners can be challenging. A great book to spur conversation and learn together.

 

4. The Money Queen’s Guide: For Women Who Want to Build Wealth and Banish Fear

Author: Cary Carbonaro

For the woman who wants to be more proactive about her finances but is uncertain how, Cary shows you how.

 

5. The Feel Rich Project

Author: Michael F. Kay

A wonderful blend of financial psychology and concrete know-how to help you feel more balanced in your relationship to money.

 

This article was originally published in KBK Wealth Connection

 

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MarketWatch: Should we divorce so my husband can get more Social Security?

This article was originally published in MarketWatch

 

Dear Moneyist,

My husband and I are soon to be retired. I have saved in a 401(k) and have pension benefits. He owned a small business for many years, but never created a nest egg for retirement. He is a vet. He may be entitled to more Social Security if he’s single. We thought about divorcing and coexisting to ensure we can make ends meet throughout retirement, but that means placing our modest home in my name only, right? – Kim

 

Dear Kim,

There is no marriage penalty or limit to benefits paid to a married couple.

And that’s a direct quote from the Social Security Administration website. “A working woman is not limited to one-half of her husband’s Social Security,” the site states. “(That rate applies to women who never worked outside the home.) So, for example, if you are due a Social Security benefit of $1,200 per month and your husband is due a Social Security benefit of $1,400 per month, you will be paid $2,600 per month in retirement benefits.”

There’s no point in getting divorced for monetary reasons, although I’ve heard of people staying together for the health of their finances (joint health insurance policies and lower housing costs). “Since you have a pension when you are married, the spouse gets it as well if you pick the joint life option,” says Cary Carbonaro, a certified financial planner and managing director at United Capital. “If you were not married, you would not get that option.”

What’s more, home ownership is excluded from your qualification for Social Security. “As for your husband’s veteran status, his time in military service can boost his lifetime earnings record as far as calculation of his Social Security benefit, which can result in a higher benefit, but it does not add directly to his monthly check,” says Kimberly Foss, certified financial planner and founder of Empyrion Wealth Management.

That 10-year marriage rule is good for people who actually want to divorce, if you remain unmarried post-divorce and you’re over 62 years of age. “Sometimes, divorced spouses can both claim full spousal benefit and allow their own benefit to grow until age 70,” Foss adds, “but the actual benefit amount varies by age and employment status, so you should do some careful calculation using both married and divorced scenarios and your current data to make sure of which way makes the most financial sense.”

Talking to a financial adviser instead of a divorce lawyer would be far less costly.

 

This article was originally published in MarketWatch

 

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Investment News: Cary Carbonaro’s experience in the land down under

This article was originally published in Investment News

 

Australia’s money culture diverges from the U.S.’s given its higher standard of living and stronger retirement saving system.

 

Earlier this year, I spoke in Australia at Real Women Global, a women’s empowerment organization, about my experience as a woman in the financial services industry.

During my travels, I met fellow certified financial planner professionals from many major regions in Australia. Although we share many similarities, I discovered real cultural distinctions in how Australians save and invest, and how women find their way in the world of finance.

FINANCIAL PLANNING DIFFERENCES

 

Much like their American counterparts, Australian advisers focus on goal-setting and retirement. In Brisbane, I found women who echo the financial life management ethos increasingly adopted by forward-looking advisers in the U.S. Called “goals coaches,” they focus on making clients feel safe and comfortable with engaging in financial planning.

These “soft skills” prove to be increasingly relevant in our industry. As FinTech advances automate more asset management activity, it is incumbent on advisers to show their value by helping clients with big-picture goals and problems. I would love to see more Australian-style goals coaches here in the U.S.

The CFP certification is a mark of distinction in Australia as it is in America (CFPs are recognized in 26 countries across the globe, according to the Financial Planning Association of Australia). There are about 5,500 CFP professionals in Australia’s population of 23 million, proportional to the approximately 79,000 or so CFP professionals who serve the 319 million people in the U.S., according to the CFP Board.

Our money cultures diverge in Australia’s higher relative standard of living and superannuation, a retirement vehicle with stronger governmental support. Every employer must contribute a minimum of 9.5% of an employee’s wages for retirement. An average Australian can expect about 20 years of retirement based on employer contributions to their superannuation. A large amount of Australian’s net worth is in their homes, while their health insurance costs are generally lower.

  • Most financial planners in Australia make a significant portion of their revenue on mortgages. Their interest rates on CD term deposits are extremely high at about 2%-3%, compared to U.S. CDs, which earn less than 1%.

 

  • Australians have a high standard of living — in 2016, annual earnings were approximately $78,832 a year in U.S. dollars. If overtime and bonuses are included, it’s $81,947 per year, according to the Australian Bureau of Statistics.

 

  • • Their minimum wage is one of the highest, at $18.29 an hour in Australian dollars, according to the Australian government’s Fair Work Commission, which comes to around $14.30 in U.S. dollars.

 

  • Advisers counsel clients in debt, which means they can work with anyone. They work a lot on cash flow because most people have money in their superannuation and in their home.

 

  • Australians spend much less for insurance than we do — approximately $300 a month for a family plan. Most hospital visits cost more out of pocket. A two-day hospital stay and operation generally costs $20,000.

 

  • Long-term-care insurance does not exist. In my conversations with advisers, they could not believe we even had that as an option in the States. They shared stories of many people having to sell the family house and deplete their assets to pay for nursing home care for an older member of the family.

 

  • Australian advisers have to have their clients re-sign an agreement to work with them each and every year.

 

SUPERANNUATION VERSUS 401(K)S

 

As I am accustomed to dealing with American 401(k)s, the more robust contributions to Australian superannuations surprised me. Employees can make voluntary contributions (though the Australian Uber drivers I met did not), but employers are generally obliged to put away 9.5% for every employee. This figure is expected to go up to 12% in 2019.

Australia does offer an old-age pension, comparable to the U.S.’s Social Security, if you have less than $400,000 in your superannuation.

Australia wants every resident to have a “comfortable” retirement, which equates to approximately $66,000 a year. Workers are paid so much that in the middle of the 2017 Australian Open finals, as Roger Federer played against Rafael Nadal, they shut down the concession stands. I could not believe my eyes. I was told they were done for the day, and that it was cheaper to shut down than continue to pay the workers.

 

FAST-RISING REAL ESTATE

 

Australia’s housing market is heating up, like the U.S.’s. There’s been a recent surge in Australian house prices, thanks in part to an increasing number of foreign homebuyers, who accounted for more than 20% of property purchases each year, according to the Sydney Morning Herald.

All real estate transactions in Australia are done by auction, rather than a regular sale. While the recent influx in real estate is noticeable, the debt ratio is very high. The average price of a home is $600,000, so most have to be leveraged. Prospective homeowners borrow four times their salary for a home, according to Canstar, Australia’s biggest financial comparison site.

Housing prices in Australia’s two biggest capital cities, Sydney and Melbourne, are between 25% and 30% overvalued, according to ABC News Online. The 2008 global financial crash only temporarily halted the climb of Australian housing costs, compared to some markets in the U.S., like Florida and Nevada, where prices dropped as much as 40%.

 

WOMEN FACE TOUGH CHOICES

 

At Real Women Global, I was asked whether I have children. When I told them about my grown stepson, most of the attendees said there was no way I could have had my career and had children. In Australia, they said, women have to make a choice because they can’t afford nannies, a luxury reserved for the wealthy. In Australia, it is either high-powered careers or kids.

Australian women, like those in the U.S., lack easy access to highly credentialed female advisers. I was curious to learn how many women were CFPs, but couldn’t get statistics. But there are estimates that 20% of Australian CFPs are women. About 23% of U.S. CFPs are women, and that percentage has gone unchanged for the last decade, according to The Wall Street Journal.

Australians do not generally practice a “Take Your Daughter to Work Day,” nor do they have a variety of strong female voices in personal finance. The women I met reacted with surprise when I told them to take ownership of their own financial future. While they told me they loved credit cards, most of the women I spoke with didn’t have them.

 

MORE UNITES US THAN DIVIDES US

 

While Australian investors enjoy real advantages and face distinct challenges compared to their U.S. counterparts, their motivations are universal. They want to be free from debt and money worries. They want to give back to the world around them and live better lives. They want to make sure their families are OK.

I believe that we should never pass up an opportunity to see financial planning through the lens of foreign cultures. We can celebrate and learn from our differences and build bridges through our similarities.

 

This article was originally published in Investment News

 

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