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Financial planning is much more than just buying life insurance, or an annuity and calling it a day. Many people have a false perception of what financial planning really entails accompanied by a false sense of fear. Financial planning is not just a singular action, the concept is a process to follow, much like a diet plan. If you wanted to lose weight, or live a more active lifestyle, would you just start by making random purchases of products you think can help? Most likely, you would not. One of the best examples I can think of to help explain the reality of financial planning is a weight management program, such as Weight Watchers or Jenny Craig. If you have ever been a part of these programs, then you know that they are more involved but generally lead to great results. When you join a program like these, you simply do not just try to eat better, workout more, and hope for the best. When you are creating a financial plan, you follow a similar format to that of a weight management program, acknowledging that both plans are to make your life better from now on so you can live longer and enjoy life!   Financial Planning Weight Management Step 1: Find your starting point Where do you currently stand financially? What assets and investments do you have? What are your measurements: weight, diet habits, exercise frequency, etc. TO CONTINUE READING & FOR STEPS 2-7, CLICK HERE

How does your mind react to those words? What emotions are sparked by those words? Do you immediately sigh and say, “whew I am not gonna panic because my ESF (Emergency Spending Fund) will take care of me.” Or, do you feel like so many people we heard from during the recent Gov’t Shutdown – “oh, no … I live paycheck to paycheck… this is an emergency spending problem.”   Like all unintended consequences, the government shutdown has highlighted a guiding principle here at Financial Sisterhood. We repeatedly emphasize the theory of having money in reserve … call it an emergency fund, call it rainy day money, call it contingency funds, or any one of other terms … you MUST have a stash of cash that has no other purpose other than to fix entirely unexpected, unforeseen, serious, threats to your financial structure.   The 2019 shutdown has shined a light on issues of personal financial security, national security and fiscal health and preparedness. In the 2018-2019 Government shutdown, employees were not being paid for the duration of the shutdown, with far too many employees having a hard time making ends meet. Does that inconvenient word “unprepared” come to mind?   This circumstance just highlights a problem that thousands of other non-governmental, private sector employees have every month with any number of unexpected issues that challenge their financial foundation. We should all use this revealing example to gain greater financial literacy and fix our own future emergency days. Ladies, let’s not be naïve … it is when, not if!   This is a lesson to learn from and to secure your own financial future.  It’s not just in the USA either … countless international examples show this necessity of action for women around the world.   Women are, arguably, the glue that holds families together. To keep your own family strong it is imperative that you have an emergency spending plan. Having exposure to such a risk without a thoughtful and disciplined solution is irresponsible in the adult world; it leaves you vulnerable, manipulated and open to poor or desperate choices. Often from those poor or desperate choices come outcomes that truly have even more devastating consequences. Think of an example of those consequences being things like a lower credit rating, higher future interest rates on borrowing occasions, lost personal and business opportunities that could make a career or personal life.   Rarely can one define an emergency in advance, and often things don’t really seem like an emergency until … suddenly … there is a problem.  Try as we all might, it is fantasy and not reasonable to assume that we can consistently live a life that is never interrupted and always goes as we wish.  Or, worse yet, that someone else is going to bail us out of our problem.   But let us all take heart and see the silver lining in an ugly situation … we can increase our financial learning and we can define an ESF (Emergency Spending Fund) for our own use.   How do we start? Using the government shutdown as an example would be that those employees who receive their back-pay apply a portion to strengthening, or as it sounds many should start, an emergency fund.   What makes an emergency spending fund? Most times an ESF (Emergency Spending Fund) is considered to be readily available money to cover 3 months to a 1-year timeframe of necessary expenses for a household. Certainly at a minimum it would mean having enough funds to carry a 14 day or 30-day paycheck, unlike what has been demonstrated in the government shutdown.   ** Woman-to-woman TIP: Have tires, food, gas, hospital bills, water heaters, refrigerators, roofs, gone down in price in the last 3, 5 or 10 years? Certainly not. Be sure to have your ESF keep pace with inflation and your spending plan; which means once in a while you will have to increase your contribution to your ESF (Emergency Spending Fund) and not just sit without attention.   And, please, don’t get enamored with trying to figure out if your money sitting in a cash account is not earning enough interest, or isn’t getting you “points” etc.  Put it aside for its’ intended purpose … be disciplined and only use it for emergency; the slight trade-off in interest will be returned many fold when you actually need, and can immediately, access your ESF. How much should you have in your ESF? Use our free worksheet to find out Free ESF Worksheet

It’s all fun and games until you can’t even keep up with yourself let alone, work, family, friends, school, and now you’re being asked to stay organized on top of it!   We want to share some tips we thought were extremely helpful in getting a system in place that you can actually benefit from.   Keeping a central spot for all organization related materials is key. And having a plan for the influx of incoming documents is so important. Use this article to help plan out what your ongoing plan will be to keep you on top of everything like the super-human you are.

We learned the method of organizing based on categories of length of time we will need certain documents. Now, what are those documents that go into each category? How do we know to keep something for 1 year versus 7 years?   Why do I have to keep this? You may ask yourself, why would I have to keep something for 7 years? Or longer? This article not only explains what to keep and for how long but also explains ‘The Why’ of keeping some documents for an extended period of time. Yes, 7 years is a long time, but its necessary for some items in this list! I printed this list and paper clipped it to my accordion file to remind myself. This is one of those things that in time, will come naturally to you. You will know when a certain document comes across your desk that you will need to file it away for long term, or if you can shred it relatively quickly. Practice makes perfect!   Personal Tip: The psychological principle of the Familiarity Effect states that humans will become more familiar with and have a preference towards something due to exposure to it. If you can increase your exposure to staying organized and the process, you will have a better familiarity with it and can generate a preference to staying organized. (Bonus tip: this works with dating and relationships too – if you want someone to like you…make sure you’re around a lot for them to be familiar with you! We’re not saying be creepy but you get the idea!)

Literally Misplacing Money When we were younger, our parents used to do Easter egg hunts with us on Easter morning with plastic eggs. Green eggs were filled with money (ranging from $1-$5- don’t worry no 100s in our eggs) and the other colors were filled with candy. On one particular year, my parents decided to take the fun outdoors to the backyard. They hid 15 green eggs and they were tasked with remembering where they hid each one. Long story short… we found egg #15 four years later by accident in the yard! How it was not taken by the hundreds of animals that may have come in contact with it is beyond me. Anyway, the point of the story is that a lot of times we think we have a good grasp of where we put things. Even if we just put it there 20 minutes ago, as in the case with the hidden eggs. Many of us think the same with our important financial documents, possessions, and heirlooms. We have all put something in a ‘safe spot’ only to pull our hair out trying to remember where we put it!   Is a Safety Deposit Box Right For Me? A safety deposit box has been a popular method to keep important items in a safe place. However, there are some questions that arise such as: What exactly is it? What do I put in it? Why do I need it? We liked this post because it was short and to the point; Telling us exactly what it was, what we should put in it and what we should not put in as well. Extra! Quick Tips: We loved this post about 15 things should know about safety deposit boxes. Sometimes information like this is not generally known and we love when others share for the greater good of the community!  

Tuesday: Where Should Documents Be Kept In that little nook on the counter? The glove compartment in the car, on the desk, with the stack of magazines? In your purse? In the diaper bag? So many places it could be, but only the one bill that you need to pay. New Year’s resolution – get more organized? Getting organized is much harder than keeping up with the organization system that you already have in place. So where do you keep all the important documents so that you can maintain an organized life and be able to find what you are looking for?   I Know What Records to Keep, But Where Do I Keep Them? We love the idea in this article to sort your organization system by how long you will need the documents. It makes total sense to store the documents you will need for a year in a different spot than you would for documents that you are planning on keeping for the long haul. Making it easier to access the records you need sooner and getting everything you don’t need right now out of the way!     Out of Sight Out of Mind Personal Tip: I found that when trying to stay organized, if I kept my immediate filing system out where I was more apt to see it on a day to day basis, I was more likely to keep up with filing than if I tucked it away somewhere.

Many women have so many other things going on life that when a decision comes across them and if it takes more than 30 seconds, they might as well just scrap it. Because in those 30 seconds, the grilled cheese has started to burn, the dog walked in with dirty paws all over your white tile, your daughter bumped her head on the table and is crying now, and your husband is asking you if you remember where he put his sunglasses… last thing you have time for right now is whether to keep that piece of mail or toss it. Trying to stay organized when you only have 5 seconds to really allocate towards organization is a difficult task. We understand where you’re coming from. There are two types of people in this world – those that keep everything, and those that toss everything. We’ve taken it upon ourselves to help shed some clarity on exactly what files you should be creating and what documents to keep in order to be a Minimalist Organized Woman – it’s all the rage these days.  A New Mantra to Live By This article lays out a simple rule of thumb to think about when making a decision like whether to keep or throw, when you only have 5 seconds to make it. “What’s the worst thing that can happen if I throw it out? Can I get another copy?” We love this!  This one little thought makes the process so much easier. A credit card statement lands on the counter; you have online banking and can access that statement anytime you want; TOSS IT! So for some of us, we’ll use this mantra to keep a relatively paper-free organization strategy. But what if we can’t get another copy or an electronic version? How do we know what is important to keep in those instances? Paper Documents You Should Keep When in doubt, if the item in question falls under one of these categories, file it away for safekeeping: Tax Returns Tax- related documents Retirement Plan Statements IRA Contribution confirmations Brokerage Statements Bank Records Bills Pay stubs Credit Card statements Receipts Home improvement costs/documentation House records Legally binding documents   Security Tip: If you receive pre-approval credit card applications, some of these have partial information about you already pre-filled in such as name and address. Shred these pre-approval applications to limit your risk of having your identity stolen. A credit card application with partial information already filled in makes it much easier for a thief to open a credit card in your name. Plus – you’ve already been pre-approved according to the company – one less step the thief needs to take to get your money! Being able to quickly decide if something should be kept or can be shredded can help keep a clean and organized home – especially if you will need to search for something specific one day. Not to mention we don’t have time for lengthy decisions! We’ve got a lot of things on our mind!  

  (These terms are intended to educate, not to provide tax advice or legal advice. We want you to seek tax assistance from a professional as each person’s situation is unique)   As tax season is once again upon us, here are a few key tax terms to help you through yet another scramble of a process that was never taught to us!   AGI This stands for Adjusted Gross Income, which is the total of all of the income you receive over the course of the year. This total includes everything from wages, interest, capital gains, dividends, etc. The AGI calculation also subtracts items such as business expenses, moving costs, contributions to IRAs, etc. to establish the adjusted amount. [ as opposed to the Gross Income] Imagine when you go to a restaurant and they give you a check with the food expenses, taxes, and tip already included into one large number – it’s the absolute total of all individual pieces combined.   Taxable Income An individual’s taxable income is the total income minus all of the allowable deductions, adjustments, and exemptions. This is the amount that one will be required to pay taxes on.  [Note: be aware of filing options and requirements – i.e. “married individuals filing joint returns, heads of households, married filing separate” etc.]   Exemption An exemption is the amount that the IRS allows you to subtract from your income to reflect the people who count on your income in their lives. The IRS allows you to claim exemptions on yourself, your spouse, and any dependents. The total of all the exemptions you take will be subtracted from your AGI. This is like a $10 off purchase of $50, $20 off purchase of $75, or $30 off purchase of $100 coupons. The more exemptions that you are allowed to claim (like the more you purchase), the more you get to exclude from your AGI.   Deduction Expenses that the IRS allows you to subtract from your AGI so that you can determine your taxable income. For example, for an individual who has an income of $40,000 and $6,000 in deductions, the taxable income will be $34,000. There are two types of deductions as explained below.   Standard Deductions This deduction is a fixed dollar amount for the year that all taxpayers can subtract from their income. This fixed amount is determined by the taxpayer’s filing status and will change each year due to adjustments in inflation,formula and regulation. *Note: The Tax Cuts and Jobs Act passed in December of 2017 results in increases to the Standard Deduction for the 2018 tax year and beyond. An individual filing their 2018 tax return now has a standard deduction of $12,000, an increase from $6,000 in the past, while joint filers’ deduction raises to $24,000.   Itemized Deductions These deductions can include expenses incurred from Medical costs, other taxes (like state, local, or property), mortgage interest, charitable contributions, unreimbursed employee expenses, etc.   Tax Credits A tax credit is an amount of money that a taxpayer can subtract from the taxes they owe. This amount is different from exemptions or deductions as those factors lower the income for which you can be taxed. A tax credit is used to reduce the amount of tax that you actually owe. You can think about a tax credit like a store coupon, it lowers your total cost that you have to pay. How do you get a tax credit? The government authorizes a tax credit to promote a specific behavior- such as replacing old appliances with more energy efficient ones.   Progressive Taxation The U.S utilizes this system of taxation in which as income levels rise, higher tax rates are applied to the taxpayer. The United States uses tax “brackets” to implement this system. The lowest bracket starts at 10% and the highest bracket can reach 39.6%.   The system works like a champagne tower! Each tax brackets contains a range of income. Think of your income as represented by bottles of champagne- one bottle is worth $10,000 of your income. Once your income fills up one of the champagne glasses, it spills over into the next glass. This next glass represents a different, higher tax bracket. Many people (including myself for the longest time) believe that if you are in the 25% tax bracket, you pay 25% of all your income. However, you are only charged the specific tax rate for whatever the amount is in the glass. When your income (champagne bottle is empty) is depleted, you pay the tax rate on the amount of income in each bucket, respectively.   Voluntary Compliance The United States tax system is based on the philosophy that the U.S. taxpayers voluntarily report their income and taxes honestly and comply with all tax laws and regulations.   Withholding Another name for this term is called “pay-as-you-earn”. This process allows for taxes to be paid to the IRS as you earn your money over the course of the year. When taxes are withheld, they can be taken out of an individual’s pay before they receive their paycheck. This money will be put into an IRS account and you will be credited [at the IRS] with the total amount when you file your taxes.