Financial Frontlines®

Want some evidence that the federal budget crunch is hitting home? Wait by your mailbox for your annual Social Security Annual Earnings Statement. You’ll be waiting quite awhile.

In an unpublicized move, the Social Security Administration (SSA)  has suspended delivery of the paper statement most wage earners in this country received about three months before their birthday each year. The Statement contained valuable information regarding covered earnings over your lifetime, your anticipated benefits amount at full retirement age and the data needed to explore other scenarios such as the expected reduced benefits available at the early retirement age of 62, the enhanced benefits amount available to those interested in waiting until age 70 to maximize their benefits, and the ability to extrapolate other scenarios in between. This information is no longer readily available.

A search of the Social Security Administration web site reveals only the following statement: In light of the current budget situation, we have suspended issuing Social Security Statements. You may be able to estimate your retirement benefit using our online Retirement Estimator.

I used the SSA’s Retirement Estimator. It does not provide the level of detail that the paper statement did. For one thing, there is no table of covered earnings over a lifetime. For another, you must enter your covered wages for the previous year. If you don’t know, the estimator returns nothing of value.

It’s not known why the SSA has kept a low profile about this issue, or whether it  will resume mailing statements to at least those approaching retirement age if the budget picture brightens. However, it’s safe to say that for now, a valuable piece of retirement information is largely unavailable to those interested in planning ahead. With more Americans facing a dimmer retirement picture than they may have hoped and potentially relying even more heavily on their Social Security benefits, this lack of credible information will hurt.

Contemplating your own mortality is an extremely unpleasant exercise.  This explains why otherwise responsible people die without adequate life insurance, without a proper will, and without adequate preparations for one of the few certainties in life.

I addressed this last year in What is Your Legacy?  Cindy, a recently widowed reader, left a comment that was more articulate and moving than anything I wrote.   Reading how she faced so many difficult decisions in the two days following her husband’s death touched me deeply.  A little advance planning would have spared the family from many unnecessary burdens.

Time slips away almost imperceptibly yet many of us act as if we had an endless supply consistently postponing important jobs “until tomorrow.”  But suppose you discovered that you only had one month left to live?  What would you do now to prepare your family?  What decisions and arrangements could help them cope with your passing?  What would you want to say to them before it was too late?

Cindy concluded by charging us to “be responsible!”  One way to meet that responsibility is by acting as if we truly had only one month left to live and taking care of these important matters now – while we still can. 

[note:  See MOAA’s Books and Guides for information and ideas about estate planning and other important subjects  http://www.moaa.org/pubs/pubs_infoex/default.htm ].  Access to this may require Log-in to the MOAA web site.  Call our Member Service Center at (800) 234-6622 for web access issues.

Lately I’ve been reading quite a bit about the new laws that apply to credit cards. Some articles are about how the credit cards companies still have loopholes to get us in other ways. Do these “reforms” really matter to most folks and is anyone really surprised by the fact that the credit card companies will find other ways to make money?

None of the legal reforms matter if you control your debt affairs properly. That’s the bottom line. You’re not at the mercy of the credit card companies and Uncle Sam is not your salvation. You have the control over your finances, always have and hopefully always will. Take back your power to control your destiny! These reforms mean more to those who use credit unwisely and the unwise will still get burned in the long run; reforms or no reforms. Laws can never compensate for questionable financial behavior.

Are you in debt in a bad way? I’m talking about where your debt never goes away and where debt is how you get by month to month because there is not enough money coming in to cover your life. There is a solution but it’s not easy and it takes supreme discipline. You’ve got to collect the financial data of your life and apply a structure to break debt’s hold on you. It’s hard because you want a higher life style than you can afford. You have to get a grip on the fact you can’t keep up with the Jones and won’t get everything you want. But you’ll get what you need—and you’ll be happy with that. The game plan…

First. Collect the data that indicates all the dollar outflows for your month. Group the outflows into categories like, rent, mortgage, car payments, credit card payments, food, clothes, cable TV, entertainment, on and on. Now put them in order of most important to least important. Now the hard part; discontinue those expenses that are the least important until you have more money coming in than goes out. Say good bye to all those luxuries. If it’s more than you can afford, it’s a luxury. In a worst case scenario, you may have to come to grips with the fact that your abode is more than you can afford requiring you to downsize.

Next. Rank order all the debts from the one with the highest interest rate to the one with the lowest interest rate. Pay the minimum payment on all the debts except the one with the highest interest rate. Pay the minimum plus add an amount to it that you can pay every month until the debt is eliminated. For example, if the minimum payment is $30, add another $50 to it and make the $80 payment religiously every month until the top debt is eliminated. When it’s gone, add the $80 to the minimum payment of the next debt’s minimum payment. For example, the second debt’s minimum payment is $25 and you add the $80 from the eliminated first debt for a $105 monthly payment. Continue this “snowball” process until your debts are eliminated. The key here is paying more than the minimum payment. Only paying the minimum each month ensures you will never get out of debt.

Finally. With the money you were using to pay down debt, keep the money out of your pocket by setting up a direct deposit plan from your pay check to a savings account. By this time, you are used to not having the money as it was paying the debt. Stay accustomed to the money staying out of pocket by having it deducted from your pay check.

Your financial health is dependent on you living below your means. If you don’t like your standard of living, fix it by doing things necessary to raise your standard of living. Change jobs, go to school, get training, seek out special expertise or new responsibilities on the job, get certified, do anything but use credit. Using credit does not raise your standard of living; it puts you in a hole and gives you a false sense of accomplishment. Credit is faking it and only hurts you. Take back the power.

There is a credit card scam going around where an email indicates that the writer is with the VA prescription drug group. This scam is phishing for credit card numbers. There is no such VA effort taking place. The VA hopes to get a press release out about this scam this afternoon.

As I’ve alluded to in the past, I am a member of the National Association of Personal Financial Advisors (NAPFA)–not affiliated with MOAA.  With that said, I think the upcoming free webinars offered by the organization may be worth your time.  These will be web-based education programs touching on topics ranging from basic money issues to complex estate and investment topics.  For more information, read on…

NAPFA Launches Consumer Education Series to Help Americans Better Understand Personal Financial Issues

Arlington Heights, IL (July 8, 2009) – The National Association of Personal Financial Advisors (NAPFA), the country’s leading professional association of Fee-Only financial advisors, has been a vocal advocate for consumer protection in the financial industry.  Now NAPFA is gearing up to further educate people on a variety of topics in an effort to help Americans become educated consumers of financial planning advice and products.

The Consumer Webinar Series is a year-long initiative beginning August 7, 2009 that will provide an opportunity for anyone in the country to learn about a wide range of financial issues from NAPFA-Registered Financial Advisors.  Each month a new session will be conducted live online. Consumers can attend the live session after registering for free, or listen to an audio file after the program.  The instructors NAPFA has recruited for the various sessions are among the industry’s leaders in truly comprehensive financial planning and includes members of NAPFA’s National Board of Directors, past NAPFA national chairs, educators, and authors.

“Each session is intentionally designed to help attendees better understand a specific issue and why it is of particular importance to them,” said NAPFA National Chair Diahann W. Lassus, CFP®, CPA/PFS.  “We want attendees to take something away from the sessions that helps them tackle these issues at home.  As an industry we have done a poor job of helping consumers increase their financial knowledge.  This program, along with the successes of the Your Money Bus Tour, is NAPFA’s way of doing its part.”

The series will include 12, one-hour sessions delivered via the internet.  The individual sessions will be conducted from 1 to 2 pm Eastern time and will include:

August 7, 2009 –         Money 101: Knowing the Basics

September 4, 2009 –    Kids & Money

October 2, 2009 –        What is Financial Planning?

November 6, 2009 –    Protecting What You Have

December 4, 2009 –    Investments: The Basics

January 8, 2010 –        Investments: Advanced Concepts

February 5, 2010 –      Managing Your 401(k)

March 5, 2010 –          Leaving a Legacy

April 2, 2010 -             Women and Money

May 6, 2010 -              Financial Planning and Small Business Owners

June 4, 2010 -             Your Retirement

July 1, 2010 –              Financial Windfalls

Registration for the 2009 sessions is open now.  Learn more about the Consumer Webinar Series by visiting .http://www.napfa.org/consumer/ConsumerWebinarSeries.asp

In addition to registering for the sessions, consumers can learn more about the topics and the NAPFA-Registered Financial Advisors who will be instructing the sessions.

“We hope people will take advantage of this opportunity to better themselves and their families.  Only through education will consumers be better capable of addressing their own financial situations,” added Lassus.