Category Archives: Personal Finance

Introducing the “Pink Tax”…and why it is worth being aware of.

Have you ever heard of the Pink Tax? This is not an actual tax levied by the state or federal government, but rather refers to what has been described as “ a discriminatory pricing practice” that lends itself to charging women more for “substantially similar” products and services. That part is real. 

If you have daughters, you’ve probably uttered the words, “geez, girls are expensive”, at least once. 

Health and beauty care products, kids’ toys, clothing, dry cleaning and car repair services are found to be the biggest offenders of the pink tax. 

Not for nothing, but in my house, regardless of gender, we don’t know what is legit for car repairs. But I suppose, “generally speaking”, men have (or are perceived to have) more general car knowledge and may be less likely to be quoted an unreasonable price. 

Toy pricing came as a surprise to me. One example cited in the piece I read was a blue bike helmet costing less than the same helmet in pink. Same manufacturer, same product, different color. Maybe pink decals cost more? 

Probably not. 

The State of New York actually passed a “Pink Tax Ban” in 2020, prohibiting this practice and requiring certain service providers to present price lists for standard services upon request. 

“Upon request” being the key words there. I’m not sure how the state will effectively police this. Time will tell, but it’s a start. 

The point I want to make on this topic is this:
I believe the best defense for stuff like this is a good offense. 

How do you create a good offense? 

AWARENESS. Through awareness you create knowledge and power, and that goes for anything. 

As women, are we always unaware we are paying more? Of course not. Sometimes we make the choice to. I am fully aware I am paying more for my “spa” shampoo, which is why I treasure every drop and don’t share it with the men in my house, but I do have the choice to buy a lower cost product and still get my hair clean. 

If you’ve never heard of the pink tax before this, now you are aware that it is actually a thing and you can be an informed consumer. Granted, you probably don’t want to smell like Axe body spray or Old Spice just to pay a lower price, but you can still make choices of one product over another or ask informed questions of a service provider. 

Be AWARE. Stay INFORMED. The best defense is a good OFFENSE. 

Financial Fitness Tip

I have been involved with a wonderful organization for a number of years called The Fresh Air Fund. April is financial literacy month and they asked me to sit on a panel with some teens to talk about what I do for a living as they learned about financial topics. 

Kudos to The Fresh Air Fund for putting this program together for their teens!

They shared a short You Tube video offering some basic, and some not so basic, financial education in an easy to understand format, which I am always a big fan of. 

Take some time to view the video and share it with others you think might benefit!

My Favorite Quotes

Since it’s financial literacy month, I am sharing a quote that promotes one of the single most important tenets of growing your wealth over time:

“Do not save what is left after spending. Spend what is left after saving”

– Warren Buffet (and me)

Flexing Your Financial Muscle

It seems every year between Thanksgiving and New Year’s Day I can’t seem to find the time to fit in my workouts.  Now it’s mid-January, and I still haven’t gotten back at it, despite knowing I feel 150% better when I do.

So now, I will pay the price.

I have not performed any studies, but I would venture to guess that exercise/diet and getting a handle on one’s finances are two of the most common resolutions people make each January.

I can’t give much advice on the former – I welcome it if you have any – but here are a few suggestions on the latter:

1. Get Organized:

Know what you have and where you have it. Create a spreadsheet or use a tracking software to note the type of account, where it is held and username/passwords. I mentioned Last Pass in a previous newsletter and now can’t imagine a day without it. It’s technically a password management software, which in itself is awesome, but you can also organize everything into folders and keep notes for each one.

2. Automate bill payments

There’s nothing worse than having to pay late fees and interest charges because you missed a payment. Anything that can be automated should be automated.

3. Pay yourself first: 

This is one of the most significant things you can do for yourself to reach your saving’s goal. Most employer plans are automated, but you can also set up autopayments to build an emergency fund, a vacation spending account or any type of investment account. You never tend to miss the money you never see. But the beauty of it is…it’s still your money.

4. Track your spending (everyone hates this one, even me)

Why do we hate it? Because it’s SO eye-opening and we sometimes do not like what we see. There is software out there to help. Quicken, Mint or Tiller seem to be the most popular. But even an old fashioned spreadsheet will work.

5. Review and update estate planning documents:

Life insurance and retirement account assets do not pass by way of will. You must have named beneficiaries on these assets if you want your wishes to be carried out. Review your beneficiary designations, powers of attorney, health care proxies and any other estate documents to be sure they still reflect your wishes.

Commit to even just one of these now and email me here to let me know which one you choose. Sometimes “saying it out loud” is the only force we need to take action.

Financial Fitness Tip

For those of you who have teens or young adults with part-time jobs, they will have a W2 detailing their wages and any taxes withheld. They will have had to pay FICA taxes (Social Security and Medicare). This is mandatory.

If their W2 indicates they have also had Federal and State taxes withheld, then they may want to file for a possible refund. Chances are, they did not earn enough throughout the year to owe any federal or state income taxes, so whatever was withheld from their paycheck is theirs.

However, they will have to file a tax return to get it back.

Things I Love: A Great Quote

Don’t you just love a great quote? I’m changing things up for 2021 and moving from “Things I Love” to “My Favorite Quotes”. 
 
Since I’m writing this newsletter on MLK Jr. Day, I thought I would kick off with one from him:
 
“We must learn to live together as brothers or perish together as fools.”
 
Thanks to the progress we’ve made, he would most definitely include “and sisters” if he were giving his inspiring speeches today.
 
Feel free to share a favorite quote of yours here and I will feature it in a future newsletter!

Highest Score Wins: How to Improve Your Credit Score in 2021

Everyone thinks that being a financial advisor means I am great with numbers, but there are lots of numbers that confuse the heck out of me. 

Blood pressure, tire pressure and my son’s PSAT scores come to mind. 

A number that is a mystery to many is their credit score. 

Sure, you know the higher the better, but how do you get there? And how do you stay there? 

This time of the year has me scrambling about at a variety of stores for holiday shopping.

Something I hear over and over again, from one cashier to the next:
“Would you like to save 10% by opening a Fill In The Blank credit card today?”  NOOOOO, I would not, but thank you for asking.

I’m a financial advisor – why wouldn’t I want to save 10%?

Here’s the thing. Having multiple credit cards won’t necessarily harm your credit score, it may even help it, when managed properly. It’s the “when managed properly” part that gets many into trouble and can inadvertently affect your credit score.

What Factors Affect Your Credit Score?

  1. Payment History

    Creditors want to see a trend of you making payments on time, every time, even if it’s just the minimum payment due.

    Carrying a balance on a high interest credit card is a financial planning 101 topic separate and apart from this (don’t do it), but paying the minimum amount due ON TIME is imperative to maintaining good credit. This is the factor most heavily weighted. 
     
  2. Credit Utilization Ratio (you want this number low)

    Simply stated, if your credit cards are “maxed out”, your ratio is not good. Lenders want to see that you have the option to use the credit, but don’t.

    For example, if you have three credit cards each with a $10,000 limit ($30,000 total limit), lenders don’t want to see you carrying a $25,000 balance. You are using almost 85% of your available credit (25/30). Conversely, if you are carrying a $5,000 balance you are only using about 15% (5/30) of your available credit. Lenders like this.
     
  3. Length of Credit History

    Different from payment history (and not as heavily weighted in your score), creditors look at the average length of all your credit accounts. This is why it often makes sense to keep an old credit card open, even if you’ve moved on to a new shiny one.

    This is why it’s also good to get teenagers/young adults started with some form of credit in their early years, and teaching them how to use it responsibly. This will put them on a solid foundation for a good credit score, which they will need for their first car loan or apartment.
     
  4. Types of Credit

    Having a diverse mix of credit and being able to manage all of them effectively at the same time helps boost your credit score.

    This doesn’t mean various credit cards from Macy’s, Amazon and Homegoods. This means entirely different types of loans, such as a mortgage, car and student loans, along with your credit cards.
     
  5. New Credit Inquiries

    How many new accounts you’ve opened and how many “hard inquiries” that come in from lenders have an effect on your credit score. Hard inquiries happen any time you are opening a new card or applying for a loan.

    Too many in a short period of time makes a lender nervous.

Financial Fitness Tip

Separate from your actual credit score is the report that makes up your score.

You can and should be checking your free credit report at least annually. The report will provide a comprehensive overview of your credit history and allow you to flag any activity that does not look right.

There are three major credit reporting agencies: Transunion, Equifax and Experian. They have come together  to make requesting your credit report more seamless and to help you avoid scammer websites offering “free” credit reports.

Follow this link to bring you to the ONLY official website you should be using. In “normal” times, you can request a report from each of the three agencies once per year, but due to COVID-19, they are offering free weekly online reports through April 2021.

Things I Love

These beautiful faces are now 17, 15 and 13, and ornaments like these become my favorites more and more every year. I am so blessed. Time is going too fast.

God Bless you and your families this holiday season, as we eagerly wave goodbye to 2020!

What Are Your Earliest Memories of Money?

The first impactful memory I have around money always comes to me right away. It’s a story I shared at my dad’s 70th birthday celebration. I was about 10 years old and was with him at the ATM. He always counted the money before putting it in his wallet.

When he counted it on this particular morning, there were two $20’s stuck together.

My 10-year old mind thought, “How AWESOME is THAT”?

I must have not only thought it but also said something along those lines because I remember CLEAR AS DAY my father’s response:

“Susan, this is not my money. I’ll return it to the bank on Monday”.

IMPACTFUL.

Sometime not too long after, he called me over to his chair where he sat every night to watch the evening news and read the paper. He showed me a piece of mail he had just opened. It was a letter from the president of the bank thanking him for his honesty in returning the $20.

IMPACTFUL.

I’d be remiss to leave out my mom in my earliest memories around money and the impact they’ve had on me. Mom handled all the day to day family finances and taught me how to balance a checkbook…to…the…penny. Of course, with today’s technology I don’t balance a checkbook anymore, but I do still watch every penny. It was also her influence that taught me that just because you can afford something doesn’t mean you should buy it and that if you can’t afford something, then you definitely shouldn’t buy it.

That’s Cash Flow Planning 101
Needs vs Wants
Spend less than you make.


And from all this, a trusted financial advisor was born. Thanks Mom and Dad!

My clients have heard me say that not every decision around money is black and white, that there is often an emotional component to our decisions that can make things a bit gray. Behavioral Finance has become a field of study in and of itself and is often a seminar topic at  financial industry conferences.

I’m sure my parents had NO IDEA at the time that all these little things would serve as defining moments for me and my approach to all things money in the future.

But it makes me stop and think, what little impacts am I having now on my kids and the way they head into their future thinking about money? I guess we’ll just add it to the list as one more thing to worry about, because parenting is definitely filled with a whole lot of gray.

Are You REALLY Paying More in Taxes, or Does it Just Feel That Way?

A friend reminded me this past week of the story I tell on my website about my dad and taxes. “Don’t just file those away”, he said to me years ago. “Look them over and get an understanding of what’s going on”.

It was an early catalyst for discovering my love of personal finance.
  Many folks feel overwhelmed by any talk around taxes. This is understandable. Our federal tax code can be a tough code to crack. It is a moving target of rules, income phaseouts and brackets which seem to change on a near constant basis.

Effective Tax Rate vs Marginal Tax Rate

We follow a progressive tax system in the US. This means the amount of tax we pay on the first dollar we earn is less than the tax we pay on the last dollar we earn. This progression results in a taxpayer’s Effective Tax Rate, or average overall tax rate, being less than their Marginal Tax Rate, or the tax rate of their final dollar(s) earned.

It tends to be a taxpayer’s marginal tax rate that is referred to most often, however it is the effective tax rate that more accurately reflects the average amount of tax you pay. When a taxpayer falls into the 24% tax bracket for example, this is their marginal tax rate…24%. This simply means that the highest level of tax paid was 24%, even if it was only $1 of income in that bracket. But their effective tax rate, the amount of tax they paid as a percentage of their overall income, is typically lower.

Total Tax Liability vs Amount You Owe

If you look at page 2, line 23 of your 1040 you’ll see “Amount You Owe”.

This is NOT your total tax liability for the year, which is up above on line 16, aptly named “total tax”.  

Amount you Owe is what is still left to pay of your total tax liability for the year, unless of course, you are getting a refund.

Your total tax liability in any given year depends on many different factors. And even if the figure on line 16 is higher this year, it doesn’t necessarily mean you are paying more in taxes.

You have to take into account what percentage of your overall income that number represents, which as you read above, is your effective income tax rate.

Let’s compare apples to apples:

In 2018, I picked 100 apples and had to give 20% of them to Uncle Sam.
That’s 20 apples (Total Tax, line 16).
I paid in 1 apple each month for the year, so in April I owed 8 more apples (Amount You Owe, line 23).

In 2019, I picked 200 apples and had to give 20% of them to Uncle Sam.
That’s 40 apples (Total Tax, line 16).
I paid in 1apple each month for the year, so in April I owed 28 more apples (Amount You Owe, line 23).

Since 40 is more than 20, it would appear I owed more to Uncle Sam in 2019, and as a flat amount of apples I did, but as a percentage of my overall apple income, my taxes did not go up.

I owed the same amount as a percentage of my apple income…20%.

And since the amount I owed in April (line 23) was 28 instead of 8 this year, it may appear as if I owed more in 2019, but it’s because I didn’t pay enough apples each month along the way in 2019 (paycheck withholdings). Overall, I still paid 20% both years.

Now for purposes of simplicity in this example, I used a flat tax of 20% instead of a progressive tax that I explained up above. You may be thinking this would not happen, because if I picked more apples, I would have owed more than 20% this year. However, this example helps to demonstrate what the expanded tax brackets did for many Americans with the passing of the Tax Cuts and Jobs Act of 2017.

From 2018 through 2025, when this law is scheduled to sunset, many Americans can earn more while remaining in the same tax bracket, or in some cases a lower bracket, than they were in prior to 2018.

That sounds like a pretty good tax deal to me!

Out of the Mouths of Babes

I recently had the opportunity to help out at our local high school with a group of students who were participating in a program called “Credit for Life”. I had never heard of it, but with a quick Google search, I learned it is a nationally recognized program designed to help high school students develop personal financial management skills. SIGN ME UP!

I had a blast. I really did. I was assigned to the “Savings and Retirement” booth. I got so jazzed up talking with these kids about real world money matters. OK, granted, some of them I was talking at instead of with, but that was to be expected. But for the ones that were really listening and trying to take in what I was saying, it was very fulfilling. I had my first glimpse into the satisfaction teachers get out of molding young minds.

The advice I was repeating over and over to each group is really no different than what I would tell a client. At any age, the foundations of financial security and independence are the same. I didn’t want to throw so much at them that they walked away feeling overwhelmed and having learned nothing, so I kept repeating the following during those precious few minutes I had their attention:

Don’t spend more than you make.

Pay yourself first.

Most eyes glazed over when I spoke the phrase, “power of compounding interest”, but when I pulled out my graph to show them a visual of what their money could do for them if they committed to paying themselves first, and how that money could grow exponentially over time, their eyes lit up. I pointed out on their expense tracker that this sum of money they were “spending” from their paycheck was different than every other expense they had listed on that sheet because IT WAS STILL THEIR MONEY!

Imagine my excitement when I heard one student approach a group of friends and say something along the lines of, “guys, go over there, pay yourselves first”. Eureka!  My heart skipped a beat. And my pure, unadulterated joy when a friend shared with me that her daughter told her,  “Mrs. Danson said I can start contributing to a Roth IRA and it will keep growing and growing and I won’t have to pay taxes on it”. Wowzer! This young lady is going to be just fine when it comes to her future financial well-being.

Full disclosure, there was another student I overheard saying, “don’t go there, she takes 10% of your money”. I laughed out loud and said to the huddle of teens, “I’m not Uncle Sam, this is still your money”! I’m sure none of them understood the Uncle Sam joke, but I knew you would appreciate my humor. They’ll understand soon enough.

But interesting, isn’t it, that this was student #2’s interpretation of my message?

To that end, I leave you with this-

Spend less than you make and pay yourself first.

Is “The Marvelous Mrs. Maisel” Art Imitating Life in 1960 or 2020?

Have you been watching Amazon’s hit comedy “The Marvelous Mrs. Maisel”? Do you love it? I have-and I DO! It’s simple. It’s funny. I can fall asleep after it is over with a light heart. I binge watched Season 3 over the holidays.

The story line focuses on Miriam “Midge” Maisel, a NYC housewife in the late 1950s/early 1960s who discovers she has a knack for stand-up comedy and begins actively pursuing a career. To keep it simple without need of spoiler alerts, her husband can’t handle her success, has an affair with his secretary and they separate.

I love that it brings current day recognition to the female pioneers that paved the way for the careers we women pursue today (although still today, this is not without challenges and/or risks to our financial well-being, but that’s a topic for another newsletter).

“Mrs. Maisel” depicts, in a “making fun of what used to be” sort of way, the early phases of breaking the mold during a time that was probably anything but fun for women choosing this path. I love that it makes me recognize and appreciate how much things have changed for women.

Yet after watching an episode of Season 3, I began to wonder if in some ways, despite the 1960’s setting, “Mrs. Maisel” is also current day art imitating life when it comes to many women and their finances. As Midge gains earning power, she washes her hands of money management and leaves it in the trusted hands of her talent manager Susie, who fails miserably. And then, of all people, Susie goes to Midge’s EX-HUSBAND, begging him to take over Midge’s finances. So Midge has a successful career and is taking on the world…but will still be relying on her ex-husband to handle her money.

Unusual for the times? No, not at all. Women weren’t even allowed to apply for their own credit cards until 1974! But how much has truly changed in regards to women being fully engaged in their finances?

Certainly, there have been HUGE strides over the decades in so many areas for women, but there are still inroads that we need to make for our financial security and that of our families.

I leave you with this question:

On a scale of 1-10, how “in the loop” are you in the understanding of your personal or family finances?

If you are not an 8 or above, I encourage you to become more engaged, ask questions if you don’t understand, and make 2020 the year that you become your own pioneer in financial empowerment.

‘Tis the Season to be…Fearful?

Earlier this week, I was engaging in the nightly ritual of moving the Elf on the Shelf to a new location. As the tale goes, he had flown back to the North Pole overnight and reported to Santa whether my children were naughty or nice that day. Given my boys are now 16, 14 and 12, there’s a whole lot of not so nice around here and long gone is the fear that Ruckert the Elf is going to tell Santa about it. At best, my youngest is humoring me by even looking for the Elf each morning.

It got me thinking about what we all know as the “fear tactic”, most often used with children, to get them to do or act in a way which we desire…

  • Behave nicely or Santa won’t bring you any toys.
  • Eat your vegetables or you won’t grow big and strong.
  • And let’s not forget about Pinocchio and his nose.  

But let’s face it, kids aren’t the only targets of the fear tactic. If it’s a subject area I know little or nothing about (like car maintenance for example), I could be “told and sold” just about anything. After all, they’re the experts, right?

Well the financial services industry is no different. There are folks out there trying to instill fear to get you to take action. And not always, but often, that action is favorable to them in some way.

Tid bits you may hear along the way, such as…

  • Do YOU know your 401(k) balance after recent market volatility? 
  • Are you afraid of outliving your money?  

and my personal favorite….

  • Don’t let the nursing home take all of your hard earned cash. Come see us before it’s too late!

Fear Tactic…

The point is, when it comes to financial decisions, making a rash decision to DO or BUY or CHANGE anything out of fear is often met with regret down the road. You have some time… to ask questions and understand, to plan according to your needs and to make a decision from a place of knowledge and clarity.

I wish I could say the same for my car maintenance!