This Week In Your Wallet: Secrets To A Happy Financial Life
It is snowing out my window. Again. But I am not complaining. We lead this week’s newsletter with research from Boston-based Fidelity Investments – where they’ve gotten eight feet of snow (so far) this winter. (The fact that they’re getting any work done at all is impressive.) No matter where you live, it helps to have a strategy to slog through the cold months. I retreat to the kitchen where I lean heavily on comfort foods. Tonight I’ll be making this version of a Coq Au Riesling from Saturday’s Wall Street Journal. And I’ll be paying for it in advance with a longer-than-usual stint on the treadmill. What’s your secret to dealing with winter? Send ‘em to me at Jean@JeanChatzky.com or tweet them @JeanChatzky. I’ll send books to the readers with the top three suggestions and publish them in next week’s newsletter. And now, for the news of the week.
Speak up!
New research from Fidelity Investments finds that 92% of women want to learn more about financial planning, and some 83% want to get more involved in their finances within the next year. Terrific, right? Unfortunately, eight in 10 women surveyed also admit to having refrained from talking about their finances with a family member, spouse, partner or friend.
Why? For many, it’s still “too personal” (or at least that was the number one reason cited). But really, it comes down to a lack of confidence surrounding the subject. For example, 77% of women are confident discussing medical issues with a doctor by themselves, but only 47% of women are confident talking about money and investments with a financial professional.
Kathleen Murphy, president of Personal Investing at Fidelity, says this confidence-gap (compared with men) is unwarranted, especially since research also shows women to have stronger savings rates and better long-term investment performances when they do invest. It’s especially important for women to stop biting their tongues — or letting self-doubt hold them back — because 90% will be at the helm of their household finances at some point in their lives. Fidelity offers advice for engaging, along with more information on the research here.
What your portfolio and flossing have in common
For more guidance on how to improve your financial IQ, check out Walter Updegrave’s 25 observations from his 30 years covering retirement and investing. (He and I spent many years together at Money magazine where I often relied on him for wise counsel!) He notes that rebalancing your retirement portfolio and flossing have something in common: A lot of people don’t get around to doing either as often as they should. I’ll leave the flossing advice to your dentist, but as for the rebalancing, I suggest doing so once a year (I use my birthday as a reminder to do it). A lot can happen in a year and your investments can get out of whack. For example, if you had 70% of your money in the stock market, and it’s now sitting at 80%, because it performed well, then you’ll want to go in and reduce your exposure. In addition to rebalancing retirement portfolios, Updegrave says people need to give their Social Security planning (i.e. when they’re going to claim their benefits) some TLC.
He also notes: “If you’re not sure whether you’re saving enough for retirement, you probably aren’t.” Face the figures by consulting a retirement calculator. Although remember that a retirement calculator can’t tell you with a 100% certainty whether you’re on track for a secure retirement, because — just like you, or even an expert on retirement — it can’t predict the future. But you can (and should) use a calculator to get a sense of whether you’re on the right track, and/or could be doing more, like bumping up your retirement contributions at work. For motivation, try looking at your employer’s 401(k) match as part of your compensation, opposed to something that’s “free.”
Your Social Security cheat sheet
If you’ve been neglecting your Social Security planning, because you don’t think you can count on it being there come retirement, then think again. The latest Social Security Trustees Report predicts that the Social Security trust fund won’t run dry until 2033. And as CNNMoney reports, even if this prediction comes true, it doesn’t mean your payments will stop. Payroll taxes that Social Security collects from workers and employers will fund 77% of scheduled benefits.
With that in mind, I have five ways to maximize your Social Security benefits on Bankrate.com. For starters, wait to collect if you can. Your Social Security benefits increase by about 8% for every year you wait between ages 62 and 70. If you’re married, however, you may not both need to wait. Instead, you can take the smaller of the two benefits first, and let the bigger one grow. Finally, know that you may also be eligible for benefits from an ex-spouse. If you were married 10 or more years— and didn’t remarry — then you’re likely eligible to collect spousal benefits on your ex-spouse’s earnings record. Your ex has to be at least 62 years old or receive disability benefits.
Secrets to a happy financial life
In Jonathan Clements’ farewell column for the Sunday Journal (don’t worry you can find him in Saturday’s Wall Street Journal now), he offers five suggestions for living a happier financial life. Topping his list: Cheap housing. If you spend half of your money (or more) on housing and commuting, then it’s time to reevaluate where you live. By keeping these two expenses below 50% of your income (especially in your early adult years), you’ll free up more money to save for emergencies, retirement and experiences, which he says are the best ways to spend your money. For happiness, use your spare money for making memories, not buying things. And if possible, never work just for the money alone. Spend your days doing what you’re passionate about and your evenings with family and friends (and perhaps a pot of Coq Au Riesling, too.)
Have a great week,
Jean
