Avoiding my mistakes

“There are two lasting bequests we can give our children. One is roots, the other is wings.”

- Hodding Carter, Jr.

Last week, I wrote about protecting kids from financial hardship, and I got so many emails and calls about it from clients and friends that it’s clear to me that it was forwarded all over the place and shared.

When I set out to blog, I didn’t quite understand how much people wanted a lawyer who cut through the legalese and spoke to the heart.

Well, I got the message. So, I’m going to return this week to the subject of children, but this time, about the older variety. This one is for those of you who have children just starting college–or are well underway, but need a little financial “kick in the pants”.

Let me know your thoughts!

“Straight Talk” Personal Strategy

What I Wish I’d Known About Finances In College

When I started university, I was a little nervous about what was about to transpire. Honestly, I thought I might be biting off more than I could chew. I should have known that I had little to worry about. But there are a few things I wish I had known — or at least thought about — before entering college…

Who is paying for college? Many have their undergraduate education paid for by parents, scholarships, and/or loans in their name [or their parents']. If your parents are paying for your education, be careful not to fail any courses. If you fail a class required for your degree, you will have to take that class again, paying for it twice. It’s not worth it, particularly since it’s usually difficult to outright fail a class. Paying for college yourself supposedly gives you ownership of your academic decisions while in school, but if you’re in a situation where you don’t have to worry about affording your own tuition, then consider yourself lucky.

Work shouldn’t interfere with studies. I am quite grateful I didn’t have to pay for all of my undergraduate education. It allowed me to focus on my education and extracurricular resume-building activities in my field rather than focusing on earning income to afford tuition. I did find a few jobs, however. I stayed on campus for winter and summer sessions to take more classes, but with a lighter load during these in-between semesters, I held various part-time jobs, and these jobs provided me with a little extra cash. I probably spent it just as fast as I was earning it, however.

Open a Roth IRA. These retirement accounts were brought into existence about 16 years ago. If I had had a way that I could put money away for retirement in a tax-advantaged account while I was in such a low tax bracket, I might have taken advantage of the opportunity. Then again, I might not have. It’s hard to imagine retirement before you’ve officially begun a career, but it’s harder to argue with long-term investing in the stock market–even in these times of economic uncertainty.

Like many, I played the “stock market game” in elementary school. By the time I entered college, I probably knew only a little more about investing, but my interests lay elsewhere so I did not particularly think about having a secure financial future. I’m not going to go on and on about the power of compound interest here, but suffice to say–it’s incredible when you start in college.

Avoid credit cards. The credit card companies are (still) vultures on college campuses. The companies set tables outside the dorms with applications and free tee-shirts, enticing sub-fashionable freshmen (like myself, at the time) to sign up.  I know.  I had a ton of debt when I got out.

One particularly sneaky aspect of college-geared credit cards is the introductory offer. Even with the recently-passed CARD Act, the fine print on these deals are heavily weighted AGAINST the college student, and (of course) in favor of the banks.

Further, here are some other goodies from Forbes for the financially-savvy student:

* Use credit cards sparingly

* Pay all credit card balances in full

* Get the best deal on a checking account

* Start saving

* Keep track of your spending

* Set a limit on entertainment

* Shop at second-hand stores

* Keep an eye out for free money

* Get a part-time job with tips

* Walk or ride a bike — don’t drive

* Avoid the tax on stupidity

* Look for student discounts

* Don’t eat out all the time

Had I known what I know now about compounding interest and the tendency for the stock market to increase over time, not just theoretically but from experience, I’d be in an even better financial position right now.

And it’s not about having more money, it’s about having more options for doing the things we like to do.

I’m personally dedicated to the success of your family– and *their* finances too. Can other lawyers say that?

A different way to protect your kids

I finally know what distinguishes man from other beasts: financial worries.

–Jules Renard

I wanted to let you know of a special opportunity to have a free lunch with me and a couple expert financial folks on Tuesday August 31, 2010 at Renaissance Bistro in Brea.  The lunch will begin at 11:45am.  It’s an opportunity to meet with us and get to know us a little better.  This is not a seminar and we will not be selling anything at this lunch.  Space is limited so RSVP be replying to this email.

It’s getting close to “back to school” time for most of my clients, is already here for others(!); and families everywhere are breathing collective sighs of relief (though, that isn’t at all to say that kids are a burden! Just…tiring for some, right?). The summer is wrapping up, and everybody’s schedule is about to fill up with all of those teacher meetings, etc.

Summer’s end means the end of a time of innocence of sorts for school kids. And, as we work with our family clients, we’re keenly aware that the economy’s impact on families can trickle into the hearts of our children, unless you’re quite careful about it.

So, as I’m watching this school season kick into gear, I had some thoughts for families which I thought might be useful–especially for those families who are walking through tough times.

Let me know your thoughts!

“Straight Talk” Personal Strategy

Protecting The Hearts (and Wallets) of Your Kids

When a close friend or family member loses their home, or their job (or both), it can be frightening on several levels. You begin to wonder if the same could happen to you. And, as you’re probably aware, this fear of economic uncertainty causes anxiety in many children, too.

While it is impossible to shield kids from all that goes on around them, I happen to believe money worries are one of those things we shouldn’t share with kids. There are a number of ways to do that — some very specific, and some more subtle.

Don’t Argue About Money in Front of Kids

This one seems the most obvious. When it comes to transferring anxiety over money to your children, there is no faster way than to fight over it with your partner. Asking couples not to argue over money at all is a little unrealistic, so when differences arise, at least try to do it in private and out of earshot of your kids.

Spenders and savers are bound to clash, but when they fight in front of kids they give kids something to worry about beyond Mom and Dad fighting. Will we run out of money? Is Dad losing his job? Will we have to move? Will we have money for food? Even if parents are unsure about the answers themselves, they owe it to their kids to exude confidence when it comes to money. If things really do get bad, emphasize that no matter what, you’ll all be together and that home is where you make it — wherever that may be.

Avoid These Phrases: “We Can’t Afford That” or “We’re Poor”

When kids ask to buy things, and money is tight, try to rationalize with them instead of simply saying, “we can’t afford it.” Tell kids that instead of spending money on toys this week, you need to focus on buying some basic things like food and gasoline for the car. Ask them to come along to the grocery store to help pick out a few favorites. If you simply say you can’t afford something, kids will begin to wonder what else you can’t afford, and that’s a psychological slippery slope for young minds.

In fact, I’d go so far as to say this: Don’t allow anyone in your house to use the word “poor” when describing your economic situation — even when times are pretty lean in the household. Families might be broke– but that doesn’t mean they’re poor! It’s more than semantics. The word “poor” seems to connote inferiority, or having some unfortunate circumstance. We don’t have to accept that paradigm. Sometimes, families simply spend more money than they earned and have to live on far less to turn things around. They may have been foolish, but they don’t have to be poor!

Now, let’s shift away from things not to do around kids, and focus on some positive things to teach kids to help them with their own financial futures.

Teaching Kids About Money

When I was growing up, money was taboo. Parents would no more talk about money with their children than their love life. While this is still true to an extent, I think most of us have recognized that kids need to be more aware about the potential financial pitfalls out there than we were.

Start giving kids an allowance to budget their savings, spending and giving. Help them open a savings account and begin to teach the mechanics of a bank account — completing deposit slips, balancing a checkbook and explaining how compound interest works. As kids get older, introduce them to increasingly more complicated topics like investing, borrowing money, insurance, etc. By the time they are teenagers they should have a good grasp on Personal Finance 101 topics to better prepare them for life.

Encourage Saving Over Spending

As adults, we know it is prudent to put back a sizable emergency fund of several months (I actually recommend a full year) of basic, household expenses. Because kids are not responsible for everyday expenses, it can be hard to get this message across to them. Instead of focusing on saving money for emergencies, teach kids to save money for opportunities.

Foster Entrepreneurialism in Your Kids

My parents and grandparents were probably a lot like yours — they worked 40-50 hours a week, punched a clock and recharged over the weekends. After doing this for several decades they were given a cheap retirement gift, maybe a small pension, and a retirement send-off.

Well, times have changed.

The recession has underscored the importance of developing an entrepreneurial streak at a young age. Chances are very slim that your child will graduate college, pick one job and stay there for 40 years. More likely, there will be many jobs with many employers, and many periods of being “between jobs” in their lifetime. Wouldn’t it be great if they developed a “side hustle” to get them through those periods of unemployment, or to supplement their full-time income all along?

Perhaps you enjoy building things and have turned your one-time hobby into a side hustle building decks and fences on the weekends. Get your kids involved in the process as they grow older, and perhaps you can pass along a valuable trade. Even if they become accountants or fire fighters, having the knowledge and experience of a trade to fall back on could be incredibly valuable to them over a lifetime.

The point is not to stifle your kids’ ideas by forcing them into some ideal career path you have selected for them. Allow them to cultivate their own ideas. Over the next few decades, personal branding, and the branding of individual ideas will likely be hotter than any particular industry. Think about it — iPhone apps may be the next lemonade stand!

In a way, social media, and new media, have greatly expanded the opportunities for kids to create new products, explore new ideas and push new content into the mainstream. There’s never been a better time to have an entrepreneurial mindset, and fostering that in your children at an early age is invaluable.

I’m personally dedicated to the success of your family– and your state of mind! Can other lawyers say that?

Legal bloopers and a caution

People who enjoy what they are doing invariably do it well.

- Joe Gibbs

I’d like to start your day or week (or whenever you get this) with a great list of legal bloopers, compiled by another lawyer (ahem). Thanks to the Wealth Counsel for the tip on this one.

Just be thankful when you read this that we don’t rely on computer spell check for your documents–and I’ve also got a quick word of advice for you, in my Weekly Note.

First the funny stuff…

1. The descendant died November 12, 2009 [instead of "decedent."]

2. Enclosed are the singed documents [instead of "signed."]

3. The will singing is scheduled for next Wednesday.

4. Our invoice includes coping charges.

5. There will be a martial deduction for gifts to the spouse.

6. We found a joint with your parents’ names on it [should have said "joint account."]

7. Before you proceed with your weeding plans, I recommend a prenuptial agreement.

8. Enclosed is my resent invoice ["I DO resent having to rebill!"]

9. Contact your account manger.

10. Be sure your assets are properly tilted.

11. The trial court rued against the defendant.

12. The remainder will be distributed to your descendants per stripes.

13. See if you can get her agreement in writhing.

14. Thank you for your incite on this matter.

15. This lawyer may be sued for probate matters [instead of "used."]

16. Let’s discuss your estate planning potions [instead of "options."]

17. We need to know the accursed interest on the above bank account to date of death

[instead of "accrued."]

18. We need to get a permanent injection [instead of "injunction."]

“Straight Talk” Personal Strategy

Another Issue With “No Estate Tax”

The current environment with no estate tax seems to be causing a bunch of unintended consequences (as if that’s a surprise!). Here’s another…

A standard estate plan for a married couple, put together by many advisors, uses “A-B” trusts. Upon the death of the first spouse, the single trust is split into the decedent’s trust and the survivor’s trust. The amount in the decedent’s trust is usually equal to the federal estate tax exemption. The remaining assets go to the survivor’s trust for the surviving spouse’s benefit.

The problem with this setup in 2010 is that a deceased spouse may unintentionally give the surviving spouse nothing. With no federal estate tax, all assets pass to the decedent’s trust, leaving nothing for the survivor’s trust. The decedent’s trust most likely benefits the surviving spouse, but probably has many more restrictions than the survivor’s trust.

For example, the surviving spouse may only be an income beneficiary with the remainder going to the children. This setup can also cause a couple to pay more state estate taxes than necessary.

That’s why it’s important that we schedule a review of your current plan, because even though the estate tax is sure to change, there are so many other aspects of your plan which are affected by our environment. Don’t be caught by surprise!

I’m personally dedicated to the success of your family– and your state of mind! Can other lawyers say that?

This could mean trouble

Keep steadily before you the fact that all true success depends at last upon yourself.

-Theodore T. Hunger

I wanted to touch on something close to my heart–being ready for whatever might come in your family. Obviously, I’ve prepared my share of estate plans in my day…and I’ve seen enough disasters–that whatever I can do to “cut that off at the pass” for you, I want to do it.

Gosh, I could tell you stories.

So, while I do my best in these notes to avoid a bunch of “legalese”, here’s some food for thought for you.

I do NOT want to have you become another sob story!

“Straight Talk” Personal Strategy

Estate Plan Problems: It’s About More Than Tax Avoidance

The typical “estate planning” experience is one in which people go in and meet with an attorney, sign some documents, put them on a shelf or in a drawer, and never look at them again.

IF your parents went through this process, and this sounds familiar, I’ve got some bad news: it probably won’t work when you need it (death or incapacity). When these plans haven’t been reviewed after a couple years, it’s likely that you could be dealing with the probate court or receive your inheritance in the wrong way.

With the much-publicized “pause” of the estate tax, many families mistakenly believe they have nothing to be concerned about in regards to setting up their estate. Nothing could be further from the truth.

This happened for a friend of mine, who happened to be a very successful lawyer in her own right!

When her father-in law passed away, even though they had set up a trust, her father-in-law’s lawyer never transferred his assets into the trust and never made sure her in-laws did it themselves either!

You see, unfortunate as it is, your parents’ estate plan is likely to fail.

You might think that the scenario above sounds like legal malpractice. Actually, I’m very sad to say, this is NOT malpractice; it is “all-too-common practice”. And, it means your parents’ estate plan, like my friend’s in-laws’, is likely to fail.

Not to mention, your parents’ estate plan most likely leaves your inheritance to you completely unprotected.

I know of a client who inherited over a million dollars. Shortly afterwards he was sued and had a million dollar judgment levied against him. He never saw a penny of that million dollar inheritance. By the time he paid off the judgment, it was gone. Ouch.

Your parents’ estate plan leaves your inheritance at risk.

If you inherit funds, it is common practice to integrate those funds directly into the family accounts. But what happens if there is divorce? Well, those funds will be split evenly…which may not have been the intent of your parents when they left you the money.

Your parents’ estate plan leaves you unable to do what they’ll need you to do.

I know of a client who called her lawyer for help when her mom was on life support (not us). Mom had planned back in 1997–and always intended to update her planning documents. She never got around to it. Sadly, her health care directive did not have the most up-to-date provisions, which meant that this client could not get access to her mom’s medical records. Because of this, it took 3 weeks to get her mother moved to a respiratory center where they could have possibly weaned her off life support had she gotten moved more quickly. Would Mom have lived if she had been moved sooner? We’ll never know.

What I do know is that you never want to be rendered helpless because your parents’ documents are outdated. And it doesn’t have to be this way.

Get a guarantee your parents’ plan will work when you need it most.

When you have your parents’ estate plan reviewed by our office, you will know with certainty you’ll have everything you need if you have to take care of your parents. You’ll know that you won’t have to deal with a long, expensive court process in the event of their death or incapacity and that dealing with things after they are gone will be as easy as possible.

Plus, you can ensure that what you receive from them is totally protected from divorce, lawsuits and estate taxes. What could be better than that?

I’m personally dedicated to the success of your family– and your finances! Can other lawyers say that?

Classic Manasan Thriving, even *now*

When one door of happiness closes, another opens, but often we look so long at the closed door that we do not see the one that has been opened for us.

-Helen Keller

Times are tough.  It’s “hot” for families and businesses which are facing a sudden change of circumstance, whether it’s through job loss or revenue decrease. Those are the simple facts on the ground for many people.

But even with these realities, you can make things much worse for yourself  if you’re not careful about your most precious possession: your state of mind.

So, for these dog days, I thought I’d pull out one of my most popular emails from a while back–because it’s just as pertinent now, as it was then (if not more pertinent).

Let me know what you think–and do act on it.

“Straight Talk” Personal Strategy

Your Most Critical Skill In This Economy

How can you maintain your sense of personal peace in this environment…while NOT simply “ignoring” everything? I’ve got four suggestions for you.

1) Firstly, DO be very selective about (even, yes, choosing to ignore) certain media elements that have an agenda of spreading fear. 24-7 news would make no money if it stopped preying on people’s fear. (You realize the news networks are not a public service, right? They are in the business of getting ratings to sell advertising. Period.)

Have you ever noticed your feelings after watching just 20 minutes of CNN Headline News? Everything is going to pot. You’ll find negative stories on the environment, war, disease, crime, and of course… the economy. It’s laughable what they’ll come up with just to broadcast some bad news. A few weeks ago I spotted this “headline” story on the tube along with some sad-faced puppies: “PETS: Feeling the Foreclosure Boom!”

Everyone is selling crisis! This is true, from the media to the politicians. So stop watching CNN all day, refuse to participate in this circus, and instead start planning your first (or next) million. Seriously.

2) Look for the good news. Now, I’m very careful here, because I’m aware that some of my clients and friends really are feeling the pinch, but let’s ALSO look at the bigger picture, especially in comparison to the early 80’s or 30’s.

This was the topic of last week’s email, and, again, I can send to you if you missed it. Short version: We’re NOT in the Great Depression (by the numbers).

You can always find doom and gloom if you want to. So turn off your TV and focus on other activity. It will significantly help your inner peace!

3) Get out and do something profitable. That may mean actually starting that exercise regime you’ve been putting off. Take up a new hobby. ANYTHING to get your mind in a more “profitable” mode! Go do it.

These steps will NOT solve the problems in your wallet, and in the economy. However, how you choose to respond will affect your peace, and, actually…this WILL impact how you spend your money. Please, for your sake, tune OUT the fear, and tune IN to smart preparation.

4) Stave off fear by knowing actual numbers. The great problems many businesses and families face when money’s “tight” is SIGNIFICANTLY compounded by not knowing. Any number of pessimistic scenarios play out in your head.

So here’s how to fix that. Sit down with an advisor, get the real facts-and if they’re bad, you can still come up with a plan. You’ll find that laying out action steps with somebody competent changes everything.

And, of course, we can sit with you, if you’d like in this process–or point you in the direction of a highly-competent advisor.

I’m personally dedicated to the success of your family — and your state of mind! Can other lawyers say that?