All Things Financial Planning Blog


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Teaching to Learn


You may have heard the saying “those who can’t do teach” but I find that, when I really want to learn something new, the best way to approach it is to prepare to teach the topic or subject to someone else. Recently I was teaching financial education training skills to a group of financial counselors and one of the topics was “maximizing income” as a way to stabilize your financial life. As you can probably imagine, this group has heard (and taught) EVERY possible way to cut expenses and has more experience developing budgets than most people could ever fathom. But when it came down to talking about ways to maximize income or generate additional income, they had to stop and think.

We are often so caught up in the “expense” side of our balance sheets that we lose sight of the opportunity to increase our income to achieve a balanced household budget. It was quite interesting watching this group of highly skilled professionals grapple with ways to increase income. I could see that as they were discussing the options that their clients could consider (most serve low to moderate income individuals and families) they too were exploring ways to increase their income.

When we are looking at our financial lives there are really only three ways to improve our situations. We can: 1) make more, 2) spend less, or 3) a combination of the two. If you have already cut your spending in every way you can (or choose to) consider ways that you can increase your income. Here are a few ideas the group came up with:

  1. Turn your hobby into cash – sell your crafts (check out www.etsy.com).
  2. Offer your existing skills to others for a fee (cook, clean, write, read).
  3. Hold regular garage sales (repetition increases traffic) sell things you don’t need or want.
  4. Get a second job – talk with small business owners who may not be able to afford full time help but could use some short-term, part-time help.

As always, consider the impact of your choice on your ENTIRE financial life. Does the additional income impact your taxes? Is working a second job taking you away from your family more than is comfortable based on your values?

 You may be willing to work longer hours or a second job for a short time but, if this isn’t a long term solution, make sure you have a plan to either reduce expenses or stabilize the additional income for your longer term needs. 

In teaching about maximizing income I learned a valuable lesson. For the longest time I have been reluctant to sell my crafts (knitting and beading) because I felt like it took the joy out of the process. I know now that it is really all about perspective. I can offer my skill as a way to generate additional income AND enjoy doing it. I will take a few items and sell them on etsy to see how that works for me. I do have a few short term goals that could use an income boost. I’ll let you know how it goes.

Saundra Davis
President & CEO
Sage Financial Solutions
San Francisco, CA


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Ready, Set, Save


Stop Treading Water & Start SavingIn the world of personal finance, saving is putting money away in the present for future consumption. We’ve all read about the dismal savings rates of Americans and the lack of a financial safety net and, although we have seen an annual increase in the saving rate after the dip into negative territory in 2005, we are still playing “chicken” with our financial future.

Recent research by the Corporation for Enterprise Development (CFED) shows that more than 127 million people (43.7%) in America are asset poor1 and living one paycheck away from poverty. Looking at these statistics it would seem that for the average American saving just isn’t possible. There are some organizations and programs across the U.S. looking to change that perception and help EVERYONE get ready to save.

Set a Goal, Make a Plan, Save Automatically

One such program is America Saves a national campaign that offers tools, resources and even email coaching support to help individuals and families save for a healthier financial future. This organization started in 2007 and has made great strides in generating community-wide support for increased savings for young and old alike with initiatives like America Saves Week (February 19 – 26) which is just around the corner. Here is how you can get involved:

  • Individuals – If you need some support to get started, you will find it with the Personal Wealth Estimator and a wealth (pun intended) of information on savings strategies and tools. With the Kick Start Your Savings tracking tool you can participate in Save Up! and receive rewards for saving and paying down debt.
  • Organizations (employers, groups, educators and non-profits) – There are three simple steps to get started and you will receive a resource kit with everything you need to participate in America Saves Week including sample activities, posters, flyers and presentation materials. You can even connect with national campaigns in your area.

America Saves is on a mission to help people get motivated, and get into the habit of saving by setting up automatic contributions to a savings account. Already saving? Great, then use this week to review your asset allocation and, while you are at it, review your goals to make sure that your savings projections will meet the target date you have set.

Family Mint

If you are already saving and have been looking for a program to help you teach your kids (or other young ones in your life) about saving, check out Family Mint. This online budgeting and tracking tool helps parents communicate the importance of financial intelligence and provides a way for kids to set financial goals and manage and track their money online.

According to the U.S. Bureau of Economic Analysis (BEA) the personal saving rate in December 2011 was 4.0 percent compared with 3.5 percent in November. Now, we know that target savings rates, just like any other “number” in our financial plan is personal and depends on many other factors. What we do know is that, before the increase in the use of credit in our society, Americans were saving at least 5 percent and as much as 14.6 percent in 19752 and now in the face of staggering consumer debt and a slow growing economy our personal savings will be crucial to our financial security.

So, join the movement and jumpstart or rejuvenate your savings during America Saves Week. Sign up, take action and help someone else you know (or someone you don’t know) begin saving for a secure financial future.

1 A household is considered asset poor if it does not have sufficient net worth (total assets minus total liabilities) to live at the poverty level for three months in the absence of income.
2 http://www.billshrink.com/blog/5667/personal-savings-rate/

Saundra Davis
President & CEO
Sage Financial Solutions
San Francisco, CA


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“Start-itis”


Maybe it’s not a word, or even a real disorder but I’m telling you it is TRUE…I have “start-itis.” You may know (or even have) the symptoms: some new idea or thing catches your attention and from all appearances is EXACTLY what you were looking for. So, you leap right in with vigor and your mind is ripe with all of the possibilities of how this could change everything for the better. In the beginning, when the romance with the new object of your affection is unexplored and every interaction offers new and fulfilling promise, sticking to this new thing is easy. You may find yourself unable to think of anything else and you approach each day filled with anticipation.

Then…the honeymoon is over. Little things get in the way and you are too busy, too tired, too distracted…too “something” to spend time on the object so in a corner it sits, longing for your attention.

Truth be told, I have several things that fall into this category. I love adventure and new challenges so much so that each year my partner and I take our grandchildren to a new place and they learn a new activity (last year was badminton – we were running out of new sports to try). I take up new sports, activities and tasks frequently and I often find that after a brief spurt of intensity, my level of participation wanes. I notice that my interest in the thing doesn’t change, but frankly, life gets in the way…and I let it.

So what in the world does this have to do with financial planning? EVERYTHING! Financial planning is ALL about allocating your resources in a way that provides you the security and the life experience you desire. If you have your financial life in order then:

  • your financial management systems are in place;
  • you have appropriate and adequate asset protection;
  • you know how much you need to earn, save and invest to achieve your financial goals; and
  • you are free to give your attention to the people/places/things that make your heart beat fast (in a good way).

When we are overloaded with things that we haven’t quite finished we can be distracted, stressed and unavailable to do the things that really matter most. 

Psychologist, business coach, consultant and public speaker Ed Jacobson has a very useful tool that can help you sort through your busy life and determine what things are most important to you. Jacobson’s Looking Back on 2011. Looking Forward to 2012: An Appreciative Year-End Review guides you through a series of questions designed to help you reflect on the previous year (Looking through the Rear-View Mirror) and envision your direction and goals for the new year (Peering through the Windshield).

I have decided that 2012 is my “Year of Completion.”  There, I said it! I don’t make resolutions, but I do set intentions and this year I will complete my pending or outstanding projects. All of my current knitting UFOs (unfinished objects) will be DONE, my new financial document organization system and family operations manual (more next month) will be DONE and I will complete the Rosetta Stone Spanish Language program. Well, I feel better already.

What about you? Are there any projects pending or that you know you want to do to make your life better? Have you developed a financial plan that will move you toward your life goals? Do you feel secure in the knowledge that when “life happens” you and your loved ones know what to do to appropriately address the situation? If not, what do you want to do about it?

Saundra Davis
President & CEO
Sage Financial Solutions
San Francisco, CA


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“That’s Too Much!”


So Black Friday is behind us and the rush to the final holiday season of 2011 is in full swing. I wish I could just disconnect from all of the hustle and bustle of this time of year but the fact is, even though I don’t give gifts (you knew this already right?) I am constantly bombarded with all of the stuff I COULD be buying at bargain prices. Just a few short weeks ago, a big box store decided that Black Friday and Cyber Monday weren’t enough and announced (right in my living room no less) CYBER WEEK! What?!

Picture me, relaxing (read: knitting) in my living room and occasionally flipping channels when I come across a segment on the television show “The Price is Right” called “That’s too much!”. Contestants stand with the host while he shows the possible price tag on an item and when the price is just beyond the pale (in the contestant’s opinion) they scream “That’s too much!” and if they are right, you guessed it, they win and all is right with the world.

An important part of being mindful with our money centers on knowing when our actions are creating more stress than pleasure. When we are doing or spending “too much” the desired outcome, which is presumably to have a joyful holiday season, is more likely to elude us and result in more stress.

This brief brush with game show television got me thinking: what’s too much? I am a fan of the coaching tool “Wheel of Life” and recently found an online version that I found very helpful in self-discovery (financial and otherwise). So as we approach this very busy season I encourage you to ask yourself two questions:

  1. What is “too much” money to spend during the holidays?
  2. What is “too much” energy expended trying to create the “perfect” holiday event?

Consider how this time of year can be beneficial for you, possibly reflecting on what went well and what you would like to continue in the upcoming year. Maybe it is time to think about things you would like to stop doing. Who knows…you may even identify a thing or two that you want to start doing to make your holiday season “just enough” of everything you want and need.

Saundra Davis
President & CEO
Sage Financial Solutions
San Francisco, CA


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To Our Military Members: Protect Your Financial Future


My first real job was the U.S. Navy. I was 17 years-old and was leaving home and going to be “on my own” for the first time. The Navy taught me many things, some of which have shaped the person I have become but one thing I didn’t learn was how to manage money. My first checks in boot camp were spent on junk food (the chow hall food left much to be desired) and stationary to write letters to friends and family. When I received my checks on the 1st and the 15th, I promptly purchased everything I “needed”. My shopping list included a stereo (for my room in the barracks) and some civilian clothes; of course, the base nightclub and bowling alley benefitted from my bi-monthly windfall. I did develop better financial habits over the four years but, at the end of my enlistment, I left the Navy broke with a young son. I hadn’t participated in any of the retirement savings accounts (now called the Thrift Savings Plan) and I didn’t even know how to set up a budget.

Fast forward more than 25 years and I see many service members struggling with some of the same challenges I faced as a young sailor. Many are receiving a pretty substantial amount of money each month without any real understanding of how to plan for a secure future. Others are trying to support a family on wages that often fall short, making them eligible for food stamps. Certainly, there are many programs the military has in place to help service members learn money management. Unfortunately there are also a host of financial predators seeking ways to separate you from your hard-earned cash.

The Foundation for Financial Planning has developed some excellent tools to help service members (active duty and veterans) learn more about ways to Accomplish Your Financial Mission and manage your financial life. The free resource offers tools to help you:

  • Calculate your net worth – know the value of what you own and what you owe (this also will inform which insurance products you may need to protect what you have).
  • Create a spending and saving plan – the only way to reach your financial goals is to know how much is available to save for goals or to reduce debt.
  • Build an emergency fund – prepare for the unexpected a little bit at a time to avoid going into debt or using payday lenders when financial emergencies occur.
  • Manage credit – in addition to having a negative impact on your ability to borrow money at reasonable rates, service members are at risk of losing a security clearance if debt gets out of control.
  • Get key estate planning documents – make sure you and your family are protected. The military has most of the documents in place, but you have to know what the documents mean and keep copies for yourself in a safe place.
  • Get the insurance you need – think about it, what can’t you afford to lose? Are you and your spouse adequately protected? Could you afford to replace all of your personal property in the event of a flood or fire?

We are grateful to you for your service to our country. You owe it to yourself and your loved ones to take good care of your financial future.

Saundra Davis
President & CEO
Sage Financial Solutions
San Francisco, CA


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Your Financial Life in Balance


Creating a balanced financial life is a lifelong process. As soon as you get one thing straightened out, it seems like another issue pops up requiring your attention. This is one of the “truisms” of financial planning – it is a process not an event. This may cause you to groan and feel discouraged but let’s explore what this really means. 

Let’s say you start with one financial concern that you are ready to tackle and you take the steps necessary to change your situation. This is where the “process” begins; when you begin changing one thing, you have to look at the impact on the other areas of your life. In the financial planning process, “everything affects everything” so no decision should be made in a vacuum. Let’s consider the following examples:

  1. Planning to increase your insurance deductible to reduce your premiums? This may also require an increase in your emergency fund to be sure that it is sufficient to cover the deductible.
  2. Thinking about cancelling a credit card that you are no longer using? This may make your credit score go down and, if you are planning to borrow money in the near future, could cause you to pay higher interest rates.

A comprehensive financial plan is really the only way to make sure that you are aware of all necessary financial considerations for your particular situation. Making a comprehensive plan doesn’t mean that you have to take on every issue at the same time if that is too overwhelming. Remember, it is a process not a one-time event so take it one step at a time.

One of the tools I use to help people find balance in their in their financial lives is the financial wheel.1 Using the financial wheel, we go through the process of identifying their level of satisfaction in several different areas and then they take action on one area before moving on to the next. Financial distress can take many different forms and assessment tools like the wheel allow us to unpack the various financial topics and look at them individually, rather than attempt to handle everything at once.

1 this is an adaptation of the “wheel of life” used by many executive and business coaches

Saundra Davis
President & CEO
Sage Financial Solutions
San Francisco, CA


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‘Til Death Do You Part?


Thomas Jefferson’s heirs were forced to sell off much of his property to settle his inherited (and other) debt, even his beloved home, Monticello.

As if it isn’t difficult enough to deal with excessive debt while we are living, many may wonder what happens to the “big black cloud” of debt when we pass away. Well, as is the case with all financial planning questions, the answer is…it depends.

At the time of a person’s death, it is the role of the executor of the estate to gather the assets and pay the deceased’s outstanding debts according to the state’s probate processes and laws. If there aren’t sufficient assets to pay the debts, the creditors may have to charge off the debt. If there are remaining assets, the debts must be paid prior to distribution to the heirs. Some assets bypass a will or probate (insurance proceeds, retirement accounts with beneficiary designations) and are therefore beyond the reach of creditors attempting to recover a debt through the probate process.

 So what determines whether or not your estate or heirs are responsible for paying your debts?

  • Where you liveCommunity property states differ from common law states when determining the disposition of debts incurred by spouses. No two community property law states handle “separate property” (including income) exactly the same way.
  • Your relationships – In most states, relatives whose names are not on the account cannot be held responsible for debts, but surviving spouses may be (see above). With a “joint account” each account holder is liable for the debt regardless of who actually incurred the charges; however, an “authorized user” is not likely to be responsible for an outstanding balance at the death of the account holder. 
  • Type of debt– Not all debts are equal:
    • Mortgage (secured) debt is attached to the property so, even after the death of the borrower, the property is still subject to the loan and the debt must be paid (either from the estate or other means) or the property forfeited.
    • Student loan debt according to the Federal Student Aid website, may be discharged upon the student’s death, this includes parent (PLUS) loans taken on behalf of the student.
    • Credit card (non-secured) debt is both simple and complicated depending on the account ownership AND the actions of the surviving family members. The simple part is that only the account owner or co-signer is responsible for the debt and the debt will be paid as part of the debtor’s estate. Things can become complicated when surviving family members don’t know the details of the outstanding debts and don’t understand their rights under the law. 
  • Some creditors will knowingly pursue family members who are not liable for the outstanding debt so it is important to know your rights and keep documentation on any accounts that you share with other people (family, friends or business partners). There are laws that govern and protect surviving family members from unethical practices. The Credit Card Act 2009 requires that creditors provide the executor of the estate the amount due within 30 days of the request and prohibits additional fees and penalties during the settlement of the estate.
  • New Federal Trade Commission guidelines went into effect on August 29, 2011 allowing creditors to contact a wider universe of people in their debt collection efforts thus making it even more important to know your rights and obligations if you are a surviving family member. Although debt collectors are within the law to contact family members to locate the executor or administrator of the estate, they may NOT mislead the person into believing that they are responsible for the debt. Being familiar with the Fair Debt Collection Practices Act can help you better manage creditor contact.

Fortunately, there are financial planning actions we can take to avoid leaving our surviving loved ones with the burdens of our debt. Of course, we can avoid creating excessive debt or have a repayment plan if we already have debt or we can have sufficient insurance to guarantee that property we want to maintain in the family passes to our heir without a debt burden. We can also:

  • Make an inventory of all debts and include details of the creditor, account number and contact information (be sure to update outstanding balances at least annually).
  • List any joint owners or co-signers and make sure they know all of the details of the debt.
  • Review all assets and verify or update beneficiary designations where appropriate.
  • Put this information together with the will and other directives.
  • Get professional help if necessary.

These simple steps can help manage this aspect of our financial life cycle and hopefully avoid leaving our families to bear the burden of our debt when they are most vulnerable.

Saundra Davis
President & CEO
Sage Financial Solutions
San Francisco, CA


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Financial Fortitude


Lately it seems that many of our discussions around money are doom and gloom, both on the national level (global, actually) and within our own households. The recent conversations about the debt ceiling were both mind boggling and distressing to me and to most of the people I know. The hostility, blaming and aggression toward other people on “both sides” of the position felt as if there was no way to find a real solution to the financial situation our country is in right now.

This of course made me wonder about how people are dealing with financial distress in their personal lives. I read numerous blogs and articles about debt and how people “should” be dealing with debt and whether or not young people “should” go to college and incur debt for a degree that may or may not lead them to fruitful and well paying careers; it seems that we are throwing out the baby with the bath water when we make financial decisions in an extreme way. That is, we decide that we are going to create a financial fortress of absolutes that leaves little flexibility to grasp opportunities or adjust our behavior to changing times or circumstances.

I see this most in the personal debt discussion. Many blog writers and financial experts rant about being “debt free” as though debt in and of itself is an EVIL thing. I am now hearing about students that are afraid of student loans to the degree that they are questioning life-long career dreams because of the student loan story that is enjoying wide media attention these days. Now, don’t get me wrong, I am not referring to financial abuses, predatory practices, or financial behaviors that cause excessive or unmanageable debt. My concern is that people will be so afraid of all types of debt that they will avoid it in all situations, even in those situations that may have a longer term financial benefit. There are many people who would NEVER own their own home or have the career of their choice without incurring debt to achieve those goals.

One of the best choices I have made in my life was to return to school at 40+ to get a degree in financial planning. This ONE thing has changed my life and I am now doing work that I love and making a difference in the lives of more people than I can count. Certainly the student loans were frightening for me as I embarked on this new adventure. To minimize the pain, I considered the amount of debt I could handle and the number of years it would take me to pay it off (I am not quite finished yet). But I have not regretted my decision…not even once.

I simply don’t believe that financial fear is a good motivator to build financial fortitude. Creating actionable guidelines that support decision making in the face of changing or uncertain circumstances can help us stay flexible enough to explore financial opportunities while establishing firm boundaries that help us avoid financial ruin.

Consider these things when you are making choices about your financial future:

  • Set goals that match your personal values and priorities.
  • Everything affects everything, so make decisions with your entire financial situation in mind.
  • Get help when you need it – bridge the gap between what you know and what you need to know.
  • Be gentle with yourself – sometimes, creating the life you want requires using debt in appropriate ways to build wealth over time; don’t be afraid, but do make wise choices.

Making good financial decisions begins by knowing what matters most to you, your desired outcome and what you have to work with. It is also helpful to know what you DON’T want but, again, this doesn’t have to be in the form of fear or avoidance.

Saundra Davis
President & CEO
Sage Financial Solutions
San Francisco, CA


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A Blast from the Past


It is said that there is “nothing new under the sun” and when it comes to our financial behaviors I tend to believe this is true. I enjoy watching films that my grandson refers to as “gray movies.” You know the old black and white movies that remind us of the slower, simpler times before the microwave and the DVR. Most often I find myself drawn to the movies that have a money theme (surprised?) or message that is still relevant today. 

I will share a couple of examples (without spoilers of course, just in case you decide to watch them yourself). In The Rocking Horse Winner, which is based on a short story by D.H. Lawrence, an entire family is tormented by a mother’s drive for more money. The house itself became “haunted” by an unspoken phrase (or money belief) that caused the children to value the acquisition of money above all else.

Another favorite is I Remember Mama, a wonderful story of how a family collaborates to create their weekly budget and overcome some financial obstacles. There are so many wonderful lessons about money and relationships in this film as well as some practical ways to promote financial education in families.

I find that watching a film is such a great resource for exploring the impact that our emotions and beliefs have on our financial choices that I use them during workshops to prompt discussion about the financial issues we face today. In addition to being a pleasant “blast from the past,” I find the older movies can serve to remind us that, although we live in “interesting” financial times, sometimes the simple steps we take are most effective in moving us toward financial health.

Saundra Davis
President & CEO
Sage Financial Solutions
San Francisco, CA


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My Mid-Year Course Corrections


This year has been a blur. Actually, I say that every year, but I really mean it this time. Seems like just yesterday I was on a rant about the reason I don’t make New Year’s resolutions and here we are in the middle of the year and it is time for my mid-year financial check in. You may recall that I teach Financial Coaching Skills for the staff members of community based organizations and as a trainer I am often a “client” when the training participants practice their skills. Because we “practice” rather than “role play,” we ask the client (me in this case) to bring a real issue to the conversation to allow the coach-in-training to have an authentic experience. The upside is that during these practice sessions, I have an opportunity to be coached by someone who can offer an objective perspective and LISTEN to some of my financial issues or limiting money scripts. During this recent session, I was amazed (again) at what came out when the coach asked me “what financial issue would you like to discuss?” Man the battle stations…here it comes.

If you have read some of my previous blogs you know that yarn is an important part of my life and I have challenged myself to manage this line item of my budget more mindfully. I have resolved to use only cash for all purchases and to stick to the discretionary budget. While this has worked well, I have found myself buying yarn because it is “budgeted” even though my yarn stash is outgrowing my available storage space. My efforts at speed knitting fail to keep the yarn stacks at bay and my family is growing weary of having to sift through yarn skeins to find me. Maybe it is time to do something differently.

Back to the coaching session: after I explained the changes I have made in my yarn related financial behaviors and expressed my concerns that these changes alone may not be enough to help me feel “satisfied” in my pursuit of my financial goals, my “coach” then asked, “What would you like to do differently going forward?” I was stunned…I wasn’t sure I wanted to anything differently and was quite annoyed that she was using my lines on me!

So, now we get to the mid-year course correction. By the time our session concluded I had agreed that I would not spend any additional money on yarn in 2011. I also decided to add up the amount I had spent this year and add an equal amount to my second tier emergency fund between now and the end of the year. Now to my fellow knitters this sounds like a drastic step and a couple of them have threatened to arm themselves in the event I attempt to go “shopping” in their yarn stash, but having purchased yarn without restraint over the past six months (let’s not even talk about the classes), I feel ready to take this challenge on and make greater strides toward my financial goal.

Fast forward three weeks and so far I have kept my commitment and made my first transfer into the savings account this week. I feel good about this. We use Stickk.com, a social media tool (you do remember that I am a techie right?) to create the commitment and I can easily keep her posted on my progress through the commitment journal since she is my “referee.” She also sends me reminders to “report in” using a free automated text message service. Both of these tools are great and I am enjoying having the additional reminders and support.

Now that we are halfway through 2011, are there any areas of your financial life that could use a mid-year course correction? Let me know if you need a referee.

Saundra Davis
President & CEO
Sage Financial Solutions
San Francisco, CA

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