Why You Shouldn’t Join a Multi Level Marketing Company (and What to Do Instead)

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Why Multi-Level Marketing Companies are the Wrong Choice for the Aspiring Entrepreneur

A lot of the topics I discuss on this site involve ways to effectively spend and allocate your money, whether that be though repaying student loan debts, choosing investments, or buying a new home. One thing that’s not talked about enough, though, is how to actually make more money. Increasing your income is arguably the most important factor in your “financial equation”, and one that is often minimized by many in the financial industry. Recently I’ve received a lot of questions about how to increase income, whether that be through your current career or starting a side hustle. One question stood out and brought up some points that may be important for you to consider:

“I’ve noticed some of my friends leaving their jobs to start selling makeup or skincare products for a well-known Multi-Level Marketing (MLM) company.  I always thought these types of businesses were unreliable, but more and more people I know are joining them and they seem to be doing well. A friend has asked me to join her team…should I?”

Now, this may sound like an appealing offer — to be your own boss and make money on your own hours — BUT…

I would recommend staying far away from these MLM sales organizations. I completely support the entrepreneurial spirit, and wanting the work freedom these types of businesses claim to offer, but you’re much more likely to find success and fulfill that spirit in other ways. The best way, in my opinion? Get involved in or even create your own bona-fide startup!


What’s a Multi-Level Marketing Company?

Before going in to why I’m so pessimistic about these “businesses”, it’s important to talk about what exactly they are, because most people aren’t entirely sure. Unfortunately, the opportunities most companies depict couldn’t be further from the truth for the majority of their “business owners”; their business models make it hard to identify the full job responsibilities on the surface. To add to the confusion, this type of business goes by many names, including Multi-Level Marketing, Direct Selling, and Network Marketing. If you find a brand that identifies as any of these things, consider that your first warning sign.

What’s the difference between a “normal” company and an MLM?  In a “normal” company, the company makes its revenue (for the most part) in one way: by selling products or services to customers.  MLMs, though, are different. If you “build your business” by working for an MLM, you make money in two ways.  Some of your revenue comes from selling their products… but most of your income comes from recruiting salespeople to work below you. MLM companies are common in industries such as makeup and skincare, haircare, nutrition, and sometimes even insurance. (Fun fact — if you look back and some of my more controversial posts about the insurance industry, you will find some comments from one of the biggest MLM insurance companies out there.)

Before making the career change to an MLM, or any career change for that matter, you should be sure that you are fully prepared to do so. Just like any other transition to a new career, jumping in to join an MLM requires planning. You need to make sure you are financially ready for whatever may come with the change — because sometimes it can bring on more financial hardships than expected. If you are unsure how to do this, take a look at my free Quit Your Job guide, where I break down the steps on how to prepare and how to know when you’re ready to make the shift.


How Do I Know if a Company is an MLM?

With so many different business structures out there today, it can sometimes be difficult and confusing to identify which companies actually operate with an MLM business structure. If you see these things in a company, they are most likely an MLM:

Advertising opportunities to “be your own boss” or “work few hours but get big pay”. These types of companies love to highlight that their independent distribution structure means the distributors have huge freedom in when and how they work. While this may be true, using it as a selling point is slightly misleading; working few hours and earning big pay only comes for a small few in the company.

Their products are not sold in stores. Oftentimes the products these companies are selling are not available for purchase anywhere else, making them the sole distributor. Most of the time you will not even see these companies on Amazon, which is shocking in this digital age where so much of our shopping and purchasing is done online. These products are typically purchasable through distributors (yes, these are those people in your Facebook feed posting about buying the latest, most innovative nutrition supplement).

They don’t just want you as a customer; they want you to sell it as well.  This is probably the biggest giveaway of an MLM company. When those selling the product are asking you to join their team and sell as well, know that their motivation comes from the ladder structure I mentioned earlier. Any company where your ability to recruit new employees has an effect on your income is one you should probably avoid.


Here’s Why Joining an MLM is a Mistake

Now that we have a clearer image on what exactly this type of company looks like, let’s address why joining one might not be the right move.

These companies have a very dubious business model.  A business structured so that your earning potential stems from recruiting people to sell below you is not sustainable. The relevant regulators in the US haven’t come out and outright said that MLMs are pyramid schemes… but they’ve come very close to.  Additionally, these companies usually have a “minimum monthly spend” amount for their employees to maintain an inventory of the product. They must purchase a specified amount each month in order to stay eligible as a distributor. Any company worth working for will not force you to spend money to buy products each month.  And indeed, these spending requirements are one of the primary reasons that so many people drop out of MLM organizations after only a few months.

The economic rewards promised are highly unlikely. In fact, the majority of MLM workers actually lose money (oftentimes due to that pesky minimum monthly spend mentioned above). The median MLM distributor often only makes around $2,500 a year, rather than the big bucks these companies advertise.  And (not to give you horrible flashbacks to 10th grade math class), if the median employee only makes about $2,500 per year, that means that half of the distributors make less.  The people who are making hundreds of thousands of dollars a year are the 1% of the 1%, and usually got into the company very early. It’s highly unlikely to have the same success as you see in the testimonials on their sites.

Along with that, there are only a tiny percentage of people that stick it out long enough to even get to a point where that would be possible. 50% of people drop out of MLM businesses in the first year, and only 10% stay longer than 5 years. To put that in perspective, it’s been found that 50% of small businesses last 5 years or more; that is a significantly higher success rate, and is even more meaningful when considering the fact that small businesses often have a reputation of being hard to maintain in the first few years.


Don’t Quit on Your Entrepreneurial Goals… Just Don’t Join an MLM!

It is highly commendable to want to pursue a more do-it-yourself career, or position yourself in a job where you have flexibility and entrepreneurial abilities. If being your own boss appeals to you, do it, just don’t do it by selling makeup or overpriced energy drinks and by recruiting other salespeople to join you.

A little personal blurb…I had an experience recently at a networking event with an independent distributor for a major energy drink MLM. This woman was very knowledgeable not only on the product, but on health and wellness in general. She knew her stuff and had a lot of great ideas, but everything she said was brought back to the energy drink she wanted to sell. Eventually, I looked right at her and said “ This product really isn’t going to fix the problems you just identified. But, I’ll hire you on the spot, right now, to be my health and wellness coach”. She immediately shook her head, and continued to insist that taking XYZ product would solve my issues. I explained to her that I wasn’t interested in the company, I was interested in her, but she would not budge. Her final statements to me included “Well, why don’t you take a few samples and think it over.”

Here’s the thing. She had a lot of great health insights, and is someone I gladly would have worked with as a health/nutritional consultant, or even a personal trainer. How much would I have been willing to pay her for that kind of service? A lot more than what she would have gotten paid for the energy drinks. Probably 10 to 15 times more. But, she couldn’t see it. I told her, multiple times, that I’d pay her more to have a different type of work arrangement, but it didn’t go anywhere.


What’s the Point?

This situation highlights the fact that for every MLM out there, in any industry, there is a business you could start with an equivalent skillset. Looking into health and wellness? Become a nutritional coach or personal trainer. Want to work in makeup and skincare? Be a makeup artist or skincare consultant. From interior design to hairdressing, ultimately you can become a “consultant” in whatever industry it is you are looking into.  And while starting any type of business involves taking some risks, the odds are very good that you’ll be better set up for long term success than you would be by joining the equivalent MLM. Take it from me – being your own boss for in a real business is awesome.  It’s a lot of hard work, but if you have the drive and passion, I have all the faith in the world that you can make it happen for yourself.  If, that is, you prepare appropriately.


If you’re still unsure of how to start a transition like this, you can download my (brand new!) guide on How to Quit a Job You Hate to help you be as ready as possible to take the leap. Still have questions? I am more than happy to chat with you. Feel free to contact me and we can set up a call!

Why Financial New Year’s Resolutions Don’t Work

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“What’s it like to work with a financial planner?”

It’s a question I get asked all the time.  When most people think about a stereotypical “financial planner”, they tend to immediately think of an investment manager.  The conversations focus solely on investment management strategies, how to “beat the market”, and sometimes life insurance sales.  

While any good financial planner will touch on investments and insurance as part of a comprehensive financial strategy, this isn’t what working with a (good) financial planner is like, at all.  

How do I describe what I do as a financial planner?  Quite simply: I work with my clients and their finances the same way a personal trainer works with someone at the gym.  While we work with different subject areas – trust me, you don’t want me giving you physical fitness advice – personal training and financial planning have the same three key job requirements:

Help you get clarity on what you want to achieve. In the gym (and in everyday life), it is important to define exactly what you are looking to get out of the experience.  One of the most important steps in creating a financial plan is taking a step back to reflect on what’s most important to you in your life, and defining specific financial goals to help you realize that vision.  A personal trainer can’t help you improve your race time unless he or she knows whether you’re trying to run a 3k or a marathon. The same applies to your finances!

Develop and implement an effective way to get from Point A to Point B. Just like with physical growth, this process is different for everyone. It is important to ensure that the methods you establish to help you save money, pay off debt, or make other financial changes are effective for your life in a way you can consistently stick to. It’s vital to follow the most efficient path from where your finances are now to where you want them to be in the future.

Hold you accountable to your best intentions. This is the tactic I find MOST important, as I see it to be the biggest deal-breaker in whether or not you find success in the financial plans you make. Individuals who invest in personal trainers at the gym often see more consistent and continued progress than those who do not. Why? Because they make a commitment to the personal trainer that they will show up to the gym regularly, and because the trainer will be able to tell if they haven’t been making progress. I want to spark that same level of motivation in my clients when it comes to financial responsibility. I do what I do because I want to make sure that they show up for themselves and can move things forward at the pace they want to see.

If you want to learn more about the benefits of having a financial “personal trainer” and how I can help you get on track with your financial goals, contact me and we can set up a free introductory phone call!

Now, in order to stay true to my word and hold you accountable, I’ve got to ask…

How are your New Year’s Resolutions going?

If they’re still going strong, congratulations! It is not an easy feat, and you’re one of the few who have successfully carried their New Year’s transformations beyond January. But if you are like most people, your resolutions probably haven’t been top of mind for a few weeks now. In this post, we talk about why New Year’s Resolutions, particularly financial ones, do not work for most people and what you can do to make sure you actually make financial progress in 2019.

Why Most New Year’s Resolutions Fail

Statistically, over 75% of people give up on their New Year’s Resolutions by February 1 — and that is for ALL resolutions. Resolutions specifically relating to money are often the hardest ones to keep.  Aspiring to make improvements to your financial situation is a great goal, but unfortunately New Year’s resolutions are typically an ineffective way of doing so. Why?

Financially, January (and December) tend to be the toughest months of the year.

Coming out of the holiday season, many individuals are stuck with large bills to pay from all of their gift-giving and travelling. If you can relate to this feeling, know that this is 100% normal.  But if you start preparing now, next year can be much more manageable! Starting to make changes in your finances before you’ve paid off your holiday credit card bill can be disheartening. What’s more demoralizing than starting new financial habits, making some improvements, and then logging into the computer later that month to pay a massive credit card bill? You’re much more likely to stick to a goal if you can see a few “quick wins” early on.  

To add to that, if we simply look at basic human psychology, we see that people tend to stress over financial losses much more than celebrating gains. Case in point: when I talk to clients about their investments, they often quote investment gains as a percentage – “My account is up 6% this month” – and they quote discussions about investment losses in dollars – “My account is down $600 this month”.  The reason? The losses feel more real to us. Psychology tells us that we often need to gain $2 to emotionally recover from a $1 loss. Because of this, those post-holiday spending bills can make it harder to see the positive progress and can dampen the motivation to continue towards your goal.  

January 1 is really just another random date.

If we look at it logistically, there is no difference between January 1 and any other date on the calendar. We often feel more motivated to makes changes at the beginning of the year because we feel like we are “supposed” to, but this self-motivation doesn’t last. Once a few days go by, we often lose the motivation brought on by the start of the calendar year, and January 7th feels more like December 7th than January 1st. At the end of the day, your self-motivation to make changes at the New Year is probably the same as at any other point in time.. There’s nothing wrong with starting on New Years if you’re ready, but if you’re not, don’t feel pressured to!

January is a difficult month in general

In the days and weeks following New Years, many people are still coming off of their “holiday high” of time spent celebrating and relaxing. Getting back into work and the stresses of regular life can often put a strain on individuals that greatly decreases the motivation to stick to resolutions. Lots of people tend to cave and give in to guilty pleasures (I can’t say I haven’t done this as well), which can throw you off track or cause you to stop altogether.

How to Set Financial Goals that Actually Work

Because of these things, many people procrastinate, become frustrated, or completely give up on their financial resolutions by this time of the year. However, this doesn’t have to be the case! Here are some strategies to set financial goals that actually stick.

  • Set your goals NOW.  The beginning of the year (or month, or week) is an arbitrary start time.  Why wait when you can act on your best intentions now?   
  • Be specific. Understand what is really important to you, and why. When speaking to clients about this, I love to dive deep into the “why” behind the changes they want to make; it exposes the motivations and can create a driving force for that individual. Once you think you’ve figured it out, ask yourself “why” one more time. You might be surprised and what you’ll learn about yourself.  Ultimately, this is important because the reasons behind the goals you set will be what compels you to stick with them.  “Self-motivation” doesn’t always work in the long term, but focusing on why you want to make a change works incredibly well.
  • Break down your goal into small, manageable steps (and focus on the first step!) For example, if your goal is to buy a home, break it down into subgoals: figure out how much you can afford, review credit reports, talk to multiple mortgage lenders, etc. By doing this you can create a timeline that is actually doable; and not only that, but by focusing on one small step at a time, you can make a daunting challenge seem much more manageable. Simply focusing on the first step along the way makes your goal much more realistically achievable and can get you excited about tackling that task.
  • Set SHORT deadlines. After you break down your goal into steps, set deadlines that encourage you to act now! Whether that be a week or a month (no more than that), setting short deadlines will keep you focused on the task at hand and actually accomplish what you have set out to do. Oftentimes, setting a deadline too far in the future, or not setting one at all, can lead to procrastination and avoidance. And when that happens, you’re back to facing the same problem you had when you set your New Year’s Resolution.
The Biggest Motivator

All these steps will help, but perhaps the biggest piece of advice for those of you out there struggling to stick to your financial goals is to find an accountability partner.

Whether that be a friend, family member, or coworker, having someone else to check in on you consistently and ensure you’re on track is the best way to keep motivated. Remember, while some people have a lot of success keeping up an exercise program on their own, it’s the people who hire personal trainers who see the best results.  Part of this has to do with the plan they help you develop, but personal trainers keep you accountable and make sure you’re doing the work week in and week out.

The same is true for finances. I am here to help guide, support, and keep you on track – but it doesn’t necessarily need to be a planner, either. Our friends, coworkers, and family members can be great accountability partners as well.  Now go find that person in your life, and set your goals together!

If you would like help refining and setting your goals to start NOW, and getting started on making real changes today, I am more than happy to set up a free introductory call with you. If you’ve already got a few, let me know what your goals are in the comments below!

Can You REALLY Get Public Sector Loan Forgiveness?

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Fears about the long-term viability of the Public Sector Loan Forgiveness (PSLF) have surrounded the program ever since it was established in October 2007.  In fact, we’ve discussed these concerns on the blog before!  But since we last discussed the future of PSLF, the initial round of forgiveness data seems to validate a lot of the concerns I last discussed in 2017, as the vast majority of applications for forgiveness were rejected in 2018.

That being said, most of this fear is misplaced.  There are three primary requirements you must meet in order to achieve loan forgiveness under PSLF – and unfortunately, the “fine print” is confusing for each of these three requirements, and the needed information historically hasn’t been clearly communicated by federal loan servicers.

At the end of the day, PSLF is a viable option for you – as long as you make sure you meet the three requirements, to the letter.  And despite scare tactics put out by companies that make money when you refinance your student loans – which, incidentally, will disqualify you from PSLF – borrowers who are currently in repayment are not threatened by any future changes to the PSLF program.

If you’d like to learn more about how to make sure your loans are on track to qualify for PSLF, download our free Student Loan Guide to learn more!

What is Public Sector Loan Forgiveness?

Before diving into the loan forgiveness provisions of PSLF, I want to give you some background on the Public Sector Student Loan Forgiveness program as a whole. This program was created to encourage citizens to pursue government jobs in exchange for loan forgiveness –the main selling point being that working in one of these jobs for 10 years would qualify you for complete loan forgiveness.

Unfortunately for the government, the PSLF program has essentially been too successful; not only did individuals in many different fields pursue these types of jobs in government in search of the benefits this program offered them, but a growing number of graduate and professional students accepted jobs at teaching hospitals and other non-profits seeking forgiveness for 7+ years of student loan borrowing.  The government didn’t intend to open this program to the volume of people currently seeking loan forgiveness, which has prompted several proposals to change the program over the years.  Critically, though, these changes will only affect future borrowers. If you are currently repaying loans seeking PSLF forgiveness, this should not be a cause for concern.

What Problems Face the PSLF Program?

When this program was first launched, the specifications and requirements for forgiveness were very vague and poorly communicated.  Additionally, Congress and the Department of Education have made significant changes to student loan policy several times over the past 15 years.  All of these changes were well-intentioned, but they made it hard for borrowers to keep up to make sure they had the right loans to qualify for PSLF forgiveness, and that they were on a qualifying repayment plan.  This particularly affects borrowers who had taken out student loans prior to 2010.

Unfortunately, the changes in student loan policy and poor communication of the requirements to applicants meant that almost 100% of people were rejected for forgiveness the first year it was offered.  And the fact that loans only started to be forgiven over the past year and a half is enough to raise concerns about the program by itself, at first glance. It is important to note, however, that this program began in October 2007. Because of the 10-year forgiveness requirement period, the first round of applicants eligible for forgiveness only submitted their applications a little over a year ago. To potential applicants for the program, seeing that the rejection percentage was so large and the total number of people who have had loans forgiven was so small, it’s completely understandable that  individuals are afraid to count on the application process altogether simply because they associate the program with failure.

But, here’s the catch: the PSLF program is not a failure, and it won’t be for anyone currently seeking loan forgiveness who reviews the detailed program requirements  PSLF is still in its early stages and there are many reasons to expect that the program will be successful for you in the coming years:

  • This is a blessing and a curse, but the government has only rejected applicants because their loans, payments, or jobs did not meet the requirements for forgiveness. Unfortunately, due to the poor communication about the program requirements, many individuals who thought they were eligible for PSLF actually were not. But the good news is that if you do make sure you comply with the “fine print” requirements for PSLF, you can expect loan forgiveness. With my help, we can ensure that you are meeting all the requirements for eligibility and are set up on the right path towards success.
  • Many people experience issues with the student loan servicers that process the payments. These companies often make a lot of mistakes processing loans that can incorrectly calculate your monthly payment or put your eligibility for forgiveness at risk. For the average millennial, it’s very difficult to identify and fix these potential issues.  With the help of a student loan planner (like me), this can be much more manageable.
  • I expect the number of accepted PSLF forgiveness applications to increase significantly in the coming years.  As I mentioned, the government did a terrible job getting people the information they needed to know how to qualify for the program.  That has gotten better over time, and it’s much easier for students who entered college in 2011 or later to have loans that automatically qualify for the program.  Just because so many people have been rejected in the first year or so of forgiveness applications doesn’t mean this will continue.
How Can I Make Sure I Get Loan Forgiveness?

Despite what you may have heard, qualifying for PSLF can be MUCH easier than many think… you just need to do your homework. Student loan policy has developed over time, and the changing options mean that additional steps may be required to maximize your likelihood of forgiveness.  If you focus on meeting three key requirements, you can feel good about your chances of achieving loan forgiveness.

As long as you make sure you are on track through each step, attaining forgiveness through this program is possible. I have laid out the three major steps you need to take right from the start to optimize your possibility of public sector loan forgiveness:

  1. Make sure your loans are eligible. The biggest myth around PSLF, that gets the most people into trouble, is assuming that every federally-issued student loan qualifies.  Not every type of federal loan qualifies for Public Sector forgiveness, so you should review your loan documents to verify. If the loans you currently have were distributed before 2010 (these type of loans are classified as “FFEL loans”), or are categorized as Perkin’s loans, you will need to consolidate them through the federal government to make them eligible for PSLF.  For those of you who have not yet started repaying your loans, be sure to check that your loans meet the eligibility requirements
  2. Make sure you are on an eligible payment plan. Often, individuals don’t realize that the payment plan they are on may be hurting their chances of loan forgiveness or reducing the amount that will be forgiven. Critically, you won’t get credit for any time where any of your loans are in deferment or forbearance.  While the Public Sector Loan Forgiveness program is often associated with a forgiveness time period of “10 years”, the real requirement is represented as 120 monthly payments.  If you make one payment a month for 10 years, this gets you to the required number of payments… but if you skip payments or place your loans into deferment or forbearance, you need to “make up” that payment in the future before you can apply for PSLF.  Additionally, “graduated” or “extended” payment plans won’t qualify as PSLF-eligible payments, either.  If you are seeking PSLF, you should make sure you are either on an Income-Driven Repayment plan or the standard 10-year repayment plan.  (And as a side note, you should make sure you are on the right Income-Driven Repayment plan.  In my experience, student loan servicers often put you on sub-optimal plans unless you specifically request the “right” one for you!)
  3. Make sure your job is qualifying and eligible. This loan forgiveness plan offers benefits to a wide range of professions, but it is important to confirm that your position qualifies. To be more specific, qualifying jobs include working for one of the following types of organizations:
    1. The Government
    2. A 501(c)3 Nonprofit
    3. The AmeriCorps or Peace Corps
    4. A Public Service Organizations.  Generally, non-profits as a whole will qualify.  But, there are a few exceptions.  Specifically, even if you work for a non-profit, jobs that are political in nature or labor union jobs are not eligible for forgiveness.

Once you understand these three criteria and confirm your eligibility, you can feel confident that you are on track for PSLF.

What is the Future of Public Sector Loan Forgiveness?

As I mentioned, a lot of the fear around PSLF has to do with future changes to the program.  And to be candid, this program is likely to see tweaks to it in the future. Congress has already tried to make changes to this program since the Obama administration, and I believe some new changes will come to fruition in coming years. Both Presidents Obama and Trump have discussed putting some type of limit on how much can be forgiven by the program.

Currently, Republicans in Congress has introduced the Prosper Act, which would completely eliminate PSLF altogether.

However, this is not a cause of concern for people who currently have student loans. This change would only affect new borrowers, not those who are already pursuing forgiveness. These forgiveness provisions are often written into borrower’s loan agreements; it will be a massive legal fight for the government to take these provisions away from current borrowers, and there is strong legal precedent for changes in student loan policy to only affect future borrowers.

So, if you or someone you know is considering going back to school with the goal of achieving loan forgiveness through PSLF once you graduate, this should be a legitimate concern. But otherwise, there is no need to fear.

The Key Takeaways

From all this information, there are two big takeaways:

  1. Public Sector Loan Forgiveness is very attainable as long as you do your homework and stay on track. Take the time to make sure that your loans, payments, and job qualify for the program.  And each year, you should recertify your income and file the Employment Certification Form to prove you work in a qualifying job.
  2. Recognize the conflicts of interest in the student loan industry.  As I mentioned at the beginning of this post, I was inspired to discuss the fears about the future viability of PSLF am discussing this topic mainly because of an article sent to me by a private student loan refinancing company.  Ultimately, this is a pretty good overview of the program, but the section in the middle calling PSLF into question is misleading and intentionally stokes fear about the future of the program.  Remember, this company is a private student loan lender, meaning they make their money by taking loans eligible for PSLF and refinancing them into ones that aren’t. As long as you follow the PSLF program requirements, there is no need to be concerned about achieving forgiveness through the program.  And above all, if you’re seeking PSLF forgiveness, don’t refinance your loans!
What’s the Next Step?

If you would like to learn more about this program or your eligibility, I encourage you to download my Student Loan Guide to give you some help in determining whether or not you are on track to qualify for PSLF. I am also more than happy to set up an introductory call to walk through any questions you may have!

The Best Strategies to Save for Retirement

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What are the best strategies to use to save for retirement?  In this video and in the summary below, I respond to a few questions sent to me regarding the “right” ways to save for retirement.  Specifically, we discuss these three questions:

  • Presuming that a 401(k) alone won’t be sufficient to fund your retirement, what are the “next best” places to put your retirement money?
  • Pre-tax vs. Roth retirement accounts- what’s the best option to choose?
  • How much do you really need to save for retirement?

(Bill’s Note: The video below was originally recorded as a Facebook Live broadcast on November 26, 2018. If you want to participate in our next Facebook Live session, which are normally held every Monday at 8 PM Eastern, head to our Facebook page, hit “like”, and you’ll get the announcement the next time we go live.  Most of the content comes from questions submitted by my readers and viewers, so if you have a topic you’d like to hear more about, send a message to our Facebook page and we will get back to you as soon as we can!)

The Three Tiers of Retirement Savings

Not all retirement savings accounts are created equal.  If your goal is to save aggressively for retirement, you’ll likely need to make some decisions about where you should be putting your money for retirement. 

I like to think about retirement savings accounts in the context of three different “tiers” that you should contribute to, in the following order:

Tier 1: Employer-Sponsored Retirement Accounts

If you have access to a retirement plan through your work, this should almost always be your first priority to save for retirement.  Typically, these accounts are structured as 401(k) accounts (for private sector workers), 403(b) accounts (for non-profit and education workers), or 457 accounts (for government employees).

If you don’t have access to a 401(k), 403(b), or 457 account through your work, you should skip to Tier 2, with one caveat.  If you are self-employed, there are a myriad of other retirement account options you could set up.  We’ll discuss these in more detail another day.

Assuming you do have a 401(k) or similar account at your job, there are several things you should consider:

  • If your employer matches your contributions, you should, at a minimum, contribute enough to receive the full match.  This is the closest thing to “free money” that you’ll ever get, so take advantage of it!
  • One of my favorite strategies to help people find ways to save more for retirement is to increase your 401(k) contributions by 1% every time you get a raise at work. You won’t notice the money you’re “missing” from your paycheck, since your paycheck is going up, anyway!  But you’d be surprised how big an effect thee gradual changes can have.  By the time I left my corporate job at PwC before starting my own business, I was contributing 12% of my paycheck to my 401(k), simply by following this strategy.
  • Most employer-sponsored retirement accounts are pre-tax accounts.  In other words, you don’t pay income tax on the money you contribute to these accounts (and in return, the money will be taxed when you withdraw funds from these accounts during retirement).  But “Roth-style” 401(k) plans have become increasingly common in recent years, which work the exact opposite way- you pay income taxes on your contributions today, but can withdraw the money tax free in retirement. If you have access to a Roth 401(k), you should seriously consider utilizing it.  More on Roth accounts in a bit.
  • Finally, make sure you know the maximum contribution you’re allowed to make to your retirement accounts every year.  For 2019, the max you can contribute is $19,000 per year (assuming you’re under the age of 50).  Typically, the IRS raises this limit each year (it was $18,500 in 2018, for example.)

But, as the three questions at the beginning of this post strongly implied, 401(k) savings alone typically aren’t sufficient to completely fund your retirement.  So, after setting up your 401(k) contributions, what should your next step be?

Tier 2: Individual Tax-Advantaged Accounts

As you have probably noticed, a key component of optimal retirement savings strategies includes managing taxes on your investments and retirement income.  As a result, you should always look for tax advantages in your retirement savings strategies, whether they’re traditional accounts (no taxes now, but you pay taxes during retirement) or Roth accounts (pay income taxes now, grow and withdraw the funds tax free in retirement). 

There are several different options available to you in Tier 2.  And my favorite one might surprise you.

Health Savings Accounts (HSAs)

Outside of a 401(k)/403(b)/457, HSAs are my absolute favorite way to save for retirement.

Why?  Because HSAs are essentially the last complete tax shelter that exists in America.

When choosing between a Traditional or Roth IRA, you pay taxes on your contributions at some point; whether it’s today or during retirement, your money gets taxed eventually.

But as long as you use the funds in your HSA for qualifying medical expenses, the money you contribute and invest in an HSA is never taxed.  Presuming your HSA account allows you to invest the money in your account, this can be an incredible savings vehicle for retirement.

This probably isn’t a shocker for you, but one of the primary challenges in preparing for retirement is making sure you have enough cash on hand to support your medical bills as you get older. With the rising cost of medical care, using an HSA to save for these retirement expenses is an incredibly efficient way to prepare for this.

Of course, there are a few qualifiers here:

  • You’re only eligible to open and fund an HSA if you have a high-deductible health plan. And if you do, you need to make sure you have a sufficient emergency fund to meet your deductible if you want to use your HSA for long-term investing.
  • The maximum contributions you can make to an HSA are relatively low.
HSA Contribution Limits for 2018 and 2019

HSAs are commonly overlooked as a retirement savings vehicle… but they really shouldn’t be.

NOTE: HSAs and Flexible Spending Accounts (FSAs) are not the same thing.  You should not be using FSAs to save for retirement, because you need to use the money in FSAs each year or it goes away.  Conversely, you are allowed to accumulate money in an HSA.

Traditional/ Roth IRAs

In 2019, you can contribute $6,000 to either a traditional or Roth IRA (up from $5,500 in 2018). Although, it’s worth noting that you have until April 15, 2019 to make that $5,500 contribution to your IRA for the 2018 tax year!

There are several questions you need to answer to determine which is the right type of account to use. Here’s how to decide which one to contribute to:

Can you deduct a traditional IRA contribution?  We’ve already established that “traditional” retirement accounts allow you to deduct your contributions from your taxable income this year.  But here’s the catch: if you have a 401(k) or similar account at work, you likely can’t deduct your IRA contribution on top of that.  The rules are somewhat complicated, and you should seek professional advice to verify your ability to deduct your IRA contributions.  But, this should be the first question you answer before making your decision.

Are you eligible to contribute to a Roth IRA? “Making too much money” is generally a good problem to have.  But, it can make you ineligible to directly contribute to a Roth IRA.  The table below shows the income restrictions on making direct Roth IRA contributions. 

Roth IRA Income Contribution Limits: 2019

Two caveats about this:

  1. These income restrictions do not apply to Roth 401(k) plans.  So, if your employer offers one, it is worth considering regardless of your income levels.
  2. You technically can still get money into a Roth IRA utilizing a Roth IRA conversion strategy. This is a very complicated process and it’s important to make sure you do it the proper way to avoid trouble with the IRS, so you should seek professional help before attempting this on your own.

When will your tax rate be higher: now, or during retirement?  This is the fundamental driver of the Traditional-or-Roth IRA decision.  Simply put, you want to pay taxes when you’re in a lower tax bracket.

If you expect your tax rate to be higher in retirement than it is now, you should pay taxes on your income now and withdraw it tax free in retirement by using a Roth IRA.  If, on the other hand, you expect your income (and income tax rate) to be significantly lower when you retire, a Traditional IRA is probably the right choice for you.

However, this is more complicated than it appears at first glance.  Remember, we’re not looking to compare your tax rate today with what your tax rate today is for your expected retirement income level.  You need to think about how tax rates will change between now and when you retire to make this decision.  Which, given that your retirement date is likely decades from now, is notan easy task.

My personal belief? Particularly after the passage of the Tax Cuts and Jobs Act in late 2017, today’s income tax rates are at all-time lows.  Which makes me inclined to believe that tax rates are likely to be higher when we retire, making Roth IRAs a great option for young people today.  That’s just my opinion, of course; I don’t have any more of a crystal ball to predict the future than you do.  But, particularly if you’re close to exceeding the income limits, you should seriously consider a Roth IRA.

How much flexibility do you need?   One final thing to consider: Roth IRAs are much more flexible than traditional IRAs.  While I don’t typically recommend that you withdraw money from your retirement accounts before retirement, you should know that you can withdraw your contributions to your Roth IRA at any time, without penalty. (As long as your investments haven’t gone down significantly in value of course- you can’t withdraw something that isn’t there!)  You can’t withdraw the investment earnings in your Roth IRA without paying a significant penalty, but you canwithdraw your contributions. 

Make Non-Deductible Contributions to Traditional IRAs

Even if you can’t deduct your traditional IRA contributions, it’s a strategy worth considering.

Even though you won’t be able to deduct a $6,000 (2019 maximum) contribution to a Traditional IRA now, and you’ll pay taxes when you withdraw the money in retirement, there’s still one tax benefit you can take advantage of:  between now and when you retire, you won’t be taxed each year on the investment earnings in your account. 

You might be losing the “primary” benefit of a traditional IRA if you can’t deduct the contributions, but at least you’ll save on taxes every year between now and when you retire by sheltering your investments in this type of account.

Tier 3: Regular Investment Accounts

You should be investing your retirement savings into something.  Which means that once you’ve run out of retirement account options, your final option is to invest in a regular brokerage account.

There are no tax benefits to holding this type of account.  The money you put into this account is after-tax money, your investment earnings will be taxed every year, and you’ll be taxed when you sell your investments.  But, the primary challenge in saving for retirement is making sure your money grows at a faster rate than inflation.  By investing your money as opposed to keeping it in a savings account, you give yourself the best possible shot to make sure that happens, even if there aren’t specific tax benefits for doing so.

What Shouldn’t You Use to Save for Retirement?

In a nutshell: you shouldn’t use permanent life insurance or annuity products to save for retirement. 

I’ve written at length before about why I hate permanent life insurance as an investment vehicle for retirement.  It might come with tax benefits, but the costs of these products far outweigh the benefits for the vast majority of people. 

And for young people, annuities are even worse. Until you’re at least 50 years old, you shouldn’t even consider purchasing an annuity.  And even then, there are still probably better options for you.

I’ll probably do a whole separate article about why I dislike these products.  But until then, if you’re contemplating using life insurance or annuities as a retirement-savings vehicle, you should seek advice from a third party who doesn’t sell these products for a livingto make sure it’s the right fit for you.

How Much Do I Need to Save For Retirement?

Unfortunately, there’s no generic answer I can give to this question.  Everybody’s retirement savings needs are different, so you should work with a financial planner to develop a retirement plan specific to you and your vision for your life to answer this question.

Simply put, the way you want to live in retirement significantly impacts the math on how much you need to save.  Consider two different families:  one of whom wants to purchase a vacation house on the beach when they retire, and the other wants to sell their primary house, downsize to an apartment, and buy an RV to travel the country.

Which person will need more money to support their vision for their life in retirement?  All other things equal, the first one.

You need to develop your own retirement savings plan to determine how much you need to save.  If you want to learn more and get this process started, I encourage you to book a free breakthrough session with me so we can discuss more and start developing your plan of action. 

The Pacesetter Planning Personal Savings Program

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I’m excited to announce the launch of the Pacesetter Planning Personal Savings Program.  The objective of this program, beginning with a four month pilot group on January 1, 2019, is to help you double the amount you’re saving every month.

If you’re interested in participating in the pilot program at a 70% discount, please take 2-3 minutes to complete this application by Wednesday, November 21.  

In the video below, you will learn:

  • Why I’m so excited about this program, and the results you can expect if you participate
  • How the Pacesetter Planning Personal Savings Program works
  • How to participate in the pilot group of the program at a significant discount.

Program Results

I find that about 60% of the value I bring to my comprehensive financial planning clients involves helping them save more on a monthly basis, and helping them figure out where they should be putting their savings.  Because I have seen the enormous value of increasing savings rates in the lives of my clients, I want to create a way to work together that helps with this as a standalone service.

But ultimately, while we call this a “Personal Savings Program”, merely increasing your savings rate is only a small part of what this program will do for you.  By getting your cash flow under control and using your money with purpose and clarity, the potential results you will experience are countless.

  • This is how we gain confidence and reduce anxiety about our financial situation.
  • This is how you can go from being able to afford buying a house in 6 or 7 years, to buying a house in 2 or 3 years.
  • This is how you can go from retiring in your 70s to retiring at 65.
  • This is how you can get the confidence to quit a job that’s burning you out so you can do work that you truly enjoy, even if you need to take a paycut.
  • This is how you can save your money to buy the memories and experiences you want in life.

The “process” of the Pacesetter Planning Personal Savings Program might be about budgeting and banking structures, but the results you’ll get are far more important.  Your results, of course, will be unique based on your hopes and dreams for the future, and the state of your finances today.  

But ultimately, this program is about decreasing the regrets you might have at the end of your life, and increasing the kind of memories you want to have with your friends and family.

Program Details

The pilot group of the Pacesetter Planning Personal Savings Program will launch on January 1, 2019 and will run for four months.  I am expecting to officially “launch” the program to people outside the pilot group on April 1. 

But even though we won’t officially start tracking your savings until January, we’ll meet in December to get you set up on the program.  After all, we need to be ready to hit the ground running on New Year’s Day… but the holiday season is not the right time to start trying to increase your savings! 🙂

Quantitatively, the goal of this program will be to help you double your savings rate.  This, of course, isn’t a “guarantee”- hitting this type of goal will depend on your degree of participation in the program.  But, that’s the sort of improvement we are shooting for!

(I should note that this program is modeled off of a similar program developed by an Australian firm – with permission, of course! –  and they find that their clients are able to increase their monthly savings rate by two or three times the savings rate of the average Australian.)

Three Program Components

1. Budgeting

You probably saw this coming.  It’s hard to talk about increasing your savings rate without talking about budgeting.  

I’ve talked at length in the past about why most people fail at budgeting.  So you shouldn’t be surprised to hear that this program is designed to address these challenges. 

We’re going to spend some time developing a realistic budget for you (without giving up your social life and entertainment expenses.)

The goal here isn’t to cut spending across the board, it’s to make sure we’re directing enough money to the things that are important to you, both today and in the future, and making sure that you’re held accountable to these best intentions.

And we’ll spend some time helping you identify what you want to be saving for, too.

One final note on the budgeting component of the program: I’m not going to tell you how much you can spend, and how much you can’t spend.  This program isn’t a dictatorship, it’s a partnership. 

You’ll be responsible for taking 15-20 minutes at the beginning of the program to complete a “trial budget” planner, and we will meet to review it before officially starting the program.  My job is to help you see the outcomes of your budget, and help you prioritize things as necessary.  And, of course, it’s my job to do everything I can to help you stick to the budget!

2. Banking

This is probably the most important piece of the program.  We’ll make sure your bank accounts and credit cards are set up to maximize your ability to see what dollars are “spendable” and which dollars need to be saved.

Most people’s bank account structure is designed to make it very, very difficult to consistently save money.  And “designed” might be a generous word; most of the people I work with don’t have their bank accounts organized in any sort of way when I first meet them.

There’s no shame in that whatsoever.  But before you get started on the Personal Savings Program, we’ll get you set up in a proven bank account structure that will make it much easier for you to hit your savings targets each month.

3. Reporting

This is where this program will really shine.  You’ll get a series of reports from me that will help give you clarity on where your money is going and will hold you accountable to your savings goals.

There are four types of reports you’ll receive throughout the Personal Savings Program:

  • Weekly reports are designed to give you a quick overview on your spending progress against your budget in 4-6 key areas of spending.  In particular, your weekly spending reports will focus on a few areas where you know you’re more likely to overspend.  In this way, these reports function in a similar manner to the text message warnings you get from your cell phone provider when you’re close to going over your data limit.  These reports will keep you focused on the few items that really matter, and help you avoid being distracted by the rest.
  • Monthly reports will show you your progress on hitting your savings targets at the end of each month, and (after the first month) will show you trend lines on a month-to-month basis.
  • Quarterly reports will be the key report we discuss in our quarterly meetings as part of the program.  These reports will show you your progress over the past three months, and if you fell short of your savings targets, will show you where things went wrong.  The quarterly meetings we have to discuss these reports will “reward” you for hitting your savings targets by deciding what we’ll do with the extra savings, and help get you back on track if you fell short.
  • Finally, yearly reports will analyze your progress over the course of the year.  Even more importantly, we’ll use the view of your full year of saving and spending to make any necessary changes to your budget.


So, what does all this cost?

Costs to participate in the program, if you start after the pilot group launches, will be finalized after I see the results from the pilot group.  But, the fee for this program will likely be about $750 upfront and $97 per month.

But by participating in the pilot group, you will be eligible for a large discount, both for the upfront fee and the first four months of the program.

The cost to participate in the pilot program will be $225 upfront, and $30 per month for the first four months.  This is about a 70% discount off of the eventual price of the program.  

But, I only have room for ten individuals/families in the pilot group.  So if you’re interested, be sure to apply today.  It will only take you a few minutes!

Applications are due on Wednesday, November 21.  If you have any questions about the program in the meantime, feel free to email me (bill at pacesetterplanning dot com) or set up a 15 minute call so we can discuss. 

I hope to see your name in the applicants list!  And I can’t wait to see how far you’ve come by the end of the pilot program in April!

KEEP More of Your 2018 Money, plus What We’ve Got for You in 2019

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In this short video, I’ll tell you what we have in store for you to close 2018 (including how to KEEP more of your 2018 money) and I have a BIG announcement for you at the end of the video!

 Watch the Video ⬇️ 

In the video above, I talk about three simple and practical ways we can work together without (or before) comprehensive financial planning services: through Focused Project Planning services.

Timestamps for your convenience:

1:06 – “Lighter” ways to work together: Focused Project Plans
1:20 – Student Loan Analysis and Payment Planning
1:39 – Health Insurance Plan Selection & Open Enrollment
1:56 – End of Year Tax Loss Harvesting (<< BIGGEST opportunity at this time of year, especially in our current stock market conditions.  There could be a great opportunity to keep more of your 2018 money by saving on taxes!)

⬆️ If you’re interested in working together through Focused Project Planning, please schedule a call with me!

I also made a special announcement in the video (at 4:36)…

could be one of 10 people
in my Personal Savings Pilot Program 
beginning together on Tuesday, January 1st! 

My program goal is to double your monthly savings amount
without feeling like you’re sacrificing your quality of life.

If you’re ready to challenge yourself
to putting your money where your mouth is…

Click below to apply for your chance 
to be one of just ten people in this program!

2 Options to Keep Holiday Spending Inside Your Budget

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With Halloween behind us, the holiday spending season is here. And with the holiday season comes travel plans, parties, family gatherings, and, of course, gifts.

With all of that comes costs.  Significant ones. 
A study from PwC estimated that millennials spent over $1,000 on holiday-related expenses in 2017, up 26% from 2016.

I’m not writing this to say that holiday spending is a bad thing. 
True story: I’m the lunatic who starts listening to “White Christmas” in October. 🎅🏻 

Here’s my question instead: 
From a financial planning perspective, how do you prevent irregular expenses from destroying your monthly spending projections?

It’s not Just about Holiday Presents

What do I mean by irregular expenses? 
Spending that isn’t completely unpredictable, but doesn’t happen every month.

Breaking your leg and needing to pay for an x ray isn’t an irregular expense- it’s an emergency, and its why I encourage all my clients to have an emergency fund before focusing on other financial goals. 

That’s not what we’re talking about here.  Instead, we’re looking at the money you spend every year or so in a way that’s predictable, but not frequent.

Holiday spending is particularly relevant in December, but this isn’t the only irregular expense that comes up during the year.  This also relates to:

  • Thanksgiving travel (or hosting!) costs
  • Car insurance payments (usually made twice a year)
  • Renters or homeowner’s insurance payments
  • Reoccurring medical expenses (for example, a refill on prescriptions or contact lenses every x months)
  • Annual car registrations and inspections
  • Car maintenance (ex: new tires every 60,000 miles)

Some of these are more predictable than others, but you get the picture.  If you aren’t careful, you can have a huge, irregular expense in your budget every other month.

Getting back to the holidays, I’m not just picking on gifts.  There are a lot of other costs that can add up around this time of year- travel expenses, shipping costs, decorating, cooking/baking, and Christmas cards, just to name a few.

So, what should you do about it?
There are two main ways you can approach irregular spending.

Holiday Spending Option 1:
Keep and Fund an Irregular Expense Account Using Past Average Spending

Personally, this is my favorite method to approach these issues. 

In a nutshell, using this approach you would average out your yearly expenses across every month, and use these savings to cover the holiday spending and expenses when they come due.  Let’s break it down.

Irregular Expense Account Step 1:
Estimate Your Yearly Holiday Spending and Irregular Expenses

In order to plan for your irregular expenses, you have to have a ballpark idea of what they are.  While it can be difficult to calculate some irregular expenses, generally I recommend that you let your own spending history be your guide.

With bank account and credit card information online, it’s not terribly difficult to piece together a ballpark estimate of your past irregular expenses.  And it’s well, well worth the time and effort.

For example, let’s say that on average, you’ve spent $1,000 on holiday spending – gifts/travel/decorating/cooking – every year in December, $500 every March and September on car insurance, and $150 on annual car registrations and inspections.   If these are your only irregular expenses, your total for annual irregular spending is $2,150.

Just to be on the safe side, let’s round up by a couple percentage points and use $2,200 instead.

What does this mean?  On top of your monthly budget for rent, food, etc., you need an extra $2,200 to cover your expenses each year.

Irregular Expense Account Step 2:
Break It Down By Month

In this step, we’re going to divide your annual irregular spending into an average amount per month. Then, add that amount to your current monthly budget.

The idea here is that rather than only thinking about holiday spending in December, it’s best to set aside some money every month so that when the holidays roll around, your budget stays intact. 

Going back to our example, if you spend $2,200 on irregular expenses every year, averaging that out every month means that you’d spend $183.33 per month on these items if you spent it evenly throughout the year.

So, how do you stop irregular expenses from blowing up your budget?

Estimate them on a monthly basis, then save that amount each month.  That way, when it comes time to buy that holiday gift or get your car inspected, you can use cash you’ve saved up in advance to cover it.

Is it easy to save $183.33 each and every month? 
It might be, or it might not be, given your budget.  That isn’t really the point.

The point is that if you did the first step correctly, you’ve been spending that money already in the past year or two.  Rather than dealing with it in large chunks, you’re planning ahead to make it easier on your wallet when the time comes.

Irregular Expense Account Step 3:  
Where to Put the Money in the Meantime?

Saving a set amount each month to cover sporadic expenses and holiday spending is great. 
But that begs the question- where do you put the savings?

I’m a big believer and proponent of having multiple savings accounts for different goals. 

Assuming you aren’t paying fees on your savings accounts (if you are, you shouldn’t be!  There are plenty of free options out there), the only drawback to having multiple savings accounts is keeping track of them.

I’d argue that it’s much easier to keep track of your money if you have different accounts earmarked for different purposes, rather than one or two accounts holding the money for everything.

Your emergency fund is different than your irregular expense fund,
which is different than your travel money,
which is different from your savings to buy a house….
You get the picture.  One of the easiest ways to keep your money allocated for the correct purpose is to use different accounts.

So, if you set up a separate irregular expense account, your goal should be to contribute to it evenly each month to fund these expenses.  Make it easy on yourself, and automate this savings.  Schedule a direct deposit from your paycheck, or an automatic debit from your checking account, once a month to make sure you’re saving what you need to be saving.  Your wallet will thank you when the holidays roll around!

Irregular Expense Account Step 4: 
Reevaluate Annually

I work with all of my comprehensive financial planning clients to update their financial plans annually. 

There’s a good reason for this: things change, and change often.  What worked for you this year might be too much or too little next year. 

Set your targets based on what you’ve done in the past, but make sure to reevaluate at least once a year to make sure you’re saving the appropriate amount.


We need to have a brief time out before we go to the second option for how to keep holiday spending from blowing up your budget.

So far, we’ve only talked about irregular expenses. 
But, irregular income works exactly the same way. 

If your cash flow increases once or twice a year, either earmark those funds toward a long-term savings goal, or average out this income each month to treat it more like a raise than a bonus.

What am I talking about here? 
For people who have seasonal income, this definitely applies to you, but I bring this up to primarily speak to one irregular source of income that most of us receive each year- your annual tax refund. 

If you get $500 back from the IRS every April, build it into your monthly income budget for the rest of the year, just like we did for your irregular expenses, rather than spending it all at once.

Time to talk about the second option for handling irregular expenses.

Holiday Budgeting Option 2:
Benchmarking and Flexibility

Let’s say that the thought of diligently setting aside money in January and February that you won’t be able to touch until December gives you some anxiety.  What do you do then?

The short answer, of course, is that you need to come up with a way to pay for your holiday spending and expenses in real time.  This can be challenging, but there are a few good ways to go about it.

Benchmarking and Flexibility Step 1:
Set Spending Caps

Before you start your shopping, set some hard caps for yourself. 

Again, this best done in conjunction with your historical spending, but the key is to come up with a realistic number and hold yourself to it.

For example: this year, you might commit to only spending 1.5% of your annual income on holiday-related items.

That’s a great first step, but now it’s time to divide it up. 
Let’s say that 1.5% of your annual income is $1,000 (if your post-tax income is $66,666.67).  How are you going to spend that? 

For example:

  • $50 for decorations
  • $75 for baking expenses
  • $75 for Christmas cards
  • $250 for a train ticket home
  • $550 for gifts

From there, divide each category down even further.  Of the $50 you’re spending on decorations, $35 might go toward a Christmas tree, $15 toward lights.  For your gift budget, break it down by person. 

This way, once you’re browsing your favorite online stores, you have your targets in mind before you buy.

Benchmarking and Flexibility Step 2:

Of course, limiting your expenses this way is great, but it doesn’t completely solve the problem of where the money is going to come from. 

Hopefully, by putting reasonable caps on your holiday expenses, you’ve made the burden light enough to solve the problem through some flexibility in your budget.

Obviously, your rent and electric bill still need to be paid.  But most people I’ve worked with have some discretionary money built into their budget somewhere. 

Maybe its money you set aside for eating out on the weekends, or for going to the bars.  Maybe you like to go to the movies or to sports games. All of those things are great, and they absolutely belong in your budget.  But, when these irregular expenses come up, they should be the first place you look to cover the costs if you haven’t been setting aside money for them.

Saving and cutting down on discretionary money isn’t fun, but your wallet will thank you come New Year’s if you plan accordingly!

The Elephant in the Room

If you’ve made it this far, you may have noticed I left out a step.  I’ve made an assumption and left it unaddressed until this point, but it’s an absolutely crucial one.

I assumed you have a monthly budget.

I don’t think anyone actually likes budgeting. But, I can’t overstate the importance of a monthly budget if you want to make financial improvements in your life.

I was in this position a few years ago.  I never sat down to budget how much I was spending on food, transportation, entertainment, etc. each month.

And guess what?  I wasn’t saving anything.

I also know that in order to achieve just about any financial goal you have, the first step is going to be to make a monthly budget.

It’s okay if you’re still getting your finances organized. I can help.
If you want to learn how to do this and (more importantly) how to make yourself stick to it, click here to schedule a free intro call

Why Budgeting Doesn’t Work For Most People (And How To Make It Work For You!)

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Visa card example of why budgeting doesn't work

When most people think about trying to improve the state of their finances, “budgeting” tends to be one of the first words that comes up.

And that’s a shame.  Really.

I’m not sure I’ve ever met anyone who actually likes budgeting.  And there are a few good reasons for not liking traditional budgeting:

  1. Most of us think that “budgeting” means at best, being cheap, and at worst, cutting our spending on things that we like to spend money on.
  2. Budgeting isn’t easy. In fact, the way most of us try to make budgets for ourselves, it takes effort to consistently make it work.

What happens when we make something that isn’t fun difficult as well?  We don’t actually do it.

Which is why I like to approach budgeting with a very different mindset.  In this video, I discuss how to approach budgeting in a way that will make you more aware of where your money is going each month. We also discuss ways to align your budget with what’s actually important to you, in a way that’s easy to maintain.

Most people make it easy to spend a lot of money, and hard to save.  In the video below, I’m going to show you how to make it hard not to save money.

To download a FREE copy of the Newlywed Money Checklist that we discuss in this piece, click here to grab it!

(Bill’s Note: This video, and the lightly edited transcription below, was originally recorded as a Facebook Live broadcast on January 29, 2018. If you want to participate in our next Facebook Live session, which are normally held every Monday at 8 PM Eastern, head to our Facebook page, hit “like”, and you’ll get the announcement the next time we go live.  Most of the content comes from questions submitted by my readers and viewers, so if you have a topic you’d like to hear more about, send a message to our Facebook page and we will get back to you as soon as we can!)

Introduction:  How Can I Make My Budget Stick?

Welcome, everyone! Welcome to our weekly Facebook Live chat. We broadcast this at 8:00 PM Eastern time every Monday.  Today, we’re doing a little bit earlier because I’m going to be in a meeting with a client at 8:00 PM.

Today, I want to talk a little bit about budgeting.  And specifically, why I think budgeting tends to not work for people.  And we’ll share some strategies to get around this.

I got a question from someone today who follows the page- let’s call him Eric. (I typically don’t use people’s real names because I know money is a sensitive subject for people. And so, I try to respect everybody’s anonymity for these questions.)

Anyway, I got a question from “Eric”.  It says, “Hi Bill, I’m a big fan of the new video series and have a question that I’d like your opinion on. I recently downloaded your Newlywed Money Checklist and I’m currently working through it with my wife.  We got to the section that discusses creating a budget and we got stuck with it. We’ve tried a few things in the past related to budgeting and they never seem to really work for us. How do we make a budget for our family that actually sticks?”

Amen, Eric! That’s a great question.  One that I get quite a bit actually.  First off, congrats on not only your recent marriage, but taking a step forward and downloading the Newlywed Money Checklist.  And not only just downloading it, but actually working through it. That’s awesome. It’s a big step.  If anyone wants to grab this checklist and follow along as we go, click here to download it.

Most Budgeting Strategies Are Difficult to Maintain

So let’s get to the heart of the question. Budgeting really and truly doesn’t work for a lot of people. And the reason for this is that we make it so difficult for ourselves to actually do it and stick to it.

I’ve seen a lot of different strategies that people have used over the years to try to manage their budget.  Everything from creating spreadsheets- literally typing in all different ways that they spend their money.  Or, using a tracking site like Mint.com, where you sync your credit cards and they pull in your transactions for you.  Sometimes, people try a strategy where they literally only spend cash as a way to really try to prevent yourself from overspending.  And even a derivative of this, which I actually like a lot, called the Dollar Bill Savings Method. I’ll probably talk a little bit about that strategy on another Facebook Live because I do think it’s kind of an interesting strategy for people who are struggling with trying to save.

But ultimately for most people, however you do it, budgeting means keeping track in detail of where your money is going each and every month.

There’s a reason why that doesn’t work and why I don’t like to think about budgeting in this way. It’s really two-fold.

Budgeting Highlights our Weaknesses

First and foremost, I think we tend to overlook it, but most people I talk to have some sort of anxiety, or shame, or even guilt about how they handle their money. It’s not something we’ve ever been taught, and it’s not something we’re inherently good at. We need to practice how to handle our money over time. Most of us are far from perfect in this regard, and we tend to not like to pay close attention to things we’re not perfect at.  As a species, this is something that all of us struggle with.

Here’s the thing- paying close attention to our budget tends to emphasize these weaknesses, or are these things that we’re unhappy with.  And as a result, people just don’t like to pay attention to their budget, which I think is perfectly understandable. But ultimately, it doesn’t help solve the problem

Traditional Budgeting Methods Are Hard

And secondly and probably most importantly, it’s a lot of work. We make it really, really hard for ourselves to actually track our budget.

If we’re using spreadsheets, we need to update them manually.  If you’re using Mint, you actually have to remember to log on to see how you’re doing.  And then once you get there, a bunch of your transactions are categorized incorrectly, so you need to go in and fix those. And finally, they don’t track your cash spending at all on these platforms. So, you have to actually manually input all the different ways you spend your cash.

Budgeting sucks. Plain and simple. It’s not easy. It’s not fun. And if you make it hard on yourself to do something that’s not fun, guess what?  It’s not going to happen. Like most New Year’s resolutions, you start budgeting, you’re excited about it at the beginning, it lasts a couple of weeks, but as soon as things get busy, it’s the first thing that we tend to drop because it’s something that we don’t enjoy and it’s hard.

Introducing… Two New Ways to Think About Budgeting

Which is why I like to think about budgeting in a completely different state of mind. To me, budgeting isn’t about only spending $20 at Starbucks this month. (And if you spend $21, that’s BAD, and Mint’s going to send you a nasty email calling you out on it!  Give me a break.) That’s not healthy. I don’t think that’s the way we should be doing budgeting.

Instead, budgeting is about two “A” words. Awareness of where your money is going (and awareness is never a bad thing, right?)  And aligning your money with what’s actually important to you.

So let’s walk through these one by one, starting with awareness.

Budgeting = Awareness

If you want to start budgeting, this is what I recommend, particularly for people who want to be saving more and find that they’re having a hard time doing it. I want you to do this:  before you start breaking out the spreadsheets or syncing all of your accounts to Mint, walk through this exercise.

This is something that, full disclosure, is not something that I’ve developed myself. For those of you who have followed the page for a while, you’ll know that I consider myself to be a “disciple” of Carl Richards. Carl is a two-time New York Times bestselling author of books about how to manage money.  (If you are serious about making improvements to the way you handle your finances, they are must-reads.  You can find them here and here.) He also writes a weekly column in the New York Times about money that I highly recommend. This is an exercise that he does and I think it’s really instructive here.

If you’re having a hard time budgeting and want to get started, do this for me over the next two weeks. Whenever you go to spend money, no matter what it is, no matter where it is, no matter what you’re spending it on, whether it’s necessary or whether it’s just for fun, do the following.  Whenever you spend money from today until two weeks from now, stop for a minute. And just think about it.

Actively try to think about how you’re spending money. Say to yourself, “Hmmm. I just went to the store and bought $125 worth of clothes. Isn’t that interesting?”

“I just spent $45 a bar… Isn’t that interesting?”  Just stop to think about it for a minute. Literally think about it. There’s no judgment, but whenever you spend money, just stop and be mindful about it for a second before you start rushing to the next thing.

You might be surprised, if you actually stop for a couple of seconds to pay attention, about the trends that you start to notice with where your money goes. You know, I frequently hear from people who do this who didn’t realize how much they were spending in particular categories of expenses that they didn’t actually really care about.

They spend money on whatever it is, they just do it, and it’s habitual. But when they actually stopped to think about it, they started to catch on to some of these trends.  So before you start putting yourself through a ton of work to track your transactions manually, stop and reflect on what you spend money on.  And see what you notice.

If it doesn’t work for you, then move on to the second piece that we’re to talk about, but give it a shot.

Budgeting is about bringing alignment between what your say is important to you financially and where your money actually goes.

Aligning Your Money With What’s Actually Important To You

The second strategy, the other way I want you to try to think about budgeting has to do with aligning where your money goes with what’s actually important to you.  Putting your money toward the things that are important to you, FIRST. This is my preferred method because I think it probably is the easiest one and it’s the fastest way to get results when it comes to your budget. There are a few steps involved.

First and foremost, I want you to figure out how much money is coming in every month, and I’m not talking about your annual salary divided by twelve. I’m talking about how much money actually gets deposited into your bank account every month.  After taxes are taken out, after your 401(k) contributions- how much money is coming in every month?

How Much Do You Actually Need To Save?

The second piece is a little bit harder. And it involves figuring out how much money you actually need to be saving to make sure you’re able to do the things that are important to you.

Never mind what you should be saving. What do you actually need to save?

Look, this is a complicated step.  It’s not easy to calculate how much you need to be saving to retire when you want to 30 or 40 years from now. It’s not easy to figure out how much you need to be saving to pay for a child’s college several years in the future. But you need to actually sit down and do this, first and foremost.

If you need help with that, reach out. I’ll help you figure out what those numbers are for you- but however you do it, you need to figure them out.

To recap this budgeting method so far: step one, how much money is coming in? Step two is how much do you actually need to save?

Automate, Automate, Automate

And then once you have that, I want you to login to your bank and schedule an automatic transfer coming out of your checking account every month to either a savings or an investment account for that dollar amount.

If you go through step two and find that you need to save $2,000 every month, I want you, tonight, to go ahead and set up a $2,000 transfer from your checking to your savings account every month.

And that really is the key here. We make it hard on ourselves to save.  For most people, when money comes into the checking account, we spend it and then whatever’s left over, we save it… if we actually remember to log in and transfer it to your savings account.

I want you to set this transfer up automatically. Make it hard for yourself not to save.

Remember, this isn’t permanent. If there are some months where you have higher expenses – if a car breaks down, if you just want to spend a little bit more money that month – that’s OK. You can always go to your savings account and transfer money back to your checking account.

But make that the hard step.  Pay yourself first, and then, if you actually need a little bit more money, you can pull a little bit out of savings. I’m giving you permission to do that.

But don’t make it easy for yourself to just spend that money. Actually put it away and make it so you actively have to think about taking it out. And if you do that, you’re going to be much, much more likely to actually make your budget work for you.

Spend the Rest, Guilt-Free!

And once you do that, once you set up the transfer for how much you need to save every month, spend the rest however you want. I don’t care.

If you’re able to save as much as you need to in order to accomplish the things that are important to you, I really don’t care where the rest of your money goes. And frankly, neither should you.

As long as you’re actively putting money toward the things that are most important to you, do whatever you want with the rest. Don’t worry about it, and don’t feel guilty about it. You’re saving as much as you need to. It’s really that easy.

It’s Not Always That Simple

Now, there’s one caveat. If you tend to actually spend more than you have left after putting money into savings, that’s when this strategy can get a little bit more difficult. And then, and only then, is when I want you to just start thinking through budgeting in the “traditional” sense. At this point, you’ll need to look to cut spending from particular places.

If we’re able to save as much as we need to save and you have a little bit of money left over, you don’t need to worry about it. But if you find that you’re having a hard time saving what you want to be saving, this is when we’re going to start trying to find ways to cut back.

And from there, here’s what I would do, in order, if you’re looking to solve this problem.

There Are Two Components to Budgeting.  Start with the One that Nobody Ever Talks About

First and foremost, when we talk about budgeting, there’s two components to it. There’s the income side and the spending side.

Most people tend to only focus on the expenses, but if you really are having a hard time saving as much as you need to every month, I want you to actually start by looking at the income side. Are there ways you could grow your income? From putting your money into investments that actually pay you income that could help potentially close that gap, to negotiating a higher salary at work if you think you’re underpaid and can back that up, to even starting some sort of side hustle. You might not actually need to cut your spending at all.

When we think about budgeting traditionally, we tend to only focus on the spending piece. But we really should be taking a look at the income side as well. So first and foremost, let’s start there.

Find the Easiest and Most Impactful Ways to Trim Spending

If that’s not enough, or if growing your income isn’t an option for you for whatever reason, the next step is not to start nickel and diming on your coffee every month.  That’s the hardest way to actually do this.  Instead, what are your top three or four categories of expenses every month? Where does most of your money actually go?

Now, for most people, this is some sort of combination of your rent or mortgage payments, student loan payments, transportation costs, food or even clothing. Pull all that stuff together in those big categories and ask yourself, what’s the easiest and least impactful cut that you can make to your biggest areas of expense?

In other words, if the goal is to cut your spending by a certain dollar amount every month, what’s the easiest way to actually do that? For most people, that’s not going to be coffee, right? Start with the biggest areas of expenses.

So maybe it means that it might make sense for you to move to a cheaper apartment the next time your lease is up. Or taking the bus or subway a little bit more rather than taking Ubers. Or if you have student loans, trying to switch your student loan repayment plan might be a good idea (if you have federal loans).  If you have private student loans, maybe trying to refinance them is a good idea. Or trying to cook a little bit more at home might be a good idea if you spend a lot on food.

The point is, there’s a lot of different ways to do this.  And each one is different, depending on what you actually need to be doing.

Make That Your Goal.  Not Just Budgeting

But only if you need to, write and make that your New Year’s Resolution. Don’t just make budgeting your resolution, but actually find the easiest and most impactful areas to cut if you need to. And when you do that, you’re going to find your budget tends to just come in order.

Make it as easy as you can on yourself. Make it hard not to save for yourself and from there, only if you need to cut spending, cut the pieces that are the easiest and most impactful for you to cut.

But ultimately, if you take anything away from this video here today, recognize that if you’re struggling with traditional budgeting and you feel like it doesn’t work for you, you are not alone.

Make Budgeting As Easy As It Can Be

The best thing you can do to make your budget work is to figure out how much you need to save every month and set it up to save that amount automatically. Move it from your checking to your savings account without thinking about it, without actually going in and doing it every month, and make the rest of your spending revolve around that. If you need to pull some of that money out of savings for whatever reason, you always can do that, but make that the hard part.

It doesn’t take a lot of time to do this. But you should be making it easy for yourself to save rather than the other way around.

Anyway, I hope this was helpful. Thanks so much to “Eric” for sending in this great question and working through our Newlywed Money Guide.  You can download that guide here if you’d like to learn more.

And again, if you have any questions about figuring out how much exactly you need to be saving every month, reach out and I’d be glad to help you out however I can. Thanks so much for joining us, and I hope you have a great day.



Should I Invest in Bitcoin?

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Should I Invest in Bitcoin?

It’s hard to escape the investing phenomena that Bitcoin has become.  The rapid growth of the investment in 2017 caused many people to wonder whether they should invest in Bitcoin.

In this article, we discuss whether or not it makes sense to put some money in Bitcoin. As we will discuss, I’d invite you to ask yourselves three “Why?” questions before deciding whether or not this makes sense for you.

First, we’ll discuss why you are thinking about investing in Bitcoin now, and the risks involved in putting money into investments that have recently taken off in value.

From there, we discuss why Bitcoin specifically is the investment venture of interest, particularly since there are numerous other opportunities to put money into crypto and/or blockchain technology.  We’ll also discuss how Bitcoin compares and contrasts to two previous investment “bubbles”, and what they can teach us about the future of investing in blockchain.

Finally, we’ll discuss how Bitcoin fits into your overall investing strategy.  There are a lot of factors to consider, and you need to take several factors into account before picking your investments.  “Making a lot of money” is a dream- it’s not a strategy that you can consistently execute.  We’ll talk about some of the factors you should take into account before deciding where to put your money.

(Bill’s Note: This video, and the lightly edited transcription below, was originally recorded as a Facebook Live broadcast on January 22, 2018. If you want to participate in our next Facebook Live session, which are normally held every Monday at 8 PM Eastern, head to our Facebook page, hit “like”, and you’ll get the announcement the next time we go live.  Most of the content comes from questions submitted by my readers and viewers, so if you have a topic you’d like to hear more about, send a message to our Facebook page and we will get back to you as soon as we can!)


Welcome, everyone.  Welcome to our weekly Facebook Live broadcast, which we’re going to hold every Monday at 8 PM Eastern.

Today, I want to talk a little bit about investing strategies.  You’ve probably noticed this isn’t necessarily something I cover a lot here- I like to focus my content on what I think are the very real, important decisions we need to make when it comes to how we approach money day-to-day- and even just from an emotional standpoint.

But ultimately, investing is a big part of how we handle our money, so today I wanted to cover a question today that I’ve probably fielded somewhere between twelve to fifteen or times in the past two months.  And this question has to do with Bitcoin.  What’s all the fuss about, should you be investing in Bitcoin?  Is it a good idea for you to be putting your money into Bitcoin?


And my response to you here today is one word.


Literally. Why?  I don’t necessarily mean that in a negative way.  I know I sound sarcastic, but seriously:  Why?  Why do you want to invest in Bitcoin? And specifically, I have three different “why” questions I want to pose back to you here today.  I really encourage you to think through these – both about Bitcoin specifically if that’s something you’re interested in, but also about how you manage your investments in general. These three “why” questions that I have are really important when it comes to thinking through how to approach this subject.

Question 1: Why Now?

The first question I have for you is: “Why now?”  Why is Bitcoin a topic that is coming up right now?

Bitcoin is not a new thing.  It’s been around for several years, and I’ve never heard anybody ask me whether or not they should be investing in Bitcoin up until mid-December 2017 or so.  Like I said, I’ve probably gotten a dozen questions about this particular topic since then.  I didn’t hear anyone asking about whether they should invest in Bitcoin when it was $100 to invest in June 2013. Or when it was $500 in November 2015.  Or even when it was $1,000 in January 2017.  Nobody asked me about it until it was over $15,000 in December 2017.

We have a natural tendency when we’re making investment decisions to want to buy when things are going up.  The investment has done well, so it will continue to do so, right?  And it very well could.

The problem is that just because it’s gone up before, doesn’t mean it will necessarily continue to go up in the future.  And in fact, that’s a very, very dangerous assumption to make when it comes to choosing investments.

Which Investment Would You Pick?

Case in point, I had a client a few years back who had two investments with me.  I don’t remember exactly what they were, that’s not necessarily the point, but we’ll call them Investment A and Investment B.

I met with the client about six months after we had invested her money into those two investments.  She had some more money to invest.  She wanted to put some more money into at least one of these investments.  Now, Investment A had done really well over the prior six months.  It had really good returns, and she made a decent amount of money off of it.  On the other hand, Investment B was still a good fund, but it hadn’t really done well over the prior six months.  It may have even gone down in value, I don’t remember the specific details.

Guess which investment my client wanted to put more money into, when it came tothis new money she was looking to invest.  I’ll give you a hint:  she didn’t choose the one that hadn’t done well recently.  She wanted to put more money into Investment A. It had done well, so why not put more money into it?

We naturally look at how things have done in the past and use that as the basis for our decision making when it comes to making investments.

Buy High, Sell… Low?

But there’s a problem with that.

And the problem is that if that’s the way you’re making your investment decisions, that’s a really, really good way to lock yourself into buying investments when they’re priced high and selling them when they’re low.  We know intuitively that we want to buy investments when they’re low, and sell them when they’re high.  That’s how we make money of them.  We want to choose things that have done well because they might continue to do well, and they might….

But what if they don’t? If these investments have done well up until this point and then they don’t do well – and there’s a decent chance that they actually might not – you’re creating a structure for yourself to invest at high prices and then lose out when the investment falls in price.

We don’t know what Bitcoin is going to do tomorrow.  We don’t know if it’s going to get more expensive or less expensive to invest in.  But the point is buying it just because it’s gone up lately is really, really dangerous.  Because if you do this consistently, you’re really setting yourself up to buy investments when they’re high and sell them when they’re low.  Which we know isn’t what we’re supposed to do, but ultimately this is just a bias that we have.  We want to invest in things that have done well, because they might continue to do well.  But we can’t assume that.

Question 2: Why Bitcoin Specifically?

The second why question I have for you is: Why Bitcoin specifically?

And full disclosure here:  I am not a technology expert.  I’m a finance guy- that’s my area of expertise, but technology really isn’t. If you have some more technical questions about how any of the information below works, I’d be happy to connect you to some people in my network who can tell you more about this.

The key takeaway here: there’s a difference between Bitcoin itself and the technology behind it, which is called blockchain technology.  It’s a very real technology that’s here to stay, and it has value.

Can Tulips Teach Us About Bitcoin?

I’ve heard some people describe Bitcoin as a “speculative bubble”, or even I’ve seen a reference to Bitcoin as a “tulip bubble”.  The “tulip bubble” reference is a very specific one, that I think is worth digging into a bit.  Is Bitcoin the next “tulip bubble”?

And my answer to that is no, for reasons that we will discuss.  But before we get to why, we need to talk about what we mean by “tulip bubble”.

This actually goes back to the 1600’s in Europe.  The very first investment bubble that existed had to do with buying tulip bulbs (i.e., the bulbs that you plant in the ground to grow tulips).  Tulips aren’t native to Europe, apparently.  Traders brought them into Europe in the 1600’s, and people really liked them for some reason.  To the point where there wasn’t a big supply, but everybody wanted them, so prices went up.  A lot.

Not only did prices go up due to supply and demand, but people started to game the system.  Some investment-savvy people at the time asked, “what if we were able to buy up a lot of tulip bulbs and try to sell them off at higher prices later?”

The price of tulips in Europe at this time went very, very high.  To the point where the price of a tulip bulb was many times the annual income for most people.

The problem is that this price spike wasn’t actually based on anything.  There was no value behind it.  The price was based purely on the whims of the ongoing fad of the day.  So eventually, after a relatively short amount of time, people got sick of tulips, and the price of the tulip went down to basically nothing.  People who “invested” at the top lost just about everything.

There’s a Better Comparison

This what I’ve been seeing people compare Bitcoin to today.  And I really don’t think that’s the right comparison to make.  Because of the underlying blockchain technology, which is something that has actual value and I think is here to stay. The value of Bitcoin is not based on nothing.  It’s something that has some inherent value to it.

But I do think it has some “bubble-like” qualities.  The comparison that I’d actually make isn’t to this “tulip bubble”, but rather what happened to the United States in the technology industry during the 1990’s and early 2000’s.

This was the dawn of the internet.  Tech startups, companies that produced computers and internet-related technology, were popping up left and right.  A lot of new technology stocks hit the market during this time, which everybody wanted to buy into because the internet was the “new big thing”.  And most of the startup companies didn’t make it.  Some of them did – and the ones that made it are the companies that have done really well, like Amazon and Google. But as a whole, ultimately prices went up so high, some companies started to fail, and there was a price crash.  Prices in the technology industry came down in the early 2000’s.

The Next Netscape?

And I think that this really is a much better comparison to what’s happening to Bitcoin today.  Let me ask you this:  at the beginning of the tech boom in the 1990s, when all of these startups were launching and tech stock prices were going up and up and up, what was the first big, new technology stock back in the mid 1990s?  Google started a little bit later as did some of the other names you might guess, but the biggest technology stock, the one that everybody was talking about and quickly went up in price, was Netscape.

Some of you probably don’t even remember what Netscape is, because it’s not around anymore.  Netscape was one of the first main internet browsers that competed with America Online back in the early days of the internet.  This was the stock that everybody was excited about.  The introduction of Netscape stock was huge, the price went up astronomically in value, and a couple of years later, AOL bought Netscape for a fraction of what it was worth, and the browser has long been defunct.

There are Other Crypto Investment Opportunities

I think that this sort of frame of reference is a really good one.  I’d encourage you to think about Bitcoin and other crypto investment opportunities in this context.

I would suspect that all of these blockchain “firms” that you’re seeing launch right now, I’d expect that about 15% or so of them will succeed and  actually make it (and the ones that do may do very well, just like Google and Amazon did back in the 90’s).  Unfortunately, we don’t know which ones those are.

And, at least as of this recording, there’s no such thing as a “blockchain or crypto mutual fund”, or at least one that I have a lot of faith in. That may well come along in time, but right now there’s no way to buy into this phenomena as a whole right now. You’d essentially need to pick and choose from one venture to another, or don’t do it at all.

Ultimately, if I think that 15% of them will succeed, means that you might have an 85% chance of losing everything, if you choose to invest in one that fails.

Should I Invest in Bitcoin?

To answer the actual question, “Should I invest in Bitcoin?”, my answer is:  if you have the capacity to invest in something with that level of risk – if you’re ok with investing in something that risky – then I’d say sure… but only with some “fun money”.  I wouldn’t invest anything that you’re relying on, just in case it doesn’t work out.

Before you invest in one of these companies, I’d ask yourself:  “What would happen if this investment went to zero?”  What happens if you literally lose the entire investment?

If you’re comfortable with taking that risk with a little bit of money here and there, then go for it.  I encourage people to invest a little bit of money into specific investments that interest them… but only with “fun money”.  Don’t do your serious investing in these sorts of products.

However, I have one caveat to this.

Watch out for scams.  These crypto or blockchain investment ventures aren’t (yet) regulated in the same way that other investments are.  The SEC has started to crack down on this, but I’ve seen several “opportunities” that have been advertised that I would bet just about everything are scams.  There isn’t the regulatory structure in place behind these sorts of products to enforce these investments.

So, I’d be very careful.  Make sure that if you do invest in something like this, that it’s legitimate and only with money that you’d be comfortable with losing entirely.

Question 3:  Why Do You Think Bitcoin is The Right Investment (For You)?

But, there’s one more “why” question that we need to answer: why do you think it’s the right investment for you?

Does it fit with your investing plan?  Does it fit with your investing philosophy, or is it just a fad that you’ve heard about and are looking to get in on.

“Making a lot of money” isn’t an investing plan.  That’s not how you should be framing this decision, at least on it’s own.  There’s a lot more that you need to take into account. How you invest is important, too.

How do you want your money to serve you?  What exactly is it that you’re looking for from your investments?  Are you primarily looking for your investment to grow over time?  Or, are you looking for something that’s going to grow really quickly and then sell it off before it crashes? Or, would you rather have an investment that will pay you some sort of income stream?  A lot of investments can do this for you.

How much risk do you like to take?  I know a few people who almost get ill thinking about their investments dropping in value. Bitcoin is probably not the right thing for that person.  You have to be comfortable taking risk in order to pursue this venture.

And finally, what are you investing for?  Is this for something longer term like retirement, or something you’re looking to spend in a few years?

You Need A Strategy

You need to know the answers to these questions before you and actually pick the right kind of investment.

And frankly, this goes beyond Bitcoin.  It certainly applies here, but all of your investments, you should have a strategy in place.  So, while Bitcoin or any of the other crypto investments out there could be the right thing for a little bit of your money, you need to make sure it fits in with the rest of what you’re trying to do.  And don’t risk your entire investment strategy for something that doesn’t entirely fit.

I hope this was helpful in terms of talking about Bitcoin.  We broadcast one of these videos every Monday at 8 PM Eastern, and I typically base these on questions that come in.  So, if you have a topic you’d like to hear about for ten to fifteen minutes or so, go ahead and leave a comment on this video or send me an email.  I’d be happy to add your question to the queue.  Thanks so much everyone, have a great day!


The Unintended Consequence of the Tax Reform Law for Student Loan Borrowers

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tax reform law
Executive Summary

When married couples with student loan debt go onto an Income-Driven Repayment plan, there’s a choice to be made:  is it better to file your taxes jointly (but base your income-capped student loan payments on both you and your spouse’s income) or to file taxes separately (and only count your income when calculating your student loan payment)?

Although it didn’t address student loans directly, the passage of the Tax Cuts and Jobs Act of 2017 has a big unintended consequence for these student loan borrowers.  This decision around whether to file taxes jointly or separately when on an Income Driven Repayment plan should be made by comparing the amount of money you’d save on taxes by filing jointly with how much more you’d need to pay each year on your student loans.  Since the tax reform law cuts taxes for most people, the difference in the amount you’d save on taxes by filing jointly versus separately will shrink for most people.  Which means that you’re now more likely to be better off filing taxes separately and saving money each month on student loans than you were under the old tax code.

Download our free student loan guide to learn more about Income Driven Repayment plans.  And if you’re interested in learning more about how to save money on taxes under the new tax law, check out our list of #taxhacks today!

(Bill’s Note: This video, and the lightly edited transcription below, was originally recorded as a Facebook Live broadcast on January 9, 2018. If you want to participate in our next Facebook Live session, which are normally held every Monday at 8 PM Eastern, head to our Facebook page, hit “like”, and you’ll get the announcement the next time we go live.  Most of the content comes from questions submitted by my readers and viewers, so if you have a topic you’d like to hear more about, send a message to our Facebook page and we will get back to you as soon as we can!)


Hello and welcome!  Happy New Year to everybody.  Today I want to have our very first weekly chat that we’re going to have on the Pacesetter Planning Facebook Page (and will be published here every Thursday).  Normally we’ll broadcast live at 8 PM Eastern time on Mondays.

Each week, we’re going to do a deep dive into a financial topic.  Typically, these will be driven by questions that people either ask me in person while I’m out and about in Philadelphia, or are submitted through the website or our Facebook page.  And I’ll share my response to these questions here.

So, if you have an idea, anything you’re curious about hearing, shoot me a message or leave a comment on this video or post, and I’d be more than happy to talk through it. I already have a few questions that we’ll be covering over the next few weeks.

Tax Reform and Student Loans

But for today, I want to talk about something that I think is timely, given current events, and that is the potential side effects of the passage of the recent tax reform law that was enacted before the holidays.  There’s a new opportunity that I think is out there for student loan borrowers, particularly borrowers who are on an Income-Driven Repayment plan (IDR).

To give you a heads up in advance, this is going to primarily involve people who are on an IDR for their student loans who are married.  Now, if you’re not married yet but you’re on one of these plans, and you see yourself potentially getting married over the course of your student loan payments, stick around and you’ll pick up on some things that will help you someday down the road.

Before we dive into exactly what this effect is, I think it’s worth pausing to make a quick note.  We did a deep dive into the Tax Cuts and Jobs Act right after it was passed in December 2017.  We’re not going to rehash that today, but just to reiterate:  there were NO direct effects on student loans in the law itself.

There were a lot of rumors going around through the legislative process that there were going to be some changes made to student loan policy, particularly to your ability to deduct student loan interest.  None of that actually happened.  So, everything in that light is exactly the way it was before.  If your income is below a certain threshold, you’re still able to deduct up to $2,500 in interest paid on your student loans from your taxes every year.  Nothing’s changed in that light.

Income-Driven Repayment Plans

What has changed, though, is the ways that we calculate student loan payments under these Income-Driven Repayment plans- or at least it has the potential to change, depending on your circumstances.

What do I mean by that?  The starting point needs to be: what is an Income-Driven Repayment plan?

For those of you who aren’t on one of these plans already, typically when you borrow student loans, you have a six- to nine-month grace period before you need to start making payments.  Your student loan servicer typically puts you on a standard, ten-year repayment plan.  They’ll tell you how much you owe based on how much you borrowed and the interest rate.  You make the monthly payment that they tell you to make, and ten years later it’s completely paid off and you’re good to go.

But for most student loans (note: not all of them, but most student loans will qualify), if you have a particularly high amount of loans compared to your income, you have a few options.  And one of them is going on an Income-Driven Repayment plan.  There are a wide variety of IDRs, but we’re going to treat them all as the same today (even though they are not the same).  There are some pretty substantial differences between them- if you want some more information on this, go ahead and download our free student loan guide. It’s about thirty pages long and it’s the most popular giveaway we’ve ever posted on our site.  It will walk you through exactly what you need to know about all of these different repayment plans, what they consist of, and will help you identify which one is right for you.  Click the link to download this guide.

But generally speaking, these IDRs tie the amount you owe every month on your student loans to your income level.  If you aren’t making a lot of money, or you have much higher levels of student loan debt than your income, it essentially allows you to scale your student loan payments back to a reasonable level based on your income.

How Do Married Couples Calculate Their Income for IDR Repayment Plans?

The question, though, is what actually counts as your income? Now if you’re single, this is pretty straightforward.  Your income itself is your income.  Whatever you make at your job, any other income you have, that’s what they base it on.  Nothing too complicated.

But, when you get married, it’s a little bit more complicated.  You have your personal income, and if you’re spouse works, they have income as well.  So- what does your student loan servicer base your payment on?  Is it based on just your salary, or is it based on you and your spouse’s?

Obviously, if your goal is to lower your student loan payment, you want to have the payments based on a lower amount.  So ideally, you’d just count your salary.

The answer to the question of how student loan servicers treat your income is that they actually let you choose which one to use.  You can either report just your income, or you and your spouses income- you have the choice.

So, that begs the question, why is that not a no-brainer?  Like I said, if you have the option to pay your loans based on a lower salary or a higher salary, your monthly payment is going to be lower based on just your income.  So, why wouldn’t you do that?

Your Tax Filing Status Determines What Income They Count

Unfortunately, there definitely is a catch to it.  And the catch is this:  however you decide to report your income (to base your student loans payment on), you need to file your taxes the same way too.  In other words, if you want to report just your income to lower your student loan payment every month, you need to file your taxes “married filing separately” from your spouse.  Or inversely, if you file your taxes “married filing jointly”, your loan servicer will look at both of your incomes when they calculate what you owe on your loans every month.

For most couples, you’re going to save more on taxes by filing jointly rather than separately.  There are a few big exceptions (we wrote on the blog last year a list of some of those particular exceptions), but particularly for most young couples, you’re going to find that you save more on taxes by filing jointly rather than separately.  But- that means that you’re going to owe more on your student loan payments if you’re on an IDR because you’re filing jointly and they’ll base your payments on your combined incomes.

You can think of this like a balance scale (like the ones we used back in school) where you weigh one thing against the other.  On one hand, we have the amount of taxes you’re going to owe.  If you file jointly, that’s likely going to be a lower number and if you file separately, it’s likely going to be a higher number.  On the other side of the scale, you have your monthly student loan payments.  And that works the exact opposite way:  if you file jointly, you’ll probably save on taxes, but you’ll owe more on your student loans.  And vice versa, if you file separately, you’ll probably owe more on taxes every year but you’ll save on your monthly student loan payments.

You can imagine that there’s a point at which these things will balance out.  For example, let’s say that if you file taxes jointly with your spouse, you’re going to save $2,000 more on your taxes every year than if you filed separately.  But, doing so might cost you an extra $2,000 in student loan payments across the whole year when you add up your monthly payments.  If this is the case, it doesn’t actually matter what you do: you’ll save $2,000 on taxes, and pay $2,000 extra toward your student loans every year.  It washes out.  (Technically, under this scenario I’d recommend that you file jointly and pay more on your student loans, since this method will cost you less in the long run!)

How Does the Tax Reform Law Change Things?

But typically, it doesn’t balance out.  There’s typically a better answer for you whether you should file separately and reduce your loan payments, or file jointly and pay more every month.  Usually, there’s going to be a clear cut answer.

And that brings us back to the tax reform law.

Because what this law has effectively done (it’s not intentional that it worked out this way, but it is the effect if you’re one of the IDR plans) is that the way you calculate your student loan payments hasn’t changed – your income is still the same, the options are still the same – but they’ve reduced  the other side of the scale for most people.  Most people are going to have tax cuts under the new law, which means the gap between how much you’re going to owe if you file jointly vs separately is less than it was under the old tax law for most people.  They’ve taken the equilibrium point between the two and threw it off a little bit.

Which means that there’s going to be more people that are going to be better off filing taxes separately and taking a lower student loan payment every month going forward than there was under the old tax law.  The balance point has shifted, which means that more people are going to better off filing taxes separately than there were before.

To be clear, for most people you’re still going to owe more on taxes filing separately than you would if you file jointly.  That hasn’t changed.

But what has changed is the magnitude of the difference.  If the overall dollar amount of your taxes is going down because of the way they drew the brackets, for most people the gap between what you’d owe if you file jointly vs. separately has shrunk- by a real dollar amount.

Which means, for more people than there were before, you’re going to be better off filing separately and reducing your student loan payments every month.  Not for everyone– there will be still people who are better off filing jointly and paying more on your student loans.  But, you need to go back and revisit the math, because the math has fundamentally changed as of January 1, 2018.

Not Too Late To Change

Now the good news is that you have the ability to decide this every single year.  If you’re already on one of the IDR plans and have been filing your taxes jointly and reporting the higher income number, you can change that every single year.  Every year, you file your taxes and you have to recertify your income level- if you’re already on one of the IDR plans, you’ve gone through this before.  So, I’d invite you to revisit this.  Try to figure it out on your own- are you still better off doing what was right for you under the old tax law, or has it changed?  Because there’s a very real chance that it could have potentially changed.

So, if you’re on an IDR and you’re filing jointly now, take a hard look at this to make sure it’s still the right option for you.  And if you qualify for an IDR, and just haven’t gotten around to signing up for one, there could be a higher benefit to you than there was before.  It might be a little bit more of an attractive option now than it was under the old tax law.  I’d invite you to take a look at this.

A Few Important Details: Other Factors You Need to Consider

Now, a couple quick details that I think are important to note before we wrap up.  I’ve tried to keep this at a fairly conceptual level, but there are some details you need to be aware of.

As I mentioned before, there are several different types of these Income-Driven Repayment plans.  Primarily, there are five different types.  You need to be aware that one of these five main types of IDRs actually doesn’t give you the choice to separate your income from your spouse’s.  We’ve spend this time talking about how you have the choice to file separately or jointly and report your income likewise, but if you’re on one particular type of IDR, you unfortunately don’t have the ability to make this choice.

The plan in question is called the Revised Pay As You Earn plan (you’ll usually see it abbreviated as “REPAYE”). If you’re on this plan, you unfortunately don’t have the option to split your income up- you need to report you and your spouse’s income jointly.  Which means that if IDRs are something that you’re looking into – like I said at the top, if you’re single now but you’re envisioning getting married down the road while you’re still making student loan payments – you might want to think twice about choosing REPAYE.

Now, there are some unique benefits to REPAYE- it’s not worth forsaking it altogether – but it is something you should take into account.  Under REPAYE, you won’t have the ability to separate your income (which might be a more attractive option now than it was under the old tax law).

(Note:  to be clear, the plan is question is REPAYE.  There’s another IDR called “Pay as You Earn”, or “PAYE”, that does give you the ability to separate your income from your spouse’s.  Congress has really mucked up the student loan policy over the past decade or so, with some assistance from the Department of Education.  There’s a lot of different types of IDRs, they all sound the same, but we’re talking today about REPAYE, not PAYE.)

Second key detail:  this principle of weighing the two sides of the balance scale is the right idea, but be aware that the calculation is a little bit more complicated than this.  There’s one other factor that you need to take into account before you decide to file separately and lower your student loan payments.

And that is that when you file separately, you lose the ability to claim the student loan interest deduction that I mentioned up at the top.  Right now, you can deduct $2,500 in student loan interest that you paid over the course of the year from your taxable income.  You can do that if you file jointly, as long as your income doesn’t exceed relevant thresholds.  But if you file separately, you lose the ability to do this.

The concept of balancing the two sides of the scale is the same… but you can almost think of the loss of the student loan interest deduction if you file separately as a “thumb on the scale” in favor of filing jointly.  It makes filing jointly a little bit more appealing.

The principle stands: more people today are going to be better off filing separately and reducing your student loan payments than there were under the old tax law.  But, there is a separate factor that you need to factor into your decision.

Student Loan Analysis is Complicated

To wrap up, this is complicated stuff.  Like I said, the way that we’ve come to the current student loan landscape doesn’t really make sense.  This is something that I help my financial planning clients with on an ongoing basis.  I help my clients do this sort of analysis to help figure out what steps need to be taken.

But, I actually offer a separate, standalone Student Loan Analysis service.  For people who don’t want, can’t afford, or don’t have any interest in doing Comprehensive Financial Planning, I offer this as a separate service.  We would meet via a video conference for 45 minutes to an hour, I’d collect your individual student loan data so we can understand what you specifically qualify for, discuss your goals for your student loans- are you trying to minimize your monthly payment, or are you trying to pay them off as quickly as possible?  Those are two good answers, depending on your circumstances, but they’re completely opposite strategies.  We discuss all of these things, and within two days I’ll send you a list of recommendations for what to do with your loans.

If this is something you’re interested in or would like to learn more about, I do offer free consultations.  Click here to set up a no-obligation, free strategy session to talk through this issue we’re talking about today, or any other issue when it comes to your loans.

In closing, I think there’s a very real, unintended consequence that came about from this change in tax law that really is an opportunity for a lot of people- if you decide to take advantage of it.  I encourage you to do so.

Again, Happy New Year!  We’re going to be holding these chats on our Facebook Page, usually live at 8 PM on Mondays.  If you have any questions or things you’d like me to cover, shoot me an email or leave a comment on this video.  Thanks so much, and have a great day!