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Do you know what you spend your money on? Are you happy with your spending priorities? Do you buy precious few “things” and spend most of your money on experiences (including food)?

My clients go through an exercise exercise in which they track how much they spend in the course of a month, and on what. Though there’s variety at the edges, the results are similar across all my clients:

They spend a lot on:

  • housing (be it mortgage or rent. If you’re in a tech hotspot, spending a lot on housing isn’t much of a choice.)
  • food (groceries, meal-prep delivery services like Blue Apron, and eating out)
  • travel and other “fun”
  • subscriptions (ex., NetFlix, Spotify)
  • self care (ex., therapy, exercise memberships)
  • time-saving conveniences (ex., Instacart, house cleaning)
  • Amazon (Yep, it gets a category of its own here. It’s so hard to know exactly how that spending breaks down because people buy everything on Amazon. And it is often a large % of their monthly spending)

They spend very little on:

  • clothes, hair, nails
  • jewelry
  • a personal car
  • furniture
  • tchotchkes
Spending Money on “Things” Doesn’t Make Us Happy. Is It Enough to Spend Money on “Not Things” Then?

We probably all know by now that spending money on “stuff” doesn’t make us happy. Looking at those lists above, it’s clear we’ve swallowed the evidence-backed kool-aid that buying experiences makes us happier. And I am delighted to see the shift away from “stuff.”

One of the books I regularly recommend to people is Happy Money: The Science of Happier Spending. (I reviewed it on this blog.) It describes 5 ways to spend your money that will actually make you happier:

  • Buy Experiences
  • Make It a Treat
  • Buy Time
  • Pay Now, Consume Later
  • Invest in Others

Even without reading the book, many people have clearly embraced “buy experiences” and “buy time.” Which, again, is a better use of your money than “buy stuff.”

Our spending habits are way different than they were 20 years ago, thanks to a variety of factors:

  • generational shifts
  • our increased understanding of behavioral finance (what makes us happy and what doesn’t)
  • the changing cost of various goods and services (for example, clothing is way cheaper than it used to be)
  • the dominant tech culture (all about Big Life Experiences, FOMO, tech gadgets, awesome ethnic food, etc.)

I say this based on my own observations, as I can’t find any research out there focused narrowly enough on people in the tech sector, though there’s plenty of research about changing spending habits in the population at large and the shift towards spending (sometimes a lot of) money on experiences.

But I’m starting to worry that people think “not buying stuff” is sufficient. That they think “buy experiences” and “buy time” are clear, unmitigated goods. I’m starting to worry that people aren’t taking that necessary step that comes after “not buying stuff,” which is: “and then I save the money I don’t spend on stuff.”

A Dollar Spent Now is One Fewer Dollars You Have Later.

I do not mean to be judge-y here. Hell, when I look at my own household expenses, my top expenses are housing, food and travel. However, more important than my ability to identify with my clients’ spending habits:

It doesn’t much matter, for the sake of your financial future, what you spend your money on. It matters how much money you spend and, the flip side of that coin, how much money you save.

And you’ve got dreams and goals for a good life! Whether you know the specifics of that Good Life now or not, you will draw that picture of Your Good Life eventually, be it Agile- or Waterfall-style. 

The clients I work with do a good job of saving at least “enough” for the non-negotiables: emergency fund and eventual financial independence. Beyond that, it’s not my place to tell them to save more now so they can spend more later. That’s a values choice, importantly, their values, not mine.

I simply don’t want people to get so wrapped up in this newfound wisdom about “stuff versus experiences” that it distorts how they understand their financial choices.

Be Clear on the Choices You’re Making.

If you work in tech, you likely have a salary or stock compensation that is higher than anything you expected growing up, anything your parents made at your age, and higher than many of the people you grew up with. This is an amazing opportunity to build financial strength. And through that, to give yourself a level of choice many people in this country can only dream of.

And “choice” is the key word here. If you’ve got the basics of your financial security covered, you can absolutely choose to spend your money on whatever you want, now or later. And we know that, to some extent, there’s a “right” way to spend. Taking a friend out for coffee brings us more lasting happiness than buying another sweater.

But even if there’s a “right way” of spending money, spending the right way isn’t free. It’s still money you won’t have to pursue goals in the future. So, when you’re spending money, I simply want you to be clear:

Is that a choice you want to make?

Do you want to make sure you’re not wasting opportunities your job in the tech industry gives you? Reach out to me at meg@flowfp.com or schedule a free consultation.

Sign up for Flow’s Monthly Newsletter to stay on top of my blog posts (and the occasional video), and also receive my guide How to Start a New Job (and Impress Yourself and Everyone Else) for free!

Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Meg Bartelt, and all rights are reserved. Read the full Disclaimer.

The post You’re Not Wasting Your Money on “Stuff.” But Is That Enough? appeared first on Flow Financial Planning.

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Do you get an annual or semi-annual bonus at your job? I always loved those… But what’s the best thing to do with the money?

Thankfully, you usually know ahead of time that you’re going to get bonuses, even if you don’t know the specific amount. They’re described in your job offer or in your performance review.

You have plenty of warning that this money is coming, so take some time to create a plan for it! In fact, make your plan specific enough (you know, percentages and names of accounts) that it’ll be like falling off a log to actually do the work when the time comes.

Bonuses Are a Great Opportunity to Leapfrog Towards Your Goals

In the world of tech, you probably have several tools you can use to improve your finances. You have a good salary. You get a 401(k) match. You get company stock. In that sense, bonuses are simply one opportunity of many to cultivate the life you want, both now and in the future.

Bonuses have one particular advantage over, say, saving from your salary: most of us aren’t accustomed to living on our bonuses. So, you can put 100% of your bonus to work towards your goals, and you wouldn’t “feel” it in your day-to-day life.

Imagine if you’re trying to save up, for example, for a house downpayment, and you’re diligently saving $1000/mo to a downpayment account. Now you get a $12k bonus, and overnight you squeeze a year’s extra saving towards your goal. How motivating is that?

[If you are relying on your bonus income in order to support regular, ongoing expenses, I’d try really hard to ratchet my expenses down so that they’re covered by my salary. The effect of “mental accounting,” ex., “salary is for monthly expenses and bonus is for saving” is powerful. Sometimes mental accounting can make us do stupid things with our money, but in this case, it can make saving money a heck of a lot easier.]

You have this same “leapfrog” opportunity every time you get a chunk of money you’re not accustomed to getting frequently, like vesting RSUs or an inheritance or a tax refund.

Make A Plan Ahead of Time

We’re dealing with two challenges when it comes to bonuses:

  1. Knowing what is the best use of the money for you, specifically
  2. Actually doing the right thing when you receive the bonus money
Start with Values and Vision

Above, I mentioned the idea of “cultivating the life you want,” and how important that is. To get to that life, however, you need to spend some time thinking, really thinking, about what it should look like for you. What’s truly important to you? Now? 10 years from now? You absolutely need clarity on that in order to make the best choices with your money.

This is no small work. When I first start with a client, in fact, we spend 2 90-minute meetings simply (“simply”?) discussing attitudes towards and memories of money, values, vision, and goals. No numbers. No “What’s your 401(k) balance?”

Let me tell you, people get a lot more excited about boring sh*t like savings rates when they’re able to visualize a life they’ve always wanted, and now see a path to get there.

This is what all financial decisions should be rooted in, not shooting straight to “what do I do with my bonus?” Really, you could mentally insert the above discussion into all of my blog posts.

Create a “Policy” for Bonuses

Next you need to take the step from that motivating “vision” to more practical how-tos. And for that, I like using financial planning “policies” with my clients. Policies are simply a list of rules that dictate how you behave in a specific financial situation.

The point of creating and using policies is to make the decision ahead of time, when you’re thinking clearly. And to avoid making the decision in the heat of the moment, when your lap is covered with dollar bills or you’re standing in a Williams Sonoma or staring at kayak.com.

I think you should (eventually) have a policy for every part of your financial life. In this case, I encourage you to write a policy for when you receive bonuses. The policy might look like this:

When I receive a bonus, with the after-tax amount I will:

1. Spend 10% now on whatever you want (to avoid a sense of deprivation)
2. Save 70% for house downpayment.
3. Save 20% towards financial freedom/early retirement.

Boom. Done. That’s the policy. No, it’s not complicated or long. That’s the point. It’s short, clear, and simple…all the qualities you’re going to need to actually adhere to it.

“Must-Have” Policies. While you can—and should—tailor your policies to the life you want, there are some rules that we should probably all follow when we get extra money, before getting to the more grandiose “this is my vision of a good life!” policies:

  1. Pay off high-interest debt.
  2. Build up your emergency fund.
  3. Pay off your 401(k) loan.
  4. Save at least 15% towards retirement.
Move the Money ASAP

If your extra-big paycheck ends up entirely in your checking account, I encourage you to move it to its proper home as soon as possible. Make the extra payment immediately against your credit card. Or move the money immediately to your dedicated downpayment bank account.  The longer money sits in your checking account, the more likely it is to simply “disappear.”

You know what I mean when I say disappear: You don’t make any outsized purchases, you don’t do anything big with your money…yet your bank account balance is back down to its normal level after just a few months, even though you’d had such a deliciously high balance after the bonus was deposited.

How Taxes Work on  Your Bonus

Your company should automatically withhold taxes on your bonus. In my experience, they usually withhold a flat 25% on your bonus. (They’re allowed to use one of two methods for withholding taxes—percentage or aggregate.) So, by the time the money gets to you, it’s pretty much all yours.

25% might or might not be the right amount for you. It’s unlikely that you will end up owing exactly 25% of your bonus in taxes, but there are so many other factors influencing your ultimate tax liability that it’s really not a bad estimate most of the time.

If you end up owing less than 25%, you can expect a tax refund. If you end up owing more than 25%, you will owe some money come tax time. If you end up owing a lot more tax than that 25%, then it also opens you up to the possibility of a tax-underpayment penalty.

You should find out how your company calculates the taxes they withhold and how much they withheld on your bonus. That said, I have yet to see this being a problem for my clients: 25% is within shouting distance, and “it all comes out in the wash.” Which is to say, I encourage you to figure out what’s happening, but don’t preemptively freak out about it.

If bonuses are a big part of your total compensation, then I encourage you to consult with an accountant to make sure taxes are properly handled (no unpleasant “surprises” come April 15).

Regardless of bonus size, I encourage you to use your bonus money intentionally and thoughtfully, which means you need to start your work well before you actually get the bonus money!

Do you want to make sure you’re not wasting the opportunity your bonuses give you? Reach out to me at meg@flowfp.com or schedule a free consultation.

Sign up for Flow’s Monthly Newsletter to stay on top of my blog posts (and the occasional video), and also receive my guide How to Start a New Job (and Impress Yourself and Everyone Else) for free!

Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Meg Bartelt, and all rights are reserved. Read the full Disclaimer.

The post What Should I Do with My Bonus? appeared first on Flow Financial Planning.

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Sarah Lacy’s A Uterus is a Feature, Not a Bug is an engrossing commentary on the professional challenges of being a woman, especially a mother, and especially in the tech industry.

She really got my attention with this one line:

Women getting run out of tech matters, because it’s where so much of the wealth creation and opportunity in the economy is right now.

This the rallying cry in my financial-planning firm. This is why I focus on working with women in tech. Tech is where the money is. It’s where the opportunities are. It’s where the power and influence are.

And if you are thoughtful and intentional and probably, yes, a bit lucky, you can translate your work in tech into serious financial strength. And once you have financial strength, you are in much more control of your life.

In a bad living situation? You have the money to move.

In a bad relationship? You have the money to leave it.

Is your boss harassing you or making it difficult for you to advance? You have the money to quit your job.

Do you have a great idea for a business? You have the money to go without a paycheck while you start your own company.

Do you want to stay at home with a baby for a while? You have the money to go without your income for a bit.

Money isn’t a panacea. I know that. There are other considerations—personal, professional—in all these decisions. And certainly Sarah Lacy’s own story is a testament to that: at one point she had to have bodyguards because she was targeting big and powerful tech companies with her journalism, they were retaliating, and she feared for her and her family’s safety.

But to be able to remove financial constraints from all these decisions…how wonderful would that be?

Ms. Lacy’s story and observations largely simply reaffirmed beliefs and practices I already had. But then she made this eye-opening observation, which will change how I view my duty to my clients, and hopefully your focus as a woman in tech:

Rights for women in America are falling more and more into the hands of states or private corporations. Individual companies are offering some of the best parental benefits anywhere in the world, even covering egg freezing in some cases.

(And that specific example she gave is one a client of mine is dealing with right now! Her company just started offering that exact benefit…and it’s keeping her at that company longer than she otherwise would have stayed.)

But if you don’t work at Facebook or don’t work in San Francisco, that trend doesn’t help you much….There’s little hope that rights for parents and mothers will become decoupled from employment anytime soon.

There’s obviously a dreadfully depressing interpretation for that observation, for the majority of women not living in cities like San Francisco or working for companies like Facebook or other tech giants with good benefits.

If you do happen to work in tech, however, then my more helpful interpretation is:

When you’re looking for a new job, pay as much attention to where you job takes you and the employee benefits it offers, as you do to the job itself, and your salary and equity compensation.

Let’s say you are pregnant. If you work at Company A, you get 12 weeks of job-protected, unpaid leave (because the federal government requires it, through the Family and Medical Leave Act).

You better make sure your emergency fund is pretty robust, to get you through 3 months of no income. And you don’t have much time to recover from birth and bond with your baby before you need to start preparing to return to work. As a one-time mother of two newborns, let me just say, three months isn’t enough to recover your equilibrium. I needed a full year the first time around!

If you work at Company B, however, your company would give you 18 weeks of paid leave at about 100% of your take-home pay, with an additional four weeks of leave before your due date. This is, in fact, what Google offers as part of its standard benefits package.

That’s an extra 6 weeks to recover, bond, and prepare to return to work. And you wouldn’t have to worry about money during that time either (well, at least you wouldn’t have to worry about current income…). Becoming a mother upends your life dramatically enough all by itself, without having to worry about paying the mortgage at the same time. 

Now, of course, this still isn’t the kind of support you’d get in Iceland (whose pro-women’s laws and culture Sarah Lacy teaches us all about) or various Nordic and Western European countries, but it’s about the best you’re going to get in this country.

And it’s all available to you as a member of the tech community. So choose well!

Do you want to make sure you’re making the most of the financial opportunities the tech industry offers?  Reach out to me at meg@flowfp.com or schedule a free consultation.

Sign up for Flow’s Monthly Newsletter to stay on top of my blog posts (and the occasional video), and also receive my guide How to Start a New Job (and Impress Yourself and Everyone Else) for free!

Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Meg Bartelt, and all rights are reserved. Read the full Disclaimer.

The post “A Uterus Is a Feature, Not a Bug” Has Advice for Your Finances, Too appeared first on Flow Financial Planning.

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You know that our tax laws changed a lot on January 1. But what you might not know is, “What should I do about it?”

These two articles do a good job of describing, in greater or lesser detail, what the changes are:

“This is all faaaascinating,” you might be saying, “but what I really care about is whether I should be doing something differently with my money now.”

And that is what I address below. If you work in the tech industry, here’s how you should be changing your finances to adapt to the new tax law. 

Consider Making These Changes 401(k) Contributions

Because the tax brackets are generally moving down this year, your top tax rate (including state income tax) could very well go down, especially if you live in a low-or-no-income-tax state, like WA (hello!).

Alas, if you live in high-tax states like CA, NY, and OR, because of changes to state-income tax and property tax deductions, your top tax rate might well go up.

Consider doing this if your top tax rate is going up (you live in CA, NY, OR, etc.): 

  1. Max out your 401(k). And pay attention to get this year’s max, which is $18,500, up from $18,000 (the 2017 limit).
  2. Make your 401(k) contributions more pre-tax than Roth (reduce your taxable income)
  3. If you also invest outside of your 401(k), hold investments that produce a lot of taxable income (real estate, traditional bonds) in your 401(k) instead of that taxable investment account.

Consider doing this if your top tax rate is going down (you live in WA): 

  1. Again, increase your paycheck deferral to your 401(k) to the new annual max ($18,500).
  2. Make your 401(k) contributions more Roth (after-tax) than pre-tax, assuming your employer provides a Roth 401(k) (take advantage of lower taxes now)
  3. Make after-tax contributions to your 401(k), again assuming your employer allows this kind of contribution.
Charitable Donations

Do you usually itemize your taxes? You’re less likely to do it now because of changes to the standard and itemized deductions. And if you don’t itemize, you usually don’t get any tax benefit from donating to charity.

Consider doing this: To help you maximize the tax benefits of charitable contributions:

  1. “Bunch” your charitable contribution every 2 or 3 years. Instead of donating the same $x every year, donate $2x every other year, or $3x every third year. Or, even more tailored to your personal situation, save your charitable contributions for years where your income is particularly high (lots of RSUs vesting? exercised stock options? got a signing bonus?).By “bunching,” you’ll get to itemize in that one year, and take the new, higher standard deduction in non-donation years.
  2. Many of my clients have trouble figuring out just which cause (of many!) to donate to, and this holds them back, especially from making a big “bunched” donation. If you face that problem, too, then donate to a Donor Advised Fund: you can get the tax write-off now and choose the charity later.
  3. Donate “appreciated” investments instead of cash. “Appreciated” investments are stocks, mutual funds, and ETFs whose value has grown since you bought them. Given the way tech stocks and the broader stock market have been moving in the last few years, your investments have probably grown in value. Even if you don’t get to “itemize” the value of the donation, you still get to avoid the tax you’d have to pay on the gains in those investments if you sold them.

Of course, ideally you both “bunch” and donate investments…double tax whammy! (in a good way)

Now, getting a tax benefit should be the second reason you donate to charity.  First being that you want to make the world a better place. So, if all these tax considerations are making it impossible for you to simply start donating, just start donating cash now directly to the charity. Figure out how to optimize later.

Self-Employment/Side Hustle

We can no longer deduct unreimbursed expenses we incur as employees. But, if you have self-employment income, it’s possible that you can still get a tax benefit if you’re able to shift some of those expenses from your personal life to your business life.

Consider doing this: Go through your list of expenses in your personal and business lives. Are there any legitimate ways you can shift expenses (that is, “ordinary and necessary” expenses, according to the IRS) to your business, where you can still write them off against business income?

Exercising Incentive Stock Options

Once upon a time, in the late 1990s, Incentive Stock Options were quite common. Now, Restricted Stock Units are more common. But still, you might get ISOs! Usually, that’s a lucky thing.

One of the few, but major, downsides of Incentive Stock Options is that you might end up owing a higher Alternative Minimum Tax when you exercise them.

The new tax law, while it doesn’t eliminate AMT, makes it much less likely to impact most people. Exercising ISOs, alas, is one of the few remaining ways that’ll probably result in AMT.

Consider doing this: Because the AMT still exists, and is still a PITA to figure out, you still need to be careful when exercising Incentive Stock Options. Ideally, you’d work with an accountant to estimate the tax impact of exercising ISOs before you do it and use that input to choose an exercise “schedule” that balances your goals, risk tolerance, and minimizing taxes.

401(k) Loans

If you take a loan from your 401(k), and then you leave your job, you now have 60 days to repay it (instead of needing to pay it back immediately), and you can re-pay it into your IRA, if you roll your 401(k) to an IRA.

So, this reduces the risk of 401(k) loans a bit, maybe even significantly, for you. Especially if you’ve got some sort of Rube Goldberg machine of money movement set up to, say, come up with the downpayment for a home.

But a major risk remains, untouched: your 401(k) is for retirement, and I fear that taking a loan from it for Other Than Retirement establishes the wrong habit and mindset around that money.

Consider doing this: Repay that loan ASAP anyways! And really really think twice before taking it in the first place.

Getting a New Job

Without getting too much into a political view of these changes: If you work in tech, you are so much better off than your Average Joan. As some women’s supports and rights get stripped away at a federal level and in many states, many tech companies are stepping in to provide that support anyway. Tech companies also tend to be in states that have more-women-friendly politics. Sarah Lacy talks about this phenomenon in her rip-roaring new book, A Uterus is a Feature, Not a Bug.

In the new tax law, the Family and Medical Leave Act is improved. Your employer must, by federal law, offer you 12 weeks of unpaid, job-protected leave if you have to take care of a family member or for your own health reasons. The most common time you’ll get FMLA, of course, is when you have a kid. And now, your employer gets a tax credit if they actually pay you during that leave.

This is progress, but it’s also the case that if you work at a company like Google, your company already provides more and better benefits than this federal change requires.

When you are looking for a new job, look at more than just your job description, your salary, and your equity. Look at employee benefits! They can affect your life dramatically.

Misc: Sexual Harassment

Surprised to see this in a blog post about tax law? Well, I was surprised to see it in the tax law itself!

And it is particularly pertinent to the tech industry, given all the (un?)believable stories we’ve heard over the last year or two from women in the industry.

If a company settles a sexual harassment suit, it used to be able to deduct from its taxes any costs associated with that case. Now, the company can still do that, but it can’t require you to sign a Non-Disclosure Agreement at the same time. Alternatively, they can require an NDA, but then they can’t deduct the expenses.

So, companies face a choice: Keep the plaintiff quiet and don’t get a tax break, or let the plaintiff talk publicly and get a tax break.

I’m still having a hard time believing this Congress put something so seemingly progressive in the tax law….

Taxes Are Too Complicated for the Back of a Napkin

With every tax reform, we have to learn how the new system works and suss out new strategies. For all but the most basic calculations, I think taxes were and continue to be too complicated to just “wing it” when figuring out how a change in your finances might affect your taxes.

Especially if you’re in tech—you probably have some sort of stock compensation, you probably get paid well, and you probably live in a high-tax state—finding an accountant you feel comfortable with is important. Maybe it’s a few hundred bucks a year, but that’s so easy to get back in better tax decisions.

Is the new tax law inspiring you to tune up your entire financial picture?  Reach out to me at meg@flowfp.com or schedule a free consultation.

Sign up for Flow’s Monthly Newsletter to stay on top of my blog posts (and the occasional video), and also receive my guide How to Start a New Job (and Impress Yourself and Everyone Else) for free!

Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Meg Bartelt, and all rights are reserved. Read the full Disclaimer.

The post I know the tax laws changed. Should I do anything differently? appeared first on Flow Financial Planning.

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Is a roboadvisor right for your investing and financial needs? 

Learn why I love roboadvisors and when they’d be a great fit for you. (From my latest monthly newsletter. Sign up here.)

Should I Use a Roboadvisor? - YouTube

Do you want a partner and guide through all your financial decisions? Reach out to me at meg@flowfp.com or schedule a free 30-minute consultation.

Sign up for Flow’s Monthly Newsletter to stay on top of my blog posts (and the occasional video), and also receive my guide How to Start a New Job (and Impress Yourself and Everyone Else) for free!

Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Meg Bartelt, and all rights are reserved. Read the full Disclaimer.

The post Should I Use a Roboadvisor? (Video) appeared first on Flow Financial Planning.

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Hopefully you’ve figured out the basics of your 401(k). Maybe you’ve even figured out whether or not you should contribute to your Roth 401(k). But are you ready for The Next Level in 401(k)?

Should you contribute after-tax money to your 401(k)?

Not all 401(k) plans allow you to make after-tax contributions to your 401(k). Google allows this, for example. Uber does not. So, you need to know whether your 401(k) allows such contributions. You could ask your HR department or look in your 401(k) Plan Summary. Look for the phrase “after-tax contributions.”  (Tricky, I know.) Go on. I’ll wait.

But after-tax contributions to your 401(k) can help you “supercharge” your retirement savings, in a pretty darn tax-savvy way.

How After-Tax 401(k) Contributions Work Step 1. Put Money into Your 401(k).

You can get money into your 401(k) in three ways:

  1. The “normal” contribution from your paycheck
    Pre-tax money to your regular 401(k), or after-tax to your Roth 401(k) (or both!). In 2018, the “basic limit” (IRS term) for these contributions is $18,500.

    (And yes, you saw right: it’s $18,500 in 2018, up from $18,000 in 2017. So, if your paycheck deferral is still set to automatically defer only $18,000, please change it now!)

    If you’re 50 years old or older, you can contribute another $6000, for a total of $24,500.
  2. Company match
    If you’re lucky, your company will also match some of your contributions. Some matches are generous, some are not. Nothing you can do about it.
  3. These “after-tax contributions” that we’re talking about today.
    Even though both these and Roth 401(k) contributions are made with after-tax money, they are not the same thing. They are treated differently.

Added together, these three numbers cannot exceed $55,000 in 2018.

To belabor the arithmetic, if:

  1. You max out your “normal” contributions of $18,500
  2. Your company makes a match of $5500
  3. Then you are allowed to contribute another $31,000 ($55,000-$18,500-$6,000) of after-tax money into your 401(k).

So, now you could have many “categories” of money in your 401(k):

  1. Pre-tax contributions + earnings
  2. Roth contributions + earnings
  3. After-tax contributions + earnings
  4. Company match contributions + earnings
Step 2. Move Your After-Tax Contributions into a Roth account of some sort. Any sort.

This move-to-Roth is where the real benefits begin. You can move this after-tax money into a Roth account in two ways:

  1. Your 401(k) might allow you to roll after-tax contributions into your 401(k) Roth. This is The Ultimate, as you can keep all your money in your 401(k) for simplicity’s sake, you can do it while you’re still at your company, and the subsequent earnings on your after-tax contributions also remain tax-free. (Check your 401(k) plan to see if this option is available.)
  2. Roll your 401(k) into an IRA when you leave the company, your company terminates or replaces your 401(k) plan, or if your 401(k) allows “in-service withdrawals.”

Pay attention to how each of these kinds of money gets treated in the IRA rollover:

  1. Pre-tax contributions and its earnings, Company match and its earnings, and earnings on your after-tax contributions will go into a pre-tax IRA
  2. Roth contributions and earnings and the after-tax contributions themselves (not the earnings) will go into a Roth IRA.

This strategy is referred to as a “mega backdoor Roth” contribution. So, now you’re all down with the lingo. Look at you…

The upshot: You can effectively put an extra, say $31,000, into a Roth IRA every year. For those of you earning more than $199,000 (married) or $135,000 (single), in 2018, you are not eligible to contribute to a Roth IRA at all.  And the contribution limit even if you were eligible is $5500/year. So, this is an amazing opportunity!

Benefits of After-Tax 401(k) Contributions

Why would you make such contributions?

  1. You can get more much more money into tax-protected accounts than you’d be able to with the usual IRA contributions (witness the $5500 IRA limit vs. $55,000 401(k) limit). The longer you have until retirement, the longer that money has to benefit from its tax-protected status.
  2. You can get more money into a Roth IRA (eventually, when you roll it over) than your income might otherwise allow you to. If you and your spouse make, say $200,000/year, you simply can’t contribute to a Roth IRA. But you can put after-tax money into a 401(k), and then eventually roll those after-tax contributions to a Roth IRA.
  3. Your money is much more protected now than it would be if it were invested in a taxable investment account. Money in your 401(k) is protected from creditors, lawsuits, etc.
You Should Probably Make After-Tax 401(k) Contributions If…

So that sounds pretty awesome, right? Of course, you might be thinking, “Uh, yeah, if I had an extra $31,000 to save, that’d be a great idea. IF.”

So, the first requirement for making after-tax contributions is that you have the extra money to save.

I’d also like to see the following things be true for you:

  1. You’ve maxed out all other (appropriate) tax-protected ways of saving for retirement.
    “Normal” 401(k) contributions are an obvious way to do this. If you’re still eligible for direct IRA contributions (in particular, if you’re eligible to contribute directly to a Roth IRA), do that first. Additionally, Health Savings Accounts can be an incredibly tax-savvy to save for retirement, possibly even better than your 401(k) or IRA!
  2. You already have enough taxable savings and investments.
    All of this money we’re talking about will be in some sort of retirement account. And retirement accounts make it difficult for you to get at your money (for good reason). There are taxes and penalties if you withdraw money. But money you have in bank accounts and in taxable investment accounts, aka brokerage accounts, you can use anytime for anything, no restrictions. This is why I think investing outside your 401(k) is so important.
  3. Your 401(k) is a reasonably good plan.
    You don’t want to trap extra money in your 401(k) every year if it’s a crappy plan, unless you have the opportunity to get the money out of it and into an IRA quickly. Fortunately, I find that plans that offer all these extra whiz bang features like after-tax contributions also seem to be on the ball when it comes to providing a good 401(k).
  4. You are keen on early-ifying your retirement/financial independence.
    Maybe you have goals that are more important to you than retiring early. Like, say, buying a home, or taking time off with a child, or starting your own business. (And yes, you could justly accuse me of some transference there.)  You’re going to be able to support those goals more easily with money invested in a taxable account than with money in a retirement wrapper.
  5. You expect to be able to roll the money over to an IRA within the next few years.
    The longer the money can sit in a Roth IRA, and have both the contributions and the earnings grow and remain tax-free, the better.  (Because, remember, when you roll from the 401(k) to the IRA, only the after-tax contributions can go into the Roth.)So, the further away you are from retirement, the more this tax-free advantage will benefit you. And therefore the less you need to worry about getting the money out of your 401(k) into your IRA super quickly.Now, in the tech industry, you’ll likely be able to get your money into a Roth IRA quickly anyways, just based on how frequently you change jobs. Also 401(k) plans that allow after-tax contributions often also allow “in-service distributions,” that is, you can roll this after-tax money into a Roth IRA while you’re still working for the company.

As you can see, in my opinion, after-tax 401(k) contributions make sense in fairly narrow circumstances. But if you’re in that situation, it can be an almost magical way of supercharging your tax-savvy retirement savings.

Do you make good money, you’re good at saving, and you can almost taste that Financial Independence? Reach out to me at meg@flowfp.com or schedule a free consultation.

Sign up for Flow’s Monthly Newsletter to stay on top of my blog posts (and the occasional video), and also receive my guide How to Start a New Job (and Impress Yourself and Everyone Else) for free!

Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Meg Bartelt, and all rights are reserved. Read the full Disclaimer.

The post My company allows me to contribute after-tax money to my 401(k). Should I? appeared first on Flow Financial Planning.

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Did you just leave your job? Or did you leave a job a loooong time ago, and just never did anything with that 401(k)?

It’s usually not urgent, to be sure, and there are plenty of other more-urgent things to think about when you leave your job. But in tech, where you might move from  job to job every few years, you’re going to collect a lot of 401(k)s over the years. 

It’s possible that doing nothing is the right choice, in addition to being the thing that you’ll do anyways. But if you haven’t thought it through, how would you know?

Let’s figure out what you should be doing with that old thing.

Your Options for Your Old 401(k)

When you do get around to dealing with an old 401(k), you have three choices. 

  1. Keep your money in your old 401(k).
  2. Roll the money from your old 401(k) into your new 401(k).
  3. Roll the money from your old 401(k) into a Rollover IRA at a custodian like Vanguard or a roboadvisor like Betterment.
  4. Cash it all out and run for the border. Just kidding. There’s, like, a Giant Freaking Wall there, I hear.

There is no universal answer. The answer depends on, well, the specifics of your 401(k) and the rest of your finances.

How to Evaluate Each Option #1: How good are the investments?

In an IRA, you have access to all the investments you could ever want. Good, bad, and ugly.

In a 401(k) plan, either your old one or new one, you have a limited list of investments. This isn’t necessarily a disadvantage! You don’t need many, if they’re good. And too many choices can lead to bad decisions.

“Good” investments are low cost and broadly diversified. Best for most people is a target-date retirement fund, which is a “set it and forget it” kind of investment. Outside of 401(k)s, low cost usually means an “annual expense ratio” of under 0.25%. A 401(k) has legitimate costs to operate, so I’m okay with, say, an ER of 0.40% or so (somewhat arbitrary there).

In my personal experience in tech, and my experience with my clients, if you work for one of the big tech employers, your 401(k) probably has good, even great, investments. Cheaper than you’d be able to get as an individual investor anywhere else, broadly diversified, and passively invested.

I’ve always attributed this to the fact that the companies have a lot of plan participants and a lot of money in the 401(k) plan—which means they have leverage. I’d like to think that these companies also have teams dedicated to running a good 401(k), but there’s plenty of evidence showing that professional investor types make boneheaded investment decisions all the time.

If you work for a smaller company, you’re more likely to get an “okay” 401(k) plan, possibly with an astoundingly bad web interface.

#2: What are the costs of the plan?

In an IRA, usually the only costs are those of the investments you hold in them. If your account is small enough or you insist on paper statements, some custodians will charge you an annual fee, say $50.  

401(k) plans have costs to cover. Some of those get paid by investment expenses, some are charged separately to account holders. Again, the larger the 401(k) plan (if you work for Google,  Amazon, IBM, etc.), the cheaper it usually is for individual participants, that is, you.

#3: How easy is it to access and make changes in your account?

Between my husband and me, when we were both in tech, we had some 401(k) providers that offered good customer service and intuitive, easy web interfaces. And some that, um…didn’t. And I’ve had clients with IRAs at really Old School firms whose web interfaces were confusing and limited.  

Honestly, in this day and age, if you can’t easily access and manipulate your account via a modern, well-designed website, I suggest you move your money elsewhere.

(Personally, I don’t think having a good mobile interface is all that important. Apps are all about making it easier for you to f**k around with something frequently, while out and about, all casual like. That’s a Very Bad Idea when it comes to your investments.)

#4: What impact will your choice have on the simplicity of your finances? And how important is that to you?

The more accounts you have, the more complicated your finances become. If you’re in your 20s, 30s, or 40s in the tech industry, I think this “simplicity” consideration is going to be particularly relevant for you. You’re probably going to collect a lot of 401(k)s over your career.

My husband and I worked in tech for many years, honoring the ages-old tradition of changing jobs every few years. So, between us, we had a lot of “what do we do with our old 401(k)?” decisions to make.  Here’s how we made the decision when my husband left Hewlett Packard, which he worked for back about 2 incarnations ago.

HP offered a great 401(k) plan:

  • It was through Fidelity, so a modern, usable web interface. While at HP and after he left, he had access to the same good interface that allowed him to do everything he wanted.
  • Great investment options. The funds were cheaper than we could find anywhere else (even the low-cost leader, Vanguard) and were broadly diversified and passively managed.
  • The plan itself charged him an extremely small administrative fee every year.

When he left HP, however, we still chose to roll his HP 401(k) to his Vanguard IRA. Why? Because we prioritized simplicity of management—and the fact that we’d actually manage it if it were simple enough—over the slight cost advantage the HP plan provided. And I’m even a financial planner! I like this stuff!

If you leave your old 401(k) where it is, are you ever going to pay attention to it? If my current clients are any indication, the answer is, “Um, nope. I’m so embarrassed that I haven’t touched that in years. Oh, and I’ve got these other 2 old 401(k)s, too.”

The more old 401(k)s you have lying around, the more disjointed your finances are going to be, and the less likely you are to understand what the heck is going on in your investments, and therefore the less likely you are to actually Do What Needs Doing.

Making This Decision While Working with a Financial Planner

If you’re working with a financial planner when making this decision, I encourage you to understand the advisor’s incentives in making her recommendation. Specifically, how does your advisor’s compensation change based on what she’s recommending?

If your advisor gets paid a percentage of the money she manages for you—as the traditional fee-only advisor does—then there is a clear conflict of interest in making this decision. She can’t manage a 401(k), and so won’t get paid on that money if you leave it there. She can manage an IRA, and so will get paid if you move it.

A recommendation to move the money from the 401(k) to an IRA can still be the right one for you. It simply introduces uncertainty into why the recommendation was made. Every compensation model has conflicts of interest, there’s no avoiding them entirely. But this scenario represents one reason why I charge a flat fee that doesn’t change based on where you hold your money.

Benefits to Keeping Your Money in a 401(k)

Your answers to the four questions above may favor keeping your money in a 401(k) or moving it to an IRA, depending on the specifics of your situation.

But there are also some universal advantages that 401(k)s have over IRAs, and vice-versa, which you should at least read and nod knowingly at before making your decision.

401(k) advantages:

  • Money in your 401(k) is protected against creditors, that is, people can’t sue you or win a court case against you and take your 401(k) money, and you can keep it through bankruptcy.  Protection for IRA money is neither complete nor universal.
  • There are some savvy tax moves you can make while money is still in a 401(k). Moves that disappear once you move the money to an IRA:
    • If you have company stock in your 401(k)—which generally I’m not a fan of, but still—you can take advantage of “Net Unrealized Appreciation” rules to get your company stock out of your 401(k) in a tax-savvy way.
    • If you want to do Roth conversions of after-tax money in IRAs, you want all your pre-tax money in 401(k)s, not IRAs.
Why You Might Want to Roll an Old 401(k) into Your New 401(k)

All those advantages above are for money in any 401(k). There are a few additional advantages from your current 401(k), which might encourage you to roll your old one into your new one.

Before I start listing reasons you might want to do this, please find out if your new 401(k) even accepts outside money like this. Some don’t!

Benefits to Keeping Your Money in an IRA

As you move from job to job, you can roll your old 401(k) into a single Rollover IRA at a Vanguard or a Betterment. Having one account (instead of 5 old 401(k)s) makes it so much easier to understand and take care of your investments.

One place to change your beneficiary designation. One place to make investment changes. One place to change your mailing address. Etc.

Keep in mind, however, that you could get this same benefit of simplicity by continually rolling old 401(k)s into your new 401(k)! If your new 401(k) is good and accepts 401(k) rollovers, I’d be hard-pressed to tell you to use an IRA instead!

Are you investments smeared over a bunch of old 401(k)s you don’t know what to do with?  Reach out to me at meg@flowfp.com or schedule a free consultation.

Sign up for Flow’s Monthly Newsletter to stay on top of my blog posts (and the occasional video), and also receive my guide How to Start a New Job (and Impress Yourself and Everyone Else) for free!

Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Meg Bartelt, and all rights are reserved. Read the full Disclaimer.

The post What Should I Do with My Old 401(k)? appeared first on Flow Financial Planning.

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Do you need to do anything before year’s end in anticipation of the newly reconciled tax bill, likely taking effect January 1?

You can find a million articles online that outline the changes to tax law proposed in the bill. I doubt I’d do a better job than CNN at writing it up, so I’m not gonna try.

What I want to focus on here is: Do you need to do anything by year’s end to improve your tax situation? Most of the provisions you can’t do anything about. They just are.

But there are a few tactics you could employ to marginally improve your tax situation, at least for this year. If you can do it in the next 13 days, that is.

To Better Understand the New Tax Bill

If you want more information about the tax bill, check out these articles:

CNN also provides a simple calculator for estimating how the new tax bill will affect your taxes, based on your state, marital status, and number of children. This only applies to you if you’re salaried (as opposed to being self-employed in some capacity).

Do You Pay High Property Taxes?

One of the most talked about strategies for minimizing the tax hit of the new bill (well, talked about in my world, at least) was to prepay your 2018 state income taxes and property taxes in 2017.

Why would you do this? Because the ability to deduct state-income and property taxes starting in 2018 will be curtailed, and so you’ll owe higher federal taxes. It turns out that legislators saw this coming and prohibited prepaying state income taxes.

However, you can still prepay 2018 property taxes. This only makes sense if you itemize your deductions. Alas, I cannot tell you how exactly to prepay the taxes, as your local government is the one who makes those rules. Check with your County government (or website) to figure it out.  

By prepaying in 2017, the goal is to write off more of your property taxes, and at a higher tax rate (which means a bigger reduction in your taxes).

Are You in the Middle of Buying a Home?

New homebuyers will now be able to deduct interest only on the first $750,000 of mortgage debt on a newly-purchased home. Currently, the cap is $1M. Most people in this country are probably thinking, “Whatevs. Like I can afford a house that expensive.” Those of you living in the Bay Area or Seattle or New York, however, know this is Business As Usual.

If you already own a home and have a big mortgage, don’t worry. This change affects only people who buy homes starting in 2018. But if you are in the middle of buying a home, and your mortgage is over $750,000, see if you can finish it all by year’s end.

[ETA 12/18/2017: As this thorough analysis explains, “the limitation only applies to new mortgages taken out after December 15th of 2017 …In addition, any houses that were under a binding written contract by December 15th to close on a principal residence purchased by January 1st of 2018 (and actually close by April 1st) will also be grandfathered.” So, if you aren’t already under a binding written contract, there’s no use hurrying to finish buying the home.]

What’s Happening to Charitable Deductions?

Thankfully, the deduction for charitable donations survived. But it’ll save you less tax money starting in 2018, for two reasons:

  1. Your tax rate is likely to decrease (and the higher your “marginal” tax rate, the more valuable any itemized deduction is)
  2. You’re less likely to itemize starting in 2018, because many itemized deductions are being eliminated or limited. And if you don’t itemize, you can’t write off charitable donations.

If philanthropy isn’t already part of your life, don’t let this alone push you into making a charitable contribution. But, if charitable giving is something you already want to do, and you are simply dithering about when to donate, or exactly how much to donate, I suggest making it happen before year’s end.

One great charitable opportunity often available to people in tech is donating company stock that has grown a lot in value (which would make selling it very costly in taxes).

What Other Itemized Deductions Can You Increase in 2017?

As mentioned above, the value of your itemized deductions will, all else equal, be lower in 2018. So, take a look at the 1040’s Schedule A and see if there are any expenses that you can deduct in 2017 instead of waiting for 2018.

For example, “Miscellaneous” itemized deductions are being eliminated entirely in 2018. So, do you have any investment management fees, tax prep fees, or unreimbursed employee expenses that could be deducted now?

Can You Control When You Receive Income?

You can’t control when you receive your salary, or when your RSUs vest.

But you can control when you:

  • Exercise options (which can count as income)
  • Sell stock that has grown in value
  • When you bill or receive income, if you’re doing some freelance or consulting work

If you were planning on doing those things in the next  two weeks, maybe wait until 2018.

On the other hand, if you were thinking of selling investments that have lost value (which can save you taxes, and it’ll save you more the higher your tax rate), that’ll likely be more valuable to do now, before the end of 2017.

Max Out Your Pre-Tax Retirement Contributions

You should probably always max out your contributions to your 401(k) (or IRA). But especially because tax rates are going down next year, your pre-tax contributions are probably worth more this year than they will be next year.

So, if you haven’t maxed out your 401(k) contribution next year, go to your 401(k) and crank up your contribution for the final paycheck contribution of the year.

On the other hand, if you contribute after-tax to a Roth 401(k) or IRA, then delaying that kind of contribution to 2018 (and the lower tax brackets) might help save you a little bit in taxes.

The Real Message Here

As you can see, there’s not all that much we can do to “game” the system before the new tax law takes effect on January 1. But it’s also the case that financial strength doesn’t come from gaming the system (any system!).

It comes from making the right decisions, over and over again; from gradually accruing wealth and building the right habits. Regardless of what you think of this tax bill, it will likely be law, and how will you adjust your habits to make the most of it?

2018 will likely be a very good year to consult an accountant for some tax projections. Don’t wait until you start doing your taxes for 2018, in early 2019, to figure out how this new tax law will affect you, and what you should have done in 2018.

Many of the strategies that a lot of us have used for years, that are almost instinct by now, will no longer serve us as well. So having an accountant be able to point you towards shiny new strategies—while there’s still plenty of time to act on them—could be very worthwhile.

Do you want help figuring out how to buy a home? Reach out to me at meg@flowfp.com or schedule a free consultation.

Sign up for Flow’s Monthly Newsletter to stay on top of my blog posts (and the occasional video), and also receive my guide How to Start a New Job (and Impress Yourself and Everyone Else) for free!

Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Meg Bartelt, and all rights are reserved. Read the full Disclaimer.

The post What You Should Know About the New Tax Bill Before Year’s End appeared first on Flow Financial Planning.

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You’re probably getting lost in a swirl of holiday activity and online spending, maybe even buying an Amazon Echo or two, so let’s talk about how to protect yourself in this digital world. 

After all, awesome financial planning can’t make up for having your data ransomed, identity stolen, or privacy breached. Happy holidays!

Equifax’s data breach a couple months ago was simply the latest and greatest reminder that our data and identities are vulnerable thanks to this Internet Thing. Then there was the revelation about Uber’s data breach over a year ago. I’m sure I could list many more in the last 12 months, but I’m too lazy, it’s depressing, and that’s what Google is for.

When I worked in the tech industry, I spent most of my years in the software security field. I don’t have any particular security chops myself, but I was and am definitely Chops Adjacent.

So, motivated by my “first we protect against risks” approach to financial planning, I reached out to a former co-worker of mine, Andrew Storms, to get his perspective on how we can protect ourselves. Storms has a special place in my security heart because he yelled at me this one time for bringing someone (my brother) into the company’s office and walking around with him, without checking in with IT/security and getting a badge. It might be 14 years late, but Storms…you were right. Sorry, dude.

Below is a series of questions I asked Storms, and his answers.

[Meg’s Note: Andrew Storms serves as the Vice President of Security Services at New Context. He has been leading IT, Security and Compliance teams for the past 2 decades at companies like CloudPassage, nCircle (acquired by Tripwire), and Tripwire. Storms’ advocacy on IT security issues has appeared in CNBC, Forbes and The New York Times. He is a CISSP, a member of Infragard and a graduate of the FBI Citizens’ Academy.]

Q: What is the most common mistake people when it comes to (not) protecting their data and/or identity? 

A: Probably not thinking like a nefarious person. Not to say we should be nefarious, but take a few seconds to consider “what could a nefarious person do?” when it comes to your information or situation.

I often counsel people to not post certain information online. For example, the fact they are going to be on vacation next week. That same person has a habit of posting their daily run stats, with a map that clearly shows their home address. Well guess what? You’ve now told everyone in the world your address and that you will be in Maui next week.

Q: What is the one change in how we interact with computers or internet-connected devices, that you’d most like to see ?

A: Probably the reliance and the trust we put into something so basic as the password, to have only 6 or 8 characters standing guard between the attacker and your account. Everyone and every system these days should be requiring 2-factor authentication.

Q: Listicle time! What are the top 1, 2, or 3 pieces of reasonable/doable advice you give to people to protect their data/identity?

A: #1. You know those password-recovery questions you are sometimes forced to create? Make up a fake persona for those questions.

Why would you possibly tell, say, your picture-sharing application your mother’s real maiden name? I don’t need to tell them my actual mother’s maiden name. They just need standard questions and answers that helps them identify you as the valid account holder so they can do an automated password reset. Make up a story about a fake person and have it committed to memory.

#2. Speaking of memory, you don’t need to memorize all your passwords. Use a password manager and let it create and store all your unique passwords for you. But be sure to enable 2-factor authentication to unlock your password manager. [Meg’s note: Here’s a recent review of the bevy of password managers available to you]

Q: Any thoughts on the explosion of IoT devices? On the dangers they specifically pose? With Christmas coming up, I assume there’s about to be a hell of a lot more Nests, Alexas, Echos, Google Homes, what have you.

A: The growth of IoT is purely too hard to comprehend. Here are some stats and predictions from 1 year ago. It’s like when you watch Cosmos and Neil deGrasse Tyson tries to explain the number of stars just in our galaxy. And then you are told there are countless galaxies larger than ours.

Every single electronic thing in your house and in your life will soon be internet-enabled in some way. These are your refrigerators, your light bulbs, cars, thermostat, cameras, smoke detectors, and even that failed wifi-enabled juicer experiment that was the epitome of valley ridiculousness  (I kept waiting for someone to tell me that it was a joke and actually part of the HBO Silicon Valley show).

From a privacy perspective, you need to be careful with devices in your home that have microphones and are connected to the internet. You just don’t know if or when they are listening. We’ve already seen smart TVs that listen and kids’ toys doing this. And then what is the company doing with all that data?

There is no doubt that all these things lend for huge innovation and automation, which should hopefully give us more time to be creative and move our cultures forward.

On the other hand, a lot of these IoT vendors just don’t have security-engineering experience or skills. They take the shortest route to reach market and will almost always forego security and privacy in order to capture market share. Not much here is going to change because the consumer demand is outrageous and most people are willing to give up privacy for technology at a low cost.

Q: What is the top danger in data security/identity protection right now? 

A: I live in this cyber security industry and have seen the most creative and nefarious attacks, which continue to surprise me. Our attackers are just as smart [as we are] and oftentimes have more time and resources. They only have to be right once to break into the system, but the defenders have to be right all of the time.

One time in my life I refused to talk to this 10 year old who was going door to door trying to sell things. I told my wife that I thought she was sent here to try and get information out of me. Call me paranoid.

At some point we just have to do our best to live our lives and not constantly have to be looking over our shoulder. Protection is about risk management.

These days everyone should have free credit monitoring because everyone’s identities have been leaked. [Meg’s note: There are a ton of free credit-monitoring tools out there. Also realize that if a tool is free, you, specifically, your data, is the product.] And you might as well just revolve your credit cards once a year. Did you know you can just call your credit card company and ask for a new card even if it hasn’t been stolen or lost? If they give you a hassle about, tell them you lost it.

Play it safe. Ask questions. Don’t be afraid or hesitant to ask people who call or email you to prove that they work for your bank or other institution.

I was in the middle of  refi once and the bank called me on my cell phone. She demanded I tell her my SSN before she would complete funding the loan. I told her that I didn’t know she worked at the bank. We were able to be creative and figured out a way for her to identify to me that she did actually work for the bank.

But these kinds of things happen all the time, we just make assumptions that people are working in best faith and that’s not always the case.

After you dig out from your bunker, do you want to work with someone who thinks holistically about your financial health? Reach out to me at meg@flowfp.com or schedule a free consultation.

Sign up for Flow’s Monthly Newsletter to stay on top of my blog posts (and the occasional video), and also receive my guide How to Start a New Job (and Impress Yourself and Everyone Else) for free!

Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Meg Bartelt, and all rights are reserved. Read the full Disclaimer.

The post Protect Your Identity and Data. Financial Security Ain’t All About Your Savings Rate! appeared first on Flow Financial Planning.

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Do you want to give more to charity? But you can’t take that first step? Here’s a way to just Make It Happen.

(From my latest monthly newsletter. Sign up here.)

How Do I Get Started Donating (More) to Charity? - YouTube

Do you want a partner and guide through all your financial decisions? Reach out to me at meg@flowfp.com or schedule a free 30-minute consultation.

Sign up for Flow’s Monthly Newsletter to stay on top of my blog posts (and the occasional video), and also receive my guide How to Start a New Job (and Impress Yourself and Everyone Else) for free!

Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Meg Bartelt, and all rights are reserved. Read the full Disclaimer.

The post How Do I Get Started Donating (More) to Charity? (Video) appeared first on Flow Financial Planning.

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