Financial infidelity: What it is and how to overcome it
BY JULIA ANDERSON
In Washington state there are an estimated 24,500 divorces each year, 13,500 in Oregon. That’s about 3.5 divorces per 1,000 population and higher than the national average of 2.3 per 1,000. All those divorce rates are down nearly by half from 20 years ago, but divorce lawyer Juliet Laycoe says it is not necessarily the whole picture. That’s because fewer couples are marrying in the first place. She thinks the break-up rate among couples living together with or without marriage is higher.
This leads us to our topic – "financial infidelity."
A leading cause of divorce, financial infidelity can take many forms. Not being honest about how much credit card debt you may be racking up, is an obvious example. Dishonesty when it comes to illegal drug use, or gambling addiction. Squirreling away cash is secret accounts. They all fall under the financial infidelity label.
In a recent Smart Money show, Laycoe related the story of a husband who was buying stuff he didn't need. To cover up the purchases he rented a storage use, filling it with computers, electronic equipment, and other items. His wife began divorce proceedings because they weren’t paying their household bills. She couldn't understand where the money was going. By looking into bank account statements the storage unit rental fees were uncovered. This led to a conversation about unrestrained spending.
The good news in this case is the husband got help for his bi-polar mental condition. With medication and counseling the couple reconciled.
Financial infidelity is surprisingly common among couples. A survey by the National Endowment for Financial Education said a significant percentage (43 percent or 2 in 5) of spouses admitted to not being totally honest about money. It might mean hiding purchases, not disclosing a cash refund, hiding bills, or running up credit card debt.
“When you comingle finances in a relationship, you’re consenting to cooperation and transparency in your money management. Regardless of the severity of the act, financial infidelity can cause tremendous strain on couples – it leads to arguments, a breakdown of trust, and in some cases separation or even divorce,” said Billy Hensley president and CEO of NEFE in a late 2021 article.
In no-fault divorce states, especially, (where you don’t have to have a reason for the divorce) assets and debt are weighed out equally. That means someone’s secret $60,000 of credit card debt is shared equally in a divorce, as was the case of a friend of mine. While the couple may have assets of $300,000, the $60,000 in debt is subtracted from the assets. That leaves the divorcing couple to share the remaining assets.
Whether or not a state has community property laws in place seems to not matter that much when it comes to shared assets and shared debt in a divorce, Laycoe said. “Financial infidelity does not occur in an open and honest relationship,” Laycoe said.
As for unmarried couples who are living together, Laycoe recommends a “co-habitation agreement” that spells out who owns what property and who pays for what as well as who gets what in a break-up. This is similar to a pre-nuptial agreement for couples who do marry.
A fair financial settlement in a divorce is a huge part of the negotiation, especially for women who may face financial hardship on their own. How can a divorce attorney go about making sure a settlement in fair?
Laycoe said that in complicated cases where large assets are at stake, hiring a forensic accountant may be required to sleuth out undisclosed accounts and purchases, or stashed cash.
“In most cases it is just a matter of looking at pay stubs and account deposits,” she said. “You add up money coming in and look at where it is going. That’s how we discovered the undisclosed rental unit fees, for instance,” she said.
The NEFE polling showed that two out of five people were aware of financial infidelity in a relationship. “This highlights the need for greater communication and a deeper understanding of who your partner is financially,” NEFE CEO Hensley said.
How to prevent financial infidelity:
Establish financial transparency and trust by frequently reviewing household bills and income.
Review financial statements – bank statements, retirement accounts.
Regularly discuss shared financial goals.
Work together to achieve common financial objectives.
Communicate – share your money worries, goals.
Consider financial counseling to strengthen trust if there’s an issue.
Stay honest even if the truth will hurt.
"Overcoming Financial infidelity," click here.
"2 in 5 Americans Admit to Financial Infidelity Against Their Partner," click here.
"How to Avoid financial Infidelity in Your relationship," click here.
"Divorce Wisdom: Smart Strategies for Anyone Contemplating or experiencing Divorce," by Juliet Laycoe. click here.
Congress wants to help more Americans save for retirement with the Secure Act 2.0
BY JULIA ANDERSON April 2022
Later this year, Congress likely will pass the Secure Act 2.0 in an attempt to get more Americans saving for retirement. At the same time the bill gives retirees more time to take money out.
This is a big deal because only 50 percent of American households use a retirement account. That is unchanged in the past 20 years. Even more depressing is that heads of households between ages 35 and 44 are actually LESS likely now to own a retirement account than 20 years ago.
The bill basics:
If passed later this year out of the Senate, the Secure Act 2.0 would expand enrollment in tax-deferred retirement accounts by offering a tax credit up to $500 to enrollees who elect to enroll in an auto-enrollment retirement savings program. The tax credit applies the first three years of participation.
More employers will be required to AUTOMATICALLY enroll new employees in a retirement savings plan with a 3 percent payroll deduction level that ticks up annually until it reaches 10 percent. Employees must opt out of the plan, rather than opt in. It also allows part-time workers to participate in a 401(k) plan. That would benefit many women who juggle family and a part-time job.
If passed, the bill would raise catch-up contribution limits for people 62, 63 and 64: The contribution limit goes from $6,500 a year to $10,000 a year for this age group. But the additional contributions must be in after-tax Roth IRA contributions.
The bill improves and simplifies a SAVER’S TAX CREDIT for medium and low-income households starting in 2027. This provision increases the number of people who qualify to save in an employers’ retirement account.
For those near retirement, the bill again raises the age when people would be required to start withdrawing money from their retirement accounts from a current age 72 to 75 by 2033.
Small businesses would receive more incentives for launching retirement plans. Student borrowers would get extra assistance with loans.
EXAMPLE: According to Forbes magazine: A married couple earning $50,000 a year and saving $4,000 annually in a retirement account would get a $400 tax credit in addition to matching money from an employer and a tax deduction on their federal taxes for the money saved.
OUTLOOK: Secure Act 2.0 is expected to be taken up in the U.S. Senate after the August 2022 recess and then become part of a larger end-of-year spending bill or it could remain a stand-alone bill and pass on its own.
NEGATIVES of this bill: Critics say this bill does not do enough: It doesn’t tackle why more Americans are doing nothing to save for retirement. Some see a universal coverage plan as a better solution. Something like a Social Security account for long-term savings rather than leaving it to individual employers to find account managers and set up programs.
Meanwhile, workers can go long stretches without having access to a retirement savings plan because they lose a job, or work for an employer without a retirement plan. Also people switch jobs and take out their money. Money leaking out of existing retirement accounts is a problem. The bill does nothing to address that.
My summary touches the surface of the reform bill. For more:
Kiplinger, click here.
Forbes, click here.
WSJ "How to get Americans to Save for Retirement" - click here.
My 2022 Smart Women Smart Money interview with Helen Raptis at KATU's AM Northwest
"It is never too late to start managing your money," Julia Anderson, author, journalist and television host.
A big thank you to Helen Raptis, host of AM Northwest at Portland’s KATU Channel 2 for profiling me and my newly updated 2022 book, “Smart Women Smart Money Smart Life.” Helen is such a good interviewer and gets right to the heart of things:
- Mistakes women make when planning (or not planning) for retirement.
- Lessons we learned from Covid-19 (a whole chapter in my 2022 book).
- Mistakes I made with my own money over my work life.
- Why women were hit hard by Covid-19 layoffs and shutdowns.
Here’s a link to the interview:
Thanks again to the crew at KATU's AM Northwest for arranging this interview.
BY JULIA ANDERSON
In so many ways, American working-age women took the biggest hit from the pandemic. They stayed home to take care of children going to school online. They lost jobs in services industries -- hospitality, childcare, and retailing. The economic pain in the short-term was real in lost household income. In the long-term it might be worse because women, more than men, lost a step with their retirement savings plans.
What can women do to catch-up?
Recently, we interviewed Jacent Wamala on Smart Money, our public television show. She shared her money management tips for women, specifically women of color.
Jacent Wamala paid off $90,000 of accumulated debt in three years. Sure, she did the usual things – reduced her spending, stopped using credit cards etc. But her biggest change-up was finding a NEW and BETTER PAYING job. Wamala told us that she spent three months looking for that better-paying job, as well as coming up with money strategy to pay down her debt. The cool thing is that she shared her “money mindset” journey on Instagram.
She used Instagram because she “wanted to share information, tools and techniques that would enable more women to create FINANCIAL FREEDOM and FLEXIBILITY in their lives faster.” Amen!!!
Her posts are a hit.
Wamala, a private-practice psychologist in Las Vegas, now has 22,500 Instagram followers who saw how she dealt with debt by sharing her “jacentsgems.” She has been interviewed on the Today Show and by Psychology Today and the New York Times. She’s writing a book, leads speaking engagements and has established her “Wealth-Wellness University.”
She regularly posts jacentsgems on Spotify and Instagram to inspire millennial women to take charge of their money and their financial future. Her Instagram posts are filled with inspiration, common sense, and tips on how to take small (but committed) steps to change your money habits. While she speaks to her millennial generation her message resonates with all women who want to change the way they manage their money.
Her message certainly hit the right note with me. She asked her clients to “become more genuine and honest with themselves.”
That is precisely how women of all ages are going to recover from the pandemic. How they will build back a money strategy and have the retirement that they deserve. For me, honesty means thinking about the future realistically. Finding a better-paying job with health benefits and a 401(k)-retirement plan makes absolute sense, especially when employers are looking for reliable, intelligent workers. What’s the point of going back to the old job that was fun but offered no advancement and didn't pay much?
I see Jacent as the Suze Orman of the millennial generation. She’s personable, intelligent, and NOT a financial adviser. That’s a plus. She speaks to the psychological barriers we place in front of ourselves. She doesn’t have to have all the financial investment answers.
Her message is about getting your mind set on a better financial future – short-term and long-term. Goals for her clients are twofold: Money freedom and money flexibility.
Here are money management tips from Jacent Wamala:
- Transform the way you see yourself when it comes to money by tracking your daily spending and saving habits. Keep a journal. Evaluate your list in terms of what is “healthy” and what is not.
- Transform your mindset by using daily “gratitude chants.” Do these gratitude chants throughout your day to see yourself in a positive way with the ability to control your life. “Listen to the information that reminds you of your ability to succeed,” Wamala says.
- Commit to your project. It will take time. Ask how you are going to turn your NEW money mindset into a long-term habit. Wamala says start with just a week. Work up to the change. She said it takes a minimum of 21 days to build a new habit. Build accountability into your plan by telling someone about your mission.
- Surround yourself with people who have the mindset that you want. This may be her most important tip. These are friends who will "cheer you on," she says.
To make this happen she encourages followers to: “Re-curate” their feeds, form accountability groups, get a coach, set up a game plan and accept that the changes will come slowly."
She offers support at her website wamalawellness.com, on YouTube and with podcasts called “Wealth and Wellness with Money Mindset Coast Jacent Wamala.
To review: Financially rescue yourself from the pandemic by changing your mindset. Get a better-paying job like Jacent Wamala did, find re-training opportunities to qualify for better-paying work, get rid of your debt burden and take charge of your money to have the life you deserve!!
New York Times, click here.
Instagram, click here. YouTube click here.
5-step financial plan to kick off 2022
BY JULIA ANDERSON
Yes, we are living in a whacky time with inflation taking a bite out of household budgets, stock markets in volatile territory and the Federal Reserve Bank deciding when to raise interest rates. All these factors will affect how we manage our money in the coming year. Here are 5 money tips to get the year off right!
No. 1 Keep up your long-term savings plan: No matter your income put money into a savings plan. This can be once a week, once a month. Just do it. Build an emergency fund so you don’t have to use credit cards if something bad happens. Put enough money into your employer’s 401(k) retirement program to at least earn the company matching money. Or start your own tax-deferred Individual Retirement Account or a Roth IRA. Plan out your retirement investment strategy, and don’t be too conservative.
No 2. Look over your household budget. Find ways to reduce expenses. Sure, gas prices are up, how about taking public transportation to your job or work from home? Save on food costs at the grocery store by buying in bulk, avoiding prepared items, and sticking with lower-cost fresh items. Budget management takes takes concentration and effort but worth it if you can cut costs. In fact, review all your fixed costs – insurance, mortgage, medical bills, Internet and TV subscriptions. Lower the temperature on your water heater to save energy costs?
No. 3. Get a NEW AND BETTER JOB: Employers are desperately looking for reliable committed employees --- railroads are hiring, manufacturing is hiring, retail and hospitality are hiring. A new job is the best way to increase household income by finding a position with higher pay. Don’t worry if you don’t have prior experience. Many employers will give you the technical training. All they want is someone who will show up every day and do the job.
No 4. Invest for the long-term. Don’t be afraid of the stock market. Stocks remain the best place to save and invest for the LONG TERM. U.S. markets have done well in the past three years and are likely to cool off as higher interest rates go up. Remember U.S. markets deliver ON AVERAGE a 7 to 10 percent return (every year for the past 50 years). If you are under 30, start saving for retirement now. Time is money. The rewards are huge if you start early!!
No 5. Kick your credit cards to the curb. Pay off anything you put on a credit card at the end of the month. If you have carry-over credit card debt with high (18-20 percent interest fees) pay it off as soon as possible. Put the money saved into your savings and investment plan.
ONE MORE TIP: Covid-19 taught us ALL that we need a Will and designated healthcare directives. Easy and cheap to do online. Download a form that pertains to your state. Fill it out and get it notarized at a bank for free. Give the documents to your family.
“The biggest risk of all is not taking one,” -- Mellody Hobson, American businesswoman and board chairwoman of Starbucks Corp. (1969 - )
BY JULIA ANDERSON
Type No. 1: Women who are confident investors, who understand investing basics like reinvesting stock dividends, interest rates and fund management fees. They appreciate investing for the long-term, managing their own money by saving and spending wisely, and they know what they are doing even when markets slide, and interest rates go up. These women have a significant and growing nest egg into their 70s.
Type No. 2: A second group of women (the majority) know they must save and invest for the future but don’t have the confidence to do it on their own. They turn to a financial adviser for help and meet with her or him once or twice a year to see how their accounts are doing. Or they may attend a once-a-year meeting hosted by their employer where they listen to updates from an outside rep from the company managing their 401(k). This group may be too cautious with their nest egg.
Type No. 3: There’s a third group that can’t be bothered with saving, either from fear or hopelessness. Investing is too complicated, they say. Besides they don’t think they earn enough for it to matter. They believe that they can’t afford to save and besides their employer does not offer a retirement savings plan.
Their mantra? “I am just going to keep working until I die.” They use credit cards for short-term purchases and save money to pay for short-term things like the next family vacation or a grandchild’s birthday. In their minds they are doing the best they can. These women don’t have a nest egg.
There are steps each of these groups can take to save and better invest money for the long-term, for their retirement. Maybe, they won’t have to bag groceries in their 70s.
Smart Women Smart Money TIPS for each type:
Let’s begin with Group No. 3: Those who are not saving and expect to work until they drop.
Tips: Lower your household expenses! Do that by sharing housing costs with someone, renting out a back room or getting rid of your car with its related expenses. Look for all the ways to reduce your ongoing expenses. Once you’ve lowered those expenses put the newly found money (however small that amount is) inside a tax-deferred saving account – an IRA or Roth IRA. You can do this on-line for free. Get someone to help you.
Some states offer programs that painlessly siphon money from your paycheck to such a state-sponsored account. If your employer has a 401(k) program save enough out of your paycheck to get the employer “matching” money.
Talk with your family about your financial future. If you have grown children, tell them where you are financially and where you want to go. They can help.
Increase your income. Look for a new job that pays more. If you need better qualifications sign-up for job-training opportunities that will give you a pay increase. Ask for a raise, ask for training on the job. Learn new skills. Put yourself first. Look for ALL opportunities to grow your income while cutting your expenses.
When you start your own tax-deferred account invest in an inexpensive stock index mutual fund. Then make regular contributions. Reinvest the dividends. Over time you will be surprised how the miracle of compound interest (dividends) will grow the value of the account. If interest rates move higher, put money into a (safer) certificate of deposit through your bank or credit union.
If you have a spouse/partner talk with them about what your financial life will be like when they die. Marrying is better than living together because Social Security will provide widow’s benefits, if you have been married for 10 years or more. This happens even if you’re divorced. Set up an online account at the Social Security Administration website www.ssa.gov. Call them, check out what your benefit will be depending on your age when retire. The longer you wait the greater the benefit up to age 70.
Group No. 2 Tips: If you need retirement saving, planning and investment advice, get help. Just make sure you know how much that help will cost. I still don’t know what the management fees were on my 401(k) account at work. If I could do it over, I would demand fee information.
When you are choosing an adviser, your first question should be, “How do you make your money, what are your fees on this account?” Anything more than an annual 0.75 percent is TOO HIGH.
When markets are going up it is easy to discount management fees because they are better disguised. But fees can reduce the long-term growth of a retirement account by thousands of dollars. Secondly, don’t let them “churn” your account by moving you in and out of investments. They may be making extra money on those transactions. (See my separate chapter on How to Hire a Financial Adviser).
Don’t let your adviser put you into an investment product that you don’t understand…annuities fall into this category for me. So does private long-term health insurance coverage and life insurance. If a return on your investment sounds too good to be true, it is.
Even though you are using someone else to manage your money, take time to track stock markets, interest rates and economic trends. You must be able to ask good questions and know where the economy is going. Read up on investing. How can that hurt?
Group No. 1 Tips: Confident investors enjoy staying up on day-to-day financial news. They enjoy checking on their investments and most of all they know that staying the course is essential to long-term rewards. Sometimes even for the most seasoned investor that’s hard to do. That is why having trusted friends might help. When the urge to SELL overwhelms you, talk to someone before pushing the button.
Avoid becoming tangled in the financial affairs of children and grandchildren. Being co-dependent is not good for anyone. Easy to say, hard to do when you love them.
If you are on your own be sure you have a will and have designated someone with power of attorney to manage your affairs if you can’t. Consider using a bank trust department to manage your money while you are still living and to settle your estate when you die. Your heirs will thank you.
No matter what type of investor you are, there are ways to take charge of your money. Who cares more about it than you do? - Julia
The Pandemic: What we learned (again)
“With women controlling more and more assets, this growing financial power represents anything but a niche market,” – Charles Schwab Asset Management
Women interested in money management, long-term investing and building a retirement portfolio should see 2020’s pandemic stock market ups and downs as a great lesson. As one analyst put it recently in the Wall Street Journal, “it felt like something different, but it wasn’t.”
He meant that when Covid-19 infections swept the world, shutting down the global economy, killing the travel industry, closing restaurants, and most everything else, it felt like something new, something awful. Panic set in, investors felt the fear and stocks sold off in March 2020 by 34 percent. That’s a bear market.
But 2020 taught us that what feels new is mostly not. Here are the lessons we relearned.
Lesson No. 1
Seasoned investors stay the course. Those who sold off stock investments in the 2020 panic were then faced with a tough decision – when to buy back in? Many did not! Several friends told me that they were bailing out of stocks. They were scared by what might happen next. As one said, “I want to be able to sleep at night.” Fear was in the air as we hunkered down, buttoned up and began hoarding toilet paper and hand sanitizer.
But what happened? This bear market sell-off was short-lived. Like other market selloffs. It ended, sooner than later as the federal government cranked up the money printing press and began rescuing the economy.
While “all bear markets are inherently different, the common thread is that they always end,” said Peter Lazaroff in a WSJ report. “Investors must be willing to lose money on occasion – sometimes a lot of money – to earn the average long-term return that attracts most people to stocks in the first place…. if you can be a buyer in times of fear, your chances of earning above average returns improve,” he said.
Starting in late March 2020, the S&P 500 began a recovery that has continued into 2021. By the end of the year, stocks were up 16.26 percent over 2019. That’s well above the annual average return of around 7 percent.
Hanging in there was among several lessons learned again by investors in 2020. In fact, buying when others are selling is almost guaranteed to reward the long-term investor.
Lesson No. 2
An emergency fund is a great idea. A survey of investment managers by the Wall Street Journal ranked putting cash into an emergency fund as a top priority money tip. An emergency fund means that the blow of an unexpected layoff can be modified. Emergency money will save you from expensive credit card debt until unemployment checks kick in and you can figure out what to do next. At least six months of cash. Everyone tells us this.
Lesson No. 3
You need at will and health care directives. At sixtyandsingle.com we have preached this forever. Since covid-19 began taking lives, it is even more clear that people need a will no matter what age they might be. A will spells out how you want your assets distributed. It makes sure your beneficiary designations are up to date on a 401(k)-retirement savings plan. A will can tell your heirs how you want your belongings distributed. This is a long-term but urgent item on your to-do list. Make a will!
Stay flexible with retirement planning.
According to Maddy Dychtwald, co-founder of Age Wave in San Francisco, an estimated 81 million Americans will see their retirement timing affected by the pandemic. In other words, they won’t retire when they originally planned. People are putting off retirement for an average of about three years, an Age Wave survey says. Working longer into your 60s is not a bad thing…more time to recover, save and invest, more time to put off taking Social Security and more time to enjoy the job. Many women I know are working because they love the action and see no reason to stop.
Markets go up and they go down. Surveys show that women can be more easily scared out of stock markets and are generally more conservative investors. They hate seeing the value of their investments decline when markets sell off. They tend to put more of their savings in low-earning money market funds at a time when they should be in equities. “A diversified portfolio that you can stick with regardless of the market environment should be the cornerstone of everyone’s investment strategy,” Jeff Mills, chief investment officer of Bryn Mawr Trust, told the WSJ.
The year 2020 taught us AGAIN that nothing stays bad forever. We learned that what might feel new and scary is really a variation on what we’ve seen before. Disciplined investors hang in there for the long haul by riding out the declines and benefitting from recoveries. The world does NOT end.
I meet women all the time who face job and money transitions and who want to do them right. It’s about building confidence and taking charge of the future. This is your money. No one cares more than you do!
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