Reducing The Stress of a Job Loss

Job Loss is Stressful and Complicated

Because my practice has morphed these last years from helping families in divorce to helping those in any major transition (getting married, losing a spouse, etc.), I see a lot of job loss.  It can happen so fast and be completely unexpected. What to tackle first?

Typically, when you are walked from an employer, they are going to send you home with some paperwork or perform an exit interview on-site.  In high times of stress, one's brain cannot focus and concentrate.  Listen to your exit interview, take your paperwork and go home.  Please do not sign anything until you have had a chance to review it.  You do not need the stress and pressure of the HR Director peering over you and the immediate sense of shock of losing employment to make major decisions.

Instead, write down your questions, organize your thoughts and call HR later.  

HEALTH INSURANCE

We get a lot of questions about about health insurance.  Heck, I know many people that go to work only to obtain health insurance for their family.  This is a major concern. 

COBRA

By 1986 law, COBRA gives employees the right to continue coverage at the group premium rates. Typically, it is 100% of the premium (which might have been partially covered by the employer) and a 2% administration fee.  This is a viable option and can provide consistent coverage for a family while other options are researched.  The employer will send over coverage termination information and your insurance provider within 2 weeks will send you COBRA continuation options via the mail.

Healthcare.gov

Outside of open enrollment, one can obtain coverage due to job-loss.  This is important to research while exploring COBRA options.  It might be less expensive to obtain independent insurance or move to a short-term coverage policy rather than pay your COBRA premiums.  I have researched this enough times with clients to know that every one family is different.  

For example, a family with young children and frequent trips to the doctor, might decide to it advantageous to maintain consistency of coverage through COBRA.  For a single person with minor health issues, a short-term medical policy through healthcare.gov can be significant savings.  

I recently read a Motley Fool article that advised to research, research and do more research.  Compare plans, check prices, and check doctor participation depending on your attachment to your physician.

Make a list of the medications you take and what they'll cost under various plans. List services you expect to need, too, such as visits to mental health counselors. Then try to estimate how much each candidate plan will cost you. Don't be afraid of high-deductible plans. If you're not likely to spend a lot on healthcare, they offer a good way to keep costs down. (Source: https://www.fool.com/retirement/2017/06/04/read-this-before-you-buy-health-insurance.aspx)

BUDGET

We say we are going to analyze our spending but let's face it, we get busy.  This is the time now to put that thought to action.  Sit down and list out all known expenses.  I like to use receipts and an Excel spreadsheet - a legal pad will do!  Take some time to get a handle on what needs to be paid and how you can address your imminent bills. 

What is not acceptable is ignoring it.  You cannot ignore your bills because you feel bad.  They don't care.  You can control your spending and your stress will reduce, the more your stay on top of it.  If there are small bills that can wait to be paid, call the company and ask for small payment plan or an extension while you sort things out.

GET ORGANIZED

You are already disciplined.  You got up every day, got ready and went to work.  Continue to do so.  Work on your resume, research new job opportunities ad treat it like your full-time job.  I see the most success and the least down time with people that have a plan. 

Get up, get ready, research, submit resumes, make calls, and have coffee with people who can help you in your field.  You will be shocked at how much time it takes to get your next awesome role.  It needs your time, dedication and attention.

GET SUPPORT

There is no shame in losing a job.  It happens!  Talk to your friends, arrange to do things to keep you occupied (hikes, movie rentals, pot lucks) that do not strain your budget.  Seek support and ask for help.  Your friends want to help but they do not know how and they cannot read your mind.  

The more you can prepare for emergency, the better (like with an emergency savings account) but hey, this is life! and $h1t happens.  Breathe and know that you can do this, get better and succeed in another role wherever you may land.

Sources:

https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/faqs/cobra-continuation-health-coverage-compliance;

https://www.healthcare.gov/;

 

401(k) Fees: The Wolf in Sheep’s Clothing

While the 401(k) plan has been around for decades, we are just now starting to see the cycle of this strategy.

Most people know that if you save in a 401(k) plan, you're able to deduct what you put into it on your income taxes. If you put $18,000 total a year into your 401(k) and you make $78,000 a year, then only $60,000 a year of your income is taxable.

However, what people don't talk about is how 401(k) plans are constructed, charged and the responsibility of the employer in managing those plans.

401(k) Fees

Even though 401(k) plans are tax-deferred until withdrawn, they may be loaded with up to 13-15 different fees that you would not normally have in a good IRA, Roth IRA or a non-qualified brokerage account. On a high-level range, these expenses can consist of:

• Communication expenses like enrollment and ongoing material fees;
• Record-keeping and administrative expenses;
• Participation fees;
• Loan origination and maintenance fees;
• Tax filing fees;
• Trustee fees, etc.

These fees can erode a substantial amount of your potential retirement nest egg.

Employers who create 401(k)s have a fiduciary responsibility to make sure they are doing everything they can to avoid high fees.

In fact, the US Department of Labor is auditing employers to see if their fees are too high.

According to CFO Daily News, in 2013:

“Nearly three-fourths (73%) of these investigations resulted in fines or other corrective action for the employers that were involved.”

The average fine last year was $600,000; up from $150,000 four years ago.

A small business owner, who in good interest creates a 401(k) plan for their employees and who trusts their broker’s advice, could unknowingly be in a high-fee plan that could result in hefty fines for themselves.

What can employers do?

As an employer, the Department of Labor requires small businesses to compare annually their 401(k) plan against others to make sure fees are reasonable. You can research 401(k) plans on the Internet, talk to your advisor or call a company like ours to ensure your plan is adequately audited and in line with the industry standard and you are not paying excessive fees.

What can employees do?

Take ownership of responsibility of where your money goes. As an employee, it's important to understand the fees being paid for your plan. Talk to your employer (chances are they don’t know and will be appreciative of the help) or call our office to check your 401(k) fees; we can help you navigate the complicated language reports. After all, this is your net worth that gets reduced by the potential excessive fees.

Does a divorce void a 401(k) spousal beneficiary?

Not by operation of federal law, but that doesn’t mean the answer is always “no.” In some states, law says that after a divorce, an ex-spouse is no longer considered to be a person’s beneficiary (unless they are reaffirmed as a beneficiary afterwards). A similar provision can be built into plans as well. So while the answer is generally “no,” you’d have to check your state law and the plan’s specific language to be 100% sure.

We say at Strada Wealth Management, “make informed financial decisions.”

• You cannot control taxes, but you can try to minimize them.
• You cannot control inflation, but you can work to protect against it.
• But fees, you can control.

These 3 things will eat away at your wealth the most over the course of your investing life. Control what you can and work with what you cannot.

Jennifer Failla, CDFA™
Principal, Strada Wealth Management
Toll Free: 866.526.7098
Email: info@stradamanagement.com

Update Your Risk Profile with Your Investment Advisor

Investment professionals are responsible to help investors continually determine what level and kind of risk they are willing to take with their investments.

In order to determine a client’s risk appetite, investment professionals often ask a client to complete a risk profile questionnaire. It’s a standard financial planning form and each firm typically develops their own or uses someone else’s. These questionnaires are typically 7 to 10 questions that attempt to measure the investor’s thoughts on the risks in the marketplace and how it might affect them inside their portfolio.

For example, a question might be something like, “If you lose 20% of the value of your portfolio, which of the following things might you do?

1. Do nothing;
2. Buy more;
3. Move your money;
4. Not sure what to do.”

When the client leaves the office, the investment professional has a baseline on which to ground the portfolio recommendations. They can choose investments that meet the client’s appetite for risk. However, it is important to update these questionnaires from time to time because the economy and risk factors continue to change.

In 2008, investors were nervous because the economy was experiencing real difficulty; risks were higher, appetite for risk taking actually dropped in our firm. So in 2008 - 2010 investors were answering risk questions differently than they are in 2014. We can't just file the risk questionnaires and put them away.

In our firm, we have instituted a new practice where every summer, after clients have fulfilled their tax obligations and have a good idea of where they stand financially, we ask them to reassess themselves in terms of their individual risk appetite. We tie this into their annual retirement/financial planning outlook.

We are looking into implementing a software application that will interact directly with the client. It will compare their current risk appetite to what they presently hold to see if they are aggressively investing in the market or not being aggressive enough.

We believe the risk should be reassessed at least annually; it is not good enough to take the risk questionnaire and then file it away. Investment professionals should ensure investment portfolios are continually monitored and not just perform a one-time task in order to get their compliance paperwork done.

As investors, clients who have not completed a risk appetite questionnaire for some time and who now feel differently about the markets should contact their investment professional. Clients should ask that their portfolio be reassessed to ensure their risk appetite is reflected in what they currently own.

Looking at one’s investment portfolio from a risk appetite perspective is a good thing to do and continually do over time. These are fast-moving times. We cannot be stale in our approach to the current economic environment.

Jennifer Failla, CDFA™
Principal, Strada Wealth Management
Toll Free: 866.526.7098
Email: info@stradamanagement.com

Allowance for Children: More Than a Lesson on Paper

I thought I had a theory regarding allowance, until I had to put my theory into motion with my own child.

What I learned was that my husband had his own theory and shockingly, I had mine. This caused conflict as to how we wanted to present allowance to our nine-year-old son.

My philosophy is that allowance should not be paid for normal work and chores, but for work or activities done above the basic chores: make bed, pick up toys, put clothes and dishes in appropriate places. I’ve always explained to the family that we are 4 people, each participating members in our home, each with an equal responsibility to take care of it.

My husband’s philosophy is that allowance should be paid for basic chores, but he was very open-minded, understood my philosophy, and was willing to compromise. The next subject was which chores were eligible for allowance credit.

When I first said, “Wash the car once a week,” my husband disagreed. He felt it was too big of a job, and what if we were travelling one weekend? Should my son lose his ability to do his chore and earn his allowance? More conversations like this ensued. Finally our debates led me to a parenting specialist.  

“My husband and I have agreed that we are not going to give an allowance for basic chores, but we are torn as to what to assign and for how much.” I also explained how we had determined that my son was to do 4 things per day, 7 days a week, to earn his allowance. The parenting specialist nearly fell off her chair laughing, saying, “I can’t even remember to do 4 things in a day. That’s too much for your son. Too much pressure.” She guided me to 4 things a week.

So my husband and I came up with a list of chores that I think are really creative, different and unique to our household that will allow our son to accomplish them even when we travel:

• Write a good sentence in Italian.

• Write a good sentence in Spanish.

• Write a complicated math problem and solve it with Papa’.

• Read a book to your brother and write the title in your journal.

Then we got to the subject of how much. My husband said, “Ten dollars,” and I said, “Five.” My husband also wanted $3 to go to charity. We are in complete disagreement. I go back to the parenting specialist, who pretty much fell off her chair again, saying, “What is it that we’re trying to teach? I think $10 a week is fine, but nothing to charity for now. Let’s pick the lesson we’re trying to impart on the child.”

Even as a money manager, I really have to think through the process and consider the family’s needs in determining the chores, the amount and delivering the message to my child. Everyone has different ideas, but even in your own financial planning, it’s important to walk through the options. Throw everything on the table; no idea is a bad idea.

What options are you leaving off the table in your own home?

Since then, ironically, my son has forgotten about requirements and the reward behind them. I am sure this subject will arise again. When it does, I will be ready. Until then, I still enjoy reading the books to Nicola and having them help me wash the cars.

Jennifer Failla, CDFA™
Principal, Strada Wealth Management
Toll Free: 866.526.7098
Email: info@stradamanagement.com

In Divorce, Transparency Is Key for Both Parties to Succeed

These last few years, I’ve participated in many collaborative divorce cases as a financial neutral. As most know, when you are hired as a neutral on a case, your goal is to help both clients meet their needs in the divorce, so that the dissolution agreements are sustainable long after the final agreement has been signed.

When hired as a client advocate and not as part of a collaborative team, I am often told many things that are personal in nature, and should not be divulged in order to protect the client’s privacy. Some of these things include: undisclosed accounts, gifts to oneself, an upcoming trip, new loves, etc.  

Collaborative really stretches us as professionals to make a paradigm shift in how we approach our work. The more collaborative work I do, the more I realize how challenging it really is. What one may not need to divulge in a case as an advocate has to be carefully considered in a collaborative case: How do we approach the information? How do we address a sensitive topic? How do we divulge the new facts?

Let’s look at an example. In a case I am working now, the client’s employer just merged with another company, forming a much larger publicly traded company. My client, as a result, was awarded numerous stock options. After meeting with the attorney, we decided that if the other spouse did not ask for it, we were not going to mention it. We are filing the proper and complete financial affidavit, but we are not going to bring it up in settlement negotiations. We are leaving the burden on the other spouse to see our disclosure and ask for the funds.

In a collaborative case, this news and additional bonus would have been divulged in the joint session. It would have been discussed by the financial neutral, the dollars around it and how it affects the Equitable Distribution or Property Division agreements. Invariably, it would be a defined agenda item. It is not only about what one person wants, but more about what is best for both moving forward. As a professional, this takes what we call a paradigm shift in the way we approach a case.  

Collaborative changed me these last years.

As much as I would love to say I do 100% collaborative now, I still do not. My practice is growing every day to be more and more collaborative. However, I still do a lot of litigation and settlement support. I have cases now that are not collaborative, but my training in collaborative and mediation these last years has positively affected the way I do business. Cases in recent years, when things have been unknown, I have asked my client for permission to just call the other spouse. It has worked, and we have avoided costly court costs around discovery. We have been getting our information in a timely manner without going through the cost of multiple attorneys and paralegals. We are cutting out the middle man by being direct and open and communicative with the other professionals.

Divorce is a very traumatic experience for clients, and when they know they have someone that is trying really hard to do the right thing, everyone responds positively. After 8 years of collaborative, I see it seeping into every aspect of my work and personal life. I am still making paradigm shifts every day. I know that the collaborative work is hard, and the more I learn about it and the more experience I have with it, the more respect for it I have.

To learn more about collaborative divorce, please visit: https://www.collaborativepractice.com/

Jennifer Failla, CDFA™
Principal, Strada Wealth Management
Toll Free: 866.526.7098
Email: info@stradamanagement.com

The Power of a P.O. Box

The Power of a P.O. Box by Jennifer Failla

I lost my wallet over the holiday season. Maybe someone took it; I really do not know and it does not matter.  Aside from the loss of something sentimental, I do not need to express the hassle around replacing everything in one’s wallet. For three days I tore apart the house, the neighbor’s house, the car, and traveled all around town asking merchants if they had seen it. I must have retraced my steps ten times and I was frantically checking my accounts every three hours; I was sick over it.

Here was the silver lining:

They had the card number, the three/four digit security codes, and my physical address (for a billing zip code). Theoretically, they had everything they needed to make purchases online. However, I have a P.O. Box that I use for all my billing purposes. It is located in a different zip code than my physical address, so they could not input an accurate address tied to the card. Ah ha! My license has my physical address on it, but after checking my accounts over and over again, I realized even if someone had my wallet, they could not use the cards to make a purchase.

We cannot be too careful these days with our identity. In the wealth management practice, I show clients how to protect themselves using shredders, checking credit reports 2x a year, the use of lock boxes or safes in the home to protect important documents, etc.

This past holiday season has taught me to include one more thing. For $35 dollars a year, you can have a P.O. box outside your physical address’ zip code or different than your license zip code to better protect yourself. If you pay your credit cards online, then you do not even have to go there, but every so often. Or BETTER yet create a paperless account and link credit cards to a cash management program for categorization and tax planning.

The P.O. Box helped us maintain the security of the family finances and that was a great holiday gift!

Jennifer Failla, CDFA™
Principal, Strada Wealth Management
Toll Free: 866.526.7098
Email: info@stradamanagement.com