The Financial Pitfall of Making Six Figures

My Partner And I Make 6 Figures, Where the Hell Does It All Go?!

There’s a common refrain I’ve come across with many of the families I meet with in Decatur and surrounding neighborhoods: We make a good living, our family is thriving, but we don’t have any money at the end of the month? After I review their spending accounts, I see big pay checks coming in. I see nice sized chunks of cash going out for nice cars and houses. And then 75-ish seemingly “insignificant charges” of between $50 and $250 throughout the month. This is the beginnings of an archetype, I am starting to call “We make enough money, that we don’t have to worry about our spending”.

You may fit into this category if:

• Your family income is greater than $175k/year

• You have 2 to 3 kids that have expensive extracurriculars and/or tutoring

• You go on a week long vacations 4 to 5 times/year

• You may have a stay at home partner

• When you see something interesting, you just buy it

• You emphasize convenience over cost

• You contribute money to your kid’s school and class all year long

• You don’t really check your bank/credit card statements

• You are well respected in your professional career

This is an interesting group, and something that seems to happen much, around Decatur and other in town neighborhoods. The amount of income you make, lulls you into thinking you don’t need to be intentional with your finances. That is, until something happens that causes you to reevaluate your situation: A friend gets laid off, you decide you hate your job and want to make less money and contribute more, a major housing renovation or project, a friends kid heads off to college, you want a pool in your backyard, etc.

Which inevitably leads to a quick analysis of the family’s current situation, and you realize:

“Dang!! Where does it all go?” or “I am too busy to deal with this, I am going to punt for some time in the future when I have more time”.

If you are in this situation, with just a little bit of work, you can make a big difference in your family’s long term outcomes. Let me help you:

• Consolidate your credit cards

• Set up automated bill pay

• Set up automated investments

• Pre-plan and budget for your family vacations

• Check out your car/home owners insurance for the best price and coverage

• Prioritize and fix the things in the house that need to be addressed

• Get the kids set up for college savings

• Land a new job that matters to you

• Sell your RSU’s

• Minimize your tax bill

A good financial planner does so much more for your family, than just manage your investments. They are an advocate and partner, working in lock step, to make sure that you are living your best life, NOW and IN THE FUTURE. **But you can’t afford to wait. Guess what? You will never have “enough time” to get this work done. It is all about prioritizing the work, and getting started.

Let’s set up some time to get your family moving intentionally towards your goals.

Financial Planning for Young Professionals

Not long ago, a young couple set up a meeting with me to discuss some of their finances. I called to learn more about what problem they were trying to solve, and learned that they wanted to make sure that their investment portfolio was appropriately diversified. As we were setting up time for the meeting, I asked how they were doing with debt, credit cards and if they had extra spending money at the end of the month. There was a pause. Then she said “You work with clients on that sort of thing?”

“Of course I do. In fact, it’s what I spend a lot of my initial client time working through.”

In our first meeting we spent ten minutes reviewing their stock allocation, and then the next 70 minutes working on an approach to better manage their monthly spending and consolidating their credit cards.

I have a fundamental belief that everyone needs a financial advisor. Millennials have a huge advantage over their elders when it comes to investing, but they have to take advantage of it now:

1. Time is on your side - Money grows over time and it makes a profound difference over a long period of time. As an example, if you invest $2k from 19 years old to 26 (8 years) when you retire, you will have $1MM. If you wait until you are 27 to start saving, you would have to put away $2k each year until you are 65 (39 years), and still only have $900k. So start early!

2. Setting up good habits - It is always easier to start with a strong and thoughtful foundation, rather than reseting in the future, due to bad behavior. Lets set up good habits now so that you will benefit in the long term.

Whether it is helping to budget/monthly spending, set goals, mediate differences between partners, set up investments, talk taxes or buying a car, a financial planner can be a steady hand to help.

If you are a young professional, you may think a financial advisor doesn’t make sense for you because you likely

• Don’t have much of an investment nest egg

• Don’t own a house, and are very likely renting

• Live paycheck to paycheck

• Have debt due to student loans and/or credit cards

• Don’t have kids and thus have fewer variables in your life equation

• Have long time before retirement

• You use an online tools/service for budgeting or saving

If some subset of that list resonates with you, here are some things to be thinking about:

• Am I successfully balancing my short/mid/long term goals?

• Am I saving enough?

• Am I spending too much?

• Do I love what I do at my job?

• Do I have disability, term life and health insurance?

• Am I accessing all of the amazing array of benefits my company offers (ESPP, anyone?)

• Does my partner see eye to eye with me on spending and saving?

• Is there harmony between my spending and my values and goals?

• Should I be consolidating your debt?

Too often it seems that young professionals make their decisions in isolation, without seeking advice from someone with more experience. Perhaps there is information around the internet that could be gleaned from a quick google search. A financial advisor, who gets to know your background and experiences, can provide much of the needed support to help get your financial house in order for the long run. Helping you set up much of the foundation, so that you can answer the questions above, with certainty and confidence.

You don’t need a small fortune to start this process and to get competent help, Chamberlain Financial Advisors is here to help! I spend the time getting to know you. I understand your context, so that the advice I give you, meets your specific needs. Lets create a plan that will help you build to that fortune, so that your future self is delighted to meet you. And don’t worry, I get that you are busy, I work to make your life easy. We can meet for lunch, after work for a drink, or I can come by your house for consultations.

2 New Apple Products That Could Save You Money

Apple held its annual spring event at its headquarters in Cupertino, California, on Monday, March 25th. Two of their new products are particularly interesting from a personal finance perspective and could save you some money.

Apple News+

I am an apple snob and stockholder.

We have too many apple devices in our household.

Apple News+ is a new service that allows you access to a large number of magazines and newspapers, as well as their standard news content. This comes at a set monthly subscription rate of $10/month. At first blush this seemed like an interesting deal for $120/year. I’m skeptical of monthly subscriptions but I love magazines, and I get my news mostly from The Wall Street Journal and The New York Times. So I figured I would run a quick audit in our house to see how much we spend on annual new/magazine subscriptions. I used magazines.com to determine pricing.

• GQ - $20/year

• Bon Appetite - $20/year

• Fortune - $20/year

• The Economist - $95/year

• ESPN the Mag - $30/year

• WSJ - $467/year

A total of $652 in reading material!

Holy crap … I was slightly horrified to realize that total. The vast majority of my reading is on a screen, so News+ seems like a bit of a no brainer for our family. Do you know how much you are spending on this category? Add it up!

Apple Card

I am generally opposed to credit cards as a means to pay for your typical monthly expenses. I prefer to spend out of my checking account, so that I know exactly what I have available. And it forces me not to over spend. When I really want to nail down my monthly discretionary spending, I like to load my weekly cash on the Cash app card. I also think that cash back rewards and sky miles bonus points are gimmicks meant to entice your lizard brain to spend more.

If you decide that you need a credit card, if you travel at all, you will, or that you can control your spending urges, and want to get the cash back rewards. Apples Card is a pretty cool product.

• It is tightly tied to your apple wallet

• it gives daily 2% cash back rewards

• it allows you to control your payment options

• it provides some visibility into you budgeting/category spending

• it gives you a physical version, made of titanium

• there are no annual charges

So all in all the new card (which is not yet available), looks like an interesting product. I am curious to see how things play out when it is available. I like the easy integration with the wallet. And I like visibility it provides for your spending.

*Note that there are currently cards available that offer a nice cash back option. So you don’t have to wait for this card to get cash back.

Budgeting Part 3 of 3: The Squeeze

BUDGETING 101: for people who hate budgeting PART 3/3:

In Budgeting Part 1: Do you need a budget, you decided you were jumping on the bandwagon, getting your act together, and starting to budget like an adult. Then in Budgeting Part 2: How to start a budget, you learned, by limiting the amount of money in your spending account, and prioritizing your goals. But now, you can’t seem to make ends meet, and you just are not sure where all of that discretionary money goes.

Your Next Steps

1. Recognize why you are budgeting.

   Your goals are important and you need to be intentional if you want to achieve them.

2. This budgeting system works If you put in the work and sacrifice.

   There’s no way around it: progress requires efforts outside our comfort zones. But you can do it. The key to being successful with budgeting is being clear on your priorities and making progress towards your short-term goals to keep you motivated. Without a budget, we spend money without intention. Twenty dollars here, eating out often, buying whatever strikes our fancy… robs you of your goals.

Budgeting Tools

You need some visibility into your spending, so that you can understand where you cash is going. The best way to do this is with technology. There are lots of tools available. Don’t get too caught up on the decision, there are pros and cons to them all. Check them out quickly, and pick one. The only way to determine if you will really like it is to try it for a month or two.

• Tillerhq.com

• Mint.com

• Digit.co

• Youneedabudget.com

What do I use? Tiller.

Tiller offers a free 30 day trial and then it is $59/year​.

Setting yourself up for success

After selecting your tool, be prepared to spend some time getting things set up. This is where the work comes in. If things go well, it will take an hour, but it could take as long as 3 to get things “just so”. You will need to link up your spending accounts. And then set up categories, to assign to expenditures, that suit you. Typically there will be a set of standard categories, but if they do not all speak to you, create your own. And delete those that you will not need. After you have the accounts linked, and the categories make sense, go take a break. Great job! You are super close.

Then spend 2-4 hours, and categorize the last month or 2 worth of expenses. Get everything categorized. You will need to be thoughtful of the categories otherwise, you’ll have a Goldilocks problem: If you have too many categories, it will be hard to see major trends in the data. And if you have too few categories, it will be hard to see trends in the data.

analyze your spending trends

Once you are satisfied with the data and categories, it is time to start analyzing the data. Are there obvious areas that you are spending too much on? Typically a nice starting point is on:

• Eating out

• Groceries

• Entertainment

• Credit cards

• Toys

• Technology

slowly squeeze your spending

Once you see a category that seems out of whack, or takes too high a % of the your overall discretionary spending, give yourself a goal. Start by limiting that category to 90% of last months bill.

Eg: you spent $1000 last month on eating out. That constitutes 20% of your discretionary budget and is also equal to the amount you spend on groceries! Start your next month will a goal of $900 ( $225/week).

Repeat that process for each major category that “needs some attention”. Also, shoot for a total goal for how much you need to trim? Perhaps your overall goal is to trim $500. Take off $100 from 5 categories, and you are there.

monitor your progress

The last step is monitoring. Block out a dedicated time each week 15 - 30 minutes, where you spend the time categorizing everything. If you set up the time to create the best categories for your spending, then this will be automated and just require a few adjustments. Each month it would get easier and take less time.

Then acknowledge where you are for the month. If you are over: tighten your belt for the following weeks. If you are on track … Great job.

If you survived the first month, but have not yet reached your savings goal, DON’T FRET!!! You are doing great. Just trim more in categories that are out of whack.

Continue to squeeze until your goals are allocated, and your spending is “under control”. With a little work, some dedication and grit, you will get there. You should start to see good results by month 3 or 4.

Q. IS THERE A PARTICULAR TIME BEST SUITED FOR THE WEEKLY WORK?

A. I suggest some time in the morning, when you are fresh. A perfect time is over coffee on Sunday morning. You also want to allocate your weekly discretionary money on Monday, not Friday.

Q. I AM HAVING TROUBLE SITTING DOWN AND DOING THE WEEKLY WORK. SUGGESTIONS?

A. An accountability partner is always a good idea. Let a friend, mentor, family member know that you are working on this. And you need to have your partner involved in the results. It takes both partners to succeed at this.

Q. By SATURDAY, I’m LOW ON DISCRETIONARY MONEY, And … MY FRIENDS ARE GOING OUT, I DON’T FEEL LIKE MAKING DINNER and I want to go shopping!

A. Yup, budgeting is about prioritizing, which means you will have to sacrifice some. Stop trying to keep up with the Jones’!!

Q. I HAVE BUDGETED DOWN TO THE NUB, AND NOW I HATE MY LIFE BECAUSE I CAN’T HAVE ANY FUN.

A. This is not what you want to happen, because it ultimately leads to you falling off the wagon. You have several options:

1. Get rid of some of your expensive bills, like a brand new German car. Maybe cutting the cord on your cable bill, will help.

2. Cut out some of your monthly subscription services for entertainment (apple music, Netflix, Spotify, Audible, the gym you never use, etc).

3. Is your home too expensive?

4. Were you too fast or ambitious with your expense squeeze?

Need to review? or IN case you missed Them, parts 1 and 2:

Budgeting Part 2 of 3: How To Start Budgeting

BUDGETING 101: for people who hate budgeting PART 2/3:

How to get started

Congratulations! You’ve realized you need a budget. That is the first step towards being in control of your finances, and half of the battle! The next step is getting started with a budget. The sooner you can get started, and make progress, the more likely you are to stick to it and succeed. So, let’s do this!

The majority of the advice out there approaches budgeting with expenses and tools. I have a different approach: First, take a breath. Innnnnn and ouuuut. Then, we begin with your income.

The easiest way to stay in control of your budget is to never have money show up in your “spending” account. Having a big chunk of money in your account is too tempting. Right after you get paid, it’s natural to think, “I work I hard, I deserve _________.”

fund your goals

with automatic payroll deductions

1. 401k - start with 5% of income or max out a company match. For every $100k, that is $208/paycheck. You wont miss it, but over a career, your future self will be pleased.

2. Health Savings Account - look at last year’s out of pocket spending, set it there.

3. Dependent care savings plan - what is your kids’ day/after care expenses? You are already spending it!!

set it and forget it

Don’t be average:

The average American has 3.1 credit cards with an overall outstanding balance of $6,354.

Credit Card Usage and Statistics 2019

set yourself up for success with online bill pay

Ok, so you funded some of your goals, but now your paycheck is in your account, and you are feeling flush! Set yourself up for budgeting success by going to your online bill pay and setting up automatic payments immediately after every paycheck .

Schedule automatic monthly payments for:

If you are self employed

Set up a SEP IRA and have money automatically contributed to your SEP IRA account.

1. Your non-discretionary bills immediately and make it a set amount each month.
   We pay GA Power $200 every month. During the winter we build up a nice cash reserve, during the summer we spend it down. The opposite happens with the gas bill. I also like to round up to the nearest hundred on my mortgage, with the extra going to principal.

2. Pay off your damned credit cards! Start with the one with the smallest payoff and allocate all but the minimum amounts for the others.

3. Transfer money into a savings account for a rainy day fund.

4. Fund your short term goals: Transfer money into a vacation savings — or other short-term goal like a new car or house renovation project.

5. IRA or a brokerage account and the kids 529’s - if you are doing nothing, make it $100. Increment in. As you get comfortable, increase it.

“The goal here is to fund your goals, and never even think about the money “leaving” your account, because it never really “enters” your account.”

— Josh Chamberlain

Don’t EVER give your bank account info to a company to take out auto payments.

You need to control the movement of your money.

Discretionary Spending

Take a moment to recognize the work you’ve done: You set up automatic payments for your non-discretionary bills AND your goals are being taken care of. That is a huge step. Nice work! What will remain in your account, is THE ONLY CASH you have left to spend on discretionary items. That means, you make a promise to yourself: NO CREDIT CARDS when you run out of money at the end of the month.

Advice on credit cards

Credit cards are bad. This is worth repeating: NO CREDIT CARDS. That means, you make a promise to yourself:

DEAR SELF:

NO, I MEAN NONE , NOTHING, NADA GOES ONTO A CREDIT CARD, not even to earn miles for the trip I’m not going to take in the indeterminent future. And if I do take the trip, it will likely be during a blackout dates and I won’t be able to use those elusive “rewards” anyway.

Yours Truly, (really I’m yours… am I getting too meta?)

Me.

Budgeting FAQs

q. I get paid twice a month, I can’t afford to pay all of my bills at once! How will i be able to afford to eat or live reasonably until my second pay check?

or

q. My bills are spread throughout the entire month how do I manage not getting late fees?

A. Both of these questions have the same answer: Spread your non-discretionary bills across your two paychecks. What that may mean is, the majority of your bill paying in your first pay check, goes to the mortgage (and maybe a few utility bills). Leave yourself enough left over, so that you can buy gas and groceries until the next paycheck. On your next paycheck, finish off the utilities and your savings for goals. Leave just enough for your discretionary spending, to make it to your next paycheck.

q. what if one of my big utility bills (e.g. my car loan), needs to wait until the second paycheck, but is due on the 8th of the month, and will thus be late?

A. Most of the time, if you are up to date on your bills, a company can work with you to change the due date, give them a call. If they won’t, make a minimum payment on your first paycheck, and then finish the payment on the second paycheck.

q. Why autopay the same amount each month?

1. You want to set up your payments on autopay, and don’t want to wait on the bill.

2. You don’t want to worry about any accidental underpayments.

3. Over the course of the year, the payments will average out.

Q. Josh, by the end of the month, I either don’t have any money left over, or worse, I am spending on my credit card to make ends meet!! This method sucks, what gives?!

A. Good question… the answer to this is in Budgeting Part 3

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Not sure if a budget is for you? Take my free assessment:

Do You Need A Budget? Take Josh's 13 Question Assessment To Find Out

BUDGETING 101: for people who hate budgeting PART 1/ 3

When working with my clients, the first thing I have them do is forget about money and DREAM BIG! I know it sounds weird but stay with me for a moment. Next, we take those dreams and organize them into short/mid/long term goals. Then money and finances comes in. My approach to personal finance is that your money should fund your dreams and goals. And the way we do that is through… BUDGETING.

Do you really need to budget?

Yes.

Don’t believe me? If you answer yes to any/all/many of these, keep reading.

1. Is your income bucket dry at the end of the month?

2. Do you use credit cards to fund your lifestyle?

3. Are you lacking in long term savings for retirement?

4. Would you like to go on more vacations?

5. Do you ever fight or stress about money?

6. At the end of the month do you wonder where all your money went?

7. Will your kids need to take out loans to go to college?

8. If you needed a new roof on your rental place (I do!), you would need to pay for it with credit cards or loans

9. Does your retirement plan include working forever?

If you answer False to any of these, you need a budget.

1. You have 3-6 months of your typical household spending saved and earmarked for emergency funds.

2. You know your monthly household expenditures.

3. You mapped out your short, mid and long term goals and are actively working towards reaching those goals.

4. You know how much you need to retire and have a target date when you will likely reach that number.

Why are you NOT budgeting now?

Now that you understand, you should be budgeting, let’s address why you aren’t already doing it.

• You make too much money, and have plenty at the end of the month

• It sucks the life out of you

• You tried it and quit

• It takes too much time and its boring

• The tools for budgeting stink

• It causes fights at home

• It’s too much work and nobody wants to take the responsibility for driving the conversation

• You are slowly but surely reaching our goals without one

• You’ve tried it before and failed. You just can’t stand to have to fail at it again

That’s just a few reasons (or excuses) I’ve heard over the years. I get it. Budgets aren’t exciting. But it’s a key component to reaching your goals. And goals are exciting. For example budgeting could fund a fabulous vacation all paid for upfront.

From my experience, 99.9% of people would benefit from a budget. Even those of you with plenty of cash at the end of the month!! Hello, retiring*** at 54 instead of 56! Hello buying the turbo instead of just the V6!! Hello, philanthropy.

The Importance of a Budget

watch this short 50 sec Video to see why you need a budget.

Thanks to my wife for sketching out this visual.

1. Income filling a bucket at the top of the process.

2. Out of the income bucket are a set of spigots, that are used to fill expense buckets, first and then goal buckets next.

3. The key is to control your expense spigots so you can fund your goals.

Non-Discretionary Expenses

The biggest monthly expense for most is housing: a mortgage or rent payment. Followed up by a standard set of non-discretionary items: gas, electric, cell phone, internet, insurance, car, student loans, etc.

Discretionary Expenses

Then you have discretionary buckets: groceries, gas, eating out, beers and clothing. This is where a budget is key in getting a handle of your discretionary expenses. Watch out little expenses add up fast…ahem, eating out.

Your goals

After you deal with your general monthly expenditures, you are left with the excess to allocate to your savings for goals like: buying a house, buying a new car, going on a vacation, saving for kids to go to school and retiring. Typically, the savings buckets are filled with little drips from spigots, if there is any excess at all. Sometimes, your top bucket is empty at the end of the month, and you end up needing a credit card to fill some of your expense buckets.

Next: How to get Started

it’s easier than you think

Josh's Car Buying Process

Choose a car that holds its value and has low maintenance and insurance costs.

My family is in the market for a new SUV. Our 2008 R300 Mercedes Benz has done an admirable job for our family: It is AWD, has a third row, is super comfy and is an absolute beast on the highway. However, it has reached my standard goal for a car of 160k miles and 10 years old. Combined with the fact that expensive things are starting to need to be repaired… its time we move on.

Next to purchasing a home, buying a car is one of the biggest personal financial decisions you will make. Given that, I am incredibly calculated when it comes to car buying and want to share the process I go through:

Josh’s Financially Sound Car Buying Process

1. Trade In or Sell Your Existing Car

I will list it on Autotrader or Craigslist, and let it continue to live on with a new family. I can’t let myself be ripped off by a dealership. And it is too old to sell to Carmax.

2. Set A Budget

You need to have a firm budget with a clear understanding of how much you can comfortably afford. A car is not worth the financial strain of sleepless nights over high payments. Decide how much you can spend on a car and how you’re going to pay for it. We determined our budget for this car purchase is $40,000.

3. Define Your Car Requirements

Here are our requirements:

• AWD for family safety

• Either Japanese or American badge, for value, ease of repair, supply

• Not a European badge, because TCO is generally higher, with a higher starting cost. ( We already have one European car in the family.)

• A car that is 1-3 years old, so that I do not pay the new car premium

• A car that has 20-30k miles, enough miles to have not been ridden too hard, but new car kinks have been worked out

• A model not in its first year of design and function has been iterated and cost efficiencies have been achieved

• A 3rd row for carpools. Our sanity hinges on carpools.

• Looks good and has a positive image. While we are not totally trying to keep up with the Jones’, we do like nice things.

4. Car Prospects

Once we decided our requirements, I put together my initial list of cars: Ford Explorer, Lincoln Navigator, GMC Yukon/Chevy Tahoe, Toyota Land Cruiser/Lexus, Toyota Highlander, Honda Pilot, Acura MDX, Nissan Armada, Infinti QX60 and Subaru Ascent. Then, as Jenn and I drove around, I would point out cars, and gauge her reaction:

• The full size SUVs were too big for Jenn. That killed the Navigator, Yukon/Tahoe, and Armada.

• The Explorer got nixed for emotional reasons, that are too deep seated for me to understand (husbands, I advise sometimes, just don’t ask questions).

• The Land Cruiser is a family favorite, but too expensive.

This left us with a more manageable set of prospects: Highlander, Pilot, MDX and Ascent. Each of these, has a different set of positives:

In a dealership, be ready for the finance manager to pitch you additional products and services.

• Highlander: looks good, comfy, AWD, hybrid for good mileage, indie shop in the hood.

• Pilot: good size, good quality … it’s a Honda!!

• MDX: looks great, good quality, potentially expensive … it’s a high end Honda!!

• Ascent: we have had Subaru’s in the past and love them for ruggedness, quality, value and local shop access — but it is in it’s first year.

5. Buy Or Lease

For our family, given that we buy and hold, we don’t have to debate the lease/buy equation. Leasing just doesn’t make sense.

6. Research

So with all of these variables, in play, here is the remaining process:

1. We need to test drive the cars.

2. Josh to explore used car prices via autotrader/ebay SOLD prices

3. Talk to local indie shops to determine any “gotchas”

4. Check short term loan options, because we will likely need to borrow $10-15k

We normally take our time on the car buying process, so this will likely play out over the course of the next few months. But taking into account all of the variables allows us to hone in on the best option for our family. And it keeps us from making an emotional purchase at the local dealership when they start throwing incentives at us.

7. Close The Deal

Get a pre-purchase-inspection (ppi) at your local/friendly indie car shop, on any car sold by an individual. If they have the service records, comb through them. If they don’t have the records, that is a red flag!! Check the carfax to make sure it hasnt been wrecked or in a flood. Before taking ownership of the car, you should add it to your insurance policy. Then, you only need to pay for the car, if buying a used car, usually with cash or a cashier’s check. Make sure you get a title and have the seller sign it correctly. When in doubt, check the state’s registry website for more information. Most states allow about 10 days to register the car in your name.

Do you need help determining your car budget, the right type of car for your family, options for buying or selling a car, lease or buy equations, total cost of ownership? Let’s sit down and chat about it.