Tara Unverzagt February 8, 2019 No Comments

3 Spending Best Practices to Help You Feel Less Uncomfortable with Your Financial Situation

“How am I doing financially? Am I ok?” I hear these questions frequently. And there are other frequently asked questions. “Do I have enough money for emergencies?” “How will I pay for college for my kids?” “Can I afford to spend money for [fill in name of your dream money sink hole] now?” Whether they want to buy a new car or remodel their kitchen or they get a sinking feeling when the stock market drops, most people are uncomfortable regarding their finances. Frankly, being a little nervous about your finances is a sign that you’re paying attention which is good.

“If I buy this car now, will that impact my vacation plans?” Maybe. It’s not a simple question to answer. If you have read past articles, you’ll know that I’m a big proponent of “spend less than you make,” a concept that’s easy to understand and, oh, so difficult to execute. If you spend less than you make, you should have a stash of cash to use for things like buying a car — without needing to take out a car loan. Okay, so far?

Three concepts to consider when spending money

1. Money in the bank is for spending, right?

“If I have enough cash in the bank to pay for the car, I can afford it, right?” I used to run the numbers for people to see how reducing their net worth by $XX,XXX will impact their goals. Even that seemingly simple question may not have a simple answer. Sometimes, it’s easier to reach long term goals if you move the money for it out of your bank account and into a long-term saving account.

2. Don’t just consider THIS purchase.

Sharon and Steve like to cook. They spend all their free time in the kitchen. A big part of their budget is spent on food and pots & pans. They spend less than they make and have a budget that works for them. They asked me whether they can afford to remodel their kitchen to make it a really wonderful place to cook in. I looked at their lifestyles and how that expenditure might impact their overall objectives. The numbers said yes, they have been saving money and have no debt; they should be able to afford the new kitchen and still meet their other goals.

I also knew that, if they remodeled the kitchen, there was a good chance they’d go out for dinner and entertainment less because they’d be enjoying their new kitchen. I knew they wouldn’t be back next year asking whether they could afford to buy a fancy car or go on a luxury trip. Cooking is their passion, and the remodeled kitchen will help make their lives more enjoyable for years. Sharon and Steve aren’t spending to make themselves happy. They are already happy, and their new kitchen can help them enjoy their hobby even more.

Zach and Kimberly asked me whether they could afford to buy an expensive car. I looked at the numbers and, yes, they could afford to buy that car. It wouldn’t impact their long-term objectives much. But they always struggle to spend less than they earn. They often turned to debt to pay for things they want. Given their spending habits, they will likely be back next year wanting to take their family to Asia. The year after they will want to remodel the basement. Their list will go on and on.

The new car will make Zach and Kimberly happy right now, but they probably won’t really be satisfied or happy in the long run. They need to reflect on the “need” they are trying to satisfy and address that first. Are they just bored, looking to impress their friends, or in some other way not happy with their current car? Until they know the answers to those questions, they shouldn’t buy that expensive car.

When making any important decision about spending, you need to stop and think about your values and your long-term goals. Think about a major purchase you made five years ago. Do you even remember any? If you do, is it important today? Is there something you’d like to buy today that is more important than that was? What might you want to buy five or ten years in the future? Is that more important than what you’re thinking about buying today? Money spent today is money that you don’t have tomorrow for something that may be more important to you.

3. Money Doesn’t Buy You Happiness

Money enables you to have choices, but there’s no guarantee that it will make you happy. Much research has been done on people who received a windfall of money and spent it within a few years, buying everything they thought would make them happy. In the end none of those purchases increased their level of happiness at all, and they often ended up as poor as or poorer than they were before. (As a matter of fact, a study showed that even the neighbors of a lottery winner often ended up poorer in the long run, too!) What went wrong?

Someone recently said, “The people I know who ‘made it’ and are wealthy are the only people that know what money can’t do for you.” If you’re thinking “if I only had more money than…, I’d be” – happy, respected, secure; know that those feelings can’t be purchased by money. You have to find happiness yourself. And it could be as simple as changing the stories you tell yourself.

Your Budget Tells Your Story

Spending less than you make is the goal. If you find it difficult to achieve this consider what’s important in your life and make sure that every dollar is used to enrich your life and bring you satisfaction. We find that apps like YNAB can help you get organized, see where your money is going, and make sure you get the most out of every dollar. Take control of your spending and don’t let marketing, your friends, or your family make you feel badly about how you live your life and spend your money. Let your budget tell your story and be proud of it.

Ready to Gain Control of Your Financial Situation?

Enter our BRAND NEW Financial Coaching Program.

Our Financial Coaching Program is truly the first of its kind, and allows you affordable access to a financial planner. Most Financial Planning options are set at an incredibly high price point. Not this program. This program is affordable and is aimed at working on all things finance 101 – still alongside an experienced financial planner!

This program allows us to easily serve as your financial coaches and help steer you in the right direction. We’ll accomplish this through a series of meetings in which we establish tangible goals to work towards, and discover your emotional drivers behind all of the decisions you make. By coupling your goals and your “Why?”, we’re able to help keep you on track by channeling your core values rather than just throwing numbers at you.

Once we’ve established your goals and your “Why?” we take a deep dive into your current financial life.

Accountability and follow through are keys to the success of this program, and are why we firmly believe that, together, we will be successful in reaching your goals.

With the South Bay Financial Partners Financial Coaching Program you can expect to live a less stressful and more fulfilling life by changing the way that you manage your finances.

Interested? Schedule a call with us HERE to learn more!

Tara Unverzagt February 1, 2019 No Comments

What’s Holding You Back? – A Reflection on Financial Success

Let’s take a moment to reflect today. What are your financial goals? What are your life goals? Almost always, there is overlap between them, and that overlap usually is happiness. What is happiness for you?

A partner whom you love and who loves you? Children who are happy and healthy, who are able to pursue their goals in life, and who love and are loved?

Enough money to buy and do what you want whenever you want it?

A debt-free life?

Whatever goals you’ve identified for yourself, do you have a realistic action plan to achieve your goals?

(As tempting as they are to imagine, winning the lottery, inheriting money from unknown sources, inventing some unidentified do-hickey that everyone will buy, being discovered somewhere unexpectedly and becoming a movie star probably don’t fit the criteria for a “realistic” action plan.)

Previous articles have offered realistic roadmaps for your success. Have you been able to stick to a plan for budgeting, spending, and saving? Investing, compounding, harvesting your rewards? “Spend less that you make.” “Have a regular savings plan.” “Buy low, sell high.”

On paper, at least, financial planning sounds easy, right? Why are so many people unable to get their financial house in order? There are more answers to that question than can be answered here, but if you still struggle with finances, you may need to start with looking at yourself and identifying some of the bumps on your road to success.

Are you telling yourself money stories that aren’t helping you?

They may involve buying rewards for yourself because “you deserve it” or spending too much money going out on the weekend because “life is short” or “spending time with friends is important.” Both sayings are, no doubt, true, but are there ways to do them honor without spending too much money? Maybe you tell yourself that buying a big, beautiful house is always a good investment. Guess what? Even a house can be just another consumer good that’s draining your bank account.

Sometimes you can’t tell your family and friends that you can’t afford to do what they’re doing. I’ll let you in on a secret: there’s a good chance they can’t afford those things either. They may be going into debt living the life “they deserve” or “they expected.” Don’t follow them down the path.

Take a hard look at what’s important to you.

Does your budget reflect your values and your goals? Or do they reflect the values of the “friends you keep.” Sarah Newcombe, a senior behavioral scientist at Morningstar, Inc., says that comparing ourselves to others is hardwired into our brains. She recommends choosing carefully whom you compare yourself with. If it’s Kim Kardashian and you realize she doesn’t really represent who you want to be, you might want to choose a new role model. A better model might be the quiet, unassuming millionaire next door who doesn’t drive a fancy car but was able to pay his kids’ college tuition without going into debt.

Decide what’s important to you, find a healthy role model who has achieved what you want to achieve, and then compare away. Newcombe says that your odds of being satisfied with your finances and life will increase with a healthy financial role model.

If you need help figuring out what you want from life and your money, contact us at South Bay Financial Partners. We can help you put the pieces of your personal puzzle together to make a beautiful picture that we call our lives. Schedule a FREE consultation with us here >> https://calendly.com/SBFP-Call

Tara Unverzagt January 18, 2019 No Comments

Are You Ready to Start Saving Money?

Saving money doesn’t happen by accident. It doesn’t happen because you want it to happen. Saving money takes some thought, planning, and action on your part. As they say: the definition of insanity is doing the same thing over and over again and expecting a different result. If aren’t saving and would like to, you need to find a new approach.

Bubble Gum Money vs Savings

Raising my kids, I gave them an allowance at a young age so they could learn about money. You can read more about teaching children financial skills in our article Saving Your Bubble Gum Money. In my house, bubble gum money was money the kids could spend immediately on anything they wanted. (My youngest used it mostly for buying bubble gum when she was under 5 years old.) But they also saved some of their allowances. They couldn’t touch “savings” unless there was something they were “saving” for. In a four-year old’s world “saving for the future” meant they had to wait at least a week before they were allowed to make the planned purchase.

If you see something and buy it, you should be using your bubble gum money. Otherwise, you should put money aside to save up to make important, large purchases that you’ve thought through carefully.

If all your money is bubble gum money, you’ll never accumulate assets that are needed for things like taking a year off work, buying a house, having kids, retiring.

You may not even have enough to pay for a simple vacation. Once you have learned the difference between bubble gum money purchases and planned expenses and transitions, you’ve taken your first step toward financial success.

Never fall in the trap of borrowing in order to “spend less than you make.” Any consumer purchase (furniture, a phone, a car, anything that does not increase in value) should be purchased with money from your savings. Borrowing (payment plans, leasing, etc.) to consume allows you to feel like you’re spending less than you’re making, but you aren’t. The credit card companies, banks, and stores love to convince you that “you can afford this low monthly payment.” Those “low monthly payments” can add up to big debt very quickly. Don’t fall for their trap.

Make Saving a Habit

How much should you save? There is no one answer to this question. It depends on your expenses, your income, your future plans, what’s going on in your life right now, etc. The rule of thumb is 10%-25% of your income should go to savings (and paying down debt). If you’re a single mom making $30,000 living in Los Angeles, CA, you are not likely to be able to save 10%. But save what you can. Save something. Anything. Even $10 weekly is better than nothing.

Saving is a habit. The first step is to integrate the habit into your life. When you get your pay check, put some into your saving account. It doesn’t matter how much–just do it. You can set it up to have it go automatically into savings without any thought.

When you get non-paycheck money, make it a habit to transfer a certain percentage to savings, such as $10 for every $100 you receive. When you get your tax refund, you’ll be in the habit and will put whatever percentage into savings. When you get a bonus at your job, you automatically save a percentage. Better yet, put is all in saving and give yourself some to splurge. Put the $100 in your saving account and give yourself $10 to blow on whatever you want. You weren’t expecting that money anyway.

A habit is a trigger, an action, and a reward. The trigger is “you receive money.” The action is “you put money into savings.” It’s important to have a reward to make the habit stick. You might check your saving account balance and have a happy feeling. You may see how close you are to reaching your goal. You may invest your cash every time you hit $1,000 (another good habit). A simple act like saying “ka-ching” like a cash register adding up the total, can be a reward. Find what works for you.

As you watch your saving account grow, or not, you should be motivated to save more. When you get to the point where the money comes in and the first thing you think is “put my savings away,” you’ve developed the habit. Congratulations!

Make a Savings Plan

There are three levels of savings: emergencies, opportunities, and asset accumulation. Your emergency fund allows you to have money on hand to take care of unexpected or anticipated, but not planned problems. Your opportunity fund allows you to have fun or take advantage of opportunities that come up. And asset accumulation allows your money to pay yourself at some point in the future.

We all find ourselves in a position that an unexpected expense pops up from time to time. Plan for it. If you want to stay away from the high cost of credit cards and pay day lenders, have an emergency fund to fill that need. If you want to have fun and not feel like you’re living paycheck to paycheck, have an opportunity fund. And if you want to one day have a choice to retire or cut back on working full-time, think about accumulating some wealth so you can pay your own paycheck.

If all of this sounds easier said than done, schedule a FREE 15 minute call with us. We are here to help!

admin September 28, 2018 No Comments

Student Loans 101

Written by: Stuart Pyne, Associate Advisor at South Bay Financial Partners.

College is supposed to be “the best four years of your life,” filled with long hours at the library, meeting lifelong friends, and creating experiences you’ll have for the rest of your life. Simultaneously, it has also become “the most expensive four years of your life,” and, for most people, making decisions about financing your education, student loan options, and the inevitable debt begins at the ripe old age of 18. As a high schooler, you’re faced with one of life’s biggest decisions at a time when you’re still developing. Trying to decide what you want to do for the rest of your life can often seem daunting, but, nonetheless, you must make a decision. Deciding which school to go to and what to major in will have countless impacts on you for years to come.

As a recent graduate of Case Western Reserve University in 2016, I have found there is no worse feeling than having debt lingering over my shoulder, especially at the age of 22. Having learned from my mistakes–and my successes–I hope that this article will help those of you who are preparing yourself or a loved one to go to college. If I could go back and speak to 18-year-old Stuart, I would share some thoughts that I’ll cover in a series of articles starting with this one.

The Different Types of Student Loans

Student loans come in many different shapes and sizes. Before choosing any of them, you need to understand the differences among all of the options that you could be presented. They break down into two categories: federal and private.

Federal loans are offered through the U.S. Department of Education as either Direct Subsidized, Direct Unsubsidized, and Parent PLUS. Subsidized loans come with slightly more favorable terms but are strictly provided to students who meet the requirements of being in “financial need.” The main benefit to Subsidized loans is that they are offered at a low-cost and fixed rate, with the interest being paid by the government while you are in school, hence the term “subsidized”.

Unsubsidized loans are available to everyone and also come low-cost and at a fixed rate.  The key difference, however, is that the government does not pay for the interest that accrues on the loans while you are in school, which means you are on the hook for a larger bill.

Parent PLUS loans are available to parents who are paying for their dependent children’s college costs. Because they come with higher interest rates, students and parents need to utilize subsidized and unsubsidized loans before considering taking out a Parent PLUS loan.

On the other hand, private loans are taken out from banks, certain states, the college or university, and other non-bank financial institutions. The rates and repayment terms vary by institution, personal credit scores, income level, debt-to-income ratio, etc., very similar to any other loan you would take out from a private institution. Due to the lower costs and repayment terms of Federal loans, a general rule of thumb is to explore those first and then pursue Private loans after you have shopped them, to ensure that you get the best possible rates and terms.

Best Practices for Student Loans

Understanding different types of student loans is important but equally as important is knowing how to utilize them. Obviously, there are many different factors that will be in play, such as money or investments that can be used, eligibility for financial aid or scholarships/grants, and ability to work while in school, so each individual’s situation will be different. Your best option is to sit down with an expert and make your decision based on your personal situation, but I will lay out a general blueprint that you can follow when you are considering student loans.

If you qualify for Subsidized loans, it is of utmost importance to make sure you utilize these first, followed by Unsubsidized loans. Following those, you can consider private loans up to the amount that is needed to cover the total costs of attendance.

Note that if you don’t use a Direct Loan one year, you are not allowed to go back and reclaim it for the current year–they are very much “use it or lose it”. A common mistake people make is failing to budget their resources for all four years and running out of resources the final years and, consequently, being cornered into taking more expensive student loans.

If, for example, you have $20,000 saved and allocated for costs of attending, you’re better off allocating $5,000 per year to tuition from a 529 account in order to maximize the number of Direct Loans that you are eligible for. Below is a chart that shows how much in Direct Loans you are eligible to receive per year for an undergraduate student who is still a dependent of his or her parents.

 

$5,500 total, no more than $3,500 Subsidized $6,500 total, no more than $4,500 Subsidized $7,500 total, no more than $5,500 Subsidized $7,500 total, no more than $5,500 Subsidized
Year 1 Year 2 Year 3 Year 4

Considerations When Picking a College

There is absolutely nothing simple about college planning, and, unfortunately, understanding the types of student loans is only one piece of the puzzle. Deciding which college to attend goes beyond just a school ranking, location, major, etc. For best college planning, you must analyze all of your and/or your child’s financial and academic information to determine eligibility for need-based and merit-based financial aid, which can then be referenced against a list of schools to maximize scholarships. In addition, it’s important to understand the differences among schools and how they award financial aid.

The sooner you start planning for the cost of college the better. For parents, spending time planning when your children are young, picking the right school when they are in high school, and planning how you will fund each year can reduce the amount you may need to borrow and the types of loans you have access to.

Sadie Goodwin July 30, 2017 No Comments

Racing Ahead

Racing Ahead

Whether it’s cycling or building her practice, Tara Unverzagt pushes her limits.

Charles Keenan

This article originally appeared in Morningstar.

 

Financial planner Tara Unverzagt knows something about grit. Around 15 years ago, she was looking into enrolling her son for training at the local velodrome, a track for bicycle racers. She found her own riding club offered training sessions for adults, and she soon was hooked. She trained on Friday nights at the velodrome and piled on training miles on the roads around Southern California, and then started to race.

All the riding led Unverzagt to the 2013 UCI Masters Track World championships in England, where she won four gold medals and a silver in her age class of 50–54. Winning wasn’t just about training, though, but being able to go inside what cyclists call the “pain cave.”

“If you want to be good at track racing, you are going to be diving into the pain cave, and staying there,” Unverzagt says. “You get to a place where your body just sort of shuts off, and you don’t feel the pain anymore, and you can just go for a while.”

Good Financial Habits

Unverzagt has also pushed herself to build her practice, South Bay Financial Partners, based in Torrance, Calif. In 2017 she onboarded 65 clients as part of a succession plan with her mother, also a financial planner. Her book of business now totals about $150 million of assets under management, but she still sees work to be done. For one, she believes many people haven’t developed the skills necessary to build wealth. “My generation and below have been brainwashed into thinking credit cards and debt are great,” she says. “Financial literacy has gone completely away.”

To combat the issue—and recruit future wealth clients—Unverzagt has introduced three levels of coaching in her practice, geared toward people aged 20 to 35. “I’m interested in giving them a good foundation,” she says. “These are probably people who have little to no net worth.”

She teaches habits that will help accumulate wealth, such as budgeting, saving, and creating an emergency fund. She has started working with the children and grandchildren of her clients, charging a flat fee of $125 to $200 a month, depending on the level of service, and will open up the service to others in early 2019 if space is available. “The goal is to get them from the financial coaching and into the financial planning side, where you actually have assets,” she says.

For that side of the business, where clients have as much as $10 million in assets, Unverzagt also sets herself apart by charging flat fees, rather than the industry standard of 1% of assets. Annual fees range from $4,000 to $16,000 per year, depending on the complexity of the service. “It just doesn’t equate to me that I would charge you more for doing the same job just because you have more money,” she says.

Healthy Money Discussions

Unverzagt, 55, learned those strong values about money at an early age. She grew up in a house where money was talked about. “It was transparent,” she says. “We had a very healthy money conversation in our family.”

Her mother was a financial planner in the 1970s, when the field was nascent. She would tell Unverzagt and her siblings each night how much dinner cost per person. They were taught responsibility with money, and were given $10,000 by their parents to attend college. The amount was enough in the early 1980s to fully pay for Unverzagt’s tuition at Purdue University in her home state of Indiana. Yet Unverzagt never spent the $10,000. She studied computer science and worked in the summers to pay off the next year’s tuition as a Kelly Girl temp, a computer consultant, and a programmer. She saved by eating Subway sandwiches and low-priced meals at happy hours.

After graduating, she worked at Xerox and Locus Computing, rising to the level of group director at the latter and getting an MBA at Pepperdine University. She left Locus in the early 1990s to become a financial planner, giving her more flexibility to raise a family. She worked as a consultant for her mom while studying for the exam to become a Certified Financial Planner. Her husband brought their 3-month-old son down to breastfeed during breaks of the exam in 1994. “I wanted to be home with my kids like my mom was, while being able to continue working,” she says.

Taking Over

Unverzagt assumed the majority of her mother’s clients in 2017, and now her mom works for her, helping review financial plans. Those plans, of course, include equity exposure, which Unverzagt prefers investing in individual stocks, with about 75 to 100 core holdings. She believes mutual funds lack transparency and exchange-traded funds come with disadvantages such as requiring investors to own laggards. She also worries that ETFs’ losses in a crash could exceed those of the underlying stocks. “It’s an unknown, and I don’t want to buy into that unknown,” she says.

At heart, she’s a value investor with a focus on income. These days, she likes sectors such as utilities, consumer cyclicals, and consumer durables. She’s selective with technology, a sector that’s hot but warrants caution. “Tech is the future, so you have to be there, but you need to be careful and strategic about what you invest in,” she says.

For fixed income, Unverzagt uses bond ladders going out 10 years. She likes five-year Treasury bonds, given the flatness of the yield curve recently. “It’s a sweet spot: You get almost as much yield with a five-year bond as with a 30-year bond, and you don’t have the long-term risk,” she says.

Unverzagt subscribes to Morningstar Office to stay up to date with client accounts. She uses Morningstar’s Back Office Services to download client data from Charles Schwab and TD Ameritrade, the two platforms she uses for trading. She also taps Morningstar ByAllAccounts to download data from held-away accounts. Morningstar Office allows her to do a complete analysis of client portfolios, including running reports on asset allocation, industry diversification, and bond ladders.

“I can slice and dice people’s portfolios any way I want with a click of a button,” she says.

Unverzagt doesn’t have time to train for another world championship with all her new clients, but she still manages to race on her bike now and then. It’s fitting that “Unverzagt,” her married name, means “undaunted” in German.

“Life-enhancing experiences always happen when I’m outside my comfort zone,” she says. “I try to do things that are not in my wheelhouse. It pushes me ahead of everyone that is trying to find their comfort zone.”

Charles Keenan is a freelance financial journalist.

Sadie Goodwin July 30, 2017 No Comments

XYPN Ep #210: Taking Over the Family Business – The Career of Tara Unverzagt

Ep #210: Taking Over the Family Business – The Career of Tara Unverzagt

This episode originally aired on XYPN.

Today we have XYPN Member and South Bay Financial Partners founder Tara Unverzagt on the show! Inspired by her mother—who was one of financial planning’s early pioneers—Tara knew from an early age that she wanted to be a financial planner. She joins us in this episode to share her experience growing up in the field, the valuable lessons she learned from having an advisor as a parent, and how she put her own twist on financial planning to do things differently.

http://xyplanningnetwork.libsyn.com/ep-210-taking-over-the-family-business-the-career-of-tara-unverzagt

You can find show notes and more information by clicking here.

Sadie Goodwin July 30, 2017 No Comments

CNN – Why wealthy parents who bankroll their adult children are hurting them

Why wealthy parents who bankroll their adult children are hurting them

By Anna Bahney
Updated 11:32 AM ET, Tue July 23, 2019

This article originally appeared in CNN

 

For some wealthy parents, the pressure to extend their social and financial status to their adult children can be overwhelming.

The recent college admission scandal revealed shocking things parents were willing to do to secure spots at top schools. But those same motivations drive some parents to bankroll their kids’ lives into early adulthood, often to the detriment of the family.
“How many times have we seen in wealthy families where the breadwinner is so inundated with making a living and providing for a family, that love, intimacy and closeness are shown through financial means,” says Dr. Alex Melkumian, a psychologist and financial therapist.
Support that keeps a young person living above their means can undermine their independence and create deep insecurities.
Dr. Bradley Klontz, a psychologist and certified financial planner who researches money disorders, calls this “financial enabling.” Often arising between parents and their adult children, financial enabling involves extended financial support that not only affects the enabler’s finances, but can also cause lasting damage to the young adult.
“The delay of financial independence is associated with a lack of purpose, creativity, drive — it can be extremely crippling,” says Klontz. And that’s to say nothing of the damage caused to the family relationships. “People then have a tendency to resent the source of their money, even while they rely on it.”

Parenting without enabling

When children grow up with the expectation of a wealthy lifestyle, it becomes harder for them to maintain that lifestyle once they are on their own. And the parents feel pressure to step in and help.
“It has to do with growing up with one identity and becoming an adult and expecting to continue on that identity,” says Tara Unverzagt, a certified financial planner in Los Angeles. “You don’t have the job to support it. Your parents have the income.”
Unverzagt works with families struggling to find the line between supporting their children and offering too much help. All of it starts by talking about money, and making sure kids have realistic expectations.
Make sure you are setting your kids up for a lifestyle they can sustain. “Because if they can’t, you’ll sustain it, and it will bleed you dry and impact your own retirement.”
She says that many ultra-wealthy parents can afford carrying a child’s expenses into adulthood but others end up hurting their own finances by supporting their kids. “They feel they should be able to do these things for their kids endlessly and afford them,” she says. “But if you continue to do it, the money can run out really quickly if you’re not paying attention.”
And that’s to say nothing of the message sent to the adult child.
“You’re telling that child, she can’t do it on her own,” says Unverzagt. “Some moms and dads want her to feel that way, that she can’t live financially without that parent. You should be striving to have an independent adult.”
Unverzagt started talking about budgets with her own three children, now all recent college graduates, when they were two years old.
“I feel it is your job as a parent,” she says. “A 4-year-old’s money mistake is nothing. Have them make a bubble gum mistake instead of buying a house at 25 they can’t afford. Are you going to enable those bad financial decisions at 24 and 30?”

Breaking the enabling cycle

Having unlimited options can be paralyzing to some young people.
“Having too many options can be overwhelming,” says Meghaan Lurtz, president of the Financial Therapy Association, who has a PhD in personal financial planning. “It happens to wealthy children a lot: I could have 1,000 careers, I could have any car I want. I can’t pick one. They appear to be the laziest bums on earth because they have so many options in front of them, it is paralyzing.”
She says that a strategy to aid in moving forward is to put boundaries on endless opportunities.
She advises parents to be clear about their expectations of adult children. “Tell them, you need to have a job, even if you’re a teacher and making $30,000 a year. You need to do something, and have purpose.”
Working with a financial therapist, a counselor who can help people think and feel differently about money, can be helpful to people in that paralyzed state, she says.
It’s okay to want your children to have the best, she says, and many people have the resources to do it. But the key is to give kids the tools to achieve it on their own.
“It is an important step to talk about what it is like to have money and the responsibility that comes with it,” Lurtz adds.
Sadie Goodwin July 30, 2017 No Comments

CBS NEWS – Americans still think they can make money flipping houses

Americans still think they can make money flipping houses

By Irina Ivanova
July 19, 2019 / 7:51 AM / MONEYWATCH

This article originally appeared in CBS NEWS.

 

While fewer Americans are buying homes these days, more of us than ever believe we should be. The portion of people who say real estate is the ultimate investment — better than stocks, bonds or gold — has hit a new high.

Nearly one-third of Americans believe real estate is a better way to invest money for the long term, according to a Bankrate.com survey released this week. Younger people are more likely to say so, with 37% of 23-to-28-year-olds ranking real estate above stocks, bonds, gold and savings accounts as an investment. This is the strongest sentiment for real estate in the seven years Bankrate has run the survey, said Greg McBride, the website’s chief financial analyst.

Sadly, real estate is no better an investment today than it was in the previous century—and that’s to say, mediocre at best. For people with a bit of money to put away, the stock market will almost always give the best return.

Between 2006, the peak of the previous housing bubble, and 2019, average home prices have increased just 13%, according to the S&P/Case-Shiller Home Price Index. In that same time period, the S&P 500 rose 125%. In other words, stocks did 10 times better than real estate.

Despite the stock market’s better returns, “it remains rather unloved,” said Bankrate’s McBride. “We’ve been doing this survey for seven years and we’ve been in a bull market for the entire seven years, but investors haven’t really warmed to it.” Just 1 in 5 think the stock market is the best long-term investment.

Things you can touch

A house is a much more unwieldy investment than a stock portfolio. It costs money to buy and sell and maintain a property, and it can lose value over time, like an iPhone or a car. If housing is an investment, buying a house is akin to purchasing a single share of stock—except instead of paying a quarterly dividend, the investment needs you to put some money into it periodically to keep it in good shape.

Nevertheless, familiarity breeds contentment when it comes to real estate. While less than half of Americans own any stocks, nearly two-thirds own the home they live in. Many if not most Americans are at least aware of homeownership through family, friends or neighbors. And of course a house is a physical asset in a way that financial instruments are not. “You can kick it, touch it, look at it; you know it is there. It provides a sense of comfort that is missing when we hold stocks and bonds,” said Anders Skagerberg, a financial adviser at Skag Financial in Salt Lake City, Utah.

The way most people think about home sales also leaves out many costs, artificially inflating real estate’s perceived rate of return, said Tyler Reeves, founder of Plimsoll Financial Planning in Birmingham, Alabama.

“You find out that this house was bought for $300,000 and sold five years later for $400,000 — wow, that’s a quick $100,000!” he said. “What they don’t see is during that five-year period, they had to get a new HVAC unit, and a hot water heater, and pay a mortgage for five years.”

Repairs and maintenance are an often-overlooked aspects of homeownership, especially for younger homeowners. Upkeep alone—tasks like yard work, carpet cleaning and maintaining the gutters—can run $3,000 a year, according to a recent Zillow study.

Unexpected repairs can cost much, much more. One young Tennessee homeowner spent $21,000 over six months to repair her modest 1950s ranch house, she wrote in Business Insider. While she admitted that “procrastination made some of the problems worse,” many of the repairs were the inevitable result of normal wear-and-tear: replacing the roof, fixing cracked ceilings and upgrading some electrical systems.

Even in a best-case scenario with minimal upkeep, property almost always comes with carrying costs: the mortgage, taxes, homeowners’ insurance, fees for water and services like trash pickup and even a homeowners’ or condo association. Those taxes and fees are why first-time homebuyers are often told to budget 30% on top of their monthly mortgage payment to get the “true” cost of owning their house.

Today, a would-be house flipper could buy the $300,000 house in Reeves’ example for a $70,000 outlay (down payment plus closing costs) and a monthly payment of $1,130, assuming she has excellent credit. After five years, the lucky debtor will have paid $45,000 in interest payments alone, and—under the 30% rule—about $20,000 in taxes and other costs. If she sells the house for $400,000, after accounting for the agents’ fees and the interest, taxes and maintenance she’s paid out along the way, she would have made a profit of $22,000.

In that best-case scenario, the flipper got an impressive 31% return on her initial investment. But if instead she’d­­ put $70,000 into a stock-market index fund five years ago, she would today have $34,000 in profit—and arguably for a lot less work.

“We have many more clients that have broken even or lost money in real estate than have made a killing in it,” Adam Van Wie, a financial planner in Jacksonville, Florida, told CBS MoneyWatch. “We more often than not try to talk them out of it, but many of them never listen.”

Like stock-picking made hard

Still, the ongoing housing crunch makes it unlikely the draw of making a quick profit in housing will ever fade. If anything, financial planners report an increase in the amount of people coming to them with dreams of real estate riches.

“In the last couple years, it’s come up in conversation with almost half of my clients,” said Reeves. “Seven, eight years, ago you wouldn’t have expected it.”

Reeves, like most financial planners, emphasized he wouldn’t discourage real estate investing for the right person. But it’s much more like a job than most people assume, and doing it profitably requires treating it like one.

“I know people who make money buying and selling and renting real estate, just like I make money buying and selling stocks and bonds,” said Tara Unverzagt, founder of South Bay Financial Partners in Torrance, California. “But that’s their life. They spend a lot of time learning the cycle and when to ‘buy low and sell high.’ ”

She added that in real estate, just like in stocks, “the average person tends to buy high and sell low and lose their shirt.”