Author: Freddie Lee

As a Mompreneur, you get used to “making” things happen. Orders need to get filled, diapers changed, calls made, teens to understand, and the list goes on. Letting things slide seems unheard of however we know deep down often we have to let some things slide to enjoy a little peace.

But have you ever considered it’s not letting things slide when you give people space and things the time to work themselves out? Actually at times being still and not responding is the very thing that you are supposed to do. It allows you the time to process and make sure your course of action is what’s really needed or not.

To get to the point of not always responding it takes a total change of mindset. For example, I’ve had a very successful career. Partly because I used to jump through hoops to attend to everyone’s needs. Now I work at my own pace and allow others the space and time they need to work things out for themselves all while still getting my work done and being of service to my clients.

Everyone close to me has noticed this change. At first, I thought everyone would reject the new, more laid back, let it go Quiana. But I see that because I am more relaxed (not to mention happy) those around me are benefiting too.

Everyone’s life I touch benefits from a more attentive, relaxed, and focused person. This is truly enjoyable for others because they have the space and room to talk, learn, and grow. Could your family, friends, and clients benefit from this too?

Think about it; people like to be heard and truly understood. Slowing down allows you to truly hear people because you’re not always moving, reacting, solving. Believe it or not, it’ll feel like you’re a new person and it’ll be fun to reconnect with others (even those you’ve known for years) on a whole new level!

Here are 6 surefire ways to help you change your mindset, so you don’t feel the urge to save the world:

  • Don’t take life so seriously. Things (good and bad) are going to happen no matter what you do.
  • Take a step back and avoid reacting to anything that is not an emergency.
  • Don’t take on anything new for a few weeks and avoid over-doing anything you have to do right now.
  • Focus on getting things done not perfect.
  • Give those around you space to solve their problems their way.
  • Allow others to make mistakes and learn from them like you did. You are who you are because of what you learned along the way.

Everyone around you will benefit from a more relaxed you. You’ll definitely be happier and be able to enjoy life more!

Try this assignment, write down every time someone comes to you to help solve their problem. Then write down all the times you want to solve someone’s problem without them asking for your input. Compare the lists after a week. Write down what you learned from this assignment.

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New parenthood means new responsibilities and new expenses. Keep it simple and less expensive by introducing some of these money-saving tips into your growing family’s life.

1. Breastfeed your baby.

Not only is this natural practice advised by experts and mothers alike for overall newborn health and growth benefits, nursing is absolutely free. An exclusive breast milk diet is recommended until the six-month mark, and a mixed diet of breast milk and soft, natural foods is encouraged throughout baby’s first year or longer. Nursing provides optimal nutrient benefits and special bonding time for mommy and child, all while saving money on formula costs.

2. Consider cloth diapers.

While disposable diapers are convenient, they’re expensive costing anywhere from $80-$150 per month during the first year. Cloth diapers are a viable alternative. Not only will you save over 60 percent on annual costs, you’ll save over a half ton of diaper garbage from going into landfills every year.

3. Make your own baby food.

Once your baby is ready for solid food, save money by making your own baby food. Puree your own with a blender or food processor to cut costs. There are also many health benefits of making your own baby food including cutting down on the amount of preservatives. Visit sites such as and for plenty of cheap and nutritious baby food recipes.

4. Become coupon and sales-savvy.

Be sure to find ways to save on baby supplies such as diapers, clothes and baby food by looking for coupons on websites geared towards new parents, such as Use these coupons on diapers or baby food during store sales to save even more.

5. Buy used or resale.

Keeping up with baby costs is almost as difficult as keeping up with baby clothes. Buying a new wardrobe for the baby every few months isn’t practical for growing families on a budget. Instead of investing in brand new clothing, try to buy the bulk of baby’s clothes pre-worn. Garage sales, and consignment shops are great resources for baby clothes and toys on a budget.

6. Shop in advance.

Before you know it, your baby will grow out of those tiny onesies and booties. Look forward to these transitions by purchasing clothes in advance and saving bundles in the long run. Watch for storewide and end-of-season sales at your favorite department stores.

7. Utilize free programs.

There are many free community events activities available for you and your baby. Take advantage of the programs in your area, such as story time at the library or bookshops, playtime at toy stores and baby yoga at wellness centers.

8. Become a member.

Many museums, science centers, aquariums and zoos offer free or discounted rates for infants and children under age two. Become a member of your family’s favorite institution to save on regular outings and city-wide events. These facilities often host family-friendly activities and classes for affordable entertainment and bonding experiences as well.

9. Stay at home.

New parents will soon find that extra-curricular time is reduced drastically once your baby is born. Consider spending your weekends entertaining at home rather than spending money to go out. Invite your friends over for game night, movie night, or cook-offs to keep your social life full and frugal.

10. Apply for assistance.

Government and privately funded programs are excellent resources for qualified families in financial need. WIC (Women, Infants, and Children) program and Children’s Health Insurance Plan (CHIP) are just a few examples of many helpful programs for new parents and their newborns.

Don’t let unnecessary expenses add to your list of concerns as a new parent. Try some of these frugal, family-friendly tips today to keep your budget on track.

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Most people would say that they have money “habits” and not necessarily money “traditions.” Money is often looked at as a necessary evil instead of a tool that can help you focus on your priorities in life. Take the changing of the seasons as an opportune time to change your attitude towards money. Instead of your adversary, make it your friend and form new positive traditions that align with how you would like to feel about money.

Create Financial Traditions

Tradition #1 – Maximize Retirement Savings. For most companies, the fall is “open enrollment” season for benefits. While you should be able to change your 401(k) elections at any time throughout the year, most people don’t bother to look at their retirement until it is time to confirm your elections. If you turned down or off your retirement savings when you bought your house or had a child, now is the time to commit to this new tradition and maximize your contribution. For 2010, you can put away $16,500 pre-tax, which will not only make sure you are staying on track for this important goal but also ensure you pay less in taxes. Don’t forget a SAHP either! As long as the working spouse earned at least $5,000 during the year, a SAHP can put away $5,000 in a traditional IRA, or in a Roth IRA (if your Adjusted Gross Income is less than $166,000). Think of the great example you are setting for your children and how happy they will be when they don’t have to support you in your retirement!

Tradition #2 – Find Real Holiday Spirit and Set a Holiday Spending Plan. This lackluster economy has made many families cut back their spending and re-evaluate on what they spend their money. I have seen families do very well at living within their means and then completely blow it when it comes to the holidays. Do yourself a favor this holiday season and decide in advance how much you would like to spend on gifts for your immediate family and other relatives. Set a target amount, and try your hardest to stick to it. Impulse purchases can ruin the best-laid plans, so if something catches your eye in a store… wait 24 hours and go back if you really think it is the perfect gift. Also, take time to critically evaluate whether you need to get everyone in your family a gift. Most people give relatives gifts because it is a “tradition,” but if you do not want to carry that tradition onto the next generation now is the time to make the change.

Also, have you gotten in the habit of giving new friends or their children gifts at the holidays? Instead of giving more “stuff” to each other, consider having a potluck holiday party and creating a new memory.

Tradition #3 – Keep What You Value and Get Rid of The Rest. Do you have closets in your house filled with things you do not use, a garage full of who-knows-what, or even a storage space? Start an annual tradition or semi-annual tradition of going through your possessions and deciding what you really value and want to keep. You may want to enlist a good friend to help you go through your closets and be a reality check. Also, it seems that kids are never too young to start accumulating stuff they never use. Try to make it fun by making piles to keep, donate or recycle. If the donate or recycle piles are bigger than the keep pile, reward yourself, or your kids with a fun treat like an afternoon out picking pumpkins.

While the urge to purge is deep in my bones, my daughter is getting the hang of it as well. Every few months she decides that she has outgrown something (a book, jacket, toy) and specified to whom it should go, be it a friend’s younger sibling, her school or someone who might like it more than she does.

You can always turn this tradition into a money maker by having a yard sale or selling goods through Craigslist or eBay. Also, remember that donations are tax-deductible, so you will be saving some money by paying less in taxes.

These are just a few examples of traditions we have implemented in our family. There is something comforting about having a tradition and calling it your own. Ideally, I would love my children to look back on their childhood fondly and to have developed a very positive relationship with money from an early age. As my grandmother always said, “good habits start young, but you’re never too old to learn.”

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Summer does not really feel like summer without vacation. Childhood memories of playing all day at the beach, swimming and collapsing in exhaustion at the end of the day always make me smile. However, creating a stress-free, relaxing vacation these days seems difficult. Even with the economy “feeling” a little bit better this summer, most families hesitate to make big summer plans that will require a lot of cash.

How to Make Your Dream Vacation a Reality

Northern California provides endless “staycation” or mini-vacation possibilities that can keep your spending in check and provide a well-deserved getaway from everyday life. However, it is the bigger plans that most families dream of but feel like they are out of reach. Whether you fantasize about starting a family tradition of a couple of weeks each year on a white sand beach, taking an extended vacation to see family, or renting a house in Italy for the summer, mindful planning can make fantasy a reality.

Bigger trips typically require more money, so planning is the key. Below are ten simple steps to follow to ensure that you can achieve your dream vacation goal and enjoy it without guilt.

CREATE your own picture of the ideal vacation. I recommend that you and your partner sit down separately. Write it down, cut out articles, or clip pictures out of magazines. Then, come together and see what the other person has in mind. It is important that there is a shared vision for this goal since you will be using family resources to make it a priority and reality. Include everything from location to how you want to spend your days.

DECIDE on your family’s big vacation goal. If your separate visions of your big vacation are worlds apart, compromise will be in order. You might decide to postpone the trip to Peru until your kids are older and opt for Disney World now.

DETERMINE how much money you feel comfortable spending on this trip. It is VERY important for you to decide on the amount you want to spend before you let others tell you how much it would cost. This amount will serve as an anchor for you when you start researching costs of the vacation. If $5,000 is the total budget, you will need to allocate this to travel (airfare, car, or train), lodging, food, and activities.

CALCULATE how long it will take you to save enough money to pay for your vacation. This is where having a comprehensive understanding of your family’s finances is critical. How are you savings towards retirement? Do you have a sufficient Emergency Fund? Are you living within your means? If you can save ~$275 per month over the next 18 months, the trip is paid for. This may mean temporarily cutting back on eating out or shopping, or potentially refinancing your mortgage to generate this savings. If you already have a sufficient Emergency Fund, you could tap into it (within reason) and take the vacation sooner, with an agreement to pay the money back over time.

MARK your calendar for the big trip. This will help make the vacation a reality and eliminate any scheduling excuses.

SET UP a high yield savings or money market account solely for this trip and give it an inspiring name, like “Summer in Provence.” Check out Bankrate for best rates so that you are at least keeping pace with inflation. Open an account and put in any amount you can afford. It might be $50 to start. By having the account open, it is ready to receive future money.

FUND your new Vacation Account. If you can put aside a specific amount each month before paying your other expenses, set up an automatic transfer. If money is tight, see what you can spare and get creative. You may have a mountain bike that you have not ridden in five years that you could sell.

SET a date to start planning your trip. If the vacation is 18 months away, you most likely do not need to start booking your plane tickets or making reservations yet. To make sure this dream vacation does not consume your every thought, determine when you will start the actual planning process.

ENJOY the planning process. Building up to a big trip can create a lot of stress for a couple because it requires decision making without instant gratification. As soon as the planning stops being fun, take a step back and revisit your vision for this trip and how you want to feel when you are on vacation.

MONITOR your progress and acknowledge your accomplishment. While it may take time to save enough money for this goal, give yourself credit for having a vision and taking steps to make it a reality. For example, once you have saved ¼ of your goal, buy a travel magazine or book for your destination.

Of course, life can throw you curve balls, such as unplanned expenses, unforeseen job loss, the arrival of another child. These things might cause your “vision” of the dream vacation to change and for you to postpone the trip for a while.

Deciding on your dreams is completely within your control, and by creating measurable goals to get you to those dreams, you are one step closer to making it a reality.

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Summer is here and now is the perfect time to evaluate progress on those resolutions that kicked off the New Year. Just as we make fitness commitments and resolutions – often with summer as a target goal – getting financial fitness goals into shape is also an important and timely exercise!

First, focus on your larger financial muscle groups. In other words, look at where you spend the most money as that is where your changes can have the biggest impact. For many families, the three largest monthly expenses are housing, childcare, and food. (In fact, these may comprise 80% of your entire spending plan!) If you’re trying to save money, I always recommend that you seek ways to reduce your spending without making big changes in your lifestyle. Reducing your housing costs is a great example of this, and mortgage rates continue to be near historical lows, so if you have not (or have not been able to) refinance, be sure to take another look at any options that may be available to you.

Next, it’s time for some interval training. Getting your finances in order can feel overwhelming, so break goals and tasks down into manageable pieces and dedicate an hour each week to getting on track. For example, if you want to transition to an online money management tool, it’s easy to procrastinate gathering all of your statements and bills together. Instead, just take what arrives in the mail each week and set those items up in a new account. Put in just a little time each week, and in just over a month, you’ll be fully up and running.

Next, remember to take regular breaks to recuperate and recharge. Taking control of your finances is like exercise, and sometimes we all need to take a day off from the gym. You need to give yourself a break in order to stay focused and feel ready for the next steps. Schedule rewards for steps taken and goals reached – a dinner out or a local day trip that doesn’t break the budget. Create incentive to stay on track, and your finances will be in much better shape by summer, fall or whatever your timeframe is!

Some financial areas – like education and retirement planning – require more exertion and can be easy to avoid because of that. That’s why you really need to give these your best effort and take care of them before you run out of energy. If you start by funding these goals first with automatic paycheck deductions or bank account transfers, you’ll have the harder exercise out of the way when you have the most energy. Decide what your targets are and make savings the foundation of your financial fitness routine.

Finally, work with a professional to help you achieve your goals by hiring a personal (financial) trainer! Just like a fitness trainer, a financial planner can design the right program for you, make sure you are taking the right steps, and help you achieve your goals.

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Springtime has finally arrived! As you start to enjoy the long, warmer days and put aside a day for spring cleaning, make sure that you give your finances a spring cleaning as well!

Start by addressing those dusty old boxes or files full of well-aged financial documents that you no longer need. It’s finally time to throw out those yellowed cancelled checks, decade-old credit card and bank statements and former apartment leases with addresses that you can barely still remember. Holding on to tax returns from 2002 or earlier? It’s generally safe to get rid of your old returns and associated records if they are at least seven years old. Make sure that you shred sensitive documents to protect yourself from identity theft! (For a clear and simple guide on how long you need to retain financial documents download our free guide on What to Keep and What to Shred.)

If you rent a safe deposit box that you have not visited in a while, this is a great time to swing by your bank to make an annual inventory of its contents. Original titles, deeds and negotiable securities (i.e., older bond certificates) are best kept here. Store your original will in the box, but make sure that you have a copy at home as well. However, keep only copies of government-issued IDs and insurance policies in the vault. Make sure that an inventory of the box’s contents, as well as the keys, are in a place where your family could find them in case of an emergency. Put with it an emergency contact list for financial issues, which may include names and phone numbers for your insurance agents, estate planning attorney and investment manager.

Next, it’s finally time to track down any stray investment and bank accounts. I recently checked-in on a long-forgotten savings account and was excited to discover $200 sitting in it. However, I was shocked to discover that the bank had started charging a $5 fee each month, which far out-paced the meager 1% interest I was earning, so I immediately closed the account. If you have changed jobs in the past few years, you may still have retirement accounts sitting in your previous employer’s plan, so take the time to transfer these funds to a retirement account that you can more actively monitor and manage.

Moving on to more fun tasks, gather up any gift cards that have been taped to refrigerator since last Christmas (or the Christmas before that) and put them to use! Spending them on something for yourself is the easiest solution, but if you are never going to use that $25 gift card to the Mitten Hut from Grandma then donate it, re-gift it, or sell it on eBay or to a gift card reseller like Plastic Jungle.

Finally, incorporate a financial aspect to clearing clutter out of your home, too. Dedicate the funds you’ll earn from a garage sale to a fun activity like a night on the town or a day at the ballpark. It makes it easier to part ways with your long un-used snowboard and will help to keep you motivated as you clean out your house in celebration of springtime!

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Smart Credit Management

Financial advice and credit advice are not always the same. For example, transferring and consolidating high-interest credit card debt to a 0% APR credit card might make financial sense, but does it make sense for your credit?

Rarely is anything ever taught about credit, and credit is somewhat counter-intuitive. Have you ever heard someone say that you do not have enough credit to qualify for a loan? Huh? You mean you have to have a debt to get more debt?

Establishing credit, and thus, a credit score enables you to qualify for a mortgage, loan, credit card and even security clearance for a job. The information below will help demystify your credit score and provide valuable tips for improving your credit and avoiding pitfalls.

What is a credit score? A credit score is a measurement for lenders to determine how much risk they take on to lend you money. Your credit score is generated from a statistical analysis that assesses “creditworthiness,” and FICO is the standard used. FICO looks at a mix of secured and unsecured credit, your payment history, and has a scale of 300 to 850. This credit score does not care about income or size of debt payments, but it does care about the percentage of debt in use and that you make your payments on time.

Credit scores also have no memory. Your credit score is pulled as of a point in time based on all the information available from the three credit bureaus. The score can be different every time it is pulled, so if you had a great score five years ago, it means nothing for a score pulled today. Credit scores are more heavily weighted on recent items.

You can get a gauge of your credit score for free once every year at, but this report will not contain FICO score. To get your FICO score, you’ll need to have to pay a credit monitoring service, though many do offer brief free trial periods. A number of services now offer free FICO score estimates, but remember these Fake-o-Scores are only estimates and may differ from the scores provided to lenders. Self-pulled scores are considered soft inquiries and will not hurt your credit score. Hard inquiries, those made by others who are trying to approve you for credit, can impact your score if too many happen within a 12-month period. The good news is that multiple mortgage and auto loan inquiries are rolled together and will not adversely impact your score if they are all done within 30 days of the initial inquiry for that loan. If the inquiries are spread out over more than 30 days, the hard inquiries can reduce your credit score up to 50 points, which can mean real money in today’s market.

The Most Common Mistakes?

1. Joint credit cards. The biggest mistake couples make is to have all credit cards (revolving credit) and unsecured credit jointly named. There is no reason to have both of your names on your credit cards. If something bad happens to one of you, both of your credit scores are negatively impacted.

2. Closing old credit cards. Debt ratios and account seasoning (the age of a given account) are important components of your credit score: approximately 45%. When you close old credit card accounts, your debt usage ratios go up, and you shorten the average age of your credit file, which will negatively impact your score.

What should you do?

Keep separate credit cards. You can pay them off from a joint account.

Rotate your credit cards. Keep your cards active by rotating your use of cards. The amount you charge does not matter; charge a coffee at Starbucks. In a bad economy, lending standards tighten, and credit lines are reduced or closed if not active. Even if they are not closed, credit card companies may eventually stop reporting inactive accounts to the credit bureaus. Again, this loss of payment history will reduce the average age of your available credit and hurt your credit score.

Pay off your credit card each month and on time. For assessing credit, your debt ratio is Dollars in Use/Credit Available. You want to keep your debt ratio as low as possible.

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Achieve Your Financial Goals

It’s time for a fresh start! Don’t dwell on last year’s setbacks – it was a tough financial year for many. Instead, look at concrete steps to move into a fresh year of healthy finances with manageable goal-setting and simple steps that everyone can do and won’t overwhelm.

1. Set realistic goals!

If you haven’t yet set goals – set a few! But important – set yourself up for success rather than failure, by making sure they are manageable!

You don’t necessarily even need a calculator for this one, but be sure to think about 3 – 5 financial goals you’d like to accomplish over the next twelve months. Keep them real and manageable so that you won’t be easily thrown off-track or discouraged. Perhaps two more easily attainable and shorter term goals to give you an opportunity to check them off the list and feel success – followed with another two more challenging. Maybe they include buying a new car, paying off your credit card or finally making a meaningful contribution to your retirement savings. Be sure to attach a number to your goals. This makes them real and helps you figure out the game plan for setting those funds aside. If you are in a relationship, ask your spouse or partner to do the same, then sit down to compare your goals. If your main priority is to become debt-free next year while your partner’s focus is taking a 3-week trip to Bali , this is the time to understand what each of you want and jointly set some priorities.

2. Create some accountability for yourself.

Like many New Year’s resolutions, it’s easy to lose track of what you are striving for as soon as the calendar turns to February. So take the opportunity to set up some benchmarks and check-in points for yourself ASAP if you haven’t already. Set your computer to remind you about your goals on the last day of every month, or schedule a quarterly call with your financial planner, accountant or spouse — whoever can best help you stay on track throughout the year. Cut your goal into digestible quarterly achievements to stay focused and motivated. For example, if your goal is to have $5,000 cash in an emergency fund, you’ll probably want to have accumulated close to $2,500 by June 30th. If you need to do smaller amounts, spread it out – whatever is easy to manage!

3. Pay yourself first

If the financial roller coaster of the past year showed us anything, it’s that we all likely need more than we thought to retire. Regular, automated paycheck deductions for retirement savings are one of the very best financial habits you can create for yourself, and this is the perfect time to get started or see if you can increase how much you are saving. Even if it’s just $25 per paycheck, directing money towards your tax-advantaged retirement account (generally provided through your employer) will help you build substantial savings over the years to come and show you how painless and easy it can be to become a disciplined saver.

You can use this same concept to direct money to your Top 3 goals. Set up separate or subaccounts in advance and be sure to name them with their intention. Put a positive spin on your goals. Seeing an account named “New MommyMobile” is certainly more fun than “Savings” and clearly states when you are “allowed” to use it (a common problem when we have general savings…we get scared whenever we actually spend some). “House Surprises” instead of “Emergency Fund” lets you feel good when you have to pay the plumber. Determine the amount you want to save in advance and direct deposit into each fund. You may want to jumpstart each one with some cash from your current savings, in case the water heater breaks next month. Send the money to its goal before you even see it.

4. Lock yourself away for a mandatory afternoon of savings

We’ve all seen the commercials about how we could save hundreds on our auto insurance, and you may even suspect that it’s true, so why haven’t you called yet!?! Pick an afternoon to check how much you might be able to save on all of those pesky recurring charges that you haven’t bothered to check in on. Lock yourself in a room and call around to find out if you are getting the best and most appropriate rate on your auto insurance, cell phone plan, cable tv, gym membership and anything else that you pay for on a monthly basis. Be sure to scour your credit card statements for anything that you are still paying for, but stopped using long ago (like unread magazine subscriptions) and cancel those services, too. Find just $42 in monthly savings, and you’ll end the year with any extra $500 in your pocket, without making one single change to your lifestyle!

5. Understand your credit picture

With consumer credit still incredibly tight, it is more important than ever to actively manage your credit profile. Start with your credit reports, which you can get free once per year from Scour them for inaccuracies and promptly write dispute letters for any errors that may be negatively impacting your credit. Next, check in on your credit scores. While you’ll need to pay for access to get precise numbers, a number of free websites, such as Credit Karma are offering increasingly accurate FICO score estimates. Be sure to check out the impressive free credit report card tool from It gives you a letter grade for each facet of your credit score and offers actionable tips on how you can improve.

Significant new credit card laws are also taking effect in February, so check in with each of your lenders to confirm any rate or fee changes that may effect you — some lenders have increased interest rates by more than 10% on millions of Americans in anticipation of the new laws taking effect. While you have them on the phone, this is the perfect time to ask for a rate reduction no matter what interest rate you are currently being charged. Rate reduction = instant savings!

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“We’d like to take a REAL family vacation… that does not involve visiting relatives!” I can’t tell you how many times I hear couples dreaming out loud about this in a financial planning session. “Just one week in Hawaii…”

Here’s your end of the year challenge: Commit to making it happen by this time next year. Seriously!

I know, everything right now is doom and gloom about the “recession,” the second Great Depression, the mood swings of the stock market…..does that mean Family Fun has to go on hold while we vigilantly watch each dollar and sit home to make sure we don’t overspend?

I sure hope not.

You may ask, “Isn’t it irresponsible to take the gratification of a vacation rather than save for your child’s education? Is that selfish?” If you do not understand your spending enough to know that you can take a vacation without long-term consequences, then guilt may have a place in your situation. But, no matter what, if you plan ahead, you will be able to take a family vacation you can feel good about in any economy.

How to Vacation Without Guilt:

  • Start with making a conscious choice. Sit down with your partner and DECIDE that you are going to take a family vacation. Get on the same page before the saving starts.
  • CLEAR your mind of any preconceived notion of where you will go (we’ll get to that part later).
  • Determine HOW MUCH money you feel comfortable spending on a trip that you would take within a year. This means the amount you could spend without guilt. Remember that finances change all the time — so this is about what amount do you feel comfortable spending this next year. Future years are a different story and whatever you’ve spent in the past does not count. You are only focused on what makes you comfortable this time around. This is where it is extremely helpful if you understand your full financial picture. If you are worried about a job loss, then maybe your number is lower. If you have a solid Emergency Fund and good Retirement savings, maybe it is a larger number. For this example, let’s say it is $5,000.
  • Decide WHEN you want to go. Let’s say August 2009. BLOCK your calendar now even without knowing the details. This eliminates the easy “scheduling” excuses to forgo a vacation.
  • If you are starting from zero, CALCULATE what this means in terms of monthly contributions to an account. Let’s assume there is no “interest” on the account since you keep it in a checking or savings account in cash. To go on a trip in 8 months that costs $5,000, you would need to set aside $625 a month. Check-in: Does that sound like a lot of money to you, or just the right amount? Could you “afford” more? Do you need to change this number? Remember, this is about finding the amount that will let you take a satisfying vacation without worry!
  • START the money flow. Set up a separate (untouchable) account dedicated solely to your Family Vacation. The best way to make sure you take a vacation and make sure you don’t fall victim to the “we have to save for other things” mentality that keeps many parents in their living room is to allocate funds directly to a Vacation/Travel Account. Either do direct deposit from a paycheck or set up a monthly transfer to this account from your checking account.
  • Now that you have set up the funds you get to decide WHERE and HOW LONG you want to go. This is the fun part. You know what you can spend, so you can start exploring. Take your investment number (e.g., $5,000) and divide it by the number of days you want to vacation. So if I want to take a 7-day vacation, I would have $714 a day ($5,000/7) to spend. Start investigating airfare (divide cost across the # of days), hotels, and activities to see what fits. While Hawaii tops many West Coasters’ lists, depending on your “number,” you may have to go another route if funds are tighter this year. Maybe your family vacation is a week at home touring the Bay Area sights you’ve always wanted to see.
  • Once you decide where your vacation is, FIND pictures and visual reminders or your destination. You don’t have to pay for the trip yet (you can book it at whatever lead time is appropriate for your trip), but you will have selected a destination. HANG UP the pictures in a prominent place in your home. Seem silly? Move on to #9 before you judge…
  • Now back to your monthly spending. Decide if there are trade-offs you will need to make to be able to meet your vacation investment number. What behaviors are you willing to change for the next 6-9 months (not forever!) to meet your vacation goal? Write down your commitments for the changes you will make. Have your partner do the same. HANG UP these statements next to your vacation pictures (from #8). This will keep you focused on your vision when short-term spending decisions get cloudy or tempting.
  • When vacation time arrives, RELAX and enjoy this cherished family time knowing that you have given yourself full permission to spend a chosen investment without any guilt.

I advocate for setting yourself up for a secure financial future while also creating lasting memories and experiences along the way. In the midst of the financial angst of late, make sure you remember to forecast for family fun, too!

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Investors are well aware that financial markets go up and down.  That is the essence of business and economic cycles.  What is difficult for individual investors to master is how to act in the face of market advances and declines.  Unfortunately, most people become very tolerant of risk and increase their exposure to the stock market when the market is advancing.  Similarly, they avoid risk and clip their exposure to stocks when markets are declining, or after a large correction.  It is human nature and “recency bias” that create this visceral response to market perturbations.  Recency bias occurs when investors believe that the most recent performance of their investment portfolios will continue indefinitely in the future.  It is just one factor that results in investors consistently underperforming the stock market.

Brad M. Barber  and Terrance Odean, in their 2011 study “The Behavior of Individual Investors,” conclude that individuals routinely underperform benchmarks through 1) selling winning investments and holding losing investments, 2) being heavy influenced by most recent past returns (repeating investment behavior that coincides with pleasure and avoiding behavior that is painful), and 3) holding undiversified portfolios.

Dalbar studies have also shown that most individual investors typically trail the market rate of return, and they typically do so by a fairly wide margin.

The message from Dalbar since its first study in 1994 is that investment results are more dependent on investor behavior than fund performance and that mutual fund investors who tend to buy and hold are more successful than those who attempt to time the market.

Investors who attempt to time the market are often acting irrationally out of fear of a potential loss. Stocks and investment funds happen to be the only assets that people buy less of when they become less expensive. Let’s think about buying food at the supermarket, if the price of steak rose considerably, you would be more inclined to reduce your purchase of steak or buy something else, but if the supermarket suddenly reduced the price of the steak by 30%, you would stock up. However, you do the opposite when it comes to stocks and other investments. The stock market can foster a gambling mentality. When you are on a roll you hate to stop, but that is exactly when you should cash some chips in.

So how does an investor counteract the tendency to time the market and invest based on most recent results? Rebalancing is great way to fight the effects of recency bias. Rebalancing to your target asset allocation is a mechanistic and unemotional way to fight these counterintuitive emotions. I sometimes get an odd look from my clients when I suggest that they rebalance after a market run-up. “Why would I want to do that, the market is hot?” might be a typical comment. But that is exactly why rebalancing is so important. It removes the emotions, market noise, and other extraneous factors, and reminds the investor of their original financial plan and goals.

The best value-added proposition a financial advisor provides is to set the target allocation and then monitor and adjust it based on the client’s personal goals and life events. The asset allocation is set within the investment policy statement and the portfolio is rebalanced yearly, or as needed, after large market advances or declines. The asset allocation is revisited periodically, at least every 3 years, and is adjusted in response to a client’s retirement goals, change in health or marital status, or market valuations.

Rebalancing in this way, will not only help the client attain rates of return closer to the respective benchmarks for his or her portfolio, it can actually be a source of additional return. In a recent article in Financial Planning magazine, “Portfolio Rebalancing: Get It Right,” Allan Roth underscores the incremental benefit of rebalancing. His analysis shows that “over the past 15 years, the portfolio that stuck to its allocation earned 1.54 percentage points more each year than the average portfolio that tried to time asset classes.”

Rebalancing is just one area where advisors add incremental return and why it is essential for our clients to commit to the annual review and rebalance exercise. Emotions can be hard to control, let your re-balancing take them out of the mix, so you can maximize your long range returns.

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