Articles by Miranda Marquit

Are You Letting Your Kids Ruin Your Retirement?

Most of us like to help others — especially if those others are our children. I know that I like to help my son. I like going places that I think he'd enjoy, and my husband thinks it's fun to shop for his Christmas presents, keeping an eye out for things he'd like. And, of course, if my son were in trouble, I'd want to help him out. But what can be really difficult is to figure out where the line is when it comes to helping or enabling. You also have to know when to say no when your own financial future is at stake.

Are You Putting Your Own Finances at Risk?

In many cases, helping your kids out occasionally with their finances won't bankrupt you, or even put your retirement at risk. Unfortunately, though, a pattern of poor financial decisions from your children can result in a situation that eventually puts your finances at risk. Even some items of financial responsibility, such as paying for college, can leave your retirement plans in ruins.

Don't Let Kids Ruin Your Retirement

It's popular to say that there are loans for college, but there aren't loans for retirement. And, in truth, there are other loans available for your children to use if they are in a tight spot and you can't help without putting your retirement at risk. And they'll have more time to repay those loans — as opposed to the situation you might find yourself in if your money is no longer working on your behalf.

Retaining financial responsibility for your grown and capable children can quickly become a double-edged sword. Your nest egg dwindles, while your children continue to think that they can make poor financial decisions while you take on all the risk. You don't want your declining years marred by inadequate funds because you have spent them all on trying to get your kids back on track. And, if your kids haven't learned anything because you've bailed them out time and again, they won't even be in a position to take care of you financially in order to repay your own efforts.

Teach Financial Skills While They're Young

One of the best remedies to the problem of having your retirement ruined by your children's financial behaviors is one of prevention. Teach good financial habits in the beginning. Encourage financial literacy early on, and focus on helping them learn to take responsibility for their own money.

Set boundaries from the beginning, making it clear what you will help them with — and the conditions for doing so. My mother has always had this rule: If you plan to live at home after you're 18, you'd better have a job, or getting an education that will help you acquire a marketable skill. She also expects anyone living with her to spend their money on paying down debt, and saving up for the future. And you'd better be ready to help out around the house.

Consider what you expect your children to do with money, and then convey those expectations to them. Teach them to manage their money wisely, and there will be a smaller likelihood that they will come looking for your nest egg.

Would You Rather Live A Little More Now? Or Have A Pile Of Cash Later?

By Miranda Marquit 4 Comments

One of the more common financial moves is to save up as much money as possible, hoping to have a huge nest egg later so that it's possible to retire from work, and maybe even travel the world. Others hope that, not only can they have a little fun with the money they amass, but that they can also leave some behind for their posterity.

These are definitely admirable goals. Being able to save up money, and creating a situation in which you can leave a financial legacy to your children and grandchildren, are both things that can provide you with a sense of accomplishment — as well as acting as a testament to your level of financial responsibility. But does it have to be that way? Do you have to sacrifice everything right now so that you can save up for the future?

Live More Now Or More Cash Later

For some people, it is preferable to live a little more now, enjoying money while they are young, than to be scrimping and saving for a future they're not even sure they'll enjoy.

Mini-Retirements, Vacations, And Staycations

Instead of saving up all of your money for “someday,” you can spend some of your money now. One of the ideas that has caught on recently is that of the mini-retirement. Instead of saving up for 40 years to try and enjoy retirement later, some advocate mini-retirements. You spend between three and six months living somewhere else, or traveling around. When you return, you look for a new job.

Others make it a point to use their vacation time at work. It's possible to enjoy a vacation for one to three weeks, relaxing and taking it easy. And, many people like to spend a little extra to make the vacation particularly enjoyable or memorable. Some even decide to go on staycations, remaining within a local area, and living it up by going to restaurants and other establishments.

Spending money like this provides you with the opportunity to enjoy yourself in doses at a time, spread out over the years, while your health practically guarantees that you are able to do more. Personally, this is how I prefer to operate. I like to go on a few trips, and I like to go out to eat in nice restaurants, as well as use my money for other things. I figure we might as well enjoy the journey.

Don't Neglect The Future

Even if you decide to spend a little more money now so that you can better enjoy it, you still shouldn't neglect the future. Use tax-advantaged retirement plans that allow you save up some money for your future. Get the right insurance plans to help you prepare as well. We don't plan to need a huge nest egg, but we know that we'll need something.

Another strategy is to cultivate different income streams so that when retirement comes, you have regular income, and you don't have to rely on your nest egg alone. Being able to consult or freelance, or having a dividend portfolio, can help you earn money in retirement, and means that you aren't required to always be maxing out your retirement plans right now at the expense of living a little.

Are Your Finances Over-Leveraged?

By Miranda Marquit 2 Comments

One of the realities of the financial world is that it's possible to use leverage to get more than what you would normally be able to afford. In simple terms, leverage is using debt to buy what you want. You leverage the capital you have right now as a down payment to allow you to borrow the rest.

For the most part, leverage is used to describe how you can increase the return on your investment by putting in a little capital and then borrowing the rest. The hope is that the return will be great enough to offset the cost of borrowing. When you are talking about your household finances, this return on investment is often about more than just the money. It often includes the emotional or sentimental value you get out of something, as well as the satisfaction that comes from instant gratification.

I recently bought a new car. I put a down payment on it, and financed the rest. I leveraged what I had in hand in order to borrow to get a more expensive car than I could buy right now with cash. I decided that getting the exact car I wanted, as well as getting it now (with dealer incentives so good and prices so low) instead of waiting another two years, was worth the cost of the interest I will be paying. I don't sell my cars; the car this is replacing was one we had for nearly 10 years before sending it to my in-laws. To me, the return on investment is worth it, even though I probably won't sell the car for money.

Consumer Leverage, and Drowning in Debt

The concept of leverage applies to a number of consumer purchases right now. When you use your credit card to buy things you don't have the money for, you are using leverage. On a larger scale, you use leverage when you get a mortgage payment. Many people use leverage to purchase an even bigger home than they expected. No matter the asset — or the liability — it's important to consider how leveraged you are. And whether or not you might actually be over-leveraged.

When you are over-leveraged, it means that you have borrowed beyond the point of your ability to repay the debt. In this situation, you aren't receiving enough of a return to justify how much you have borrowed, and how much you still owe. Pretty soon, your payments and interest begin eating up your available income. We sometimes refer to this as drowning in debt. You can't meet your obligations, and even the emotional returns you might have received from your overspending are fading. This becomes a serious problem, and it can lead to financial collapse.

Take a look at your financial situation, and consider your debt levels. Are you over-leveraged? Have you borrowed beyond the point that it makes sense? Will you be able to repay the loan — and still feel as though you have received a good ROI? You might be over-leveraged, and if this is the case, it's time to get serious about paying down your debts, and reconsider the ways you use debt to get what you want.

Home Business And Taxes: Doubling Up On Tax Day

By Miranda Marquit 1 Comment

When Tax Day rolls around, those who owe taxes are often a little disgruntled. But, if you have a home business, you need to be extra careful if you owe. Don't forget that you actually have two tax payments to make: What you owe from underpaying the year before, and your first quarterly estimated tax payment for the current year.

Quarterly Estimated Taxes

When you have side income, you might need to pay estimated quarterly taxes. If you are making regular income throughout the year, and not having it withheld by an employer, the IRS expects you to pay quarterly. A traditional employer pays taxes quarterly — including the amount of money withheld from your paycheck for the purpose. And if you are making income on the side, you are expected to pay quarterly as well.

Over the course of the year, this can be a helpful state of affairs. You make your quarterly payments, and you don't have to worry about coming up with the money to pay a huge bill on Tax Day. At least that's the theory. You still need to plan carefully, though, or else when Tax Day rolls around you could find yourself in trouble.

Two Tax Bills Due on Tax Day

When I first started with my home business, I got on track with quarterly tax payments, and began making them faithfully. However, as my income grew, it was plain that the quarterly tax payments weren't enough to cover my total tax bill. I usually owed a couple thousand more at the end of the year. That didn't seem too bad — provided I was prepared for it.

However, one thing I didn't prepare for was the fact that the quarterly estimated payment for the first quarter of the current year is due on Tax Day. So, instead of making one tax payment, I actually needed to make two tax payments. And that didn't even count the bill owed for my state taxes.

One year, I discovered that, with what I owed the IRS from the previous year, plus the quarterly tax payment, plus state taxes, I had almost $8,000 due on Tax Day! While I was prepared to pay some of it, I had been so focused on paying what I owed at the end of the year that I forgot about my new quarterly estimated tax payment. The result, unfortunately, was raiding the emergency fund as a way to help pay what was owed.

It's true that many of us would rather owe the government, rather than get our own money back, without earning interest, through a tax rebate. However, there does need to be a level of preparation. And, if you are making quarterly estimated tax payments, it's important to consider that they may not be enough to cover what you owe throughout the year — especially if your income is growing. On top of that, remember that your first quarterly payment will be due the same day as your previous year's tax bill. Plan ahead for that reality, or you could find yourself stuck.

How Would You Handle A Financial Setback?

By Miranda Marquit 4 Comments

Chances are that at some point in your life you will experience some type of financial setback. Indeed, emergencies are part of life. Businesses fail. Medical bills need to be paid. The house floods.

When you experience a financial setback, it can be difficult to get back into the swing of things. However, it's important that you do what you can to get back on top of your financial situation.

Deep Breath: What are Your Options?

Before you do anything, stop, take a deep breath, and evaluate your options. When you are in the moment, it is easy to panic and start making impulsive decisions about money. Before you make decisions, take some time to figure out what your options are.

Can you arrange a payment plan? Does it have a reasonable interest rate?
Is it possible to raise money another way, perhaps through selling some of your items or starting a side hustle?
Have you prioritized your bills? If you have to let some slide, which ones will have the least impact on your situation?
Are there community services, charities, or religious organizations that can provide you with help? Food pantries, or special heating programs, and other services can help you weather a storm.
Would downsizing help? What services can you do without (cable, subscriptions, gym memberships, etc.)? Does it make sense to move into a smaller place?
Can your extended family help?
What is your last resort? If things are truly bad, you may need to resort to letting your home be foreclosed on, or trying to navigate your problems through bankruptcy.

In many cases, a combination of help and payment plans can help you get back on track. However, you need to make decisions after some thought. Most of the time, you can wait two or three days — or even longer — after a catastrophe or setback before you have to make a decision. Take your time and make a plan.

Preparation: The Best Way to Handle a Setback

Of course, there is no substitute for preparation. Careful preparation can reduce your exposure to the risk of a financial setback, although it might not completely protect you from all problems. There are three main things you can do to help your prepare your finances for a setback:

Live below your means: One of the best things you can do is live below your means. This means that you take in more money each month than you spend. It's not just about budgeting so that you spend all your money. It's about making sure you have extra money, and that you aren't living up to your income. You want to have room to cut things out, if possible. Plus, if you are used to living less lavishly than you could, it's easier to cut out unnecessary spending.
Purchase adequate insurance coverage: Adequate insurance coverage can help protect you from some costs. Auto, home, and health insurance policies can all reduce the amount of money that you pay out of pocket in a financial setback. Protect your assets, and you will be better prepared.
Build your emergency fund: We all hear about how we should have an emergency fund — and it is important. Build up your emergency fund so that you can pay deductibles, pay bills, and take care of other financial problems during a setback.

What would you do in in a financial emergency?

Do You Really Need Coupons To Be Frugal?

By Miranda Marquit 7 Comments

One of the popular ways that many frugal people save money is with the use of coupons. I, however, could never get into penny pinching or clipping coupons. I've tried, at different points in my life to use coupons, but I'm not a coupon maven, and I wasn't willing to put in the time or effort. But I'm not sure that you even need coupons to be frugal. In my mind, frugality isn't just about completing a laundry list of items like clipping coupons, and buying the cheapest thing you can find.

Frugal is more of a state of mind — and a lifestyle.

coupons and frugality

Best Value For The Money

To me, one of the essentials of frugal living is getting good value. A frugal lifestyle doesn't have to be about getting the cheapest thing imaginable (and using coupons to do it). Instead, it's more about getting the best value. Sometimes, the best value isn't the cheapest thing out there. My favorite example is shoes. I buy high quality shoes that cost more — but they last longer. Instead of replacing shoes every six to eight months, I can keep them for years. I still have the hiking boots I bought 10 years ago. They've held up much better than the cheap pair I bought less than a year before I spent the money for a better product.

Whether it's food, clothing, tools, or other items, sometimes the cheapest thing you can get is not the best value for the long term. It is worth it to carefully evaluate what your buying. In some cases, the truly frugal choice is to buy the higher quality item without the coupon. Saving $2 now isn't going to be a big deal if you have to spend another $15 in a few months to replace a low quality item.

Do You Even Need (Or Want) That?

The savviest couponers, I know, only clip coupons for what they need/really want. However, there are many more who are convinced that they are being frugal because they bought something with a coupon — even though they had no intention of buying that item in the first place. Using a coupon to buy something you don't want or need isn't true frugality. Instead, you are still spending money, no matter how much you think you are “saving” with the coupon.

A problem with using extreme couponing to stockpile food is that it can go bad before you use it. If you have to throw away items in your stockpile, what's the point? Another problem is that many of the foods you can buy with coupons are pre-packaged and outright junk food items. This isn't healthy, and can cost you more in the long run as health care costs go up. Pay attention to the types of things that coupons encourage you to buy, and be wary of them.

In the end, coupons work well for some people. They enjoy the challenge, and don't mind spending the time. However, I would rather use the time to make more money, and not worry so much about saving a few dollars at the store.

What do you think? Can you still be frugal even if you don't use coupons?

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