The Costco Battle – Round 2

Welcome back to the Costco Boxing Ring!  This week, to counter the non-love of Rebecca Kennedy, we have Addie McHale, CFP ® to extoll the virtues of a Costco membership.

 

Kristi:  When did you get your first Costco membership?  Why?  How long did you have it?

 

Addie McHale: I have been going to Costco for probably 20 years, and I started out going to the Billings, Montana warehouse with a friend who had a membership when I lived in Montana. We would share things like produce.  This was my introduction to Costco.  At that time, I was actually running a natural food co-op group for about 20 families in my small town out of my garage!  I’ve always been a “healthy foodie,” and Costco helps me supplement my healthy grocery needs.  I usually go to Costco a couple of times each month.

 

KS: Can you quantify or just anecdotally say why you think a membership is a good/bad financial move?

 

 

AM: I am all about eating whole, unprocessed, organic food for health reasons, and as a side benefit eating this way generates very little packaging waste so it’s better environmentally too.  I am always surprised how much organic food Costco carries!  And since my particular store’s clientele gobbles up anything that is “organic,” they seem to stock more and more organic items.  I love the “vote with your dollars” aspect of Costco as they have such huge buying power.  My boyfriend recently pointed out to me that anything organic has a bright green price tag, so it’s really easy to pick out the organic produce that way. As well, they often carry bulk versions of local brands, and I think this really helps smaller companies get their product in front of a larger audience (a hummus made in Boulder comes to mind).

 

Kristi:  What do you love about your membership?  What do you hate about it?

 

AM: I love the demos!  I bought my amazing high-powered blender there that I have used over 2000 times in 3 years (with an extra year of warranty thanks to Costco).  Recently on a trip with my mom, we purchased a special foot massager that was being demoed and it has been absolutely life-changing for her.  It was $100 less than its normal price and it has eliminated my mom’s arthritic knee pain — she can walk much easier now.  And the samples — my mom is often not up for doing much anymore but she’s almost always up for a trip to Costco on sample day. And we sometimes meet interesting people at the Vita-mix demo.  Costco just makes shopping a little more enjoyable. Nobody gets excited to go to Safeway but people do actually get excited for a trip to Costco.

 

I like the no-frills, no advertising aspect too — it’s just very simply food in a warehouse. I value efficiency and Costco has this down — you can get in and out pretty quickly if you stay away from the busy times (I’ve found the best time to go is AFTER dinner an hour or less before they close).  They take care of their employees with decent pay and good benefits.  And I like that they re-use boxes to pack up your food so there are none of those terrible plastic bags that eventually end up in the ocean.  And where else can my boyfriend get tires put on his car while we are shopping?

 

One of my issues with Costco is that like anything, used the wrong way it can be detrimental.  I see a lot of junk in people’s carts when I’m there, and I agree with Becky in that there are certainly many temptations and ways to part with your money.  If you don’t have a plan going in, it is very easy to buy things you don’t need, and like any good marketer, they know all the tricks (we call the line up of the wares they are pawning when you first walk in “Costco porn”).  Including the samples.  But for me, I go in when I’m not hungry and with a list, and I don’t succumb to the temptations.  If you are someone that is not disciplined, Costco is probably not a safe place for you to shop.

 

I also don’t like how they sometimes stop carrying an item I have become hooked on.  This tends to make me stock up a little more sometimes due to fear of it not being there on my next trip.

KS: Can you quantify or just anecdotally say why you think a membership is a good/bad financial move?

 

AM: I’m pretty price conscious (thanks to my parents for having a strange love of grocery store price trolling it seems to be in my genes).  I definitely am saving money on the items I purchase at Costco.  What comes to mind is 4 pound bags of frozen organic fruit for $10 (very expensive in other stores) and actually all of their produce prices are significantly lower.  I discovered matcha, a Japanese green tea powder, at my local Costco last summer and it is now a morning ritual.  One bag for $35 makes at least 100 servings, if not more.  One hundred matchas at my local coffee shop would cost over $500!

 

I also pride myself on wasting very little food (again, genetics).  If I buy something that can’t be eaten before going bad, I freeze it, and split it up into smaller containers so it’s easy to just thaw what I need (diced green chiles and tomato sauce come to mind).

 

Before going into Costco, you definitely need a plan. If you can be disciplined and stick to a list and not shop when you’re hungry, you can get a lot of great healthy food and save a significant amount of money doing so. Bonus points: setting a dollar amount from which you allow yourself to stray, and/or putting the tempting item down and thinking it over at home. If at that point you really decide you need/want it, you can pick it up during your next Costco adventure.

 

Kristi:  Thanks, ladies, for your solid arguments on both sides!  As with any debate, there are pros and cons, but the one thing we can all agree on is DISCIPLINE makes all the difference.  This is true in our savings and spending habits, as the Costco debate shows so well.

 

addie mchale

Addie McHale is a Certified Financial Planner™ who believes that the best financial planning happens every month by the spending and saving decisions you make with your income, and she teaches her clients how to master their cash flow. After building thousands of financial plans for a Fortune 50 company, she founded her firm Moneyfull, and her philosophy and tagline — Plan a richer life™— means YOU define your life, your values, and your goals.  Aligning your money with what’s important to you = your richest life!  Addie lives and works in the Denver Highland neighborhood.  Visit her website, moneyfull.com.

Costco – Love it or hate it? Two financial advisors battle it out!

For your entertainment, I have brought into the fighting ring two financial advisors, Rebecca Kennedy and Addie McHale, to duke it out over whether a Costco membership is a good or bad financial move.  Hold onto your hats, readers!  This could get messy!

 

This week we hear from Costco Non-Believer, Rebecca Kennedy, CFP ®.

 

Kristi:  When did you get your first Costco membership?  Why?  How long did you have it?

 

Rebecca Kennedy:  My first membership was a wedding gift that we received almost exactly 10 years ago.  We had it for one year because that was the length of the membership.  We let it expire because we just didn’t go much. We tend to join every few years for one reason or other, mainly because our memories are short.

 

KS:  What did you love about your membership?  What did you hate about it?

 

RK:  Shopping at Costco is truly an experience.  It’s laid-out with fun, eye-catching products that are sure to enhance your life in some form or fashion – at least temporarily, like all things.   What I dislike about Costco, in addition to the crowds and how much time a shopping trip can take, is that it’s FAR too easy to walk out having spent hundreds of dollars on debatable “needs.”

 

KS: Can you quantify or just anecdotally say why you think a membership is a good/bad financial move?

 

RK:  I think membership is a bad financial move for most people, though I can’t unequivocally say it is for all.  I consider myself a fairly disciplined person, though definitely not as disciplined as Addie, and I have trouble making rational purchases at Costco.  Inevitably, I walk out having spent more than was ever intended and purchased things that were not on my shopping list.

 

Not everything sold at Costco is even that good a deal, especially when you factor in the time value of money spent upfront on an item that could take months to consume.  It’s even less of a good deal if some portion of your purchases aren’t fully consumed and eventually get thrown out or perish before their “use by” date.     Case in point, I still have four frozen veggie burgers in my freezer from the 16-count bulk pack purchased months ago.  They were a decent deal, and I thought they would make weeknight dinners easier.  But you know what?  I’m sick of veggie burgers.

 

And what about the value of your time making trips to multiple stores?  Costco doesn’t carry everything on my shopping list so that means at least one other trip. All of these things, in my opinion, argue against a Costco membership as a good financial move.

 

Rebecca Kennedy

 

Rebecca Kennedy, CFP ® is the Principal of Kennedy Financial Planning, a fee-only Registered Investment Advisor based in Denver, Colorado.  She does hourly and project-based financial planning and investment advising for a wide range of clients.  She is a member of the Garrett Planning Network, NAPFA, and the Colorado Financial Planning Association, and has over 19 years of experience in the financial services industry.  http://kennedyfinancialplanning.com/

 

College Merit Scholarships: What They Are and How to Get Them

merit scholarships, denver financial advisor

This week I am happy to offer an article by guest blogger Sara Zessar, an expert in the field of finding the college fit for students and money to help pay the tuition.  Read more about Sara at the end of this piece.

 

What is a merit scholarship?

 

In essence, it’s a scholarship that is awarded based on one or a number of factors, such as academic achievement (often as indicated by GPA and test scores), leadership, community service, extracurricular activities, and talents.  Merit scholarships are not based on athletics or financial need, which is why they may be a great option for students who don’t qualify for need-based aid.

 

Many colleges offer merit scholarships, ranging from a few thousand dollars a year to full tuition.  Just as the amounts of scholarships vary considerably, so do the qualifications and methods for applying.  As you are researching colleges, it’s important to find out what (if any) merit scholarships are available, what they’re based on, and how to apply or be considered for them.

 

Here are examples

 

The University of Colorado, Boulder awards scholarships to Colorado residents through its Esteemed Scholars Program.  Students are automatically considered for these scholarships when they apply for admission to the university.  The scholarships, which range from $2,500 to $5,000 per year, are based on students’ GPAs and SAT or ACT scores, so it’s easy to determine the amount of money you’ll be offered.

 

In contrast, the University of Southern California’s merit scholarships are “based on academic excellence, leadership, service and talent.”  USC uses a holistic review process to evaluate students for scholarships, so there’s no way of knowing if you’ll receive a scholarship or how much money it will be.  In order to be considered for merit scholarships at USC, students must apply to the university by December 1.

 

At Tulane University, students are automatically considered for partial-tuition merit scholarships.  The university also offers full-tuition merit scholarships, but these require a separate application, and some require students to apply for admission by the Early Action or Early Decision deadlines.

 

The Danforth Scholars Program at Washington University in St. Louis awards merit scholarships to students who have been nominated by their high schools.  Once students are nominated, they have to complete an application for the scholarship.

 

I use these examples to illustrate differences in the types of merit scholarships colleges offer and the processes by which they are awarded.  As you research colleges, be sure to investigate the requirements for applying for scholarships.  Do you need to apply by an earlier deadline to be considered for a scholarship?  Are you automatically considered when you apply for admission, or is there an additional essay you have to write or a separate application you have to fill out?  Do you have to be nominated, and if so, who can nominate you?

 

Getting answers to these questions can mean the difference between receiving thousands of dollars and not getting a dime, so make sure you take the time to do your research.

 

sara zessar, college

 

Sara Zessar, the founder of Discovery College Consulting, LLC, has assisted hundreds of students with the college search and admissions process. With an M.Ed. in counseling, Sara worked for six years as a high school counselor in private, public, and charter schools. Because of her counseling background, she is able to help students and families with the emotional aspects of the process in addition to the academic and procedural ones. She also assists students with the scholarship process, and Discovery College Consulting’s students have received up to $33,000/year in college merit scholarships.  To learn more, visit www.discoverycollegeconsulting.com.

WTF (What the Finance) is Life Expectancy?

life expectancy, denver financial planner

Life expectancy is a concept that seems basic but is not well understood.  If we all knew the exact date of our death, the whole financial advice industry could cease to exist.  After all, if you know exactly how many more days you need your money to last, all planning can be done with an abacus.

 

It’s the uncertainty of lifespans (and investment markets) that allow me to have a job.

 

What does “life expectancy” mean?

 

Technically, life expectancy is that age at which half of a population (generally defined by country) born in the same year are dead and half are still alive.  It’s not an accurate predictor of your age of death because it’s an average including children who died very young in freak ice fishing accidents or from small pox and those who died very old repeating the same story for the thousandth time to their great-grandkids.

 

Therefore, Life Expectancy is not a number that is very helpful in your spending plan during retirement.

 

What do financial planners worry about?

 

My colleagues and I worry about Longevity Risk. What is the risk that you will run out of money if you live to age 95 or 100?  Truly, the healthy retiree is a nightmare for a financial advisor.  We’d prefer you take up smoking and heavy drinking, so we don’t have to worry about stretching your asset pool for 40 years.

 

If you have some sort of medical condition that will likely shorten your life, tell your financial advisor so he or she can adjust those expectations.  You will be able to spend more money each year if you know your life expectancy is shorter.

 

Conversely, if you are a woman who is healthy and has a history of old women in the family, you may be more comfortable planning for your assets to last 40 years in retirement.  Yikes!  This means less spending now to support that nonagenarian of the future.  You may be a candidate for certain types of longevity annuities, long-term care insurance, or to take a lifetime pension instead of the lump sum option.

 

I hope this little statistics lesson hasn’t been too boring and gives you a peek behind the curtains of one of the many aspects of retirement income planning.

Top Summer Jobs for Teenagers

summer jobs, denver financial planner

I can’t believe it.  My niece, who was just an infant yesterday, is now lifeguarding at the neighborhood pool where I grew up!  The family is promising her lots of visits in our string bikinis to support her and she is thrilled at the prospect.

 

What else are kids doing for money this summer?  While many employers only want to hire year-round workers, there are plenty of seasonal opportunities out there.

Here are some ideas

 

  • Amusement Parks hire for ticket sellers, food prep, and ride monitors.
  • Summer Camps! A great way to play around for a job and not spend any money because you are too tired (or tucked away from civilization) to blow your paycheck at the mall.
  • Farms will hire younger folks for weeding, watering, and working local produce stands.
  • Sports venues need people to sell food, take tickets, answer questions, and clean up.
  • Jobs at resorts, such as housekeeping, gift shop clerk, bellman/woman, and kid camp helpers.
  • Start your own business mowing lawns, tutoring, washing cars, or babysitting.
  • Work for your town. Denver has a Summer Youth Employment Program (https://www.denvergov.org/content/denvergov/en/denver-office-of-economic-development/jobs-employers/for-youth.html) and a quick Google search will probably yield results in your town, too.
  • IT consultant. You know those annoying questions your parents are always asking about how to use their phones?  People without teenagers need help, too!  Make up some flyers and advertise around your neighborhood to offer phone and computer help to hapless middle-agers.

 

What to do with all that hard-earned cash?  Spend a little, save some for college, and ask your parents about helping you set up your first Roth IRA!

The Myth of Working Until You Die

working, denver financial planner

There is no doubt that I am getting crabby in my middle age, and one thing that gets my goat is when people tell me that saving is too hard, and they are just going to keep working until they die.  Physically, I am giving the speaker a bland smile and nodding, but inside I’m thinking, “You should be so lucky, pal!”

 

Let’s get real.

 

It’s true, people are staying in the workforce longer.  The U.S. Bureau of Labor Statistics reported in 2017 that 32% of people ages 65 to 69 were working, and 19% of people ages 70 to 74 were employed.  The projection for 2024 is that 36% of people ages 65 to 69 will be in the labor force, compared to 22% working in 1994.*

 

The reasons for this shift range are many:

 

  • Longer life expectancies
  • Better education leading to less physically laborious work
  • Not enough retirement savings
  • Just plain love of work

 

However, there are those who are forced to leave the workforce before they are ready.  Ageism is alive and well, and if you don’t believe me, read this article in Forbes detailing 11 sneaky ways companies get rid of older workers.

 

And then there’s the unexpected.

 

There is also the unexpected health change that can appear at anytime during our lives.  A 2014 Employee Benefit Research Institute survey found that 33% of workers expect to retire after age 65, but only 16% of retirees report staying on the job that long. The median retirement age in the survey was 62.  Forty nine percent of respondents said they left the workforce earlier than planned because of health reasons.

 

Why do I bother telling you all this sad news?

 

My takeaway, as usual, is that it’s never too early or never too late to start saving!  Your willingness to work until death may be there, but your body or boss may have other plans.  Reduce expenses and sock money away now.  Your older self will thank you!

 

 

*Source:  https://www.health.harvard.edu/staying-healthy/working-later-in-life-can-pay-off-in-more-than-just-income?utm_source=delivra&utm_medium=email&utm_campaign=GB20180606-LivingBetter&utm_id=936791&dlv-ga-memberid=11197042&mid=11197042&ml=936791

 

** https://money.usnews.com/money/retirement/articles/2014/05/12/the-ideal-retirement-age-and-why-you-wont-retire-then

WTF (What the Finance) is…Impact Investing?

impact investing, denver financial advisor

Impact investing has been around for a while.  The idea is to direct your money to causes that are important to you and away from companies with products you dislike.

 

In a December 2017 I gave examples of mutual funds and ETFs that focus on the environment, certain religious beliefs, and gender equality.  I also gave examples of the opposite of impact investing – ETFs and mutual funds that focus on guns, gambling, alcohol, and tobacco sales.  We like to be fair and balanced here at Sullivan Financial Planning.

 

Those December blogs may have been putting the cart before the horse. Here are some definitions of various kinds of impact investing.*

 

Socially Responsible Investing

Socially Responsible Investing (SRI) is the avoidance of harm in your investments.  Harm to whom?  The environment, employees, public health are some examples.

 

Impact Investing

Impact Investing is a subset of SRI, requires investors to consider a company’s commitment to corporate social responsibility (CSR), or the sense of duty to positively serve society as a whole.  Some examples include giving back to the community by helping the less fortunate or investing in sustainable energy practices.

Gender Lens Investing

Gender Lens Investing has investors concentrate on finding companies whose policies benefit women and girls. Often, there are scores given to companies based on hiring practices, promotions, and the executive presence of women in the organization.

 

In the old days when I first started in the investment business, Socially Responsible Investing was considered a nice concept, but one in which returns were compromised by the philosophy.  These days, SRI is gaining steam both from a philosophical standpoint and a good showing for risk and return.  The idea is that by doing good, these companies can be sustainable and profitable for the long haul.  For example, a company that isn’t polluting the oceans is less likely to face government fines or class action lawsuits.  Same for companies where the products don’t cause cancer or other public health problems.

 

There are more options than ever in the realm of Socially Responsible Investing.  However, it may be tough to create a complete diversified portfolio using only these funds.  Small and Mid-Cap funds, bond funds, and international funds are not too plentiful yet.  Stay tuned, though.  There is bound to be growth in this area.

 

*Source:  https://www.investopedia.com/terms/i/impact-investing.asp

Divorcing? Run away from home!

divorcing, denver financial advisor

Frequently when I’m talking to a new client, he or she will start of by saying “I’m sorry, I don’t have more saved.  Or, “I’m sorry, I made these mistakes in the past.”  Believe me, we all, even financial planners, have made money moves we regret.

 

One that came up recently in a phone consultation was a woman who had to file for bankruptcy because she kept her family home after her divorce.  She was beating herself up for that decision, but I have seen it so often.

 

So, for those of you contemplating divorce, and this goes for men and women equally, let me just lay it out there:  DON”T fight to keep the marital home.

 

Top five reasons

 

  1. It’s possible you barely could afford the mortgage and upkeep together. You certainly won’t be able to living off one income.

 

  1. The upkeep is a pain as a single person. You don’t have a spouse to stay home from work or help coordinate plumber visits.  Unexpected repairs could derail your fragile new single-person budget.

 

  1. Bad memories – this is the scene of your marriage ending.  Move on to a fresh environment while you heal from this trauma.

 

  1. You are staying put to not disrupt the kids or force them to move into a smaller house. Guess what?  The kids are disrupted already.  Just get them used to the new situation, housing and all, at one time.  They kids will recover, and you won’t be broke.

 

  1. The better asset to get in divorce is something liquid and that doesn’t have a huge mortgage on it. Think IRAs, investment accounts, pensions, etc.

 

Renting for the first year after divorce is a good idea.  It lets you get your feet under you financially without the pressure of financing a new mortgage and home repairs/improvements.

 

The lesson here – if you are getting divorced, run away from the home!

I LOVE a good yard sale!

yard sale, denver financial planner

I hate clutter.  And most anything that doesn’t have immediate use to me is clutter.  My mom once said about me, “Don’t stand still in Kristi’s house for more than two minutes or she’ll donate you to Goodwill.”  Some people might be insulted by that statement, but it made me proud.

 

Now it’s summer and time for my favorite activity: A yard sale!  Getting rid of stuff makes me feel like I’ve lost weight.  So light and happy!

 

Once I’ve decided to do a yard sale, I start looking at everything in my house with a critical eye.  WHY do I have two manual potato smashers?  Really, why do I even have one?  There has got to be a point were my kids have too many Legos.  That point is now.  Is anyone going to read those two 500-page volumes of Henry Kissinger’s autobiography?  Doubtful.  What about those margarita glasses that have the cactus shaped stems?  Haven’t been used in 12 years?  Gone!

 

Here are my top five reasons for giving a yard sale:

 

  1. You can get rid of big stuff and not have to worry about how to transport it to Goodwill. People bring their own trucks!

 

  1. A yard sale is a fun social event where you make money. You get to meet new neighbors and chat with old ones.

 

  1. It’s a great way to get your kids involved. They can see the value of used goods, work on their sales skills, do some manual labor by helping set up, and make a little cash.

 

  1. You just can’t believe the stuff people will buy from you. When in doubt, put it out there with a $.25 sticker on it.

 

  1. Christmas in summer. Meaning, you can get rid of all those Christmas decorations that never get displayed and use the cash to go buy yourself some presents.

 

Happy selling, everyone!

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