MONEY Out of the Red

How I Paid Off $158,169 in Debt

G. McDowell Photography

Think there's no way to get out from under your obligations? This first in a series of profiles of people getting "Out of the Red" proves that it's possible.

Rachel Gause just wanted to give her three kids more than she had growing up. So, though she was receiving a secure income along with child support, she found herself living beyond her means every month—eventually racking up six figures in debt. With a whole lot of determination and almost a decade’s worth of belt-tightening, she’s climbed most of the way out. This is her story, as told to MONEY reporter Kara Brandeisky.

Rachel Gause
Jacksonville, N.C.
Occupation: Master Sergeant, United States Marine Corps
Initial debt: $179,625
Amount left: $21,456
When she started paying it down: 2006
When she hopes to be debt-free: November 2015

How I got into trouble

“I was just trying to keep up with everybody else. I’m a single parent to three kids, ages 10, 14, and 16. I was always spending extra on Christmas and on birthdays. Also, growing up, I didn’t have new clothes and new shoes at the start of every school year. But I wanted to make sure my kids always did.

Looking back, I wish I would have known not to rely on credit cards. I wish I would have known that it’s okay to keep your car for four or more years, as long as you maintain it.

I started going into debt when my first daughter was born, 16 years ago. I remember I had to get a furniture loan. By 2006, I had $55,848 in credit card debt and $76,711 in car loans. Then there were the personal loans. I had a consolidation loan that I used to pay off my credit cards. Altogether, it came out to $179,625.”

My “uh-oh” moment

“I wasn’t aware of how much debt I was in. The turning point for me was when I hit the 10-year point in the Marines, and I saw other people around me retiring. I wanted to sit down and see where I was at. And that’s when I realized I didn’t want to retire in debt. I didn’t want to be that person.

At the time, I had a Toyota Sequoia, and I couldn’t make payments on it. I knew I was in way over my head.

Even though I had three kids, we didn’t need that big truck. It was going to put my family at a financial challenge. So I spoke to a lady at my church, and I said, ‘I have this truck, and I’m going to trade it in for something smaller.’ And she said, ‘I always wanted a Toyota Sequoia.’ I sold it to her and got into a Corolla instead.

I realized buying that truck was a bad choice, and I knew I needed to develop better habits from there. That was my first step forward.

How I’m getting out from under

Now I put roughly $2,100 a month toward my debt.

For the rest of my income, I use the envelope system. Before I get paid, I do my budget. Then I have 13 envelopes—one for groceries, one for clothes and shoes, one for charity, one for dining out, one for gas, and so on. I go to the bank, take the money out, and divide it between the envelopes.

I don’t spend anything that doesn’t come out of those envelopes. Debit cards are nice, but swiping is less emotional. Cash makes me more aware of what I’m spending my money on. If I run out of money for something that month, I don’t buy it. But I’ve never run out of money for something important—now I’m more aware of how much I’m spending.

That’s because I also got a small composition book from Dollar General to track my spending. Every time I spend money, I write it in that book. Then I compare that to what I’m supposed to be spending, according to my budget.

I also do a quarterly audit on myself to make sure I’m not spending too much more on my cable or cell phone bills.

But it’s not all deprivation. We have a chart that we color in every time we reach a milestone, and we treat ourselves to something nice. For example, recently I went on a trip with my high school classmates to Atlanta—funded totally in cash.

My kids have been understanding about our debt-free journey. They know that mommy has made some bad financial decisions in the past. Now I teach them about needs and wants.

The other day, I was coming home from work, and I said, “Do you need anything from the store?” My son said, “We don’t need anything, but we’d like some candy.”

If they want a video game, they know they need to save their money to get that video game—and that means there’s something else they won’t be able to get. They understand if you have a big house, that means you have to pay big electricity and water bills. I’m teaching them to live within their means and not just get, get, get to try to impress people.

What I’ve learned that could help someone else

My advice would be to sit down, see where you’re at—first, you have to know how much debt you’re in—and then create a spending plan. (Some people are scared of the word “budget.”) You have to tell your money where to go, or it’s going to tell you where to go.

The numbers may scare you in the beginning. It takes two or three months before you can get the budget right.

And you have to be consistent. If you don’t put 100% into it, it’s not going to work. You can’t be half, ‘I’m trying to get out of debt,’ and half, ‘I still want to spend money.’ You have to sacrifice.

My hopes for the future

Once I become debt-free, I plan to build up my emergency fund and then start actively investing and saving for retirement.

Then I hope to get my kids off to a better start.

My daughter will go to college soon. We’ve talked about student loans.

The main reason I joined the military was to obtain my college degree for free. I earned my degree in business administration from the University of North Carolina-Wilmington last year. But while I was there, I saw so many kids taking courses for a second and third time because they were failing and they weren’t going to class.

So I told my daughter, you’ll pay for that first year, and we’ll see how you manage. Then I’ll assist you with your second, third and fourth years. But first, I need to make sure you’re dedicated.

After I retire from the military, I want to become a certified financial counselor so I can help people break the vicious cycle of being in debt and dying in debt. My passion is to put together financial classes for non-profit organizations like women’s shelters, churches, and organizations for military service members. There aren’t that many in this area, and I see a real need. I see so many people struggling to survive, living paycheck to paycheck.

I’ve already started counseling some people who ask for help.

Every now and then, I get a message on Facebook from someone I helped that says, ‘I just paid off another credit card’ or ‘I paid off my car.’ That’s my motivation now. I don’t want to stop – the need is out there.

Are you climbing out of debt? Share your story of getting Out of the Red.

Check out Money 101 for more resources:

MONEY Love + Money

5 Super Easy Online Tools that Can Help Couples Feel More Financially Secure

hearts made out of money
iStock

Can't seem to get on the same page with your partner when it comes to money? Help has arrived.

In order to achieve common goals, getting on the same financial page with your romantic partner is critical—but it’s also challenging.

As our own MONEY survey recently revealed, a majority of married couples (70%) argue about money. Financial spats are, in fact, more frequent than disagreements over chores, sex and what’s for dinner.

The Internet can offer some strategic intervention. From budgeting to paying off debt, saving to credit awareness, these five online financial tools can help everyone—and, in particular, couples—get a better handle on their money.

The best part: They’re free.

1. For help reaching a goal: SmartyPig

SmartyPig is an FDIC-insured online savings account that—besides paying a top-of-the-heap 1% interest rate—is designed to help consumers systematically save up for specific purchases using categorized accounts like “college savings,” “summer vacation” or “new car.” Couples can link their existing bank accounts to one shared SmartyPig account and open up as many goal-oriented funds as they desire. You see exactly where you stand in terms of reaching your goals, which can motivate you to keep saving.

Additionally, SmartyPig has a social sharing tool that lets customers invite friends and family to contribute to their savings missions. Don’t want people to bring gifts to your child’s next birthday? In lieu of toys, you can suggest a ‘contribution’ to his SmartyPig music-lessons fund and provide the link to where they can transfer money.

2. For help boosting your credit scores: Credit.com

If you and your partner need to improve one—or both—of your credit scores and seek clarity on how, Credit.com can help. The Web site offers a free credit report card that assigns letter grades to each of the main factors that make up your score: payment history, debt usage, credit age, account mix and credit inquiries.

A side-by-side comparison of each person’s credit report card can—even if the scores are roughly the same—actually reveal that one spouse scored, say, a D for account inquiries, while the other has a C- under debt usage. From there you can tell what, specifically, each person needs to improve upon. “It may lead to some friendly competition,” says Gerri Detweiler, Director of Consumer Education at Credit.com.

3. For help tracking your expenses: Level Money

Called the “Mint for Millennials,” Level Money is a cash-flow-management mobile app that automatically updates your credit, debt and banking transactions and gives a simple, real-time overview of your finances. It includes a “money meter” that shows how much you have left to spend for the remainder of the day, week and month.

A spokesperson tells me that couples with completely combined finances can share a Level Money account and see all bank and credit card accounts in one place. They can get insight into when either partner spends money and how that affects cash flow. The company says it’s continuing to build out tools for couples.

4. For help eliminating debt: ReadyForZero

If you and your partner need some nudging to get out of credit card debt once and for all, ReadyForZero may be of service. Launched three years ago, it’s an online financial tool that aims to help people pay off debt faster and protect their credit. The free membership gets you a personalized debt-reduction plan with suggested payments. The site tracks your progress so you can see how well—or how poorly—you’re doing and regularly posts “success stories” on its site to motivate users. You also get access to the ReadyForZero mobile app which sends you push notifications suggesting an extra payment towards your balance if you just placed a larger than normal deposit in savings or checking.

For couples, the tool can help one or both partners to stop living in denial and to come to terms with their financial obligations. Says CEO Rod Ebrahimi, “it demystifies the debt.”

5. For help syncing up generally: Cozi

When I asked attendees at the annual Financial Bloggers Conference last month about what sites, apps and online tools they like to use to keep their finances in check in their relationships, a few pointed to the website and app Cozi. It’s not a financial tool per se, but Cozi helps households stay organized, informed and in sync with master calendars and household to-do’s like food and meal planning, shopping and appointments.

Want to schedule a meeting to talk about holiday gifting and how much to spend? Put in in Cozi. Want to plan meals for the week so you’ll know exactly what to buy at the market and not be tempted to order in? Tap Cozi to make a list.

Ashley Barnett who runs the blog MoneyTalksCoaching.com says she and her husband have been using Cozi for years. “My favorite part is that the calendar syncs across all devices, so when I enter an event into the calendar, my husband will also have it on his,” she says. Cozi’s actually gone so far as helping the couple minimize childcare costs. “Before Cozi, if I accidentally booked a meeting on a night my husband was working late, I had to either pay a sitter or reschedule the client, which is unprofessional and hurts my business,” says Barnett. “Now when I pull up my calendar I see his work schedule as well. No more surprise sitters needed!”

[Editor's Note: Cozi was recently acquired by Time Inc., the company that owns MONEY and TIME.]

Farnoosh Torabi is a contributing editor at Money Magazine and the author of the new book When She Makes More: 10 Rules for Breadwinning Women. She blogs at www.farnoosh.tv

MONEY Financial Planning

A Simple Tool for Getting Better Financial Advice

financial advisor with couple
Ned Frisk—Getty Images

If a financial adviser doesn't know what's going on in a client's life, the advice will suffer. Here's one easy way to fix that.

True story: Many years ago, I was meeting with a married couple for an initial data-gathering session. Halfway through the three-hour meeting — the first stage in developing a comprehensive financial plan — the husband excused himself for a bathroom break. As soon as the door shut, the wife turned to me and said, “I guess this is as good a time as any to let you know that I’m about to divorce him.”

That’s just one example of why exploring a client’s financial interior is a worthwhile investment for both the adviser and client. All the effort we had expended on their financial plan, for which they were paying me, was for naught.

So how can an adviser really understand what’s going on with his or her clients?

A great first step is to fully explore the simple question “How are you doing?” Not “How are your investments doing?” or “How is your business doing?” but “How are you doing?”

As financial planners, we are quick to put on our analytical hats. We will gladly examine numbers down to three decimal places, but we often fail to delve below the superficial on a relational level.

Here’s a tool that can help. I include it with permission from Money Quotient, a nonprofit that creates tools and techniques to aid financial advisers in exploring the interior elements of client interaction. It’s called the “Wheel of Life”:

Wheel of Life

The instructions are simple: you rate your satisfaction with each of the nine regions of life listed on the wheel. Your level of satisfaction can range from zero to 10—10 being the highest. Plot a dot corresponding to your rating along each spoke of the wheel. Then you connect the dots, unveiling a wheel that may — or may not — roll very well.

If you’re wondering what value this could bring to your client interaction, consider these five possibilities:

  • It’s an incredibly efficient way to effectively answer the question, “How are you doing?” In a matter of seconds, you know exactly where your client stands. You now have an opportunity to congratulate them in their successes and encourage them in their struggles.
  • It demonstrates that you care about more than just your client’s money. It shows that your cordial greeting was something more than just obligatory. It shows that you recognize the inherently comprehensive nature of financial planning.
  • It helps in gauging how much value you can add to a client’s overall situation. For example, if this is a new client, and all the numbers are nines and tens except for a two on the “Finances” spoke, then it stands to reason that good financial planning could have a powerfully positive impact on the client’s life. If, on the other hand, a prospective client’s wheel is cratering, you might conclude that his or her problems lie beyond the scope of your process. Your efforts may be in vain, and a referral to an external source may be in order.
  • It could tip you off to a major event in a client’s life that should trump your agenda for the day. Many advisers use this exercise as a personal checkup at annual client meetings, sending clients the “Wheel of Life” in advance. Doing so encourages clients to share if they have suffered one of life’s deeper pains, like the loss of a loved one. That’s likely your cue to recognize that now isn’t a time to talk about asset allocation. It’s simply time to be a friend and, as appropriate, address any inherent financial planning implications.
  • You’ll likely find it a beneficial practice for you, too! I don’t recommend putting a client through any introspective exercises that you haven’t completed yourself. So please, complete your own “Wheel of Life” exercise. You’re likely to see this tool in a new light and find valuable uses for it that I’ve not uncovered here.

———-

Financial planner, speaker, and author Tim Maurer, is a wealth adviser at Buckingham Asset Management and the director of personal finance for the BAM Alliance. A certified financial planner practitioner working with individuals, families and organizations, he also educates at private events and via TV, radio, print, and online media. “Personal finance is more personal than it is finance” is the central theme that drives his writing and speaking.

MONEY Kids and Money

You Can Teach a Two-Year-Old How to Save

child's hand with ticket stubs
Frederick Bass—Getty Images/fStop

Worried about your children's retirement? With the help of a few carnival tickets, says one financial adviser, you can get them started early on saving.

A new type of retirement worry has recently surfaced among my clients. These investors are concerned not just about their own retirement, but about their children’s and even grandchildren’s retirement as well.

Much of our children’s education is spent preparing them for their careers. But in elementary school through college, there is little discussion about what life is like after your career is over. Little or no time is spent educating children about the importance of saving — much less saving for their golden years.

When it gets down to the nitty-gritty, parents want to know two things: One, at what age should they start teaching their children about saving? And two, what tactics or strategies should they use to help their children understand the importance of saving?

While parenting advice can be a very sensitive subject, discussing these questions has always worked out well for my clients and me. I keep the conversation focused around concerns they have brought up. In a world where student debt is inevitable and other bills such as car loans and mortgage payments add up quickly, parents are concerned for their child’s financial future. We now live in a debt-ridden, instant-gratification society, so how can our children live their lives while still saving for the future?

Here is what I tell my clients:

You can start teaching children the value of saving as early as two years old. At this age, most children don’t necessarily grasp the concept of money, so instead I recommend the use of “tickets” or something similar — maybe a carnival raffle ticket. As a child completes chores or extra tasks, he or she receives a ticket as a reward. The child saves these tickets and can later cash them in at the “family store.” This is where parents can really get creative: The family store consists of prepurchased items like toys or treats, and each item is assigned a ticket value. The child must exchange his or her hard-earned tickets to make a purchase.

I’ve seen first hand, and been told by others, that the tickets end up burning a hole in children’s pockets. They want immediate gratification, so they cash their tickets in for smaller, less expensive prizes. This is where parents can begin to really educate kids. Through positive reinforcement, they can encourage their children to save their tickets in order to purchase the prize they are really hoping for.

Eventually, saving becomes part of the routine. As children receive tickets, they stash them away for the future with the intentions of buying the doll, bike, video game or whatever their favorite prize may be.

As the child gets older, parents can transition to actual money using quarters or dollars. Now the lesson has become real. Parents can also implement a saving rule, encouraging the child that 50% of the earnings must go straight to the piggy bank. By age five, most children can grasp the concept of money and can begin going to an actual toy store to pick out their prizes. By starting out with tickets, parents are able to educate children about the power of saving at a younger age. By switching over to real money, children can then begin to learn the importance of saving cash for day-to-day items while still setting aside some money for later.

While this tactic may seem like it’s just fun and games, I have received feedback from several clients and family friends that it does in fact instill fiscal responsibility at a young age. Most importantly, I have seen it work first hand. My wife and I used this system with our five-year-old daughter. She was like most children in the beginning and wanted to spend, spend, and spend. Now, it is rare that she even looks at her savings in her piggy bank. She has graduated to real money and seems to really value its worth. She identifies what she wants to buy and sets a goal to set enough money aside for it. Before purchasing, she often spends time pondering if she actually wants to spend her hard earned money, or if she wants to continue saving it. In less than a year, she developed a true grasp on what it means to save and why it is important.

By implementing this strategy, financial milestones like buying their first car, paying for college, or purchasing their first home could potentially be a lot easier for both your clients and their their children. And the kids will learn the value of saving for their retirement, too.

———–

Sean P. Lee, founder and president of SPL Financial, specializes in financial planning and assisting individuals with creating retirement income plans. Lee has helped Salt Lake City residents for the past decade with financial strategies involving investments, taxes, life insurance, estate planning, and more. Lee is an investment advisor representative with Global Financial Private Capital and is also a licensed life and health insurance professional.

MONEY Financial Planning

POLL: Are You Better Off Now Financially Than You Were Last Year?

When it comes to your money, is 2014 shaping up to be a banner year—or one you'd rather forget?

MONEY retirement planning

Why Americans Can’t Answer the Most Basic Retirement Question

141014_RET_FEARRETIREPLAN
marvinh—Getty Images/Vetta

Workers are confused by the unknowns of retirement planning. No wonder so few are trying to do it.

Planning for retirement is the most difficult part of managing your money—and it’s getting tougher, new research shows. The findings come even as rising markets have buoyed retirement savings accounts, and vast resources have been poured into things like financial education and simplified investment choices meant to ease the planning process.

Some 64% of households at least five years from retirement are having difficulty with retirement planning, according to a study from Hearts and Wallets, a financial research firm. That’s up from 54% of households two years ago and 50% in 2010. Americans rate retirement planning as the most difficult of 24 financial tasks presented in the study.

How can this be? Jobs and wages have been slowly improving. Stocks have doubled from their lows, even after the recent market tumble. The housing market is rebounding. Online tools and instruction through 401(k) plans have greatly improved. We have one-decision target-date mutual funds that make asset allocation a breeze. Yet retirement planning is perceived as more difficult.

The explanation lies at least partly in an increasingly evident quandary: few of us know exactly when we will retire and none of us know when we will die. But retirement planning is built around choosing some kind of reasonable estimate for those two variables. But that’s something few people are prepared to do. As the study found, 61% of households between the ages of 21 to 64 say they can’t answer the following basic retirement question: When will I stop full-time work?

Even the more straightforward retirement planning issues are challenging for many workers. Among the top sources of difficulty: estimating required minimum distributions from retirement accounts (57%), deciding where to keep their money (54%), and getting started saving (51%).

Those near or already in retirement have considerably less financial angst, the study found. Their most difficult task, cited by 33%, is estimating appropriate levels of spending, followed by choosing the right health insurance (31%) and a sustainable drawdown rate on their savings accounts (28%).

For younger generations, planning a precise retirement date has become far more difficult, in part because of the Great Recession. Undersaved Baby Boomers have been forced to work longer, and that has contributed to stalled careers among younger generations. The final date is now a moving target that depends on one’s health, the markets, how much you can save, and whether you will be downsized out of a job. Americans have moved a long way from the traditional goal of retirement at age 65, and the uncertainty can be crippling.

Nowhere does the study mention the difficulty of estimating how long we will live. Maybe the subject is simply one we don’t like to think about, but the fact is, many Americans are living longer and are at greater risk of running out of money in retirement. This is another critical input that individuals have trouble accounting for.

In the days of traditional pensions, many Americans could rely on professional money managers to grapple with these problems. Left on their own, without a reliable source of lifetime income (other than Social Security), workers don’t know where to start. The best response is to save as much as you can, work as long you can—and remember that retirees tend to be happy, however much they have saved.

Related:

How should I start saving for retirement?

How much of my income should I save for retirement?

Can I afford to retire?

Read next: 3 Little Mistakes That Can Sink Your Retirement

MONEY charitable giving

Give to Charity Like Bill Gates…Without Being Bill Gates

Bill Gates, co-founder of Microsoft, co-founder of Bill and Melinda Gates Foundation.
Chesnot—Getty Images

You don't have to be rich to set up the equivalent of a charitable foundation — one that can continue making donations even after your death.

One of my clients — I’ll call him Jonathan — came to me recently with concerns about his estate planning. Jonathan was a successful corporate manager who received a big payday when a major firm acquired the company he worked for. With no children of his own, he’d arranged for most of his wealth to be divided between two favorite charities: a local boys club and an organization that helped homeless people train for work and find jobs. Life had been good to Jonathan, and he wanted to give back.

But recently, there had been some management changes at the homeless support agency, and Jonathan was no longer confident that his gift would be well used. He was thinking about removing them from his trust.

We suggested something that sounded to him like a bold plan, but was really quite simple. Amend your trust, we told him, so that upon your death your funds go to a donor-advised fund — a type of investment that manages contributions made by individual donors.

Jonathan knew what a DAF was. He was already using one for his annual charitable giving because it let him donate appreciated securities, thus maximizing his annual tax deduction. Like many people, however, he’d never thought about donating all his wealth to a DAF after his death. He was under the impression that a donor needed to be alive to advise the fund.

Not so. Jonathan just needed to establish clear rules on who the future adviser or advisory team would be and how he would want them to honor his philanthropic wishes. With a DAF, he could arrange for a lasting legacy of continued giving beyond his own life. Another plus: Because no organization’s name is written into trust documents, changing your mind about what charities to give to is quick and simple. With a trust, changing a charitable beneficiary often requires a trip to your lawyer.

People tend to think that leaving an ongoing charitable legacy is exclusively for uber-wealthy people such as Bill and Melinda Gates, whose foundation gave away $3.6 billion in 2013. While there is no defined level under which a foundation is “too small,” Foundation Source, the largest provider of foundation services in the US, serves only foundations with assets of $250,000 and up. While foundations offer trustees greater control over investing and distribution of gifts, they are costly to set up and run, and have strict compliance rules.

DAFs offer an alternative. Their simplicity, relatively low cost, and built-in advisory board make them an ideal instrument for securing a financial legacy. Unlike foundations, there is no cost to set them up. And the tax advantages are better. The IRS allows greater tax deduction for gifts of cash, stock, or property to a DAF, compared with a foundation. Foundations have to give away 5% of their assets annually, but there are no distribution requirements for DAFs.

All DAFs have a board of directors as part of their structure. Many of them are willing to maintain the gifting goals of a donor after their death and insure that the recipient charities are eligible for the grants each year. At my firm, we have been asked to serve as part of clients’ DAF’s adviser team, to which we have agreed. Upon Jonathan’s death, we will continue to monitor his charitable recipients for quality of services, efficiency, and results — all very important goals of Jonathan’s.

You have many options to choose from. DAFs come in many shapes and sizes, from local community foundations to national organizations. Most of the independent brokerage firms have their own funds, with minimum initial contributions as low as $5,000.

With a little research, a family should be able to find a suitable home for their estate and leave a lasting legacy — whether they are rich, Bill-Gates-rich, or not wealthy at all. To learn about finding the DAF that fits you or your loved one’s vision and values, one way to get started is to check out the community foundation locator at the Council on Foundations.

———-

Scott Leonard, CFP, is the owner of Navigoe, a registered investment adviser with offices in Nevada and California. Author of The Liberated CEO, published by Wiley in 2014, Leonard was able to run his business, originally established in 1996, while taking his family on a two-year sailing trip from Florida to New Caledonia in the south Pacific Ocean. He is a speaker on investment and wealth management issues.

MONEY financial advisers

When It’s Time for the Adviser to Fire the Client

Pink Slip of termination
Tetra Images—Getty Images

The relationship between a financial adviser and a client can be like a marriage — sometimes a failing one.

Sometimes there’s a client relationship you sense is no longer as functional or effective as it once was.

Perhaps the client engagement was never ideal in the first place, but you took on the client even when your gut suggested it wasn’t an optimal fit. Or, in some cases, the client did once fit the ideal client description in your practice, but your own practice changed rather than the client. In other cases, the client chemistry changed just like it can between two spouses. Life circumstances sometimes prompt this shift, but other times you can’t even put your finger on why things aren’t quite like they used to be.

How do you decide if it would make more sense to discontinue the relationship? When do you make the change? And how do you do it? I have sometimes struggled with the ifs, whens and hows.

I think it is part of the DNA of advisers to want to serve our clients no matter what, and thus very difficult to see that it is not always best for each party, even if it seems obvious. I give a lot of credit to a financial coaching firm I worked with many years ago for encouraging us as advisers to try to recognize when it’s time to say goodbye. They told us if we could recognize that the relationship was not working for everyone, it might be time to consider parting ways. In the end, they said, it’s often better for the client, better for the adviser, and better for the other client relationships.

Years ago, I had a client who, at the beginning of the relationship, fit the description of my ideal client. This person even added services over the years to the point where he was one of my highest revenue clients. In time, he began making requests that I felt were unrealistic and unreasonable. But, for a time, I stretched and successfully responded to each request, even though I was stressed by them. He persisted and made the same request again and again, also saying he was going to reach out to other advisers to get other quotes.

The stress on my business grew as the demands continued, even though each time he apologized afterward. After four of these anxious experiences, I realized that if it happened again, I would need to let the client go. Remembering the coaching, I thought it through on all fronts.

It would be better for my client to find another adviser who might provide a better overall fit, and thus my client would be better served in the long run. But also, I’d be less stressed as a result of no longer attending to requests that seemed inappropriate. And I’d be that much more fully available to help out my clients who were still with me. Ultimately it would be a win, win, win for all.

If realizing the need for a break up is tough, working through the breakup can seem worse – but try to remember the end result of things getting better for everyone.

Such was the case when I informed this particular client — in an email followed by a phone call — that I was resigning from our work together and that I felt I wasn’t the financial adviser to take him through the next phase of his financial life. As could be expected, he was at first upset and unhappy. I don’t know what happened with that client and his next advisers, but I do know that I slept better the first night after that conversation and went into the office the next day feeling much more relaxed.

And despite having to make some adjustments when that client revenue ended, in time, the loss of that client actually propelled me to make some major changes to my practice that took me to new professional heights. In the end, the move helped me better serve my remaining clients, add more ideal clients, and pursue other professional and personal goals for myself.

How to end a client relationship depends on the client relationship. Sometimes a letter is sufficient. Other times a phone call is best. And from time to time, an in-person meeting is the way the go. The breakup can be awkward, no doubt, and I don’t think there’s a template to follow. But it’s best to formalize the end of the relationship so the client knows his or her next steps, your staff knows what is happening — when and why — and everyone can go forward with eyes wide open.

In the end, this is all about the client and making sure your client is well served…even if you have decided you no longer want to be the adviser serving him.

———–

Armstrong is a certified financial planner with Centinel Financial Group in Needham Heights, Mass. He has guided clients since 1986 in matters of financial planning, insurance, investments, and retirement. He currently serves on the national boards of the Financial Planning Association and PridePlanners. His website is www.stuartarmstrong.com.

MONEY Financial Planning

Here’s What Millennial Savers Still Haven’t Figured Out

Bank vault door
Lester Lefkowitz—Getty Images

Gen Y is taking saving seriously, a new survey shows. But they still don't know who to trust for financial advice.

The oldest millennials were toddlers in 1984, when a hit movie had even adults asking en masse “Who you gonna call?” Now this younger generation is asking the same question, though over a more real-world dilemma: where to get financial advice.

Millennials mistrust of financial institutions runs deep. One survey found they would rather go to the dentist than talk to a banker. They often turn to peers rather than a professional. One in four don’t trust anyone for sound money counseling, according to new research from Fidelity Investments.

Millennials’ most trusted source, Fidelity found, is their parents. A third look for financial advice at home, where at least they are confident that their own interests will be put first. Yet perhaps sensing that even Mom and Dad, to say nothing of peers, may have limited financial acumen, 39% of millennials say they worry about their financial future at least once a week.

Millennials aren’t necessarily looking for love in all the wrong places. Parents who have struggled with debt and budgets may have a lot of practical advice to offer. The school of hard knocks can be a valuable learning institution. And going it alone has gotten easier with things like auto enrollment and auto escalation of contributions, and defaulting to target-date funds in 401(k) plans.

Still, financial institutions increasingly understand that millennials are the next big wave of consumers and have their own views and needs as it relates to money. Bank branches are being re-envisioned as education centers. Mobile technology has surged front and center. There is a push to create the innovative investments millennials want to help change the world.

Eventually, millennials will build wealth and have to trust someone with their financial plan. They might start with the generally simple but competent information available at work through their 401(k) plan.

Clearly, today’s twentysomethings are taking this savings business seriously. Nearly half have begun saving, Fidelity found. Some 43% participate in a 401(k) plan and 23% have an IRA. Other surveys have found the generation to be even more committed to its financial future.

Transamerica Center for Retirement Studies found that 71% of millennials eligible for a 401(k) plan participate and that 70% of millennials began saving at an average age of 22. By way of comparison, Boomers started saving at an average age of 35. And more than half of millennials in the Fidelity survey said additional saving is a top priority. A lot of Boomers didn’t feel that way until they turned 50. They were too busy calling Ghostbusters.

MONEY Ask the Expert

Why This Estate Planning Tool Beats Just Having a Will

140605_AskExpert_illo
Robert A. Di Ieso, Jr.

Q: “We established a living trust this past year and put our home and two rentals into it. Most of our investments are in IRAs, and I don’t want to put them into the trust. I am now thinking that I may not have really needed the living trust. Should I go back to just a will and cancel the trust?”—Mark Schmidt

A: A living trust has advantages that a will can’t offer, so you may want to keep both, says Greg Sellers, a certified public accountant and president of the National Association of Estate Planners and Councils.

A revocable living trust is similar to a will in that it indicates how you would like your assets to be distributed after your death and can be amended anytime. While you should always have a will, a living trust—which is simply a trust set up during your lifetime as opposed to one created after your death—can be a valuable addition to your estate plan. Here’s why.

1. Your estate can be settled more quickly. Unlike with a will, the assets in a trust do not have to go through the probate process. Your heirs can skip the expense (lawyers, executors, paperwork, and the like), potential publicity, and inconvenience of a court-supervised distribution of your estate. And there’s no delay while your heirs wait for creditors to come forward and file claims, even when you owe no one.

This probate escape hatch is more valuable in some states than others. Many states have an expedited form of probate for estates below a certain value, which varies by state. For example, in New York, you can use the simplified small estate process if the property, excluding real estate, is worth $20,000 or less. To see what probate shortcuts your state offers, check Nolo.com’s list.

If most of your estate is in the form of IRAs or life insurance, you will not need to worry about probate either. As long as you have named a beneficiary, those assets will bypass probate.

2. You have back-up investment help. Because you must name a trustee to manage the assets, pay the taxes, maintain good records, and make payment to the beneficiaries—or a successor trustee if you’re managing the trust yourself—you already have someone in place to take over if you become disabled or incapacitated and are no longer able to manage your money.

3. You can set things up for your children. Trusts can also be good if you have minor children or heirs with special needs. When you set up the trust, you can add provisions specifying when a child can receive the assets and how he or she can use the property. With a will, your assets pass straight to your heirs.

If you don’t find managing the trust too onerous, Sellers recommends keeping it since you’ve already gone through the effort and expense of establishing and funding it (you need to retitle the assets you put in a trust, for example). On a final note, you shouldn’t transfer an IRA to a trust. That’s counted as a withdrawal and could subject you to a penalty, depending on your age.

Your browser, Internet Explorer 8 or below, is out of date. It has known security flaws and may not display all features of this and other websites.

Learn how to update your browser