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HerMoney Podcast Episode 183: On The Couch With Financial Therapist Amanda Clayman 

Kathryn Tuggle  |  October 16, 2019

"You can't change your financial circumstances overnight. It takes sustained effort and application." 

That’s just a bit of the wisdom shared by this week’s HerMoney podcast guest, financial therapist and Prudential financial wellness advocate Amanda Clayman. In her role, Amanda guides her clients on how they can positively change their overall approach to their finances, and adjust their thinking in areas that may be holding them back. 

Over the last decade, the concept of financial therapy has become more mainstream, as more people have sought to discover why and how our thoughts and feelings may shape our financial choices

Amanda says she was led to her profession after seeing “how money was so misunderstood, and how much suffering we really take on in our lives because of this misunderstanding.” Facing her own financial struggles has better enabled her to guide her clients: “I was in a pattern where I would just shut my eyes and spend,” she says, describing some of the money habits she had to re-learn. 

“I had been engaging with money only as a form of self punishment,” she says, discussing a time when she erroneously believed she had to strip away all the small joys and comforts from her life in order to pay off debt. After some self-discovery, she was able to make the mindset shift from thinking of budgeting as a constraint that forced her to say “no,” to a tool that has allowed her to say “yes” to the things she wants most in life. 

At the end of the day, Amanda says she tries to impart to all her clients that money is a tool that should be used consciously — a tool that allows us to take care of ourselves and the things and people we care most about, both today and in the future. She describes why her approach to money is based on holistic health and wellness, and tells us what many of her clients have in common. (Hint: No one shows up to financial therapy because they want to check in and brag about how well they’re doing with their money!) In many cases, people seek her guidance because of a conflict in their family, or a desire to finally put a stop to a recurring problem. Amanda starts each session by helping her clients to establish a framework for where money is or isn’t working in their lives, and then digs into where and why money may be causing them anxiety. 

Amanda also offers up her thoughts on the automation of our finances — sometimes “set it and forget it” can separate us too much from our money. “I fully embrace and appreciate automation, but it takes us away from being conscious,” she says. In other words, automation is a place that we want to get to, but there needs to be a period where we are highly engaged with our money before we can allow ourselves to disengage. 

In her role as a financial therapist, Amanda has guided hundreds of couples on their path to understanding one another’s differing money styles, and has helped them “excavate under the surface” so they can start solving the real problems. (As opposed to just arguing about who is “right”… No one is, but often we so desperately want our partner to validate our point of view that it results in conflict!) 

Lastly, Amanda shares her thoughts on why money is such a sensitive and powerful thing, and offers her tips for the best things we can all do to feel positive and confident about our finances on a daily basis. She leaves us with some powerful philosophy to mull over as we look to make more empowered money decisions: “Don’t live so in service of the future that you miss out on the joys of today. And similarly, don’t be so focused on today that you aren’t taking the necessary steps to have safety in the future.” 

Then, in Mailbag, Jean and Kathryn talk about the pros and cons of closing credit cards you no longer use, what to do if you worry you’ll have too much money saved for college, and the myriad options for how child-free individuals can leave a legacy behind. And in Thrive, Jean gets serious about elder abuse — who’s at risk, how to prevent it, and what to do if you suspect it. 

SUBSCRIBE: We’re changing our relationship with money—one woman at a time. Subscribe to HerMoney today!

Transcript

Jean Chatzky: (00:06)
HerMoney is supported by Fidelity Investments. We want you to demand more from your money, so start by knowing what you own and what you owe. We’ll help you take the next step that fidelity.com/demandmore. Now HerMoney comes to you through PRX. Hey everybody, it’s Jean Chatzky. Welcome to HerMoney. I don’t often recommend books on this show except for the ones that are written by the authors that we feature because I have very particular taste in books. I tend to read mysteries almost exclusively and I really like mysteries that have strong female protagonists, so it narrows my worldview by a great deal. However, right now I am reading, or rather listening to ’cause some of my reading takes place in my car when I commute, I’m listening to this book written by Lori Gottlieb and it’s called, Maybe You Should Talk to Someone and it’s all about Gottlieb, who is a therapist, who is going through therapy herself, and the world of therapy. And having gone to my own therapist while I was in the process of reading this book, I just have to tell you like, mind meld. It was a bit of an explosion and I felt really funny walking into the room, but maybe our next guest can help me with that because financial therapy has become a thing in the last, I don’t know, 5 or 10 years, we’ve started to hear a lot more about people going to therapists specifically to help with their financial matters and when I talk to financial therapists for research that I’m doing for a book or an article, my first call is typically to Amanda Clayman. She is a financial wellness advocate. She’s a leader in the field of financial therapy and she helps her clients decode how their thoughts and their feelings may be shaping their financial choices. My guess is, she has saved a lot of marriages as well. Amanda, welcome.

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Amanda Clayman: (02:24)
Thank you Jean. And I have to say, I feel incredibly flattered to be mentioned in the same breath as Lori’s book. I also adore that book and I also listened to it as an audio book and it was such a great experience.

Jean Chatzky: (02:39)
It’s such a great read. I mean I sometimes go through the process, I have an audible subscription, so I, you know, I download a book once a month and sometimes I just get on a real roll with a reader, and I find myself looking for other books read by that person. I’m definitely gonna do that with this book because there’s something about this reader that is so, her name is Brittany, I don’t remember her last name, but she’s wonderful. So I’m glad to hear that you enjoyed it too. Tell us a little bit about financial therapy. I had coffee with a friend of mine, Robbie Myers, who runs Shondaland, a couple of weeks ago and we were talking about financial therapy because we were hashing out story ideas, and she was like, that’s a thing? I think a lot of people are surprised that that’s a thing.

Amanda Clayman: (03:31)
It’s funny to me because that was actually my first kind of light bulb moment on my journey to become a financial therapist is I saw not a field that existed, but a need that existed. And I really thought to myself, why isn’t this a thing? And then of course the next thought was, well, maybe I should try to move into that need and see what develops. For me going into the mental health field, which was a career change, going into the mental health field specifically to work with people around the role of money in their lives seem like such an intuitive thing. Because I really saw once I was coming to terms with some events in my own financial life, I really just saw all around me how money was so misunderstood and how much suffering we really take on in our lives because of this misunderstanding.

Jean Chatzky: (04:29)
I’m so glad to hear you say coming to terms with something in my own life because I have looked at, sometimes in therapy, I have looked at why I do what I do. And I really think I do what I do because I was trying to solve financial problems that existed in my own life and my own emotional attachment to money. What were you looking to fix?

Amanda Clayman: (04:54)
Well, I would add, too, to that list, we’re often trying to solve problems in our own emotional and financial past where we’re sort of reliving patterns or trying to work through traumas and money can be a very central figure in some of our traumatic and emotional experiences. For me, what was overlooked in terms of what I was taught about money, because I was really, I was raised by two very frugal parents, but two parents who had undergone some of their own sort of personal traumas around growing up in poverty, such that when I was growing up, I really thought that the wolf was at the door all the time. And sometimes that was true, but but many times it really wasn’t. And so I was sort of taught this frugality that was based in almost like a clenching, if you will, around money. And when I became financially independent as a young adult, I didn’t know how to take risks in my life. I moved to New York, I had no money. And whether that advisable or not, I had certain problems that I needed to solve as a result of that. And so I did have to sort of like throw myself at the world a little bit. And that began, for me, a cycle of starting to incur debt and then just really not being able to use money in a conscious way to take care of myself and still be able to make good financial choices. So I was kind of in a pattern where I just would shut my eyes and spend. And I didn’t knowm and it was a whole sort of the problem, as you can imagine, really just fed on itself and sort of compounded. And that was the thing that I needed to be ultimately reparented around money and my parents did kind of step in and teach me how to budget in a much more productive and healing kind of a way.

Jean Chatzky: (06:58)
I often use the phrase money is a tool and you should use it consciously, but that you should use it consciously to take care of yourself is not something that I’ve heard before, but I’m going to borrow it because I think it’s totally right. Right? Well that is what money’s about. It’s about taking care of ourselves and the people that we love and the things that we care about today, tomorrow and down the road. Right?

Amanda Clayman: (07:24)
Yeah. I think it’s actually the only way that we should think about money because it is based on holistic health and wellness. And when we, and that was in fact one of the real shifts for me was, I had been only engaging with money as a form of self-punishment. I thought, I have made these mistakes, oh, that is so bad about me. What I need to do is sort of do penance through money. Like, strip away all joy and comfort from my life in order to pay off this debt. But that wasn’t sustainable in the way that I was doing it. And it was only after I had this kind of epiphany or this really profound shift from budgeting and allocating my money and that being sort of a process or a tool of no, and turning that into a tool of yes, what is it that I want to say yes to in my life? And that definitely included debt repayment as a priority, but that was finally balanced with a realistic understanding and acceptance of how I needed to use money in all of these other ways that would keep my life stable, such that I would stay in this process for the longterm, because as you know, most financial changes don’t happen, you can’t change your circumstances overnight. These really take sustained effort and application in order to bear fruit.

Jean Chatzky: (08:53)
And you have to resolved in the fact that they’re happening. Because unlike changes in weight or changes in appearance, you can’t often see them, right? They’re invisible. And so you’re not going to get the kind of positive reinforcement that you might get from the outside world noticing that, Oh my gosh, your fabulous new diet is working wonders.

Amanda Clayman: (09:16)
It’s so true. And in fact it’s more often I think the opposite because you’re telling people, no, I’m not going to meet you for brunch, for example, or you’re showing up in the same outfit to an event that you wore, I mean, this is such a, I feel like a rarefied example, but, the things that people would perceive are probably not things that indicate the progress that you’re making.

Jean Chatzky: (09:43)
Yeah, absolutely. When you go to a financial therapist, I mean, I know what it’s like to go to a therapist. I’m sure many of our listeners know what it’s like to go to a therapist. I’ve never actually, I’ve been to one money therapy session years ago when I was still reporting for Smart Money Magazine. So it must’ve been, god, 15, maybe 20 years ago. I went and sat in with Olivia Mellon when she was, and she was coaching a couple through an exercise of listening, like really hearing what the other one was saying. But I’m sure many things have changed. What happens when you, when somebody comes to your office for the first time?

Amanda Clayman: (10:29)
There’s always a presenting problem if you will. Like nobody is showing up for financial therapy because they really want to just check in and brag about how great their money is going. So there’s always something that is off. And sometimes that is a pattern that has really just become intolerable. Sometimes it is a conflict between two people. Sometimes it is that somebody kind of out of options, you know, like they had been maybe, there had been something out of balance in their finances and now they’re sort of no more available credit, etc. So there’s always this precipitating event and what I help them do is to frame this event as the entry point for us to begin to look at how money is working and not working in their lives. So sometimes I describe that as the what and the how. So the, what is this presenting issue and then the how is what’s going on around it that contributes to how you experience this issue, what, what contributes to it in terms of your behavior, and what really needs to shift in order to resolve it. So it’s, I think a way of recontextualizing in a much more holistic sense.

Jean Chatzky: (11:55)
I want to dig into some of the most common issues that you deal with on a day to day basis because I think framing some of those and helping our listeners understand what some possible solutions might be is a nice place to go here. But before we do that, let me just remind everybody that HerMoney is proudly sponsored by Fidelity Investments. You don’t have to have all the answers when it comes to your financial future, but you do have to ask the questions. And an important one to ask is what do you want from your money? What are your financial goals? No matter where we’re meeting you on your financial journey, the folks at Fidelity are here to help reach those goals faster. It starts with a financial checkup and understanding of what you own and what you owe. And from there, Fidelity can work with you to evaluate your investment options and different ways to grow your savings, discuss your goals, see where you stand and get help. Taking the next steps at fidelity.com/demandmore. I am happily talking with financial wellness advocate and financial therapist, Amanda Clayman. Amanda is based in LA these days. That’s where she sees her patients. When people come into you, what are the, and let’s talk about women specifically, what are the issues they bring to your couch or your chair most often?

Amanda Clayman: (13:22)
Well, one of the things that I really love about working with women in a financial therapy framework is that I don’t have to make a pitch to most women about the connection between money and emotions. So when women are coming to me, one of the most common sort of issues is a high degree of financial anxiety and difficulty being able to stay in a decision making process around money. For example, like, you know, for so many of us these days, our money, there may be a lot of changes and volatility in our money, people could be freelancers or in a creative field, people in the gig economy, like anywhere there’s a lot of complexity, especially with money, it can be really hard to sort of follow any kind of pattern, you know, to have like this rigid structure. And so it requires us to be able to be in our financial choices in a much more sort of highly engaged way. And for people who are especially anxious, that kind of engagement can feel uncomfortable if not downright impossible. And so I see a lot of unconsciousness when it comes to money and therefore people really aren’t sure what it is that they, what it is, irst of all, even specifically not working, and then what it will take in order to resolve whatever financial issue they’re facing.

Jean Chatzky: (14:58)
One of the things we talk about a lot on this show, and I talk about a lot in general, is the benefit of automating financial decisions in general that if you, for example, you put your 401(k) contributions or your IRA contributions, if you’re in the gig economy, on automatic pilot and invest them in a preselected portfolio, you only have to make a good decision one time and you know that they’ll happen. I’m wondering, though, if that’s a good thing in light of the tough decision making environment that you’re talking about or if it takes us too far away from the problem?

Amanda Clayman: (15:39)
You know, I’m really grateful for this question actually because I sometimes feel that I’m a little bit, well, I fully embrace and appreciate automation. Anything taken for an unhealthy reason or sometimes taken to too much of an extreme really loses its beneficial effect pretty quickly. And automation can be one of those things if it contributes to unconsciousness. And one of the things that I’m really trying to help my clients with is to be able to be more consciously engaged with their money.

Jean Chatzky: (16:14)
How conscious do we have to be? We’re busy. I’m busy. I have a financial advisor who manages a lot of my day to day investments because I know I don’t have time to do it.

Amanda Clayman: (16:27)
It’s true. And I really do think that automation is a place that we get to. So there needs to be a period where there is a high level of engagement so that you can get to a lower and appropriate level of engagement. So, you know, looking at things and sometimes this is a deep dive, sometimes what I’m helping people do is actually to be able to partialize this process because trying to do too much too fast can be a thing that is overwhelming to people, that makes them sort of tag back out again. So one of the skills that I’m teaching is how do we structure these tasks so that you can look at it, you can have enough self awareness to see when you’re sort of getting into a red zone? And then how do we, I sometimes describe it as like, how do we open this box called money and then how do we put it back in the box and close the box and be able to walk away from it? And then know that we’ll come back to it again at sort of a more regular kind of a structure. So when we’ve opened this box and we can look in the box and we can sort of see like, these are my committed expenses, for example, or this is what I want my savings rate to be, or the rules around savings, for example, like, you know, a certain percentage of every incoming amount, you know, you can create different rules. Like those need to be determined and chosen at some point. And so that’s where I think the attention is really beneficial. But once we can sort of see all of these things together, so it’s not like, Oh, savings is good, I’m going to save at this rate, it’s, okay, here’s where savings fits in with all of the rest of my obligations and choices. And so I know that that’s an informed and safe choice for me to then do that, and then we can automate it, but we need to go through the steps, first of all, to to put that full picture together.

Jean Chatzky: (18:29)
Got it. It’s an interesting process and I would imagine for your clients it must be a difficult process to go through from time to time, or even always. These are hard things to look at. Especially when we are sticking our head in the sand and not dealing with them somewhat intentionally. How do you handle the problems with money in a marriage or a relationship? I mean, we know the statistics, I know you know them, I certainly know them, that money is the biggest cause of divorce according to many, many studies. When you are seeing a couple or one part of a couple who is saying, I am not getting along with my partner or spouse about money. What are you usually seeing and what’s the best first step to deal with that?

Amanda Clayman: (19:19)
Well, it’s interesting, one of the first things that I’m assessing for is is the problem around money or are the problems around money? Are they emblematic of other problems that are happening in the relationship? So do we see a sort of consistent difficulty of which money is a part, or does the couple have strength and stability in other areas of their marriage and money is really the anomaly? Because, I mean, sometimes that that’s an indication of whether or not a person is appropriate to work with me. Like, if there are greater issues in the marriage, and I’m not saying that the marriage has to be perfect outside of money, obviously, but sometimes I would actually recommend that people start with a couples therapist because sometimes that can automatically resolve the issues with money. Or if that’s not the case, then they can come to work with me. Or, again, if we’re sort of looking at money as its own standalone topic. I think that very often I’m holding optimism for a couple when it comes to the money work. Because from my perspective and having worked with hundreds and hundreds of couples at this point, what I can see more clearly, than sometimes the people who are inside of the marriage, is how the system is working when it comes to money. And by that I mean what are the different pieces that each of these two individuals are bringing to how they think about and use money here? And for so many couples, actually what we do is we partner with somebody who would seem kind of on the surface to be different from us and that difference may be the source of conflict. But if we can excavate a little bit underneath that conflict, what we discover is that there are two points of view that are each really critical to making a more balanced hole between them. And so my job becomes helping each partner identify and, really understand where their own point of view is coming from, to help them get out of just an ongoing argument about whose point of view is correct, first of all. We sort of try to step away from that as correct. I mean, I love that saying, like you can be right or you can be married, right?

Jean Chatzky: (21:46)
My stepfather says you could be right or you could be happy.

Amanda Clayman: (21:50)
Yes, exactly. Like we want so desperately for our partner to validate and agree with our point of view and truly like money is so tricky because it does, it’s hardwired right into our sense of survival. So when we feel like someone is threatening our money, it can feel like, you know, our fight, flight or freeze response just goes right off the charts. And so it’s hard to stay in a productive place and I totally get that. And then when we start sort of bludgeoning our partner with facts and did you read the article I sent you? Sorry.

Jean Chatzky: (22:29)
Yeah, no. It doesn’t go well. I’ve been there and done that.

Amanda Clayman: (22:38)
It does not. And I have so much affection for clients, too, who are still coming to terms with how to get themselves out of that being locked in to that Did you read the article I sent you? For example, like there’s often someone who is more, maybe more anxiety prone, who has an eye toward the future, who is more, kind of, vigilant and wary, who sees money and engaging with money. Their primary motivation is avoiding danger and avoiding mistakes. And then oftentimes we’ve got another person in the partnership who puts more of a value on experience and pleasant experiences and living for today and has, can hold maybe more optimism about the future. And these two people, much as they might try to get their partner to agree with them, the greater benefit is actually in them maintaining those different points of view and being able to work together because we need both of them. We need the partner who’s got an eye on the future and we need the partner who’s going to say, you know what? Let’s make sure that we still take the time to enjoy where we’re at, to appreciate what we have and to not live so in service of the future that you miss out on the joys of today and similarly to not be so focused on today that you’re not thinking about and doing the things that you need to in order to have safety in the future.

Jean Chatzky: (24:12)
It is such fascinating stuff. We are about out of time, but if you had to give our listeners one piece of advice, one thing to do to make themselves financially well or with very poor grammar, financially well-er than they are today, what would you tell them?

Amanda Clayman: (24:30)
I would tell them to have a regular practice of just looking at their money to start with. Not even to change, not to impose something, but really to just start by getting familiar. It’s one of the things that Prudential actually found in their financial wellness census is that over a third of us in America actually have a skewed perception of where we’re at with our money for better or worse.

Jean Chatzky: (24:54)
Interesting. All right. We’re going to take a look at what do we own, what do we earn and what do we owe? And that’ll definitely help us. And track our spending, too. I think that’s a good exercise. Amanda Clayman you are fascinating. How can our listeners find more of you?

Speaker 3: (25:10)
You can find me at AmandaClayman.com.

Jean Chatzky: (25:12)
Thank you so much for being here.

Amanda Clayman: (25:14)
Thank you Jean. I really loved it.

Jean Chatzky: (25:16)
Thanks. And we’ll be back in just a second with Kathryn and your mailbag. HerMoney’s Kathryn Tuggle has joined me in the studio. I feel a little better actually after talking to her. Is that strange?

Kathryn Tuggle: (25:31)
I do, too. No, she was very calming.

Jean Chatzky: (25:35)
Yes, she speaks like a therapist.

Kathryn Tuggle: (25:37)
I feel very reassured. I’m going to go out and make some great decisions.

Jean Chatzky: (25:42)
But I do have to say she totally, she’s really on it. You know that piece about couples and avoiding and I mean I was like, do you know my husband? And that was what was going on inside my head. And we don’t really fight about money, but we are quite different when you get down to it.

Kathryn Tuggle: (26:01)
Right. It’s amazing to see how many couples have the same problems because it’s so easy in your relationship to think no one else is dealing with this. I really loved her line about punishing yourself for the mistakes that you’ve made. It made me think about when you splurge on your diet and then you think you have to go out and run 10 miles because you ate the cake. That feeling that you need to punish yourself for overspending and, it’s a very scolding kind of bad, bad, bad mentality, which doesn’t help anybody.

Jean Chatzky: (26:33)
It doesn’t, I mean we aim here at the podcast, but also on the website and in our Facebook group to be this judgment-free zone, except we are always judging ourselves. Right? And that kind of has to stop because once you ate the donut, you can’t un-eat it. You have to just start from where you are and save for retirement or pay down the credit cards or make better decisions going forward. And I think her methodology of taking a look at why you made those decisions is exactly right. It’s why the first third of Women With Money is devoted to understanding who you are when it comes to money. ‘Cause if you don’t get yourself you’re going to do the same things over and over again.

Kathryn Tuggle: (27:23)
Absolutely. And just being kind to yourself. So many of us speak to ourselves, our internal dialogue is so much more cruel than what we would say out loud to another person.

Jean Chatzky: (27:34)
Absolutely. Did you see that New York Times story on how the whole self-help industry has now become this booming self-care industry?

Kathryn Tuggle: (27:48)
It’s the whole wellness movement.

Jean Chatzky: (27:50)
It is. It’s wellness and self-care. And I remember I learned this from Hayden. When Hayden worked at HerMoney, she was really big on self care and she would ask, you know, what are you doing for self-care? And I’d be like, I don’t know that phrase like is this a millennial thing? But it’s not. It’s huge. And you should read the story. It was kind of fascinating and it’s a, it’s become a huge industry.

Kathryn Tuggle: (28:14)
It’s more about taking time for yourself or doing things for yourself?

Jean Chatzky: (28:17)
I think all of the above being kind to yourself. It’s about skincare rather than makeup, if that makes sense.

Kathryn Tuggle: (28:26)
Right, right, right.

Jean Chatzky: (28:27)
I mean I think that’s kind of the difference anyway, to be continued. What do we have from our mailbag?

Kathryn Tuggle: (28:34)
We have some good ones today. Our first one comes from Kelly. She says, I’ve heard conflicting answers with regard to credit cards and closing them versus keeping them open. Is it best to keep credit cards active, some with high limits and not use them or just go ahead and close those accounts? In other words, does having that credit available improve your credit? I’m hoping to improve my overall credit score and hoping you can clear this up for me.

Jean Chatzky: (29:00)
So she’s talking about credit utilization and credit utilization is a big part of credit scoring. We have five different factors in credit scoring and the number one is do you pay your bills on time every time? The number two and it’s a very close second is credit utilization and that’s the percentage of credit that you have available to you that you’re actually using. We had Michelle Singletary on this show from the Washington Post to talk about her perfect pristine credit score. And the thing that she had actually worked on was credit utilization. She got it down to the point where it was really, really low. Under 10%. It doesn’t have to be that low to have a good credit score. You want to keep it between about 10% and 30% but those credit cards with the high limits represent a big share of Kelly’s pie, her credit pie, and closing them will hurt credit utilization. So I would say keep them active unless they have an annual fee and if they have an annual fee, go through the process of trying to bump up your limits on other cards to make some extra capacity before you close these cards. And your credit score should stay about the same. It does get annoying that you have all these cards in your wallet that you’re really not using. And the other risk is that the cards will quit you, right? That you won’t use them for so long that they will eventually just say, Hey, you are not worth it and nd we’re closing your account due to inactivity. That happens. So if it’s capacity that you care about, just put one automatic bill on that credit card every month. Pay it automatically as well. You never ever have to deal with it, but you’ll continue to maintain that relationship.

Kathryn Tuggle: (31:00)
Great, and question, if a credit card company quits you due to inactivity, is that somehow better for your credit score than if you close the card?

Jean Chatzky: (31:10)
No, it really isn’t. In fact, I have been given advice from people who really know credit scoring that if you close a card, you want to make sure that on your credit report it reflects that it was closed by you. I’ve never seen the numbers on the difference between them closing it and you closing it, but either way, if you want to maintain that credit limit, you should make an effort to keep it and if it’s meaningless, if you’ve got a very small line of credit and you’re not using the card anyway, then just get rid of it.

Kathryn Tuggle: (31:43)
Great.

Jean Chatzky: (31:44)
What’s next?

Kathryn Tuggle: (31:45)
Next up, we have a note from Jessica.

Jean Chatzky: (31:48)
Hey Jessica.

Kathryn Tuggle: (31:49)
Hi Jessica. She says, hi Jean. I have a daughter who will turn one next month and I’m wondering what the best savings vehicle is for gifts she receives as well as money we put aside for her. Some of our relatives were generous enough to fund a 529 plan for her, which has given us a big head start on college savings and may even cover the cost of undergraduate education entirely.

Jean Chatzky: (32:09)
Whoa.

Kathryn Tuggle: (32:09)
Whoa.

Jean Chatzky: (32:10)
Generous.

Kathryn Tuggle: (32:11)
Yes, but we have received several smaller monetary gifts for her, totalling about $3,000 that we are not sure what to do with. I expect this number will increase over the years with birthdays, holidays and contributions from my husband and me. It feels inefficient to leave this money in a savings account for her. Since interest rates are so low, we have considered an additional 529 perhaps for private school or possible graduate school and a UTMA account but aren’t sure which way to go or if there are other options we should consider. Thank you.

Jean Chatzky: (32:42)
So great question and I know we’ve got a lot of listeners thinking you are one lucky woman, Jessica, and that your daughter is a lucky, lucky girl. I don’t think we’ve ever before had the question of do I have too much money in my 529 because with college costs these days it’s a very, very high bar to clear. But it’s a really good question because if you have more in the 529 than you know that you’re going to use for education, that money will be penalized and taxed when it comes out. At least the growth on it will. So, if you believe that there might be private school in her future funding another 529 is something that you might want to do. I wouldn’t fund for graduate education unless you really know that she’s going. And with that in mind, a uniform gift to minors account or a UTMA is a fine place to put the money. You just have to realize that although there are benefits, which is that any earnings on that money will be taxed at the child’s rate, which is lower than your rate, you are also putting the money in her hands when she reaches the age of majority. Once she becomes an adult that money is hers and she can choose what to do with it. So just be a little bit careful there. The other thing Jessica, that I want to point out to you because I’ve dealt with this in my own life, is that if there is any consideration that your child is going to receive financial aid, having those other relatives own the 529 is not the best for your daughter’s financial aid eligibility. Before she gets to the point of being a sophomore in college, which is when colleges start to look at your tax returns ’cause they look backwards, you need to own that account or she needs to own that account. And so you want to, early on, talk to those relatives about the possibility of transferring the ownership of that account to you or to her. Not something that you have to deal with when she’s one, just something to put on your radar for later, again, if you think she will qualify for any financial aid at all.

Kathryn Tuggle: (35:04)
Great advice. Okay. Our last question is from Irma in Queens, just across the river. She writes, I am a 55 year old administrative assistant who is single, never married with no children and I’m curious to know what my options are for leaving a legacy and for making the most of my money while I’m still here. There’s always so much talk around what to do with your money for people who have a family and children, but never any discussion around people like me. In many ways I feel single people are often the forgotten demographic in financial conversations. I feel good about where I am financially. I have a 401(k), an IRA and savings, but I’m curious what to do with my money both now and when I pass. Before I pass. I know there’s the option to spend it all, LOL, but of course there’s also an option to designate a charity. Thankfully, I have a lot of years until then and I’ve saved and spent my money wisely. But for what? Should I look for the best senior housing? Buy a co-op or condo? Continue to rent? Move to Costa Rica? I know that buying something is generally a good idea, but I’m not sure if I could qualify for a mortgage at my age. What smart money moves should I be making to secure my future and the legacy of my money? I’d love to hear your perspective.

Jean Chatzky: (36:17)
Oh boy. Oh boy. So first of all, I just want to apologize because I think sometimes I am guilty of being a little too couples-focused. It is something that I’ve heard from our listeners and we’re trying really hard to make sure that this is not a place where single people feel left out or forgotten. So if you felt that way, Irma, I’m sorry. And we’re doing our best to shake things up here a little bit. You could absolutely qualify for a mortgage as long as you have the income. That is not a consideration. Plenty of people in their fifties get a mortgage. So if you want to buy something, have at it. Mortgage rates are low. As far as the rest of your questions, there is a really big difference between look for the best in senior housing and move to Costa Rica. And I can’t decide that for you. I really, you know, I think Costa Rica is lovely. I had a great time zip lining there. I don’t know more than that, but what I do think is that you should really think about what you want to do and you should make a list. And you should take that list and you should talk to somebody, talk to a financial advisor, talk to a close friend, like start having this conversation on a regular basis until your list takes form. And once your list takes form and you know what you want to do with your money. Once you know, as Amanda Clayman said so nicely, what you know, what you want to do consciously with your money in order to take care of yourself, then you can start to put the plan in place in order to make that happen. And you can, there are vehicles that allow you to take care of yourself now and to give to charity in the future, often after you pass away, so that if you’re worried about healthcare costs later in life, because we are all living for a very, very long time, you can check off both boxes. You don’t have to limit yourself to one or the other. And thank you so much for writing.

Kathryn Tuggle: (38:25)
Thanks Irma.

Jean Chatzky: (38:25)
Thanks Irma. If you wanna send us some questions, a question, we’d love to hear from you. You can send it to mailbag@hermoney.com. In today’s thrive, as we’re talking about aging, the biggest threat to mom and dad’s bank account in their golden years? It isn’t only someone that they know, it is someone they’re related to according to a new study from the National Center on Elder Abuse. It turns out family members are much more likely to financially abuse their elderly kin than some random online scammer is. Of all the calls reported to the center’s resource line, financial abuse was the most common complaint. It accounted for more than half of abuse calls. And that is frightening, especially when you consider elder abuse is responsible for more than $5 billion in U.S. Healthcare costs each year. That’s due to individuals who lose their savings, who are forced onto Medicaid due to physical abuse. If you’re looking to protect your parents as they age or even to protect yourselves, there are a few things to do. First, always set up a trusted contact anytime you set up a financial account. You’ll just have to provide their name, their contact info. They don’t have to be a beneficiary of someone who has the authority to talk to your financial advisor or provider. That person can then be consulted when there are questions about a particular transaction or if something were to happen to you. You can also look to hire a financial planner who can help you look out for your best interests as you age. And you may want to consider setting up some form of trust which can restrict who is able to access your money and who your beneficiaries are. Finally, if you suspect elder abuse, you’re going to want to report it immediately both to your local police and to the National Center on Elder Abuse. I don’t like those numbers one bit. If you like what you hear, though, here on the HerMoney podcast, we hope you’ll subscribe. You can do that at Apple Podcasts. You can do it at HerMoney.com/signup. We hope you’ll leave us a review. We like to hear what you think. We also want to thank our sponsor Fidelity. We record this podcast at the lovely CDM Sound Studios. Our music is provided by Track Tribe and our show comes to you through PRX. Join us next week. I’m excited for this one. We sit down one-on-one, with Seth Godin, New York Times bestselling author and marketing guru, and he’s going to tell us all about the single most important thing we can do to grow and protect our personal brands. Thanks so much for listening. We’ll talk soon.


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