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Getting Personal: Sneak Peek of a Financial Planner’s Own Money Moves in 2018 (Part III)

February 6, 2019


Welcome to the final chapter of our three-part series where we reflect on the most important decisions we made about our money last year.  In Part I we looked at our decision to pay off our mortgage, keep our investment allocation and contributions on a steady course despite the market volatility, and how we diversified our income streams to be better prepared for unplanned events. In Part II we reflected on decisions for long-term care insurance, tracking real estate basis, and emergency funds. Let’s jump into three more areas.


1. Cash Flow/Budgeting


My love affair of tracking of our household expenses began way back in 1991 with my first version of Quicken.  My wife Sherise and I were diligent about tracking our cash flow for many years but got complacent in the Foreign Service when our income had reached a comfortable point and we were living rent-free overseas.  Of course, when your income increases, so does your spending. Financial Planners call that phenomenon “lifestyle creep” and we were as guilty of this as many of our clients are today. In 2018 we didn’t go back to Quicken but have once again begun to more proactively manage our cash flow with the eMoney financial planning software we use at Logbook Financial Planning.

Why did we do it?  


We began tracking our expenses for many reasons but a basement full of kids’ stuff has been a constant reminder that not all of those purchases were well thought out (drums, viola, empty aquariums, etc.).  Keeping track of your spending makes purchases purposeful and intentional. It helps you understand the tradeoff of spending today versus funding your future goals. Plus, just like a DC assignment entails for our Foreign Service clients, our income decreased during our transition from overseas and our costs significantly increased.  When that happens, you need to make adjustments in real time to live within your cash flow. While we tracked our cash flow more closely in 2018, we also, for the first time in our 26-year marriage, created a “fun” money slush fund for guilt-free spending. Every two weeks, we have $90 transferred to an online savings account at Ally Bank.  As my wife will tell you, we should have done this years ago!


Why it may not work for you?


Tracking your spending takes time which is usually in short supply.  To make it meaningful, it’s important that you have definite goals in mind to keep you motivated week after week.  If you are ready to get started, take a look at Mint, You Need a Budget, Right Capital, Quicken or use a good old-fashioned spreadsheet.

2.  Re-Shopped Expenses & Cash Yields


Once you start tracking your spending more closely, you will notice areas in your spending that are too high.  Insurance companies, banks, subscription services, and other companies are counting on your inertia when it comes to spending.  Many businesses use the subscription model that often follows a free 30-day trial because they expect that once they have you signed up, you will continue paying the automatic monthly charges on your debit or credit card.  In 2018, we re-shopped our life insurance, internet, newspaper, and cable TV and opened online savings accounts at Ally Bank.


Why we did it?


It pays to shop around.  The market rate for life, home, and auto insurance changes every year.  When renewal time is approaching, it is well worth your effort to see if your current policy is still a good deal.  We discovered that our long-time insurer, USAA, is no longer the low-cost provider in many of these categories and has sadly abandoned their values in search of more profits.  Cable TV and other services usually often offer a teaser rate for your first year of service and then you will need to re-negotiate with them to find an acceptable rate going forward.  Finally, the big banks are too miserly but many online banks offer 2.2%-2.45% interest on savings accounts insured by the FDIC.


Why it may not work for you?


Some of you are assigned overseas and there are not enough service providers to negotiate meaningful market discounts.  Still, we think that almost everyone can review their spending and look for substitutes of comparable quality at lower prices.  Only by researching the market will you understand if there are opportunities for savings.


3. American Opportunity Tax Credit (AOTC)


The AOTC is a credit for qualified education expenses paid for an eligible student for the first four years of higher education. You can receive a maximum annual credit of $2,500 for each eligible student. The credit is 100% on the first $2,000 of qualified educational expenses paid for each eligible student and 25% of the next $2,000.  The AOTC begins to be phased out at $80,000 (single) and $160,000 (married filing jointly) of Modified Adjusted Gross Income (MAGI). In 2018, we used $4,000 from our checking account to partly pay for our son’s first semester at the University of New Hampshire instead of taking all the money from his 529 college savings account.


Why we did it?


The IRS does not allow double benefits for education expenses.  This means you cannot use money that you remove from your 529 plan to pay expenses (that had the benefit of growing tax-deferred) and then try to claim the same expenses for the AOTC.  If you know you will qualify for AOTC based on your MAGI, a better idea is to use other available funds for $4,000 of qualified educational expenses per year and then remove the remaining amounts from your 529 plan.


Why it may not work for you?


If you are over the phaseout limits, you will not qualify for the AOTC but you should click here to better understand AOTC and how you determine your MAGI.  Some Foreign Service clients will need to add the foreign earned income exclusion when determining MAGI which may drive income too high.


We hope sharing insight into these challenges adds color to challenging financial decisions you are facing. Good luck on all your financial and life decisions in 2019!


As a former Foreign Service Officer and Air Force pilot, I’m passionate about continuing to serve those in government and the military.  Our services and publications are designed for individuals and families in these communities. Follow me – Chris Cortese - on LinkedIn so you can continue to benefit from our expertise.


Chris Cortese
Financial Planner & Founder
Logbook Financial Planning, LLC



“Investment advisory services are offered through Logbook Financial Planning, LLC, a Licensed Investment Adviser in the state of Maine and Registered Investment Adviser in the state of Virginia” “All written content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions.” “Logbook Financial Planning, LLC is not affiliated with or endorsed by the Social Security Administration or any government agency.”

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