Millennial Couple Squares Away Finances

The Knapkes hiking last May in the Rocky Mountains.

Heather and Tyson Knapke were like a lot of young couples starting out: they were in debt.

One household expense on their credit cards loomed larger than all the others: at least $1,000 every month for groceries and dining out. Some weeks, the Denver-area couple could be found at their various favorite restaurants Thursday night straight through Sunday night.

The food budget “was astronomical, and I had no idea,” Heather said.

Their lives changed dramatically after realizing about 2 1/2 years ago that their finances were spinning out of control. How this couple transformed their debt-laden household into one that is free of credit card and college debts and has a tidy emergency fund, with retirement saving now well under way, could be a blueprint for other Millennials in the new year.

Here is the order in which the Knapke’s accomplished this: reduce expenses, impose a budget, pay down debt, and start saving for retirement.

“I’m trying to get ahold of my finances early – earlier than most people – so compound interest works in my favor so I’m set when I’m older. That’s the goal,” said Tyson, who is 32.

How did the couple get into trouble in the first place? Before marrying, Heather, a 33-year-old hairdresser, had learned a few things about controlling expenses as she purchased shampoos and hair dyes for her clients. Her personal finances were, as a result, in decent shape. Then she fell in love with a man in debt. Tyson had graduated from the University of Colorado with a communications degree, $16,000 in student loans, and another $9,000 distributed among three credit cards. …
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Our Readers’ Favorite Blogs in 2016

The 10 articles that received the most attention from our readers last year are ranked below in the order of their total page views.  Retiree taxes and Medicare made up the top three:

Why Most Elderly Pay No Federal Tax

Medicare Advantage: Know the Pitfalls

Federal Taxation Drops for Retirees

Financial Fallout from Gray Divorce

Stress is One Reason People Retire

How Many Years Can You Do Your Job? …Learn More

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Enjoy!

Squared Away writer Kim Blanton invites you to follow us on Twitter @SquaredAwayBC.  To stay current on our Squared Away blog in 2017, we also invite you to join our free email list. You’ll receive just one email each week – with links to the two new posts for that week – when you sign up here.       Learn More

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Financial Misinformation Shared Online

My mother sent an anxious email that included the above picture, which one of her elderly friends had emailed to her as a warning about coming tax increases.

“Have you seen this?” my mother asked in her email.

I’m glad she inquired, because it took 15 seconds to learn on factcheck.org that this misleading information has made the rounds on the Internet for three years in a row, updated to the new year – 2017 this time.

There are nuggets of truth in the misinformation above. The Medicare tax already increased as part of the Affordable Care Act. However, it applies only to employed couples earning more than $250,000 and employed individuals earning more than $200,000. The retirees living in my mother’s very modest senior community – and most working Americans – are not affected. Yet “shocking” information like this rears its head over and over again on Facebook, Twitter and other social media.

At a time that misinformation is deliberately being fabricated, and one such lie coursing through the Internet even spurred gun violence at a Washington, D.C., family pizza joint, it’s time to bring attention to false financial information that, unwittingly, people may be sharing online. …Learn More

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Bypassing College for a Professional Job

Apprenticeship programs in the United States are largely found in just a few unionized skilled trades: construction worker, plumber, electrician.

But a recent panel made up of British and American employers and other experts made the case that U.S. employers in myriad professional fields – health care, social care, information technology, law, medical exercise therapy, lab technician, teaching assistantship, nursing, and finance – would benefit from thinking more creatively about providing apprenticeship training.

Apprenticeship programs are much more common among U.K. and other European employers. Microsoft Corp. is a big exception here: its U.S. program, modeled on what the company does in Europe, will graduate 1,000 apprentices next year, said Bill Kamela, Microsoft’s policy counsel for U.S. government affairs. Apprentices “have incredible intangible skills, and they’re incredible learners,” he said.

These programs seem more relevant than ever in the wake of U.S. and European elections shaped in part by blue-collar voters dissatisfied with their economic circumstances, said Tom Bewick, founder of New Work Training Ltd. in London, which arranges employer apprenticeships. Bewick moderated the November panel for the Urban Institute in Washington.

“Our working and middle classes are in revolt against stagnating wages, a lack of affordable housing and distant institutional structures that come across as elitist,” he said. Apprenticeships aren’t a “silver bullet, but they are surely one of the practical responses to this set of challenges.” …
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Retirement Isn’t Always Fair

Chart of SESMore than half of older Americans with the lowest socioeconomic status can expect to face an income gap if they retire when they’re planning to.

That finding is from a study by the Center for Retirement Research, which supports this blog. The researchers quantified and compared the gaps in the retirement preparedness of more than 3,000 older U.S. households, grouped by four levels of educational attainment.

First, the researchers estimated the target income that each working household will need in retirement to maintain its current standard of living.  That target income will be less than its current income from working, because retirees no longer need to save money, and they pay less in taxes.  Then, the researchers projected the income each household will actually have – at each different retirement age – from their Social Security, employer retirement plans, regular savings, and home equity.

When a household’s projected income reaches the target, that’s the age at which they can expect to retire comfortably. But people don’t necessarily make decisions that are in their best financial interest. …
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Inside the Minds of Older Workers

A decade of research into the impact of cognitive aging shows that workers throughout their 50s and 60s are generally just as productive as the younger people working alongside them.

A new summary of this research, by the Center for Retirement Research at Boston College, explains how older people are able to adapt to the gradual loss of brain mass in the parts of the brain associated with memory and an ability to think on one’s feet – their “fluid intelligence.”

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The highly skilled pharmacy profession is a good example of how workers in their 50s or 60s adjust to this changing dynamic.  These pharmacists have an advantage over their younger coworkers in what psychologists call “crystallized intelligence,” which is the deep reserve of information stored up over decades of working in their profession.  They can no longer process drug interactions and other new information as rapidly as they once did.  But they can tap into their reserves to solve the myriad issues that crop up in their work.  This crystallized intelligence – for pharmacists and many other types of skilled jobs – is effectively making up for their loss of fluid intelligence.

Interestingly, older workers who execute routine tasks usually aren’t at risk of aging out of their jobs for cognitive reasons either.  That’s because even though their fluid intelligence is in decline, they have more than enough of it in reserve to complete their relatively simple tasks.

While the majority of older workers do not lose their productivity due to cognitive aging, two groups are vulnerable.   One group is those for whom the work demands on their fluid intelligence are extremely high.  A 2009 study of air traffic controllers highlighted this challenge – and demonstrates the logic behind a Federal Aviation Authority requirement that controllers retire at age 56. …Learn More