Allison V. Bishop, CPA - Financial Coach

If you know anyone who would love to attend one (or four) workshops about being intentional with your money, I'm presenting a series at SerenityMe on Tuesday evenings in March and April. Register for any of the workshops individually or get a discount for the full series. Snacks provided by Empeople Credit Union

Mindful Money Entire Series - SerenityMe 5:30-7:00pm $100 per person or $30 per workshop Join us for a series of talks, sponsored by Empeople Credit Union, around financial wellness and being intentional with your money. Starting in March, Allison Bishop, financial coach, will be leading a four-week series of Mindful Money workshops, which...

I'm so excited to be speaking at the Maine Women's Conference next month! Join us at Holiday Inn by the Bay in Portland if you're free on October 25. Tickets available here: https://www.themainewomensconference.org/

Next in our epic speaker lineup is Allison Bishop!

Allison Bishop is a financial coach in Portland with more than twenty-five years of experience as a CPA. She started her financial coaching business eight years ago when she recognized a lack of resources to help people make wise financial decisions. She helps her clients to identify and prioritize their financial goals and then come up with a realistic plan to make progress toward those goals.

Learn more about her session here: https://bit.ly/44OHNuo

New blog up - this one is on a serious topic: imbalance of power in a couple's finances and the possibility of financial abuse. Full text is below (although it's easier to read on the website).

You can find my other blogs on my website at https://allisonbishop.com/blog

Digging into an Imbalance of Power in Relationship Finances

I usually write about somewhat lighter topics – a podcast review or a blog about how to combine finances with a partner. Today I want to talk about a subject that alarms me, and I see it with some regularity: an imbalance of power regarding finances. I’m looking at this as it relates to married couples or long-term partners who share finances.

It’s fine if one partner is the primary financial person in the household – paying the bills and possibly making most of the investment decisions. Sometimes it falls much more in one partner’s skillset and interests than the other person. However, both partners should have a voice in how the money is spent, saved, donated, or invested. Each has a responsibility to have a basic understanding of the assets, debts, income, and expenses.

Here are some examples of the types of items that I think both people should have some idea about:
• The balances and monthly payments on any debts. You don’t need to be able to tell me your mortgage balance down to the penny off the top of your head, but you should have some idea what it is, and you should be able to look it up relatively quickly and easily.
• Which banks or investment firms are holding your money and roughly how much is in the accounts. Is your 401(k) balance $10,000 or $500,000? What about your spouse’s?
• How much money is coming into your household every month.
• Are you saving and/or investing every month? How much and into what accounts?
• How much did you spend on your vehicles? How did you pay for them – savings or loans?

To clarify, I think it’s okay for each party to have a level of privacy around some money. For example, you might both contribute to a joint account for the household expenses proportionally to each of your incomes, and each maintain a separate account that you can spend at your pleasure and don’t have to account for to the other person. That’s a healthy system if it’s jointly agreed to, and it doesn’t worry me at all if that’s what you’ve decided works for you.

However, both parties should have a sense of all investments, regardless of whose name they’re in. Retirement accounts can only have one person’s name on them, but they’re being built for the future financial health of the couple, and the balances should be available to both parties. I was a stay-at-home mom for a while, and so all of our retirement savings was done through my husband’s employer retirement plan. That doesn’t mean it’s all his money and I have none from that time period.

But what if we're not talking about a healthy balance of decision-making? If all of the financial decisions are dominated by one person, the culprit is likely one of two things:
(a) the passive party is intentionally putting their head in the sand and not stepping up to shoulder their share of the financial decisions, or
(b) the decision maker is controlling the information to the other party, which is a form of financial abuse

The ostrich
If you are a person who has eagerly abdicated all financial decisions to your spouse, consider your reasons for that. Does the thought of money make you so anxious that you avoid it at all costs? Talk to your partner. Ask them how the arrangement is working for them, and find out whether your relinquishing of all responsibility is negatively affecting them. You are leaving them to shoulder the whole burden themselves, without a real partner to lean on.

I’ve seen marriages where one party is deeply immersed in the daily money management and is keenly aware of mounting debt, while the other person is blissfully ignorant and is then treated to a shock when they have to face reality. It’s not fair to either party, and regular and honest communication is the only real solution. If the thought of open conversations about money is stressful to you or causes a lot of anxiety, this is an area where therapy might help.

If you need more motivation beyond being a good partner, consider what you would do if your spouse or partner got sick or died. How would you access your accounts and make sure the bills are paid? Do you know where the passwords are kept? Would you know where to look to track down your investments or retirement accounts? If your spouse has a will or life insurance, do you know where you’d go to access those important documents?

Financial abuse
Option b, financial abuse, is very real, very common, and deeply alarming. Here are some frequent signs of financial abuse:
• Your partner controls all of the accounts and won’t allow you access to them.
• Your partner gets defensive or angry when you ask basic questions about your joint finances.
• If your signature is required to file a tax return or get a loan, your partner doesn’t show you all the related documents – you’re only allowed to see the signature page.
• You’re asked to sign forms that you know contain fraudulent information.
• You are discouraged from working or having your own money, or the other person controls your paycheck from the moment it is deposited.
• Your partner refuses to tell you how much they earn.
• Your spending is scrutinized and criticized.

If these red flags sound familiar to you, please take a step back and consider what might be going on. Financial abuse keeps many spouses from leaving their partners because they’re afraid they won’t be able to support themselves and their children, but there are resources and legal protections for people who have been subjected to financial abuse.

Consider who in your life might be knowledgeable about professionals or resources that might help. Your local bank teller might have had training on financial abuse, or might be able to direct you to someone who has. If you’ve been hiding your spouse’s misconduct from your family, consider reaching out to them. If you’re concerned that your partner is looking at your internet browser history, head to the public library and search for resources on the public computers there. Search for “IRS Innocent Spouse Relief” if you’re worried that you signed a fraudulent tax return (or someone signed on your behalf). Your state may have laws on the books which provide relief for someone who was subjected to financial abuse. Search your state’s name and the term “financial abuse” or “economic abuse.” Contact your local domestic violence organization and find out if they have information or resources. The two articles below are a good place to start.
https://dfpi.ca.gov/2022/10/04/financial-abuse-is-domestic-abuse/
https://nnedv.org/content/about-financial-abuse/

You’re also welcome to contact me, and I will give you the best advice I can, free of charge. You are not alone.

[Photo by Firmbee.com on Unsplash]

Allison V. Bishop, CPA - Financial Coach My mission is to assist my clients in aligning their financial decisions with their values and to pr

If you haven't filed your taxes yet and your household's combined income for the year is $60,000 or less, you can get your taxes filed for free! The Ca$h Coalition of Maine offers free tax filing for those that qualify. Go to https://www.cashmaine.org/free-tax-prep/ to either find a "scan and go" location near you, sign up for an appointment, or use their free online filing service.

I recently e-mailed some tips for getting out of credit card debt to a colleague of mine to pass along to a client. I was going to turn them into a blog post, when I was surprised to see that I already had published similar advice back in 2019! I dusted it off and am sharing the full text below:

The Basics: How to Get Out of Credit Card Debt and Start Saving

I’ve seen a trend lately of people who aren’t in serious debt trouble, but who are carrying a relatively small amount of credit card debt – a few thousand dollars – and are having difficulty breaking that cycle. In nearly every case, they also have no cash savings. Spoiler alert: this is not a coincidence.

We all have expenses that pop up from time to time which often fall into the following categories: car or home repairs, medical or vet bills, and kid expenses. You may know that you’re going to need new tires on your car, or you may be surprised by a trip to the ER, but these things pop up all the time, and many times are too big to be paid for out of your monthly cash flow. You need a cash cushion to absorb them so that you don’t resort to putting the expense on your credit card with no real plan to pay it off.

The most important thing I can tell you is this: Credit card debt becomes nearly impossible to pay off if you’re continuing to use the credit cards, as it’s a moving target. You have to stop using your credit cards if you want to pay them off. The only way to avoid using them going forward is to have some amount of cash available to cover unexpected expenses. Many people in this situation throw every extra dollar at their credit card debt, because it’s carrying such a high interest rate, and they know that that’s a bad thing. But that means that they never have savings when they need it.

My advice to people in this situation usually looks something like this:

1. Set up a savings account in your bank and fund it however you can – with your tax refund or a bonus or more gradually, with monthly automatic transfers. Aim for an initial goal of $2,000-$3,000, and don’t stop saving until you get there.

2. Use that savings to pay for things that you can’t manage out of regular cash flow. Do everything you can to avoid using credit cards.

3. Figure out how much you can afford to pay on your credit cards each month, and make that a priority. You may have to make other sacrifices for a period of time to get rid of this debt.

4. Consider ways to reduce the interest rate on your credit cards, whether that’s by negotiating down the rate, transferring to a 0% interest credit card, or a personal loan from a bank.

5. If you’re still building your savings and find yourself with “extra” money – whether you’re in a 3-paycheck month, your car is finally paid off, or it’s bonus time at work, put half of that money towards your savings account and half toward your credit card debt. If your savings account is already at a comfortable level, you can put all the money towards your debt.

6. Once your credit card debt is paid off, use the monthly payments to increase that savings cushion to a higher level – maybe something in the $5,000-$10,000 range.

This savings cushion is different from a true emergency fund. An emergency fund is designed to be available to pay the mortgage or rent and to put food on the table if you experience a life-changing event such as a job loss or severe illness. That money is sacred and should be only touched in cases of true emergencies. People with credit card debt usually don’t have an emergency fund, or any savings at all. I try to have them start with a modest savings account as described above, and then once they’re out of high-interest debt they can make serious progress towards building a real emergency fund. It’s very difficult to build an emergency fund if you’re also facing 22% interest rates on your credit card debt.

I have some clients who I see on an ongoing basis who have been remarkably successful in getting a handle on their credit card debt and also building a small savings cushion at the same time. The key is usually their level of motivation; if they’re done with debt and can’t take it anymore, I find that they are able to take the necessary steps to build this small amount of savings, and they stop using credit cards entirely – often they choose to cut them up as part of the process. They can see the light at the end of the tunnel and can visualize what their lives will be like when hundreds or thousands of dollars aren’t going out the door every month to pay down old credit card debt.

You can see my other blogs, relating to money and relationships, podcast reviews, and setting financial goals at my website: https://allisonbishop.com/blog

Photo by Clay Banks on Unsplash

Home - Allison V. Bishop, CPA - Financial Coaching I help my clients to gain clarity, focus, and direction around their money by identifying their priorities and coming up with a plan to reach their goals.

I'm hosting a free webinar on January 31 that's chock full of information for parents of middle and high school students who are interested in learning more about paying for college in the current environment. My friend and colleague Bill Smith will be presenting, and I learn from him every time I watch him. He's the person I go to with my own questions about paying for college.

The webinar is free, but you can register here:

Understanding College Financial Aid and Paying for College Join college financial aid expert Bill Smith as he demystifies financial aid in today's college environment

New blog up on the website, called Overcoming a Common Money Stumbling Block. Full text here, but check out my other blogs at the link at the end.

A few months ago I started to recognize a pattern that some of my clients were struggling with when I’d ask them to come up with a summary of their spending. It turns out that they’d hit an expense that could have fit into a couple of different categories, and then they were stuck. For example, they’d pay for parking because they traveled to Boston for a performance that their child was involved in. They were unsure what to do, because it could be classified as parking, or as travel, or as child-related activities.

Another example is something like a higher-than-normal gas expense because you drive to go skiing a couple of hours away. Should be categorized as “Gas”, or “Skiing”?

These are pretty low-stakes problems, right? Nothing bad is going to happen if you categorize an expense incorrectly. However, hardly anyone truly enjoys tracking their expenses, and we need to make the process as smooth as possible in order to not give up at the first roadblock.

My philosophy on these kinds of expenses that aren’t always obvious is to go back to the source. In the parking case above, I’d put that as a child-related activity, because that’s the underlying reason it was incurred in the first place. If the child hadn’t had an event in Boston, they wouldn’t have parked there. I’d call the gas used for skiing a Ski expense. Even meals and snacks that day I’d probably include in the Ski category, assuming it’s likely I wouldn’t have gone out to eat that day had I not been skiing.

I like to know how much every category of my life costs me. If I stopped skiing or my child stopped playing the flute, I want to know how that would change my spending. I see it as artificially inflating my monthly gas expense if I include a tank that I only needed because I drove to a ski resort. My Gas category should be just my normal gas consumption that I incur in my regular life.

I’m certainly not over the top on this. I make a quick determination and move on. I’m not going to agonize over whether I had some gas left in my tank after the ski trip. It’s just designed to give me a reasonable sense of what that activity costs me in total. Don’t overthink it – just be consistent over time in how you record these sorts of expenses.

See my other blogs, including about relationships and money, and lending to family and friends, here: https://allisonbishop.com/blog

[Photo by Towfiqu barbhuiya on Unsplash]

Home - Allison V. Bishop, CPA - Financial Coaching I help my clients to gain clarity, focus, and direction around their money by identifying their priorities and coming up with a plan to reach their goals.

New blog up today on the website! All about things to consider when lending money to a loved one. Full text is below, but you can read all my blogs on my website: https://allisonbishop.com/blog including money dates, setting financial goals, and combining finances.

I had a client come in recently who wanted to talk about lending a significant amount of money to a family member. It’s not something I see a lot, and it got me thinking about what you need to consider before lending money.

Lending money to a loved one might make sense if one person has money sitting making almost no interest in the bank. They can lend it to someone they trust for a higher interest rate than they’re currently receiving, but a lower interest rate than the borrower would pay a bank. If the borrower is conscientious about paying it back, both parties benefit.

However, I think you have to carefully consider the following:

• Most importantly, don’t lend more than you can afford to lose. Hopefully you will see that money again, but if you don’t, it can’t be so much that it will jeopardize your own financial stability or future.

• Formalize the loan with a signed agreement, including a payment schedule. This not only signals that you’re taking it seriously and are expecting repayment, but also provides each of you with clarity regarding the timing and amount of each payment.

• This one might be controversial, but I’d also want to know how the person was planning to repay me. What source of income will they have that will make it realistic that they can make the payments? A bank won’t lend you money unless they know that you have the income to repay it; why should an individual be any different?

Lending money to family or friends can come fraught with emotions, and they’re usually not the warm fuzzy ones. As the person being asked for a loan, no one is looking out for your interests except you. You might be under a lot of pressure to lend the money, but make sure you’re not making a decision out of guilt. If the loan goes bad and you never see that money again, it could cause a lot of resentment and poison the relationship. Then you’re left with no money and no relationship. If you’re concerned about that happening and you can easily afford it, consider making a gift rather than a loan, with no expectation of repayment.

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Hi all - I just posted a new blog on my website, called Taxes in Divorce. The full text is right here, so share it with anyone you know who might find it useful:

Heading into a divorce, you’re likely so overwhelmed with the legal, emotional, and financial issues that you’re dealing with that the last thing you probably want to be thinking about is how it’s going to affect your taxes. But considering the tax effects of your decisions can make a big difference to your financial situation down the road.

Here’s a few of the major ways that your taxes can be affected by getting a divorce:

1. Filing Status: In general, whether you file as Single, Head of Household, or Married Filing Jointly (or Separately) is entirely due to your marital status on the last day of the tax year. If your divorce is final as of December 31, you will file either as Single or Head of Household (if you are the custodial parent to at least one dependent child). If your divorce is still in the works as of December 31, you will have to file Married Filing Jointly or Married Filing Separately. However, there is an exception to this rule: you can file as Head of Household while still married as long as you lived apart from your spouse for at least 6 months and otherwise fulfill the Head of Household requirements.

2. Selling Your House: The house is usually among a divorcing couple’s most valuable assets, and selling it can have huge tax implications. You may know that a single person can exclude $250,000 of capital gain upon the sale of their home, and that a married couple can exclude $500,000, so long as they have lived in the house for at least two of the past five years. If the house is sold immediately pursuant to a divorce, each spouse will be entitled to a $250,000 exclusion if the residency requirement is met. Whether to keep or sell the house, and who retains ownership, should be a well-considered decision. For example, if you and your spouse decide to retain joint ownership but only you and your children live in the house, although it may make sense from a financial and tax perspective, that arrangement keeps you and your ex-spouse legally and financially entwined in a way that may not be beneficial to both of you. In such a case, each spouse would be entitled to the $250,000 exclusion upon the ultimate sale of the house, even if only one satisfies the residency requirement.

3. Spousal Support: For all divorce or separation agreements signed after 2018, alimony is not taxable to the recipient, nor is it deductible by the payor. [See note below for details of agreements signed December 31, 2018 or earlier, including the taxation if such agreements are modified.]

4. Child Support: Child support payments have no tax effects – you cannot deduct them if you pay them, and you do not have to include them as taxable income if you receive them.

5. Claiming the Children: The custodial parent (who has custody of the child for more than half the year) is entitled to the exemption for the child [Note: in 2022, the exemption amount is $0]. However, the divorce decree can award the exemption to the other parent for a period of time; in that case, the custodial parent will be required to file Form 8332, releasing the exemption to the non-custodial parent. The parent claiming the child in any given year may also claim the child tax credit; however, the earned income credit, Head of Household status and childcare expenses may only be claimed by the custodial parent, regardless of which parent claims the exemption.

You may be facing even further tax issues in your divorce: retirement plans, allocating jointly paid estimated taxes or prior year tax carryforwards, property settlements instead of (or in addition to) alimony. For any of these cases, before you sign your divorce decree, it’s wise to consult a financial professional who understands the tax issues surrounding divorce – even better if you can involve them earlier in the process.

Old tax law (for divorces signed prior to December 31, 2018):
Spousal support is generally treated as taxable income to the recipient and deductible by the payor. However, the spouses may choose to opt out of considering payments as alimony for tax purposes, as long as it is recorded in the divorce decree and the recipient spouse attaches the decree to his or her tax return every year of such payments. For decrees executed on or before December 31, 2018 and amended after that date, the spousal support will be treated as not deductible or includible as taxable income as long as the modification (a) changes the terms of the support and (b) states that the alimony or separate maintenance payments are not deductible by the payer spouse or includable in the income of the receiving spouse

For divorces final before 2018, if the payor pays less than the full amount of child support and spousal support, then the partial payment is first considered child support and any remainder is considered spousal support.

Note: tax laws are constantly changing; the facts in this article are accurate as of June 21, 2022.

You can check out my other blogs, including on on starting over after divorce, and one about what to do when life throws you a financial curveball at https://allisonbishop.com/blog

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Home - Allison V. Bishop, CPA - Financial Coaching I help my clients to gain clarity, focus, and direction around their money by identifying their priorities and coming up with a plan to reach their goals.

A super helpful article which puts the current bear market into perspective. I don't give any investment advice, but of course the declining balances in my client's retirement funds come up in our meetings regularly, and I often have to talk people out of pulling their money out of the stock market when it goes down.

If you don't need to access your investments now, and are investing every month through a retirement plan, think of it as a great buying opportunity! Bear markets are a normal part of our economic cycle.
We are in it for the long haul when it comes to retirement and we should expect that we will sometimes hit bumps in the road.

https://www.hartfordfunds.com/practice-management/client-conversations/bear-markets.html

For the Mainers out there - you have to file a 2021 Maine tax return by Oct 31, 2022 in order to receive your $850 stimulus check. If you know someone who doesn't usually file because they're low income, please let them know of the filing requirement. They can reach out to Cash Maine for help in filing: https://www.cashmaine.org/

For the rest of us, you will be eligible if you can't be claimed as a dependent on someone else's return, and if your income is below $100k for a single filer, and $200k for married, filing jointly. Checks start going out next week, and most eligible taxpayers will receive them by mid-July.

Maine $850 inflation relief checks start rolling out Thursday The office of Gov. Janet Mills said 5,000 $850 checks will be sent out initially, then 200,000 per week after.

I get a lot of couples coming in to my office, and one thing that we tend to talk about is communication. What do you need to talk about, and how often? Note that right now I’m talking about a couple in a long-term relationship or marriage, who are sharing common goals. If you’re living with a boyfriend or girlfriend, but are keeping separate finances because you’re not on the marriage path, this level of communication is likely not appropriate for your situation.

It’s fine if one person is the primary bill-payer in the relationship, and is on top of the balance in the checking account much more so than the other person. Or maybe they’re interested in investing in a way that the other partner will never be. Where I see these couples get into trouble is when one person is hyper-aware of the finances, and the other person is living in a state of blissful ignorance. Especially if the family finances aren’t sailing along smoothly – the partner in the know can face huge amounts of guilt and stress, and the other is in for a rude awakening.

Both people in the couple are adults, and both need to have a sense of the family’s finances. Plenty of people have found out the hard way that they had absolutely no idea what their own financial picture looked like when they were forced into a reality check when their circumstances suddenly changed – most often due to the illness or death of a spouse, or divorce. The time to realize that you’re totally clueless about your financial situation is NOT when you’re grieving or suddenly facing a divorce.

I think you should formalize these meetings in terms of the time and place. This is an official meeting, and you need to take it seriously, and put it in your calendar. If it’s not scheduled, it’s not going to happen. Consider the time of day and day of the week – you need to be in the right frame of mind. I personally wouldn’t do well if we met at night when I’m drained. Also consider snacks, whether that’s a cup of coffee or a microbrew – make it special.

How often and what to talk about varies depending on where you are financially. Let’s start with the most intensive:

If you’re trying to dig out of a hole of debt, or are actively trying to rein in spending, I think you need to meet weekly at a minimum. In that conversation, talk about what you thought was going to happen last week (a paycheck was expected, certain bills were due) and then what actually happened. Then look ahead – what’s coming up during the next week and beyond? You need tight control on your finances for a period of time. And looking out further, is there something that needs to come onto the radar? Summer camp expenses due next month, or an upcoming car repair that you can’t put off any longer? You should also be communicating daily as things come up, but a structured weekly meeting is critical as well. Have one of those meetings also act as a monthly budget review for the prior month, as soon as you know what your actual spending looked like. You can also report on other progress then too, such as paydown of a debt or progress towards a savings goal.

Let’s say you’re one step up from there. Your spending is under control and you’re making progress towards savings and debt goals, but you still need regular check-ins. A monthly review may be the right level of communication. One of my clients writes up brief bullet points to communicate to me and his wife the good and the bad of the prior month. It’s a great way to focus our discussion on the important items. This monthly official money date doesn’t mean that you don’t communicate about money at other times during the month – it’s absolutely appropriate and necessary to alert the other person if you received a medical bill or other expense that was higher than expected, and you can talk about how to handle it as you’re making dinner or washing up.

And the promised land: the quarterly check-in. You’re ready for this if you family is living below your means, you’re easily covering your monthly expenses, and have cash in the bank to spare. I think it’s wise to review your investments on a quarterly basis. I have a net worth template that I update once a quarter, which summarizes our cash, investments, college savings, and retirement accounts. In January every year I also prepare a spreadsheet showing our actual average spending in every category for the prior year. That can provide enormous clarity in terms of understanding where our money is actually going.

If your communication level is working for you, go ahead and continue with your system. But keep in mind what you would do if you or your partner was suddenly unable to manage the finances. If you’re the person who isn’t hands on with the finances, make sure you know how to access all of your financial accounts electronically – and if you are the financial person, make sure you record user names and passwords in a place that your partner can easily access.

You can find my other blog posts on my website at https://allisonbishop.com/blog

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