Investing in a Green Future If you’re still managing bills and other financial matters the old-fashioned way, you could be missing an important opportunity to invest in the future of the planet. A thoughtful review of your financial life is likely to yield a wealth of strategies for nurturing a cleaner, healthier environment.

Green finances are good for the soul
Even with the best intentions, most people tend to put off changing the way they do things until tomorrow. But consider the environmental impact of continuing business as usual. The amount of wasted paper generated by bills and bank statements alone is staggering. A recent Javelin Strategy and Research report described the financial paper chain from U.S. households as being long enough to stretch around the globe more than 200 times.

Consider the potential benefit of all those households opting for electronic bill paying and banking. According to a study by Javelin Strategy & Research, “2007 Online Banking and Bill Payment”, all-green financial transactions could:

• Reduce greenhouse gases equivalent to the removal of 355,000 cars from the road
• Save enough energy to supply electricity to all residences in San Francisco for one year
• Eliminate enough solid waste to fill 56,000 garbage trucks

Being green is easier than you think
Given the urgent need for waste reduction, switching to paperless transactions is a pretty simple way to do a lot of good. In most cases, green financial practices provide practical benefits, too. Online financial management not only minimizes desktop clutter but also provides access to tools that promote efficient, organized money management.

• Online banking—Using electronic statements and debit cards can conserve tons of paper and save you loads of time and trouble. You can track your balances in real time on your bank’s website and transfer funds from your desktop. If a debit card is not your style, order checks made from recycled paper. Direct deposit not only saves paper but also cuts down on trips to the bank. It’s easy to set up with your employer, and paychecks generally clear faster.

• Electronic bill payment—You can arrange online payments with your bank or through various service providers. Bills from public utilities and mortgage and credit card companies often note the availability of this option. With bank bill pay, you enter the amounts you owe each month on your financial institution’s website. The bank then transfers funds from your account to your designated payees. The alternative setup works pretty much the same way—except you’ll make payments from the providers’ websites. Many providers also offer automated bill payment. By enabling you to schedule regular monthly payments, this option not only saves time but also helps to ensure against late fees and damaged credit ratings.

• Playing it safe—Tales of phishing scams and Internet security breaches make us all concerned about the safety of online banking and bill payment. But according to the aforementioned Javelin Strategy & Research report, most people overestimate the risk of online fraud. For instance, about 90 percent of cases of identity theft begin offline—with acquaintances or family members who steal victims’ bank statements or a copy of their password. Nevertheless, the public’s perception of increased risk has not gone unnoticed by the financial industry. As a result, most banks and other financial institutions have installed the highest level of data protection allowed by law.

However, even when the odds are in your favor, it’s important to avoid unnecessary risks. Report any unexpected changes in your account immediately. Above all, read your online financial communications carefully. Never respond to e-mails requesting your credit card numbers, computer password, or other sensitive information—regardless of how official the message may look.

Smart green investments might also benefit your financial health
The potential of environmentally responsible policies to build shareholder confidence, reduce energy and liability costs, and capitalize on new markets continues to fuel a greener corporate world. As a result, the number of options for supporting green business practices has grown steadily.

Before modifying your investment strategy, make sure you’ve done your homework.
Start by meeting with your financial advisor. Explain your primary environmental concerns as well as your financial goals. Then, discuss how to achieve the right balance between the two. By bringing together industry knowledge and an understanding of your priorities, an experienced advisor can help ensure that the investments you choose are consistent with all your objectives.

Your advisor can tell you about various investment vehicles designed to exclude companies that harm the environment and help you screen your existing investments. As you evaluate your portfolio, consider the following questions:

• Which companies are making the biggest contribution to the environment? Firms can show their commitment to the environment in a variety of ways:
o Manufacturing eco-friendly products
o Developing alternative energy sources and environmentally sound technologies
o Donating to major environmental initiatives
o Instituting energy conservation, waste reduction, and other green practices in the workplace

• Who needs to clean up their act? Identify major culprits. Send a message with your wallet to businesses that dump toxic chemicals in our waterways, poison the air with carbon emissions, and churn out solid waste like there’s no tomorrow.

• Where can I have the most influence? There may be some companies that could benefit from a little friendly persuasion. By investing in companies that don’t live up to your standards, you gain a say in their policies. You can organize with like-minded shareholders, express your views at annual meetings, and vote in proxies. Or you can choose a socially responsible investment vehicle to perform these functions for you.

Every little bit helps
A little foresight and awareness can go a long way in saving the planet. The following list highlights some additional ways to make your financial life a little bit greener:

• Go digital. Send electronic invoices, customer service inquiries, and other financial communications whenever possible. Saving financial information to PDF files to help eliminate hard copies is another great way to prevent waste.

• Think before you print. If printing a hard copy is absolutely necessary, save it and use the other side for another document.

• Keep it clean and safe. Avoid toxic waste and encourage paper mills to develop more eco-friendly practices by buying chlorine-free paper. Changing from petroleum-based inks to products with a soybean or linseed base decreases pollution.

• Stop the rising tide of preapproved credit offers and other throwaways. Opt out of credit offers online at www.optoutprescreen.com or call 888.5.OPTOUT (567.8688). Say no to junk mail at www.dmachoice.org.

Going green is a process that deserves careful and thoughtful consideration in light of your own personal objectives, and not all of the options outlined here will work for everyone. Be sure to consult your financial advisor—and your own conscience—to decide what makes the most sense for you.  8:09 AM •  1 Comments •

Can’t Make a Budget Work? Try Filling Your Buckets Whether you are trying to save money or lose weight, there is no one-size-fits-all solution. However, as with dieting, sometimes the financial strategies that work the best are a little bit offbeat, even fun. Consider, for example, the success of Bank of America’s “Keep the Change” program where your debit card purchases are rounded up to the closest dollar and the difference is transferred from your checking to your savings account. Another savings strategy found to be effective is the “bucket concept.” Rather than adhere to the traditional budgeting chore of writing down your expenses and tracking them each month, the bucket concept requires you to divide your spending into six categories and assign a specific percentage to each bucket.

The bucket approach was first encountered in Secrets of the Millionaire Mind: Mastering the Inner Game of Wealth by T. Harv Eker. In his book, a New York Times bestseller, Eker suggests dividing your income this way:

• 50% for necessities such as your mortgage or rent payment, car payments, groceries, utilities, gas, internet, cell phone, etc.

• 10% for long-term savings to fund vacations, car repairs, house maintenance, clothes, etc.

• 10% for retirement accounts such as your 401(k) plan or IRAs.

• 10% for fun.

• 10% for education, from repaying student loans or funding your continuing personal development to saving for your children’s college education.

• 10% for charity.

When making your allocations to each bucket, consider 100% of your total after-tax income. This means that, in addition to income you earn, you also divide inheritances, bonuses, even your tax refund into six categories. Eker’s key is that this money should never be commingled. That is, you cannot borrow from long-term savings to fund a dinner out or forgo your regular deposit into the education bucket when your charity bucket is empty and you want to contribute $100 to your friend’s bike-a-thon.

The easiest way to fund each bucket would be to open separate checking accounts and have the appropriate percentage of your paycheck deposited into each account. This may not be feasible with your employer and could involve significant banking fees. Of course, you can open a 529 college savings plan and an IRA and have your education and retirement accounts funded directly from your checking account. Also, if you have a 401(k) at work, that account is funded automatically before you receive your check.

Interestingly, however, many people report success with substituting jars for checking accounts, particularly for the fun account where it is easy to spend cash. Perhaps that’s because by actually placing money in a jar it encourages them to think about finance more often than at bill-paying time or during an annual review with a financial advisor. Using a jar also can be especially effective if you are trying to save for a family vacation. For example, as your family sees the savings accumulate, they may be more inclined to make sacrifices to stay within your food budget. Of course, if you’d rather keep your long-term savings in a money market account to earn interest, putting a piece of paper noting the amount you invested in that account could also serve to motivate your family.

In discussing the bucket concept with clients, there are some common reactions. Most notably, many say that they spend far more than 50% of their income on necessities. In fact, given the high cost of living in particular parts of the country, surviving on half of what you make may be an impossible goal. Naturally, you can adjust Eker’s percentages to reflect your own circumstances. For example, if you need 65% for necessities, you might drop education, charity, and long-term savings to 5%. However, you are encouraged to at least reflect on the possibility of living on 50% of your income. Often, simply considering the idea can help you start to prioritize your expenses and to think more proactively about what you are spending your money on each month. In fact, quite a few clients have come to the realization that they were living in a house that was too expensive for them.

Debt is another issue that can throw a wrench into Eker’s ideal percentages. If you have significant consumer debt, you may need to direct more than 50% to your necessities bucket in order to help you dig out of that hole as soon as possible. However, once you are out of debt, funding your long-term savings account can help you stay debt-free. That is, as your long-term savings account builds up over time, you’ll have a cushion so that you won’t have to pull out your plastic to manage an unexpected car or home repair bill. In that sense, your long-term savings can also function as the traditional “emergency account.”

Finally, Eker insists that your fun money be spent on a regular basis. Arguing that most budget plans fail because they create a spending plan that is too tight for comfort, Eker stipulates that fun money cannot accumulate for more than 90 days. Think of spending money on yourself as both a reward for saving in other buckets and as a means of re-energizing yourself to save more.

If you are considering implementing the bucket theory, it is suggested you keep in mind another piece of advice from T. Harv Eker. He believes that what we focus on expands and grows. Accordingly, he suggests that for at least seven days after implementing any financial self-improvement plan, you do absolutely no complaining – not out loud, not in a whisper, not even in a passing thought. The positive energy you create – in combination with the structurally sound bucket approach to budgeting – may be just what you need to move further down the road to financial freedom.  8:37 PM •  0 Comments •