COMMON Financial Advice

Dear Readers,

We are moving this blog to www.commonfinancialadvice.com.

This is a special forum that advocates ethical, unbiased expert financial advice for everyone (not just the wealthy!).

Because good advice can improve life, we’re here to show you what that looks like, what it doesn’t look like and how to get it to work for you.

Read the blog posts, watch the videos, and join the community. If you have a burning question, post it. If you need one-on-one advice, ask for it. Welcome.

Should you buy gold?

By: Tammy Kraig, CFP^®

It is hard to open a newspaper or flip to a financial channel without seeing the price of gold for the day…or an advertisement to buy gold coins. Should you buy gold now?

Why are investors buying gold? Investors worry that the U.S. and other developed nations will spend years digging themselves out of debt and that stocks will therefore underperform. They believe that gold will provide protection against inflation of other assets and currencies, including the U.S. dollar. Many investors view gold as having more buying power than the dollar.

Gold is also seen as a hedge against other investments. In other words, if things are going badly, the thinking goes, gold should do well. And in fact, gold has performed well in the past ten years. On average over the last ten years, gold prices have increased over 18% a year. By comparison, the broad stock market in those ten years has risen an average of 2.5% per year.

How high can gold go? While gold is now over $1,700 per troy ounce, since 1967 gold has averaged about $700 per ounce (price stated in 2010 dollars). As with any investment that has risen significantly higher than its historical average, investors have to have solid reasons to assume that gold is not a bubble. In fact, in the 1980’s, gold prices soared over concerns about South Africa and the Apartheid situation. And if you had bought Krugerrands in the early eighties when there was a gold frenzy and the price reached over $800 an ounce, unless you sold quickly before the price suddenly plunged, you could have sold at a loss or held it for 20 years or more (until the last few years) to get your initial investment back.

If you decide that there are good reasons to expect that gold will go higher and that a small portion of your portfolio can be used as a hedge against inflation and political uncertainty in the Euro zone and the world, then how do you buy gold?

You can buy physical bars and coins of gold from coin dealers or on eBay. You will, of course, pay a premium over the spot price or current price of gold to compensate the seller for his efforts. In general, coins command a larger premium because collectors value them for their artistic characteristics as well as gold content. Gold bars or bullion are a “purer” way to pay for gold without the artistic value premium. If you take possession of the gold you have to store it in a safe place and/or insure it, which adds cost.

Perhaps the easiest way to buy gold is to buy a gold ETF. Exchange Traded Funds are similar to stocks in that they can be bought and sold during the day, but they are also similar to mutual funds in that the investor is buying a piece of a basket of assets. In the case of gold backed ETF’s, the funds own gold bullion and store it in vaults. The managers of the funds aim to reflect the price of gold, and the investor owns a fractional share of the gold. Fees for administering the funds, storing, and insuring the gold are deducted from the fund.

You can also buy the shares of individual mining companies or buy a mutual fund that owns stock shares in a number of different mining companies. These stocks and funds, however, do not always track the price of gold as ETFs do.

Before you buy gold, or any investment, a primary consideration is being able to sell it if and when you want to. Is it a liquid investment? We all know that if we sell our grandmother’s gold bracelet we are going to be offered 25 cents on the dollar of its replacement value.

Right now, however, there is a thriving market for gold bars, bullion, and coins thanks in large part to online markets. It goes without saying, that the seller must be very careful with whom he deals. Dealing in person with a commercial, local dealer may be less troublesome than working with someone online or mailing the gold for an appraisal and offer to buy. An advantage of Gold ETFs is that they are very liquid. Demand can change quickly, though, and investors must monitor political events, economic news, and investor sentiment. Gold prices are very volatile. Today as I’m writing this, gold prices have dropped 3.51% to $1,744.60 per Troy ounce.

As investment managers, we stress diversification of investments to reduce volatility and mute temporary rough patches. If you are concerned about inflation, or the creditworthiness of various governments, you may be comfortable investing a small portion of your portfolio in gold as a hedge and as a diversification from the stock market. However, do your homework. Research ETFs and their fees. Do even more research if you are buying physical gold bullion. And unless you are planning to leave this asset to your children or grandchildren, stay informed and be ready to sell.

Tammy Kraig is a Certified Financial Planner™ professional licensed with a registered investment adviser that provides personal financial advice online for a fee. She specializes in working with couples to help them identify and work toward their investment and retirement goals, long-term or short. Contact Tammy for help with virtually any financial need.

Current Condition of Social Security

By: Rick Kahler, CFP^®
At the heart of America’s overspending are two entitlement programs, Social Security and Medicare. Most Americans count on Social Security for a significant portion of their retirement income and on Medicare for their retirement health care.

I’m often asked, “Will Social Security be there for me when I retire?” That’s a fair concern when you consider the staggering size of our national debt, which is small compared to the “off balance sheet” liability represented by the unfunded obligations of Social Security and Medicare. Most lawmakers agree off-record that the only way these programs will continue to exist is if we make cuts in benefits and broadly raise income taxes on all taxpayers, not just the rich. Such a scenario probably includes a European-style national VAT (value added tax).

The good news is that when you take politics out of the equation, saving Social Security could be fairly simple. Its solvency could be guaranteed by fixes such as extending the retirement age to 70 and increasing the Social Security tax. I have little worry that current recipients will see any reduction in benefits. For those not yet retired, my best guess is the program will “be there” in some shape or form.

To qualify for Social Security benefits you need to have worked at least part-time for a cumulative total of at least 10 years. Your benefit is computed on your average lifetime earnings of the past 35 years, adjusted for inflation. Having a high salary the last few years of employment will help raise your average, but not significantly.

In their current form, when compared to other similar immediate annuities, Social Security and Medicare are a great deal. They represent a complete security net of retirement, disability, and health insurance benefits that are indexed to inflation. The only little flaw in the formula is that the benefits are so good, we are having to borrow money to deliver them. Only time will tell if Congress increases taxes enough to retain the current benefits or whether we will see some decrease in benefits.

Currently, while Medicare benefits begin at age 65, the qualifying age for receiving full Social Security benefits is being gradually increased. It tops out at 67 for those born in 1960 or later. Some retirees, however, elect to start receiving reduced benefits (70% of the full amount) at age 62. The thought is that the present value of gaining the five years of reduced benefits offsets waiting until 67 for the higher amount.

That reasoning is absolutely correct—if you plan to die early. Generally, if you are in good health and don’t have a genetic history of cancer or heart disease, you are probably best off waiting until 67 to take your Social Security. It also makes sense to wait until age 67 if you are still working at age 62, as any earnings above the $14,160 limit will reduce your Social Security benefit.

For more information, visit a local Social Security office, call (800) 772-1213, or go to www.ssa.gov.
Rick Kahler is a Certified Financial Planner™ professional licensed with a registered investment adviser that provides personal financial advice online for a flat fee.He is an author of four books on financial psychology and recognized by BusinessWeek magazine as one of the 15 most experienced financial planners in the nation. Contact Rick for help on virtually any financial need.

Financial advice you can depend on

If you wonder why it is easy to get “free” financial advice on the web, but hard to get “real” (i.e., actionable) advice from a professional at a reasonable price, here are the reasons.

1. Most financial advisors are not trained to offer advice in modular, usable amounts to middle income people. Instead, their training and continuing education are designed to help them solve complex problems common to high net worth, high income folks who pay them higher fees.
2. Free financial advice is offered by financial services companies to set you up for a sale. It isn’t “bait and switch”, precisely. In sales parlance, advice is used as a “loss leader”. The advisor gets a prospect, the prospect gets “free” or inexpensive advice. But, strangely, prospects often walk away from that kind of meeting having purchased a financial product (mutual fund, CD, insurance policy, annuity). It seems, in this fact pattern, as if “financial services” is not about solving your problems or answering your questions, but instead is about selling you a financial product.
3. It is difficult to know who to trust! How do you know who are the advisors with the real expertise and the ethical white hats. For safety’s sake, you need to look to the training, licensing details and reputation of each advisor. For taxes, see an Enrolled Agent or a Certified Public Accountant. For technical investment questions and securities analysis, you may choose to see a Chartered Financial Analyst. For general financial planning, investment, cash flow management and life event help, see a Certified Financial Planner professional.  All these professionals have received up-to-date, current training and have the analytical tools to help you make good decisions.
4. It’s hard to get “face time” with an expert in their office without paying high fees. However, you may be able to get online access to these folks at a reasonable price through sites that help you identify the problem you need advice on.

 

If you want free advice, you may be in for an unpleasant experience. But if you want help in making an important decision and will pay an advisors hourly rate or flat fee for good advice, there is help out there. Dependable advice must offer the option of recommending doing nothing, waiting for a better time or opportunity or price or milestone before acting or walking away when the issue is currently too risky. The professionals who give advice this way are called “fiduciaries”. They are worth their weight in gold and are beginning to be available to all. Advisors who blog here can serve you as fiduciaries. You can also examine some credentials of other real pros here.

 

Kevin Condon is a Certified Financial Planner™ professional licensed with a registered investment adviser that provides personal financial advice online for a flat fee. His firm, located in Boulder, Colorado, includes a portal through which expert, independent advisors give advice.  Find advisors there for help on virtually any financial need.

The Pickle Jar

The pickle jar as far back as I can remember sat on the floor beside the dresser in my parents’ bedroom.

When he got ready for bed, Dad would empty his pockets and toss his coins into the jar. As a small boy, I was always fascinated at the sounds the coins made as they were dropped into the jar.

They landed with a merry jingle when the jar was almost empty. Then the tones gradually muted to a dull thud as the jar was filled.

I used to squat on the floor in front of the jar to admire the copper and silver circles that glinted like a pirate’s treasure when the sun poured through the bedroom window. When the Jar was filled, Dad would sit at the kitchen table and roll the coins before taking them to the bank.

Taking the coins to the bank was always a big production. Stacked neatly in a small cardboard box, the coins were placed between Dad and me on the seat of his old truck.

Each and every time, as we drove to the bank, Dad would look at me hopefully. ‘Those coins are going to keep you out of the textile mill, son. You’re going to do better than me. This old mill town’s not going to hold you back.’

Also, each and every time, as he slid the box of rolled coins across the counter at the bank toward the cashier, he would grin proudly. ‘These are for my son’s college fund. He’ll never work at the mill all his life like me.’

We would always celebrate each deposit by stopping for an ice cream cone. I always got chocolate. Dad always got vanilla. When the clerk at the ice cream parlor handed Dad his change, he would show me the few coins nestled in his palm. ‘When we get home, we’ll start filling the jar again.’ He always let me drop the first coins into the empty jar. As they rattled around with a brief, happy jingle, we grinned at each other. ‘You’ll get to college on pennies, nickels, dimes and quarters,’ he said. ‘But you’ll get there; I’ll see to that.’

No matter how rough things got at home, Dad continued to doggedly drop his coins into the jar. Even the summer when Dad got laid off from the mill, and Mama had to serve dried beans several times a week, not a single dime was taken from the jar.

To the contrary, as Dad looked across the table at me, pouring catsup over my beans to make them more palatable, he became more determined than ever to make a way out for me ‘When you finish college, Son,’ he told me, his eyes glistening, ‘You’ll never have to eat beans again – unless you want to.’

The years passed, and I finished college and took a job in another town. Once, while visiting my parents, I used the phone in their bedroom, and noticed that the pickle jar was gone.. It had served its purpose and had been removed.

A lump rose in my throat as I stared at the spot beside the dresser where the jar had always stood. My dad was a man of few words: he never lectured me on the values of determination, perseverance, and faith. The pickle jar had taught me all these virtues far more eloquently than the most flowery of words could have done. When I married, I told my wife Susan about the significant part the lowly pickle jar had played in my life as a boy. In my mind, it defined, more than anything else, how much my dad had loved me.

The first Christmas after our daughter Jessica was born, we spent the holiday with my parents. After dinner, Mom and Dad sat next to each other on the sofa, taking turns cuddling their first grandchild. Jessica began to whimper softly, and Susan took her from Dad’s arms. ‘She probably needs to be changed,’ she said, carrying the baby into my parents’ bedroom to diaper her. When Susan came back into the living room, there was a strange mist in her eyes.

She handed Jessica back to Dad before taking my hand and leading me into the room. ‘Look,’ she said softly, her eyes directing me to a spot on the floor beside the dresser. To my amazement, there, as if it had never been removed, stood the old pickle jar, the bottom already covered with coins. I walked over to the pickle jar, dug down into my pocket, and pulled out a fistful of coins. With a gamut of emotions choking me, I dropped the coins into the jar. I looked up and saw that Dad, carrying Jessica, had slipped quietly into the room. Our eyes locked, and I knew he was feeling the same emotions I felt. Neither one of us could speak.

~Anonymous

To Defer or Not to Defer; The Ultimate Pre-Retirement Question

By: John D. Buerger, CFP^®

Should you fund your retirement plan (401(k), IRA and Roth IRA), or not? Which plan? How much?

As a financial planner, these are the most common questions I am asked by clients, workshop and Webinar attendees. Ask three people and you’ll probably get three different answers. Here’s my answer (and it is sure to be different as well):

No Simple Answer

To start, every case is different so there is no single one-size-fits-all answer.

The solution for your specific case depends on a number of variables: your age, current income, chances you will earn more later in life, best guess of your retirement income sources (pension? social security? inheritance?) and best guess of tax rates in the future. They’re all critical to the answer of whether or not to put money into an IRA, a Roth IRA or some kind of non-qualified retirement savings account.

Basic Rule of Thumb

The general objective of good retirement and tax planning is to always pay the least amount of taxes whenever those taxes must be paid. Note that I didn’t say, “Always pay as little taxes today as possible.”

Example: If Susan is young (in her 30s, let’s say) and in the early part of her career and earning cycle, putting money into a 401(k) plan will help her save taxes at a low rate (maybe 15 percent) in order to potentially pay taxes at a much higher rate later on (when she retires and has grown used to having more income to work with). This works against the principle of paying the least amount of taxes whenever those taxes are paid.

So if you think your nearer the bottom of your lifetime pay scale, then don’t defer taxes and fund a Roth-type or regular retirement investment account – at least for any dollars beyond a company match (more below).

Calculator Fail

This is the problem with most financial calculators for IRA contributions and much analysis done by tax professionals and CPAs. The calculations use static data and assume that tax rates and your income will stay the same for the rest of your life. Neither are valid assumptions for most people in real life.

Advantage of 401(k) Plans

401(k)-type plans have two major advantages. The first is that the company may match any contributions you make to the plan (up to a limit). This is “free” money being offered to you as an incentive for you to use the program. No higher tax rate in the future can make “free” money in the present undesirable. You should always contribute to your plan up to the match limits.

The second advantage of 401(k)-type plans (including 403(b) and other deferred compensation plans available through your employer) is that they are automatic forced savings. You never see the money so never realize it’s gone.

“Out of sight, out of mind” is a very powerful financial concept for building wealth.

A Different (and Easier) Way to Answer the Question

Look at your lifestyle, income and expenses today (hopefully you’re spending less than you earn). If that lifestyle is about what you expect to enjoy in your retirement years, then you defer the taxes and make the contribution to your 401(k)-type or IRA plan. If you expect that your retirement lifestyle will require more income than you’re earning today, then save the money in a Roth-type or regular savings account.

Furthermore, if you think tax rates are going to go up in general before you retire, then you will want to trim how much goes into tax-deferred savings and put that money someplace else.

No Pass on Savings

In order to build a more secure future for you and your family, you simply must start saving. Ten percent of your income is the minimum and really 20 percent is preferable. That may mean cutting back on current expenses and/or lowering your quality of life, but I’d rather make a few small sacrifices when I’m young than have to make huge ones when I’m old and set in my ways … or risk running out of money before I run out of life.

So if you choose not to defer compensation today (don’t use your 401(k)-type program), you still have no excuse to not save money. I know that is a bitter pill to swallow for many people, but if you don’t want to rely on handouts from others in the future, it is acting responsibly.

John Buerger is a Certified Financial Planner™ professional licensed with a registered investment adviser that provides personal financial advice online for a fee. John is a wealth coach and an online advice pioneer who teaches his clients to make better money choices.Contact John for help with virtually any financial advice need.

Don’t be the last one to know the score

By: Rick Kahler, CFP^®

Your credit score, that is. Your credit is often checked for reasons beyond just applying for a loan. If you apply for a job, an apartment, or an insurance policy, a company will probably look at your credit report to find out more about you. As a result, a strong credit report will benefit you in many areas of your financial life.

When was the last time you pulled your credit report? Generally, most of us only see our own credit reports when we apply for a loan. Unfortunately, at that point it may be too late to fix any mistakes. The time to view your credit report is before you apply for that loan or credit card.

You can obtain one free copy of your credit report from each of the three credit bureaus (Equifax, Experian, and TransUnion) once a year from annualcreditreport.com. Don’t be fooled by the catchy commercials for freecreditreport.com; its business is selling credit reports, not giving them away. To diligently monitor your credit report yourself, either get all three reports at the same time every year or pull one every four months.

It’s important to note that free credit reports will not list your credit score. You must pay for that information, usually about $20. A good site to purchase it from is myfico.com.

Most people who look at their credit reports for the first time find errors. You want to be sure everything on your report is accurate and up to date. It’s also important to look at all three instead of just one report, because each bureau collects and reports slightly different information.

What affects your credit report?

• The single largest element is your payment history. The best thing you can do to improve your score is to make all payments on time.
• The next biggest contributor is the amount of credit you currently have used. Don’t max out your cards, as this shows an inability to handle your available credit.
• The third largest factor is the length of your credit history. This is why young people should establish credit early.
• The fourth component is the amount of new credit you have received. Creditors prefer you to have older credit accounts, not a lot of new ones.
• The last element is the variety of your accounts. Your score will go up if you have a car loan, credit card, and home equity loan as opposed to three credit cards.

If you find errors on your credit report or need to recover from bad credit, don’t be fooled into using credit repair agencies or credit monitoring agencies. These are scams, and you would be paying them to do something you can do yourself. A detailed resource for more information is The National Consumer Law Center’s book, Guide to Surviving Debt. http://shop.consumerlaw.org/forconsumers.aspx

Your credit report says a lot about you. It’s a good idea to check it regularly and make sure it’s telling the truth.

Rick Kahler is a Certified Financial Planner™ professional licensed with a registered investment adviser that provides personal financial advice online for a flat fee.He is an author of four books on financial psychology and recognized by BusinessWeek magazine as one of the 15 most experienced financial planners in the nation. Contact Rick for help on virtually any financial need.

Debt

By: John Buerger, CFP®
DEBT is the four-letter-word of personal finance.

Most people have some debt to deal with. Once the debt level gets to a certain point it is nearly impossible to get rid of. Interest payments crowd out all the productive (and fun) uses of your money until the whole thing implodes in an avalanche of expletives and misery.

GOOD ADVICE?

The personal finance gurus have their theories on how to deal with debt. There are some good ideas with hard and fast rules and heated discussions about whether any debt is good debt.

These advisory approaches, however, treat you – the person in debt – as a child who cannot make good choices for yourself. I have found (in my personal, parental and professional life) that if you treat people as inferior or incapable, they make every effort to meet your expectation of them.

So let’s try something different.

THE ROOT CAUSE

I believe (please give your opinion in the comments) that the root cause of our problem today is the triumph of marketing. Immediate gratification and impulse beat out rational thought, logic and patience – and we as a society have been deluded into thinking that such behavior should now be celebrated.

If you want something … you should have it.

If you can’t afford it … who cares? You should have it anyway.

SAVE BY SPENDING

See that lovely flat screen TV. You know you want it. You might come up with some bogus excuse but the truth is you WANT the TV. You don’t NEED the TV. Nobody ever died because their TV wasn’t big enough.

Here is where the logic (or lack of logic) really get’s turned upside down – You can “save” $500 by buying that flat screen TV today. You want it … and now you can have it and “save” at the same time. Yay!

You don’t really “save” anything by buying something – your bank account is still smaller. But good marketing and a societal shift that gives a free pass to and actually encourages anybody who falls for this trick allows us to blow our budgets every year and actually feel good about it.

THE WORST OFFENDER

By far the biggest offender is our own government who not only spend more money than they make, but encourage us to do the same with our own accounts. Some example for our “leaders” to set. It is no wonder that most Americans are in hock up to their eyeballs.

YOU KNOW IT’S A FOUR LETTER WORD WHEN …

If this conversation bothers you, you’re not alone.

Debt does that to you. It is the raw underbelly of personal finance. Debt is at the heart of more family financial arguments than all the other topics combined.

Debt is the giant, stinky elephant in the room that nobody wants to talk about, but if we don’t start dealing with it very soon it will kill us all (probably bury us in manure).

FOUR STEPS TO DEAL WITH DEBT

Step #1 – When at all possible, spend (including minimum payments) MUCH less than you make. 20% of gross income is a good start.

Take those real savings and (1) build cash reserves of three months of expenses and then (2) pay down the debt (usually start with the highest interest rate).

Step #2 – Negotiate your debts.

No damage is done by asking for an interest rate reduction or debt workout. They won’t ding your credit score and they won’t (can’t) make the terms on your account any worse, so ask! Do this for yourself, though. Don’t pay someone else to renegotiate your debts for you.

Step #3 – Move Up – add a second job or add value to your current work to be paid more.

Where you are is where you are but you can always grow from there. Increase your income, but don’t increase your expenses or lifestyle. Every extra dollar you earn should go directly to saving or debt retirement.

Step #4 – Be patient.

How do you eat an elephant (how appropriate)? One bite at a time. You didn’t build up this debt overnight. You won’t get rid of it in a week, either.

About the Author

John Buerger is a Certified Financial Planner™ professional licensed with a registered investment adviser that provides personal financial advice online for a fee. John is a wealth coach and an online advice pioneer who teaches his clients to make better money choices.

Knowing your Goals for Retirement May Help the Process

By: Heidi Davis, CFP®

I get to work with wonderful couples in their late 40’s, 50’s and 60’s that are planning their retirement.

Many hope retirement will allows them to:

• Volunteer for a cause close to their heart
• Travel more domestically and internationally
• Try out a new job
• Spend more time with and help their kids and grandkids
• Exercise more
• Develop and expand their hobbies and
• Meet new people experiencing retirement also.

To achieve your retirement dreams and goals, it may help to have an
idea of what your situation would look like at retirement.

1. Credit cards paid off
   This is a good thing to do pre-retirement, but in retirement it’s crucial.
2. Living expenses fund
   Your emergency fund that you’ve been building for years- now becomes your backup living expenses fund. If the stock market has a down year, this allows you draw on this fund instead of selling stocks when their value is low.
3. Equity Loans and Lines of Credit on your home
   These should be paid off, primarily to reduce your fixed expenses. That will give you more flexibility with your monthly income needs.
4. Mortgage
   It’s nice to have this paid off or close to paid off, once again to give you
   flexibility in your retirement cash flow needs.
5. Tax Strategies
   Consider diversifying some of your tax deferred retirement funds (Retirement Deductible or Nondeductible IRA’s) to Roth IRA’s. Roth
   IRA’s may offer tax benefits in retirement (The pros and cons of the Roth IRA should be reviewed first). Consider tax exempt investment options. Regular taxable retirement funds also offer flexibility in managing your tax liability during retirement.
6. Retirement Expenses Budget-Fixed Expenses
   Develop a budget before you retire so you will know your fixed  expenses such as food, utilities, taxes, car and home maintenance. Retirees may feel more secure if they know the majority of these expenses may be covered by Social Security, company pensions and possible low cost annuities. A word of caution on annuities, though, because they may carry relatively high costs compared to other investments. So, prepare to do your research!
7. Retirement Expenses Budget Discretionary Expenses
   A withdrawal plan from your 401k, IRA savings may be used to fund your travel, hobbies and helping your children and other fun  activities.
8. Back Up Plan
   Consider what kind of a part time job would work for you and your spouse. Life just does not always go “our way”.
9. Transition Process
   Finally, and most importantly, consider avoiding an abrupt change from work to retirement. Check out part time jobs, volunteer opportunities, new social groups, start exercising, develop your hobbies, and travel a little before you retire.

All couples have a unique set of circumstances. For some, the above
listed ideas will not make sense. The same rules do not work for
everyone, just as the same hairstyle does not make everyone beautiful!

This is an opportunity to plan ahead so you can make your retirement
the most fulfilling, exciting time of your life!

Heidi Davis is a Certified Financial Planner™ professional licensed with a registered investment adviser that provides personal financial advice online for a fee. A former commercial lender, she  helps her clients with investment  reviews, financial and retirement planning  issues.  Contact Heidi for help on virtually any financial need.

Your house is your home, your castle, and your refuge.

By:  Rick Kahler, CFP^®

Until the time comes to sell it. Then it becomes a commodity in the public marketplace. Once you put something up for sale, it doesn’t belong to you any more. At least that is the financially healthy way to see it.

One of the most challenging aspects of selling a home is letting go emotionally of your attachment to it. Back when I was selling real estate, I saw scores of deals collapse, not because buyers and sellers couldn’t agree on the purchase price, but because both of them wanted a fixture such as a painting on the wall or a chandelier. As a financial planner, I also have seen bitter battles in divorce settlements over personal property that has little financial value but huge emotional value.

Being unable to let go of a house or any other important possession makes it hard to set a reasonable selling price according to its market value rather than its emotional value. Just because you rocked your babies to sleep in it, a particular rocking chair isn’t inherently a valuable antique. Its worth to potential buyers may be far lower than the emotional worth it has for you.

Of course, the same concept can lead to pricing something too low. A divorcing couple, for example, may just want to get rid of an item and the emotional pain attached to it.

Before you sell anything that has an emotional attachment, it’s helpful to acknowledge that giving up this possession is painful. It’s helpful to say goodbye to it in your own way. It’s also helpful to understand that the emotional value of a physical object can be separated from the object itself. What makes most of these possessions so important are the memories we have attached to them.

A few years ago the parents of one of my clients retired and sold the farm that had been in the family for three generations. Before the sale, my client took photographs of the home place. She said, “It was a shock when I saw the pictures. They didn’t look anything like the way I saw the farm. I realized what I was seeing wasn’t the place as it looked then, but the place as I remembered it when I was growing up.”

She realized her memories, attached as they were to the past instead of the present, belonged to her and not to the land. They didn’t disappear when the land was sold.

One suggestion to help you let go of a home or other important possession is to realize that its emotional value doesn’t end when you sell it. Through your memories, you get to keep most of the value the object has had for you. You also pass on the potential of a high emotional value to the next owners who, with time and use, will almost certainly develop attachments of their own. For both of you, the sale can be an emotionally winning transaction.

Rick Kahler is a Certified Financial Planner™ professional licensed with a registered investment adviser that provides personal financial advice online for a flat fee. He is an author of four books on financial psychology and recognized by BusinessWeek magazine as one of the 15 most experienced financial planners in the nation. Contact Rick for help on virtually any financial need.