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November 25, 2020

Money Black Holes You Should Avoid

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The Most Important Retirement Rule

November 18, 2020

The Most Important Retirement Rule

The best way to determine your retirement target savings is to use your income.

Here’s why.

Almost nobody wants to work 40 hours a week in retirement. Not you, not me. To avoid that, you must have money at your disposal to cover expenses like food, travel, and medical bills.

But how much do you need?

There’s a 38% chance that if you retire at 65 you will live to 85, and a 5% chance that you’ll make it to 95.¹ That means you’ll need enough cash to cover at least 20 years of life with no income.

This is where your paycheck comes into play.

Aiming to save 20 to 30 times your income helps prepare you to maintain your current lifestyle into retirement. You might even have extra spending money if you’re debt free!

Plus, it forces you to scale your savings as your income grows.

Setting a goal based solely on how much you want to spend in retirement can result in lowering your savings goal. You might splurge more now, telling yourself that you’ll just live on less later. But you’re cheating your future self!

Using your income as a retirement benchmark forces you to increase your savings amount as your paycheck grows. Let’s say you make $80,000 annually and you start saving. Your goal is to stash away 20 times your income, or about $1.6 million.

After a while, you’re able to save 5 years worth of earnings, or about $400,000.

But then you get a raise! Suddenly you’re making $100,000 per year. Your retirement target shifts up accordingly to $2 million. That $400,000 you have in the bank is a hefty slice of cash, but it’s now only worth 4 years of income instead of 5.

In other words, basing your saving around your income actually encourages you to save more as your income increases.

The best thing about this method is that it focuses on the most important part of retiring—to sustain the lifestyle that you envision. Meet with a licensed financial professional to map out what that would look like for you and how much you must save to make that vision a reality.

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¹ “How Long Will Your Retirement Really Last?,” Simon Moore, Forbes, Apr 24, 2018, https://www.forbes.com/sites/simonmoore/2018/04/24/how-long-will-your-retirement-last/?sh=31a59fb37472

Disappearing Pensions and Protecting Your Retirement

November 4, 2020

Disappearing Pensions and Protecting Your Retirement

The old days of working at the same company for 30 years and retiring with a company pension are just about over.

Today, very few companies offer pension plans and those that do are finding those plans in peril.

Most modern workers must learn to plan their retirement without a pension. Luckily, there are still great financial tools for your retirement strategy, and workers who save diligently and prepare well can still look forward to a well-funded retirement.

Disappearing Pensions and the Rise of the 401(k)
A company pension was commonplace a few decades ago. In exchange for hard work and service for somewhere around 30 years, a company would provide you with a guaranteed income stream during your retirement.

Many Americans enjoyed a comfortable and secure retirement with a pension. Coupled with their social security benefits, they lived fairly well in their golden years.

The reason pension plans are going the way of the wind has many factors, including changes in workers’ behavior, longer life expectancies, and rising costs for employers.

A study by the professional services firm Towers Watson found that from 1998 to 2013, the number of Fortune 500 companies offering pension plans dropped 86 percent, from 251 to 34.1 Couple that with the Revenue Act of 1978, which allowed for the creation of 401(k) savings plans, and you’ll have a good view of the modern retirement landscape.

How to Retire Without a Pension
The company pension isn’t coming back, so what can workers do to secure a retirement like their parents and grandparents had?

Here are a few retirement planning tools that every worker can put to good use.

Take Full Advantage of Your Company 401(k) Plan
If your company offers a 401(k) retirement plan, make sure you’re taking full advantage of it. Here are a few ways to maximize your 401(k) plan.

  • Make the match: If your employer offers matching contributions, don’t leave the match on the table. Contribute the required percentage to collect the most you can.
  • Get fully vested: Make sure you are fully vested before you make any employment changes. Your contributions to a 401(k) will always be yours, but to keep 100% of your employer contributions, you must be fully vested.

Open a Roth IRA
A Roth plan is funded with taxed income. The upside is that you won’t pay taxes when you take it out. If your 401(k) contributions are maxed out, a Roth could be a good savings vehicle for you.

Consider an Annuity
If you like the idea of a guaranteed income stream, consider an annuity. An annuity is an insurance product, so most of the time it isn’t invested. In exchange for a lump sum of money, an annuity will pay a guaranteed monthly income stream.

Talk to a Trusted Financial Professional
Pensions are all but gone. This means today’s workers must be more involved in how they create a strategy for their retirement. There are many great retirement savings tools. Talk to a trusted financial advisor to understand and learn how you can make sure your retirement income is going to be there when you need it.

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This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies for saving and/or investing that may be available to you.

“Pensions Are Taking the Long, Lonely Road to Retirement,” Lou Carlozo, U.S. News and World Reports, Jul 20, 2015, https://money.usnews.com/money/personal-finance/mutual-funds/articles/2015/07/20/pensions-are-taking-the-long-lonely-road-to-retirement

Is Your Home An Investment?

October 26, 2020

Is Your Home An Investment?

It’s a law of the universe that your house is an investment, right?

Just ask your grandparents who bought a $250,000 home for $50,000 during the 1950s. Better yet, listen to your savvy landlord buddy who rules an urban real estate empire that they gobbled up following the Great Recession. We’re surrounded by evidence that conclusively demonstrates the power of houses as investments… or are we?

Hmmm.

It turns out that buying a place of residence may not actually pay off in the long run like it might appear on paper. Here’s why you might want to rethink having your primary residence be an investment only.

Houses (usually) don’t actually grow more valuable
Think about that suburban mansion your grandparents snagged for $50,000 that eventually “grew” to be worth $250,000. On paper, that looks like an awesome investment; that house quintupled in value! But remember, $1 in 1950 had about the purchasing power of $10 today. Four gallons of gas or two movie tickets were just one buck!¹ That means $50,000 at that time could buy a $539,249 house today. Your grandparents actually lost money on that house, even though it looked like they made off like bandits!

It’s all because of one simple feature of economics: inflation. Prices tend to rise over time, meaning that your dollar today doesn’t go as far as it would have in 1950. So while it looks like your grandparents netted a fortune on their house, they actually didn’t. They lost over half its value! Unless your neighborhood suddenly spikes in popularity with young professionals or you start renting, your house probably won’t accrue any real worth beyond inflation.

Houses have to be maintained
But it’s not just that houses usually don’t actually appreciate in value. They also cost money in property taxes, utilities, and maintenance. Homeowners spend, on average, $1,105 annually to maintain their dwelling places.² You can expect to pay $12,348 annually on the average mortgage and $2,060 for utilities.³ & ⁴ That comes out to a total of $15,513 per year on keeping the house and making it livable. Let’s say your home is worth about $230,000 and appreciates by 3.8% every year. It will grow in value by about $8,740 by the end of the year. That’s barely more than half of what it costs to keep the house up and running! Your house is hemorrhaging money, not turning a profit.

It’s important to note that homeownership can still generally be a good thing. It can protect you from coughing up all your money to a landlord. Buying a property in an up-and-coming neighborhood and renting it out can be a great way to supplement your income. Plus, there’s something special about owning a place and making it yours. But make no mistake; unless you strike real estate gold, your place of residence probably shouldn’t be (primarily) an investment. It can be home, but you might need to rely on it to help fund your retirement!

Market performance is based on many factors and cannot be predicted. This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies for saving and/or investing that may be available to you. Any examples used in this article are hypothetical. Before investing or enacting a savings, investment, or retirement strategy, seek the advice of a licensed financial professional, accountant, and/or tax expert to discuss your options.

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Market performance is based on many factors and cannot be predicted. This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies for saving and/or investing that may be available to you. Any examples used in this article are hypothetical. Before investing or enacting a savings, investment, or retirement strategy, seek the advice of a licensed financial professional, accountant, and/or tax expert to discuss your options.


“7 Things You Could Buy For $1 in 1950,” Megan Elliott, Showbiz Cheatsheet, Oct 9, 2016, https://www.cheatsheet.com/money-career/things-you-could-buy-for-1-dollar.html/

“How Much Should You Budget For Home Maintenance,” Paula Pant, The Balance, May 26, 2020, https://www.thebalance.com/home-maintenance-budget-453820

“National Average Monthly Mortgage Payment,” Hannah Rounds, LendingTree, July 11, 2018, https://www.lendingtree.com/home/mortgage/national-average-monthly-mortgage-payment/#:~:text=What%20is%20the%20average%20monthly,the%20typical%20homeowners'%20monthly%20income

“How much is the average household utility bill?,” Nationwide, https://www.nationwide.com/lc/resources/personal-finance/articles/average-cost-of-utilities#:~:text=The%20typical%20U.S.%20family%20spends,climate%2C%20and%20your%20usage%20patterns

What To Cut In Your Budget

August 19, 2020

What To Cut In Your Budget

Intro
Budgeting is empowering. It gives you information so you can make those decisions that will impact your future. But budgeting can often feel discouraging. It might even make us miserable! Especially if we look at our budget and decide to slash all the little things that make us happy. How many times have we been lectured about the amount of money wasted at coffee shops?

It turns out that’s not where most of your money is going. Here are some suggestions for where you should really focus when you’re slashing your budget.

Focus big first
We spend roughly $1,100 per year on coffee.(1) That’s about $3 per day. But that’s nothing compared to how much we spend on big ticket items. Housing alone costs $19,884 per year, and transportation an additional $9,576.(2) They’re by far the biggest drain on our income. So the question is, are you paying more than you should for housing and transportation?

Are you renting a large apartment in a ritzy part of town without roommates? Are you driving a stunning new sports car? Those might have more to do with your financial woes than your latte habit. Consider how you can reduce your rent, refinance your mortgage, or consider trading in your sports car for a more modest ride before you totally remove life’s simple pleasures.

Food
We spend about $7,729 on food every year.(3) Broken down monthly, that’s about $372 on food at home and $228 on eating out.(4) Around $133 of that ends up getting thrown in the trash due to spoilage or just not wanting to deal with leftovers. That’s a lot of money going to restaurant owners and landfills!

There’s nothing wrong with enjoying a nice meal out on the town every now and then. But, while you’re budgeting, come up with a strategy for eating at home more often. You’ll be surprised by how much that alone can save you in the long run! And if you end up with leftovers, there are plenty of ways to use those up so they won’t go to waste.

Replace cable
Americans still spend a staggering amount on cable television. The average bill is more than $200 per month!(5) That’s about as much as we spend eating out every month for access to shows and programming we could probably find online for less or even free. Cut the cord, sign up for a streaming service, and save bigtime!

The key takeaway is to try cutting back on the big items first before you take aim at your little daily joys. Use whatever you’re able to cut to reduce your debt or start saving for your retirement. You might be able to put away a bit of that extra cash towards your next down payment for a house or that fancy new car!

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What It Means To Live Paycheck to Paycheck

August 12, 2020

What It Means To Live Paycheck to Paycheck

A 2017 survey found that 78% of Americans live paycheck to paycheck.(1)

“Paycheck to paycheck” is an expression we’ve all heard, but what does it really mean? Have we taken the time to understand its implications for our daily lives and futures? Here’s a crash course in what it means to live paycheck to paycheck.

Living paycheck to paycheck technically means that all of your “income” goes towards your “outgo” each month and you’re not saving anything. You get paid, spend everything, and have to rely on that next check to make ends meet. And millions of Americans seem okay with this lifestyle of razor thin margins. They’re certainly comfortable with sharing it on their social media!

But the paycheck to paycheck lifestyle means more than just spending all you earn. It means you’re constantly on the verge of a financial catastrophe. What happens if you’re spending your whole paycheck each and every month and you lose your job? Suddenly, you’re facing your normal expenditures but the cash isn’t coming in. Or what if you face an emergency car repair? Where will you find the money to cover that unexpected expense? Living paycheck to paycheck means you’re standing right on the knife’s edge of money mayhem!

Thoughtless spending doesn’t just leave you exposed to a present-day disaster. It also means you aren’t preparing for your future. By definition, a paycheck to paycheck lifestyle excludes saving. You can’t stash money away for a house or your retirement if you let every penny fly out the window. Most Americans are poorly situated for the future; 70% have less than $1,000 in savings, and 45% have saved exactly $0.00.(2) That’s not enough to cover a new transmission, much less the retirement lifestyle most of us envision!

But there are alternatives to the paycheck to paycheck trap. You can take steps to move away from financial insecurity towards financial freedom. Let’s talk about what that would look like for you!

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How much will this cost me?

How much will this cost me?

If you’re dipping your toe in the pool of life insurance for the first time, you’re bound to have a lot of questions.

At the top of your list is probably how much setting up a policy is going to cost you.

There are several things that can determine how much you’ll pay for life insurance, including the type of policy you select. But before we dive in and look at cost, let’s check out the types of life insurance available.

Major types of life insurance
Life insurance is customizable and can suit many different needs, but for the most part, life insurance comes in three main varieties.

Term life insurance: A term life policy is active for a preselected length of time. It could be 15, 20, or 30 years. If something happens to you during that term, your beneficiary will receive the death benefit of the policy.

Permanent life insurance: Permanent life insurance is a policy that stays active as long as you’re alive. When you pass away, the policy pays out to your named beneficiary. The value of the policy increases over time, and you can borrow against this “cash value” in some circumstances.

Universal life insurance: Universal life insurance works like a permanent life policy in that it pays out to your beneficiary, but it also accrues interest over the policy term (which may be affected by market performance).

How your cost is calculated
The insurance company estimates the cost of a life insurance policy based on your risk factors. Risk factor data is gathered and evaluated based on the information in your application. Then the insurance company uses historical data, trends, and actuarial processes to come up with a premium for you.

The cost of some life insurance policies can change over time, while others remain the same.

What risk factors does the company use?
When the insurance company is calculating your rate, they look at several factors, including:

Your demographics: Your demographics include your age, weight, gender, and health. The company will also want to know if you smoke, and other health-related issues you may have.

The amount of the death benefit: The death benefit is the amount the policy will pay to your beneficiaries when you pass away. The larger the death benefit you select, the more expensive the policy.

Your lifestyle: Lifestyle habits and hobbies can affect the cost of your policy. The insurance company will want to know if you ride a motorcycle regularly, or how often you drink alcohol, for example.

Your risk and life insurance cost
The risk of when your death will occur ultimately determines your life insurance costs. That’s why the younger you are the less the policy should cost. If you wait to purchase your life insurance policy when you’re older, the policy will most likely cost more.

But there are things you can do that may help lessen the cost of the policy. Anything that will increase your health status may help with your life insurance costs. Quitting smoking and starting a regular exercise program can promote your health and in turn this may also have a positive effect on your health insurance premium.

A life insurance agent can help
If you’re looking for a life insurance policy and wondering about the cost, a qualified life insurance agent can be a great help. A life insurance agent has access to many different insurance companies and can work to get you matched with the right policy at the right price for you.

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This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies for saving and/or investing that may be available to you. Market performance is based on many factors and cannot be predicted. Before investing or enacting a savings or retirement strategy, seek the advice of a financial professional, accountant, and/or tax expert to discuss your options.

Read this before you walk down the aisle

June 24, 2020

Read this before you walk down the aisle

Don’t let financial trouble ruin your future wedded bliss.

Most newlyweds have a lot to get used to. You may be living together for the first time, spending a lot of time with your new in-laws, and dealing with dual finances. Financial troubles can plague even the most compatible pairs, so read on for some tips on how to get your newlywed finances off to the best possible start.

Talk it out If you haven’t done this already, the time is ripe for a heart to heart talk about what your financial picture is going to look like. This is the time to lay it all out. Not only should you and your fiancé discuss your upcoming combined financial situation, but it can be beneficial to take a deep dive into your past too. Our financial histories and backgrounds can influence current spending and saving habits. Take some time to get to know one another’s history and perspective when it comes to how they think about money, debt, budgeting, etc.

Newlyweds need a budget Everyone needs a budget, but a budget can be particularly helpful for newlyweds. A reasonable, working household budget can go a long way in helping ease financial stress and overcoming challenges. Money differences can be a big cause of marital strife, but a solid, mutually-agreed-upon budget can help avoid potential arguments. A budget will help you manage student loans or new household expenses that must be dealt with. Come up with a budget together and make sure it’s something you both can stick with.

Create financial goals Financial goal setting can actually be fun. True, some goals may not seem all that exciting – like paying off credit cards or student loans. But formulating financial goals is important.

Financial goal setting should start with a conversation with your new fiancé. This is the time to think about your future as a married couple and work out a financial strategy to help make your financial dreams a reality. For example, if you want to buy a house, you’ll need to prepare for that. A good start is to minimize debt and start saving for a down payment.

Maybe you two want to start a business. In that case, your financial goals may include raising capital, establishing business credit, or qualifying for a small business loan.

Face your debt head on
It’s not unusual for individuals to start married life facing new debt that came along with their partner – possibly student loans or personal credit card debt. You may also have combined debt if you’re planning on financing your wedding. Maybe you’re going to take your dream honeymoon and put it on a credit card.

Create a strategy to pay off your debt and stick to it. There are two common ways to tackle it – begin with the highest interest rate debt, or begin with the smallest balance. There are many good strategies – the key is to develop one and put it into action.

Invest for the future Part of your financial strategy should include preparing for retirement, even though it might seem light years away now. Make sure you work a retirement strategy into your other financial goals. Take advantage of employer-sponsored retirement accounts and earmark savings for retirement.

Purchase life insurance Life insurance is essential to help ensure your new spouse will be taken care of should you die prematurely. Even though many married couples today are dual earners, there is still a need for life insurance. Ask yourself if your new spouse could afford to pay their living expenses if something happened to you. Consider purchasing a life insurance policy to help cover things like funeral costs, medical expenses, or replacement income for your spouse.

Newlywed finances can be fun Newlywed life is fun and exciting, and finances can be too. Talk deeply and often about finances with your fiancé. Share your dreams and goals so you can create financial habits together that will help you realize them. Here’s to you and many years of wedded bliss!

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3 Ways to Shift from Indulgence to Independence

June 17, 2020

3 Ways to Shift from Indulgence to Independence

On Monday mornings, we’re all faced with a difficult choice.

Get up a few minutes early to brew our own coffee? Or sleep a little later and whip through a coffee chain drive-thru, hair askew and a drool trail still drying against our cheek?

When that caffeine hits our bloodstream, how we got the coffee doesn’t seem to matter too much. But each time you pull through a drive thru for that cup o’ joe, just picture your financial strategy shouting and waving its metaphorical arms to get your attention.

Why? Each time you indulge in a luxury that has a less expensive substitute, you’re potentially delaying your financial independence. It’s strange how that can happen one $5 peppermint mocha at a time, but that’s how it happens – incrementally and without too much warning. Then comes the credit card bill… This isn’t to say that you can’t enjoy yourself every once in a while. Just be sure that you’re sticking with your strategy and saving wherever possible. You’ll thank yourself later.

Here are 3 ways to shift from indulgence to independence:

1. Make coffee at home. Reducing your expenses can start as simply as making your morning coffee at home. And you might not even have to get up earlier to do it. Why not invest in a coffee pot with a delay brew function? It’ll start brewing at the time you preset, and what’s a better alarm clock than the scent of freshly-brewed coffee wafting from the kitchen? Or from your bedside table… (No judgement here – Do what you need to do to get up in the morning.)

Get started:Here’s a huge list of copycat Starbucks drinks that you can make at home.

2. Workout at home. A couple of questions to get this one going:

1) Is an expensive gym membership really worth it? 2) How often have you gone to the gym in the last few months?

If your answers are somewhere between “No” and “…I’d rather not say,” then maybe it’s time to ditch the membership in favor of working out at home. Or perhaps you are a certified Gym Rat who faithfully wrings every dollar out of their gym membership each month. Ask yourself if you really need all the bells and whistles that an expensive gym offers. Elliptical, dumbbells, and machines with clearly printed how-tos? Yes, please. But a hot tub, sauna, and an out-of-pocket juice bar? Maybe not. If you can continue to workout without a few of those pricey luxuries, your body and your wallet will thank you.

Get started: Take a 30-minute walk around your local park each day and reap the positive results – it’s completely free! And if you’d prefer to workout at a gym, look into month-to-month memberships instead of paying a hefty price for a year-long membership up front.

3. Ditch cable and use a video streaming service instead. Cable may give you access to more channels and more shows, but if any of your favorite shows end up gathering digital dust in your DVR most of the time, waiting a little longer for them to be available on a streaming service like Netflix or Hulu might not be a bad idea. (Plus, who doesn’t love using a 3-day weekend to binge-watch an entire season of a show?) There’s also the bonus of how easy it is to cancel/reactivate a streaming service. With cable, you may be locked into a multi-year contract, installation can be a hassle, and you can forget about knowing when the cable guy is actually going to show up. The affordability and ease of use of a video streaming service makes it a more attractive option for your journey to financial independence.

Get started: Check out PCMag’s “Best Video Streaming Services of 2018” for a comparison of several options. Keep in mind that plenty of streaming services offer free trial periods. Go ahead and give any of them a try, but be careful: You may have to enter your credit card number to access the free trial; do not forget to cancel before your trial is over, or you will be charged.

Taking the time to address what kinds of luxuries can you live without (or enjoy less often) has the potential to make a huge impact on your journey to financial independence. Cutting back here and investing in yourself there – who knows where you’ll be this time next year.

Where are you going to start indulging less?

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Should I pay off my car or my credit cards?

Should I pay off my car or my credit cards?

Credit card statements and auto loan statements are often among the bigger bills the mail carrier brings.

Wouldn’t it be great to just pay them off and then use those monthly payments for something else, like building your savings and giving yourself a bit of breathing room for a treat now and then?

Paying extra money on your credit card bills and your car loan at the same time may not be an option, so which is better to pay off first?

In most cases, paying down credit cards might be a better strategy. But the reasons for paying off your credit cards first are numerous. Let’s look at why that usually may make more sense.

  • Credit cards have high interest rates. When you look at the balances for your auto loan vs. your credit card, the larger amount may often be the auto loan. Big balances can be unnerving, so your inclination may be to pay that down first. However, auto loans usually have a relatively low interest rate, so if you have an extra $100 or $200 per month to put toward debt, credit cards make a better choice. The average credit card interest rate is about 15%, whereas the average auto loan rate is usually under 7%, if you have good credit.[i]

  • Credit cards charge compound interest. Most auto loans are simple-interest loans, which means you only pay interest on the principal. Credit cards, however, charge compound interest, which means any interest that accrues on your account can generate interest of its own. Yikes!

  • You’ll lower your credit utilization. Part of your credit score is based on your credit utilization, which specifically refers to how much of your revolving credit you use. As you pay down your balance, you’ll not only pay less in interest, you may also give your credit score a boost by reducing your credit utilization.

The numbers don’t lie
Let’s say you have a 5-year auto loan for $30,000 at 7% interest. You also have an extra $100 per month you’d like to use to pay down debt. By adding that 100 bucks to your car payments, over the course of the loan you can cut your loan length by 10 months and save $972.32.[ii] Impressive.

Let’s look at a credit card balance. Maybe the credit card interest rate is higher than the car loan, but hopefully the balance is lower. Let’s assume a balance of only $10,000 and an interest rate of 15%. With your minimum payment, you’d probably pay about $225 monthly. Putting the extra $100 per month toward the credit card balance and paying $325 shortens the payment length for the card balance by 26 months and saves $1,986 in interest expense.[iii] Wow!

The math tells the truth. In the above hypothetical scenarios, even though the balance on the credit card is one-third that of the total owed for the car, you would save more money by paying off the credit card balance first.

Financial strategy isn’t just about paying down debt though. As you go, be sure you’re saving as well. You’ll need an emergency fund and you’ll need to invest for your retirement. Let’s talk. I have some ideas that can help you build toward your goals for your future.

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How Much Is Enough To Retire?

June 3, 2020

How Much Is Enough To Retire?

How much money do you need to retire? That’s a tough question to answer specifically.

People have different expectations of their golden years that range from simple and cheap to extravagant and expensive. But there are a few simple guidelines you can follow that might help point you in the right direction.

Standard of living
How do you envision your retirement? Surrounded by family and friends in the suburbs? Kicking back on white sands? Fishing outside your tiny mountain lodge? Each of these visions come with different price tags and will require different types of planning. Dreams of a simple and stripped back retirement will cost you less than touring Europe or enjoying exotic cocktails on the beach. Figure out the standard of living you want in retirement, estimate how much it will cost and for how long, and then make a plan.

How much should you have saved?

So you’ve figured out how much you want to spend annually during your retirement. How much does that mean you need to save? Let’s say you’ve done your homework and your standard of living will run you about $40,000 a year throughout your retirement. The general rule of thumb is that you want to be able to withdraw roughly 4% of your savings each year throughout retirement without running out of money. To find that number, just take your desired annual spending and divide it by .04 to get your savings target. That means you would need to save around one million dollars to sustain your lifestyle.

How much should you save per month?

Financial advisors typically suggest you put 15% of your income towards retirement. Just remember that there’s always some wriggle room depending on your situation! You might be well ahead of schedule already, due to your budgeting and thriftiness. Maybe you’re just now starting to save and you need to put away a little extra. It’s always best to consult with a professional before making a big saving or investing decision!

The sooner you start planning and setting goals, the better. Start thinking about what you want out of your golden years, crunch the numbers, and meet with a professional!

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How Much Should You Save Each Month?

How Much Should You Save Each Month?

How much are you saving?

That might be an uncomfortable question to answer. 45% of Americans have $0 saved. Almost 70% have under $1,000 saved (1). That means most Americans don’t have enough to replace the transmission in their car, much less retire (2)!

But how much of your income should you send towards your savings account? And how do you even start? Keep reading for some useful strategies on saving!

10 percent rule
A common strategy for saving is the 50/30/20 method. It calls for 50% of your budget to go towards essentials like food and rent, 30% toward fun and entertainment, and the final 20% is saved. That’s a good standard, but it can seem like a faraway fantasy if you’re weighed down by bills or debt. A more achievable goal might be to save around 10% of your income and start working up from there. For reference, that means a family making $60,000 a year should try to stash away around $6,000 annually.

A budget is your friend
But where do you find the money to save? The easiest way is with a budget. It’s the best method to keep track of where your money is going and see where you need to cut back. It’s not always fun. It can be difficult or even embarrassing to see how you’ve been spending. But it’s a powerful reality check that can motivate you to change your habits and take control of your finances.

Save for more than your retirement
Something else to consider is that you need to save for more than just your retirement. Maintaining an emergency fund for unexpected expenses can provide a cushion (and some peace of mind) in case you need to replace your washing machine or if your kid needs stitches. And it’s always better to save up for big purchases like a vacation or Christmas gifts than it is to use credit.

Saving isn’t always easy. Quitting your spending habit cold turkey can be overwhelming and make you feel like you’re missing out. However, getting your finances under control so you can begin a savings strategy is one of the best long-term decisions you can make. Start budgeting, find out how much you spend, and start making a plan to save. And don’t hesitate to reach out to a financial professional if you feel stuck or need help!

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Can You Buy Happiness?

Can You Buy Happiness?

Let’s face it: There’s a relationship between money and happiness.

Anyone who’s looked at their savings account during a market correction or has lived paycheck to paycheck knows that not having enough money can be incredibly stressful. But there’s also a fair chance that you know of someone who’s wealthy (i.e., seems to have plenty of money) but is often miserable. So what exactly is the relationship between money and happiness? Let’s start by looking a little closer at happiness.

Happiness is really complicated
There is no single key to happiness. Close relationships, exercise, and stress management all may play a role in increasing emotional well-being. Little things like journaling, going on a walk, and listening to upbeat music can also help lift your mood. But none of those factors alone makes you happy—most of them actually turn out to be interrelated. It’s hard to maintain strong personal relationships if you take out your work stress on your friends! Assuming that money alone will outweigh a bad relationship, high stress, and an unhealthy lifestyle is a skewed mindset.

Money contributes to happiness
That being said, money can certainly contribute to happiness. For one, It’s a metric we use to figure out how much we’ve accomplished in our lives. It helps to boost confidence in our achievements if we’ve been handsomely rewarded. But more importantly, the absence of money can be a huge cause of dismay. It’s easy to see why; constantly wondering if you can pay your bills, fending off debt collectors, and worrying about retirement can take a serious emotional toll. In fact, having more money essentially only supports greater emotional well-being until you reach an income of about $75,000 (1). People felt better about how much they had accomplished past that point, but their day-to-day emotional lives pretty much stayed the same.

What’s the takeaway?
In short, you can’t technically buy happiness. However, taking control of your financial life definitely has emotional benefits. You may increase your feeling of wellbeing if your income gets boosted to a point, but it’s not a silver bullet that will solve all of your problems. Instead, try to think of your finances as one of the many factors in your life that has to be balanced with things like friendship, adventure, and generosity.

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What's a Recession?

February 12, 2020

What's a Recession?

Most of us would probably be apprehensive about another recession.

The Great Recession caused financial devastation for millions of people across the globe. But what exactly is a recession? How do we know if we’re in one? How could it affect you and your family? Here’s a quick rundown.

So what exactly is a recession?
The quick answer is that a recession is a negative GDP growth rate for two back-to-back quarters or longer (1). But reality can be a bit more complicated than that. There’s actually an organization that decides when the country is in a recession. The National Bureau of Economic Research (NBER) is composed of commissioners who dig through monthly data and officially declare when a downturn begins.

There’s also a difference between a recession and a depression. A recession typically lasts between 6 to 16 months (the Great Recession was an exception and pushed 18 months). The Great Depression, by contrast, lasted a solid decade and witnessed unemployment rates above 25% (2). Fortunately, depressions are rare: there’s only been one since 1854, while there have been 33 recessions during the same time (3).

What happens during a recession
The NBER monitors five recession indicators. The first and most important is inflation-adjusted GDP. A consistent quarterly decline in GDP growth is a good sign that a recession has started or is on the horizon. Then this gets supplemented by other numbers. A falling monthly GDP, declining real income, increasing unemployment, weak manufacturing and retail sales all point to a recession.

How could a recession affect you?
The bottom line is that a weak economy affects everyone. Business slows down and layoffs can occur. People who keep their jobs may get spooked by seeing coworkers and friends lose their jobs, and then they may start cutting back on spending. This can start a vicious cycle which can lead to lower profits for businesses and possibly more layoffs. The government may increase spending and lower interest rates in order to help stop the cycle and stabilize the economy.

In the short term, that means it might be harder to find a job if you’re unemployed or just out of school and that your cost of living skyrockets. But it can also affect your major investments; the value of your home or your retirement savings could all face major setbacks.

Recessions can be distressing. They’re hard to see coming and they can potentially impact your financial future. That’s why it’s so important to start preparing for any downturns today. Schedule a call with a financial professional to discuss strategies to help protect your future!

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Now’s the Time for Future Planning

February 10, 2020

Now’s the Time for Future Planning

What happened to the days of the $10 lawn mowing job or the $7-an-hour babysitting gig every Saturday night?

Not a penny withheld. No taxes to file. No stress about saving a million dollars for retirement. As a kid, doing household chores or helping out friends and neighbors for a little spending money is extremely different from the adult reality of giving money to both the state and federal government and/or retiring. Years ago, did those concepts feel so far away that they might as well have been camped out on Easter Island?

What happened to the carefree attitude surrounding our finances? It’s simple: we got older. As the years go by, finances can get more complicated. Knowing where your money is going and whether or not it’s working for you when it gets there is a question that’s better asked sooner rather than later.

When author of Financially Fearless Alexa von Tobel was asked what she wishes she’d known about money in her 20s, her answer was pretty interesting:

Not having a financial plan is a plan — just a really bad one! Given what I see as a general lack of personal-finance education, it can be all too easy to wing it with your money… I was lucky enough to learn this lesson while still in my 20s, so I had time to put a financial plan into place for myself.

A strategy for your money is essential, starting early is better, and talking to a financial professional is a solid way to get going. No message in a bottle sent from a more-prepared version of yourself is going to drift your way from Easter Island, chock-full of all the answers about your money. But sitting down with me is a great place to start. Contact me anytime.

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Begin Your Budget In 5 Easy Steps

February 3, 2020

Begin Your Budget In 5 Easy Steps

A budget is a powerful tool.

No matter how big or small, it gives you the insight to track your money and plan your future. So here’s a beginner’s guide to kick-start your budget and help take control of your paycheck!

Establish simple objectives
Come up with at least one simple goal for your budget. It could be anything from saving for retirement to buying a car to paying down student debt. Establishing an objective gives you a goal to shoot for, and helps motivate you to stick to the plan.

Figure out how much you make
Now it’s time to figure out how much money you actually make. This might be as easy as looking at your past few paychecks. However, don’t forget to include things like your side hustle, rent from properties, or cash from your online store. Try averaging your total income from the past six months and use that as your starting point for your budget.

Figure out how much you spend
Start by splitting your spending into essential (non-discretionary) and unessential (discretionary) spending categories. The first category should cover things like rent, groceries, utilities, and debt payments. Unessential spending would be eating at restaurants, seeing a movie, hobbies, and sporting events.

How much is leftover?
Now subtract your total spending from your income. A positive number means you’re making more than you’re spending, giving you a foundation for saving and eventually building wealth. You still might need to cut back in a few areas to meet your goals, but it’s at least a good start.

If you come up negative, you’ll need to slash your spending. Start with your unessential spending and see where you can dial back. If things aren’t looking good, you may need to consider looking for a lower rent apartment, renegotiating loans, or picking up a side hustle.

Be consistent!
The worst thing you can do is start a budget and then abandon it. Make no mistake, seeing some out-of-whack numbers on a spreadsheet can be discouraging. But sticking to a budget is key to achieving your goals. Make a habit of reviewing your budget regularly and checking your progress. That alone might be enough motivation to keep it up!

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Saving For Retirement: Where Do I Start?

January 29, 2020

Saving For Retirement: Where Do I Start?

We all know we should be saving for the future.

But depending on your stage in life, it might feel like retirement is either too far away or it’s too late in the game to make much of a difference. Regardless of your income—or which season of life you’re in—you can (and should) start saving for retirement. Here’s how to get started:

Make savings automatic
Have your employer deposit a set dollar amount or percentage from each paycheck to a savings account or your 401(k). It’s an effortless way to start loading your savings account while also reducing temptations to overspend.

Pay yourself first
Your attitude towards saving makes a big difference. It shouldn’t be something that is optional after all of your other spending. If you view saving the way you would a bill and pay it to yourself first, you will be far more likely to save.

Investigate IRA options
An IRA is a retirement account that invests your money in stocks and bonds. Many people opt for either a traditional IRA or a Roth IRA, though there are other types to choose from. The big difference between the traditional and the Roth is how and when their tax exemptions kick in. Contributions to the traditional are tax deductible until they are withdrawn. A Roth, on the other hand, gets taxed on contributions but withdrawals are tax deductible and get to grow tax free. The maximum amount you can contribute to an IRA is $6,000 – $7,000 per year (depending on your age), so you’ll need to consult your budget to see how much you can put away.

Establish your permanent lifestyle
It’s easy to be tempted to try to one-up our friends’ and neighbors’ lifestyles. But continually increasing your cost of living can set your retirement up for failure. Establish a basic amount of what it takes for you to live a comfortable lifestyle, and stick to that mode of living. Doing so can help you save money right now and also give you an idea of how much you’ll need to save for retirement.

Meet with a financial professional
Investing can be intimidating, especially when it’s your future on the line. Be sure to meet with a licensed professional before you make any big saving decisions. Getting an extra pair of qualified eyes on your goals and strategies is always a good move and can help bring you peace of mind about your retirement strategy!

Whether you’re just entering the workforce or retirement is right around the corner, there are many ways to contribute to your future. By adjusting your lifestyle, investing carefully, and making it a priority to prepare for the future, you can nurture your peace of mind and look forward to seeing how your financial strategy unfolds in your golden years.

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Market performance is based on many factors and cannot be predicted. This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies for saving and/or investing that may be available to you. Any examples used in this article are hypothetical. Before investing or enacting a savings or retirement strategy, seek the advice of a licensed financial professional, accountant, and/or tax expert to discuss your options.

7 Money-Saving Tips for Budgeting Beginners

January 27, 2020

7 Money-Saving Tips for Budgeting Beginners

Starting a budget from scratch can seem like a huge hassle.

You have to track down all of your expenses, organize them into a list or spreadsheet, figure out how much you want to save, etc., etc.

But budgeting doesn’t have to be difficult or overwhelming. Here are 7 easy and fun tips to help keep your budget in check and jump-start some new financial habits!

Take stock
Laying out all of your expenses at once can be a scary thought for many of us. One key is to keep your budget simple—figure out what expenses you do and don’t really need and see how much you have left over. This method will help you figure out how much spending money you actually have, how much your essential bills are, and where the rest of your money is going.

Start a spending diary
Writing down everything you spend for just a couple of weeks is an easy way of finding out where your spending issues lie. You might be surprised by how quickly those little purchases add up! It will also give you a clue about what you’re actually spending money on and places that you can cut back.

Don’t cut out all your luxuries. Don’t get so carried away with your budgeting that you cut out everything that brings you happiness. Remember, the point of a budget is to make your life less stressful, not miserable! There might be cheap or free alternatives for entertainment in your town, or some great restaurant coupons in those weekly mailers you usually toss out.

That being said, you might decide to eliminate some practices in order to save even more. Things like packing sandwiches for work instead of eating out every day, making coffee at home instead of purchasing it from a coffee shop, and checking out a consignment shop or thrift store for new outfits can really stretch those dollars.

Plan for emergencies
Emergency funds are critical for solid budgeting. It’s always better to get ahead of a car repair or unexpected doctor visit than letting one sneak up on you![i] Anticipating emergencies before they happen and planning accordingly is a budgeting essential that can save you stress (and maybe money) in the long run.

Have a goal in mind
Write down a budgeting goal, like getting debt free by a certain time or saving a specific amount for retirement. This will help you determine how much you want to save each week or month and what to cut. Most importantly, it will give you something concrete to work towards and a sense of accomplishment as you reach milestones. It’s a great way of motivating yourself to start budgeting and pushing through any temptations to stray off the plan!

Stay away from temptation
Unsubscribe from catalogs and sales emails. Unfollow your favorite brands on social media and install an ad blocker. Stop going to stores that tempt you, especially if you’re just “running in for one thing.” Your willpower may not be stronger than the “Christmas in July” mega sales, so just avoid temptation altogether.

Keep yourself inspired and connected
Communities make almost everything easier. Fortunately, there’s a whole virtual world of communities on social media dedicated to budgeting, getting out of debt, saving for early retirement, showing household savings hacks, and anything else you would ever want to know about managing money. They’re great places for picking up ideas and sharing your progress with others.

Budgeting and saving money don’t have to be tedious or hard. The rewards of having a comfortable bank account and being in control of your spending are sweet, so stay engaged in the process and keep learning!

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Tips for Getting Out of Debt

January 22, 2020

Tips for Getting Out of Debt

Americans owe a whopping amount of debt.

Total consumer debt, for example, tops $4 trillion (1), and the average household owes $6,829 on credit cards alone. (2)

Debt can cause a serious drain on your financial life, not to mention increase your stress levels. You may be parting with a big slice of your income just to service the debt—money that could be put to better use to fund things like a home, your own business, or a healthy retirement account.

Fortunately, there are lots of ways to get out of debt. Here are 3 of them…

Create a budget
Before you can start digging yourself out of debt, you need to know how you stand with your income versus your outgo every month. Otherwise, you may be sliding deeper into debt as each week passes.

The solution? Create a budget.

First, start tracking your expenses—there are apps you can get on your phone, or even just a notebook and pencil will do. Divide your expenses into categories. This doesn’t have to be complicated. Food, utilities, rent, entertainment, misc. Add them together every week and then every month.

Then, review your spending and compare it with your income. Spending more than you make? That has to be reversed before you’ll ever be able to get out of debt. Make a plan to either reduce your expenses or find a way to raise your income.

If debt payments are driving your expenses above your income, call your lender to see if you can get a plan with lower monthly payments.

Seek out lower interest rates
If you’re paying a high interest rate on credit card debt, a good portion of your monthly payment may be going towards interest alone. That means you may not be reducing the principal—the amount you originally borrowed—as much as you could with a lower interest rate. The lower your interest rate, the more your monthly payments can lower your debt—and eventually help you get out of it.

Find out the annual percentage rate (APR) on your current credit card debt by looking at the monthly statements. Then shop around to find any lower interest rates that might be out there. The next step would be to transfer your credit card debt to that new account with the lower rate. The caveat, however, is if any fees you may be charged now or after an introductory period would nullify the savings in interest. Always make sure you understand the terms on a new card before you transfer a balance.

Another option is to apply to a lender for a personal loan to consolidate your high interest rate debt. Personal loans can have interest rates significantly below those on credit cards. Again, make sure you understand any fees, penalties, and terms before you sign up.

Increase your monthly debt payments
Now that you’ve got your spending under control, it’s time to see if you can raise your debt payments every month. There are two primary methods to do this.

First, review your expenses to see if you can cut back in some categories. Can you spend a little time each week clipping coupons to reduce your grocery bill? Can you make coffee at home rather than purchasing it at the coffee shop every day? These changes can add up! Review entertainment costs, too. Can you cut out one or more streaming or cable services? It might be a good idea to find introductory offers that can reduce your monthly payments. Check into introductory cell phone offers, too, but always read the fine print so you don’t have any surprise fees or costs down the road.

Second, make a plan to increase your income. Can you ask for a raise at work, make a case for a promotion, or find a higher paying job? If that’s not in the cards, consider working a side gig. A few extra hours a week may increase your monthly income significantly—and help get you out of debt a little faster.

Are you struggling with debt? Get in touch with me and we can work on a strategy for a debt-free future.

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Why Financial Literacy is Important

Why Financial Literacy is Important

There’s a good chance that you’re facing a financial obstacle right now.

Maybe you’re trying to pay down some credit card debt, facing a meager retirement fund, or just struggling day-to-day to make ends meet.

It’s easy to feel overwhelmed and helpless in those situations, so much so that you might think learning a little more about how to manage your money wouldn’t make much difference right now.

But adopting a few key financial tips is often the best and simplest step towards taking control of your paycheck and finding some peace of mind. Here are some reasons why financial literacy is an essential skill for everyone to master, and a few tips to help you get started!

It helps you overcome fear
Let’s face it; money can seem scary. Mounting loans, debt, interest, investing—it can all be confusing and overwhelming. It may feel easier to ignore your finances and live paycheck to paycheck, never owning up to not-so-great decisions. But financial literacy gets right to the root of that fear by making things clear and simple. It empowers you to identify your mistakes and shows options to fix them.

Facing a problem is much easier once you understand it and know how to beat it. That’s why learning about money is so important if you want to start healing your financial woes.

It lets you take control of your finances
Financial literacy does more than just help you address problems or overcome obstacles. It gives you the power to stop being a victim and take control. You can start investing in your future with confidence instead of reacting to emergencies or going into deeper debt. That means building wealth and living life on your terms instead of someone else’s. In other words…

It helps you realize your dreams
Managing money isn’t about immediately seeing a bigger number in your bank account. It’s about having the resources and freedom to do the things you care about. Maybe that means taking your significant other on a dream vacation, giving more to a cause you care about, or providing your kids with a debt-free education.

Where to start
Acknowledging that you need to learn more can be the hardest step. That’s why meeting with a financial advisor is something you may consider. Calculate how much you spend versus how much you make and write down some financial goals. Then find a time to discuss your next steps. You may also want to sign up for a personal finance class that will cover things like budgeting and saving.

Financial literacy is one of the most important skills you can develop. Improving your financial education takes some time but it doesn’t have to be difficult. Give me a call. I’d love to sit down and help you learn more about ways you can take control of your future!

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Improve Your Love Life... With a Financial Strategy?

Improve Your Love Life... With a Financial Strategy?

You may not know this, but a financial advisor is also a relationship expert.

It’s true!

Here’s the proof: Ally Bank’s Love & Money study discovered that 84% of Americans think a romantic relationship is not only stronger but also more satisfying when it’s financially stable. What does it mean to be financially stable?

Here’s a simple 5-point checklist to let you know if you’re on the right track:

  1. You aren’t worried about your financial situation.
  2. You know how to budget and are debt-free.
  3. You pay bills on time – better yet, you pay bills ahead of time.
  4. You have adequate insurance coverage in case of trouble.
  5. You’re saving enough for retirement.

If you didn’t answer ‘yes’ to all of these, don’t worry! Chances are this checklist won’t come up on the first date. But when you have the “money talk” with someone you’ve been seeing for a while, wouldn’t it be great to know that you bring your own financial stability to the relationship? It’s clearly a bonus (remember that stat up there?).

Everyone could use a little help on their way to financial stability and independence. Contact me today, and together we can work on a strategy that could strengthen your peace of mind – and perhaps your love life!

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