Recently I had a chance to have some fun with some of my undergraduate students. Polling my entire class I asked them to make a list of wants (not needs) that they frequently spent money on. Answers varied from smartphones (and the respective bill), cable and satellite TV, dining out, coffee shops, beverages (you know which ones), and appearance (spending extra to dye hair, pedicures, etc.). Here’s a list of how each expense was broken down as told by the students. In other words, it was their numbers not mine.
saving
How to Save More Without Making More
Here’s a pretty neat strategy that you can try if you’re looking to save a bit more for retirement, college or even paying down debt. It works like this: Whenever we’re out shopping or online shopping there’s always the temptation to purchase things we really don’t need. For example, I was at the store the other day and tried on a few pairs of jeans. Did I really need them? No. Did I want them? Of course. You may have seen yourself in a similar situation – wanting something but knowing you most likely didn’t really need it.
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ABLE Accounts
For 2015 there is a new type of tax-deferred savings account, called the ABLE account. The acronym ABLE comes from the name of the act: Achieving a Better Life Experience Act of 2014. As such, these accounts are dedicated to provide for tax-deferred savings (non-deductible contributions) of up to $14,000 per year for folks who became blind or disabled before age 26. Tax-free distributions from the ABLE account can be used to pay for housing, transportation, education, job training, and the like. The assets in an ABLE account are not counted toward an individual’s eligibility to qualify for Medicaid, Supplemental Security Income and other federal mean-tested benefits (up to a $100,000 balance in the ABLE account). This is the great benefit of the ABLE account, because the means-testing applied to so many benefits for folks with disabilities actually discourages savings of this nature. With the ABLE account, people with disabilities […]
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Wants and Needs
Sometimes when we need more money for a specific goal in the future such as retirement, college, a down payment on a home or an emergency fund we may feel that before these things can happen we need to make more money. We may feel that once our incomes are up to a certain level that we’ll be able to afford to save for those goals. It may not be necessary to earn more in order to achieve the above goals. For many folks the solution is simply to prioritize between wants and needs. In other words, learning to distinguish between the wants and the needs in your life and then reallocating your money to fund retirement or college goals without having to ask for a raise or get a second job.
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It’s Never Too Early to Teach Your Kids About Money
I have two daughters and it has given me the pleasure of seeing them grow up and get excited about even the little things like chasing butterflies or finding a lucky penny. My kids find lucky pennies all the time. In fact, they find lucky coins all over the place. Some are by chance as we’re walking down the sidewalk and other times it’s a lucky coin that I may place in an inconspicuous place so they stumble upon it and find it (sometimes it’s fun creating luck for my kids). Whether they find the coin by luck or otherwise, it gives me a great opportunity to teach them. After the excitement of the find goes away, they get even more excited when I ask, “Where should we put that lucky coin?” With glee they almost always reply, “In the piggy bank!” I feel parents can teach their kids about […]
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The Cost of Waiting
Procrastination is a silent and slow killer. Everyone, including yours truly, is guilty of putting things off, waiting until the last minute and then scurrying around frantically to get done what we could have easily gotten finished weeks or months ago if we would have either planned ahead or simply started. Let me give you an example. Last year my wife and I were debating whether or not to have a tree removed from our back yard. The culprit is the much loathed sweet gum tree that is common in this area of the country. Readers familiar with this pariah of the deciduous family of trees recognize it with annoying “gumballs” that are far from being smooth but rather are the sharp and pointy fruits that fall relentlessly from the tree mainly in the fall and work wonders on mower blades and bare feet. Needless to say they are a […]
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How Much Do I Need to Save: Part II
Last week I gave some general indications on how much someone needed to save. We used general percents and some basic numbers but this week I want to actually put those numbers to work. For example – let’s say we have a 30 year old couple that says they would like to have $3,000,000 saved at retirement (assume their both the same age and will both retire at 65). We’ll also assume that they have not started saving yet. Using a 5% compounded annual rate of return this couple would need to save about $2,640 per month for 35 years in order to hit their goal. If we assume they’ve amassed $50,000 by age 30, then they only need to save $2,388 per month. If we use the $2,388 as our savings made at 10% that means our annual income for the couple is about $286,560. Using the same amount […]
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How Much Do I Need to Save?
Frequently I’m asked by folks how much they need to be socking away for retirement. Many people I talk to are concerned about having enough (a very common concern I would say among most people) for retirement and fear running out of money. As much as I would love to give them a rock-solid answer and as much as they want a definitive answer, the true answer is that it depends – on a number of factors. 1. How much do you plan to spend in retirement? This question can be difficult to answer especially if you’re young and can’t contemplate nor even come close to an estimate of what expenses will be in retirement. For others, this may be more readily a number to come up with especially if one is close to retirement or in the peak accumulation years of their careers which is usually later in life. 2. […]
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Market Returns Aren’t Savings
In 2013 the market and those invested in it experienced a nice return on their investments. The S&P 500 rose an amazing 29.6% while the Dow rose 26.5%. Needless to say 2013 was an amazing year for investors – but try not to make the following mistake: Don’t confuse investment returns with savings. While it is true that the more of a return an investor receives on his or her investments the less they have to save it still does not mean that your returns should take the place of systematic saving for retirement, college or the proverbial rainy day. And by no means should you reduce the amount you’re saving thinking that the returns from 2013 and other bull years will repeat and continue their upward bounty. Investment returns are the returns that an investor receives in a particular time frame. For 2013, if an investor was invested in […]
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How to Save More
This may seem like common sense but we are common sense people. If your’e looking for ways to save a bit more money in 2014 – here are some steps that you can take to put some extra green back in your pockets. 1. Brew your own coffee. I’m m a coffee fanatic and rarely go a few hours without replenishing my mug of joe. I can’t imagine what my coffee bill would be per month if I went to the fast food place or coffee shop – likely $5-$10 per day. At $150-$300 per month, brewing my own makes more sense. 2. Cut your TV costs. Don’t watch a lot of TV or want to make more time for other things? Simply reduce the channels you watch or scrap it altogether. This can put an extra $150 in your pocket per month. 3. Turn the lights off. This one is near and […]
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Saving in The Military
If you or a loved one are in the military and are about to be deployed you may be able to take advantage of a special savings account that is specifically for our Armed Forces members that are deployed in a combat area. The Savings Deposit Program (SDP) is a unique savings account for service members that are deployed in combat zones and allows the service member to allocate some, most, and in some cases all of their combat pay to a savings account. The maximum that can be contributed to the savings account is $10,000 per deployment and that money grows at 10%, yes 10%. Eligible service members include: You are deployed to an area in support of Operation Enduring Freedom/Operation Iraqi Freedom (OEF/OIF), or other contingency operations where you are receiving HFP/IDP. You serve in the combat zone or in direct support of a designated combat zone for […]
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Save 1% More This year – Your Future Self Will Thank You!
Like so many other things, practicing financial awareness has few payoffs in the early stages. Think about exercising, eating right, putting in the extra effort at work, or taking a class to improve your skills. All of these things have a future payoff for the extra effort that you put into it today. Small steps matter in all of these areas, and before you know it you’ll look back and thank your earlier self for putting in the work to get where you are today. Below is the list of my fellow bloggers who have written articles showing ways that you can start to increase your savings rate, as well as showing what the benefits can be. Thanks to everyone who has participated so far – and watch for more articles in the weeks to come! How Much is 1% by Sterling Raskie, @SterlingRaskie Retire Rich With Only […]
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How Much is 1%?
A penny saved is a penny earned and penny-pincher are two common terms that are used to describe someone that is most likely frugal. I would admit I am one of those individuals that aspires to both phrases – and it’s not out of accident. I am one of those folks who will pick up a penny (heads or tails showing – no superstitions here) when walking down the street and put it in my pocket. That penny, nickel, or quarter (in rare cases a one-dollar bill or even higher) will usually make its way into my piggy bank or more likely one of my daughters’ porcelain pigs. I pick up the loose change for one of two reasons: It’s literally free money. To not pick it up is asinine. Little amounts add up. Think of it this way – a penny is 1% of a dollar. A dollar is 1% […]
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You won’t regret it, I promise!
I often have opportunity to speak to young folks who are just starting out with their retirement accounts – this usually happens when we’re looking at ways to reduce taxes, primarily, so we start looking at IRAs and diverting income via 401(k) accounts. One of the things I point out is that this is an activity that you aren’t likely to look back on in 20 years and say “Gee, I sure wish I hadn’t saved all that money!” We may have many things we look back on in our lives and wish we hadn’t done them, but I think you’ll agree that saving is rarely in that category. So take the encouragement of my fellow blogging brethren and sistren (you betcha sistren’s a word, regardless of WP’s spell-checker!) and put aside at least 1% more of your income into your savings, starting right now. You won’t regret it, I […]
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Add 1% More to Your Savings
Savings rates in America are really not what they should be. Studies have shown that, in order to achieve the goal of replacing 80% of your average pre-retirement income you should be saving at a rate around 17.5%. This doesn’t necessarily mean that 17.5% is the right number for everyone, because pensions and Social Security can help out in replacing some of your income in retirement. But the average savings rate for all Americans is something just south of 5% – so we can definitely do a better job. So make the effort to apply at least 1% more to your savings rate this November. It certainly can’t hurt! Below is the list of my fellow bloggers who have written articles showing ways that you can start to increase your savings rate, as well as showing what the benefits can be. Thanks to everyone who has participated so far – […]
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November is “Add 1% More to Your Savings” Month
That’s right, we unofficially declared November to be “Add 1% More to Your Savings” month. So you can add that to the month-long observances like: No-shave November International Drum Month Sweet Potato Awareness Month and many more (see the list at Wikipedia) In November we encourage folks to increase their retirement savings rate by at least 1% more than the current rate. It’s a small step, but it will pay off for you in the long run. Below is the list of my fellow bloggers who have written articles showing ways that you can start to increase your savings rate, as well as showing what the benefits can be. Thanks to everyone who has participated so far – and watch for more articles in the weeks to come! The 1 Percent Solution by John Davis, @MentorCapitalMg Friday Financial Tidbit-What increasing your retirement contributions 1% can do for your retirement account by Jonathan White, […]
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C’mon America! Increase your savings rate by 1% more!
This November we’re encouraging folks to increase their retirement savings rate by at least 1% more than the current rate. It’s a small step, but it will pay off for you in the long run. Below is the list of my fellow bloggers who have written articles showing ways that you can start to increase your savings rate, as well as showing what the benefits can be. Thanks to everyone who has participated so far – and watch for more articles in the weeks to come! THE 1% MORE BLOGGING PROJECT by Robert Flach, @rdftaxpro A Simple Strategy to Maximize Open Enrollment by Jacob Kuebler, @Jakekuebler Take a Small Step: Increase Your Savings by 1% by Jim Blankenship, @BlankenshipFP
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Call All Bloggers! 2nd Annual 1% More Blogging Project
I’m sure that I’m not alone in the financial planning world with my concern about the rate of saving toward retirement across this great land. Recent figures have shown that we Americans are not doing as this year as last, at a 4.6% rate versus 5% last year when we started this project. This is a dismal figure when you consider how most folks are coming up way short when they want to retire. Just like last year in November, I thought maybe something could be done to encourage an increase in savings – if only by 1%, this can be a significant step for lots of folks. November is the perfect time to do this, as most corporations are going through the annual benefit election cycle, so the 401(k) (or 403(b), 457, or other savings plan) is right at the forefront for many folks. I’m proposing that all financially-oriented […]
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Take a Small Step: Increase Your Savings by 1%
As savers, we Americans are not doing a good job. We’re improving (according to recent data), but still way behind what we should be saving. But it doesn’t have to be that way – you can take small steps to increase your savings right away, and it doesn’t have to hurt. The Bureau of Economic Analysis recently reported that we are saving at a rate of around 4.6% of disposable personal income, an increase of 0.1% over the prior month. On a per-person basis, that works out to about $1,831 saved per month, or just short of $22,000 per year. Since we know that very, very few people are exactly average (by definition most people are going to be something above or below the average), what concerns me is that even those who are a bit above the average are still not saving enough. And woe to those who are […]
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Avoid the Trap
Eating and dining out all the time can drain our money and potential retirement savings without us even being aware of it. We get asked from friends to go to lunch, coffee or we find ourselves skipping breakfast and getting in the line at the coffee shop for a scone and latte. Before we know it, we’re left asking, “Where did the money go?” Or worse, “I can’t afford to save for retirement.” What’s happened is we’ve fallen into the trap – a habit really, but it can be broken and we can relearn. Here’s how: The first thing you can do is to pass on that latte or scone all together. Instead, make yourself breakfast at home. Invest in a coffee maker if you don’t have one, and make your own coffee. Then make a nice meal of scrambled eggs and whole wheat toast, a cup of cottage cheese with […]
Sterling Raskie, MSFS, CFP®, ChFC®
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