Wednesday Welcome: How to Motivate Yourself to Save Money

This week David Ning joins the blog. David is the writer behind MoneyNing, a blog that encourages readers to take action when it comes to their finances. The action he’s encouraging today? Some simple steps you can take to get more money in the bank. You know we love that!

moneyning-headshot-1“Savings is boring, so why do it?” says pretty much everyone around you. Luckily, you know better, but still, stepping on the gas could be difficult to maintain at times. If you are struggling to stay focused on saving money, then you need a few tricks to help ease the perceived sacrifice. Here are a few such suggestions:

Celebrate a milestone generously. Savers know the key to long term success is to keep the fire up. That’s why it’s important to relax for a brief moment every time you reach a mini goal to bring out the bubbly. It’s like resting just so you can actually walk farther. Aside from validating the effort you put behind reaching this milestone, you are also giving the present a bit of a priority. After all, today is just as important as the future.

Look at history. Sometimes, all it takes to remind yourself of the effects of modern day consumerism is looking at everything you bought but no longer use. Open up the closet, dig out the cabinets and check out the garage when you have a chance. Do you even get any enjoyment out of much of that junk taking up space anymore? Now what if you just bought half of those things and saved the rest? (more…)

Mailbag Monday: Finding an Independent Financial Advisor

investingI recently came out from under the mess of the recession but I still have minimal yet manageable credit card debt. I want to start rebuilding my savings and retirement plans so I took your advice and looked up certified financial planners in my area.  Unfortunately, a couple of them never got back to me and the one who did said he deals with wealth management and since I have no wealth, I’m not a candidate for his services.  He recommended that I seek help from companies like Fidelity Investments and TD Ameritrade but aren’t they biased to their own products?  If so, how will I know my money is being invested in the right place?  What should I do?

– Kelly

Hi Kelly.  It sounds as if you’d prefer an advisor not affiliated with a particular firm.  Take a look at the Garrett Planning Network.  Sheryl Garrett, a fine planner in her own right, has built a network of planners willing to work with customers by the hour.  So you can spend just the time you need to get the plan or information you need, then execute the recommendations yourself.  This will save you a considerable amount of money.  Then, once a year, I’d go back to the planner for a check-up to make sure you’re moving in the right direction.

Wednesday Welcome: Boomer Housing

We’re pleased to welcome back Joy Loverde, author of The Complete Eldercare Planner. If you recall, she joined us last year for a post sharing her favorite resources for active aging, and this time, she’s back to talk about boomer housing options. They’re not what they used to be!

Screen Shot 2014-04-09 at 9.05.35 AMJust as the 76 million Baby Boomers have redefined every other stage of life from college to careers, we are now redefining and remaking the concept of living arrangements.  Developers take note.  No cookie-cutter “senior” housing approach for us.

While many Boomers will simply downsize, others will go straight to some flavor of housing that appeals to their lifestyle. This shift in how we think about living spaces has everything to do with the mindset that we have places to go and things to do no matter what physical shape our bodies are in.

We have proven over a lifetime that we are a generation that expects to stay involved in living. With that in mind, here are a few housing and lifestyle options to consider:

Age-in-Place

The ever-popular concept of staying put may require remodeling the home. Ground-level laundry rooms and walk-in showers, for example, help keep aging residents mobile and safe. National Association of Home Builders offers access to Certified Aging-in Place Specialists. When in-home caregiving services are needed contact The Eldercare Locator.

Shared Housing

Some people love living alone. If you’re not one of them, consider a home-mate. Sharing space with others solves a multitude of problems financially and otherwise, and may make it easier to go through difficult life stages together. Check out Sharing Housing and the National Shared Housing Resource Center.

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Money Sense on Fortune

jobreportIf you’ve been following me for a while now, then you might already know my take on target-date funds (TDFs). I’m a proponent — especially if you’re aiming to rebalance your portfolio — and need some help along the way. In this week’s column, I take you through what you need to know about TDFs when it comes to retirement.

FORTUNE – More than 51 million Americans have an active 401(k) retirement account, according to the Investment Company Institute.  And if recent statistics from Vanguard hold across the category – more than half have at least some of their money in a target-date fund. That’s a lot of dough and it’s growing fast.  According to BrightScope, target-date fund balances overall hit $500 billion in assets in 2012.  The company is estimating them to reach $2 trillion by 2020.

In many ways, that’s a good thing.  That shift has tempered the bi-polar tendencies of many 401(k) investors.   According to Vanguard, 10 years ago, 13% of their self-directed 401(k) investors held no stocks and 22% held only stocks.   No matter how you slice it, those investors were taking too little or too much risk.  Last year those numbers dropped to 10% and 13%, respectively – a result, at least in part, of making TDFs the default option on many retirement plans.

I’ve been a proponent of TDFs over the years.  I like the way they help humans who say they are going to rebalance their portfolios but never seem to get around to it stay at least in the vicinity of the track. Which is not to say I think they’re perfect.

For the full column, head over to Fortune.com

Mailbag Monday: IRA Income Requirements

retirementI want to open up an IRA, however I do not have any earned income from employment.  I am on disability. Could I qualify for an IRA?

– Dave

Hi Dave.  Generally, no.  There are a few exceptions — alimony and scholarships, for example.  But perhaps the biggest is spousal income.  If you have a spouse who works, you (and your spouse) can both make contributions based on that income.

Not being able to qualify for an IRA, however, doesn’t mean you shouldn’t save.  Invest your money in a discretionary account just as you would an IRA, based on your age and your risk tolerance – and let the time value of money work on your behalf.

You can open a discretionary account at any major brokerage.

Today’s Money: Helping Aging Parents Manage Their Finances

When it comes to aging parents and money management, 70% families find it difficult to handle. How do you know when your parents need help with their money? It’s a tough question, and an even tougher conversation to have. This morning on Today, I offered my tips on how to get the ball rolling, while keeping emotions at bay. To see what I had to say, check out the clip below:

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Mailbag Monday: How Does My Pension Factor Into Retirement Savings?

retirementIs there a rule of thumb that a monthly pension payment should equal a certain amount of dollars of savings? We hear that we need X dollars for retirement, but with a pension, what might that equate to? Some of us will have pensions from previous employers and wonder what it means in terms of the amount we need to save. (For example, does $1,000 in a monthly pension = $125,000 in savings?) What are good numbers to use in planning? Thank you.

– Kathie

Kathie, it really all boils down to how much of your pre-retirement income you’re trying to replace. That’s what you should focus on. Recent research has shown that spending in retirement isn’t linear as previously thought. You were often told you should plan on spending 70 to 80% of your pre-retirement income in retirement. In fact, spending usually tails off after the kids go to college and leave the house and, eventually, you stop working full time. Then life gets really expensive when you hit uber old age and healthcare expenses ramp up.

That said, on average, aiming for that 80% replacement rate is probably a pretty good move. You need to head to a retirement calculator that allows you to input how much you’re expecting from Social Security and your pension as well as how much you’ve saved.  The AARP’s retirement calculator – which you’ll find here – will let you do just that. It’ll run the numbers and help you figure out how much more you need to save to meet your goals.

Wednesday Welcome: Making the Most of Company Benefits

This week we welcome Sophia Bera, a certified financial planner who caters to millennials — though this particular post, about how to maximize your company’s benefits, is a good reminder to us all. Whether you’re just starting a job or you’ve been with the same company for years and haven’t re-looked your benefits in a while, the below advice will help you make the most of what your company is offering.

Bera - HeadshotDo you remember what company benefits you signed up for when you were first hired?  Did you make any changes during open enrollment this past year?  When it comes to working for a company, the salary offered isn’t the only aspect of the job to take into consideration. Unfortunately, many people only skim through or completely overlook their company benefits package – and this can be a big financial mistake.  Many of these benefits come out of your paycheck pre-tax which helps you lower your tax bill and save you thousands of dollars in the long run!

You might be leaving a lot on the table if you fail to comb through your benefits and take advantage of what you company is offering its employees. It’s more than just an employer match in a retirement account (although that is a big benefit you need to be sure to grab). Here’s where to start and what to look for:

Request Your Company Benefits Package 

If you work for a company with an HR department, you might want to start there. The department (or whoever is in charge of staffing concerns, if you work for a small business) should be able to provide you with some sort of handbook or paperwork that details what you are entitled to as an employee.

It can be really overwhelming to dive into pages and pages of technical writing on your benefits, but understanding the perks that come with your job is important! By utilizing what you can, you could save thousands of dollars in expenses throughout the year.

Common Company Benefits

Before you start feeling too bogged down in all the paperwork that explains your benefits, take a look through this list so you’ll know what to be on the lookout for:

  • Retirement Benefits. The biggest benefit you need to be taking advantage of is any kind of retirement account your employer offers, such as 401(k)s, 403(b)s, or a SIMPLE IRA. Sign up for the retirement plan your company offers and make sure you contribute enough to meet the match if there is one. This is free money! If your employer offers to match your contributions up to 5%, you need to contribute at least 5% of your salary to get the full benefit.
  • All Kinds of Insurance. It’s widely known that the majority of companies offer some sort of health insurance coverage to their employees. But they also offer other types of insurance that you need to take advantage of to make sure you and your family will be protected in the event of a disaster or emergency. Your company benefits could include life insurance, disability insurance (both short term and long term), a health savings account, and flex spending accounts (one for health care and one for childcare costs).
  • Financial Perks in Addition to Your Normal Salary. In addition to your regular paycheck, your company benefits might include things like stock options in the form of a employee stock purchase plan (or ESPP). This allows you to buy company stock at a discounted price. You might also be entitled to reimbursements on your wardrobe, commuting expenses, or other costs that you incur that are a direct result of working for your employer. This will all depend on the company you work for, so be sure to look into this and ask questions!

Finally, don’t forget about vacation time. On the surface, this might not seem like a financial perk. But remember, when you take vacation days you’re getting paid for hours that you’re not actually working.  Be sure to make the most of your paid time off.

Your company benefits package can be a lot to look through, but it’s crucial you take the time to do so. If you’re want to learn more about benefits, you can take a more in-depth look at my post on my website, Gen Y Planning, on how maximizing your company benefits could save you thousands of dollars!

About Sophia: Sophia Bera, CFP® is the Founder of Gen Y Planning and is a financial planner for Millennials.  She’s passionate about helping people in their 20s and 30s across the country with their money. She is a contributor for AOL’s Daily Finance website and has been quoted on various websites and publications including Forbes, Business Insider, Yahoo, Money Magazine, InvestmentNews, Financial Advisor magazine, and The Huffington Post. She was named one of the “Top Financial Advisors for Millennials” by the website www.MoneyUnder30.com. Follow her on Twitter @sophiabera or sign up for the Gen Y Planning Newsletter to stay up to date on financial articles geared towards Millennials.

Wednesday Welcome: Saving for Retirement When You’re Self-Employed

I’m excited to have John Schmoll as today’s guest poster. I met him when I spoke at FINCON — a financial bloggers conference — last year, and have enjoyed reading his blog Frugal Rules since. Today, he’s sharing his tips for saving for retirement when you’re self employed. 

 

John Profile PictureI have learned a lot about myself in the 18 months or so that I’ve been self-employed. I’ve learned about what truly motivates me, what I do in the face of a challenge, and how easy it can be to let things slide by.

One particular area that I’ve been guilty of letting slide by over the past year is actively saving for retirement. Gone is the 401k and the ability of getting that nice employer match – it all rests on my wife and I now. I’ve learned that even with the ups and downs of self-employment it is possible to have balance and put away money for retirement, though it takes action on your part.

Months Turn in to Years

If you run your own business, you know better than most that time is precious and there never seems to be enough of it in a day. As a result, time passes and things get delayed as you implement an “I’ll take care of it tomorrow” mindset.

The problem with this mindset, as it relates to retirement investing, is those days turn into months and thus you lose that precious time needed to grow your portfolio. This temptation to delay happens to the best of us and the best thing you can do is take the bull by the horns and actively engage with your retirement investing now.

Know Your Options

Many employers offer a solid framework you can use to save for retirement in a 401k. Often, entrepreneurs allow this lack of framework to hold them back from saving for retirement. If you’re self-employed, there are many retirement saving options you can use to create your own framework:

  • SEP IRAs
  • SIMPLE IRAs
  • Solo 401ks

Most brokerages offer all of these options, but make sure you find the one that works best for you and has either no fees or low fees so you can have more of your money working for you.

One nice added feature is that you can invest in virtually anything in these retirement accounts vs. restrictions you might face in an employer-sponsored 401k. Thus, you have access to lower-fee index funds as opposed to being forced to choose between several higher-fee funds – which means more of your money can work for you.

Look at Your Priorities

The problem many face in their self-employment journey is fluctuating income. You could have a stellar month followed by one that is barely enough to get by. When dealing with this fluctuating income there are a number of things to look at:

  • What are you spending money on each month that can be cut?
  • What is your rolling average of income over a longer period of time?
  • Are you sitting on too much cash?

Taking a serious look at some of these things can not only reveal what your priorities are, but it can also show you that you do have money you could set aside each month or quarter for retirement. Of course you still want to be able to live life, but you don’t want to do it at the expense of sacrificing your future for the present.

Saving for retirement while running your own business does present some unique challenges, but it’s not impossible. Making it a priority and knowing your options will set you up to succeed in the long run.

About John: John Schmoll is the founder of Frugal Rules, a blog created to help people experience financial freedom through frugality. John is passionate about budgeting, saving and investing and enjoys sharing his knowledge and experience with others so they can avoid making some of the mistakes that he made. A veteran of the financial services industry, John has an MBA in Finance and experience as a licensed stockbroker. You can find John online at frugalrules.com and follow him on Twitter at @frugalrules.

Jean on The Texas Daily

The Texas Daily caught up with Jean last week when she was in Dallas for the 2014 CSCUF FOCUS Summit.

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