Will you take the spending freeze challenge?

Can you stop spending for a two week period? That is the challenge. Today, I will tell you how to prepare for your challenge. Later, I will tell you the benefits you will reap.
First, you need to decide when you will start and where the money you will save will go. I hope you have an emergency fund set up – that is a great place to stash the cash you will save.
Second, you need to inventory your freezer and refrigerator. Stock up before the freeze. Fill up your car with gas and maybe get a 5 gallon gas can so you can stash some surplus gas.
Third, check your essentials. Medications and personal care items are very important to stock pile.
Now that you are prepared, no discretionary spending is allowed for your two week period. I realize that household bills will need to be paid; those are exempt from the challenge. Keep a diary of what you wanted to spend so you know exactly how much you now can add to your savings.
Good luck!


“How do I budget?”

This question was recently asked of me by a client. Let’s first look at what comes to mind when we think of a budget. Most people think of the basics, housing costs, utilities, auto expense, food, and our children’s activities. You look at your income and then figure out the difference. That is not the whole picture. When we look at how you are living your life, we also want to know things like:
How much do you contribute to charities? How much do you spend on personal care? What about pet care? Vacations? Phone? Cable? Taxes? How much does inflation add to your costs? These are the items that “nickel and dime” our bottom line.

An easy way to track your spending, because that is what really matters, is to put yourself on a cash only diet. For a two to four week period, you only use cash. Not for the big things like paying your mortgage, but everything else. Pay cash for gas, food, entertainment, coffee, and clothing, whatever you may purchase. Keep your receipts, then review. You will get a good look at exactly where the money is going. I have also found that when you spend actual cash vs. using a card it is more real. This method can also help you determine if the purchase is a need vs. a want. Track the cash flow, then you can keep your budget on track.


18% – are you kidding?!

18% of you that are in your late 50’s are banking on an inheritance for your retirement security. I have news for you, your parents and Grandparents are not living their lives so you can inherit!

Our parents and Grandparents are living longer, but not necessarily healthier lives. We all know that health care, especially Long Term Care, has increase in cost by leaps and bounds. Because our parents did not expect to live into their late 80’s or 90’s, they are spending much more than anyone dreamed on their own health care. This is chunking into your “inheritance”. Our Parents are staying in their homes much longer than previous generations did; this is also taking a bite out of your “inheritance”. If you think about past generations, when someone retired, they moved to Florida and lived out their lives in the sun & fun – until about age 72. We already live in Florida, as do most of our Parents – and they are living 10- 15 years longer in the same house. Home repairs, as well as retro-fitting for an elderly parent, cost a lot of money.

Our Parents saved for their retirement and for a “rainy day.” This is the lesson we need to learn from them. If we inherit anything, it is as an unexpected gift.



8 Times my annual income?

The other day my girlfriend asked me about an article she read stating that pre-retirees need to save 8 times their annual income in order to have a comfortable retirement. With the average income in the U.S. being just over $50,000 that means $400,000 in the nest egg. After the last few years we have been through economically, this figure may be hard to reach for many Americans.

My comment to her was; I prefer to look more at expenses vs. earnings. I want to know how my clients are living their lives + taxes and inflation. My average client is spending $30,000 so that would mean having a nest egg of $180,000 – $240,000 in reserves. Most of my clients do not wish to reverse their standard of living in retirement and that is why I like to look at their expenses vs. their current income. I want my clients to know that when the time comes to buy an airline ticket to their Grandchild’s graduation, they do not have to think about what they might have to give up to do so.

Financial planning should be done no less than 2 years prior to retirement. Call me today for your plan.



It’s time for a Q & A!

Q: I have $10,000 sitting in a 401(K) that is not earning much and I owe $20,000 on a credit card with 9.5% interest. Should I take some out of the 401(k) to pay off this debt? I am under 59.5 years old.

A: Generally, this is not a good idea. Firs,t whatever you withdraw from the 401(k) will be added to your income and taxed. This could put you into a higher tax bracket. Next, you will have to pay an additional 10% early withdrawal penalty due to you age. These two taxes could reduce your withdrawal amount by 25% turning your $10,000 into a spendable amount of only $7,500.
This would leave you with the remaining credit card balance and no retirement fund. If we look at the loss of compounding tax deferred dollars, for every $1000 withdrawn, you will be losing $7,686 in future spending dollars.

Here is what I recommend: reduce the amount that you are contributing to your 401(k) and apply the difference to the credit card debt. Contact the credit card company to see if you can get the interest rate lowered. You do not know if this is possible if you do not ask. Put together a budget and track where your income goes. Look for areas where you can spend less to reduce the debt, and you will have more money for short and long term savings.

I am going to refinance my mortgage, is PMI necessary?

Depending on the current value of your home vs. the mortgage, PMI may be necessary. Generally, if the mortgage is greater than 80% of the value, PMI will be required.

How can I open a 529 account but not have it count against my child if he wants to apply for scholarships?
A: If the owner of the 529 account is your Parents, a sibling, or a trusted friend with your child as the beneficiary, then it will not have to be reported.

I am an Audi girl. I love the look of the car, the drive, and how safe it is.

What I don’t love is having to use premium gas. I get gas every Sunday at the same station because I want to track the prices. I could not believe that last Sunday the price per gallon was up 10 cents. Every other week the price has been creeping up at about 4 cents a gallon. So what’s a girl to do?

I try to never let my tank go below half full. By doing this, I will not faint next to the pump when I fill up and embarrass myself. Here are a few more tips for saving at the pump:
Keep your tires properly inflated. This is the easiest fix to increasing your gas mileage.
Remove heavy items from your trunk. Excess weight in the car can increase drag and increase gas consumption.
Drive the speed limit. Constant stopping and starting could cost an additional 15-28 cents per gallon.

So have fun out there and be safe. Happy driving.

You did some belt tightening along with everyone else over the last few years.

 No longer do you buy premium coffee 7 days a week, you have switched to some store brands at the grocery, and you are driving a lot less. My question to you is, “are you saving what you are saving?”
Let’s look at what I will call “The Latte factor”. If you have in fact start brewing your own, then you are saving about $1092/year. But, are you truly saving that money? By brewing at home you can be saving $21/week. Are you putting that extra $84/month in your saving account or are you feeling a little flush and going out to dinner? I know a lot of people are suffering from frugal fatigue, but be strong! Lifestyle changes can be hard, but the extra money in your bank account makes it so much easier.

It’s time for resolutions

Peace of mind comes with understanding and being in control of your own financial situation. Whether this need arises during a major life transition such as divorce, or with your everyday finances, we help empower you to make sound financial decisions by providing advice, analysis, and education.

Resolutions need not be big or grand. Baby steps make being financially secure much easier. First take a look at where you stand financially. How much debt do you have? How much are you saving on a regular basis? What big expenses are down the road? Second, you need to put together a plan of action. Here are a couple of steps for you to take:

Pay yourself first. This is a very old idea, but an important one. Pay yourself as you would any other monthly bill. As you see your account balance increase, you will know that you are giving yourself the power of choice. Having cash gives you the power to choose how you spend it. There is no better feeling.

Reduce your consumer debt. If you are only paying the minimum toward this debt – increase the payment. Once your consumer debt is gone, do not charge any more than you can pay off the next month. This takes you back to the previous point- you will now have financial choice.

Start a slush fund for the large expenses that are down the road. If you know that you will need to replace your car in a couple of years, start saving now for the down payment, or maybe even half the value of what you might spend.

Resolutions can be hard to keep, but for 2012, give yourself the peace of mind that comes with financial freedom

Time for a financial checkup

Would you let more than a year go by without taking your child for an annual physical? Of course not. And although your financial future isn’t your child, its health and growth are in your care, too. When was the last time it had a checkup?

A lot has been changing on the economic front in the past 12 months. You see and hear the headlines every day: stocks, housing, automakers, retail, jobs, bank bailouts and all the rest. No one is untouched by the fallout. Perhaps it’s affecting your career and your income. Even if not, it’s a sure bet that they’re affecting your investments and your emergency cash-in-hand fund.

Like many people, you may have found yourself dipping into that fund recently. You’ve heard it before, but there’s no time like the present to restate it: You need six months’ worth of living expenses in cash savings (or close to six months as possible) as your emergency fund. It’s there to cover a sudden loss of income, or out-of pocket costs for unexpected house expenses (summer’s here, and you’re A/C unit isn’t getting any younger) or car repairs, or medical expenses, or . . . the list goes on. Start adding to your emergency fund now.

Once it’s en route to being replenished, you can move on to your longer-term savings goals and holdings, from CDs to your investment portfolio. If you haven’t already, meet with your Certified Financial Planner (CFP) for a checkup of your retirement account and your investments—stocks, bonds, mutual funds, etc. They may need to be re-balanced. Also consider your “time line” (how long before you retire), your reduced investment balances, and how current economic conditions my have affected your original goals. Your CFP can rework that long-term plan for you.

One more checkup: Insurance. Review your medical coverage, disability protection, long-term care plan, and life insurance. Because people are living longer, costs are coming down for many types of coverage—which means you may be paying too much if your costs are based on outdated actuarial tables. And don’t overlook savings on home and auto insurance. Shop around: rates are often competitive there, too. And if your home and auto are insured by the same company, they typically give a discount.

As with physical health, good financial health is critical, so take good care of it. Call your Certified Financial Planner for a checkup now: a little preventive “medicine” can help ensure a financially healthy future for you and your family.