Tag Archives: savings

Is too much cash a bad thing?

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Perhaps. While many people do not have an emergency fund at all, some people have too much of an emergency fund. Conventional wisdom says that 6 months of expenses is a good amount to have in cash – is that too much for you? We know that savings accounts, money markets, and even CD’s are not paying much in interest. Those are wonderful areas to save, but not to invest.
Any amount of money that you might have to use within 18 months should be stashed in those types of accounts, anything else can be invested. A quality mutual fund with good diversification will add to your overall accumulation success.

disclosures:http://www.hechteffect.net/?page_id=31

How much should I keep liquid?

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I purchased a home earlier this year and want to know how much money to keep in my home repair/upkeep fund. I have a small house (3 bdrm, 2 bath, 1500 sq ft) on a small lot. I have no debt other than my small mortgage ($900/month, including taxes and insurance).

My retirement (including a pension) is continuing to be fully funded on an ongoing basis and I already have an emergency fund that is fully funded with six months of living expenses.

Thanks, in advance, for your advice. Happy New Year!

My answer:

Congrats – it sounds like you have put yourself in a fine position for short term emergency funds and long term savings. Home repairs can be tricky as far as pre-funding goes. Next week we will be replacing our roof at a cost of $20k. If you were to look at that as being the most expense home repair to plan for, that would be my goal. Any repair below that, such as a hot water heater, would be less than $1000. If you use the roof as a maker you should be well prepared for anything. If you have any other questions, please let me know.

The final comment:

Thanks for responding. I was thinking around $20K too, good to have it confirmed by an expert.

 

Disclosures:http://www.hechteffect.net/?page_id=31

Listen to 96.5FM this Saturday from 9-10 am. I will be presenting these topics and answering your questions.

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You are in the Retirement home stretch – 3 tips to keep in mind.

70 IS your magic number!
Why delaying retirement until age 70 makes a difference to you.

Email:
Q: We have remaining student loans @ 3.9% – should we increase our payment to that so we can pay it off faster or should we put the extra savings toward our kids 529?

What to do with an Inheritance?

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Sadly, I have had to help a number of clients through inheritance issues lately. Dealing with the emotional issues are hard enough; add on a sudden lump sum of money and some people become paralyzed. Where do you start and what do you need to do first?

Does the estate have any unpaid bills or owe Estate Tax? These are the first issues that need to be taken care of. After that, you now have to decide what to do with the money.

There are two schools of thought on the next move; do you splurge a little or not? I feel that if there is that one small item or vacation that you always wanted – go for it. Your loved one would be happy that they could provide a bit of happy during a sad time. The other school is save first, then splurge. Really, you can do both.

An emergency fund is a great place to start. Make sure you have enough liquid cash to get you through 6 months of expenses, and then plan the splurge. If you do not have a retirement plan, fund that too. Do you have kids that want to go to college? A 529 college savings plan can be funded with the inheritance.

Sudden wealth can be overwhelming, but don’t count your chickens before they hatch. Many people who inherit do not receive as much as they had thought they might get. Planning on an inheritance is not a retirement plan either. Be grateful for anything that you might receive and try to use it in a manner that would make the grantor of this gift proud.

What is your “phrase to save?”

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We all know that we need to save money for the big things like buying a house, college for our kids, our own retirement, etc., but what is your “phrase to save” that gets you there?

Every journey begins with a single step and saving is no different. Many people now are saying that due to the economy it is much harder to save, but it is not impossible. Let’s say that you have already accomplished the big things, you love your home, and you contribute regularly to your retirement plan. But it is the small items that have you worried. Let’s say there is a big family event coming up next year and you don’t know how you can afford the airfare and hotel.

For two weeks, keep a receipt for everything you spend from a pack of gum to dinner and a movie to your mortgage payment. You will be surprised at all of the small areas you can cut back and save for that family trip. If your “phrase to save” is for the airline tickets, look at items such as that daily premium cup of coffee or buy movie tickets for $10 each vs. renting a movie from Netflix for $3.00. Maybe you will take a sabbatical from eating out for two months and save those dollars specifically for the airline tickets. Small changes in your everyday spending can make huge differences in your savings account.

Whether the goal is big or small, think about and write down your own “phrase to save” and you will be on your way to savings success.

Budgets are Sexy?

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I recently ran across this title while doing some research. Yes, I do think budgets are sexy. They are also a lot of work and are the path to freedom.

Let’s look at your budget as your new exercise program. It is summer after all and you want to look good on the beach. Nothing makes you look better than confidence and being fit. Financial fitness is just as important as physical fitness. So you are ready to walk into the gym for this first time in a long time. This decision takes commitment and planning but you know that the end result will be worth it. This first step is just that. You will be on a long road to fitness and it will require maintenance.

Planning and sticking to your budget requires the same commitment and maintenance. You need to look at all of your regular monthly expenses such as mortgage, power, internet, food, and transportation costs. Next, you need to look at the periodic expenses such as insurance premiums for your home and life as well as items such as property taxes. Don’t forget your regular savings. We look at savings as an expense whether it is long term savings to a retirement plan or short term savings into an emergency fund. I think it is important to add charitable gifting into the budget. Giving to your community is a wonderful way to spend money.

So stretch your muscles, sharpen your pencils, and get your financial and physical sexy going.

DO NO USE YOUR PERSONAL EMAIL ADDRESS WHILE ON VACATION!

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Yesterday I received an email request from a client asking for money. This is not an unusual request, what got my attention was the amount and where the funds were to be sent. I called the client and found out the request was not from her. I asked if she had been on vacation recently and checked her email, she said yes.

This is the fourth client that has checked their email while on vacation and I have then received a request for money. Do not do this! You are logging into a public, unprotected network. You have no idea who is sitting next to you with equipment that can capture your screen, your clicks, your login, or passwords.

You can go to any number of email sites and set- up a separate email address that you can use while on vacation. Use that vacation email address for that trip only, shut it down when you get home, then establish another one for your next trip.

I have had my identity stolen twice; there is a lot that needs to be done after the fact to protect yourself and to regain a sense of peace. Be proactive, set up a temporary email before you travel

How much do you care about your future self?

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If you care a lot about your future self, you will save more. If you care a little, not so much. The question then becomes – how can you save more than you already are? In the past we have discussed the “Latte Factor.” If you cut back the premium drinks you buy each week from one a day to 3 a week, you can save $10/week or $520/year. While this small change may not seem like much it does add up.

Another trick to keeping your savings is to open up an account with a banking institution that is not close to work or home. It is a chore to deposit into this account and a chore to withdraw. You pat yourself on the back for going out of your way to save for your future and give yourself another big pat for not making the trip to withdraw. Accounts that are not convenient make us think twice about withdrawing from them until we really need to.

Saving is what we have after we finish spending. If we can control spending we will be much better off