Financial Goals

Income: Knowing Where You Stand

To take charge of your finances you have to know where you stand. I know that some people will want to shut the book at this point, but don’t. It’s not going to be that hard for you to do this. This is not a one day project, so don’t panic. You have a week to do this for yourself. No one is going to look at this, but you will need this as a starting point. Take the time to do this.

Start with my budget or spending plan worksheet. If you’ve already prepared your taxes, you will have this information readily available. For your income, look at your W-2 forms and divide by 12. This will give you a monthly figure. If you have 1099’s then you can do the same. Or take your pay stub and multiply by the number of pay periods in the year. Remember to add any other income – pensions, rental income, investments etc to get a clear picture.

Share this post for the Financial Literacy Month Contest. Learn more at www.JillRussoFoster.com/financial-literacy-month-2013

Financial Literacy Month starts Monday!

In honor of that, I’ll be posting an entire chapter from my book, Thrive in Five, in 1 post a day.

My micro-tips will ask you to think outside the box and push your saving even higher. For starters, you’ll have a week to record your monthly expenses. Then I am going to suggest things to you that you might not want to do. Other things might intrigue you, try them.

Each effort you make will save you money.

Watch for my first post on April 1st. 🙂

Stop Doing What You Do!

beach-sign

“If you keep on doing what you’ve always done, you’ll keep on getting what you’ve always got.” If you want to make changes with your life and finances, then you need to do something different.

When I imagine my perfect life, it’s like a sunny day at the beach – calm and bright with a peaceful, beautiful feeling. This year, I’ve decided to do some things differently, in the hopes of making my real life closer to my ideal life.

My Morning Meditations: I have trouble quieting my mind. When I finish one task, the next item on my to-do list pops into my head. Since January, I have started my day with a guided morning meditation. Maybe someday I’ll be able to meditate on my own, but for now it works best to listen to someone guiding me to a state of relaxation.

Results: This is really new to me. So far, I’ve seen changes in the amount of stress in my life. I am much calmer and more easily cope with my long appointment driven days. I have noticed subtle changes in my body. I now have trouble keeping my purse on my shoulder. Less stress has lowered my shoulders.

My Intention Journal: I’ve kept a gratitude journal for years, ever since reading Simple Abundance. It was difficult to think of even 5 things to be grateful for at first, but now I have to stop myself after one page. This year, I added an intention journal to my routine. In the morning, I set an intention for what I want to happen that day, and then I journal about the results before bedtime. My intention can be anything from “I easily completed this project” to “I achieved this outcome for this meeting.” I word it as an affirmation as if it already has happened.

Results: Setting my intention in the morning gives my day focus. Writing down the intention helps to keep it foremost in my mind. This compliments my gratitude journal. I recommend it to everyone. It’s worked great for me.

Going Paperless in the Kitchen: I am continuing to get rid of more paper. This year I am organizing all of my recipes in a folder on my hard drive. This includes all the old family recipes that I had on scraps of paper or recipe cards and the new ones from magazines or friends that I want to try.

Results: No more recipe cards, or notebooks with torn out recipes in my kitchen. That’s been really nice. Have you ever wanted a specific recipe, but couldn’t remember if it was in a book, card box, or ripped-out magazine page? It’s not fun.

Minimizing My Possessions: Over the last few years, I’ve been streamlining and simplifying my life. I used to keep too many things, “just in case”. But, going through things can lead to new piles because I want to give them away to just the right person. This year, I am giving myself a one-week time limit on the stuff. If I think that someone, or an organization, can use the item, I have one week to contact them, and get it to them (if they need it or want it). Otherwise, it’s at the curb.

Results: As I clear things out of my home, I’m making way for new energy (not things). I have several new projects on the horizon and have given three talks to new organizations just in the month of February alone.

I can’t wait to see what’s next. What are you willing to change in your life to get different results?

What I Learned about Money from Sitcoms

I love to watch old sitcoms on TV Land and Nick at Nite. They’re like comfort food for the brain. I’ve seen the episodes already so there’s no suspense, and I certainly don’t expect to learn anything.

But sometimes they surprise me.

A couple of weeks ago, I was watching reruns of The Nanny. In the episode “Close Shave”, Fran is having trouble paying her credit card bills.

Here’s the conversation between Fran and Niles:

Fran: I have to pay my American Express because if I buy a piece of gum, the S.WA.T. team storms the building. Meanwhile, I pay my MasterCard with my Discover Card, my Discover card with my Optima Card, My Optima Card with my City Trust Visa.
Niles: But doesn’t that leave a very high balance on your Visa?
Fran: Exactly! And that’s why they gave me an espresso machine which I sell to pay off my American Express, thank you.

This reminded me of the Cosby episode “Theo’s Holiday.” It’s the one where Theo wants to move out using money from a modeling career (that he doesn’t have). Cliff and the family show him the real costs of living on his own.

(Start at 3:32) To see the full episode watch Part 2 and Part 3

For sitcoms, these episodes are very realistic in the way they portray people who are uninformed about money. But, the solutions weren’t realistic at all. How nice would it be if we could solve our problems in 23 minutes just like they do on TV?

Now, imagine you’re a child watching the same episodes for the first time. What would you learn? There’s a telling discussion on TV.com.

How will your kids learn about money? Will they learn from TV, or because you took the time to teach them like Theo’s family taught him? What about yourself? You’re old enough to know that your problems won’t magically go away like Fran’s. Be informed and make informed choices that are right for you.

People want their finances to be perfect – like a TV show. But most of us don’t go from a plan to success by receiving a windfall. There’s usually a long journey and detours in the road. What matters most is how you get yourself back on track. Keep yourself moving forward towards your goal and you will accomplish it.

And, if you need a little comfort, try an old sitcom. They’re cheap, there are no calories and you might learn something… but don’t count on it.

Start Small to Have It All

This is Part 2 of my “Having it All” series. The first part is “Step One to Having it All”

Everyone has a different definition of Having it All. In the first article, I asked you to list a few goals based on what you want out of life. Now, I want you to pick one for this exercise.

Living Debt Free with Enough Money for Expenses

That’s part of the “Having It All” dream for many people, so I’ll use it to illustrate how to start small and take action steps towards your goals.

As an example, I am going to use “Save $20 per week to build $1,000 in emergency savings in 1 year.” See how specific this goal is? That lets you check your progress and feel good about your success.

It’s also a good example of starting small. It may not seem like much, but $1,000 can cover a leaky roof or a brake repair. The less often you use your credit cards, the more your savings accounts will grow. One thousand in emergency savings is a good base for building the “debt-free” dream.

Now let’s break down the goal into action steps by first asking a simple question…

Do you have $20 a week to save?

If the answer is Yes…

Step 1. Set up a separate savings account in a different bank or credit union than the one you normally use. This way you won’t have easy access and it won’t be linked to your ATM/debit card.

Step 2. Visit your HR department to set up an automatic transfer from your paycheck, or, visit your bank to have $20 per week transferred from your checking account to your new savings account, or if you do online banking you can set this up yourself.

If the answer is No…

Step 1. Reduce expenses until you can save $20 per week.* (I’ll write more on this below.) Can you bring your lunch to work? Can you cut out the impulsive shopping? Think of how you can reduce your spending to come up with the $20.

Step 2. Return to the top and take Steps 1 and 2 above.

Step 3. Tracking and celebrating your success

I want you to check in on your progress throughout the year. Are you on track to meet your goal or did something happen to throw you off? We all want to be perfect, but that’s not real life. Things happen that get in our way. You have to understand this and get back on track as soon as possible to achieve your goal.

Keeping track also allows you to celebrate and feel good about what you’re doing. This is your baby that you’re nurturing – your future, your wealth, and the beginning of your dream life.

*Just a note about personal austerity measures. “What…” you might ask, “…does giving up eating out and impulse shopping have to do with having it all!? That’s my dream lifestyle!”

First, I’ll have you know that a lot of millionaires are pretty tight fisted. They spend their money selectively instead of blowing it on any old thing that comes along. So, I challenge you to think like a millionaire.

Second, many successful entrepreneurs like Bill Gates, Mark Zuckerberg, Julia Childs, Martha Stewart and Oprah Winfrey started with small budgets. They built their fortunes by working hard and investing their money back into their businesses, making a little bit go a long, long way. They had the discipline to put off luxury living until after they had money.

Third, cutting back doesn’t mean living unhappily. Take joy in building your dream life from the ground up.

I used saving money as an example. I challenge you to break down one of your goals into simple action steps. Let me know what you’re working on and join the discussion.

Step One to Having it All

One of my clients told me that a 6-figure income would give her everything she wanted. She could pay the bills, have a home, save for the future, travel, and indulge in all the little things.

I gently pointed out that there are a lot of 6-figure earners who wished they made more money. A bigger income means a bigger mortgage and a more expensive lifestyle. High earners often find themselves pushed to their budget limits, balancing debt against what feels like a meager paycheck.

That’s human nature for you. We pick up more than we can carry, then blame nature for not gifting us with extra arms. We grab for everything, instead of just those things that make us feel fulfilled.

You can have it all (maybe not at once), as long as you know what having it all means to you. The key is in knowing what will really make you happy, having a plan, and working towards your goals.

When my client dreamed of making 6-figures, I believe she was really fantasizing about the freedom of living debt-free, with money in the bank for travel, retirement and a comfortable home life. But, without a plan and goals, she would have fallen into the big-earner/big-spender debt trap.

You may already know what you want, but, if you are living your life day to day with no goals, how do you expect to get to where you want to go? You may not even know if you are headed in the right direction without action steps to judge your progress.

The first step is to set a goal. What is it? Do you want to eliminate your debt, save for a vacation, save for a down payment on a home, start an emergency fund, save for retirement, your children’s education, or something else? Remember the goal must be reasonable and measurable.

Examples of wishy-washy goals:

I want to get out of debt by the end of the year (may not be reasonable).
I want to have an emergency fund (not measurable).

Examples of reasonable and measurable goals:

I want to pay an extra $100 per month, and stop creating new debt, to eliminate my debt in two years.
I will save $20 per week to build an emergency savings of $1,000.

This is Step One: determine your goal(s). Write them down and put them where you will see them every day.

In our next Quick Tips, we’ll discuss Step Two and the action steps you’ll take to have it all.

What Don’t You Do with Your Money?

I’ve shared two ways we save money in our household – careful food shopping and credit monitoring. Now I’ll tell you what we don’t do that saves us money.

We don’t have a data plan with our cell service

We have cell phones, but that’s it – just cell phones. We don’t have text messaging or a data plan. We lowered our minutes to the lowest plan available and we regularly come in way below our limit.

We don’t have HBO.

Only in the last month have we upgraded to an HDTV and that’s because one of our two TV’s needed to be replaced. We still have one older TV and we don’t plan on replacing it unless it stops working. We have a basic cable package and get our movies free – either from the library or the free on-demand selection our cable company provides. We gave up our paid movie channels a while back. We don’t have a DVR either – still using the VCR.

We don’t hire home contractors (often).

We do a lot of home maintenance and repairs ourselves. Last year, we painted the garage. This year we painted the bathrooms ourselves. We don’t have a landscaping service to take care of our yard. (It helps that we don’t have a big yard to take care of.) I really enjoy gardening. There is nothing better than picking fresh vegetables and eating them within minutes while they’re still super fresh.

We don’t buy new cars.

We drive older cars. Mine is a 1995 with 167,000 miles and it runs fine. I just had a tune up and the mechanic says the car is in great shape. Having older cars works perfectly for us, because we don’t like making payments. I’m not into fancy cars – all I need is reliable transportation.

You might be thinking that we lead lives of deprivation, but I can assure you that we are not missing out on anything. We only spend money on things that are important to us. If we spent money on things that we didn’t enjoy (but made us look good to other people), that would mean having less money for things we do enjoy – like nice vacations.

What don’t you do with your money? Join the discussion.

Are you preparing for retirement?

It is so important to prepare for retirement. It really is better to put aside money now so you can have those happy golden years later.

So, what should you do?

You can contribute to an IRA, or Roth IRA, by depositing up to $5,000 each year. If you are at least 50 years old, you can contribute $6,000 for each year. (Those guidelines could change, so visit www.IRS.gov if this is an older post.)

Also speak with your tax preparer, investment person, and/or your banker; all will be willing to give you their professional advice. Depending on the type of account you have, and your income level, the contribution to your retirement account may be tax deductible for you.

If you are thinking, “I don’t have $5,000 to contribute!” (that’s $416.66 a month or $96.15 a week), it doesn’t have to be an all or nothing situation. Make a plan so you can contribute an affordable amount on a regular basis, then increase it over time. Remember to have it withdrawn automatically so that it bypasses your checking account. It will add up over time.

The earlier you start, the more money you will have when you retire.

That’s my advice. What are you doing prepare for retirement? Let me know in the comments.

If you’re in a relationship, how do you handle finances as a couple?

Are you in a relationship? If you are, you know what it’s like to share your life with someone you love: your joys, your sorrows… and your money.

One of the biggest reasons for divorce (or breakups) is finances. I know you don’t want that to happen, so what can you do about it? Talk. Communication is the key to handling joint finances.

People have different ways of handling their finances. One person might be a saver who really values the money saved for future dreams and needs, while the other might be a spender who lives in the moment. If these two individuals become a couple, there can be disagreements about money that can escalate to divorce.

Take a minute to talk with each other about your money habits. It can be a really eye opening conversation. Really listen and try to understand the other person’s point of view. What did they learn about money growing up? What do they want right now? Where do they want to be in 1, 5, 10 years and beyond? With this understanding, you can choose a path that will work for the both of you. Meaning, the spender will save a portion and the saver will spend some money. Come up with mutual goals and agree on how you will achieve them together.

The goal is to handle your household finances and your goals in a blended way so that both people are comfortable. To do this, communication and action is key so that all feelings are heard and considered.

If you’re in a relationship, tell me how you handle your finances as a couple. Who handles the money? Who makes the budget? Who sets the goals?

Double Your Savings with Matching Funds

I get this question all the time: “How can I make my money grow faster?” I’m not an investment broker, so I can’t give you advice on buying stocks or bonds. And, personal savings accounts don’t pay as much interest as they used to, so I can’t help you there either.

But, there are two types of savings plans that offer matching funds, which means that your employer, or your state, will put their own money into your account to increase the money you put into the account. Never turn down FREE money! (Normally, I would tell you that there is no such thing as free money, but with these 2 plans there really is.)

Employer Matching Funds in Employee 401K Plans

If you work for an employer that offers a 401K or retirement savings, participate in the plan as soon as you are eligible. If you are eligible and you haven’t signed up yet, find out how soon you can start. Many companies offer to match your contributions. Not only that, but you will be putting your pre-tax dollars into this account, which means you can report less income for income tax purposes. That could mean a bigger tax refund or a smaller tax bill.

If you think you don’t have enough money to contribute, start out small and then increase your contributions. I have clients who did just that, who haven’t felt the loss in their monthly budgets. Remember: the first decision is to start to save. After that, you’ll find a way.

State Matching Funds from an Individual Development Account (IDA)

Another way to get matching funds is from an Individual Development Account (IDA). These accounts were designed to promote good money management and to teach savings habits. To open an IDA account, you need to have a specific goal in mind, such as saving for a home down payment, starting a small business, tuition for post-secondary education, etc. Once you meet eligibility requirements, you will put money in your IDA account on a regular basis, and your funds will be matched. Check with your individual state for eligibility and participating organizations.

But, what if you aren’t eligible for a 401K or IDA?

Don’t be discouraged. If you’ve made the decision to save on a regular basis, set it up to happen automatically. It’s the best way to make your money grow. If you have to go to the bank to put cash into savings, something will come up and you will decide to spend it instead. You will tell yourself that you’ll save next week, then next week comes and goes and you still won’t deposit the money into savings. When you have it taken out of your paycheck automatically, you never see the money, so it’s less tempting to spend it. With interest and time, your money will grow.