Plan for the Future

Make Payments towards Your Retirement

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Making payments towards retirement doesn’t have to be difficult. Remember what you’re saving money for. You want to retire some day, so you can enjoy some golf and vacations when you get older without having to work.

There are few ways to fund your accounts. If you receive large bonuses, you could simply deposit them into your IRA or 401K and just live within your regular paycheck. That won’t be possible for everyone. Most of us calculate the amount to pay by dividing our maximum contribution amount by the number of pay periods per year. Basically, we’re taking the money out of our paychecks.

The key is to act like it’s not yours to spend. This is your fun money, so you can take the grandkids to Disneyworld and finally take the European cruise, without having to worry about where you’re going to live or how.

The Biggest Savings

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The Biggest Savings

In honor of Financial Literacy Month, I want to show you the biggest savings we’ve come across in our family. Any guesses?

It’s lunch! We used to eat out for lunch every day. Who has time to make lunch before work, right? But we gradually learned that we could save a lot of cash for things we really want if we could just get used to bringing our own food.

Lunch shouldn’t cost that much. It’s not dinner at a nice restaurant – it’s a sandwich at the cafeteria or a McD’s. But, it does add up. Let’s say you spend $10 a day for food at work or school, combining lunch, a vending machine snack, and coffee, bottled water or pop. It’s just a few little items throughout the day, but let me show you the numbers.

$10 x 5 days a week = $50
$50 x 50 weeks a year = $5,000
$25,000 is what it will cost you for 5 years

And that’s for one person. If there are two of you in the household, then you can double the numbers. I bet you can find something better to do with $5,000 or $10,000 a year.

I used to have all the excuses – not enough time to make my lunch, it’s too boring, etc. Well times have changed.

Part of that change was accepting that we like different types of lunch foods. He’s a sandwich person and makes his lunch the night before. Sandwiches keep well in the fridge overnight. That doesn’t work for me. I like leftovers, soups and salads. I might make extra for dinner so I can have leftovers for lunch the next day. Or, make soup on a Sunday, then have soup for a few days. I like combining my leftovers with salad greens to make a fancy salad. My lunches need to be freshly made in the morning. Because I have the ingredients, and a plan, it takes less than 5 minutes.

What about beverages? My husband is a coffee drinker. He makes his coffee the night before with a programmable coffee pot. The money savings made the pot a really good investment. I’m a water drinker, so I use a washable metal water bottle. I just refill and put it back in the fridge when I get home from work, so it’s ready to go in the morning.

Just by taking these little steps, we are able to save money and use it for other purposes. How about you? Are you ready to try bringing your lunch to work? What system would work for you?

Shop around before opening an IRA

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Opening your own IRA is a great idea, but do your research first.

Make a few appointments to interview banks and investment companies. What are their fees? What types of investments do they offer? There are many options to choose from.

If Your Company Doesn’t Offer a 401K, Get an IRA

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If your company doesn’t have a retirement plan, then you should start an IRA or a ROTH IRA.

An IRA account is for saving pre-tax money to be able to withdraw later in life when your tax rate should be lower.
A ROTH IRA is the opposite. You contribute after tax money now and withdraw tax free at retirement.

Talk with your investment person or tax preparer to determine what is best for you. Discuss the income limits and the maximum contribution amounts you can contribute based on your age. Have this discussion today.

If Work Offers Retirement Savings, Do it

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I can hear you saying… “I don’t have enough money to live today, so how can I think about saving for retirement?” Yes, that might be true, but look at it another way… you will get older and you will want to retire some day. If you don’t start now you’ll have to work the rest of your life.

If you work for a company that offers a 401K or 403B, take advantage of it. If your company offers you matching funds and you haven’t taken advantage of it, then you are turning down FREE money. As an added benefit, the money you contribute is tax free today, and any growth in your account is not taxed until you withdraw it.

Talk to your company benefits person and start an account as soon as possible. If you need to wait for open enrollment, mark that date in your calendar.

If you already have a retirement savings with your company, increase the amount you contribute so you’ll have more later when you really need it.

Saving for Emergencies

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Emergency savings are for when your car breaks down. It’s for an unexpected medical expenses. It’s for covering your bills if you’re between jobs. It’s for unexpected home repairs. An emergency is something that must be taken care of right now or you won’t be able to get to work, have a place to live, or when you might have to choose between medical bills and utilities.

What it’s not: a savings account for things you think you need. No matter how much you think need to book a cruise, a nice vacation is a want. You will survive if you vacation at home with trips to the local beach. You will also survive without a smart phone, or cable TV, or a Kindle. You get the idea.

Once you have an emergency savings equal to one year of your expenses (yes, I said one year), then you can start saving for the fun things you want in life. Today, plan on how you are going to start saving for emergencies. Set up a regular savings amount from your pay that automatically goes to this account.

Living Within Your Means

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Whatever your goals are, you have to learn to live within your means. That means that you cannot spend more than you earn. For every dollar you bring in, you need to spend less than a dollar so that the remaining amount can be saved.

Go back to the numbers you did earlier this month. Are you including money for savings? If not, you need to figure a way to do that. In a perfect world, you need to have savings for emergencies, savings for retirement and savings for wants. Today, think about how you will get that money to save.

What do you want financially from your life?

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It’s Day 20 of Financial Literacy Month – time to make a list of things you really want. Maybe it’s money to pay for your children’s college? Maybe it’s more money to save for retirement? Maybe it’s enough money to be able to live monthly and not worry about how to pay your bills? Whatever you want, today is the day to make a list and meditate on your goals.

Spend Time with Friends – Just Talking

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Want to spend time with a friend at no cost?

Try going for a walk and having a chat with your friend. Save the cost of food and get your exercise in.

This is a fun thing to do and has many health benefits.

Time With Friends – Cheaply

Do you ever want to spend time with friends, but don’t want to spend lots of money on a restaurant? I know that I really want to spend time with people. Consider a potluck dinner.

You can select the house (yours or theirs) and then everyone brings something. To kick it up a notch, try having a menu based on a certain cuisine. I and some friends got together at a friend’s home and the theme was Chinese food. The hostess made moo shoo pork and the rest of us brought the sides.

I know people who get together on a regular basis for dinner clubs, wine tastings, movie nights and more. What appeals to you? Think about which of your friends would find it fun to have an inexpensive dinner party. Make a plan with your friends.

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