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Monthly Archives: September 2017


Lifestyle-habits-that-can-save-you-huge-amount-of-money-compressor

Lifestyle habits that can save you huge amount of money

Sometimes the difficult thing of money saving habit is just how you can start the habit itself. It is really very difficult to find out easy ways to save money and how you can use your savings to reach your financial goals. So, let’s discuss few basic tips that can help you to develop a realistic money savings habit.

  1. Make a list of the expenses

The first step would be figuring out the amount of your spending. Keep track of all your expenses. This may include the cost of newspaper, coffee/snacks, etc. After getting the data, categorize them according to their total amount. You can use your credit card or bank statements as reference.

  1. Plan a budget

Once you have the idea of your monthly spending limit, you can execute a budget and try to fit your expenses into it. Apart from your monthly expenses, you must also consider expenses that occur often but not regularly. These may include car maintenance cost, home renovation, etc.

  1. Make a strategy on saving

After planning the budget, try to put away 10–15 % of your income as savings. If you save money every day as well as reduce your fixed monthly expenses,  very soon you’ll be able to build up a good saving habit.

  1. Choose a goal to save for

Try to set a goal. You need a specific target for which you’ll cut off expenses and save money. Figure out how much time you need to save for it. If you need help figuring out a time frame.

These are some examples of short- and long-term goals:

Short-term (1–3 years)

  • Emergency fund (3–9 months of living expenses)
  • Vacation expenses
  • Down payment for your bike or car

Long-term (4+ years)

  • Retirement investments
  • Child’s education
  • Down payment for your new home or any remodeling job

If you’re saving money for your child’s higher education and your retirement fund, then you may invest your money in IRA or a 529 plan. These investments might come come with risks but they also give you good, compounded returns if you plan properly.

  1. Initiate automatic saving

Almost all banks offer automated transfers between your checking and savings accounts. You should decide the time, the amount , and the account where you’ll transfer the money to. You can also divide your income between your checking and savings accounts. Automated transfers are a great way today to save money as you don’t have to twice about separating money into two accounts manually.

  1. Keep noticing your savings

Check your progress every month. Keep eyes on your checking and savings account. This will not only help you to stick to your savings plan but it also helps you identify and fix problems quickly.

These easy tips to save money will be very helpful to you and will inspire you to build a good money saving habit.

 

The one BIG problem with your 401k

Great guest post from William Cain over at www.adultingmoney.com

With the popularity of the 401k growing across America, more people than ever are jumping on the compounding interest, employer match bandwagon. And who wouldn’t! Your employer is giving you “free money.” If you’re not currently signed up then stop reading this and sign up now! It’s one of the best retirement vehicles on the market today.

Most employers draft it from your paycheck (pay yourself first!), and you can also select a Roth option if available. Most experts recommend contributing at least 15% of your income to ensure you’ll have a comfortable and adequate retirement. But who really wants comfortable and adequate??? Not me, and definitely not my fiance’s shoe closet.

So let’s say you up it to 15% of your $85,000/year household income and your employer matches 5%. Nice, up to 20%! Bring on that McMansion.

We’ll also assume it returns a 7% interest rate per year on average. How are we looking 35 years from now when we have to retire???

$2,450,000.

Boom…

So we’re going to be totally “multi” millionaires and burn $100 bills to light our $200 cigars with our $300 bottle of Pappy Van Winkle.

Not so fast. Here are some things to think about.

First, the money you contributed was pre-tax, which means once you take it out the government will want to collect on it AND the profits. Stupid taxes. The amount depends on which tax bracket it puts you in when you decide to withdraw. While we don’t know the tax climate 35 years from now, let’s say 15%.

$2,450,000 x .15% = $2,085,500. Still ok right?

But wait, there’s more!

Here’s the secret retirement killer, that hits everyone just the same regardless of how smart or dumb you were with your money.

INFLATION

It’s a scary word.

Using an excellent future inflation calculator
we can guestimate how much our remaining retirement monies will be worth in today’s dollars when we retire.

In this example, accounting for a 3%/year inflation rate, in today’s dollars, it leaves us with the same spending power as $741,000…

Ouch.

At age 65 this is the same monthly purchasing power as $5,638 and at 85 it’s $3,122.

Sure, hopefully, we’ve had our house paid off, rarely get new cars, and settle down into watching TV 8 hours a day. However, some people’s expenses actually increase once they retire. They now have the time to travel, play golf or a massage every week. What about medical bills? You know they’re coming, it just depends on how big they’re going to be. The average retired couple spends approximately $250,000 during retirement just on premiums! Are you helping your grandchildren through college? Helping your adult children through, well, adulting. There are so many factors and possibilities being supported on an ever-dwindling income.

So let’s reverse engineer it. Let’s figure out the kind of life we want in retirement, the things that are important to us, that we think may be important to us, and create a buffer the unexpected.

Next, let’s find out how much is it going to take to have the life we want in 2052 using our future inflation calculator.

Lastly, using simple 401k calculator lets see how much we really need to be contributing to hit our goals.

This isn’t meant to scare anyone or show unattainable goals and savings, but rather to shed light on how our retirement could truly shape up to be. The worst thing possible is to get to retirement only to realize it’s not the life you thought you had created, and it’s better to start working on a plan now to prepare then later.

This also highlights the need for additional passive sources of income among other well thought out investment strategies.

I’d love to hear your thoughts on this article and I’m always open to learning about topics that are of interest to you! Please send me an email, pigeon, or hit me up on the blog in the comments section.

As always, happy adulting out there!