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How to improve your finances on a low income

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Improving your financial situation is hard for anybody. It can be even more difficult if you have less to work with.

This is an all too common problem in America, as 78% of full-time workers live paycheck to paycheck (Source). Even scarier, 34% don’t have any money saved whatsoever (Source).

That said, there are steps you can take and resources you can utilize to better your financial picture.

Budget

The first and one of the most important things you should do is, create a budget. This is a great way to figure out where you are at. Here are the steps:

  • Write down your expenses for the last few months (month-by-month breakdown)
  • Line items for expenses – housing, utilities, debt, food, transportation, bills, discretionary spending.
  • Write down your monthly income
  • Compare the two numbers to see exactly how much you have left over.

Here’s another way to look at it.

  • Write down your income
  • Write down your necessary expenses (housing, utilities, bills, transportation, food, debt)
  • If there is any left over, do you want to save it, pay down more debt, or have fun with it

If there isn’t any left, you need to figure out how to lower your expenses and make adjustments as needed.

Lower expenses

  • Move closer to work – this should reduce your transportation costs
  • Take public transportation – much less expensive than driving a car
  • Walk or ride a bike – if you live close to work, this could save you tons on commuting costs
  • Move to a less expensive place to live – if you work in a metropolitan area, housing probably isn’t super cheap, look for a cheaper place to live
  • Shop at discount stores
  • Shop at thrift stores
  • Use coupons – Or coupon sites like Coupons.com
  • Use apps – A great list by LifeHack
  • Find a side hustle – Again, solid list on BudgetsareSexy
  • Only buy necessities

Automate

Automating your finances is an important step, though not possible for everyone. If you have a lower income, you may be afraid that the money won’t be in your account for that automatic withdrawal.

Automate what you are comfortable with, or voraciously set reminders. Don’t forget to pay a bill. You can damage your credit score and incur late penalties.

Additionally, having a small transfer from checking to savings once a month can be a great way to save up for emergencies.

Take advantage of social programs

Open a credit card

There’s no denying it, your credit score is important. It determines your interest rate on loans, it can influence where you live, it can even play a factor when applying for a job.

Start small and start slowly. Open up a credit card. Look for one with no annual fee and a great rewards program. Make small, necessary purchases each month and pay them off right away.

Don’t carry a balance month-to-month. Doing this will inevitably cost you money via interest charges. And never miss a payment.

Start an emergency fund

If you don’t have one, set one up today. Having some sort of safety net available is vital. If you don’t have that, you’ll probably charge an emergency expense, which will cost you more money in the long run.

Start small and stay consistent. Contribute a little bit each month or each week to build up that emergency fund.

Get rid of debt

This will have a huge impact on your financial life. Once you are free from debt, you will have more money available for savings, fun money, or for improving your situation in other ways.

There are a few methods to help with debt repayment.

  • Debt avalanche – This method targets high-interest debt. You will pay the minimum to your other debt accounts and pay as much as you can towards your debt with the highest interest. Once that is paid off, you refocus that money towards the debt with the next highest interest
  • Debt snowball – This method targets low-balances. You pay the minimum on your other debts and pay as much as you can on the debt with the lowest balance. Once it’s paid off, you redirect that money towards the next lowest balance.
  • Balance transfer – If you have credit card debt and have a high-interest rate, it may be beneficial to transfer your balance to another card. Many cards have 0% interest, introductory offers on balance transfers.

This will also save you a lot of money on interest payments! Debt is very annoying, and getting rid of it will feel so liberating. Work towards this goal.

Go to the library

There are two ways the library can help you.

One, it’s filled with knowledge. If you want to get a different job, but don’t know much about your target industry, there are resources to help you. If you want to get promoted at your current company, and need to learn about different job roles and responsibilities, you can learn more.

Two, the more time you spend at the library, the less you have to spend at home. You can turn off the heat or air conditioning, and your lights while you are gone. This could drastically lower your utility bill.

Conclusion

One thing I forgot to mention, is the benefit of small rewards. When you are trying to better your financial situation, and are focusing everything on that goal, it can feel discouraging and you can quickly lose motivation.

If you meet a milestone, like paying off a debt account or you cut a balance in half, reward yourself.

Now, don’t go crazy, but a small reward for a job well done can keep you motivated.

You can improve your situation, but it has to be a priority. Do your best to improve a little bit each day. These improvements will compound over time and you’ll be amazed where you stand in a year or two.

If you’d like to learn more about improving your financial situation and for our disclosures, visit www.crgfinancialservices.com.

 

If reading this blog post makes you want to try your hand at blogging, we have good news for you; you can do exactly that on Saving Advice. Just click here to get started.

How much do I need in retirement?

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Conventional advice tells you that, for retirement, you need $1 million to $1.5 million saved, or that you need 10 to 12 times your current annual salary.

For example, if you make $100,000 per year, you’ll need $1 million to $1.2 million saved for retirement.

Are these numbers and calculations good enough? Is there a better, more accurate way to figure out what you’ll need to save for retirement?

In this post, we’ll look into that and more.

Check out retirement calculators

There’s a huge number of them out there. I recommend trying a few different ones, that way you can compare and average out the numbers. They’ll ask you things like age, current savings, current income, future contributions, etc.

Here are a few of the better ones.

Using some or all of these calculators, you can probably get a good idea of where you’re at currently, how to improve, and where you’ll need to be at the end.

What are the factors?

There are a variety of different factors at play. You’ll have different expenses and different income levels, and some of those numbers won’t stay steady throughout retirement.

For example, a couple’s health care costs in retirement are said to be $275,000 (Source). However, not all of that will hit you in the first few years of retirement.

More than likely, you’ll have minimal costs in the beginning, and they’ll slowly increase as you age.

Where will you live?

This can be a huge variable in retirement. Its widely known that different areas of the country have a higher cost of living. San Francisco is more expensive than Lincoln, Nebraska.

Another important factor regarding your living situation is if you have a mortgage or not. No mortgage means fewer expenses, which is less going out of your pocket, and more that can be saved for the future.

Not having a mortgage can also give you some leverage. If you decide that your current home is too big and would like to downsize, you can use the proceeds from the sale of your previous home to, hopefully, buy your new one outright.

Living Expenses

We’ve talked briefly about health care expenses during retirement and we talked about housing. Without a doubt, these are the two largest expenses during retirement. There are a few more to consider, however.

  • Transportation – did you relocate? Or do you have family in other parts of the country? Transportation and lodging need to be taken into account when figuring out your expenses for retirement, especially if you’ll be traveling regularly.
  • Entertainment – you might be looking for something to fill your time. It could be filled with expensive hobbies or other activities. If you are looking for something to do, or are looking to start a hobby, be sure your budget will allow for it.
  • Remaining expenses – the leftover expenses are ones you deal with right now (food, clothes, utilities, bills, insurance, etc.)

A budget is just as important in retirement as it is now, if not more so. Keeping track of your expenses and your income is very essential to your finances during retirement.

You often hear people in retirement say they are on a fixed income. What that means is they have lost their ability to earn more money. What they have is it. If you are spending more than your savings and your income allows, you are setting yourself up for failure.

Income

Your income from retirement could come from a variety of places.

  • Social security – provided by the government. The normal advice regarding social security is that it shouldn’t replace more than 40% of your income. Meaning 60% should come from another place. Your monthly payout from Social Security does increase the longer you delay taking it, and the reverse is true if you take it early.
  • Pension – these are becoming less and less popular as time goes on. They were huge back in the day when workers would stay with one company until they retired, but because people switch jobs so often nowadays, employers don’t want to take the chance. If you have one, consider yourself lucky.
  • Retirement savings – more than likely, this is where the other significant portion of your income will come from. This is where having a financial advisor is beneficial because you have to use enough of your savings to afford your retirement, but not too much so you don’t run out of money. Tricky.
  • Other areas – there can be other sources of income during retirement. You could have some dividend or interest income from your investments, you could work part-time to stay active and earn a little extra, or you could possibly have a rental property or several.

If you want to learn more about where your income could come from in retirement, click here.

Wherever your income comes from, it’s important to coordinate effectively so you maximize your current income without jeopardizing your savings.

What will you do in retirement?

How you spend your time will also have a huge effect on your expenses.

If you plan on spending most of your time with your grandkids, retirement could be more affordable than if you planning on golfing a few times per week. Although it could quite possibly be much more expensive than golf, we all know how grandparents are with their grandchildren.

If money is tight and you are looking for things to fill your day, there are many free or low-cost activities available to you.

  • Volunteer – not only is this a free activity. You’ll feel useful, you’ll get to use your brain, and you’ll have a sense of community, all are shown to increase longevity.
  • Go to the park – take a walk, bring a book, or just interact with nature and the community.
  • Community center – not all municipalities have one, but go to your local community center or go to your municipality’s website. There you will find local events, most of which are free.
  • Discounts – most places offer senior discounts. If you aren’t offered one, make sure you ask for it. This really could save you a lot of money on activities, food, etc.

How long will you live

The most depressing point in this post, but one of the most important. Unfortunately (or fortunately, depending on how you look at it), no one knows how long we are going to live for.

One way to get a little indication, but not really, is your family history. If your grandparents or parents lived into their 80s, 90s, or 100s, the chances of you living a long life are a little higher.

On the flip side, if most of your relatives passed away in their 60s or 70s, your odds of living into your 80s and 90s are lower.

However, this really is no indication on how long you’ll live for. One of the most important things you can do for yourself is to live a healthy lifestyle. Take a walk once or twice per day, do something daily that will engage your mind, interact with friends and people in your community, and eat better.

The 4% Rule

You’ve probably heard this before too. Here’s what it is. Once you retire, you withdraw 4% of your retirement savings every year. This is considered a safe withdrawal rate, as the withdrawals would consist mostly of interest, dividends, and unrealized gains from your investments.

Let’s say you have $1 million saved for retirement. The 4% rule would allow you to withdraw $40,000 per year. All else staying the same, you have 25 years worth of withdrawals using this method. Be advised that no growth was factored into this calculation.

Conclusion

I suppose you’d like an answer to the question we proposed in the beginning. Here it is. It depends. It depends on your current and future expenses, it depends on where you’re income will come from, it depends on how much income you expect (outside of retirement savings), and it depends on how you live your life during retirement.

Most importantly, you need to work with a financial professional, ideally someone that specializes in retirement planning.

To learn more about retirement planning and for our disclosures, visit www.crgfinancialservices.com.

The Real Cost of Waiting to Save

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What are your financial goals? Perhaps you want to save for retirement or your child’s education – it’s better to start sooner than later.

The ‘I’m young. I still have plenty of time to save money’ attitude could end up costing you a lot more time and money in the long term. Rather, speak to a financial advisor and with their guidance, decide on an investment or retirement product that will suit your needs.

The true cost

Every month that you choose to spend money that could potentially be saved, increases the amount that you’ll need to save to reach your ultimate financial objectives. There will also be a concurrent effect on when you will reach your goals. This is the case no matter which investment product you choose.

When it comes to investing, time can be your best friend or worst enemy. For example, if investments are returning 9% per year and you need to meet your objective in 10 years’ time, delaying saving for just 18 months will increase the amount you need to save per month by more than 25%. In addition, if your timeframe is five years, an 18-month delay results in more than a 50% increase in the amount you will have to save on a monthly basis.

One of the key factors to extracting maximum benefit from your chosen investment is to understand that this is a long-term commitment. Market fluctuation can influence an investor to panic and cause them to sell or switch accounts too quickly.

Fluctuation exists on paper and is not a risk in itself unless you withdraw or switch when your investment has lost value. If you do this, and reinvest when the market has improved, you’ll be starting from scratch. Rather, keep a level head and stay focused on your long-term objective.

Long-term objectives beat short-term gratification

You want to make significant returns on your investment and that’s why the combination of having a clear plan of your financial objectives and choosing the right unit trusts and/or investment product(s) are important.

For example, if you’re looking for a short-term investment that is stable but can still offer greater returns than a bank deposit, a money market fund is advisable. There is potential to make some short-term gains even if you’re making small contributions. The money is preserved and is accessible. However, it’s important to understand that the size of the returns is relative to the size of the contributions.

If you then decide to take that money and switch to a long-term investment fund such as an equity or balanced fund when the market looks appealing, you’re going to have to re-think your financial objectives. These funds require a long-term investment commitment, being comfortable with short-term ups and downs in order for compound interest to increase the value of your money over time.

In summary, whether you have short-term or long-term financial goals, starting to save as soon as possible can be beneficial when combined with a sound investment strategy.

 

5 Benefits of Having an EIN

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Your Internal Revenue Service – Employer Identification Number – Tax identification number or your IRS-EIN-Tax-ID is very easy to obtain. You can apply for this nine-digit number via a very easy five-minute process online or via fax.

Top 5 Benefits

To Establish the Legitimacy of Your Business With the IRS

Your EIN number is the easiest way that the IRS can confirm your identity as a business entity. It goes directly to establishing the legitimacy of your business. This is the top benefit of acquiring your EIN.

Through the course of your business, you will have to deal with the IRS a lot of times – at least once a year to pay your taxes — or to declare why you won’t be paying your taxes. It would be such a hassle if you have to prove the legitimacy of your business every time you have a transaction with them.

To Protect Your SSN

Your business entity is legally required to use your Social Security Number (SSN) or an EIN to conduct all transactions.

Like the EIN, your SSN is also a nine-digit number. However, the SSN is associated with you personally. Thus it would be dangerous if many people knew about it. If people knew your SSN, there would be a few transactions that they could make on your behalf.

That is why sole proprietors, while allowed to use their SSN for their official documents and transactions, are now also given the option of applying for and using an EIN instead.

To Apply for a Business Permit and to Hire Employees

Your business permit is another important document. It tells your customers that you have fulfilled all the requirements that the government has set for business entities. It certifies the quality and safety of your products. You cannot obtain your business permit without your EIN.

An EIN also allows you to hire quality employees who will help you expand your business.

To Apply for a Loan or for a Credit Card

Aside from the IRS, your business also needs to establish its legitimacy with the bank and other financial and lending institutions. This is important because there will be many transactions you will need to make with the bank.

Using your EIN, you may open a bank account; apply for loans, establish corporate business credit or apply for a credit card; establish pensions, retirement, or trust plans for your employees; and purchase another business.

To Make All Tax-Related Transactions

Let us expound on the importance of establishing your legitimacy with the IRS.

First, you need an EIN to file your tax return, specifically paying federal taxes online and filing annual tax returns. It is also needed to establish that you are qualified to withhold taxes.

To Create a Trust, Estate, or Non-Profit

Sometimes, your business has the capacity to branch out to give back to the community. You would think that the government would allow you to do this with the thanks of your fellow countrymen. You would be wrong. For this, you would still need to learn how to get an EIN for a trust, estate or non-profit.

So all in all, your EIN is not only beneficial but in fact essential to exist as a business entity.

 

Ultimate Estate Planning Guide

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Estate planning is a very important step in the financial planning process.

What does it mean, what are the steps, and what’s the most effective way to plan?

Let’s dive into these questions in this estate planning guide.

What is it?

Estate planning is the process of figuring out what you would like to happen to your assets when you pass away. Assets include retirement accounts, non-retirement accounts, and physical assets (house, cars, etc.).

What should I do?

  • Get an inventory – physical and non-physical items. Physical items can include property (primary residence, rental property, land, etc.), vehicles (cars, boats, recreational vehicles, etc.), and precious metals (gold bullion, silver bullion, etc.).
  • Make a list of all debts – Mortgage, personal loans, car loans, credit card debt, etc.
  • Make a charity list – Organizations and/or charities you would like to leave a specific amount of assets for.
  • Make a few copies and send these lists to your estate administrator (more on this below)
  • Review retirement accounts – Retirement accounts include traditional IRA, Roth IRA, Rollover IRA, and employer-sponsored plans like 401(k), SIMPLE IRA, SEP IRA, 403(b), and 457. (Click here to learn more about these plans). Whichever account(s) you have, make sure the beneficiary information is up to date.
  • Review life insurance policies and annuities – Same go for any insurance policies/annuities you may have. Make sure the beneficiaries are accurate and up to date.
  • Assign Transfer on Death (TOD) designations to non-retirement accounts. A non-retirement account includes individual brokerage accounts, savings accounts, money markets, CDs, etc.
  • Create a will or a trust (more on these below)
  • Get a list of accounts and passwords – any online account you may have, create a list of accounts, usernames, and passwords. This makes it easy for the person in charge of your estate (executor) to cancel all these accounts.
  • Visit some professionals – Meet with a financial professional and an estate attorney so they can review your plan and help you with any corrections or things that you’ve missed.
  • Consolidate your accounts – If you have several bank accounts or retirement plans from past employers, consolidate them into one account. This makes it much easier on the executor.
  • Select who you want to get what – Specify who you’d like to give your house too, cars, other physical assets, and money. You like to think that your family won’t fight over who gets what, but it happens very often, so take your time here.
  • Write a living will – A living will is a document that you put together that states what medical treatment you would like to have done and what medical treatment you would not like to have done if you are incapacitated and/or unable to make any decisions.
  • Establish power of attorney – A power of attorney is someone that you trust to make decisions for you. There is a medical power of attorney and a financial power of attorney.

Estate administrator

The person in charge of your estate. If you have a will, this person is called the executor. If you have trust, this person is called a trustee. If there is no person named in the will as executor and/or there is no trust/trustee named, the courts will appoint a personal representative.

This person collects assets, pays debts, and pays out any remaining assets. If a will or trust has been drafted, then the executor or trustee has to act in accordance with the will or trust.

Wills

A will is a legal document created by you and your estate attorney that specifies who will be your executor, the beneficiaries that will receive the assets that haven’t been specified yet (retirement accounts and TOD designations), and when those assets will be transferred.

Trusts

A trust is similar to a will in regards to it being the “playbook” on who is in charge and where your assets will go. It is different, however, because you can transfer ownership of assets to a trust and any asset owned by the trust will avoid the probate process.

Probate

A court-based process where the will (if one was written) is verified of its validity. If it is, the court then goes ahead and appoints the executor named in the will as the estate administrator. This gives that person the ability to act in accordance with the will to distribute assets.

If there is no will, then the deceased died intestate. The court then appoints an estate administrator and they distribute the deceased assets in accordance with state law. They are also tasked with tracking down heirs of the deceased.

This can be an expensive process, however, so planning ahead to avoid probate as much as you can is always beneficial.

Conclusion

As I said in the beginning, estate planning is an important step in your financial planning process. Hopefully, you’ve learned a lot about what’s involved and what you need to do to sure up your estate plan.

For more information about estate planning and for our disclosures, visit www.crgfinancialservices.com.

 

If reading this blog post makes you want to try your hand at blogging, we have good news for you; you can do exactly that on Saving Advice. Just click here to get started.

What’s a Tariff and How Will it Affect Me?

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Tariff. It’s a word that you’ve probably hear a lot lately, but do you know what it means, how it’s applied, and how it’ll affect you?

What is a tariff?

In its most basic form, a tariff is a tax on goods imported from other countries

Why are they used?

There could be several reasons why a country would impose tariffs on certain goods and/or certain countries. Here are several of them:

  • Protecting employment – This is the one you are hearing about right now. President Trump wants to place tariffs on Chinese made goods. This will increase the cost of goods, which could make employers manufacture the goods themselves, which could warrant more hiring and more working Americans.
  • Protecting consumers – Countries levy tariffs for this reason if they feel a product coming from another country could danger domestic consumers. For example, if we import chicken and find out this chicken could be tainted or harmful, a tariff could be assessed to this, and force U.S. citizens to buy domestically.
  • Infant industries – If a country has an industry or sector that’s just getting started, a country could impose tariffs on similar products in order to limit competition and help that new industry grow.
  • National Security – More often than not, this has to do with defense. Most countries will manufacture and supply it’s defenses with their own products for obvious reasons.
  • Retaliation – Like what we’re seeing right now. Countries will impose tariffs in response to tariffs being imposed on them.

How do they affect U.S. consumers?

Tariffs affect consumers in a few ways. The first and biggest impact is that goods and services could cost more.

For example, President Trump put a tariff on steel and aluminum. You know what uses a lot of steel and aluminum? Vehicles. The makers of those vehicles will then pass the increased cost down to the consumer.

Personal cars, farming equipment, etc. will now cost more as a result of those tariffs.

The other effect it could have is employment. As mentioned before, if imported goods cost as much or more as domestic products (post-tariffs) it makes U.S. employers manufacture those goods in The States.

With the rapid increase in product creation, these employers will need to hire workers to create these products.

On the flip side, it could also negatively affect employment. With the increased cost of goods, companies could lay off workers in order to reduce the impact of that increase in expenses.

How do they affect the stock market?

We are already seeing an impact on the market. People hear that their costs will go up, or they hear the phrase “trade war,” and they start to worry. We’ve seen an increase in volatility this year, and a lot of that is due to these talks.

Here’s the thing, a healthy majority of investing is psychological. So any news that frightens investors will have an impact on the stock market. Scared people sell, and level-headed and/or institutional investors buy at lower prices, hence the dramatic up and down movements.

Companies that import a lot of goods will see an increase in cost, which could hurt their bottom line. Also, companies that export a lot of goods could see decreased demand due to the retaliatory tariffs put on by China and other countries. Again, bottom line.

A lot of investors look at that bottom line to make investment decisions. If they see a decrease in revenues, they could sell.

Additionally, the tariffs placed by other countries on U.S. products could have a negative impact on entire industries/sectors, which could hurt the companies in those industries and their stocks as a result.

Conclusion

No matter your opinion of President Trump, these tariffs are a net negative for the consumer. The increase in costs to consumers could be much greater than the increase in domestic employment, which is one of the goals with these tariffs.

Whatever happens with this mess, it’s important to know what the tariffs will impact and how consumers, industries, and the economy will be affected.

For more information on how to plan for these tariffs, and for our disclosure visit www.crgfinancialservices.com.

Must Know Tips When Buying and Selling a House

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Seeing as the housing market is incredibly hot right now, I found it appropriate to talk about buying and selling a house.

This is a very big decision and can be an extremely stressful endeavor. You can alleviate some of that stress if you know what to do and what to expect.

Buying

Do your homework

Whether you are building new or buying an existing property, you need to do your homework. Hire reputable contractors, realtors, inspectors, etc. You can cheap out with these services, but over the long-term, it’ll cost you.

Always do the inspection

This is a must, must! The inspection can save you so much money! Say you visit a house and love it, but want to get in ASAP, so you skip the inspection. After a few months, you notice some significant shifting and cracking.

Guess what, you need your foundation fixed. That could run you, depending on the severity of the issue, $20,000 or more.

Another example and costly example would be a roof replacement.

Not only can it save you money, but some issues found in the inspection can be added to your contract. If the inspector comes back with some issues, you can include that in your amended contract, and have the seller fix whatever the issue is before closing.

Finances

There are many financial conditions that come into play when buying a house.

  • Hidden costs – Inspection, appraisal, down payment, earnest money, etc.
    • Once you own it – property taxes, insurance, utilities, maintenance, etc.
  • Pre-approval – Get this done by a lender before you buy. If you have a pre-approval when you make an offer, your offer is more competitive
  • Improve your credit – Having your credit in the best possible condition is a must. A higher credit rating can lower your rate and could increase the amount you’re approved for.
  • Stay on budget – Don’t buy more house than you can afford. Live within your means and look for a price that’s below your pre-approval amount.
  • Avoid big purchases and new credit – This goes along with the rate you get and the approval process.
  • Debt/income ratio – This is one of the big parts in the approval process for your mortgage. The lender compares your income to all of your outstanding debt, along with what your possible mortgage payment will be. Income/debt ratio should be 43% or below.
  • What you need – W2s, tax returns, paycheck stubs, verification of employment

Selling

Clean and declutter

Make your home spotless. Vacuum and put lines in the carpet if you can. Sweep and scrub floors. Clean windows. Make sure the kitchen and bathrooms are especially clean.

Take pictures and art off of the walls, and leave minimal amounts of furniture. People want to walk into a home and imagine their art and their furniture. They want to “make themselves at home,” and imagine what it would be like if they lived there.

Fix the big issues

This could come out during the inspection too, but fix blatant, big issues. Roof repairs/replacement, furnaces, air conditioning units, etc. The goal is for someone to buy your house, so if you have the big issues taken care of, people have fewer excuses to say yes.

Curb appeal

Trim the hedging, cut the grasses, and make that garden look perfect. You need people to say wow before they walk in. If they love the house before they step inside, they’ll be in a better state of mind going in.

If your yard is ugly and they know it, they’ve already been disappointed, and everything they see inside won’t be as impressive.

Get the word out

Put that house on every and any social media, website, etc. as you can. Hopefully, your realtor does a lot of this for you, but the more people know about it the better.

Make sure you tell your neighbors also because the people who buy your house will, obviously, be living next to your neighbors. They want good people next door. Preferably, someone they know and trust.

Conclusion

Buying and/or selling a home is a very important decision, and probably the biggest purchase you’ll ever make.

Use these tips to help you through the process.

To learn more about the financial aspect of buying or selling a home, and for our disclosures, visit www.crgfinancialservices.com.

 

If reading this blog post makes you want to try your hand at blogging, we have good news for you; you can do exactly that on Saving Advice. Just click here to get started.

How does Investment Strategy Change with Age?

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As we all know, as we age and our lives change. Our financial responsibilities and investment strategies change along with it.

In most cases, there are two truths to abide by. You have saved as much as you can and invest according to your risk tolerance, time horizon, and goals.

But what else is there? How do my financial life and my investment strategy change with time?

Starting career

Either you are just out of school or have been in the workforce for a few years. Regardless of which path you came from, there are two things on your list. Get rid of debt, or at least get it under control, and save for retirement.

There are several ways to plan for debt repayment.

  • Debt Snowball
  • Debt Avalanche
  • Balance transfers (credit cards)
  • Personal Loan (loan consolidation)
  • Refinance (student loans)

Check out this post on paying off your debt, here.

Step two is saving for retirement. If the company you work for offers a retirement plan, sign up for it. Max out your contributions if you can, but at the very least, contribute enough to get the employer match (if it’s offered).

Also, open a Roth IRA. If you have a little extra, contribute some to a Roth IRA in addition to your workplace plan.

Your investments. Time is your best friend at this point. Most of your investment allocation should be focused towards growth. Don’t put all of your eggs in one basket, diversify among stocks and bonds.

Again, the majority (at least 70%) of your portfolio should be in stocks, in some form or another.

Starting family

If you’re like the average American, your family starts to form around your 30th birthday. Hopefully, you’ve got a good head start on paying down your debt and saving for your retirement. Continue on that path.

With a family, comes saving for your kid’s college education, as well as other expenses (house, car, etc.). Contribute a little every month to a 529 College Savings Plan. The funds within this account can be invested aggressively, similar to your allocation in your twenties.

Your retirement savings is still in a good spot. Similar to your twenties, regarding the stock and bond allocation.

One last thing, get some disability and life insurance. If you have people that count on you, you need to protect them.

High earning years

More than likely, this will be your forties and fifties. At this point in your life, the average American is in their peak earning years, so take advantage of that and increase your retirement savings.

This will also be the time that your kids either go off to college or enter the workforce. Congratulations (kind of) you are empty nesters. You no longer have a college education to save for. More can go towards your retirement.

More than likely, though, you will have miscellaneous expenses from your kids that you will continue to pay for.

Your investment strategy will change slightly. You are getting closer to retirement so it’s time to start protecting what you’ve saved. A little less in stocks and a little more in bonds. Think 60/40 or 50/50.

Near retirement

You are in the home stretch! At this point, your debts (including your house, hopefully) should be paid off. All assets and your retirement savings should be looking healthy.

Your investment allocation will be similar to the last section. Definitely 50/50 if not 40/60, stocks to bonds.

Retirement

Congratulations, you’ve made it to your retirement. This can be liberating for some, but for others, this is an emotional challenge.

You’ve spent the last 40 or so years saving for retirement and now you are expected to start spending it. This is very tough for a lot of people.

From my experience and in my opinion, you should retain some sort of activity. Something that gets you out of the house, something that forces you to socialize, and something that makes you use your brain.

Staying social and sharp mentally could add some extra time to your life.

Your investments should be conservative. At least 40/60, but the more conservative the better. And it’s usually not a bad idea to keep some of your savings in cash, for emergencies such as health expenses (which will certainly go up at this point).

You don’t have many or any, more chances to earn more money, so it’s very important that you protect what you’ve saved.

Conclusion

The above information can be very useful to the average person. Paying off your debt and making your retirement savings a priority is very important.

Unfortunately, there is a retirement savings crisis in America. People aren’t saving nearly enough for retirement. They are counting on other sources, like Social Security or pensions to fund their retirement.

This isn’t enough. You won’t receive enough from Social Security to support yourself and pensions are few and far between, nowadays. We all need to do a better job of saving.

This article was created for informational purposes only. The above items are not to be taken for personal financial advice. Please consult with a professional about your personal situation.

To learn more about retirement savings and investing, and for our disclosures, visit our website: www.crgfinancialservices.com.

 

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Everything You Need to Know to Set Up Your Own Emergency Fund

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How many of you have had an unplanned expense recently? How much was it $500? $1,000?

Unplanned expenses are anything but, unplanned. Sure, we don’t know when they will occur, but they will occur.

Being able to “plan” for those expenses will save you a lot of grief, and will probably save you money.

If you don’t have a rainy day fund, how do you pay for an unexpected expense? Your credit card?

Having an emergency fund has many benefits, and having one set up can make a big difference in your life. But how do you save for emergencies? What characteristics does an emergency fund have? And when should you use it?

What is an emergency fund?

It’s exactly how it sounds. It’s an account, usually a savings account or a money market account, that you designate for emergencies.

You set this up to “plan” for unexpected expenses. For example, you set aside money for the future in case your car breaks down or your furnace stops working.

Why do you need one?

The emergency fund is designed to save your monthly budget. Unexpected expenses can be expensive and can do significant damage to one’s monthly budget.

If you have money set aside for a rainy day and something unexpected happens, you can use the money from your emergency fund to pay for that expense. Your monthly budget isn’t affected at all.

What are the characteristics of an emergency fund?

There aren’t really many characteristics of an emergency fund. Here’s essentially what you need:

  1. You need an account separate from your checking account.
  2. This separate account needs to be easily accessible and liquid.1
  3. You should have 3-6 months worth of expenses saved in this account.
  4. You can have too much.
    1. Having 3-6 months, or even a year is fine, but anything else should be saved and invested for your retirement. (Savings accounts earn next to nothing in interest)

What strategies can you implement to save for an emergency?

There are many things you can do to save money for your emergency fund.

  1. Create a budget
    1. List your income
    2. List your necessary expenses (housing, transportation, food, etc.)
    3. List your discretionary spending (fun money)(keep this to a minimum)
    4. Compare income to expenses and adjust as necessary
  2. Reduce your expenses
    1. Cut the cable, use subscriptions instead
    2. Eat out less, or don’t eat out at all
    3. Rent movies, TV shows, and books from the library
    4. Walk or ride your bike instead of driving (when applicable)
    5. Control your utilities (open windows during summer, layer up during winter)
  3. Automate your savings – Set up automatic transfers from your checking to your savings. Have it take place at the first of the month or every Monday. If this happens first, you can’t spend it away.

When should you use it?

You should use your emergency fund whenever you have an unexpected expense that could disrupt your monthly budget.

Here’s a small list of examples:

  • Car repairs
  • Home repairs
  • Emergency, short-notice flights
  • Life expenses post-job loss

When shouldn’t you use it?

Your emergency fund shouldn’t be used on large once per year costs like:

  • Property taxes
  • Owed taxes
  • Holiday spending

Conclusion

Unplanned expenses can wreak a person’s monthly budget. It helps and makes a dramatic difference to have money set aside for a rainy day.

Besides the financial aspect of having an emergency fund, you also have a psychological benefit. Peace of mind knowing that you have money available if a large expense were to come into your life.

For more information about emergency funds and for our disclosures go to www.crgfinancialservices.com

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