Saving

Every time we’ve written about working on your budget, or even other articles you might have read on the subject, it always talks about reading yourselves of your favorite luxuries. Maybe it’s spending the extra money buying the expensive cup of coffee versus making your own. Maybe it’s cutting off Netflix are some of the other subscriptions you’re paying a lot of money on each month.

Is this always the right answer? Some of the things you’re considering cutting might be very important to you, like that first cup of coffee in the morning. Should you remove every single guilty pleasure from your life, where is there a middle ground? You certainly should put certain priorities in order. If you need to cut things from your life, you don’t have to cut every luxury to save money.

Let’s look at several ways in which to keep in mind the metal ground when preparing your budget.

1) How Important Is It to You?

First thing you should ask yourself when going down your budget is seeing what items are actually important to you. You pay for cable TV, yet you rarely watch it. Is this a luxury that you can cut out of your life? Is it really important to you to have something that cost so much money that you barely use?

This is where this question comes in. You barely use it, but when you do use it, it’s usually for family time. That’s very important to you. Are there other ways to enjoy family time without cable TV? Of course! But we can’t make that decision for you. Were simply saying you should ask yourself which is important enough for you to keep and what you can cut out of your life for a period of time.

2) Are There Any Benefits to Keeping It?

Another question you should ask yourself is do you benefit from keeping the luxury. Will it pay off in the end? Does it improve your life? Sure, going to get a monthly massage can be expensive. But does it help you with life in general? Most likely the answer is yes. It can give a boost of energy and make things a lot more tolerable. If it makes you really happy and it relaxes you, you don’t have to cut out every entertainment expense. But maybe there’s something else you can cut out to help pay for the luxury want to keep.

3) Will You Really Miss It?

Using cable TV is another example, would you really miss it if you cut it out of your life? You can get a regular antenna that gives you all of your local network stations, you can subscribe to Hulu and Netflix which offer plenty of shows and movies, and then cut the $100 cable bill from your life. Will you really miss cable? Probably not. Apply the same idea when going over your budget.

A new survey from MagnifyMoney has found that plenty of Americans are making a lot of mistakes with their retirement savings. Nearly 50% of all the people they talked to said at one time or another, they pulled money from the employer retirement funds. Nearly a fifth of them aren’t adding nearly enough towards their retirement to maximize what their employer can put in. These are mistakes that will cost them in the end.

“The most damning finding of all is that 27% of those surveyed have never thought about how much they’ll need in retirement,” the survey report states. “And while ‘ignorance is bliss’ may hold true when it comes to some things in life, this expression should not apply to your retirement plans.”

A big retirement mistake is taking money out when in a crunch. Often times, this money isn’t replenished. When you save money for retirement, it shouldn’t be like a regular savings account where you can pull out cash anytime you want. It’s going to force you to work that much harder and longer well past the retirement age.

Why People Are Pulling Money from Retirement Savings

The main reason why someone pulls their retirement savings isn’t for the reasons you would think. They do it to buy a home due to the large down payment that’s often required. Many economic experts still recommend putting up at least 20% of the cost of the home up front. This is during a time when a lot of young adults are starting families and at the same time has a lot of student debt still to pay off.

36% of millennials said there was no issues with taking from their retirement fund to help pay for a house. In contrast, only 17% of baby boomers felt the same. Of course, they are near or in retirement already and understand the stakes of pulling money too soon. The other problem with sapping your retirement is the financial cost of doing so. It often requires other taxes and fees, hurting them even further.

By not maximizing the retirement saving options provided by their employer, they’re losing out on a lot of free money. Let’s say you put in $300 of your own money with each paycheck. Your boss would contribute an additional $120. But that’s only if you put in the necessary 10%. The less you put in, the less your employer will contribute.

The best advice here is to consider your retirement savings untouchable. If you want to buy a house, find other ways to save money for the down payment. You may not understand this now, but many people get to retirement and realize they didn’t save enough. They rely on government programs that are quickly running out of money.

If you’re looking for a risk-free alternative to stash your cash, consider the option of picking up a CD.

Sure, you could open a garden-variety type savings account, but your interest earned could be minuscule or negligible. Your adviser might even suggest a high-interest or high-yield savings account as the smarter choice, but have you thought of the CD?

Not the album kind of CDs, but a certificate of deposit. While the top interest rates on high-yield savings accounts are currently topping out at 2%, you could find CDs that payout at 3% or more. To earn that extra interest however, you will have to give the bank some reassurances in return.

How does a CD work?

Here’s the catch: you would have to let the bank hold on to your money for months or even years. There are various CD terms that last six-months, two years or even five years. As you would expect, the longer the term, the higher the interest rate.

It is enticing to pick the long-term CD to take advantage of the higher returns. But if a financial emergency crops up down the road, the money in the CD remains untouchable.

Now let’s dive into some of the risks involved.

Risky CDs

CDs are generally risk-free, you will never lose your investment in a CD as long as your account is at a bank linked with the FDIC or a credit union that is insured by the NCUA.

However, if you renege on your contract and decide to withdraw your money early, you will incur pernalties which could result in you giving up a substantial chunk of your interest.

To put it into perspective, if you close out a one-year CD half way into it, you will give up 6 months of interest. If you’ve only had the CD for 2 months though, the penalty would erode your original deposit.

An early withdrawal on a five-year CD might incur a penalty of a whole year’s worth of interest.

Another risk is that interest rates might rise while you have your money stuck in a CD. You are locked into that one interest rate for the entirety of the CD term, and you may miss out on the opportunity of better returns.

Alternative CDs

There are alternative CDs available to you that can circumvent these restrictions. There are liquid CDs, which allow you to make withdrawals easier, and bump-up CDs which allow you to take advantage of rising interest rates.

In order to enjoy that flexibility however, you would have to accept a lower interest rate when you begin the CD term. But if you are thinking about leveraging higher rates with a regular CD, there is a trick you can use called laddering.

It involves dividing your investment across multiple CDs staggered over multiple years. That way you have CDs that mature every year.

If you ladder your CDs, you will be able to take advantage of higher initial interest rates from long-term CDs and also have the opportunity to invest in new CDs down the road at even better rates.

Where to Start?

Looking to obtain a CD today? Head on down to your nearest bank or credit union. Small, local banks will give you better rates, and online-banks can offer better deals because of their lower expenses.

The minimum deposit for a CD could run you about $500 to $1000, some banks however have no minimum requirements. Do the necessary research to see which CD will give you the best rates for the best term.

Get your money out of a low-rate savings account and into a CD as soon as possible, plan for your financial future today!

For any other financial advice you may need, reach out and call the Financial Helpers at the number below.

It’s more vital than ever to start preparing for your financial future.

One of the easiest ways to fluff up your nest egg is to simply cut down on expenses and start saving more of your hard earned cash. No matter your current situation, here are 12 golden rules that everyone can use to save on everyday expenses from mortgage bills to utilities.

1.Tax Deductions

Most homeowners know the benefits of lower monthly payments as compared to renting. The tax benefits also make the decision a no-brainer. Here are some deductions that homeowners should be leveraging:

• Mortgage interest – If your mortgage doesn’t exceed $750k you can deduct the interest you pay on the loan. This can result in greater deductions come tax time. The Tax Cuts and Jobs Act of 2017 reduced the limit from $1 million and made some additional clarifications on deducting interest from a home equity credit line.
• Property taxes – After the TCJA passed in 2017, homeowners can now deduct up to $10,000 from their property taxes. The deduction from state and local income taxes is also combined with the deduction for state and local property taxes.
• Tax incentives for energy efficient upgrades – Homeowners can now claim tax deductions on solar energy for both electric and water heating equipment through 2021. However, the deductible amount decreases by 4% each year over the next 2 years.

2. Slash Your Energy Bills

A new policy introduced this year qualifies homeowners who live in certain zip codes to obtain government funding to install solar panels. Most homeowners don’t check to see if they qualify, and thus miss out on the many subsidies and rebates that can cover a lot of the costs associated with installation.

Be a smart homeowner and do your research today, you could find yourself saving thousands a year on your energy bill.

3. Install CFLs or LED Lights

Lighting technology has made huge strides in recent years. Even though they can cost more than traditional bulbs, CFL and LED bulbs use less energy and can last for years without replacement. You don’t need to replace every light bulb in the house, even switching just five of them can save you $45 or more a year.

<br>

4. Automating Your Thermostat

Save money on your heating and cooling bills by investing in an automated thermostat. These smart thermostats will be able to know when you are home and adjust to pre-set comfort settings, some of them can even qualify you for a rebate from your utility provider.

5. Make A Grocery List

Instead of grocery shopping on impulse, make a list of groceries you need for the upcoming week. That way, you avoid checking out with way more than you need and buy only what you intend to use. This minimizes waste, and your wallet will thank you!

6. Buy in Bulk

One of the easiest things you can do to save money is to buy your necessities in bulk. Retailers like Costco and Sam’s Club often give a much better deal on products such as paper towels and toilet paper. Become a more efficient shopper and start saving today.

7. Concrete Patios, Not Pavers

Patios can add value to a home as an enjoyable outdoor living space. But they can get expensive quickly the more add-ons you get.

Most landscapers would recommend pavers over concrete as it increases durability. But if the cost savings are more important to you, just go for the clean look of concrete. Just make sure to hire a good concrete crew to prep the concrete right to minimize cracks.

8. Get Life Insurance

Nobody wants to think about it, but preparing for the worst gives peace of mind that your family will be taken care of financially. A good life insurance policy can protect your family from inheriting your debts, and cover the cost of a mortgage among other costs.

There is now a service that you can apply to get free life insurance quotes from top insurance companies out there. You may be surprised at how affordable an excellent policy can be. Truth is, life insurance rates are at a 20 year low and thanks to new policies in place you can qualify for a great new policy at a lower rate.

9. Give Your AC a Break

If you have an air conditioner, you need to place it in an area where air flow is unimpeded. If the airflow for your AC unit is restricted in any way, take a few steps this weekend to do the following:

• Trim any bushes to give the AC unit at least a 1 foot area of clearance.
• Remove any debris or leaves from the ground
• If there is any debris clogging up the unit itself, consider having a professional clean it out.

10. New Auto Insurance Policy

Most auto insurance companies won’t notify you of savings, but you should always be on the lookout for a better deal with this auto insurance comparison tool.

Insurance companies are always competing for your business. Join thousands of other drivers and save up to $531 a year with a new policy. All you have to do is to fill out a short form and you can start saving on your auto bill.

11. Veteran’s discounts

Lowe’s offers all active military and veterans a 10% discount on all in-store purchases. This offer is also extended to their spouses.

So be it tools, new appliances or even a kitchen remodel. If you qualify for this discount, head on over to Lowe’s and start saving today.

12. Get Mortgage Relief

Unknown to many homeowners is the government program Freddie Mac Enhanced Relief Refinance Program or FMERR. This program can help millions of Americans to reduce their mortgage payments up to $3k per year.

This federal program is due to stop taking applications at the end of this year however, so take advantage of this program as soon as possible. If you are looking to lower your payments or pay off your mortgage faster, this free program could help you get a better rate than the marketplace.

And that is it. If you found these savings tips useful, please share this post and our page with friends and family. If you need any more help or financial advice, please don’t hesitate to give us a call!

Already have a 401(k) but looking to retire earlier?

This is where Individual Retirement Accounts (IRAs) come in. Sure, you may not be allowed to save as much, the max amount you’re allowed to save for 2019 is $6,000 till you’re 50, then it increases to $7,000.

Based off your income and some other pre-qualifications, you can choose to either start with a Roth IRA or a traditional IRA. The Roth IRA requires you to deposit after-tax money to get more benefits at retirement, whereas for the traditional IRA you get the tax deductions immediately. You can own an IRA in addition to your 401(k), with deductions dependent on various IRS rules.

Savings Plans for the Self Employed

There are 4 retirement savings options favored by the self-employed. Some are IRA-based like the Simplified Employee Pension (SEP) IRA and the Savings Incentive Match Plan for Employees (SIMPLE) IRA. These plans are funded by tax-deductible employer contributions and pre-tax employee contributions.

Other options like the Keogh Plan and Health Savings Account (HSA) are funded with pre-tax dollars and grow tax-deferred over time. Creating a retirement strategy is paramount because there is no one looking out for your retirement but you. That’s why you should be paying yourself first.

Government Assistance

It’s important to know that with every 401(k) or traditional IRA contributed dollar, the government lowers your taxable income for that year. The tax deferral is an incentive to you to save as much as you can for retirement.

Setting Up Automatic Deposits

The simplest way to avoid the pain of saving each pay period is to set up automatic savings with your bank. By getting a certain amount deducted each pay period, the money is gone before you receive your paycheck. It’s a lot easier to have the money locked away before you are able to access it than have to fight the temptations to spend it on payday.

Looking to Retire Early

If you are not able to max out your 401(k) or IRA savings every year, what you have to do is figure out how much money you will need in retirement and actively work to reach that goal.

Tax-advantaged accounts such as 401(k)s and IRAs have strict and complex rules for withdrawal before a certain age and aren’t too helpful for a person looking to early retirement. In addition to saving extra, consider a regular savings or brokerage account.

Even if you’re looking to retire at 55, you will still need to cover living expenses until you can withdraw from your 401(k) at 59½ without incurring penalty fees. Having additional savings and investments is therefore crucial for an early retirement and is a big reason why you need to save more than the recommended 10% of your income for retirement.

Starting Today

When it comes to saving for retirement, take into account the 4% rule to figure out how much you will need per year of retirement. Don’t become a retiree that struggles to get by, save more than 10% of your income today.

To get started preparing for your golden years, give us a call. The Financial Helpers are ready to assist you.

Build your retirement nest egg by changing the way you save.

The 10% rule has often been recommended by financial planners and retirement experts. The truth is, unless you plan to move overseas after retiring, 10% of your income is not going to be enough to sustain you through retirement.

But what about Social Security, you ask? The government assures the population that Social Security will get the funding it needs to provide for retirees, but it’s better not to rely too heavily on the government when planning out your golden years.

In a May 2019 study, it showed that the average benefit for a retiree was $1,470, or roughly $17,640 a year. Now that is nowhere near a liveable income, so it’s best to find alternative sources rather than depend on the continued longevity of Social Security.

Here are some saving and spending guidelines that you can follow for your retirement to ensure a sustainable lifestyle in your later years.

Rule of 20

This rule states that for every dollar needed in retirement, one should save $20. This means that if you make roughly $48k a year you would need to save about $960k for your retirement. If you kept to the 10% savings rule, that would get you about $913,000. But realistically how many people can save $4,800 a year for 40 years? The truth is most people need to save well over 10% of their income to come close to what they need for retirement.

4% Withdrawal Rule

This rule limits how much you should be withdrawing from your account once you get to retirement. To sustain your savings over a longer period of time, it is recommended that retirees stick to withdrawing a limit of 4% from their accounts in the first year of retirement. That amount should then be used as a baseline for subsequent withdrawals.

How to Save More than 10%

So we have shown that saving 10% isn’t enough for you to retire comfortably. For average salaries of $48k, using the rule of 20 you would need $960k for retirement. By saving 10% or $4,800 a year, your money would need to grow at a rate of 6.7% every year to retire in 40 years.

But what about people in their 30s who don’t have 40 years to save for retirement? It is simply not feasible for some to double their savings and still retire with enough. In general, adding 5% to your savings rate lengthens your retirement nest egg’s longevity by almost a decade.

The easiest way to save more for retirement is to find some for free. The frontrunner here will be getting a job that offers a 401(k) match. What this means is that a portion of your paycheck is deducted to be put towards the plan, and the company throws in some more at no additional cost.

For example, if you contribute 3% of your income and the company contributes another 3%, that’s 6% of your income that you’re saving every year. That’s a no-brainer when you can get 100% return on your money with no risk.

Larger 401(k) contributions have a double benefit. A $5k increase in contributions every year for 40 years, compounded at 6% interest, can skyrocket your retirement savings by $800k. In addition to your annual contribution and the tax savings from putting money into a retirement account, that will go a long way to building a comfortable nest egg.

So start planning for your financial future today and give the Financial Helpers a call. We are ready to assist you in preparing a comfortable nest egg for your golden years.