10 Steps to Making a Budget

10 Steps to Making a Budget

Apr 2021

Creating — and sticking to — a household budget is the cornerstone of a sound personal financial plan. Here’s how to make one in 10 simple steps.


1. Pick a system. There’s no shortage of budgeting apps and online tools available. You can also use a basic electronic spreadsheet or even pen and paper, if you prefer. But whatever your approach, select a convenient and flexible system to capture and categorize your income and expenses over time.


2. Track current spending. Keep track of everything you buy for a month to have a realistic picture of your spending before you start. It can be surprising how many purchases occur under your radar — like that occasional latte, magazine or fast-food lunch.


3. Log Your Income. Record income from your job and any other sources, like a side hustle building websites or selling handmade jewelry on Etsy. Don’t forget to include investment or retirement income as well.


4. Record Fixed Expenses. These are costs that remain relatively stable over time — things like your mortgage, insurance premiums or car payment.


5. Project Variable Expenses. These change from month to month. They might include things like gas, takeout dinners and clothing purchases. Credit card payments tend to also fall into this category. Look at your average over the two previous months for a ballpark, but always err on the high side when it comes to budgeting for them.


6. Include Occasional Expenses. Some expenses only come up from time to time. They can be predictable (like your summer vacation) or unpredictable (like a car repair). Either way, it’s important to budget for expected and unexpected occasional expenses. To do this, take the total estimated cost, divide by 12, and include that amount into your monthly budget.


7. Emergency Fund Savings. Aim to set aside at least 3-6 months’ worth of expenses in a highly-liquid savings vehicle like an FDIC-insured bank account (some advisors suggest 12 months depending on whether you own a home, are married or have children). Clearly, this can take time to build up, so if you don’t yet have enough saved for a rainy day, budget regular contributions to an emergency fund.


8. Retirement Savings. Sit down with your financial advisor, who can help you determine how much you’ll need to save in your 401(k) and other retirement accounts each month to stay on track to achieve your retirement goals. It’s important to “pay yourself first” when it comes to funding your future — and your budget should reflect this important priority.


9. Plan for Windfalls. Decide ahead of time what you’ll do with an increase in pay, tax refund, gift, bonus or other found money. Having a plan reduces the likelihood of an impulse buy. Consider using most of it to bolster your retirement fund or pay down debt.


10. Monitor and Periodically Re-evaluate. It’s important to reexamine your budget regularly and whenever your financial circumstances change. Depending on your situation, that could be quarterly, semi-annually or annually.


Don’t be hard on yourself if it’s difficult to stick to your budget each and every month. You may need to make some adjustments from time to time. The most important thing is to keep trying to meet your spending and saving targets. If you need help determining a realistic budget for your situation, make an appointment with a financial advisor who can assist you.


How Do I Save for My Child’s College and Retirement?

How Do I Save for My Child’s College and Retirement?

Mar 2021
You juggle multiple financial priorities, whether it’s buying a house, having children, starting a business or buying a car. Saving for retirement and a child’s college fund at the same time is no different, but that’s not to say it’s easy.

Get It Down on Paper
Start by setting a budget and timeline for both retirement and college. While the college start date is probably somewhat fixed, you may have more latitude concerning your retirement. Once the kids are old enough, include them in the conversation about how much you can afford to help with college and what they can do. 

It’s important to set realistic goals about the types of colleges within your budget. Don't let higher education costs get out of control. If your child has their heart set on a specific school or major, there may be ways to lower costs (e.g., subject-specific scholarships and grants). The expectation shouldn't be that you're going to write a lot of checks. And always have a backup plan or safety school.

Controlling College Costs
Explore ways to reduce college expenses. Help your child identify special interests early on. Athletics? Music? Science? Math? Money may be available for all of those IF your child is exceptional. Identify colleges early too. See if they can attend special interest camps there to (a) see how they like it, and (b) meet faculty who might recommend them for a grant/scholarship.

Also, 529 plans can be a good way to divide retirement from college savings and offer a number of benefits, including the option of contributions by relatives. Coverdell Education Savings Accounts (ESA), sometimes called education IRAs, are tax-advantaged savings vehicles that allow tax-free distributions for qualified educational expenses. Read more about the rules and restrictions of the program in the link below. 

Reevaluating Retirement
Similarly, find ways to boost your retirement savings or scale back your retirement goals. If time is tight, consider whether you can work a little longer or adjust the kind of retirement lifestyle you’re budgeting for. For example, could you downsize your home or move to an area with a lower cost of living? 

Also, make sure you’re contributing at least enough to your employer-sponsored 401(k) to earn the maximum company match — this is free money, and you don’t want to leave it on the table. What you also don’t want to do, however, is ramp up your level of investment risk beyond what is appropriate for your personal tolerance and your retirement timeline just to try to boost returns.

The most important thing you can do during this juggling act is to sit down and have a frank conversation with your financial advisor about your goals. He or she may be able to come up with options you haven’t even considered.  


Myths About Working with a Financial Professional

Myths About Working with a Financial Professional

Mar 2021

An employer-provided financial professional can help you plan for a successful retirement and navigate a wide array of financial decisions and challenges. Unfortunately, many people fail to take advantage of this valuable resource because they believe one of the following myths:


1. Financial advisors are only for the rich. You could actually make the opposite case — a financial advisor is even more important for those who aren’t independently wealthy. Good financial advice can make the difference between retiring comfortably on time and remaining in the workforce for years longer.


2. Nobody can “beat the market,” so why bother? While returns are never guaranteed, there are many reasons to work with a financial advisor beyond selecting investments. They can help you create a budget, determine how much house you can afford, plan for your children’s college education and help you manage debt.


3. I’ll lose control of my money. You will always maintain control of your investment funds while working with your employer-provided financial advisor. Their role is simply to explain and give advice, but you’ll always have the final say regarding all financial decisions.


4. They’ll make me feel embarrassed about my spending. A good financial advisor helps their clients make better decisions through education and support — not by judging or embarrassing. They should never make you feel bad about any lack of investing experience or ongoing financial challenges.


5. I’m in a target date fund (TDF), so I don’t need advice. Target date funds adjust risk according to your planned retirement timeline, thereby automating a certain amount of decision-making. However, you may still want to discuss your contribution levels to the TDF as well as a host of other issues, such as the ones already mentioned. Your personal finances comprise more than just your retirement account, and your adviser can be helpful in many different areas.


6. I won’t understand what they tell me. Your advisor can explain financial concepts and investment options in a way that matches your level of understanding and experience. If you don’t understand something, ask for an example. You may also receive written materials or videos that you can read or view on your own. In short, it’s their job to explain things to you in a way that you can understand — no matter your level of expertise.


7. They’ll pressure me to put my money in risky investments. You’ll always have final say over how to invest your money. An advisor should conduct an investment risk assessment to help gauge your personal risk tolerance and make recommendations that are appropriate to the level of risk you’re comfortable with.


Don’t believe any of these myths and potentially miss out on a valuable and useful employer benefit. Schedule a meeting with your financial advisor today to discuss retirement planning and any other financial goals you have.

Budgeting During a Pandemic

Budgeting During a Pandemic

Feb 2021

Sticking to a budget is hard enough normally — and things are anything but normal right now. Unfortunately, this is one more area of our lives that’s a lot more complicated since the pandemic began. Just as many folks are rethinking how they work and grocery shop, it’s a good idea to look at your household budget and consider whether some adjustments are in order.


Budgeting is about planning ahead. But before you do that, review changes in your spending habits since the COVID-19 crisis began. While it may feel like you’re saving money by eating out less or staying home, there may be other areas where you are, in fact, spending more than you did before the pandemic. These might include groceries, utilities and even household repairs, as appliances and other systems in your home deal with increased demand.


Once you have a good sense of the increases and decreases in your spending, adjust your budget accordingly. Then, consider the following:


1. Bolster your emergency fund. Whether or not you’ve had to tap your emergency fund, consider adding to your safety cushion. With the future still uncertain, see if you can squirrel away an extra $50 a month to put toward repairs or other unexpected expenses. Adding to your Flexible Spending Account (FSA) or Health Savings Account (HSA) can also help cover any unanticipated medical costs.


2. Review discretionary spending. Some budget items are necessary expenses, such as food, housing and utilities, while others are optional. Review your discretionary spending, such as multiple streaming services and nonessential clothing. Consider cutting back on these temporarily to liberate additional money for building your emergency fund or paying down debt.


3. Seek out savings on essential spending. Curb grocery bills by using paper or online coupons. Buy in bulk and look for lower-cost meal options that include pasta, beans and in-season vegetables. Cut back or eliminate alcohol purchases. Getting creative with leftovers can also help. Look for new budget-friendly recipes to add to your meal-planning repertoire. Many auto insurance carriers are offering discounted rates as well, so check to see if yours is one of them. You can lower monthly insurance payments by increasing your deductible, but only consider this strategy if you can afford the higher out-of-pocket expense.


4. Negotiate with creditors and service providers. If your budget is straining, speak to your lenders to see if they can lower your monthly payment or interest rate. They may even allow a forbearance of payments altogether. If you have a mortgage, investigate whether refinancing that loan makes sense for you. Call credit card companies and ask for a lower interest rate or consider a balance transfer to a card with a more favorable fee structure.


5. Review your retirement plan. Try to avoid dipping into your 401(k) as this could potentially set you back years on your retirement timeline — as can lowering or stopping contributions. It’s particularly important to contribute the minimum required to receive any company-match funds if possible.


Many American families are feeling the crunch right now. You’re not alone. Seek out guidance from those who can help. Setting an appointment with your financial advisor is a great place to start during this challenging time. If you’re under a great deal of financial stress, talk to supportive friends and family. And, if necessary, obtain professional help from your Employee Assistance Program (EAP) or a qualified counselor through your health insurance plan.


It’s Time to Talk to an Adviser When…

It’s Time to Talk to an Adviser When…

Feb 2021

Having a financial advisor is like having a tennis or baseball coach. While you want them to track your performance throughout the year during routine practice, there are also key moments during a big game when you look to them for important advice. So, when exactly should you touch base with your advisor?


1. When you land your first job. This is an excellent time to schedule a meeting with an adviser about setting up a monthly budget and starting to save for retirement. If your employer offers a 401(k) plan, a financial advisor can help you decide how much to contribute and how to allocate your contributions.


2. When you leave or change jobs. If you’re taking a hit in income, your advisor can give you strategies about how to adjust your finances until you find that next job. And they can walk you through options regarding your 401(k) plan from your previous employer — such as rolling those funds into an IRA or transferring them into a 401(k) through your new job.


3. When you get married. Getting married can change your personal finances significantly. Are you going to merge your funds or keep them separate? If you are now going to be a dual–income family, what will you do with that additional income? What about life insurance needs?


4. When buying or selling a home. An advisor can help you figure out exactly how much house you can afford and, along with a tax professional, plan for any tax consequences. Finally, he or she can help you adjust your budget to accommodate all of your home mortgage and maintenance needs as well as continue to invest toward retirement.


5. When you have children. Children are bundles of joy that can also cost your bundle. Getting professional advice about how to manage child-rearing expenses can be extremely beneficial. An advisor can also help you set up a dedicated college fund to plan for your child’s educational needs down the road.


6. When you receive an unexpected windfall. Whether it’s a large bonus or an inheritance, you want to plan for any unanticipated funds. There can be tax obligations, and you need to make decisions about how to spend or invest that money.


7. When you’re about to retire. The transition from your income-generating years to retirement can be tricky to navigate. Working with a financial planner all along will help smooth out the transition. However, there will still be adjustments to how you manage your money, and an advisor can help you during this critical time.


8. Every 6 to 12 months if nothing major has changed. It’s important to touch base regularly with your advisor, even if your circumstances remain more or less the same. Periodically review your progress toward your retirement and other financial goals, such as debt reduction.


A good financial advisor can help you train and prepare, recover from injury, and come up with a game-winning strategy to get you over the goal line to your retirement years.

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