3 Clever Ways to Trick Yourself Into Saving Money

February 24, 2023

I actually don’t think we have a financial literacy problem in America as much as we have a financial wellness problem. Everyone I talk to on our financial helpline knows what they’re supposed to do to be more financially stable. But while knowledge is power, putting that knowledge into action is where the real trouble is. It’s the same thing with eating well and exercising. We know what we’re supposed to do, but we don’t always do it. Continue reading “3 Clever Ways to Trick Yourself Into Saving Money”

How to Make 2017 the Year of Financial Security

December 28, 2016

According to Fidelity’s annual study on New Year’s resolutions, the number of Americans considering a financial resolution for 2017 increased significantly over last year. If you are one of those who are hoping that 2017 will be the Year of Financial Security, I suggest a quick review of 2016 as a starting point. Ask yourself four questions to get started:

1. How much did you save? Before you start on a mission to save more money next year, take a look at how you did over the past year. Are you better off this year than last? Could you have saved more money? Were your expectations of how much you could save realistic?

Don’t let a small balance in your savings account discourage you from continuing your efforts. Make saving automatic by scheduling a recurring transfer on payday so you never miss the money. If you don’t yet have 6 months of your expenses tucked away in a savings account, that’s a good goal to start with.

2. How is your 401(k) or IRA doing? If you haven’t checked on your retirement account lately, this is a good time to log in and check your asset allocation. If nothing else, you should make sure you’re re-balancing your investments to account for changes in the stock market.

But you should also make changes to your allocation as you approach retirement. Someone who only has 5 years until retirement will have a lot more of their assets invested in fixed income funds versus someone with 30 years to go. It’s also a good time to run a retirement calculator to see if you’re on track to retire when you want to.

3. Did you reduce debt? Raise your hand if your financial resolution includes reducing or eliminating debt. Extenuating circumstances aside, if your total amount of debt increased or stayed the same in 2016, then it’s time to take a look at how you are going to make that number go down for the coming year. The first step in eliminating credit card debt is to stop using credit cards, so start thinking now about how you will shift your spending to cash only while you tackle your debt. Then make a plan and stick with it.

4. Has your financial outlook changed? Perhaps 2016 was a year of change for you. Perhaps you got married, got a raise, switched careers, etc. As you prepare your plans for 2017, cover these questions to set you up for financial success in the coming year:

  • What are your greatest concerns? What keeps you up at night about your life and money? It might be something totally different from last year. This will affect your financial goals.
  • Is there specific financial guidance you need? Perhaps you received a promotion and have a lot more money to throw around so you finally need investing help or maybe now you’re caring for a relative. Does that affect your taxes? Consider seeking out a professional to help you with any big changes you’ve encountered. Your workplace financial wellness program is a great place to start.
  • Have your goals changed? Did you get married, have a baby, move to a new city, or decide to go back to grad school? All of these will affect your long-term goals. Hopefully, you’ve already examined how these changes affect your finances, but if not, now is the time to take a look and make any changes needed.
  • Do you need to revise your budget? If you did have any major life events in 2016 or if you’re setting a “stretch goal” for yourself for 2017, you probably need to revise your budget. Take a look at those expenditures that have become routine such as stops at Starbucks or taking Uber home from work and decide whether you need to reconsider those activities. For me, I have a renewed focus on my health after a rough 2016. I’m planning to spend more money on fitness activities like specialty classes and less money dining out.

Goal-setting for the New Year can be overwhelming. Make sure you give yourself some time and head space so that you are able to mindfully set goals that are realistic, achievable and motivational! Happy New Year!

 

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3 Numbers That Matter More Than Your Credit Score

June 22, 2016

While knowing your credit score and the elements that impact it is important to your overall financial well-being, I sometimes find that people are overly concerned about it at the peril of other more important financial measurements. Your credit score only really matters when you’re applying for a loan, certain types of insurance and increasingly, when applying for a job. If none of those things are on your horizon, then your score is more like your high school ACT scores – perhaps a point of pride, but pretty irrelevant for the time being. Here are three more important numbers you should be focused on instead:

Net Worth

What is it: Assets (bank accounts, investments, home, car – basically cash or anything you could turn into cash) minus liabilities (credit card balances, car loans, student loans, mortgages, 401k loans – anything you owe).

Ideal number: As high as possible.

Why it matters: Your net worth is the ultimate measure of your ability to weather financial storms and maintain financial choices in life. The higher your net worth, the more financial freedom you can afford. There are countless cases of people who were millionaires on the asset side but broke on the net worth side as cautionary tales of neglecting this important number. Many of these people suffered during the last recession when their debts were called.

How to track it: I calculate my net worth on a monthly basis using Google sheets at the same time I sit down to set up any bill payments for the month. Here’s a snapshot of what it looks like:

Net worth snapshot

One nice side effect of this is the fact that I’m checking on all of my accounts at least once a month, so I can also do a quick check for anything fishy.

Worth noting: I pay all my credit cards off each month, but I include them on this sheet because that’s money I still owe that is reflected in my checking account above. It’s the only way to have a truly clear picture of what I have. I keep things like my student loan and Mini Cooper loan on there both for historical accuracy as well as for the psychological thrill of seeing a big fat ZERO under old debts. It’s a little, “Yay me! Look how far you’ve come!” moment each month.

Retirement Readiness

What is it: The best way to measure whether you’re saving enough to retire comfortably when you want to, especially if you have many years to go until retirement.

Ideal number: On track to replace about 80% of your current income, unless you’re within 5 years of retirement (when you can be more specific about how much you’ll need each year).

Why it matters: Retirement, which really just means transitioning to living off your savings one day, is one financial goal that pretty much all of us share. Whenever anyone asks me what to do with extra money or if they can afford to take on an additional debt payment or savings goal, my first question is, “are you on track for retirement?” Even though it may be one of your longest-term goals, it should be in the top 3 in terms of priorities.

How to track it: There are countless calculators out there, but for people with a 401k or other workplace savings plan, I prefer this Retirement Estimator.

Worth noting: Many people who say they aren’t on track to retire have never run a calculator. Knowing is the first step!

Emergency Fund

What is it: A cash cushion in place to tap into in case of an unexpected loss of income due to job loss or extended illness or injury.

Ideal number: 3 months of expenses, minimum. For single income households or career fields that aren’t as certain, at least 6.

Why it matters: Life happens and when it does, having cash that’s easily accessible takes away much of the financial stress and allows you to focus your energy on finding a job, healing or adjusting to the new normal.

How to track it: If you’re starting from zero, start with a goal of setting three months of rent or mortgage aside. Then tack on three months of your next highest expense and so on until you have all essential expenses covered. Once you’re at three months, make sure you adjust for any changes such as a new home, new baby, etc.

Worth noting: It can be tempting to keep a credit card on hand instead of the cash or want to invest the cash for higher earnings, but resist. Should something happen, consider the probability that it could be due to an economic downturn when credit may not be as easily accessible and/or the stock market could be down. The best place for your emergency fund is in a high yield savings account.

These are the three numbers you want to focus on. Even if you’re not at the ideal numbers yet, you’ll be well on your way to financial freedom if you can find a way to track them on a consistent basis. And you just may find your credit score improving as well.

Financial Rules Of Thumb: The Emergency Fund

September 30, 2015

There are countless rules of thumb out there meant to guide us in our everyday lives: Exercise at least thirty minutes per day for optimum health. Wait at least two days before calling after the first date. Don’t wear white after Labor Day. Continue reading “Financial Rules Of Thumb: The Emergency Fund”

Should You Plan For Retirement Or Seek Financial Independence?

July 13, 2015

When our team of financial planners asks others about their top financial concerns and priorities there is a consistent answer – retirement. In fact, our financial wellness reports usually show that every age group with the exception of those under 30 indicate that their top financial planning priority is indeed retirement planning. This probably comes as no surprise because everywhere you look these days financial services companies are bombarding us with clever messages to shift our focus to retirement. The Financial Finesse blog team, which I am a contributing member of, frequently writes about different aspects of the retirement planning process as well. Continue reading “Should You Plan For Retirement Or Seek Financial Independence?”

Your Financial Check-Up (Week 3): Achieve Your Most Important Financial Life Goals

June 08, 2015

It is week 3 of the Financial Check-Up Challenge and I’ve heard from readers who are participating in the challenge. I’ve also heard from others who basically told me, “I get it Scott. It’s important to check in occasionally to assess our financial health but LIFE HAPPENED and I didn’t get a chance.” Continue reading “Your Financial Check-Up (Week 3): Achieve Your Most Important Financial Life Goals”

What Is Your Family Vision?

May 19, 2015

Okay, I am somewhat of a geek. One of my favorite channels is HGTV. I am fascinated by how they can turn a home that looks like something out of a horror movie into a dream home. Continue reading “What Is Your Family Vision?”

Finding Balance

March 20, 2015

I met with a young woman recently who had a few options in front of her and we talked through the choices in front of her.She had just graduated from business school and accepted an offer with her current employer. She is in a two year long leadership development program, and during that program, the company is paying for her living expenses. They do that so that she could maintain her home back in her hometown since that’s where she will eventually live again. This woman had just gotten married and her husband moved to the new city with her and he will look for a job there since he just finished school as well. Continue reading “Finding Balance”

What A Lost Cell Phone Can Teach Us About Investing

February 25, 2015

Earlier this year, my boss shared with us her story of how she dropped her phone behind her bed. Her first thought since the bed was basically against the wall was to move the bed…in her words “bad idea.” After some time (and a little pain medicine), she took a second approach: use a hanger from the side to pull it out….again, “No dice.” (She thinks she actually made it worse by pushing it further out of reach.) Continue reading “What A Lost Cell Phone Can Teach Us About Investing”

One Word That Can Change Your Financial Life

February 02, 2015

Can one single word change your financial life and perhaps completely change your life story? Sound a little too simplistic? Before you dismiss the possibility that one single word can have transformational powers, ask yourself one question – Is my financial life just a little bit complicated? Continue reading “One Word That Can Change Your Financial Life”

How Much Progress Can You Make Next Year?

December 26, 2014

One of the joys of being in a role where I can see a person make progress over the course of time is that I can remember where they started and see where they are now. Since they are living in it day to day, they don’t have the perspective that I do as a casual observer. It’s a lot like when my kids were younger, there were cousins we would only see once every year or two. Every time we saw them, I was shocked by how much their kids had grown and they were shocked by how much my kids had grown, but neither of us was shocked by the growth of our own children. Continue reading “How Much Progress Can You Make Next Year?”

When the Wedding Bells Stop Ringing

June 18, 2014

For centuries, June has been the most popular month for weddings.  The idea of two people vowing to share the rest of their lives together always puts a smile on my face, but are these two souls that have now been joined as one fully prepared for what lies ahead?  I should think that a person that says “I do” does so with no thought of some day thinking “I don’t,” but the reality is that many of these newlyweds won’t be together in 20 years. Continue reading “When the Wedding Bells Stop Ringing”

How to Make the Financial Planning Process Work for You

March 10, 2014

I get the unique opportunity to speak with employees taking part in our Ask-A-Planner consultation service offered through their employer as a financial wellness benefit.  Every session is unique and last week was no exception. One moment I was meeting with a recent college grad feeling overwhelmed with student loan debt and a few minutes later, I was talking with a parent trying to save for their kid’s college without overlooking their own retirement savings.  A conversation about establishing an income plan for retirement quickly transitioned to an emotional discussion about the death of a loved one and concerns about protecting one’s family through a well-crafted estate plan.  Continue reading “How to Make the Financial Planning Process Work for You”

Are You Doing the 52 Week Savings Challenge?

February 24, 2014

Have you heard about the 52 week savings challenge? Apparently this challenge has been pretty popular on social media sites and there are some pretty creative money jars out there on Pinterest and Facebook.  It wasn’t until a recent financial planning consultation that I’d ever talked to someone actually using this approach and it came up again in multiple sessions with others just last week.  Continue reading “Are You Doing the 52 Week Savings Challenge?”

What’s SUP With Your Budget?

September 09, 2013

A few months ago, I wrote about my own retirement planning journey and a list of things that I plan to do along the way.  The ultimate purpose was to find some balance between living in the moment and planning for the future. I’ve made some progress over the past few months and thanks to a friend who lives on a tidal creek, I was able to check a long awaited paddle boarding trip off my list.   Continue reading “What’s SUP With Your Budget?”