Saving Money Is One Of The Hardest Things To Do !

Saving money is one of the hardest things to do for most people. I find automatic savings programs are a great way to help people to reach their savings goals and make managing their cash flow less chaotic as well.. 

The first step is to look at your current cash flow numbers to see where the money is going. I often recommend that married couples divide up their expenses between essential and discretionary expenses and then rank the discretionary expenses one to three in terms of importance. If the item is a two or a three in terms of personal importance to the couple, it's up for grabs to be redirected toward additional savings.

I also think it's important to have savings goals for short-term savings and the long-term. I recommend my clients establish several online savings accounts and start automatic saving towards specific goals. For example, they may put aside money on a monthly basis for an emergency fund, vacations or holiday gifting. The beautiful thing about an automatic savings programs is that it dials down the anxiety that comes with managing your money. For example, when Christmas and Hanukkah are around the corner, having a specific holiday gifting account already set up can provide peace of mind. This type of automatic savings program also has the potential to lower credit card debt by removing the dependency on short term debt to satisfy fluctuating cash flow expenses.

The next step is to set a longer term savings goal. Our savings goal our clients is to save 15% per year. This money should be first directed towards your 401(k) or 403(b) plan (especially if there is a matching contribution). Other worthy savings options include funding an IRA or paying extra principal on a mortgage as well. Switching from a 30 year mortgage to a 15 year mortgage can also be quite desirable because you get a lower interest rate on a 15 year mortgage than a 30 year mortgage as well.

Saving for education is also important but, this should be ON TOP of your savings goals since it will not help you to save for your own retirement.


If you have additional questions about financial planning, please feel free to call my office at (201) 843-0044. My staff would be happy to help with any setting up a free introductory phone call if you would like to talk about your financial planning needs.  

Avoid Financial Blunders as You Get Closer to Sending Your Child to College

Every parent feels nothing but guilt as they get closer to sending their children to college and it's that guilt that causes people to make a financial blunders.  I am sure you have heard the old saying, you can always borrow money to go to college but you can never borrow money to retire.

Here are a few of the big mistakes that I have seen:

·       Not having a family mission statement on how much money each member of the family needs to pay for college is a big mistake. Everyone should know how much the parents are willing to pay and how much the children are expected to pay.

·       Stopping saving for retirement while your children are in school. Not funding the 401(k) plan because your children are going to college will hurt you because you lose out on the time value of money and you'll probably miss out on employer match as well.

·       Taking out student loans without having a frank discussion of how much you can afford to repay. I have seen many clients who took out large student loans and then had a financial downturn and could not make payments on them. It is amazing to see how quickly the principal balloons when you are in forbearance on a student loan.

Student loans are shared concern for both parents and students and shouldn't be entered into lightly. I often show people what the cost will be per month and overtime for student loan so they can see the true impact it will have. If the cost is too high, they should think of commuting for at least part of their time while in school.

All students should work summers and the family needs to decide what percentage of the money goes to college funding. My favorite plan is to put all of those earnings into an online savings account and to use the money in the last year of their schooling. It is a source of pride and gives them bragging rights to later say, “I saved $____ for my own education”.

If you have additional questions, please feel free to call my cell phone at 201-650-0753. Also, check out our website at:

www.wattersfinancial.com

Timothy Watters, CFP