Many people realize that the best way to stay in shape is to develop an appropriate fitness regimen and then stick with it. If you start a fitness program and drop out, you never give yourself a chance to become physically fit. In the long run, regular workouts pay off.
It is the same with fiscal conditioning. To achieve fiscal fitness and the financial independence that goes along with it, be sure to adhere to a regular program of sound financial practices. Here are some tips to help you “shape up” your finances:
With physical fitness, small accomplishments can lead to big successes. The same holds true for fiscal fitness. Set one-, three-, and ten-year financial goals and evaluate your progress regularly. Make adjustments, as appropriate, to achieve long-term financial independence.
Just as personal trainers are available to guide you at the gym and accelerate your progress, financial professionals are available to guide you toward vehicles that help facilitate savings. Contribute to an IRA, 401(k) plan, or other retirement plan for which you qualify that offers an edge: tax-deferred savings.
Before spending your paycheck, put savings first. Earmark a set amount out of each paycheck for the future. Like regular repetitions at the gym, this habit can build financial muscle to help support you for the long term.
Just as you trim excess fat from your diet, shop around for credit cards and loans with low rates. Pay off your credit card balances monthly to avoid high finance charges. If you need to carry a balance, try to only use cards with low interest rates.
Many people visit the doctor yearly for regular physical exams. Similarly, consider meeting with a qualified insurance professional periodically to review and update your insurance needs. Also, schedule a regular review with your attorney to evaluate and update your will and trusts to accommodate any tax law changes.
To get in top physical shape, it's important to chart your progress. It can be very inspiring to look back at your progress and see how far you've come. It is also important to monitor your financial progress regularly and to meet, at least yearly, with a qualified financial professional. This can help ensure you are moving in the direction of your long-term goals.
By committing yourself to fiscal fitness, you are taking the first step toward achieving financial independence. Before long, you may be able to achieve the future of your dreams. Remember, the sooner you begin, the better.
One of biggest mistakes you can make is failing to create a plan to meet your goals – no matter what your goals might be.
Benjamin Franklin once said, “If you fail to plan, you are planning to fail.”
Your financial advisor can help you plan. So you can reach your goals.
If you were asked how best to prepare your child for college, you might say that a well-rounded high school curriculum would be a good start. It may be true that your child needs to be a good student to compete for admission to a college or university. Today, however, getting into college and graduating are two distinct challenges.
Each college and university has admission guidelines that are followed when applications are reviewed. Naturally, the first items most likely to be examined are your child’s high school academic record and SAT or ACT scores. However, academics are not the only items that catch the eye of an admissions officer.
Sometimes acceptance to a school depends on the applicant’s participation in extracurricular activities and his or her civic involvement. Many admissions committees are as interested in grades as they are in the quality and character of individuals who may attend their college or university. Therefore, it is important for your child to include a résumé of achievements, interests, and volunteer efforts with his or her application.
Any of the following may enhance your child’s college application:
Awards demonstrate formal recognition of an applicant’s ability to excel in a particular area.
Sports participation demonstrates an applicant’s competitive spirit and winning attitude, along with the ability to be a team player.
Extracurricular activities highlight an applicant’s enthusiasm, leadership qualities, and specific interests.
Volunteering or religious involvement can often indicate that an applicant is active in the community and possesses moral character and integrity.
Political activity can demonstrate an applicant’s strong leadership skills and awareness of current events.
Work experience may indicate motivation, responsibility, and a strong work ethic.
Hobbies and special interests can provide a better understanding of who the applicant is, in addition to highlighting areas of knowledge.
Building the Foundation for Long-Term Success
Many children today are exposed to an array of social pressures that may be unfamiliar to most adults. So parents and other role models may need to work harder to set positive examples and instill good values, in addition to teaching respect for others and emphasizing overall common sense.
Besides making the grade academically, a candidate for college needs to demonstrate a good attitude. Parents can help children recognize the value of learning and how education is often linked to future success. Learning to make sound choices is equally important. Being an individual rather than a follower isn’t always easy, however, and your college-age children need ongoing encouragement to continually examine themselves and strive to reach their goals.
Although you hope your child will use sound judgment while navigating the maze of activities associated with college life, remember that maturing is a process, and there may be mistakes made along the way. The key is to encourage your child to learn from those mistakes, rather than keep repeating them. If you, as parents, and other role models can provide emotional support, encouragement, and guidance during these difficult years, the chances of your child transitioning smoothly to adulthood will be greatly enhanced.
Regardless of the path your life takes, money will play an important role at every turn. Certain events, especially graduating from college, entering the work world, getting married, having children, and retiring all require targeted financial strategies. Developing good financial habits now can go a long way toward helping you achieve your future financial goals.
If you’re just starting your career, set some goals for making the most of your disposable income. Consider the following three rules:
Paying off college loans is important. Also, try to avoid spending too much on housing by limiting rent or mortgage-related expenses (principal, interest, insurance, property taxes, and/or condo fees) to between 28% and 30% of your gross monthly income. When other short-term debt, such as car payments, student loans, and credit card bills are included, the debt limit guideline may rise to 36% of your gross pay.
For younger workers, retirement is often last on the list of financial concerns. However, if your employer offers a retirement plan with tax benefits, such as a 401(k), you may want to make the most of the opportunity. Pre-tax payroll deductions make contributing relatively painless. Try to contribute the maximum amount allowed—especially if your employer matches some, or all, of your contribution. If you don’t have a retirement plan at work, consider opening an Individual Retirement Account (IRA) that can provide for tax-deductible contributions and tax-deferred earnings.
If settling down means marriage, you now have two financial situations to reconcile. Keep in mind that marriage establishes a legal relationship, and your spouse may have his or her own debt. Ideally, attempt to begin your new life together with a clear balance sheet.
Whether single or married, financial goals take on greater importance as you assume adult responsibilities. You and your spouse may choose to name each other as beneficiaries of retirement accounts, annuities,or life insurance policies. Also consider the protection offered by disability income insurance. In the event you or your spouse is unable to work due to an accident or illness, disability income insurance can provide a certain level of replacement income.
Although children present new and immediate demands on your time and financial resources, having dependents may motivate you to plan for the future. Two essentials include adequate life insurance and a will that names guardians for minor children.
You may also want to establish an education funding plan to help finance higher education. Many adults feel torn between saving for their children’s college education and their own retirement. Being fiscally responsible and starting early may allow you to do both.
For many people, a comfortable retirement may require 75% to 80% of their pre-retirement income. The three-tiered components of retirement income consist of Social Security, employer-sponsored plans (e.g., 401(k)s, pensions), and personal savings. If you anticipate little or no income from Social Security or a traditional company pension, you will need to prepare early to make up the difference with savings and an employer-sponsored retirement plan.
A comprehensive estate plan, to minimize potential estate tax liabilities and to help ensure that your assets are transferred to your heirs according to your wishes, is also important.
It is never too early to begin building the foundation for your financial future. Good habits developed now can go a long way toward helping you achieve your financial goals. Regardless of your stage in life, be sure to consult qualified financial professional to help you determine appropriate strategies for your unique circumstances.
Budgeting is a balancing act. The secret to sustaining yourself from day to day while also reaching financial goals is building a budget that balances your needs with your wants. Pinpointing the difference between the two is a subjective proposition.
In budgeting worksheets, some people object to separate categories for items in the “wants” category. Home internet, for example, is classified as a want and not as a need. But if you do not work from a home office (in which case your home internet is a business expense), there’s a good chance that home internet is a want (because let’s face it, you’re probably using it primarily to watch Netflix).
And the same is true for your cable television — your Netflix subscription and your iPhone as well. It also goes for your hair dye … These are all wants and not needs. You totally can do without these things, if you were forced to. They’re not necessary to live, as painful as it might be to lose them.
Of course, wants and needs, sometimes, don’t fit into neat, distinctive categories. It’s too simplistic, for instance, to say that your grocery store spending is a need. Your entire grocery bill is a combination of wants and needs. Bread, milk, eggs, and whole fruits and vegetables can be classified as a need.
But, on the other hand, chips and cookies are most certainly not a need. Fruit juice is a want, especially if it is of that upscale variety. Milk is a need, but organic milk is a want. And so is the whole grain, organic honey-infused bread.
The 50/30/20 budget says that 50 percent of your after-tax income should be spent on “needs,” 30 percent should go to “wants,” and 20 percent should go to savings and debt reduction. That means there’s nothing wrong with buying fancy bread and milk or subscribing to Netflix. The 50-30-20 budgeting rule of thumb allows you to spend 30 percent of your take-home pay on things you want. The key is to separate your wants from your needs so that you’re more self-aware of how you’re spending money.
Takeaway
Distinguishing “wants” from “needs” will truly help you realize how much power and control you have over your own budget. If you’re choosing to spend money on wants, you easily can choose those items and re-direct your money elsewhere. After all, budgeting, at its very core, is not always about crunching numbers. Budgeting is the art of aligning your spending with your values.
Raising children without a partner can be challenging – emotionally, physically, and financially. Challenged by the work involved in earning a living and caring for children, single parents can sometimes feel that they may never break the cycle of living paycheck to paycheck.
But, even if you have a limited income, you may find that simply managing your money better can alleviate some financial problems and allow you to save for the future. Consider the following steps toward becoming a financially savvy single parent:
The first step is to take stock of your situation. What are your fixed costs? How much do you pay for housing, utilities, transportation, and childcare? If these expenses alone consume most of your income, leaving you with little money for groceries or discretionary spending, consider whether some of these costs could be reduced or eliminated entirely.
If your mortgage, property taxes, and utility bills are more than you can reasonably handle, selling the house and moving to a smaller place may be an appropriate option. It may be difficult for you and your children to leave the family home, but the prospect of having more money to spend on other things may make it worth it. Similarly, it may make sense to trade in that late-model sport utility vehicle for a more fuel-efficient or used vehicle.
If you need childcare while you are at work, there may be ways to reduce your costs. Daycare centers are often more expensive than programs offered by local religious institutions or YMCAs. If your children only require after-school care, a stay-at-home parent may be willing to help out in exchange for your babysitting services at other times. You may also want to speak to your employer about working a flexible schedule or doing some of your work at home. If you do pay for childcare, be sure to claim all available tax deductions and credits.
Next, assess areas where you can cut back on other forms of spending. By keeping a diary of all expenditures over the course of a month, you can identify some fat that could be trimmed from your budget. Simply replacing takeout with fresh, but easy to prepare, meals can save a bundle.
With your spending under control, you can start planning for the future. After establishing a fund for emergencies, think about your retirement and education goals. If your workplace offers a 401(k) plan, try to contribute at least enough to take advantage of your employer match. You may also want to consider putting money into an Individual Retirement Account. If paying for your children’s college education – or your own – is a priority, look into several tax-advantaged accounts that can help you save efficiently.
While finances may continue to be tight, it is important not to overlook the need for adequate health, life, and disability insurance. How would your children cope if you were no longer able to support them? To start, all families need health insurance. If you do not receive benefits through your employer, look into a high-deductible catastrophic policy that covers the costs of serious illness or hospitalization. Depending on your income, your children may be eligible for public health-insurance programs.
Consider also the protection offered by life and disability income insurance. Life insurance can offer funds that can be used to maintain your family’s standard of living in the event of your death, and disability income insurance can replace a portion of your income if you sustain a sickness or injury that prevents you from working.
Despite your efforts to cut costs and adhere to a budget, you may still find yourself burdened with credit card debt. If possible, move the debt from higher-interest to lower-interest credit cards. Then, develop a strategy to pay down debt gradually and within your budget. In the meantime, avoid the temptation to take on new debt.
Sticking to a budget can sometimes feel like an exercise in deprivation, but it doesn’t have to be if you set aside money for a few treats, like a weekly family pizza night. Even if you can only contribute small amounts, create a “fun fund” to be used for a vacation or a trip to the amusement park. Providing for a family on your own is a challenge, but it is one that can be managed with careful planning.
Investment advice is offered through Integrated Partners, a registered investment adviser doing business as Strong Valley Wealth & Pension. This information on the website has not been approved or verified by the United State Securities and Exchange Commission or by any state securities authority. Registration as an Investment Adviser does not imply a certain level of skill or training. Strong Valley Wealth & Pension, LLC offers securities through M.S. Howells & Co. Member FINRA/SIPC. M.S. Howells is not affiliated with Strong Valley Wealth & Pension. Not all products and services referenced on this site are available in every state and through every representative or advisor. Check the background of the firm or investment professional on BROKER CHECK or ADVISER CHECK.
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