Saving and Budgeting

It is retirement funding season, and a good time to examine our savings habits and methodologies. There is no question that the average saver is struggling to put aside the amount of capital necessary to provide for a comfortable retirement, and the path to an improved savings discipline is difficult for many to see. Below is a wide ranging menu of ideas designed to get you thinking about how you can affect change in your own life.

 Behavioral Savings Principles 

  • Pay yourself first – make the conscious decision to pay yourself before you pay others. Recognize that your retirement funding is as important an “installment payment” as your mortgage and auto loan.
  • Actively maintain a budget – so you know where you stand. The chances of increasing your savings rate are greatly improved if you can identify where your money is going. Use apps such as Quicken or MoBu to help.
  • Avoid spending triggers – such as late night surfing of retail websites. Instant gratification can impede your plan to pay yourself first.
  • Cultivate contentment with what you have. 

How else can you modify behavior to achieve your goals? 

  • Maximize contributions to employer-based retirement plans up to the full employer match.
  • Establish a monthly automated checking account or salary reduction transfer to a non-retirement investment portfolio.
  • Auto-increase your 401k based on annual raises.
  • Pay off credit card balances immediately.
  • Comparison shop, and use coupons and wholesale clubs to save. 

Generate More Income

It seems like a tall order, given how hard we all work currently. But there are surprising ways to add revenue, which translates into increased savings. 

What are some ways to change the income side of your budget equation? 

  • Make yourself more valuable in the work place and ask for a raise.
  • Change jobs with a higher salary or a better retirement plan.
  • Rent your home – see what’s already available in your neighborhood by visiting airbnb.com.
  • Rent your car – one man’s Chevy is another man’s Rolls. Visit turo.com for a test drive on the subject.
  • Blog – become an internet sensation, and get paid for your following. Eyeballs = Dollar signs. Visit onlineincometeacher.com to see how.
  • Become a driver- to be “fare”, Uber and Lyft are always looking to reward excellent drivers.
  • eBay – Sold! Sell stuff you no longer want or need, or become an agent for friends and family and sell their stuff.
  • Run errands – some people need help. Visit taskrabbit.com to pick up a few pointers.
  • Temp – full-time job doesn’t fit your lifestyle? Who says a little less can’t be a little more? Visit manpower.us for work options that work for you. 

Reduce Expenses

Expenses can be trimmed in ways that are simple and effective. Challenge yourself to discover other ways to make your daily routine a little less so. Belt tightening is considered a good thing if you are dieting, so put your expenses on a diet and reap the rewards. There are general, household, and financial expenses to consider. 

How can I reduce my general expenditures? 

  • Take care of your car
    • Proper maintenance lowers operating costs.
    • Buy late model or used cars to avoid sticker shock.
    • Downsize or reduce the number of cars you own.
    • Drive less – use mass transit or carpool (ride a bike for short trips).
  • Recreation and entertainment
  • Take advantage of free offerings; concerts, plays, library events, etc.
    • Unsubscribe from optional TV/Internet packages.
    • Choose an alternative to expensive gym memberships.
    • Opt for “drive away” vs “fly away” vacations, and look for off-season packages.
    • Pick specific target nights to dine out each month. 

What about household expenses? 

  • Conservation awareness
    • Conserve water with shorter showers and by repairing leaky faucets.
    • Make heating and cooling programmable for maximum efficiency.
    • Unplug electronics when not in use.
    • Ask for a utility-sponsored energy audit.
  • Food, glorious food
    • Stop paying for overpriced pre-packaged food.
    • Buy only what you use.
    • Stop buying bottled water which can cost up to $3000 per year.
    • Buy generic where possible and comparison shop. 

What about financial expenses?

  • Keep track of and deduct unreimbursed employee expenses.
    • Reduce W2 tax withholding and add the savings to your 401(k).*

*consult your tax professional accordingly

  • Review property and casualty insurance for lower premiums.
  • Challenge your children drivers to maintain good grades and take driver education classes.
  • Lower consumer installment debt, interest rates are prohibitive.
  • Refinance mortgage for lower rate or lower duration – either will save thousands in interest payments.
  • Change mortgage to bi-weekly, or pre-pay with extra $100/mo.

If you are able to incorporate any of these recommendations into your life, you will create additional cash flow to improve your savings rate. However, a personal pledge will not do the trick. In order to convert this hypothetical savings to real savings, it must be automated. Either through salary reduction plans or savings/checking/credit union account transfers, it is imperative to create forced savings. The “saving grace” is that we have a variety of tools to make this happen.

Please call us to schedule some time to talk about your savings goals, or to tell us about savings tips you’re already using.