It isn't how much you make
. . .It's how much you keep!
Archive for Savings Goals
Everyone approaches their finances differently, but there are common mistakes that certain money personalities make. The following highlights five different money personalities, the mistakes they make, and how they can improve their financial picture.
Entrepreneur
Because they put all their financial resources and energy into their business, entrepreneurs may make mistakes such as cashing out their retirement plans to fund their business, holding too much debt, or even getting behind on self-employment taxes.
Entrepreneurs would be best served by developing a business plan with income and expense projections to ensure they use debt wisely to fund their business. They should also make contributions to a retirement plan annually, even if it’s only a few thousand dollars. And finally, entrepreneurs should work with a tax professional to help reduce their taxes as much as possible,
while making sure quarterly tax payments are made.
The Saver
This is the person who follows all the rules and does it just right. They fully fund their retirement
accounts each year, don’t carry much debt, and have plenty of savings in the bank for any unexpected expenses. While this money personality may get to retire early, they may want to stop and smell the roses once in a while.
The High-Income Earner
Professionals, such as doctors and lawyers, fall into two groups: savers and spenders. Those who
fund a large lifestyle may find they have trouble funding their retirement because they’ve spent too much.
Big earners need to develop a financial plan so they understand how much money they will need
to fund their retirement based on the lifestyle they want to live. They should also pay themselves first with a predetermined amount to
saving, before buying nicer cars or bigger houses, as well as considering setting monthly spending limits.
I Need to Save?
This money personality spends their paycheck as soon as it hits their account, and in some cases, live beyond their means. They have no savings if an unexpected emergency comes up, and they are likely carrying too much debt. To be able to retire, this person needs a financial plan with a strict budget to help pay down debt and develop both long- and short-term savings.
Doing Fine and Enjoying Life
This person saves and spends. They want to enjoy life experiences along the way to retirement, such as vacations, maybe a boat or
cabin. While they contribute to their 401(k) plan, they may not have a financial plan that includes short-term financial goals and how much they need to save for retirement.
While it is great that this money personality saves, they need to ensure that their spending isn’t outpacing their savings. By developing a solid financial plan, this money personality can create a more balanced approach to saving and
spending.
What’s Your Money Personality?
You should determine where you fall on the spectrum of money personalities so you can develop a financial plan that suits your personality, but also helps you secure your future.
Please call if you’d like to discuss this topic in more detail.
Think of all the lessons parents teach their children, but what about learning to save? Short- and long-term savings are important life lessons that should start early and remain an ongoing conversation. Here are some tips you can use:
Wants versus Needs: To a child, most everything is a need. A toy, a new bike, and a video game are all needs to them, so the first important lesson of
saving is helping them understand the difference between wants and needs. You’ll want to explain that needs are the basics, such as food, housing, and clothing, and that anything beyond the
basics are wants. You could use your own budget to help illustrate that wants are secondary to needs.
Their Own Money: To help your child become a saver, they need to have their own money. Giving your child an allowance in exchange for chores will be a step in helping them learn to save as well as understanding the value of work.
Set Goals: Setting savings goals is a way for your child to understand the value of saving and what a savings rate is. For example, let’s say one goal is a
$40 video game, and they get a weekly allowance
of $10. You can help them understand how long it will take to reach that goal based on how much of their weekly allowance they put toward the goal.
A Place to Save: Kids need a place to save their money, so take your child to a bank or credit union to open a savings account. This will allow them to
see how their savings grows over time, as well as the progress they are making toward their savings goals.
Track Spending: Knowing where your money goes is a big part of being a better saver. Have your child write down their purchases and then at the
end of the month add them all up. Just like adults, this can be an eye-opener. Help your child understand that if they change their spending habits, they will be able to more quickly reach their savings goals.
Mistakes Are a Good Lesson: A parent’s natural reaction is to step in to prevent mistakes, but part of learning to control money is letting your child learn from their mistakes. A bad purchase
decision can be a great lesson to understanding
that a savings goal will now take much longer than they thought based on decisions they made.
Beneficiary Designations Override Wills
W hen was the last time you looked at your
beneficiaries on your retirement accounts, insurance policies, annuities, and bank accounts? Many people forget to update their beneficiaries, especially if they’ve held the accounts for a
long time. If you marry, divorce, or have other changes to your family situation, you need to update your beneficiaries.
Some people think their will or trust is all they need to ensure their assets go to the desired recipients. A beneficiary designation is a legally
binding document that supersedes a will or trust. That means that regardless of your current family
status or what your will or trust says, the assets will go to the beneficiary you named when you
last updated it. And if you don’t have anyone named as your beneficiary on these types of
accounts, state laws will determine who receives the benefit.
It is also a good idea to get into the habit of reviewing them on an annual basis to ensure your assets will be distributed based on your
wishes.
Financial Thoughts
Companies with a lot of passive fund ownership are more likely to repurchase shares in order to boost their short-term stock price, subsequently harming performance over the long term. Higher passive ownership was shown to negatively impact the relationship between buybacks and future capital expenditures, employment, cash flow, and return on assets and equity (Source: Centre for Economic Policy Research, April 2020).
A study found that although retirement plays a role in alleviating some of the stress the body undergoes while working a manual labor job, when those workers retire they can accumulate health deficits faster than individuals whose jobs do not require manual work. The health of men working in manual labor was more positively affected after retirement than women. Individuals with low education, in blue collar jobs, and in physically or psychosocially demanding occupations develop new health deficits faster than white collar workers. People who perform manual labor jobs display
on average almost 30% more health deficits than their counterparts who do not (Source: AAII Journal, September 2020).