Jeremy Fulton, Financial Wellness Coach

Tag: savings

  • How to avoid eating ramen noodles at age 65

    How to avoid eating ramen noodles at age 65

    Retirement.  If you are like me, this is decades away, and doesn’t really enter your day-to-day thinking.  You are probably putting something away for the future, but don’t really have any idea how much you really need to save to make the transition to retirement at the lifestyle you will be living at that time.

    Money in glass jar on wooden tableThe first time I calculated how much I needed to have saved at retirement, my jaw about hit the floor!  To maintain my current lifestyle I will need to be rich!

    Most people spend more time planning a vacation or kid’s birthday party than they do planning for retirement.  They have no idea what they will need to have saved to live at the level they want, nor any idea how much they will need to save each month to get there!

    I don’t know about you, but I don’t want to get to age 65 and realize I have to work to survive, not just work because I want to.  How about you?  Do you know?

    I challenge you to run the numbers in a financial calculator, such as this one to see what you realistically need to save to meet your long term goals.

    What did you learn?  What will you do now?

     

  • How to get more money in your paycheck without working more!

    How to get more money in your paycheck without working more!

    All of us would like to bring home more money for the work we do.  I discovered an easy, legal and simple way to boost your paycheck, without taking more overtime!  If you want to learn what I learned, keep reading.

    Back before I learned this method, I was missing out on several hundred dollars every month!  I look back now and wonder how much more I could have invested, how much faster I could have paid down my debt, how much more I could have saved for trips and ‘toys.’

    What I found out was that I was loaning the Federal Government hundreds of dollars a month at 0% interest!  I bet that you are doing the same thing.  How do I know?

    Almost everyone that I’ve talked to over the years gets a hefty tax refund this time of year.  They look forward to it.  They are happy that they get a huge check.

    What they don’t realize is that it’s not free money, but money that they overpaid to the IRS!  And like I used to do, they tend to blow most, if not all, of it on spontaneous unplanned spending.

    Wouldn’t you rather be able to use that money as you earned it?  Or at least put it in a savings account to earn some interest?  What financial goals are you working towards now, that having this additional income would help you achieve?

    Now for the action part.  There are many W-4 calculators online, including the official IRS one; you can even ask your HR department or CPA for assistance.  Once you have calculated your new withholding amount, fill out a new W-4 and submit it to your HR department.

    The goal is to have as small a refund as possible ($100-200) without owing anything.

    So, how much more will you get out of your next paycheck?  Encourage others with your results!

  • What if this one thing did happen to you?

    What if this one thing did happen to you?

    He never thought it would happen to him, that it could happen to him.  He was careful: he never took huge risks, thought through his actions before taking them.  But it wasn’t enough to protect him from this.

    He fell.  He fell far, and by the grace of God he survived the fall.  He should have died, but by a miracle he survived.

    But now he can’t work; this hardworking, family man can no longer provide for his family, through no fault of his own.

    1 out of every 4 people in the US will suffer a disability before retirement.

    What if it was you?

    What if something happened to you that removed your ability to provide for your family?  How would they eat?  How would the rent get paid?  How long can you go before they cut off your lights and heat?

    The way to protect your family is with Long Term Disability Insurance (LTDI).

    But you are still thinking that you won’t ever get hurt.  1 out of every 4 people in the US will suffer a disability before retirement.  And every second someone becomes disabled!

    LTDI usually pays out 60-65% of your gross pay for the duration of the disability.  This works out to be pretty close to most people’s take-home pay!  And if you buy it with after-tax dollars, it is not taxed!

    You may still be thinking that you don’t need any more deductions from your paycheck, and besides, isn’t that what workman’s comp is for?  Workman’s comp won’t cover an injury if it happens outside of work, and knowing many people who have had to fight them for what is due, I wouldn’t recommend relying on that to cover you, either.

    • Many employers offer LTDI (and short term disability insurance), and purchasing it at work is the most affordable way to get it.
    • There is an ‘elimination period’ of usually 90 days before LTDI kicks in; cover this income gap with your emergency fund.
    • You don’t need short term DI because you have an emergency fund.
    • Purchase your LTDI with AFTER-tax dollars, if given the option, so that you won’t be taxed on your benefits.

    If you are not sure what your employer offers, talk to HR and enroll if it is available ASAP!  If you want to review what your employer offers before signing up, contact me and I’ll help you understand each benefit your employer offers, and help you decide what is best for you and your family.

    Share with me your experience with LTDI and/or workman’s comp!

  • How to save money every day the way I do

    How to save money every day the way I do

    Here at the Fulton’s we are always looking for legitimate ways to save money.  Especially when it comes to every day expenses.  Some of these you probably already do, others will seem extreme, and the rest you will want to start doing today!

    Everything I’m about to talk about is something we currently do, use, buy, own, or have previously done, used, bought, or owned.

    • Ting mobile phone service.  Ting is a pay-per-use service, so you can control your bill!  Our bill, for two smart phones, went from about $150 on Verizon to about $35 with Ting!  Ting uses the Sprint network, so it’s reliable.  They will even credit you up to $75 to get out of your current contract!  Click here to see how much you can save.
    • Menu Planning.  My wife plans out two weeks of meals at a time, then generates the shopping list based off of this.  Between having a plan for what to cook/eat and shopping with a list, we cut our grocery bill by 25%!!!  My wife uses this App/service; it’s not perfect, but works for us (let me know what you use)
    • GasBuddy.com.  If you want to compare gas prices before you head out the door, this site is great!  Prices are reported by users of the site and app (yes, there is an app that you can use!).  Don’t waste your time/fuel driving around to find the best deal!
    • Lower the thermostat.  In the winter, we keep the thermostat pretty low (55F!) and wear warm clothes inside, and blankets while sitting on the couch.  We both work in the same room/office, so we use a small oil-filled space heater to keep that room at a reasonable temp.  In the summer we use fans, except when it’s too hot for that.
    • TV.  I cut the cord years ago, “giving up” traditional satellite TV service.  We will check out movies (and TV series) from the local library (they can get movies from other libraries if it’s one not in stock),  or use Redbox.com for a new release (pro tip: reserve online or w/ the app to ensure the movie you want is at the kiosk closest to you).  Also, now there is the option of streaming content from the internet; devices such as a Roku, AppleTV, ChromeCast, or Fire TV allow you to stream free content or inexpensive subscription programs such as NetFlix, Amazon Prime, or Hulu+.
    • Cloth napkins.  And no paper towels.  Not only do cloth napkins add some ‘class’ to your meals, they don’t cost anything to re-use (they will fit in your normal laundry load)!  We use old hand-towels instead of paper towels.  Again, they don’t add measurably to the laundry (and are tougher/more absorbent than paper, anyway!).
    • Cloth diapers.  With Baby-J on the way, we wanted to find out how to keep costs as low as possible.  We calculate that we will save several thousand dollars over the course of two children; this includes the cost of buying quality diapers, extra laundry loads, and our time.
    • Amazon Wish List.  This may seem counter intuitive, but hear me out.  I’m a spender.  So I’ll put stuff I want or think I need on the list instead of buying it right away (even if it’s in budget).  I’ll take some time to price shop and to just let it sit.  Many times I’ve removed something from the list, either because I realized I didn’t really want it that bad, or I found a better option.
    • Buy used.  Craigslist, eBay, etc are all great  places to find used, quality goods (80% of my furniture, and my last 4 cars were found on Craigslist).
    • Buy quality.  When it counts.  Some things, like baby clothes, don’t matter, but with many things, buying it once, for a little more, if better than buying it many times.  Or the usability factor can make it worth while to buy the better model.
    • Cash Flow Planning.  This is the single BEST way to reduce your spending and save money.  It forces you to be intentional about your spending.  It is how we ensure we only spend on what is important to us.  It reigns in the impulse spending and prevents overdraft fees.  We use You Need A Budget (YNAB for short) as our budgeting software.  It is super easy to use, has a free mobile app, great resources, forums, FB group, and even has a good looking interface!  I’ll be writing a formal review on it, soon.  But for now, download the free trial here.  If you want to buy it, save $6 by using this link.

    What money saving tips would you like to share?

     

    Disclosure: some of the links provided are for referral programs.  By clicking those links, I will receive an account credit or money.  You may also receive a credit from those same links.

  • Mutual funds; the good, the bad, and the ugly

    Mutual funds; the good, the bad, and the ugly

    First things first, what on earth is a mutual fund?  If you remember, I said that I recommend investing in them as part of your investment portfolio.

    According to Investopedia.com, a mutual fund is:

    An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets.

    In simple-speak, a bunch of people pool their money with a professional fund manager to take advantage of opportunities not normally available to small investors.

    Like all things in life, there are pros & cons to investing in mutual funds.

    The Good

    • Diversification – your invested money is spread among several stocks.  This is the opposite of “keeping all your eggs in one basket.”  If one company does poorly, the effect on you is limited.
    • Professional management – most people (myself included) don’t have the time to evaluate, in depth, all that should be evaluated in a stock before buying it.  The fund manager’s only job is to maximize performance of the fund, by picking good stocks.
    • Economies of scale – since the fund manager is buying huge amounts of stocks at a time, the transaction fees are much lower than for you or me.
    • Mutual funds are liquid assets – they are easy to convert to cash, unlike real estate or bonds.
    • Simplicity – investing in mutual funds can be as simple as an automatic bank draft, payroll deduction, or buying from the fund’s website.
    • Variety – If there is a sector, stock style, social impact, or any other area you want to invest in, there is a mutual fund for you.  In fact, there are more mutual funds than stocks!

    The Bad

    • Professional management – Not all managers do as well as they should.  Just because the fund is professionally managed, doesn’t mean it performs well.  Look at the manager’s track record, along with the funds track record before investing in it.
    • Over diversification – if the fund has too many stocks, a great performance by one or a few might have minimal effect on the overall fund value.
    • Taxes – all capital gains taxes are passed on to the investors.  If the fund is churned a lot (the manager buys and sells the fund assets a lot), investors could be liable for more capital gains taxes.  You can look at the fund’s turnover rate, or having the funds as part of a tax-preferred account such as an IRA or 401(k).

    The Ugly

    • Fees – Fund managers have to be paid.  There are costs associated with the administration of the funds.  There is no such thing as a free lunch!  Fees, referred to as expense ratios, can range from as low as 0.2% for some index funds, to over 2%!  The fees will be listed in the fund’s prospectus.  These take away from the fund’s overall performance, so look carefully at them.  Another fee to be aware of is a sales charge (load).  This is how some advisers get paid (think commission on sales); there are many different ideas on the value of advisers and what the best fee structure is (I won’t go into it here), but I will say is that a good adviser is worth his/her compensation.  With loads, the more you invest in one fund company, the lower they are, and at some point they usually go away.  If you pick a low fee fund and invest regulatory, you may end up paying less in fees than you would buying several different stocks each month on a self service site (up to $9/trade).

    Final Thoughts

    It’s important to know the details of a fund before deciding to invest in it.  A quality adviser will teach you why he/she recommends a particular fund or group of funds.  They will help you pick funds that have a low expense ratio, a good track record of performance over the long term, and are appropriate for your needs.  Mutual funds are a great investment tool for average Joes like us!

    If you are ready to start investing, I can put you in touch with a qualified investment adviser who has the heart of a teacher!  If not, I can get you ready.  Contact me today:

    jeremy.fulton@me.com
    860-469-2278

  • Should you should KISS your investment strategy?

    Should you should KISS your investment strategy?

    You know what K.I.S.S. stands for

    Keep It Simple Silly

    And you thought I was going to insult you!

    We’ve both heard that “serious investors” have complicated and advanced investing products and strategies which enable them to make more than us mere mortal investors.

    • Hedge Funds
    • REITs
    • High Yield Bonds
    • FOREX trading
    • Commodities
    • Penny Stocks
    • Etc, etc, etc

    I will admit that there is potential that someone could make a lot more with these. There is also the potential that you could loose it all!

    I have one overriding investment philosophy that I teach my clients:

    Never invest in anything you don’t understand well enough to teach it to someone else.

    Think about it; if you have a thorough understanding of your investments, how they work in the market, and what makes them ‘go up’ or ‘go down’ then you are a lot less likely to panic and worry when the Dow Jones dips. In fact, you might even see a silver lining in market drops!

    It is possible to learn all the ins-and-outs of the more complex investments, but what will it gain you? Do you have the time and desire to become an expert? Or the time and desire to manage those investments?

    I’ve been trained in all that stuff (through the Certified Financial Adviser program) and I could teach you a lot of it, but I still don’t have a “sophisticated” investment strategy.

    Because I don’t have the time to manage my portfolio every day and want to keep my risk to a manageable level, while taking advantage of the long term growth of the market, I stick with mutual funds.

    Mutual funds are easy to understand, have high diversification (my eggs are in lots of different baskets), and are easy to invest with. I even invest in mutual funds that cover different market sectors to increase my diversification even more! (If you are not sure what a mutual fund is, please ask!)

    Boring? Yes. Simple? You bet! Do I know enough to teach you how they work? Of course! Give me a call and I’ll teach you today! Then you, too, can have confidence in your investments!

    What are your thoughts?

  • 3 ways to keep Christmas from surprising you this year.

    3 ways to keep Christmas from surprising you this year.

    Yes, I know its only February, and you have 10 whole months till Santa comes down the chimney.  So, why think about it now?

    I’ll point you to my motto:

    “Have a Plan, Not a Payment”

    How would it feel to get through your Christmas shopping, knowing you didn’t blow your budget and still gave all the gifts you wanted to?

    Pretty good, right?

    Here are 3 simple things that can enable you to do just that!

    1. Determine who you will buy for, and how much you will spend

      This could take some thinking and discussion with your spouse; I’ll wait here till you figure it out. Surprised by how much you want to spend?  Hold on, it gets better!

      This is the first step of your plan, figuring out the end goal!

    2. Add up the total and divide by 9

      No, you didn’t loose a month; I’m assuming you will start saving in March and shop in November.

      Put this number under the “Christmas” category in your Cash Flow Plan.  Since you and your spouse agreed to the amount per person, this should go into the budget w/o much discussion, except where to cut the monthly amount from.

      I imagine that this number is much more manageable then the value determined in step 1.

    3. Each month put that amount aside in an envelope or separate savings account, earmarked for Christmas.

    There are a few unexpected advantages to this method:

    • No fighting over how much is spent on Black Friday
    • If you run across a great deal in July, you will have the money already to buy the gift; just make sure you hide it well!
    • When the bills come in January of 2016, there won’t be one for Christmas gifts!

    So, think you can do this?

  • The 5 ‘best’ reasons to buy a new car

    The 5 ‘best’ reasons to buy a new car

    Let’s face it; there’s nothing like driving off the lot in a brand new car!  The new-car smell, the fit & finish inside feel luxurious, no strange noises, and everyone is noticing you and your new ride!

    So, what are the 5 ‘best’ reasons to buy a new car?

    5. I’ll impress my friends and strangers with a new car.
    Have you ever seen a brand new Kia or Honda on the road and said to yourself, “Wow!  Someday I hope to be as successful as that person!”  Me either.  So, unless  you are buying a Ferrari, I probably won’t give your shiny new car a second look.  And do you really care what some stranger you’ll never see again thinks?  And if you want to impress your friend, buying them dinner or clearing the snow from their driveway will do a much better job!

    4. I’m always going to have a car payment, so why not get a nice, new car?I haven’t had a car payment since 2008; and the last two cars I bought were fully loaded cars in good shape and still very nice inside.  I’m not rich, nor did I have tens of thousands of dollars saved up; I paid under $4000 each; that’s only 8.5 car payments!  There are lots of reliable, nice cars out there that you can save up for in a reasonable time frame.

    3. I want to save money on gas, so I need a more fuel efficient car.
    Yes, new cars tend to be more fuel efficient than a comparable old one.  So, you could end up saving at the pump.  But that is where the savings end.  The average car payment in America is $471; will you be saving that much every month in fuel?  Unless you trade in your Mac truck for a Honda Civic, I doubt it.

    Maybe it’s not your savings, but you are trying to be more environmentally conscious  with your MPG boost.  Will you reduce greenhouse gasses enough to offset those created by manufacturing your new car (mining the metals, pumping the oil for the plastics, the heavy metals & toxic waste created because of the electronics)?

    2. We are having a baby, so we need a safe car.
    Really?  When your 10 year old car rolled off the assembly line it surpassed all the safety requirements and whoever bought it then didn’t think it was unsafe.  Has your car become un-safe over time?  If you think so, have a qualified mechanic inspect it and replace aging components.  It will be much less expensive than even 2 car payments!

    1. I need a reliable car; old cars break down all the time.
    Yes, old cars tend to have failures more often than new cars.  Parts wear out and fail over time.  But is it really that bad?  Suppose you just had to replace the transmission at $2000.  That is a LOT of money, I agree.  But how often have you actually had your car break down and leave you stranded?  And $2000 is only about 5 car payments, and is easily covered by your emergency fund.  And a rental car is only about $20-30 a day while your car is in the shop.  The key to a reliable car is not age, but keeping up with maintenance.  Replacing parts before they fail and performing routine maintenance will keep your car running for many more years.

    Now, it is possible that your car will need a very expensive repair (such as a transmission) and you are wondering if it is worth putting that much money back into your car.  Here is a simple way to determine if it’s time to upgrade: If the value of the car as-is (in it’s broken state) plus the cost of repairs is more than the value of the car repaired, it’s time to replace it.  Sell it for what you can get for it and buy a newer, used car, for cash.

    So, why am I so against new cars and car payments?

    • Cars are depreciable assets.  They lose 10% the moment you pull out of the lot, and over 60% in 5 years.  Let someone else take the big hit and buy a 2-5 year old car.
    • $471/month.  That equals almost $40,000 in 5 years if invested instead; Invest that for 5 years starting at age 20, and that’s $2.6 million at retirement!!!  Investing it monthly for your entire working career results in $7.2 million!  Is that new car smell really worth that much?
    • Contentment.  Yes, I like new stuff, new gadgets, cars, etc.  But driving an older car can help teach you to be content with what you have and not worry about what the Jones’s think.

    What reasons do you have to buy a new car?  Or not buy one?

  • The Rain Is Coming, Do You Have A Rainy Day Fund?

    The Rain Is Coming, Do You Have A Rainy Day Fund?

    I just read an article from The Wall Street Journal describing how few people actually have a ‘rainy day’, or emergency fund, and that most of those people who do have some savings, don’t have enough.

    Statistically speaking you are one of the 209 million people who don’t have sufficient savings.  Of those, 82 million have NO savings.  WOW!

    I would wager, if I were a betting man, that very few of those surveyed even know how much is sufficient.

    3-6 months of expenses is what the experts (myself included) recommend.  For most people that’s $15-25,000, sitting untouched in a savings account.

    “That’s a lot of money sitting around not making any interest to speak of, why not invest that money and just use a credit card or home equity line of credit (HELOC) when an emergency comes?” you might ask.

    That might work for you to cover an auto repair, or your auto insurance deductible, but what happens when the boss comes to you on Friday, letting you know that you are part of the rumored layoffs?  That ‘secure’ job you were going to use to pay back the credit cards is gone, and racking up debt while unemployed is never a good idea!

    Lets also consider the intangible benefits of having a fully funded emergency fund.  There is a sense of peace in your home when you know that you will be OK, no matter what happens.  Think back to the last time you had an emergency (had to fly last-minute to a funeral, your car broke down, the furnace broke one cold and snowy weekend night); was there any panic in your mind, wondering where you would get the money to pay for it, or pay off the card, in addition to the actual thing that happened?  When you have some cash sitting around for those kind of events, it turns them from emergencies to inconveniences.  The stress level drops to near zero.  Your spouse is relaxed, not having to worry about grocery or rent money being spend, and it becomes easier to focus on getting through the actual event.  Think about that.

    I can attest from personal experience how important it is to have an emergency fund.  I’ll give you to recent examples from my own life:
    1. On my honeymoon last year, while 2000 miles from home in the Black Hills, one of the tires on my car came close to having a blow out.  Instead of having to cancel the rest of the trip, or any of the fun stuff we had planned (and stressing out my new wife), I simply put on the spare, dropped off the car with a local mechanic, bought 4 new tires (the rest were due to be replaced, too), went on our tour, and picked up the car afterward.  We hardly skipped a beat in our day, and even were able to smile when we talked about it that evening over supper.
    2. At the end of January of this year, after almost 5 years at a very stable engineering company, I was let go.  I didn’t enjoy what I did (have you ever had a life-sucking J-O-B?) and would not wanted to go back to work as a cube-dwelling engineer for another company. Having a fully funded emergency fund has allowed me to start my own Financial Coaching business!  This is something I’ve been preparing to do (school, training, reading, etc) for a long time, and now I can!  My wife is not stressed out about the money situation, even as the company is slowly growing, because she knows that we can go many months w/o any income and be OK.

    “Ok, ok, I get it; I need to start saving more.  But I’m not sure I can.”  The key to this is using a monthly budget, paying off your debts, then living on less than you make until you’ve saved enough.  If you are still in debt, quickly save up $1,000 then attack your debt.  $1,000 is enough to cover most emergencies, but low enough that you should feel the urgency to become debt free quickly so you can build that rainy day fund.

    So, where do you stand?  Fully funded?  Almost there?  Ready to start saving?