5 Ways to Turbo Boost Your Savings in 2017

MONEY TALKS – Achieving your goals and aspirations may be closer than you think. Saving is the foundation to any good financial plan. Follow these five steps to boost your savings to the next level!

  1. Max Out Your Retirement Plans – In 2017 you can defer up to $18,000 of your salary into an employer sponsored retirement plan such as a 401(k), 403(b), or 457 plan. If you are age 50 or older, the IRS has a special “catch-up” provision which allows you to contribute an additional $6,000 for a total contribution limit of $24,000. If your employer doesn’t offer a retirement plan you may still be eligible to contribute to a Traditional or Roth IRA. The IRA contributions limits for 2017 are $5,500 or $6,500 for those age 50 or older. If you didn’t maximize your IRA last year there is still time. The Internal Revenue Code has a special provision permitting you to make a 2016 contribution up until April 17th of 2017.
  1. Know How Much You Are Spending – Most people have no idea what they are actually spending. While some bold participants may blurt out a response when asked, in my experience what people say they are spending and what they are actually spending are two very different numbers. A good back of the envelop approach to calculate your spending is to look at your final pay check for 2016. Take your year to date gross pay and subtract any taxes paid as well as any employee benefits such as medical, dental, and retirement contributions. This in effect is your take home pay. From there subtract any additions you made to long term savings accounts throughout the year and you have calculated your annual spending. Most people are surprised by how much they are spending. Now that you know how much you’re spending, keep any eye on major outflows and set up an automatic transfer to your savings account to ensure some money is put away before hitting your pocket.
  1. Review Your Investment Portfolio – When it comes to determining an appropriate asset allocation, most people take the set it and forget it approach. Meaning they randomly picked some stock and/or bond mutual funds when they enrolled in their employer retirement plan, and they have not looked at it since. For many of us this could be 5, 10, or even 20+ years. Review your most recent portfolio statement to see if your current allocation is still appropriate for your age. Traditionally younger investors can be more aggressive and allocate a higher percentage of their portfolio towards equities. On the other hand, seasoned investors whom are approaching retirement may want to reduce their risk by diversifying into more bond funds and less stocks. If your current asset allocation is appropriate for your age, be sure to rebalance your accounts annually to make sure your portfolio stays properly aligned.
  1. Take Responsibility – The glamorization and/or demonization of politics and economics by the media can be hard to ignore because they are on the face of every TV station, newspaper, and social media site. Nonetheless, it’s essential to remember that for the most part these situations are out of your control. However, that doesn’t mean you should sit idly by and hope for the best. To use a weather analogy, while you don’t have control over when the next snow storm will hit, you do have the ability to buy snow tires for your car, a new shovel, and salt for your driveway. By personally managing the internal factors in your life such as; how much you save, your consumer loan balance, and the size of the home you purchase, you are taking responsibility over the aspects in your life that allow you to control your own financial destiny rather than taking a back seat to external factors over which you are powerless.
  1. Invest in Yourself – Many people don’t realize that the greatest financial asset they have is themselves; i.e. their ability to earn a living. Investing in post-secondary education, technical training programs, and advanced degrees go a long way toward building a complete resume. Combine these skills with quality work experience and you have just positioned yourself for a financially rewarding career.    

Budgets and Diets: the reasons why most fail


Turn on the TV today and within minutes you’ll see several commercials with a weight loss solution designed just for you. “Drop 5 pounds in a Week,” “21 Day Fix,” “How to Lose Weight Fast.” Many of these program are well intentioned and will help you to lose weight, but, as many of us know from experience, they can be difficult to stick with. The same can be said for budgets.

At their core, dieting and budgeting are very similar concepts. A balanced diet works when you burn more calories than you take in. Likewise, a balanced budget works when your income exceeds your spending. The fundamental concept of earning (or burning) more than you spend (or blend) is simple to understand yet hard to practice.

The common dominator in any unsuccessful diet or budget is the feeling of deprivation. No one wants to be starved of their favorite food or weekend activity, particularly when the gratification of a fatter bank account or thinner waistline is so far away. With no immediate rewards, we often concentrate more on the loss. The challenge is to change our perspective and develop a process that better aligns our goals with our emotions.

When creating a budget, many of us start by drafting a list of expenses followed by the daunting task of identifying the specific areas we can cut back on or live without. The problem with this process is the focus is on how much we can take away or deprive, not how much we can save. A better and more satisfying approach is to decide how much you are going to save per month, save it, and spend the rest.

So where should you begin? Create a checking account that you use to pay all your fixed household expenses like your mortgage, utilities, car loan, etc. Each time you get paid, say 2x a month, put the equivalent of ½ of your monthly expenses into the household expense account. In addition, set up a savings account for bills like insurance or taxes that may not occur monthly. Figure out the total annual cost of all your non-monthly bills, divide by 24, and put that amount per paycheck into the savings account. Whatever is left from your paycheck after funding your household checking and savings accounts is your spending money. However, before you begin spending your disposable income, take $20 and put it in an envelope in your desk drawer labeled “long-term savings.”

Now start spending. The beauty of this system is it doesn’t matter what you choose to spend your disposable money on. Nowhere am I going to tell you where you can or cannot spend the money. The only rule is that when the money is gone you can’t spend anymore until your next paycheck. At the end of the pay period, if you still have money left over, gradually increase the amount you are saving until you find a happy balance between saving and spending. If you spent all your money and had to reach back into that envelop to grab your $20, try withdrawing your spending money each paycheck in cash. Spending cash is much more tangible then purchasing goods or services with a credit or debit card – you actually have to pull the money from your pocket, count it out, and hopefully take notice of how much is left as you wait for your change.

Budgeting, much like dieting, only works when you are emotionally vested in the process. By allowing yourself choices, you remain in control, making it much more likely you will “buy in” and continue the process. Giving clients options shifts the focus towards their goals, as opposed to their behavior, empowering them emotionally and inspiring them to stay the course and reap their future rewards.

Tip of the Week – Setup a Savings Account for Non-Monthly Bills

Setup a Savings Account for Non-Monthly Bills

Each and every one of us has reoccurring bills that we need to budget for. Some are payable monthly and are fairly uniform. The larger issue at hand is those bills such as oil, insurance, and taxes that sneak up on you quarterly, semi-annually, or even annually. These bills, as fate may have it, tend to be larger and always seem to hit when you can least afford it. To prevent being stung by these large infrequent bills, set up a separate savings account. Take an estimate of the total yearly cost of all your non-monthly bills, add them together, and divide by 12. This is the monthly amount you should be automatically transferring into your savings account (Hint: If you are having a hard time estimating this, take the total of last year’s non-monthly bills and multiply it by 9%). Next time one of these bills comes unexpectedly in the mail, you’ll have the funds to pay the bills, and you might even earn some interest on your savings.