Author: abschilling

Tuesday’s Tip: Take a Retirement Readiness Quiz – Part 1

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“Are you ready for retirement?” Gail MarksJarvis (a money expert) asked in a newspaper article. When I read that question, I immediately thought to myself, Heck yeah, I’m ready to retire! Not work anymore? Count me in! Then I read the next sentence, which explained that she didn’t mean ‘not work anymore’, but rather ‘do you have enough money to retire and do you know how to make it last?’ My shoulders instantly sagged like a failed soufflé. What really made me sad, though, was my next thought: WILL we have enough money to retire? And can we make it last?

Nowadays, with the economy being what it is, it’s hard to figure out just how much you’re going to need. And even if you do have money saved up, do you know how to make it last so that you’re not eating peanut butter and jelly or beans every day for the rest of your life?

So, let’s begin by focusing on the first question: Do you have enough money for retirement?

Obviously, the goal here is to have plenty, but how does that translate to yearly savings? How much should we set aside per year to make sure we reach that goal? Are we saving anything at all? Is it enough?

According to the March 2015 survey conducted by Bankrate.com, Chief Financial Analyst Greg McBride says that approximately 28% of the 1000 people surveyed are putting away 5% or less, while 16% are saving nothing at all. That’s a little scary. Almost half of the people surveyed have little to no savings. The good news is that 24% are stashing away 6-10% of their income per year, and about 24% are saving 11% or more per year. McBride adds that the middle class are doing the best job of saving. He says that’s because they’re taking matters into their own hands, knowing they’ll have to do it all themselves. “They don’t have the six-figure income to fall back on” to pay for everything later in life, and “nobody is going to do it for them”.

It’s not hopeless. But the questions still remain: Do I have enough? How much will I need when I retire? How much do I need to save every year until then?

Thankfully, there are many calculators available to help you in your quest to be able to eat and be comfortable once you retire. Try heading to http://www.bankrate.com, hover over the Retirement tab, then choose Calculators from the menu. They have everything from 401(k) and IRA calculators to Social Security and investment calculators. There’s even an Investment Goals calculator you can try. Then take a look at your current finances to decide if you’re saving enough to get you to your goal. Remember that all the numbers are approximate. We can’t possibly know exactly how much we’ll need, but we can make a well-educated guess and shoot for it.

Yes, you want to live your life now, but you also want to make sure you can live out the rest of your life with a little comfort, right? McBride says, “It doesn’t matter how much you make, it’s what you have left over” that’s important. The best thing you can do for yourself now is to make sure you’re living within your means. A good way to do that is through smart money management. Need some help with that? Click on the “Buy it” tab at the top of the screen. There’s a little book that can show you the way . . .

Tuesday’s Tip: Give Yourself Some Wiggle Room

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How many of us have begun a diet with gusto, resisting all the foods we’re not supposed to eat, vowing never to give up . . . only to chuck it to the curb when we’ve slipped a bit, indulging in 1 or 2 (or 3 or 4) no-nos and ended up feeling guilty? How many of us have embarked on a new fitness routine, promising to find time to work out 3, 4, or 5 days a week so we can shed those winter pounds and not be embarrassed to walk out on the beach or show up at the pool . . . only to quit when we didn’t reach our weight goal or missed a few workouts and wallowed in our disappointment in ourselves?

We, as humans, tend to take on enormous pressure to achieve certain goals that we’ve imposed on ourselves. We also, many times, find ourselves dining on self-loathing when we fail. It’s happened time and time again. So what’s the cure?

1) Set reasonable goals.

2) Give yourself some wiggle room.

It may be somewhat safe to assume that the majority of us have heard the first one before. If you set goals that are impossible, or can’t be reached within the time frame you’ve given yourself, then success is always going to be the proverbial ‘dangling carrot’ you can’t quite capture. While setting priorities is important, you also have to know yourself and what you’re capable of, which is why it’s sometimes better to start off small and add to it once you’ve established a routine and know you can manage it.

The second one isn’t very common. It’s kind of like forgiving yourself – we frown upon that. A lot. Our expectations are so high that when we slip up, we beat ourselves into the ground, admonishing ourselves for being careless, stupid, weak . . . you choose the destructive adjective. But it doesn’t have to be that way. And the way to do that is to establish a goal with a range. While dedication is paramount to successfully managing your money, you have to be flexible, too, and understand that Life has a funny way of messing with everything you’ve planned. That’s where wiggle room comes in.

Let’s say, for example, that you’d like to save up for some kind of home improvement, special vacation, whatever. You decide to put $300 away every month so you reach your goal. It goes well until you need to replace the hot water heater and you’re unable to set aside the money that month. You’re not happy. That puts you behind. So you may think, then, that you’ll need to double it the next month so you can catch up. Well, guess what? You can’t quite scrape together enough. You panic, thinking that now you’re even further behind. How are you ever going to reach  your goal?! Finally, after a few months of beating yourself up, you give up and say, “I just can’t do it.”

Now try this on for size. Set a range for your goal. Instead of setting a strict time frame, give yourself a few months or so as a buffer. So, rather than 12 months, set your goal at 12 to 16 months. If Life tosses you a zinger, it’s not the end of the world. You’re still within your time range. And don’t think you need to double the amount the next month. Maybe try just putting a little extra over the course of a few months to make up for it.

Setting a range works with the monthly amount, too. You’d like to set aside $300 every single month, but we all know how Life works and it may not always happen. So how about giving yourself a range of, say, $100 to $300 per month? That way, if something happens and you can’t put the full $300, you can still shoot for as little as $100. And, coupled with the time range, you can still reach your goal and enjoy whatever it is you were saving for.

Yes, it takes a little patience. Yes, it takes dedication, too. But if you build in a buffer to allow for Life’s little surprises, you can accomplish your goal and revel in the feeling of success.

Tuesday’s Tip: Build a Rainy Day Fund

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When people ask me how my money management system works, I tell them that it’s a way to take the money they earn and put it where it needs to go so that their bills are paid in full and on time. They can also use the system to put money aside for other necessities, savings, or things they want. I strongly urge people to have a ‘rainy day fund’ for those unexpected things that pop up from time to time. If you think rainy day savings are unnecessary, think again.

Case in point: my family and I went on vacation recently to Virginia. We set up our camper in Williamsburg for a week and hit all the great tourist attractions like Colonial Williamsburg, Jamestown, Yorktown, and Water Country USA. Then, we headed to Staunton and set up camp for another week. We relaxed by the lake, fished, and hiked a few trails in the Shenandoah National Forest. We even took a trip  to Monticello (Thomas Jefferson’s home) – and that’s when trouble hit.

We’d been caught in a storm on the mountain, the roads were a little slick, and the grade of the road was a bit steep. Suddenly, the van’s gears wouldn’t engage. We heard a strange noise. We managed to pull over, turn the car off, then restart it. My husband put it in drive. It moved forward. We got on the highway and made it to our exit – barely. We ended up limping into the parking lot of an auto parts store. And that’s where she died. Old Blue wasn’t going anywhere. Reverse? Nope. Drive? No way. Fourth? Uh uh. Park was all that worked.

In the next 30 minutes, we scrambled to arrange for a rental car and a tow truck to haul Old Blue to the dealership nearby. We visited her the next day and the diagnosis sent us reeling: the transmission was shot. Gone. There was no saving it. She needed a whole new one.

Ugh.

To add insult to injury, we found out the axle was locked and had to be torched off. The parts wouldn’t be in for another several days. We were scheduled to leave for home the next day. After a lot of discussion, we decided we had to leave her there for a while so she could be fixed. We simply could not stay for an unknown length of time. (My husband likes his job and wants to keep it!) So, we secured storage for our camper, stuffed ourselves into a little sedan, and spent the next 2 days in virtual silence, trying to absorb all that had happened and figuring out what we were going to do now.

As it turns out, 2 weeks later, my husband and I had to fly out to Virginia, pick up Old Blue, get our camper out of storage, and drive home. I’m not going to divulge how much we’ve had to spend on a rental car, tow, repairs, plane tickets, a hotel room, and food, but suffice it to say that we were incredibly glad we had our ‘rainy day fund’. It literally saved the day. Now we don’t have to take money that’s supposed to go for paying the mortgage, our regular bills, or kids’ college savings. We’ll have to, basically, start all over again to build it back up, but I’m grateful we had it.

Now we can move forward . . . and so can our van.

Tuesday’s Tip: Redefine ‘Minimum Payment’

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A few days ago, my husband and I were sitting at the kitchen table taking care of a few household things like bills, etc., when he kind of chuckled. It was more like a derisive snort, actually, so I looked up from my work and asked him what was wrong.

“Nothing,” he replied. “I just find it interesting that this bill says that if we pay only the minimum payment each month, it’ll take us 19 years to pay it off.”

I did one of those cartoonish head shakes and said, “Umm . . . what?!” It’s true.

Last December we bought all new kitchen appliances: a fridge, dishwasher, stove/oven range, and range hood. It was time. We were, literally, waiting for the day when they would just up and quit on us. So we researched brands, stores, and prices, and settled on a whole set that cost us $3589.96, which included tax, delivery, and installation. It was a good deal on some great appliances, and to top it off, we took their offer of 2 years interest-free financing.

So here’s the thing. On the bill, it says that the minimum payment is $100, and that it’s required. Okay. It also says that if the balance isn’t paid within those 2 years, “interest will be imposed from the date of purchase”. That means that 2 years of interest will then be owed. Ugh. Now, here’s what my hubby found ‘amusing’ . . . it informs us that if we pay only the minimum payment, and make no other charges on the account, we’ll pay it off in about 19 years and it will cost approximately $12,649. WHAT?!?!?! Holy cow! Seriously? We both shook our heads in disbelief. We’d pay $12,600 for something that’s only $3600??? That’s 3 1/2 times the original purchase price! How does that happen? Well, they tack on the 2 years of interest and keep adding interest every day until it’s paid off. Sneaky, huh?

Were we surprised? Absolutely. Were we scared? Not in the least. Why? Because we don’t figure our ‘minimum payment’ the same way the store does. Let me explain . . .

When we talked about buying new appliances, we estimated what the total cost would be before we even went shopping, and figured out what we could comfortably afford. Then, when we found what we wanted and sat down with the sales associate, the total came to $3589.96. We knew the terms of the promotion: we had 2 years interest-free financing. That’s 24 months. We rounded it up to $3600, then divided by 24. That came to $150 per month. That’s our minimum payment. Not $100. We know that if we pay $150 per month, we’ll pay off the $3600 within 2 years and won’t have to pay the interest. Simple.

So if you’re looking to buy something and take advantage of some kind of financing, don’t rely on what they say is the minimum payment. Figure out your true minimum payment so that you can pay it off in plenty of time and avoid fees and interest that could end up costing you way more than it’s worth. Here’s the equation: Round the total price to the nearest hundred (or thousand, depending), then divide by the number of months defined in the financing terms. This will give you the amount you’ll need to pay each month. For example, let’s say you’re thinking of buying a living room set. The total cost is $1487.32 and you’re going to finance it for 18 months. Round it up to $1500 and divide by 18. That comes to $83.33 per month. If you make monthly payments of $85, you’ll pay it off in time – without penalties or fees. Just remember to ask yourself if it’s something you can afford. If not, then I suggest you reconsider. Either don’t buy it or find something in your price range.

It’s simple math, but it could end up saving you thousands.

The Roadmap Challenge – Your Turn

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It’s been a month already. Wow. Time flies. Did you take The Roadmap Challenge during the month of April? If so, I’d like to hear from you! Who knows, you could win the free consultation with me . . .

Fill out the form and let me know how you did!

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I look forward to hearing from you!

Tuesday’s Tip: Take the Roadmap Challenge (Part 2)

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Well, it’s been a week since I introduced the first part of the challenge. Did you try it? How did it go? Did you notice anything about your spending habits? Were you surprised by anything? Many times we’re shocked by how much we spend. We don’t realize that those ‘little things’, the inexpensive items we buy on a whim, can actually add up to quite a bit when it happens on a regular basis. Think about what you saved in one week – and now imagine that on a slightly grander scale . . .

Which leads me to the next part of the challenge, in three steps.

Step 1: Take a good, hard look at your expense log from the past week. Is there anything you could stand to cut back on or do without? (Answer HONESTLY!!!) You may find that there are a couple of things on your list. That’s ok.

Step 2: Pick just ONE thing on your list and cut it out for the next 30 days. April 1 – 30. One month.

Step 3: Keep track of how much you save over the course of the next month.

I’m not asking you to give up every extra expense, just one. Pick one that’s the most frequent purchase. Or maybe one that’s the most unhealthy. Or the most expensive one. Whichever one you pick, do without it for the next month. On April 30, take the amount of money you saved and multiply it by 12 to see how much you can save in a year. Then ask yourself, What else could I do with that money? Pay down debt? Make an extra payment on something?? Pay something off???

Once you’ve done that, contact me and let me know what you cut out of your spending, how much you saved in a month, how much you’d save in a year, and what you learned from the experience. If you do, you’ll be entered into the contest and you could win a FREE consultation with me. You’ll get the Money Roadmap package which includes my book, a binder, and ledger paper, plus I will help you set up your own Roadmap and teach you how to use it.

There it is. The Roadmap Challenge. Try it. What do you have to lose? More importantly, what could you gain with good money management??

Good luck! I know you can do it! I can’t wait to hear from you!

Today is April 1st. Ready . . . set . . . GO!

Tuesday’s Tip: Take the Roadmap Challenge (Part 1)

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Ah, Spring! Aren’t you excited? More sunshine. Longer days. Warmer weather . . . ok, I choked on that one, too. (For those of us living in the Chicago area, we’re still waiting for that last one!) But still, when I think of Spring, I think of trees budding, flowers blooming, grass greening, and I’m filled with a sense of renewal. That’s what Spring is all about, isn’t it? Things beginning anew. Fresh starts. And . . .

SPRING CLEANING!!!

When I say that, most people think of the mile-long “Honey, Do” list taunting them from the fridge door: cleaning out the closets, going through the stuff in the garage, and washing windows, to name a few. But I’m talking about cleaning in a more financial way. The concept is the same though . . . go through your stuff, keep what’s necessary, and get rid of the rest. Think of it as clearing up and reorganizing your finances.

Over the years, I’ve had many people ask me what they could do to accomplish that particular goal and my answer is always the same: Grab a pencil and paper and keep track of all the money you spend in a month, then sit down, take a very close look at it to figure out where your money is going, and determine what you need and what you can do without. (Coincidentally, it’s one of the first steps outlined in my book!!) Most of the time, the reaction is the same – jaws drop to the floor.

“A whole month?” they ask.

“Yes. A whole month,” I reply.

“That’s a really long time,” they complain.

“Yes, it is,” I say, “But it’ll give you a solid picture of where all your money is going.”

“And we have to write down ALL of it?” they ask.

“Yes. ALL of it. Every dime. Bills, credit cards, EVERYTHING you buy in CASH. ALL of it.”

Again, jaws drop to the floor. What I’ve found, however, is that everyone who was truly serious about taking control of their finances followed my advice and were astonished by what they learned at the end of that month. They also learned that, by doing away with some of the extraneous items they didn’t realize were emptying their wallets and bank accounts, they were able to save quite a bit of money. In some cases, hundreds of dollars a month. Some people even told me that after just one or two weeks of tracking their expenses, they could easily see which unnecessary items they could cut back on, or cut out completely.

Don’t believe me? Ok. Let’s consider my friend, “Lucy”, who once told me that she’s addicted to a mocha coffee concoction and has to have it every morning on her way to work. She says she wants to get a good jolt to start her day, so she orders a large. Ok. With tax, she pays $3.58. Multiply that by 5 work days. That comes to $17.90 per week. Multiply that by, say, 49 actual work weeks in a year. The total now becomes $877.10 per year. Hmm . . . I can think of a few things that I’d rather do with $877 than drink coffee . . .

Still don’t think that makes a difference? Ok. Try this one on for size. Let’s say you go out to eat two times per week. For the sake of making it easier to calculate, let’s estimate that you spend about $50 per week. $50 multiplied by 52 weeks comes to $2600 per year. I suppose if you really want to get goofy, imagine you get a mocha coffee every day AND go out to eat twice a week . . . that’s almost $3500 per year that could go toward something else. And that’s just for two people. What about a family of 3? 4? 5? It boggles the mind.

So, here’s my challenge to you: Track your extra expenses for the next week and calculate how much money you could save per month and per year by cutting back or cutting them out. I’m not even talking about bills. I’m talking about those extra things you put on your credit card or things you pay for in cash. Those dinners out. Those lattes in the morning on the way to work. Movies. Drinks with friends every weekend. Try to focus on the extra little things that you pay for fairly often. Is there a habit forming?

Now think: What would happen if you went 30 days without them? Would it make a difference in your finances? Are you willing to find out?

Stay tuned for Part 2 of the Roadmap Challenge . . .

Tuesday’s Tip: Get Those Tax Breaks!

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Ok, so it’s not Tuesday. Forgive me. Let’s just call this one . . . Wednesday’s Wisdom.

With tax season in full swing, most people I know are busy gathering the necessary materials so they can file their income taxes. Some (like my hubby and I) are do-it-yourselfers and use computer software to guide us through it. Others meet with a tax professional who knows the “code” and can give advice on complicated situations. Whether you do your own taxes or have a professional deal with it, the goal is one and the same: get the biggest refund possible. In order to do that, it’s necessary to take advantage of the tax breaks that are out there for us. And with the April 15th deadline quickly approaching, it’s a good idea to find out what those breaks are. So, I’d like to share an article that I read highlighting some tax breaks that you may not have thought, or known, about that could have an impact on your tax refund. The article specifically gives hints for people at different stages of life, so keep that in mind as you read it. Not everything will apply to your particular situation, but hopefully you’ll be able to get a good idea or two. Click on the link to get started.

http://finance.yahoo.com/news/tax-breaks-every-life-stage-050001787.html

Good luck and happy filing!

Tuesday’s Tip: It Doesn’t Hurt to Ask

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I’ll admit that, when it comes to bartering for a deal, I’d rather leave it to my husband. He always seems to be on the lookout for a good deal. Aren’t we all? But what sets him apart is that he finds new deals on products or services we already have and doesn’t hesitate to act if he thinks we may be getting a raw deal.

Case in point: About a week ago, he saw a commercial by our current cell phone provider offering a better deal than the one we have now. I have to say it got him a little fired up. “Are you kidding?” he scoffed. “That’s like . . . $80 less than what we pay now! Unbelievable! Maybe we should call and complain!” (Not quite the word he used, but whatever.) I told him that if he felt that strongly about it, then he should call. He should call. Not me. I’m not comfortable with that. Don’t know why. It doesn’t matter.

Anyway, after a few days, a couple more commercial sightings, and some mental number-crunching, he decided it couldn’t hurt to call and ask if we could get in on the deal. He picked up the phone and dialed. We spoke to a very nice man who told us that we could, in fact, get the same advertised price. We have 5 phones. Do we have to upgrade all the phones? Not at all. Will it affect our contract? Nope. We have automatic billing. Do we have to set that up again? No. When will the new price take effect? Immediately. So our next bill will be lower? Uh huh. So we’ll have unlimited talking and texting? Yes. And tons more data? Yep.

Alrighty, then! Do it!

And so, with one phone call (that lasted less time than being on hold) we got more for less. We’ll be saving $80 per month. That’s $960 per year. I like that. And I love that my husband took care of it all. He’s always got an eye for a good deal. Maybe it comes from being a closet conspiracy theorist or simply not wanting to get screwed over, but whatever the case, I’m glad he’s in my corner!

Tuesday’s Tip: Break the Bad

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Everywhere I go, I hear new year’s resolutions being flung around as freely as candy from a parade float. People are vowing to make changes to better themselves, their lives, their communities, and even the world. However, the most common goal, by far, was to lead a healthier lifestyle, which encompasses a multitude of different options ranging from losing weight to exercising more to breaking bad habits. And that got me thinking . . .

Breaking a bad habit is tough to do. I know, first hand, how hard it is, but I also know how wonderful it feels to be successful – in more ways than one. I confess that I used to smoke. (There it is, folks.) I tried to quit several times, but always seemed to give in eventually. I was smoke-free for quite a long time before having kids and during my pregnancy, then started again when they were about 6 or 7 months old. It was easy to blame it on stress, of course. Then, when they were almost 2, I finally managed to quit altogether and have been rid of the habit for over ten years. Don’t get me wrong, there are days I seriously wonder why the heck I ever quit! Then I think about all the progress I’ve made as a runner, how much I love it, and how smoking would completely ruin it, and I decide it’s not worth it. So, you could say that I’m enjoying the health benefits of being a non-smoker.

Just recently, I noticed a sign at the corner gas station advertising a sale on cigarettes: $6.85 per pack. Wow! I couldn’t believe it. That’s a lot more than I used to spend over a decade ago. And that got me thinking about the cost of being a smoker now. What would I be paying if I were still smoking? When I got home, I grabbed a calculator and did a little experiment to find out the financial benefit of not smoking. I know the cost per pack varies depending on location, but I live in the Chicago suburbs, so I’m going to use the average for this area, which is about $7.50. Ok. Let’s see. I used to smoke about 10 cigarettes per day. That means it would cost me $3.75 per day . . . times 365 days . . . that comes to $1,368.75 per year. If I smoked a pack a day, then the cost rises to $2,737.50 per year. Really? I was amazed at the numbers starting at me from the calculator. I instantly thought of a few things I could do with an extra $2,700 per year. Then, just for kicks, I multiplied that number by 5 . . . $13,687.50 saved in 5 years. Holy cow! Then I took one step closer to ridiculous and calculated the savings for 10 years. I nearly fell off my chair! $27,375. Amazing! Do you know how much house you could pay off with that money? Or you could buy a nice little car! You could save it for a rainy day . . . or college . . . grad school . . . vacations . . . retirement . . . The list goes on and on.

And what about other costly habits? I could think of a couple. How much could people be saving by kicking those bad boys to the curb? They don’t even necessarily need to be bad for you, like smoking was, for me. What about that iced coffee on the way to work everyday? Or eating out for lunch everyday? Or even twice a week? How about takeout dinners? Shopping every weekend? Blah, ba-blah, ba-blah . . . Please understand that I’m not suggesting we all become hermits, eat ramen and rice for the rest of our lives, deprive ourselves of things we need, and never do anything fun – we gotta live, right?! The trick is to be sensible about it.

Moral of the story: breaking a bad habit, or any habit that drains your pocketbook, could potentially save you more money than you think. Don’t believe me? Pick a habit . . . do the math. See what happens. The truth lies in the numbers. Cutting out a habit, or at least scaling way back, could mean some serious extra cash in our pockets. I don’t know about you, but I like that!