I read an article last week in the popular press (based on a legitimate research brief) that offered encouragement for those who are worried they haven’t saved enough for retirement. The research project demonstrated that if you delay retirement 3-6 months, it provides the same benefit as if you had saved an additional 1% of your income for 30 years.
If you are: a) wishing you could save more, but really can’t; or b) wishing you could go back in time and start saving more, sooner, this research is encouraging because it says you can partly make up for a savings shortfall by delaying your retirement date. To be clear, delaying a few months doesn’t “magically” double the balance in your 401(k) or IRA account. The delay affects your retirement income security in several ways:
- It means additional months of contributions to your retirement account.
- It gives your money more time to grow.
- It reduces the number of months you’ll need to support yourself in retirement.
- Delaying Social Security benefits beyond full retirement age results in a larger monthly benefit. (under current law).
The fourth benefit accounts for most of the mathematical advantage of delaying retirement, but all four factors contribute. The first two actually DO increase the size of your nest egg; the third one means your money doesn’t need to be stretched so thin.
Wherever you are in your pre-retirement saving journey, it always pays to save more starting now if you can. But even a modest delay of retirement can provide a retirement lifestyle as if you’d saved more all along.
Many students recently marked a big milestone by graduating from school. Looking back, what words of wisdom regarding personal finance would you like to have received when you left high school?
Personal finance does not have to be boring! The National Endowment Financial Education – www.nefe.org has a couple resources to help your graduate be an independent young adult.
On Your Own –is a blog with a range from credit score calculated, making better money decisions, and the pros and cons of college? This is a trustworthy site.
Another option is Smart About Money (SAM) is an in-depth, guided learning experience. There are five sections with valuable tools, worksheets, calculators and quizzes. Each course is about 45 minutes.
Cash Course targets college students. Some colleges and universities offer it especially for their students, but any student can enroll independently. It’s free, with no strings attached, but you do need to create a user account.
Forty Money Management Tips Every College Student Should Know – this Cash Course resource helps young people learn how to take control of their money instead of letting their money control them.
My brother recently attended a medical conference in which a lawyer spoke about the physician’s responsibility when providing care for someone who is unable to make medical decisions for themselves. If a patient has not completed a Power of Attorney for Health Care, the doctor is required to listen and weigh the concerns of all family members when caring for the patient. Speaking from our personal experience, my brother and I did not struggle while communicating with caregivers and making decisions for dad; we knew what dad’s wishes were and the two of us shared dad’s values and faith. Additionally, as Dad’s POA for Health Care, it made it easier for me to say “no” when a family member made a request that was clearly not in line with his wishes…even when there was support from a fourth sibling for that request.
In comparison, the family of my brother’s wife is learning (the hard way) what happens when someone has not designated a Power of Attorney for Health Care. Their mother had a major medical emergency that has left her unable to communicate her wishes. Early on in her health emergency, there were 8 – 13 people in her room at all times and an additional 3 – 5 being consulted by phone; basically, they were making decisions by a majority vote while under stress and in an emotional state. Can you imagine being the physician in this example…having to listen and weigh the concerns of all family members?
The Finances of Caregiving is a series of five 2-hour workshops to expand your understanding of options and to help families plan together for providing care for a loved one. Understanding your choices is only possible when you know your current situation. This series guides you through finding and collecting that information, and includes the importance of identifying a Power of Attorney for both Health Care and Financial matters. For more information on this program, visit https://www.extension.iastate.edu/humansciences/finances-caregiving
Having a debt – perhaps a mortgage or a car payment – may feel as if you have a ball and chain around you for the duration of the loan. Is there a way to lessen the load?
One option is to simply round up your payments. Suppose your current car payment is $360 per month. If you round up and make monthly payments of $400, that is like making one extra payment during the year on your car, and the extra money goes toward the principal on the loan. You’ll reduce your interest costs, and you will also pay off the loan faster.
Here’s a mortgage example: if your mortgage payment is $900, but you pay $1,000/month, the extra $100 goes toward the loan principal. That’s an extra $1200/year! If $1,000 is too much for your spending plan, try $950, which is an extra $600 per year. Over several years, either strategy will save thousands in interest and get your mortgage paid off years early. Read the fine print on your contract. Make sure your lender accepts larger payments. Need to know so it helps your cause.
You can use the same strategy with any credit card bills where you are carrying a balance, and on any other loans, as well.
Every time you round up you’re getting closer to debt freedom without feeling much of a pinch. Once you start this habit, it will be hard to break. Fortunately, it’s a very helpful habit!
When a family saves for an agreed-upon goal, there is more buy-in to succeed.
Are you dreaming of a vacation? You are not alone. Nearly half of people –no matter their age, income, or gender – say vacation is one of their savings priorities. How are they working toward their vacation fund goal? Only 40% indicate they are on track to meet their vacation savings goal. Sixty percent of the savers do not feel on track but are working on the vacation savings goal.
If you and your family have a goal (a vacation or some other goal), you need a plan to succeed. If the whole family is helping, it will be a lot easier to follow the plan. Here are some examples of common-sense ways people have planned and saved for a specific goal:
- My brother-in-law took a job in Geneva, Switzerland. I immediately decided I wanted to visit. That meant considering how I would pay for the trip, airfare, Eurail pass and spending money? At the time, I received reimbursement for miles driven on my job. My gasoline was already paid for, so if I banked the payment checks in an account, I would soon have enough funds for a Europe vacation.
- Several years ago, a friend found out her daughter-in-law was expecting twins. Upon getting that news, she and her husband saved their coins for six months and were able to purchase a dresser for their new grandsons. They had a deadline – the birth of the grandsons, and the coins added up over time to purchase the piece of furniture. This week, those grandsons will be thirteen.
America Saves can offer more ideas.
Happy America Saves Week! We’ll be celebrating all week with special posts focused on ways to make saving happen for real.
One key is to have a PLAN. While I could write more, I want to focus on just 3 parts of a savings plan that can make a big difference.
- Save with a clear REASON in mind. And make sure it’s a reason you care about. If you’re just saving because someone said you should, it may be difficult to succeed. After all, finding money to save means letting go of something else you used to spend money on. It will be a lot easier to give up that “other thing” if the reason you’re saving is truly important to you.
- Figure out in advance HOW you are going to come up with the money to save. If you simply say “I’m going to save $20/week” and don’t answer questions about when, where and how, then it probably won’t happen. (Not sure how? stay tuned the rest of the week for more ideas!)
- Plan for MOTIVATION. Most savings goals take time; you might need a morale boost along the way, especially when obstacles arise. Think about what motivates you, and plan to build that motivator into your life. Maybe it’s a graph that shows your savings growth. Maybe it’s a cheerleader – an encouraging friend you recruit to your “team” – someone who will remind you of your positive progress even in a week when you did not succeed in making a savings deposit. Maybe it’s a special reward for when you reach certain milestones, or for each week or month you take a step forward; low or no cost rewards like bubble baths, or coffee with a friend, or an evening of reading can help keep your enthusiasm up.
Starting any new habit can be challenging. If you want to start (or increase) a savings habit, making a plan will help you succeed!
We generally budget by the month or by the week — we plan our spending in relation to our income, and that’s how we meet our regular expenses. It makes sense.
A tax refund is different, however. It’s a “bonus” that only comes once a year; it’s often the biggest single chunk of income we receive during the year. If you expect a sizeable tax refund, I suggest you consider the whole year as you plan how to use it. Here are a couple of ways you might do that:
- In a typical year, are there some big expenses that throw a wrench into your financial routine? Perhaps your tax refund can help you be ready for those expenses. Examples: holidays, back-to-school time, car maintenance (planned and unplanned), summer weekends away,… it could be anything. Setting aside part of your refund to help cover those costs can be a great way to remove stress and unwanted drama from your financial life.
- Tax refunds are often the way families make special purchases, such as furniture, a computer, or new appliances. Your refund can help you meet an important family goal. Again, though, it makes sense to consider the whole year before deciding. That might mean thinking ahead to all the possible special purchases you might want to make during the year, and prioritizing which of them is/are most important. An example from my imagination: I can imagine getting to summer and realizing you need a new lawn mower, and really wishing you had used your tax refund to buy a lawn mower! Thinking about the whole year can help you get the most value from any special purchases!
No one can foresee the future, and trying to plan for the year doesn’t guarantee you’ll think of everything that might come up. However, if you make an effort to consider the needs of the coming year, you are more likely to be satisfied in the long run!
What are your plans for your tax refund? We’d love for you to share!
Yep, that’s Glen with his golf cart: snow blade in the front; a 50# bag of sand in the back and chains on the wheels. Mark proudly boasts, “Had Dad been born today, he would have gone to college and been an engineer. He can invent and create anything!”
I used to wonder why people would buy a golf cart…it is expensive; it is used for a few short months; and it takes the exercise out of the sport. However, if you were to drive through any of the small towns in my area, you are sure to see people driving golf carts to visit friends or to run home from the camp ground on the far side of town; one elderly woman enclosed her cart with plastic so she could drive it year round…without a drivers license.
Seeing Glen and his golf cart made me stop and think…how much of the stuff I own was purchased with a single purpose in mind and is underutilized? I reached out to a couple of my kids this weekend, asking if they wanted a few of these things that I no longer have time to use. It created a bit of concern, “Mom’s giving her stuff away…WHY?”
I have Spring Fever. I have a goal of removing 50 bags of stuff from my home by Easter. If I don’t use it, don’t need it or can’t afford it…it is gone. By “can’t afford it,” I mean “do I really want to store it?” It costs money to store, insure, clean and maintain stuff.
How about you? Spring is coming! Take a look at YOUR stuff. How much is it costing you to hang on to it?
Now that the holiday bills are in, what do you think? Any worries or regrets? If so, how can you change your behavior to prevent worries or regrets next year?
This month, many folks have had mailboxes or autopay accounts full of holiday bills or credit card bills; I have a few myself. But next year at this time it doesn’t have to be that way if we take action now.
Think about the amounts you spent on gifts, food, and other holiday-related expenses and add them up. Divide the amount by 10 (months). Suppose your total spending was $400. Then 400 ÷10 = $40; if you save $40 each month until November, you will have $400 available in November for next year’s holiday purchases.
Another approach could involve saving $20 per week; after a year you would have $1,040. This could be a holiday fund or a vacation fund; the money could be used for other annual expenses too, like back-to-school costs or car registration. Think about your goals for this year and save accordingly.
People who plan to save excel in reaching their goals.
My job provides me opportunities to expand the financial management skills of people of all ages and stages of life: basic money management, investing, how to pay for long-term care. I find that people are most willing to come to a class and get the most out of a class when it is a teachable moment for the individual. I think the reality that “you don’t know what you don’t know” often prevents people from participating in financial programs. Wouldn’t it be nice to have a crystal ball that showed you what financial challenges you are soon to face so you could sign up for classes and check out self-help books to better prepare yourself BEFORE the challenge strikes. THE TIME TO DIG THE WELL IS BEFORE YOU ARE THIRSTY.
I participated in a discussion this weekend with professionals and volunteers who work with couples preparing for marriage. Again…a skill building program that should be full with a waiting list. Failed relationships (especially when children are involved) carry high and long-term financial and emotional costs. Among the reasons stated by couples as to why they won’t sign up for a relationship-strengthening program is MONEY and TIME – both very important assets that are in limited supply. Yet, if you stop and think about it…taking the time (and money) to strengthen relationships could save you a lot of time and money and heart ache in the long run.
It is easier and cheaper to prevent disaster than to clean up and fix disasters. Check out our web pages for programs and publications to keep your home running smoothly… https://www.extension.iastate.edu/humansciences/, https://www.extension.iastate.edu/humansciences/relationships and https://store.extension.iastate.edu/Topic/Finances