Category : savings

There are a Thousand Ways to Save: Pick One and Start Today

We are mid-way through National Save for Retirement Week so it makes sense that it’s also “Brown Bag” your lunch day. There is no shortage of “how to save money” blogs on the internet and maybe I am just feeding the beast by offering my five tips. But the good news is, there ARE thousands of articles out there about saving. So whether you are focused on saving for your “Life After Work” or have other goals like saving to pay extra on your student debt or saving for the down payment on your first home, there is never a shortage of tips to help you along the way. Just pick a few that you like and start saving!

  1. Remove yourself from alerts: It’s hard to resist the temptation of shopping when every day you are receiving emails and text messages about the next “can’t miss” sale. Shut down the impulse noise to keep your budget on track.
  2. Make it a competition: My husband and I follow the Dave Ramsey Cash Envelope System. We take out a certain amount of cash each week that we allocate for our own personal use. We call it our “fun money.” But we still found ourselves putting some incidental purchases on our cards that caused a lot of budget leakage. So we now have a bet. We can only make purchases with our “fun money” cash. Whoever puts any “extras” on the debit or credit card has to treat the other person to dinner and pay for it with their “fun money.” The thought of losing a bet to my husband is a great motivator to keep the plastic in my purse.
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The Dollar-A-Day Challenge

“That Einstein fella was a real idiot.”
-No one. Ever.

What’s the first thing that comes to mind when you think of Albert Einstein? The Theory of Relativity? Nuclear energy? Bad hair day?…All jokes aside, the guy was an absolute genius that provided some of the greatest intellectual contributions to humanity that we’ve ever seen. Yet with every invention or theory he and all the brilliant minds before him came up with, what has he famously named as mankind’s greatest invention of all time?

Answer: Compound Interest

If one of the smartest dudes to ever walk the face of the Earth said it, we here at blooom figure it’s worth a short blog post. Compounding in investing sounds boring, but trust me, it’s a magical thing for retirement planning.

If you aren’t familiar with the term, you can think of compounding as the way your money can be used to make more money, or the ability for your money to grow exponentially over time. Take just a single dollar, for example. If you invest a single dollar in the stock market and just let it sit untouched for 40 years, it could be worth around $31 by then. That’s a 3,000% (yes, three thousand) return on your investment for simply investing $1! And if you really want your mind blown, consider this – if you’re a newborn baby reading this, by the time YOU retire, that same single dollar invested could be worth $789! In other words, 788,000% growth. Not too shabby.

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Don’t Sacrifice Your Future

Don’t sacrifice your future: retirement vs children’s education

Every parent, at some point, has made a decision to put their children’s needs ahead of their own. Starting from the moment your child becomes a part of your family, you’re putting aside your need for sleep, to feed and comfort your tiny bundle of joy…Every. Two. Hours.

And, this continues throughout parenthood with decisions to miss that once-in-a lifetime concert because your little one has a fever or to buy the minivan over the sweet two-seater you’ve absolutely fallen in love with. We make these “sacrifices” without regret because we love our children unconditionally.

There is one decision, however, where your children’s needs should not supersede your own…that’s the decision between saving for your retirement or saving for your children’s education. For many the decision normally comes down to which one to save for, not how much to save for both. When you’re pressed with making a choice between the two – your children’s future or your own future – placing yourself first will give your family a long-term benefit.

In a 2016 Parents, Kids and Money survey conducted by T. Rowe Price, more respondents had saved for their children’s college than saving for their own retirement. And, in this same study 16 percent of those questioned indicated they used their retirement savings to pay for their children’s education.

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The Single Most Important Piece of Financial Advice

There is no shortage of advice on this topic. A quick google search on “ financial advice ” reveals roughly 65 million hits on the topic. I intend to share the one piece of financial advice that – if followed – will have the single largest impact on you becoming financially independent at some point down the road. This advice comes from my years of working with investors as they approached their own retirement.

Prior to blooom, I spent 20 years advising, planning, and managing investment portfolios primarily for baby boomers. Most of these clients were 55-65 years old and almost all of them had more than $1million in their portfolio. Often times I would meet these folks when they were within 5 years of the finish line and were looking for someone to help them plan out the financial transition from work-life to retirement. With just a few years (or months) left until retirement, there wasn’t a whole lot I could do to alter their ability to retire. Most of these folks had, for the most part, “won the race to financial independence.” Candidly, I was not their advisor when they were younger and working towards their retirement. Rather, I stepped in to help them make the transition into retirement and captain the management of their finances from that point forward.

But that begs the question…how did they amass this wealth? How did they arrive at the point in their life where they could stop earning an income and live on their accumulated savings? The answer is simple. They lived below their means during their working years. Translation – they spent less than they made. It wasn’t an inheritance, it wasn’t a big salary (as most of my millionaire clients NEVER made more than $100,000 per year) and it definitely wasn’t because they knew how to time the market. Rather, it was the simple in concept but hard to execute lifestyle of buying less “stuff” than their incomes allowed. These were the kind of people that would go to take out a mortgage in their early working years and buy a house that they could afford to buy, not the house that they could qualify to buy.

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Drowning in Student Loan Debt!

One of the frequently asked questions we get from our blooom clients is – “I am still paying on my student loans, how much should I contribute to my 401k, if anything?” Unfortunately, piles of student loan debt are hindering retirement savings for a huge segment of millennials and Gen Xers. Paying down your student loan debt instead of being in a position to put those dollars towards your retirement savings can translate into hundreds of thousands of less dollars in your 401k by the time you reach retirement. If anything this problem has been getting worse as the average student loan balances have risen steadily over the past 20 years from less than $10,000 owed upon graduation in 1993 to $35,000 for the unfortunate class of 2015. (source Mark Kantrowitz, wsj.com) Personally, when I walked down the Hill at my college commencement in 1995 I was also dragging along $29,000 in student loans. My point is, you are definitely not alone with this burden.

For those of you in the workforce with access to participate in your employer sponsored retirement account such as a 401k or 403b you are likely juggling your student loan re-payment and retirement contributions, potentially wondering what balance should be struck between these two. Fortunately, the advice is fairly straightforward when it comes to this subject. IF your employer offers a match on contributions that you make into your 401k, – PLEASE, PLEASE DO NOT miss out on this free money! So even if you are saddled with student loan payments, I still strongly encourage you to contribute to your 401k but ONLY enough to get the maximum employer match. Although the employer match can take on many different shapes and sizes, often times it looks something like this: For the first 6% that you contribute to your 401k, your employer will match $0.50 on the dollar. In other words – if you contribute 6%, they will match another 3%. Put in different terms, if you make $50,000 per year and you elect to put 6% of your paycheck into your 401k that would mean you are saving $3,000 towards your retirement (6% of $50,000) AND your employer is contributing another $1,500 into your account (3% of $50,000). Try this one on for size – your $3,000 contribution just received an automatic 50% return before any investment return!

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