How Much Should You Save In Your Emergency Fund?

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You’ve most likely heard many variations of answers when it comes to the question of “How much should I have in my emergency fund?” From $1,000, to six months of expenses, up to a year, and anywhere in between. These answers vary from person to person, so it’s hard to know which amount will be right for you.

We’ve come up with some guidelines for you to evaluate your situation and figure out just how much you should have saved in your emergency fund before taking the next steps towards financial freedom. Check them out below!

What is your living/family situation like?

The first thing you’ll need to consider is how many people you’ll need to support should you have to rely on your emergency fund for a while. If it’s just you, obviously you’ll need less than someone who is married with three children, or who has their elderly parent living with them. Keep in mind that the more people you have to support, the less your emergency fund money will be spent on you directly.

How do you pay for your living arrangements?

Do you have a mortgage? Do you rent an apartment? How long do you want to be able to make payments before going to work again, should you lose your job or have medical leave or maternity/paternity leave? Are you paying for it all yourself, or are you splitting payments with someone?

Do you own a vehicle?

If you car is your primary source of transportation with no options of biking, walking, or public transportation, you need to take that into account when building your fund. If your car breaks down, you have to be able to fix it as soon as possible so you can continue to go to work.

How much do you spend each month on bills?

Similar to how you assess your living payments, figure out how much you pay monthly on bills. Are there any bills you could negotiate to a lower monthly rate? Are there any recurring subscriptions that you could cancel (whether you’re even aware of them or not)? Do you split costs with anyone? Knowing how much goes out each month will help you figure out how much you can put into savings each month, and how much you’ll need to live three-to-six months without worrying about extra income should the situation arise.

How much do you spend on extra expenses (non-necessary)?

Ah, here come the worst part. We all have to have our vices now and again, but how often do you indulge? Those daily coffee runs can add up, so see where you can cut back. After that, figure out how much this monthly cost is, and figure out if you’ll be able to spend that much after you put away your monthly savings contribution.

Do you have savings already?

Perhaps you have some money tucked away already, but you aren’t quite sure what to do with it. Figuring out a goal for your emergency fund helps give those dollars just floating into accounts a job to do. Plus - you’ll have a cushion already, and you’ll be that much closer to hitting your goal and taking your next financial steps.

Do you use healthcare frequently?

How often you need to visit the doctor and dentist will drastically affect your emergency fund. Make sure you have enough saved to cover any co-pays, medication, and hospital visits should an emergency arise.

Do you have debt to pay off?

If you do, hopefully you’re already making monthly payments. Make sure to figure out how much you can pay if you need to rely on your emergency fund to cover costs. That being said, don’t dip into your emergency fund to pay for debt if you don’t have to. Ideally, this account should be used for last-minute emergencies that may come.

Do you expect a major financial crisis to occur in the next year?

Obviously, it’s hard to predict financial crises, but if you feel as though you may have to make a big payment (for example, you have a feeling your car will break down for good and you need solid transportation), it’s good to trust that intuition and budget accordingly. Hope for the best, but expect the worst (or at least, prepare yourself for it).

What number are you comfortable with?

All in all, it really depends on what number you feel you’ll be comfortable living off of for an extended period of time. Ideally. you won’t need to use your emergency fund hardly ever, but it’s good to have a solid number and time frame should you end up in that situation.

Still not sure how much you should save? Contact us for a free consultation, and we’ll be able to tell you exactly what you should do!

Overlooked Aspects of Planning for Retirement

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If there’s one thing we all have in common in personal finance, it’s that the finish line is retirement. Most of us are working our entire young lives to make sure we are financially comfortable and secure in our 60’s and beyond (or earlier, if you’re strategic!).

It is, however, easy to let some aspects slip into the cracks. Here are some key pieces of retirement that we noticed tend to get overlooked, and how you can get started on including them in your financial retirement plan.

Having enough life insurance coverage

As we get older, unfortunately the reality of death gets closer. It’s understandable as to why people are more likely to overlook this step, but it has to be considered and planned for - what will happen to the finances when one spouse passes away?

“Here are some crucial facts to consider:

  • The surviving spouse will receive the greater of the two social security amounts — which is about a 30 percent loss of income.

  • The surviving spouse will typically receive only 50 percent of their spouse’s pension (if they have one).

  • Most group life insurance either reduces greatly or entirely upon retirement.

  • There is a strong probability that one of the two spouses will live into their 90s and an early death could leave a surviving spouse 20-30 years to live with these reduced incomes.

  • Term insurance will eventually become cost prohibitive or terminate in coverage as the spouse ages.

  • Health care costs and taxes will go up — the longer the surviving spouse is alive, these costs can impinge on budgets” (Marlowe 2018).

Luckily, retirement planning is our specialty. Whether you’re retiring in 30 years, or next week, we can help you go over everything and make sure you’re ticking all the boxes to guarantee you and your spouse have a stress-free, bountiful retirement.

The home you will retire to

Are you planning on staying where you currently live? Will you be moving into a senior center? Are you going to finally flock to that vacation home permanently? No matter where you end up living, you need to make sure the home is adjusted to your needs as you continue to age. Mobility must be considered, along with the labor financial and time costs to maintain the house.

Will you be living close to your family, or moving to another country? Make sure that, where ever you move or live, you have enough access to people who can help and support you. Be candid about potential assistance needs with your spouse, and decide from there the proximity.

Having a withdrawal plan

We tend to focus so much on how we’re saving for retirement that we forget to set up a plan for how we will take out that money once we get there. There are many different strategies you can research, but general rules of thumb are to not forget about the taxes, always revisit and revise your plan, include all streams of income, try to pay off debt before retiring, and plan with the idea that the amount you withdraw every year will be different.

What aspects of retirement planning have you overlooked? Do you feel your retirement plan is air-tight, or do you need a second opinion? Contact us today and we will be happy to look over your plans and finances!

References

Coombes, Andrea (31st October, 2018). “Retirement Withdrawal Strategies: Which Should You Use?” NerdWallet. Retrieved from https://www.nerdwallet.com/blog/investing/retirement-withdrawal-strategies-which-should-you-use/

Marlowe, Robert (1st December, 2018). “The Most Overlooked Aspect of Retirement Planning.” Knights of Columbus. Retrieved from https://www.kofc.org/en/news/insurance/overlooked-aspect-of-retirement-planning.html

Wroblewska, Anna B. (9th February, 2015). “The Most Overlooked Aspect of Retirement Planning.” Motley Fool. Retrieved from https://www.fool.com/retirement/general/2015/02/09/the-most-overlooked-aspect-of-retirement-planning.aspx

Hey, Mom - Here's How to Start Focusing on Your Personal Finances

Moms have a ton of responsibilities – so much so, that we recognize their hard work every year on Mother’s Day! If you’re a mom who wants to focus on improving your finances, but you just can’t seem to find the time outside of your responsibilities and your schedule, here are some tips that we hope can help you make your personal financing a little bit easier.

1.      Prep your day before everyone else’s

First thing in the morning – before the kids are awake, before your husband rises, even before the pets escape their snooze – set time aside to put your day together. This is probably a step you forego quite often; it’s time to kick that habit and replace it with a new, better one.

Make yourself a cup of coffee or tea, sit down, and take time to organize your day – schedule a time to look at your finances. If you’re not a particularly early riser (which, as a mom, is hard to believe honestly), do this the night before, right before bed.

That way, when you’re chasing the kids around to get ready for school, you’ll feel that much more put together yourself!

2.      Actually do the financial check-in you scheduled

Now that the financial check-in is on your calendar, make sure you actually do it (and don’t you dare do it during your lunch – that is your downtime!). Give it priority and your full attention. Truthfully, once you get into the habit of this, it most likely won’t take you more than 10 minutes a day.

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3.      Nurture your finance’s growth

Like you would with your own children, give your finances the best options for its growth. Use a high-yield savings account. Research what type of IRA is right for you. Make sure you’re making the most out of your 401K contributions. The more you put in the legwork at the start, the more your finances will give back to you in the future!

4.      Have an incentive

If you have trouble justifying savings, or not spending all your money on your kids all the time, make a goal for yourself. It could be small, like a spa day, or larger, like a vacation for the family. Make sure you’re also putting away money for your children’s future – be it college, helping them be secure while job-searching, a wedding, or any other need that you want to help with. These are all great incentives to encourage a little more saving.

From all of us at Milborn Advisors, we hope you have a wonderful Mother’s Day!

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Curated - April 2019

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Here are some of our favorite financial reads and Internet finds we came across from last month!

Which Game of Thrones House Are You In, Based On Your Financial Habits? | Money Under 30 | Just in time for the new season - see which house you belong in based on your spending and saving habits.

The Financial Wisdom of Rob Gronkowski | The Simple Dollar | Did you know Gronkowski didn’t spend his NFL earnings until 2017? His big splurge - a gold chain.

If You’re Not Tracking Your Net Worth, Here Are 9 Reasons Why You Should | Rockstar Finance | Tracking your net worth is an easy task you should make into a habit - and Rockstar Finance makes a good argument as to why.

A Minimalist Approach to Finances | YouTube | Famous minimalist Matt D’Avella breaks down how to approach your finances with a less-is-more mindset, along with why it works for him.

The 4 Best Ways to Use Your Tax Refund for the Highest ROI | 20 Something Finance | Tax season has ended for most - read this for great ways on how to make the most of your tax return.

Here’s Everything a Financial Guru Can Tell You | Two Cents | Sometimes, it’s nice to be reminded of the obvious.

Keep up with us on social media, where we share content like this regularly:

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Investing for Beginners: When, Why, and How

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Almost every financial advice resource - from your advisors, to online blogs, to your family member you only see once a year at reunions who claims they know more about money than anyone else in the family - says that in order to have stable finances and independence, you should invest your money.

Sure, it sounds like a smart thing to do. All the rich people do it, right? Why shouldn’t I?

So, you sit down at your computer, and you wonder - how do I even begin? What is a stock? How do I “match my 401k?” What about my debts?

With all these questions in your mind, it’s easy to put investing off until you think you’re ready. But we’re here to tell you - the sooner you start investing, the better off your future will be. Even if it’s small, investing should absolutely be included in your financial planning.

Here’s our quick-start guide on how to research, prepare, and begin investing:

Figure out your why, and why now.

You’ve probably heard many times with almost every smart habit to just start now. Just start exercising now. Just start eating healthy now. Quit smoking now. Start saving now. The same can be said of investing - to an extent.

If you are in a viable position where putting money into investments won’t hurt your current living situation, then start now. If you don’t have savings, or have a huge loan to pay off (such as school), or if you haven’t done your research, make sure these are done first.

Best of all - if you can figure out how to manage these aspects and put a little way to start investments, then you’re golden.

Make sure you also figure out why you want to invest, as this will help you determine what to invest in. Is your goal long-term or short-term? Are you buying a house? Are you saving for retirement? Clearly determining your why will set you up on a much more successful - and much less intimidating - investment path.

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Learn the different types of investments.

There are many different options to choose from, and investing smartly means choosing the options that are best for you. These types include:

Stocks - These are probably what you think of when you hear “investing”. A stock is a share of a company that you purchase at a price determined by the stock market (depending on market climate and how well that company is performing). As a shareholder, you have the opportunity to vote at shareholder’s meetings, as well as receive dividends (which the amount is determined based on if you hold a common stock or a preferred stock).

Bonds - These are loaned by an investor to a company in exchange for interest payments plus the bond’s face value when the bond matures. Bonds are issued by corporations, the federal government, and states and municipalities.

Mutual Funds - Managed by an investment manager, mutual funds are pools of investing money that can be used in stocks, bonds, and other types of investments simultaneously. Mutual funds are valued at the end of a market day, and can be accessed and traded after market hours as well. Distributions are made in the form of dividends, interest, and capital gains.

ETF’s - Similar to mutual funds, but are traded on stock exchange during the market day. ETF’s are valued constantly while markets are open, unlike mutual funds.

Real Estate - These are made by purchasing a property directly - residential or commercial. These investment trusts are then pooled together with the investor’s money and purchase properties, and traded like stocks. Mutual funds and ETF’s can also invest in real estate investment trusts.

Hedge Funds - Only open to those who meet income and net worth requirements, hedge funds can virtually invest anywhere and are more likely to hold up in more volatile markets.

Private Equity - Another type of investment that has income and net worth requirements. This is a way for companies to raise capital without going public.

401K - Did you know that matching your employer’s contribution to your 401k is considered an investment? If your company offers this, take advantage of it as soon as possible. While it may be hard to part with that money now, your future self will certainly thank you later.

Determine your course of action.

Now that you have a better idea of your options, it’s time to make a plan. While it is possible to plan on your own, it’s much easier to find a professional who can help you. When you meet with Milborn Advisors, you will be asked to prepare all necessary documents to see exactly how far you are on your financial journey and if you are ready to invest. We’re even able to help you set up your investing account through TD Ameritrade - you tell us what you want to invest in, and we will take care of the rest!

Investing can be scary, but it doesn’t have to be - as long as you know why you want to invest, what you can invest in, and have a strong team behind you, you can absolutely use investments to supplement your financial goals!

Contact us today for your free consultation!

What’s holding you back from investing? Let us know in the comments!


How to Discuss Finances Before Tying the Knot

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We all know that finances play a huge part in a marriage. If you’re dating someone long-term or currently engaged, have you had this conversation yet?

According to a survey done by American Express, only 43% of the general population talk about money before marriage. 12% have never talked about money with their spouse - how is that possible!?

Being able to openly communicate with your partner about anything, especially finances, is a great quality to have in a relationship and can either make it or break it. Here’s how you can have this conversation without fear of upsetting your partner:

Wait until you have been with this person for a long time, or you see a future with them.

Money is a scary topic for a lot of people - it can cause judgement of character, or create feelings of inadequacy. Don’t bring up the topic if you don’t think it’s necessary - rather, wait until you’ve developed a deeper relationship with your partner, and when you feel comfortable enough that you can talk to them about anything.

Instead of springing it on them, let them know ahead of time that you’ve been thinking about it and would like to talk about it. This gives you both time to prepare.

Know what you’re willing to bend on and what you absolutely can’t negotiate.

Before having this conversation with someone else, know where you stand. Take time to reflect or write down your own money rules, and figure out which ones you are willing to compromise on and which ones you can’t break. You’ll feel much more prepared going into the conversation and discussing your partner’s thoughts when you don’t have to worry about organizing your own.

Keep it general and lighthearted at first, and read the conversation.

Does your partner look relaxed, or are they crossing their arms and leaning away from you? Are you able to laugh or make jokes, but still keep the conversation on track? Go in easy, and then delve deeper when able to. Also, be sure to avoid accusatory statements - this isn’t a blame game.

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Be honest.

Chances are, you’ve got some financial skeletons in your closet, and so does your partner. Make sure not to hide anything that could come up and ruin both of your finances in the future. Talk about any debts you may have, your credit score, and any other money issues that could come up in the future - the sooner you bring these out into the open, the sooner you two can come up with an action plan so that they aren’t hindrances in building your lives together.

If you disagree about something, try to find a compromise.

This is a great reason why preparing ahead of time is key. There’s a good chance that you and your partner will not agree on everything. Are you two able to compromise, or are you being strong-willed about a rule? Are they not willing to loosen the reins a little? This part can be tough because it could mean the end of your relationship - but again, it’s much better to get these grievances out in the open now, than to be in too deep later.

If the conversation goes south, be willing to let each other cool off and come back to it later. Not everything has to be discussed in one sitting, and sometimes, it’s better that way - money talk can be overwhelming. As long as the important details are discussed, and you two can come to an agreement, your relationship will thrive and come out that much stronger.

Need help preparing your financial rules? Book a free consultation with us - we can help you figure out exactly where you stand financially!

How to Increase Your Financial Literacy This Month

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April is Financial Literacy Month! Now that we’re done with Q1, this is a great time to check in with your finances, set goals for yourself for the next quarter (and the rest of the year), and improve your knowledge about finances!

Here are three different ways to increase your financial literacy this month:

Read, read, read!

Physical books, blog posts, news articles - just keep on reading! Here at Milborn, we have a curated feed of news articles and blog posts all about personal finance, so we can stay on top of the latest reads! You can start your own free curated feed at Feedly.

Don’t want to stare at a screen all day? Make this your excuse to head to your favorite book store! Some good ones to start with include The Total Money Makeover by Dave Ramsey; Rich Dad Poor Dad by Robert T. Kiyosaki; and Broke Millennial by Erin Lowry (her new book, Broke Millennial Takes on Investing, comes out April 9th!).

Arm Yourself With the Right Tools

Are you doing anything outside of checking your statements? Do you even check your statements? Now’s the time to start.

If your bank has a mobile app, download it. If you aren’t tracking a budget, start (If you don’t want to do it yourself, apps like Mint can make it so much easier)! If you want to get into investing, research investing sites or apps (Robinhood or Acorns are great ones to try if you find investing a bit intimidating).

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Create a Team

This one is so important - make sure you have a good support system, and check in with them if you haven’t yet. This includes making sure you have a strong and capable financial advisor. At Milborn Advisors, we are your guide, as well as your allies - we make sure to give you the best possible advice for your current situation, without any hidden fees or tactics. You’re as much on our team as we are on yours, and we want to see you succeed.

Want to take us for a test-drive first? Contact us today for your free first consultation.

Are you trying anything else to increase you financial literacy this month? Comment your tips below!

No Spend March: Week Four

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We made it! The final week of No Spend March. While I feel that it was a good experiment and challenge to try, I will admit, the idea of forcing myself to not spend money felt like I was, in a way, shackling myself to my work and my home. While I may have a few extra dollars in my bank accounts, I passed up on many opportunities to see friends and socialize because, “I’m doing a no-spend challenge for work.”

Sure, it was entirely my choice to partake, but I definitely felt why it can be difficult to not spend money, especially when everyone around you is.

Let’s go over my final week!

Friday I repeated a mistake I made the first week - I found myself after a photoshoot hungry with no preparation, so I ended up going to Jimmy John’s for lunch. While it may be slightly better for me than McDonald’s (who am I kidding?), it was certainly not better for my wallet. Money spent: $11.11

In case you forgot, this Saturday was my day to allow myself to spend money, because I went to the Comic Convention and Entertainment Expo (also known as C2E2) in Chicago. I bought two Blu-Rays of shows I had been looking for for such a long time, and got Joel and I Taco Bell after our hellishly long day driving in Chicago traffic and walking 20,000 steps. We were not in a mood to cook. Money spent: $156.31

Yes, you read that right. Thankfully, I kept some restraint for the rest of the week, because I know I had to make up for this past weekend.

So, now that this challenge is over, what have I learned?

  1. I figured out times where I am more likely to spend money. My impulses are driven by hunger, always. This is why diets are the worst thing in the world for me (the latter of which I’m trying to attempt in an effort to clean up my eating habits). So, if I know I’m going to have a long morning or day of being on my feet, I need to prepare myself for that.

  2. I now take my time to decide what purchases take priority. Not being able to spend money has given me a lot of time to figure out what I need and want to purchase. I give myself less grief spending on items I need, and find more joy in spending on items I want, because I now give myself more time to reflect before purchasing.

  3. Sometimes, I’ll have to spend money, and that’s O.K. I’ve always made myself feel guilty when making purchases. Have you ever gone shopping with someone who carries an item around the store with her for most of the time, only to put it back right before you leave? Yeah, that’s me. Sure, reflecting is good (as I mentioned in my prior point), but also - I shouldn’t deny myself the simple pleasures of life simply because I feel guilty parting with my money.

Now, I better understand not to spend money frivolously by being prepared ahead of time, think about the purchases I want to make, and then, when the time comes, actually go for it and enjoy the process.

How did your month of no-spending go? Did we inspire you to try a no-spend month? What did you learn over the process? Leave your comments below!

(Also, if you’re nervous about not spending money - did you know Milborn Advisors can help you make a budget? Budgeting is a great way to figure out where your money is going and how not to spend it impulsively. Contact us today for a free consultation!)