saving

The 4 Steps You Need to Take to Secure a Healthy Financial Future

By Christopher Haymon

Christopher Haymon is the founder of Adulting Digest.

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Are you planning for your financial future? If you’re like the average person, you’re more focused on today than tomorrow. But failing to plan comes with major consequences, and they don’t always wait until you’re 65+ to strike. These are the four steps you need to take to protect your family today and into the future.

1. Plan for Emergencies

According to a survey from GoBankingRates, 69 percent of Americans have less than $1,000 in their savings account. That’s less than you need to cover a broken furnace or a trip to the emergency room, let alone a major event like losing a job.

If you’re among that 69 percent, prioritize building an emergency fund over other financial goals. Your emergency fund should cover three to six months of living expenses. This includes non-negotiable expenses like mortgage or rent, car payments, and utility payments, food, and gas. The exact amount in your emergency fund depends on your expenses along with other factors, such as benefits you might qualify for if you lost your job.

It’s also beneficial to have a general idea of how much your assets are worth when planning for emergencies. Assets include your home, cars, investments, and other items of value you own. You can use an online estimate to calculate an approximate value for your home.

2. Pay Down Debt

Debt seriously hampers long-term savings goals, especially if you have a lot of bad debt. Debt.org defines bad debt as debt that doesn’t increase your net worth or hold future value, and it’s this debt you should focus on paying off first. Common forms of bad debt are credit card debt and car loans. While student loans are often considered good debt, high balances can still make this debt burdensome, especially for privately held student loans with high interest rates.

There are two philosophies regarding paying off debt: paying off debt with the highest interest rate first, to minimize the total amount paid over time, or paying off debts with the smallest balance first, to build motivation by eliminating debt accounts. Choose the strategy that works for your finances and your morale.

3. Invest in Good Insurance

Life is full of unexpected events. If you’re not prepared in the event of a medical emergency, disabling health condition, or early death, you’re putting your financial security at risk.

Paying hundreds of dollars monthly for insurance is a hard pill to swallow, but when you look at the numbers, investing in insurance makes sense: one in four people will spend at least three months out of work due to a disabling condition, the average funeral cost is over $7,000 and is rising, and medical debt is the leading cause of bankruptcy in the US.

Most Americans understand the value of a good health insurance policy, but life insurance and disability insurance are less understood. Disability insurance pays a portion of your income if you’re unable to work, both short-term and long-term disability policies are available. Many workers can purchase disability insurance through their employer at a discounted group rate. Life insurance pays money to beneficiaries in the event of the policy holder’s death. It’s important to have this if a spouse or children depend on your income or if you don’t have savings to pay for funeral expenses (though many people opt for burial insurance to help cover the cost of funerals). While many people opt for term life insurance due to lower premiums, a term policy doesn’t accrue cash value. Purchasing a whole life policy instead gives you the option to sell the policy later on to free up cash for retirement.

4. Save for Retirement

Unless you want to work until your final day, you need retirement savings. If your employer offers a 401(k), this is the best place to start. Workers contribute pre-tax income to a 401(k) through payroll deductions, and some employers match that contribution up to a set percentage. To save beyond the annual 401(k) contribution limit, or if you don’t have a 401(k), look to IRAs. You can save either pre-tax with a traditional IRA or post-tax using a Roth IRA. If you’ve maxed out both your 401(k) and IRA, talk to your financial advisor about other ways to invest.

You can’t afford to put off thinking about the future. While today may be comfortable, tomorrow won’t be without a strong financial foundation. Whether you’re just getting your finances on track or looking to expand your investments, talk to a financial counselor about how you can better prepare for your financial future.

Curated - August 2019

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

Choosing when to claim Social Security benefits is an important decision that will affect how much you receive each month for the rest of your life.
— Katie Brockman, The Motley Fool

15 Steps to Take if You Were Affected by the Capital One Breach | Money Crashers | While this happened at the end of July, there’s still time to see if you were affected and read about what you can do to fix your situation.

Why Women are Less Prepared for Retirement than Men | CNBC | Mark found this and wanted to share it with our community. Read on to find out interesting facts about men vs. women with finances, and how, if you are a woman, you can better prepare for retirement.

What are Stocks? What are Bonds? | The Simple Dollar | Before you start investing, make sure you know the difference!

Which Financial Advice Should You Trust? | Get Rich Slowly | Everyone has thoughts about personal finance. Here’s how you can navigate these waters and determine which advice will best suit your situation.

5 Things You Should Know About Apple’s New Credit Card | The Motley Fool | Apple released their new credit card this month - are you going to use it?

What to Do if You Claim Social Security Benefits too Early | The Motley Fool | This one is quite relevant to the Lunch & Learn talks we’ve been having. If you find yourself in this situation, read on to see how you can remedy it!

ICYMI: How I Increased My Net Worth by $10,000 in One Year | Milborn Advisors | Amy decided to take her financial situation seriously - and it paid off. Here’s how she did it.

What Will Make You Rich - And What's Holding You Back

If you’ve ever wondered why you just can’t seem to get richer, you may want to take a step back and examine the daily habits in your life. The solution could be something as small as a mindless task you take advantage of every day!

Here are habits that you are most likely doing that are preventing you from increasing your net worth - along with habits you can start incorporating to set yourself on the path to wealth.

What Isn’t Making You Rich

  • Microtransactions and Subscriptions

Netflix. Spotify. Amazon. Skillshare. Gym memberships. Do any of these sound familiar to you? When was the last time you used these products? Do you still find value in them? If not, it’s time to ditch them.

On average, a person in the US can save up to $500/year by cutting back on monthly or yearly subscriptions. Chances are, you may not even know you’re still paying monthly for a service you haven’t used in years! Take the time to comb through your bank account for recurring transactions. If any make you ask, “What the heck is this?”, it’s time to cancel.

  • Impulsive spending

Another practical way to begin accumulating more wealth is to reign in any bad spending habits you may have. If you find yourself buying because of an emotional reason, or feel that if you ever have cash in your pocket you just have to get rid of it, now’s a good time to reassess your spending habits. Find your triggers that cause impulsive purchases and nip them in the bud before they can cause any problems again.

  • Complaining too much

Accumulating wealth isn’t just a matter of spending less or saving more. You also have to be sure to have the right mindset. As long as you’re complaining about not having money, you’re putting the signal out into the world that you don’t have money and you won’t have money. Studies have shown that rich people do not complain as much as poorer people - they’re more likely to own up to mistakes, try new things, and aren’t as afraid to fail. By complaining, you’re setting yourself roadblocks on paths that could lead you to more money. Negativity never reaps anything.

  • Surrounding yourself with the wrong people

There’s a saying that goes, “The 5 closest people in your life are a reflection of yourself.” Like attracts like, which means we naturally tend to gravitate towards those who are similar to us, be in in lifestyle, careers, or habits. When it comes to money habits, this can be detrimental if your 5 closest people are all poor, not managing their money well, or negative. Try to find people that you want to be like or can look up to and incorporate them into your life.

What Will Make You Rich

  • Prioritizing savings

If you had an unexpected emergency happen today, could you cover the cost? Studies show that 69% of Americans do not have enough in their savings to cover $1,000 of an emergency cost. When you prioritize your savings, not only are you paying yourself first, but you’re also ensuring that should an emergency come up, you won’t have to dip into credit and set yourself back even further.

  • Paying down debt

The more debt you pay down, the higher your net worth becomes. You’ll never be able to build riches if you always have that lingering loan number in the back of your mind. Plus - the longer you take to pay it off, the more you will have to pay off because of interest, so you’re setting yourself up for an endless cycle of owing money.

Start paying off any debt as soon as you can - and make sure you’re doing it in a way that you won’t be putting yourself in a bind for the rest of your monthly expenses. The last thing you want to do while paying debt is to take out another loan to cover other costs.

  • Thinking outside the box

When was the last time you flexed your creative muscle? Studies have proven that rich people tend to be more creative thinkers; they aren’t afraid to try new methods to make more money. You can practice creative thinking as soon as today by viewing a situation at work from a different angle; the more you work on your creativity, the easier it will be to think of new solutions that might very well earn you a pay raise.

  • Having a financial mentor

Similar to surrounding yourself with like-minded people, consider finding a mentor for your financial journey. Many people learn best by following example; find someone who is in the financial place you want to be in. They can help you with any questions you may have, and you have someone to visualize whenever you’re about to make a decision regarding money. Think of them as the “What would Jesus do?” of finances.

Another way to help build your finances is to see an advisor. We at Milborn Advisors are committed to helping you on every step of your financial journey - we want to see your wealth grow as much as you want to experience it. Contact us today for a free 60-minute consultation!


How I Increased My Net Worth By $10,000 in One Year

By Amy Lancaster

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Up until I started working at Milborn Advisors, I had no money. Seriously - I was living paycheck-to-paycheck, wondering how I was going to come up with rent for the next month. Now that I am involved in the financial world daily, I decided I wanted to grow my own bank account and really start taking my own personal finance seriously. From August 2018 to now, I’ve managed to increase my net worth by $10,000.

Of course, it’s not where I want it to be yet - but it’s been a huge help in my financial future. I’ve been able to begin to pay off student loans - something I’ve never done before. I’ve raised my credit score. I have health insurance for the first time in my life. I have an emergency fund that can cover me for up to six months. All in all, while I still have a lot of work to do, I’m incredibly proud of what I’ve accomplished in a year.

Here’s how I did it.

I researched.

Ask anyone - I love learning about things. As soon as I see a movie, I immediately look up random facts about it. If I have even the slightest question about something, I google it. So, when I first got interested in finances, I read all the articles. I created an RSS feed that updates daily with blog posts just from financial sites. I looked into phone apps that would help keep me on track. I made sure I knew the ins and outs about everything I was going to be doing for the next year so I knew what I was actually doing.

I still do this, as well - not as feverishly, of course, because I’m still in the building stages, but once I get to a place where I can start contributing to retirement for example, I’ll be researching all of my options to make sure I choose the right one.

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Arm yourself with knowledge.

I created a plan.

After having all the facts, opinions, and experiences laid out in front of me, I began to plan. What was my goal for this first year of finance overhaul? What did I want to accomplish? I decided on three things:

  1. Open a savings account and start contributing to an emergency fund.

  2. Get to a point where I can start contributing a large sum of money towards my school loans.

  3. Figure out a way to earn more money.

From there, I broke these steps down further:

  1. Open a savings account and start contributing to an emergency fund.

    1. Calculate how much money I can realistically put away each month.

    2. Divide that up by every pay period, and immediately put it into savings when pay day hits.

  2. Get to a point where I can start contributing a large sum of money towards my school loans.

    1. Determine if I can pay off loans while still in school.

    2. Determine what number this is that won’t put me in a bind for other expenses.

  3. Figure out a way to earn more money.

    1. How can I use skills I already have to earn extra cash?

I created a budget and started tracking my expenses.

All of these goals could not be completed unless I had set a strict budget for myself and tracked where every cent was going. I’ll admit - I’m the extreme case who has an Excel spread sheet color-coded tracking literally every cent daily - but that’s what worked for me. Whether you’re checking daily or weekly (and I wouldn’t recommend checking less often than that), be sure to at the very least keep an eye on your account balances.

I was also just genuinely curious about where most of my money went (hint: it’s food. It’s always food.)

Here is how I broke down my expenses every month:

  1. I wrote out where all my money would be coming from for the month and what my total post-tax income would be.

  2. I kept track of when that money hits my bank account.

  3. I took my income and tacked off 20% of it towards savings, setting a specific date for myself on when to transfer it over.

  4. I wrote out all my necessary expenses for the month (bills and loans), and determined that total.

  5. I subtracted that total from the amount of income left after my savings contribution.

  6. I tacked off 30% of that amount and transferred it to my “fun money” account.

You’ll notice I determine the amount of savings before I calculate my necessary expenses. This is important - you want to pay yourself first before taking care of anything else. You’ll also notice that with this method, I have a left over amount of money with no job. The first year I did this method, I didn’t worry about that money - I was more focused on getting this system in place and seeing if I did actually have extra money left over after all the payments and transfers were made.

I would not recommend doing this - if you can give every dollar a job, do it. I could have been putting all that extra money towards retirement, hitting two birds with one stone (retirement contributions and loan repayments).

I opened multiple bank accounts.

Before starting, I had one checking account with Chase, and one checking account with a mobile bank called Simple that I never used but just didn’t close. I also had a bank account from my hometown that had been open since I was 5. It had $6.00.

Here’s how I now allocate my accounts:

  1. Chase checking account - for bills, loan repayments, and other necessary expenses.

  2. Chase savings account #1 - for emergency fund.

  3. Chase savings account #2 - for long-term savings goals (I’m currently saving up for a new laptop, for example).

  4. Simple checking account - for “fun money”.

The childhood bank account is obviously closed. RIP. (I did get that $6.00 back though.)

I started paying attention to my credit score.

You’ll notice that I don’t have any credit cards or accounts. This is intentional. From personal experience, I’ve seen credit burn my family directly, so I vowed to not have to rely on credit to improve my credit score. Of course, you don’t have to do this - if you’re good with credit repayment, it doesn’t hurt to have one.

I do eventually want to be able to either open a mortgage or get a car or do things that rely on good credit, however, so I still pay attention to this. I’ve had my bad credit score bite me in the butt in the past, and I was tired of it. Because of my changes, my score has increased by 50 points in the last year.

I began tracking my net worth.

Now for the fun part! While I obviously could tell the health of my bank accounts because of my overly-obsessive budget tracking, I wanted to put everything together and see the progression as a total lump sum. So, I downloaded an app called Personal Capital and plugged in all my info. It’s nice because it tracks your bank accounts, loans, and investments all in one place and gives you your total net worth number, along with assets and liabilities. I believe you can also get your credit score on there. Seeing those numbers change and rise is a great motivator, and it’s nice to have all that info in one place.

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I compared last year’s amount to this year’s, and rewarded myself.

As of August 1st, one year has passed since I began this journey. Seeing the amount of money I had from last August compared to now is so amazing. I can’t believe it. So, I rewarded myself by (correctly budgeting for, of course) purchasing new work outfits.

Don’t be shy about celebrating your successes. You’ve worked hard, and you should be proud of yourself!

Let me know if you try this plan - I’d love to hear your progress! Also - are you an obsessive budgeter like myself, or are you more lax about your budget? Let us know in the comments!

How to Save Money During the Summer

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Summer is here! The endless parties, nights, vacations, festivals, food and drinks are always fun to partake in - but they all take a toll on your finances as well. Here are our top five tips to save some money this summer and still be able to have some fun! 

  1. Embrace the beautiful weather!
    Now that we're going to have consistently warm and sunny weather, it's time to use that to our advantage! Instead of driving, consider walking or biking to work, and you'll save on gas money and parking. 
    Exercising outside will also help with any monthly gym fees you may have but never use. Jogging, hiking, or yoga are all great outdoor activities!

  2. Timing is everything!
    Seeing a movie? Go during a matinee! Getting dinner or drinks? Take advantage of the longer days and go outside of the dinner rush. Always be aware of local deals happening during off-times during the summer when you'll perhaps have a little more free time. 

  3. Picnics over patios!
    Summer and Patio Season are interchangeable. While it's fun to meet friends for outdoor drinking once in a while, change it up and plan a potluck-styled picnic instead. Everyone gets to share their best recipes, you'll be outside where it's likely to be less crowded, and you'll be saving money! 

  4. Don't forget about local deals!
    A lot of places offer a discount for people who live in Milwaukee or the surrounding area. The museum and the zoo are two notable examples, and both are great for summertime visits. When out and about, make sure to bring your ID with you, and you may be treated to a discount or special you never even knew existed!

  5. Street festivals, anyone?
    One staple of Milwaukee is what seems to be its endless supply of street festivals during the summer. When I lived in Bay View, I was lucky enough to be able to walk to the end of my own street to partake in one every year! Bars and local businesses love making these events happen to celebrate their city and thank their community, so head to these for inexpensive fun! 

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

No Spend March: Week One

By Amy Lancaster

By Amy Lancaster

For the entire month of March, Amy is taking part in a no-spend challenge! Want to join her and track your progress? Join the Facebook group!

Last week’s post, I announced that I was going to be spending the entire month of March doing, well, the opposite - not spending.

Let’s see how my first week panned out!

(PS - I’m only counting expenses that I would otherwise not normally make - anything outside of transportation, bills, groceries, and other necessities for myself will not be counted.)

I started the month by realizing my cat needed more dry food, and of course, I cannot let her go hungry, so I had to get her her specialty food. It definitely costs more than the average cat food, but she’s going to live until 40, so I have to invest in that. Plus, I count her expenses as necessary, since a cat’s gotta eat, too.

Friday also decided to start with me getting sick, so outside of two hours, I spent the entire weekend in bed. This was definitely good for my wallet and any possible temptation. I also made sure to stay away from any shopping sites online. Joel and I did go check out the new Campsite 131 bar in the Third Ward, and he was kind enough to take care of the tab.

On Sunday, I was still sick. We made our usual grocery run, and Joel was (once again) kind enough to get us Cousin’s and satisfy my sandwich craving (is it weird to crave sandwiches?). Yes, I know I eat out too much - hoping to curb that habit this month as well.

On Tuesday, I woke up to a message from a photography group asking for the fee for the styled shoot I’m participating in on Sunday. I applied to this back in February and forgot that the payment would be made this month.

Thursday I was given an reminder that my free trial of Amazon Prime would expire the next day, so I had to - regretfully - cancel my membership before the charging period started. It pains me to turn it away (for now), but I have to commit to my goal!

Total Money Spent This Week: $10

For the first week, this is absolutely not bad. I’m hoping next week, I can make it $0, and keep it that way for the rest of the month!

How was your first week of No-Spend March? Have you joined our group yet? Click here to join and get support throughout the month!

No Spend March

By Amy Lancaster

By Amy Lancaster

So, this post is a little different from the rest.

As someone who is newer to the personal finance world, and – as someone who likes a challenge – I’ve decided to embark on different monthly challenges to help me improve my finances.

Looking back at my budget last month, I was floored by how terrible of a job I did. I tried to limit myself to $25/week in eating out, and $50/week in shopping (clothing, makeup, fun materialistic items, you know – things I don’t really need), and I absolutely failed. Granted, I had to do some extra spending for upcoming photoshoots as well as indulge in one of my nerdier interests via a local convention – but those acts alone made my budget completely crash and burn for the rest of the month.

Therefore, this month, I am forcing myself to do a spending freeze. Here are my personal rules:

  1. Only spend money on absolute necessities. This includes bills, groceries, transportation, and prior commitments (I have a hair appointment this month, but I feel it’s a bit of a win in terms of saving money because I have been able to work out a deal with my hairstylist to make it less expensive).

  2. Allot for one cheat day. This month, I’m going to Chicago Comic and Entertainment Expo on March 23rd – this will be the one day that I will allow myself to spend money on whatever I want (within reason, of course).

  3. Figure out ways to save more money. There are a few things I could most likely do without that I am paying for every month. This month, I will go through any recurring expenses and see where I can cut some corners.

  4. Share weekly updates. I’ll be posting weekly updates via this blog to share my experience, what went well, and what I can improve on for next week.

  5. Encourage others to join. This is where you come in! Because I have the discipline of my cat the moment a treat enters her field of vision, I will be creating a Facebook group for this that anyone can join! I’ll also be promoting the hashtag #milborntosave on our social media – so, if you want to share anything pertaining to this, make sure to use the hashtag!

Your rules don’t have to be exact to my own – everyone’s circumstances are different, and people have situations where they have to spend money on things besides the necessities. Just make sure to tailor your rules to your situation in the best way that will make sure you come out ahead by the end of the month!

Ready to join the challenge? Join the group and comment below if you’re #milborntosave!