Saving Money Articles
When was the last time you focused on financial healing as a way to fix your money troubles? We’re always looking for an easy way out when we’re in too deep financially. But instead of a get-rich-quick scheme, I want to help you build long-term wealth slowly and deliberately. And to do that, we need to start your financial healing process.
Step 1: Detach
Distractions are around us daily. Cell phones buzz with messages and calls all day. Emails are a never-ending task. And, at the end of the day when all we want to do is rest, the television winds us down until bedtime.
You’ll never be able to financially heal if you don’t eliminate the commotions taking up your attention. So this week, take a few nights to totally detach. Unplug from the outside world and focus on your authentic self: core values, beliefs, unique abilities and sense of purpose.
Step 2: Define
Congratulations! You’ve disconnected the internet, turned off the smart phone and found a quiet place to explore. Let your mind wander to places you’d usually deem off limits. No boundaries here; the idea is to unearth everything that’s hidden.
It’s easy to pass off a particular idea as crazy or impossible, but let those negative feelings float out of your consciousness. Don’t judge what you come up with; embrace it. Define your own personal dreams and desires to determine what you’re passionate about; this is necessary to get what you really want out of life.
Step 3: Devise
Now it’s time to get a plan together. You’ve figured out your big dream. How are you going to make it happen? What will you do today? Tomorrow? Next week? Next year? Design your ideal life. What does a typical day look like when you’re living your dream?
What you just devised is a Personal Navigation Route. This is the life plan that will get you from where you are right now to where you want to be. Once you’ve defined this path, write it down and post it everywhere. Remind yourself that each day is another opportunity to live your dreams. Don’t waste one moment living anything other than your ideal life.
I’ve come to believe that most unhealthy financial behaviors result from emotional conflict or unrest within the individual. In a few short weeks we’ll be in February, the month of love. It’s the perfect time to understand how you might be sabotaging your relationship with money. Knowing why you’re spending will help you get in touch with your heart’s desires. And it’ll create a vibration of harmony and abundance in your life.
First, let’s look at a few reasons we sabotage one of our most important relationships in life.
• We put other’s needs before our own
How many times have we bought something our husband or kids didn’t need, “just because”?
• We spend on what we think we need
It’s easy to get caught up in the “keeping up with the Jones’” mentality, so we rationalize those expensive briefcases or luxury cars as fitting in with our circles.
• We’ve convinced ourselves it’s a treat
We work hard, so we deserve that high-end handbag. But when it comes at the expense of what what’s really in our hearts, how much of a ‘treat’ is it really?
• We listen to what the “crabs” say
We want the ones closest to us to accept what we want, and we’re devastated when they don’t.
• And one of the biggest ways we sabotage our money situation is to ignore our dreams and desires for the sake of taking care of the “necessities.”
So many of us are just going through the motions in our lives, pushing down our true passions in lieu of what we think life should be. But there’s no better time than now to take the leap.
Here’s an exercise: Sit quietly and listen to your own heartbeat. Ask yourself, “What do I need? What do I want?” Maybe you want more time alone or need a creative outlet or more physical activity. Maybe you need to end a relationship that’s making you miserable or move overseas.
Remember, there are no right or wrong answers. So don’t judge your needs and desires; they have merit and deserve to be taken seriously. Let them flow out onto a piece of paper, and look over what you wrote.
Now choose one of the items on your list and describe some specific, practical ways you might begin to meet it. Do you need fifteen minutes alone each day when you get home from work? Do you need to open a “Europe” savings account and put ten dollars into it each month? What’s the first step, and when can you get it done?
Acknowledge how powerful it feels to funnel your energy toward your own needs and desires. Make a pledge to take at least a few minutes each day to accept who you really are and think of concrete ways to honor the authentic you. Feel the harmonious vibration from one simple act hum through every aspect of your life!
Review your retirement strategies
As you approach retirement, many important decisions await you. If you have a qualified employer-sponsored retirement plan, whether it is a traditional pension or a defined contribution plan, such as a 401(k), you will have to decide how to manage the proceeds from the plan once you retire. Your choice may depend on the following considerations: your current financial situation and your projected income requirements; the health and life expectancy of you and your spouse; the anticipated inflation rate; and Federal and state taxes.
Pension Payout Options
If you have a company pension plan, you will need to make some decisions about how you wish to receive your pension proceeds when you retire. Generally, you’ll be given the choice between receiving an income for the rest of your life (single life option), receiving an income for the life of you and your spouse (joint and survivorship option), or receiving a lump-sum distribution.
Each option has potential advantages and disadvantages. For instance, a single life option may pay a higher income than a joint and survivorship option. However, if you take the single payout option, income will cease upon your death, whereas if you take the joint and survivorship option, payments continue for the life of both you and your spouse. With both payout options, you exchange your pension balance for periodic payments.
If you prefer to maintain control over your pension assets during retirement, you might consider taking a lump-sum distribution. You can choose to receive the pension proceeds net of income taxes or roll them over into a traditional Individual Retirement Account (IRA), where they will continue to grow through tax deferral. (Required minimum distributions (RMDs) must commence at age 70½.) Either choice with the lump-sum distribution allows you to actively manage your own retirement assets.
Defined Contribution Plan Proceeds
If you’re a participant in an employer-sponsored defined contribution plan (such as a 401(k)), you must begin taking RMDs by age 70½. Depending on the rules of your company plan, you may also have the option of taking a lump-sum withdrawal net of income taxes or rolling over the proceeds into an IRA. Either of these options requires you to actively manage your retirement assets, and there may be tax consequences. Therefore, it is important to consult with your qualified financial and tax professionals to ensure that your savings decisions are consistent with your objectives.
Shortfall Planning
As you approach retirement, regularly reevaluate your financial strategies to help ensure that you will meet your retirement funding goals. For many individuals, retirement plan assets and Social Security alone will not meet retirement income needs. Therefore, personal savings are important to long-term success. Before you begin your personal retirement savings program, be sure you are maximizing contributions to your tax-advantaged, employer-sponsored plan.
As you can see, there are a number of choices available and decisions to be made regarding the distribution of proceeds from your employer-sponsored retirement plan. If you are not sure which strategies are best for meeting your particular goals, seek the advice of your professional advisors. It’s never too early to start!
How much can you earn and still receive Social Security?
Retirees are often ready, willing, and able to start new careers that may earn them significant incomes. However, some individuals may feel that it is not worthwhile to work for wages, only to have to “give up” some of those earnings in the form of higher income taxes. As frustrating as that may sound, it is important to understand the fundamentals of Social Security income and taxation so you can make your retirement years more “golden” and less “taxing.”
Income Limits: Paying to Work?
The first factor you must consider is your age and the so-called Social Security “giveback.” If you are age 62 or older, under the full retirement age (65–67 depending on your birth year), and receiving reduced Social Security benefits, you must “give back” $1 for every $2 earned above $14,160 in 2010. If you attain full retirement age in 2010, your benefits will be reduced by $1 for each $3 earned over $37,680 in months prior to full retirement age. Upon attainment of full retirement age, there is no limit on your earnings, and Social Security benefits are not reduced.
How Much Is Taxable?
A second factor affecting your Social Security benefits is the potential income taxation of those benefits. Let’s assume you are working and you also receive a check from the Social Security Administration (SSA) each month. You must first determine how much, if any, of your benefit is included in your gross taxable income. The first step in estimating this is to add up the following items: your wages, taxable pensions, interest, dividends, and other taxable income; all tax-exempt interest; any exclusions from income; your net earnings (net income less net losses) from self-employment; and half of your Social Security benefits.
This total is then compared to a first-tier threshold of $25,000 for a single taxpayer or a married taxpayer who is filing separately and lived apart from his or her spouse for the entire year, or $32,000 for a married taxpayer filing jointly. For a married taxpayer filing separately, who lived with his or her spouse for any period during the year, the first-tier threshold is $0.
For illustrative purposes, suppose your total applicable earnings are $27,000, and you are married and filing jointly. Since the total does not exceed the applicable threshold amount of $32,000, then no portion of your Social Security benefit is taxable. However, if the total exceeds the applicable threshold amount, further calculation is needed to determine the amount of your benefits that are taxable. You can refer to IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits, for more information, or consult your financial or tax professional.
As you can see, performing these calculations is no simple task. Thus, it is important for anyone who is thinking about receiving Social Security benefits while still working to understand the potential tax consequences and plan accordingly. As with all tax planning matters, it is important to consult a tax professional to help ensure your planning decisions are consistent with your overall goals.
We live in a society where consumption and waste is a huge problem. I often speak with clients who complain about their monthly cost of living – i.e. their utility bills are too high, groceries are too expensive, gas prices are ridiculous. While much of this is true, once we sit down and actually go over these payments, we realize that many of these costs can be reduced by making an effort to live a little more simply.
When we are conscious of the everyday choices we make in our life and how they affect our finances, we put ourselves in a better position to meet our overall financial goals. Here are some surprising, yet simple tips from the Department of Energy to help reduce your impact on the environment and save money at the same time.
- Save Water. Installing faucet aerators and low-flow shower heads will cut water heating costs by 50 percent and save up to $300 per year. It will also cut water use by up to 50 percent. Only run your dishwasher and washing machine with full loads.
- Unplug. Turn off electronics such as the TV and computer when not in use and unplug battery chargers and other equipment. Taken together, these small items can use as much power as your refrigerator.
- Adjust Water Heater. Turn your water heater down to 120° or the “Normal” setting when home, and to the lowest setting when away. Water heating accounts for about 13% of home energy costs.
- Plan Ahead at the Grocery Store. Plan out your meals for the next few weeks before going into the grocery store so you buy only what you need and don’t waste food that spoils before you can use it. Plan your grocery list and meals around items that are currently on sale. Buy items in bulk for a lower cost and freeze the rest to be used at a later date.
- Reduce Winter Heating. With the winter season quick approaching, many people are concerned about heating costs. Keep the draperies and shades on your south facing windows open during the day to allow the sunlight to enter your home and closed at night to reduce the chill you may feel from cold windows. Re-set your programmable thermostat from 72 degrees to 65 degrees for eight hours a day (for instance, while no one is home or while everyone is tucked in bed) and you can cut your heating bill by up to 10 percent. Weatherize your home by caulking and weather strip any doors and windows that leak air.
*The tips above may not be suitable for all people, and JMC Wealth Management advises clients on their investment strategies on an individual basis.
Julie Murphy Casserly, CLU, ChFC, CFP® is a 15-year veteran of the financial services industry, founder of JMC Wealth Management in Chicago and author of the award-winning book, “The Emotion Behind Money.” Julie helps people understand how their emotional attitudes and behaviors affect how they earn, spend and save. For more information, please visit www.JulieMurphyCasserly.com.
August and September is generally the time when many of my clients ask me how they can use the remaining months of the year to bulk up their savings as much as possible. While four plus months seems like a small amount of time to save a vast amount of money, saving money is within your control. Don’t stress about saving thousands and thousands of dollars. Every little bit counts. Start saving today with these tips:
- Make sure a sale is a sale. With back-to-school shopping season in full swing, many retailers will be promoting and advertising sales. Make sure you do your price research before you go to the store. Make sure the sale really is a sale and not a creative marketing strategy of the store to encourage you to spend your money without thinking. “Buy one get one free” and “50% off”, will only help you save money if the actual price you pay is lower than you would pay somewhere else for exactly the same product. And set your budget and shopping list before leaving for the store so you buy only what you need and spend within your means.
- Use less. We live in a society where consumption and waste is a huge problem. Consider using less shampoo when you wash your hair, turning your air conditioning up or cooking in bulk and freezing the left-over’s rather than throwing them out. Turn off lights, the TV and the computer when not in use. If possible, consider walking or biking to the store or to work rather than using more gas. Each of these efforts will help you save on your utility bills and put that extra money into savings.
- Plan Tax Savings Now. If you don’t itemize your taxes, consider it and start thinking about ways you can save on your 2010 tax bill now. Wait until April and it could be too late to take advantage of tax-saving maneuvers. Make a donation to your favorite charity. Donations made to qualified charities before year’s end can result in some serious tax savings and will make you feel good too. Check with your company to see if they offer a flexible spending account (FSA) and when you can enroll. Under a flexible account program, funds are taken from your paycheck on a pretax basis, which reduces your taxable income, and are refunded to you when you submit the appropriate claim forms to your benefits department.
Julie Murphy Casserly, CLU, ChFC, CFP® is a 15-year veteran of the financial services industry, founder of JMC Wealth Management in Chicago and author of the award-winning book, “The Emotion Behind Money.” Julie helps people understand how their emotional attitudes and behaviors affect how they
earn, spend and save. For more information, please visit http://www.juliemurphycasserly.com.
*The tips above may not be suitable for all people, and JMC Wealth Management advises clients on their investment strategies on an individual basis.