If budgeting were easy, you wouldn’t be reading this. It’s not easy. You may already know not to overspend, and you understand income minus spending equals savings. That’s not the problem for many people who struggle with budgeting. The hard part is accidental under-planning.
If you’ve ever made up a spending plan that only worked for a month or two, you have probably experienced the effects of under planning. The typical budget format includes monthly expenses like housing, bills, transportation, and food. You also include non-monthly spending like clothing, vacations, and car maintenance. If everything on your spending plan adds up to your income but you didn’t actually plan for everything, you will overspend.
Continue reading “Budget Giving You Trouble? Look Below the Surface”
Last week, Shannon wrote about what emergency funds are really intended for. As a follow up, I’m sharing a piece I wrote last summer that first appeared at NerdWallet.
Financial emergencies come in all shapes and sizes. They are, by definition, obligations that you haven’t planned for and that will be difficult to pay. Whether you should have anticipated an expense is irrelevant once you’re faced with it. If you must pay it soon, and if not paying it will bring serious consequences, then you have a financial emergency.
Many people have an emergency fund — money set aside for no other purpose than to bail them out of a crisis when they have no other cash available. Even if you don’t have such a fund, there may still be ways for you to make room in your budget to accommodate the urgent expense. And if you do have an emergency fund, you can use those same methods to put off having to dip into it, which will make your “rainy day” money last longer — or preserve it for the next unforeseen expense.
Continue reading “Dealing With A Financial Emergency In Stages”
I’ve recently talked about how, as a financial advisor, I’m often approached with the question,
How much do I need to be saving for my future goals?
Putting a dollar amount on something set for the future is no easy task, so I’m never surprised when I get asked this question. We all have a list of objective things we want to save for (retirement, a home, cars, even a tank of gas), but understanding the amount we need for each of these goals isn’t always so straightforward.
The breakdown I give my clients is fairly simple: I give them a specific ratio for income allocation. But in order to structure that income allocation, I introduce a term that most of my clients have never heard before: “achieving expenses.”
Continue reading “A New Way to Look at Income Allocation (and Your Savings)”
As a financial planner, I’m commonly approached with this question:
How much do I need to save for my future goals?
In thinking about it over time, it’s become clear to me that savings isn’t always what we think it is. In fact, the line between savings and spending (two seemingly opposite financial actions), isn’t as clear as it seems.
Continue reading “Savings, Redefined: What You Need to Know”
How do you invest savings for short-term, medium-term, and long-term goals? There are almost as many different answers to that question as there are definitions of these terms. But are we even starting with the right question?
At its core, the question of how to invest over different lengths of time is really a question of whether to invest your savings in securities like stocks and bonds or deposit it at a bank or credit union. Knowing when you would likely sell those securities or withdraw your cash deposits is only a piece of the puzzle. You also want to consider what risks are involved over that period of time and whether they can be sufficiently managed.
Continue reading “What Does “Long-Term” Really Mean in Investing?”