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What Every Investor Should Know About Planning And Saving For Retirement

In today’s vlog, I’ll be talking about Why You Might Not Be Saving As Much For Retirement As You’d Like. According to some recent data from the Federal Reserve Bank of St. Louis US adults are saving just under 6% of their disposable income and obviously I think that number is just way too low. Many people are not saving at all. And according to that survey, this is not even something that’s unique to just lower income individuals. Even many of those individuals that are making over a $150,000 a year are still not saving enough money.

Why is that? I believe it has to do with your budget. If you’ve ever put together a budget most people begin by listing out some of those big ticket items. Your housing is obviously going to be one of those items that you’re list as part of your budget. You might have some car expenses, maybe a car payment or lease payment. You have some insurance like your auto, home owner’s and health insurance. Then of course taxes are another item that we have as well and utilities. What I think many people do is look at those big ticket items as relatively inflexible items because they are more or less fixed. And then they start listing out some of their discretionary spending items and that might be some of the entertainment that you do. Hobbies, playing golf, going out to dinner, traveling, how much you spend every week at the grocery store. These are all things that we consider to be discretionary items. When people realize that they’re not saving enough money for retirement, they start going through these items what they often times focus on is those discretionary items because they’re looking at those big ticket items again as relatively inflexible. And so if you’ve ever put yourself on a budget and you start listing things out and say “Hey, we’ve got to cut back on going out to dinner!” or “We’re spending too much money on our groceries every week!” and you put some number down that you think you should be spending often times it becomes very difficult to stick with that budget. Something inevitably comes up and you end up having your budget essentially blow up on you and it can be very frustrating so you just give up on putting together a budget altogether.

What my belief is and one of the things we talk to our clients about here quite often is looking at those big ticket items and if you’re having trouble saving money for retirement or even just putting money into an emergency fund it maybe because you’re spending too much money on some of those fixed items. Maybe you’ve bit off more than you can chew on your housing. We usually recommend that clients stick within 20% to 25% of their income as their total housing expenses. In fact we talk about this a lot in our guide on home ownership and financing your home. So that’s a resource that you can download from our website. Car expenses are another one. I think according to some recent data people are spending over $500 a month on average car payment. So that’s another big item that you can look at. Its not always going to be super easy for you to sell your house and buy a new house. That might be difficult but if you’re looking at making some changes, it might not be a bad idea to go back and look at some of those big ticket items.

Taxes are another one too. There are some tax strategies that you can implement where you could save some money. Insurance is another big one that if you’re not staying on top of it your insurance can really get away from you. So take a look at instead of just focusing on those discretionary items, look at the big ticket items and look at where you could potentially save. Maybe you have a leased car that’s coming due here soon. When you go to get your new car, if you’re struggling on saving maybe you get a less expensive car. Maybe even buy a slightly used car or you get an inexpensive lease.

The last thing I want to just say here on that is if you can make your saving automatic, that’s going to be a big step for helping you be successful. And what I mean by this is for example you might have a 401K plan at work and that’s maybe one of the best automatic savings plans because that money goes into your 401K savings plan before you even have a chance to spend any of it, it just comes right out of your paycheck and goes into that. You can also set up automatic savings on your own by taking money out of your primary checking account every month and moving it over into a savings account or having that transferred to an investment account of some sort where maybe its a $100 a month or a few hundred dollars a month that’s automatically going into one of those accounts. Try to make that automatic. It will keep you on track because a budget is something that is ongoing. You really need to work with it on an ongoing basis. It is not an one time event and you are going to fall off course on your budget from time to time. But you just need to course correct, get back on track and look at where you might be going wrong with it.

What I Do

I help individuals make the transition from working to retirement.

As you approach retirement you will be making some of the most important financial decisions of your life. Most of these decisions don’t get a do-over, once you’ve made them your stuck.

My goal is to help you get the most out of your retirement resources. I do this by coordinating and optimizing what I call the 7 Core Elements of Retirement Planning.

It all starts with a plan!

We use advanced financial planning software to help you understand your retirement cash flow so you know where the gaps are.

Understanding your retirement gap is the foundation to getting the most out out of your retirement resources and avoiding costly mistakes.

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