The only thing that we seem to go through more quickly than money these days is time. It seems that it was just yesterday that we were enjoying the carefree, days of high school—longing for the days of being "grown-up" and a bit naive to the changes that would soon come complete with a full slate of responsibilities. They started innocently enough as the first credit card bills arrived and were soon joined by a car payment for that first vehicle (and the insurance payment that came along for the ride). In what seemed to be no time at all, the monthly rent or mortgage began making demands on your income and a new little one joined the family. A once carefree existence quickly took the full-fledged form of what we now know as life. Just as quickly as that initial phase of adulthood transpired, so too will the middle phase leading, ultimately to your "golden years" and the slower pace of a well-deserved retirement.
Although it seems like its a million miles away, retirement is lying in wait somewhere in your future and financially preparing for it can be a daunting task for many. After all, there are bills to be paid, vacations to take, braces to buy and hot water heaters to replace. When it is so easy to get caught up in the demands of daily family life, it is very hard to think that far into the future and plan your finances accordingly. Although every person's retirement savings needs are different and no one plan can fit or be right for every family's situation, incorporating a savings plan for your retirement into your family budget is one thing that unites us all. If you are one of the many who has yet to set a retirement plan in motion, the following basic tips will hopefully help point you in the right direction for your future.
The Federal Citizen Information Center (FCIC) advises that the first step towards developing a plan for long-term saving lies in performing a personal analysis of your monthly income sources and spending habits to generate a monthly spending plan. The FCIC provides the following form to help you start your personal analysis:
Monthly Spending Plan
Total Income - Total Expenditures = Amount you can put towards savings without changing your regular spending habits.
The FCIC notes that the recommended savings rate is 10% of your net take-home pay. If the total from your worksheet turns out to be a negative number or less than you would like to save, then you will need to find specific expenditure categories where you can cut spending or income categories where you can increase the funds you have available (e.g. through a part-time job or overtime).
Once you determine areas where you can save money (i.e., refinance at a lower interest rate if you have a mortgage, buy a used car instead of a new car, limit eating out to one night per week, etc.), make the adjustment on your worksheet and see how your monthly savings potential increases. The FCIC adds that once you have determined an appropriate amount for monthly savings (remember, no amount is too small—any amount is better than nothing at all), add a permanent "Savings" category to your worksheet under "Other" in your Expenditures column.
Now you are ready to start following the first guideline that diligent savers follow religiously—Pay yourself first. As soon as you get your paycheck, deposit a predetermined savings amount into your savings account before spending money on anything else. If your place of employment offers the option to have your paycheck direct deposited, see if you have the option to assign the amount for "Savings" to your savings account or, if the entire amount can only be deposited to your checking account, immediately access your account online and transfer your "Savings" amount to your savings account.
Be forewarned—emergencies do happen and you will no doubt need to call on your savings from time to time. Don't get discouraged—simply remember to get back into your savings rhythm the following month and maybe revisit your monthly expenditures to see if you can "go without" something for a few months to recover the amount that you used to deal with the uncontrollable emergency.
Savings goals for individuals and families are varied. Some are long-term goals (a college education, a home, retirement), while others are short-term goals (family vacation, a second car). Develop a list of your long- and short-term goals and prioritize them in order of importance to you. Then write down the estimated time frame you have to reach your savings goal for each item. In addition, allow some flexibility to save for potential emergency situations. The FCIC states that a good savings goal is to put aside between three and six months of living expenses to help provide a cushion should an emergency situation occur (disability, unemployment, extended illness).
Once you have some money set aside for family emergencies, you will be able to direct your attention to applying those savings dollars to your eventual retirement. Remember to be serious about saving for your retirement and to make it high on your list of priorities. It is all too easy to let other more "fun" goals take precedence over your retirement plans that may be twenty, thirty, forty or more years away.
Such long-term planning is a daunting and confusing task for some and many people turn to a qualified financial planner or advisor for assistance. Although a fee will be involved for the service, a financial planner will be able to take an objective look at your financial picture, your spending habits, and your retirement goals in the process of determining the proper "mix" of savings and investment options that will be most appropriate for your particular situation. Financial professionals can be great resources of information and guidance when it comes to budgeting issues, investment options, insurance, savings, and taxes.
However, discussing all of the variables involved with developing a financial plan would fill many pages so some of the topics will be addressed in future issues of Family Times. Right now, the primary goal is to get you started on a savings path today! Once you analyze your particular family financial situation and make monthly savings a habit, you will be well on your way to being better able to handle the little emergencies that pop up while still making a regular monthly contribution to that nest egg that will help keep your "golden years" of retirement something to look forward to, not fear.
As with any financial issues, always consult with a financial advisor, accountant, of tax advisor regarding your particular family situation.
Articles are provided for the general interest of our readers. Gerber Life Insurance is not responsible for any content and recommends that you consult the appropriate professional with any questions or concerns you may have concerning any financial or health related issues.