What Are Your Savings Goals? Today is the perfect time to reconsider your financial goals. If you have a partner, make this discussion a priority. It is the only way to determine if you are on the same page when planning for the future. To assess your financial needs, ask yourself the following questions: Are there any impending near-term changes in your life? Do you need dividends or interest to support your present lifestyle? When do you plan to retire? What about other long-term plans, such as having children, changing jobs, traveling, or starting a business? Do you want to help your children with college expenses? Do you want to support specific charities? Are there unique factors to consider, such as health issues? Do other people rely on you for financial support? Do you have children or other family members with special needs? Are you interested in and willing to…
Make Your Retirement a Priority
Women often put others’ needs—our parents, partners, or children—before our own. We all have heard the advice that we cannot help others without taking care of our individual needs first, which is also true for our finances. Women take on many roles throughout their lives – daughters, wives, mothers, and, increasingly, businesswomen. The Small Business Administration reports that 50% of all US small businesses are home-based, equating to approximately 15 million. The Census Bureau estimates that women run nearly three-quarters of home-based businesses. Running your own business offers independence and flexibility. These appealing attributes are sometimes the primary reason why women start businesses, especially those who are mothers. At the same time, women business owners need to be even more diligent and disciplined about planning for retirement. Saving enough for retirement is the biggest concern for many of us. For some people, retirement is a long way off. For others,…
Emergency Reserve and Liquidity
Experts recommend that you have an emergency fund sufficient to cover three-to-six months of living expenses. Your emergency fund should be a safe, stable reserve such as a savings account or money market fund. If you are new to the workforce, it may take time to build up an adequate reserve. The easiest way is to transfer a portion of your paycheck every pay period directly into an account. If you dip into your emergency fund, replenish it as soon as possible. In addition to an emergency reserve, you need to think about liquidity. Liquidity is a term from economics that indicates how easily an asset can be converted to cash. Some asset classes are more liquid than others. Cash and money market funds are the most liquid assets. Stocks and bonds are usually liquid. During periods of financial turmoil, however, you may not want to convert these assets to…
Investment Truths
Managing your financial life is not a “set it and forget it” exercise. You must take a comprehensive view and stay engaged. As you work through the process and become more conversant with concepts, many financial truths are worth remembering: The importance of time: Compounding is powerful. The importance of risk and return: There are many types of risk. The importance of discipline and conviction: Stay true to your plan. The importance of patience: Study your investment decisions and don’t rush. The importance of value: Value is not what you paid for something. It is what someone else is willing to pay for it. The importance of supply and demand: Both have an impact on value. The importance of expectations: They also drive value. The importance of liquidity: How easily something can be converted to cash is key. The importance of total return: Look at both appreciation and income. The…
Recession Readiness: Emergency Reserves and Liquidity
Whether you get your information from the traditional financial press or podcasts, most sources are looking for a recession in 2023, especially during the first six months of the year. More than ever, we need to evaluate if we can weather such a storm. Experts recommend that you have an emergency fund sufficient to cover three-to-six months of living expenses. Your emergency fund should be a safe, stable reserve such as a savings account or money market fund. If you are new to the workforce, it may take time to build up an adequate reserve. The easiest way is to transfer a portion of your paycheck every pay period directly into an account. If you dip into your emergency fund, replenish it as soon as possible. In addition to an emergency reserve, you need to think about liquidity. Liquidity is a term from economics that indicates how easily an asset…
Benefits of Dollar Cost Averaging
When markets are turbulent, many ask if it is time to stop saving and investing. The practice of saving and investing consistently has numerous benefits. The amount you save is not as important as getting into the habit of putting money aside on a regular basis. Automatic savings plans, which you can use to build an emergency reserve or save for a down payment, graduate school, or retirement, are a relatively painless way to save. You can set up an automatic transfer from your bank on the day you get paid, a practice known as “paying yourself first.” Investing a fixed-dollar amount at set intervals is called dollar-cost averaging. An advantage of these automatic plans is that you invest the same dollar amount every time. When markets are weak, or asset values have fallen, the same dollar amount will allow you to buy more shares of a mutual fund or a stock than when markets…
Take Advantage of Retirement Plan Matches
When it comes to planning and saving for retirement, you must be consistent and save and invest every year. You also must be disciplined. Once you invest the money for retirement you cannot touch it. Because of the power of compounding investment returns, contributing to your retirement every year and allowing it to grow are the keys to building your nest egg. It is easier to put money away when you are young than when you have a mortgage or a family to take care of. Many of those that are just starting out in the work force, however, face substantial headwinds: hefty student loan payments and high—and in some cases sky-high—housing costs. Even with a tight budget, saving for the future must be a priority. Start saving for retirement through your employer as soon as possible and take advantage of corporate matches. Corporate matches are free money that help…
Tackling Your Credit Card Debts
There are different approaches to tackling your credit card debts. The best approach for you depends on your individual situation. Start by listing the outstanding balance for each debt, along with the minimum payment due and available credit line. For each outstanding debt, you must pay the minimum balance due every month. To achieve your goal of digging out of debt, you must find additional cash every month – by cutting back on day-to-day expenses or finding ways to earn extra income – and apply that cash toward your debts. The main difference between these approaches is the order in which you tackle your various debts. Start with the Smallest Debt Balance Some recommend that you focus first on the smallest outstanding balance (Debt A). After paying the minimum balance due on each of your debts, apply any extra money to Debt A until it’s paid off. Once that debt…
Prioritize Regular Savings
When you are just starting out, make a goal of saving and investing a fixed dollar amount every month. The amount you save is not as important as getting in the habit of putting money aside consistently. Automatic savings plans, which you can use to build an emergency reserve or save for a down payment, graduate school, or retirement, are a relatively painless way to save. You can set up an automatic transfer from your bank on the day you get paid, a practice known as “paying yourself first.” Investing a fixed-dollar amount at set intervals is called dollar-cost averaging. An advantage of these automatic plans is that you invest the same dollar amount every time. When markets are weak, or asset values have fallen, the same dollar amount will allow you to buy more shares of a mutual fund or a stock than when markets are strong and investable assets have appreciated. In this example,…
Prepare for the Unexpected
Experts recommend that you have an emergency reserve equal to six months of living expenses. It should be in a safe, stable vehicle such as a savings account or a money market fund. If you don’t have a sufficient reserve, make it a top priority. The easiest way is to address the shortfall is to transfer a portion of your paycheck every pay period directly into an account. If you dip into your emergency fund, replenish it as soon as possible. In addition to an emergency reserve, you need to think about your overall liquidity. Liquidity is a term from economics that indicates how easily an asset can be converted to cash. Some asset classes are more liquid than others. Cash and money market funds are the most liquid assets. Stocks and bonds are usually liquid. During periods of financial turmoil, however, you may not want to convert these assets…