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  • Archive for the ‘Budget’ Category

    Grandma’s Wisdom: Lessons about Saving and Retirement

    Sunday, September 13th, 2015

    By Kassie Barroquillo, former WISER Research Associate

    September 13th is Grandparents Day – a day when we can celebrate our grandparents and those people in our lives who fill that role. One reason to celebrate is because grandparents can provide us with wise advice based on their own years of experience. This year, WISER asked grandmothers at all stages in their lives for advice they would give their grandchildren on saving and retirement.

    Saving Early

    Linda, a grandmother of a four- and a five-year-old, said, “Every time you get any money try to save some back, even if its small amounts.” She also added that she hopes her granddaughters start saving early, so they can retire. Penny wanted her two grandchildren, seven and nine, to remember that “no amount is too small to begin saving.”

    Want to help younger children learn about the importance of saving and planning for the future? WISER has a children’s book called “Sonja Meets Her Future Self,” which teaches kids the valuable lesson of Save, Spend, and Give.

    Budgeting

    Barb, who has three grandsons between the ages of three years and three months, said they should add retirement savings to their budget. Gayle, who has three grandchildren between the ages of 10 and 19, added that they should discern between “what you need versus what you want.”

    WISER has two budget worksheets, if you want to start building your own budget: Simple Budget Worksheet and Detailed Budget Worksheet.

    When the Grandkids Grow Up

    Retired grandma to a four- and a five-year-old, Barbara, said “My advice is to save money, comparison shop, buy quality items, and to save a portion of all your pay for a ‘rainy day’…and always take advantage of employer savings programs like 401k.” She also added that if you have the means, use a financial advisor. Michelle, who has two grandchildren, ages two and four, echoed Barbara, “Definitely invest in a 401k for retirement!”

    WISER has an entire page dedicated to 401k’s here! Don’t have access to a 401(k) Plan? Learn more about other ways to save for retirement.

    A Little Advice from my Grandmas

    I asked my own grandmas what advice they would give me. My Grandma Greta has 13 grandchildren, three great grandchildren, and one on the way, between the ages of two and 38. She said I should be sure to “have enough money saved to plan for inflation. It is more than you think it’s going to be.” She also said I should consider investing in property.

    Learn more about inflation and ways to invest your savings in The Beginner’s Guide to Saving and Investing.

    I am the oldest of my Grandma Wilma’s four grandchildren at 26, with the youngest being 13. She said, “Save money in a 401k or IRA while you are working. I’ve been saving my money the entire time I’ve been working, so I will be able to live, hopefully, without depending on anybody.” She added that she always had money taken out of her paychecks and always put it in a retirement fund. Most importantly she never borrowed from it.

    To find out more about IRAs and what happens if you borrow early, see this page from WISER.

    Thanks to the grandma’s who contributed their words of wisdom and happy grandparent’s day to all!

     

    The Kids Are All Right. But How Are You?

    Monday, August 25th, 2014
    Summer is winding down, and it’s often a time of change. Each year, many of us watch as our children go off to school and college. This change is big, not only for the kids, but also for the parents.  In addition to the emotional aspects and changes to the daily family routine, it can also mean a big change for your family finances as well.

     

    For the past several years, Sallie Mae has put out a study, “How America Pays for College,” to examine the decisions and funding sources that go into paying for a child’s college education in the United States. The 2013 report  found that average costs of college in 2012-2013 was $21,178. Parents paid 27% of that cost, close to $6,000.

     

    The difference between what you have saved for your kid’s college, and what it actually costs, can be large. This gap can lead parents to make some poor financial decisions. For example, this year’s Sallie Mae report found that one out of 10 parents said they are planning to tap into their retirement funds to help pay for the cost of college. While this may solve the immediate problem, it could lead to many more problems down the road if you have to turn to your kids to help support you in retirement.

     

    If your child has just graduated from high school or college, you may be sighing with relief because she has found a job, and you can start putting the money you were giving to her directly into your savings and retirement accounts. But, if your child is like 36% of 18 to 31 year olds in the US, she is still living at home, and likely unemployed.

     

    With these realities, it can be tough to continue to save for retirement.  But it is important to keep saving.  Start by keeping the basics in mind, set moderate goals, and work to achieve them.  Here are three steps and ideas:

     

    1. Saving a little is a big step! Start saving today, with whatever amount you can. Putting small amounts away for many years will add up.  Work on putting 10-15% of your income into your retirement account every month. That is a large goal, and one you can build up to. You can also help yourself by helping your children. Get them started on saving now, so they will ask less from you later. WISER has 5 saving tips for young people that can get you started.

     

    2. Find creative ways to reduce everyday expenses. Get a small notebook and Piggy Banktrack everything you spend money on for 3 months. Then identify patterns that you can change. For example, if you see that you buy two cups of coffee every day, only buy one, and put the money you were using for the second up into your retirement savings. Other ways to reduce your expenses might include driving less and walking more, or taking more public transportation. Remember to utilize public resources, such as your local library, where you can check out movies, tools, and books for free, and your local recreation center, where you can often swim or exercise much more cheaply than at private, membership facilities. Take a look at some of our previous blogs on budgeting to help you find ways to cut expenses.

     

    3. Plan to work longer. Retirement age isn’t what it used to be; people now live longer and are healthier longer. Put off retirement a little longer so that you can continue to save money for an extra few years. If you can, wait to start collecting Social Security after age 65, not before, in order to maximize your Social Security benefits. Learn more about how your benefits can increase.

     

    Wanting to help your kids financially is noble, but it comes with trade-offs.  You don’t want to support them financially to the detriment of your own retirement savings. The 2013 Sallie Mae report found that the largest source of college funding actually came from grants and scholarships. So make sure to look into all the different funding sources that are available for college, and make your retirement account off limits.  If you want more information about how much money different colleges will cost, check out the Consumer Financial Protection Bureau’s Paying for College  website, which has lots of information and handy guides to help you better understand your options.

    Get Back to the Basics: 8 Financial Questions You Should Know How to Answer

    Wednesday, April 30th, 2014

    Smart Piggy BankAs Financial Literacy Month comes to a close, we came up with 8 questions we think you should know how to answer. They range from personal questions to straight definitions. Try answering them first, and then take a look at our answers and explanations for more information!

     

    Questions

    1)      What is your monthly budget?

    2)      What is your net worth?

    3)      What is your “full retirement age” to receive Social Security benefits?

    4)      Every year, each U.S. citizen is entitled to one free credit report from each of the credit bureaus. Do you know the names of these three credit agencies and how to access your credit report?

    5)      Do you know how compound interest works?

    6)      What is the difference between immediate and deferred annuities?

    7)      How much do experts recommend keeping in your savings account for “rainy days?”

    8)      When trying to figure out how much to save for retirement, you must consider how long you expect to live (keeping in mind that women live longer than men). What is a good rule of thumb to follow to figure how much savings you will need to cover your lifespan?

    Answers

    Question 1: Monthly Budget

    The first step to saving is to know how much money you spend, where you spend it, and what you can cut. Obviously everyone’s budget is different, but we have some tips to help you figure it out. Start by adding up your total annual income (after taxes) including salary and money regularly received from any other sources. Divide this number by 12. This gives you an idea of how much you have to work with each month. Next, keep track of your expenses for a month and organize them into categories. Make sure to include all of your bills! If you’re having trouble thinking of everything you spend money on, take a look at our budget worksheet to see common categories and expenses. These two steps will help you understand your monthly budget by showing how much money you have and how much you’re spending. If you are spending more than you are earning, you will have to cut expenses or find ways to supplement your income.

    Question 2: Net worth

    Net worth is your total amount of assets, minus your liabilities. In other words, it is how much you own, minus how much you owe to others. Again, your net worth will depend on your own finances. It is important to know where you stand financially when considering all of your assets.  We have a worksheet to help you with this question!

    Question 3:

    “Full retirement age” is the age at which you can receive the full benefits of Social Security. If you were born in 1960 or after, your full retirement age is 67. If you were born earlier than 1960, your full retirement age varies slightly depending on the year you were born. Our chart can help you figure out when you are entitled to full Social Security.

    Question 4: Credit Reports

    The federally- recognized credit bureaus are Equifax, Experian, Transunion. If you plan on making a large purchase soon, you can choose to get all three at once. If you are not, consider receiving a report from only one bureau at a time and spacing them out so you can track your credit over the year. If you are paying off debt, you may want to view your credit report over time to see where you are improving and where you may need some assistance. The Federal Trade Commission has great information about how to order your credit report and imposter websites to look out for.

    Question 5: Compound Interest

    Compounding is a principle in which the interest you earn on your original investment can ALSO earn interest. So, for example, if you had $2000 in your account, with a compounded interest rate of 10%, at the end of the first year you would have $2200, which is your original amount plus interest. With compounding, at the end of your second year you would have $2420.  Your $200 worth of interest also earned interest. If your interest is not compounded, you would only have $2400.

    Compounding is great when it comes to saving because that extra interest adds up quickly! But be careful when loans or credit cards have compound interest. You will end up paying more each year.

    Question 6: Annuities

    Immediate annuities are ones that pay a fixed amount for as long as you live, or for a certain number of years as defined by your agreement. Deferred annuities are investments that delay payments until a future date. There are some great reasons to consider buying an annuity upon retirement, including having a fixed, certain income. But as with any financial product, you need to do your homework to make sure it is right for you.  We have more information and facts on our website.

    Question 7: Savings Accounts

    Experts recommend having about six months’ worth of living expenses saved in a savings account. This amount will help cover unexpected periods of unemployment or other emergencies. Even if you can’t easily save 6 months’ worth of income, any amount in an emergency fund is better than nothing.  Check out our tips on saving to help you reach this goal!

    Question 8: Live Long

    Start by estimating your expected lifespan. On average, people who reach 65 will live into their 80s. However, since 25% could live much longer, experts suggest saving for an additional 10 years. While this rule of thumb is not perfect, you are less likely to run out of money if you plan to live that much longer. For more tips and information on living to 100 and beyond, see our latest newsletter.

    WISER

    About Us

    WISER is a nonprofit organization that works to help women, educators and policymakers understand the important issues surrounding women's retirement income. WISER creates a variety of consumer publications including fact sheets, booklets and a quarterly newsletter that explain in easy-to-understand language the complex issues surrounding Social Security, divorce, pay equity, pensions, savings and investments, banking, home-ownership, long-term care and disability insurance.

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