From August, 2014

What does your retirement look like? I mean specifically…

Has anyone ever asked you this question?  Or have you asked it of others?  What was their answer?  What’s your answer?  People typically spend more time planning for a vacation than planning for retirement, but isn’t that was retirement is . . . one big, long vacation?  What does your “vacation” look like?

People always talk about when they want to retire, but they don’t usually get specific when asked, “What are you going to do in retirement?”  They’ll give generalities like traveling, spending time with family, etc., but is that specific enough to make sure they’ve got enough funds to last several years?  Traveling, for example, costs a lot more if it includes annual trips to Europe versus domestic road trips.  And what about hobbies?  Flying planes is expensive, and if you plan to woodwork, does that include buying equipment and building a workshop?

Before you can decide if you’re saving enough, you of course have to know when you want to retire, how long you think you’ll live, and have some type of general idea of what type of monetary legacy you’ll leave your kids.  But you also want to get detailed about how you’ll spend your days.  Something else to think about is purchasing power.  If you were to buy an item that costs $100.00 today, assuming a 3% inflation rate, here’s what that same item would cost in the future (baseline date – June 18, 2014):

5 years  $115.93
10 years $134.40
15 years $155.80
20 years $180.61
25 years $209.38
30 years $242.73

So now that you’re thinking about specifics, here are some questions to ask yourself:

1. How expensive are my hobbies now?
a. What do they cost me monthly?  Annually?
b. Will I have different hobbies in retirement?
c. What might those hobbies cost?
d. Will they require major purchases, like a boat, special equipment, etc.?

2. What are my travel habits today?  Will they change in retirement?
a. Do I stay at 4-Star hotels, hostels, or sleep in a tent?
b. Do I travel abroad or stay local?
c. Do I do short weekends or am I gone for weeks at a time?
d. What do my current trips cost me?
e. Do I eat out for every meal or stop at the grocery store in each town?
f. Do I drive or fly everywhere?
g. Do I/will I have pets, and if so, will they be kenneled?
h. How much will I travel each year?

3. What spending habits do I have today?  How might they change in retirement?
a. What’s my current budget for groceries, eating out, entertainment, etc.?
b. Will my spending go up or down in retirement?

4. Will I have the house/car paid off?  How will my current monthly expenses (utilities, etc.) change in retirement?

If you consider things like these, along with when you plan to retire, you can get a better idea of the kind of money it will take to get there.  And don’t forget to include FitFin’s budget and expense tracking tools in your plans!  These will help you get a handle on future spending, and also help you understand what you’re currently spending.  Check us out and sign up for free at http://www.fitfin.com.

Advertisements

This Just In: Kids Are Expensive

I have three kids.  They’re expensive.  No wait . . . new tires are expensive.  Kids are obscene.  But don’t get me wrong, I love my kids and I wouldn’t trade them for anything in the world.  That said, there’s always something to buy for them:  baseball cleats, piano lessons, new clothes, a new toy, Happy Meals, etc.  Then when they get older it becomes worse:  My nine year-old wants a new iPhone (of course the answer to that was no, but I can see where this is headed).

According to the U.S. Department of Agriculture, it now costs just over $241,000.00 to raise one child from birth to age eighteen.  Now I’m not 100% sure of the number’s accuracy, but even if it’s half that, it’s a LOT of money, especially when you consider that their number doesn’t even include college!  Because it’s likely that you’re not raising the next tennis prodigy who will be raking in millions by age fifteen, here are eleven ideas on how to decrease that spend!  Hey, every little dent helps, right?

1. Don’t be afraid to say no to their requests/demands (see my iPhone comment above).  Hold your ground and remember who’s in charge.

2. Have kids subsidize what you buy them.  Want a new iPhone, junior?  Then pony up some cash for both the phone and the monthly bill.  That should end it right there.

3. Teach kids about money and budgeting (better yet, learn together.  Best yet, include FitFin in your budget planning!).  Open up a savings account for them.  Then model good behavior by putting a little money into it periodically, and encourage them to do the same when they get money for their birthdays, etc.  Suggest that they save a certain percentage of what they get.  Literally focus on that number.  What I mean is that if they decide to save 10% of everything (or whatever number), really focus on that number with them.  Then hope that the same habit transfers over into adulthood.

4. Next time they want fast food, suggest a simple picnic in the park.  You’ll save lots of money and they’ll burn some calories.

5. Going shopping?  Leave the kids at home with your spouse, or a trusted neighbor or friend.  Think about how much money you spend when the kids are with you versus when by yourself.  And don’t forget to use your FitFin shopping list (and stick to it!).

6. Tuck away money every month for college.  If you’re not sure if the kids will go to college, then put it in a Roth IRA (if you qualify).  If they go to college, you can withdraw the money without taxes or penalties to pay for education.  If no school, then let the money grow for your retirement.

7. Allow them to participate in only one activity at a time.  According to the American Express Spending and Savings Tracker, in 2012 it was estimated that Americans would spend $16 billion on children’s activities during the summer, at an average of $601 per child.  Do you know what you spend on your kids’ activities, when you factor in registration fees, equipment, travel, snacks, etc.?  Yes, activities are important, but at least make sure you’re aware of what their costing your wallet and your child in terms of lost sleep and education.

8. Look for fun things to do that are cheap or free.  A simple Google search for “cheap and free things to do with kids” will give you literally hundreds of ideas for an inexpensive, but good time.

9. Teach your kids about the Joneses.  We all know the Joneses—those neighbors who buy a new car every 18 months and go to Disney World every year.  Let your kids know that life is not a competition of who can acquire the most stuff or go on the most trips, and that many times such luxuries are bought on credit.

10. Ask your kids for ideas on how to save the family money.  If they come up with their own thoughts around it, they’ll have buy-in, which will help to form a unified team around this goal.

11. Give kids money-saving “jobs” around the house.  Even at an early age, give children cost-savings tasks, like turning off lights left on around the house or turning off the water while brushing their teeth.  This will give them a sense of pride that they’re doing their part to help.

Saving money on your kids won’t always be easy.  Be sure to reward them once in a while (and even give in occasionally to their requests).  Most of all, enjoy them, because they grow up too dang fast!

Christmas (Budget) in July

Yes, I’m aware that it’s already August.  The fact that I’m a month behind on this post kind of proves my point that the holidays are rapidly approaching.  At any given date during the year, you can hear someone excitedly exclaim, “There are __ shopping days until Christmas!”  This is usually followed with a laugh, but have you considered that you might want to pay attention?

According to the American Research Group, in 2013, the average American spent over $800.00 on holiday gifts. That’s a lot of dough to come up with in a short period of time. So how do you fit in against the average?  FitFin recommends the following steps to determine what you spend and to help you determine when to start budgeting for the holidays:

  1. Make a list of who you’ll buy gifts for, including family, friends, co-workers, teachers, the mailman, etc. Anyone you think is deserving.
  2. Estimate how much you think you might spend this year on each of those people. Note to parents: According to Investopedia, we spent an average of $271/child in 2011, and 10% of us plan to spend $500 or more on each child. Don’t be conservative, be realistic. And a note to my dad: If you’re reading this, I’ll take a new Sonos sound system for the house. Thanks!
  3. Don’t just consider gifts—factor in all holiday-related items, including greeting cards, decorations, food, travel, etc.
  4. Once you have an estimated number, determine how much money you can save each month.
  5. Divide the total estimated spend by the monthly amount to get the number of months before Christmas.  For you engineering-types, check out this handy Christmas Calculator, which shows how many days are left until Christmas.
  6. Again, be realistic. If you don’t think you can save the amount you need to by Christmas, either think about who you might cut out of the list (sorry, Uncle Fred), or spend a little less on each person. Also think about how and when you can score some deals (Black Friday insanity comes to mind).

Once you know when to start planning, figure out where you might be able to sacrifice a little bit out of your existing budget. FitFin makes it easy with our Budgets Overview page to see where your money is going.  It’s also easy to create a short-term budget for the holidays.  You could, for example, set a $800.00 budget starting today and ending on December 15th, then track any holiday purchases toward that budget.  In fact, I just did that myself–it took me about 30 seconds.  FitFin took that $800.00 and averaged it out by month based on the start/stop dates of the budget.  How cool is that?  To keep my monthly spending even, I decreased my grocery budget by $100.00 and deactivated one of my summertime budgets.  That took me about another 90 seconds.  Just two minutes, and now I’m ready for the holidays (well, at least from a budgeting standpoint).

Consider using some of these strategies and incorporating FitFin into your holiday shopping plans to help prevent a Blue Christmas (or worse yet, a January in the red). Thanks and Happy (early) Holidays from FitFin!

And if you’re keeping score at home, there are 144 days until Christmas.