Michele Clark
Clark Hourly Financial Planning - Chesterfield, MO Advisor
17295 Chesterfield Airport Road, Suite 200
Chesterfield, MO 63005 USA
Work 636.375.1813
+ Add to Contacts

Emergency Fund: The Foundation for Financial Success

September 3rd, 2013

Unexpected financial expenses seem to crop up at the least opportune time. The car needs a new transmission, you lose your job, or a parent or child becomes ill and you need to reduce your hours at work in order to care for them, taking an unexpected reduction in income. All of these expenses, and others, can drain savings quickly.

Why have an emergency fund?

You can resort to using credit cards to pay for emergency expenses however, worrying about paying down your growing credit card balance can lead to further stress during an already difficult period. You will experience “one step forward and two steps back” where it’s hard to see any progress.

How to create an emergency fund.

The better choice is to establish an emergency fund now. Determine how much money you want to set aside in the emergency fund and set up an automatic deposit into that account once a month for a small amount, so that you establish the habit of adding to the emergency fund. If you have finished paying off a monthly loan of some kind, consider immediately setting that money aside for the emergency fund so you don’t use it for daily expenses. Set up an account with your bank that is not easily accessible so there is less temptation to use the money.

Remember a large screen TV or a vacation is not an emergency. If large items such as these, are on your wish list, start saving for them separately and only use your emergency fund for true emergencies.

How much should you have in an emergency fund?

The rule of thumb is to keep six to twelve months of living expenses in savings for emergency funds.

Whereas a dual income family could get away with six months of income in savings, if you are a single income household, you would want twelve months of income saved.

If you and your spouse work for the same company, there is a greater risk of you both losing your jobs at the same time, therefore it would make sense to keep twelve months.

Having an emergency fund will reduce your stress during periods of difficulty because you can tackle the situation and not worry about the financial aspect.

Related Posts:

Retirement Planning: When You Haven’t Tracked Your Spending

August 19th, 2013

Planning for retirement is not a subject you dwell on every day until you realize it’s closer than you think. However, there are various components for you to consider when planning for your “golden years.” An important piece of this planning requires you to calculate your current spending so you can make wise financial decisions for your retirement years.

How much do you spend?

Some families track their spending using software, online tools, a homemade spreadsheet, or simple paper and pencil. If you have been tracking your spending, congratulations! You have some solid spending history to use when estimating how much you will need to spend each year to pay your bills and do the things you want to do to enjoy your retirement.

What if you do not track your spending?

Many families that are easily able to pay their bills and accumulate healthy balances in their savings and investment accounts have never felt the need to track their spending. However, as they get within a few years of retirement they realize they do not have any spending history to use for projecting whether they can afford to retire soon. They do not know if their investments will provide enough income to support them with the same lifestyle they have always enjoyed. Fortunately there is a solution.

How to calculate your current spending?

Before you decide to turn off your income from employment, you want to be confident that you know how much money you need for retirement. What you don’t want to do is not have enough income at the time of retirement to provide for you and your loved one. Therefore, it is best to use pure facts when calculating your current spending.

  1. You make A.
  2. You give B to the government for taxes.
  3. You save C.

The rest is what you spend.

A – B – C = what you spend

It’s that simple. Don’t let the fact that you have not been tracking your spending delay your retirement planning. You can use this simple calculation to estimate how much you spend currently. And track your spending going forward so that you can more accurately estimate your spending needs in retirement.

Tracking your monthly spending today is important to do in the last few years before retirement. If you haven’t started, it’s okay. Start now. When you have an accurate picture of your expenses today, you’ll be better off in your future.

 

 

Related Posts:

Financial Bloggers Give Advice to Increase Your Savings Rate

November 18th, 2012

Think about this: on average you have 45 years of working life to save up for 30 years of retired life.

While you are working, it can be hard to save because you have bills to pay; utilities, groceries, gasoline, insurance, property taxes, day-to-day living expenses.  You will have all those same bills to pay when you are retired, however they will be more expensive due to inflation.  So you need to save now to pay for those bills that you will have later, all while paying your current bills.  It can seem overwhelming!

When faced with a large task, the best way to accomplish it is to just get started one small step at a time.  A friend of mine, Jim Blankenship, CFP®, EA a financial advisor in New Berlin, IL, came up with the idea of asking financial bloggers all over the country to write blog posts encouraging people to increase their savings rate by 1% in their employer sponsored retirement plans, such as 401(k)s, 403(b)s, or Thrift Savings plans.  Earlier in the year I was quoted in a US News and World Report article about 401(k) retirement accounts, and one piece of advice I gave was to increase your contribution rate by 1% each year, so when I heard Jim’s plan, I knew immediately that I wanted to participate.

So far there are thirteen articles with ideas that can help you increase your savings rate by 1% in your retirement account:

From Jim Blankenship: Add Your First 1% to Your 401(k) 

My Contribution: Employer Retirement Accounts: 2013 Contribution Limits

From Roger Wohlner: Need Post-Election Financial Advice? Try the 1% Solution

From Sterling Raskie: A Nifty Little Trick to Increase Savings

From Robert Wasilewski: Increase Savings Rate by 1%

From Mike Piper: Investing Blog Roundup: Saving 1% More

From Theresa Chen Wan: Saving for Retirement: The 1% Challenge for 2013

From Steve Stewart: Seriously. What’s 1 percent gonna do?

From Laura Scharr: In Crisis: Personal Savings-Here Are Six Steps to Improve Your Retirement Security

From Ann Minnium: Gifts That Matter

From Alan Moore: Financial Challenge – Should You Choose To Accept It

From Jonathan White: Ways to increase your retirement contributions 1% in 2013

From Emily Guy Birken: Increase your savings rate by 1%

After reading these posts hopefully you know why it makes sense to increase your savings rate, and have some good tips for where to find the money in order to allow you to increase your savings by 1%.  The next step is to take action, and this is the season to do so.  This is the time of year that HR departments are having their annual meetings about benefits.  Commit to yourself and your family’s future financial security and increase your contribution by 1% this year!

Related Posts:

Employer Retirement Accounts: 2013 Contribution Limits

October 26th, 2012

An excellent way to save

What is my favorite feature of investing in your retirement plan at work?  No, it’s not the employer match, well alright it is the match, but a very close second is the fact that it is automatic!

The Elephant

Because companies are doing away with pension plans, saving for retirement can seem like an impossibly huge task.  But as the old saying goes “How do you eat an elephant? One bite at a time.”  Having a little money taken out of each paycheck and deposited automatically into an employer sponsored retirement account is taking that one bite at a time.  Eventually you will get that Retirement Elephant eaten.

Change in contribution limits

Each year the IRS announces if there are changes in the maximum contribution limits to employer plans due to cost-of-living increases.  Why is that important to you?  Because you can take bigger bites; and get that Retirement Elephant eaten sooner.  The catch is, depending on the instructions you set up for 2012, you may need to take action and contact your Human Resources department to let them know that you want to increase the amount you are investing in your retirement plan.  This is the month that HR usually wants to hear from you about these decisions, so the timing is right.

401(k), 403(b), 457, and SARSEPs

The 2013 maximum contribution limit is $17,500, an increase of $500 over 2012.  Be sure to contact your company to take advantage of the opportunity to put more money into your plan next year!  If you are 50 or turning 50 in 2013 you have the opportunity to add additional money to your employer sponsored retirement plan each year in the form of a Catch-up Contribution, the amount for 2013 is $5,500 the same amount as last year.  However, please check to make sure you are taking advantage of this opportunity; it is common for me to find that new clients are not doing this, and have often never even heard of a Catch-up Contribution.  But now you have, and you can take full advantage of it!

SIMPLE plan

The maximum contribution limit also went up for the SIMPLE, it will be $12,000 in 2013 whereas it was $11,500 in 2012.  If you are 50 or turning 50 in 2013 the Catch-up Contribution for SIMPLEs in 2013 will be unchanged at $2,500.

What to do

Check to see what you are contributing to your employer sponsored retirement plan, if you want to “put the max in” as I so often hear, make sure that you do that by adjusting the numbers for the new 2013 increases.

If you are over 50 or will turn 50 in 2013, make sure that you take advantage of the Catch-up Contribution which allows you to put additional money in the account.

If you are not “putting in the max” make sure that you are getting at least the full amount of the match from your company.  This needs to be balanced with having an emergency fund/savings account.

Once you have gotten to the point of getting all of the match, and establishing the appropriate emergency fund for your family, you need to evaluate all your goals and make sure that you deploy any extra cash among those goals in a way that fits with your priorities and values.

A hint for increasing your retirement savings – each time you get a raise, increase your retirement account contribution by one percent.  You will not even feel the loss, because it is money you didn’t even have yet.

Take action today, and you will be that much closer to retirement!

Related Posts:

Missouri A+ College Scholarship Program

September 14th, 2012

What is the A+ program?

The Missouri Department of Higher Education has an offering called the A+ Scholarship Program.  If your High School participates in the program, a student can enroll, and by fulfilling certain requirements can earn reimbursement for tuition and general fees for a two year degree at a participating community college or vocational/technical school.

Sign up for the program even if you do not plan to go to community college!

Getting your two year degree and transferring the credits to a four year college is a terrific way to save money on college costs.  However, if that isn’t in your plans, and you are going to go straight to a four year college, and you are a Missouri student, you should still enroll in the A+ program.  Why?  Because there are many four year colleges that are offering scholarships to A+ qualified students, but your high school transcript must indicate that you are an A+ qualified student.  Also, in the summer after high school graduation and before college, some students use the A+ scholarship money take general studies courses, such as math or language arts, at the community college to get a jump start on college, and doing so in smaller more intimate classroom settings, for topics that may be more challenging for them.

What are the requirements to qualify while in High School?

According to the Missouri Department of Higher Education (MDHE) website:

  • Have a written agreement/enrollment form with your school.
  • Have a GPA of 2.5 on a 4.0 scale.
  • Have an attendance record of at least 95%.
  • Graduate with at least 50 hours of unpaid mentoring/tutoring of students, in our school district this is organized by the school.
  • Beginning with the class of 2015, have achieved a score of proficient or advanced on the Algebra I end of course exam.
  • Must apply for financial aid using the FAFSA form.
  • Attend an A+ school for 3 years prior to graduation; exceptions are made, see the MDHE website.
  • Maintain a good record of citizenship and avoid drugs and alcohol.
  • Be a US citizen, permanent resident, or lawfully present in the US.

What is and is not covered

The scholarship covers tuition and general fees but does not pay for books, supplies or lab fees.

It is quite a good deal and an opportunity for families to save thousands of dollars if they use it exactly as it was set up and go to a community college or technical/vocational school.  Or save hundreds if not thousands of dollars, depending on the type of scholarship you get, at the four year colleges that are offering A+ students money to skip the community college and come straight to them.

Related Posts:

Disclosure

All written content on this site is for information purposes only. Opinions expressed herein are solely those of Clark Hourly Financial Planning, LLC, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties' informational accuracy or completeness. All information or ideas provided should be discussed in detail with an adviser, accountant or legal counsel prior to implementation.

This website may provide links to others for the convenience of our users. Our firm has no control over the accuracy or content of these other websites.

Chesterfield, MO Financial Planning

© Clark Hourly Financial Planning, LLC – All Rights Reserved.
powered by  Advisor Designs - Web Designers for Financial Advisors